Rotherham Metropolitan Borough Council & Ors, R (on the application of) v Secretary of State for Business, Innovation and Skills

The Claimants are those South Yorkshire Local Authorities within the Sheffield City Region Local Enterprise Partnership and those Local Authorities within the Liverpool City Region Local Enterprise Partnership. (Footnote: ¹) The South Yorkshire Local Authorities within the Sheffield City Region are:

In this judgment the following abbreviations will be used:

The Claimants challenge decisions of the Defendant in relation to the regional allocation of EU Structural Funds for the period 2014 – 2020. Two decisions of the Defendant are challenged:

The relief which the Claimants seek is that the court quashes both decisions so that they may be reconsidered by the Defendant.

The witness evidence in the case is from:

Extracts from the core legal materials are set out in the Appendix to this judgment. They are:

Articles 174 – 178 TFEU require the EU to promote its overall harmonious development and strengthen its economic, social and territorial cohesion by reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions. The achievement of these objectives is via the Structural Funds (Article 175). The largest Structural Fund is the ERDF (Article 176). Its purpose is “to help redress the main regional imbalances in the Union through participation in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions.” The ESF (TFEU Articles 162 – 164) aims to facilitate the employment, and adaptation to industrial changes, etc., of workers.

The European Parliament and the Council define the tasks, priority objectives and organisation of the Structural Funds by EU regulation. Prior to legislating, they consult with the Economic and Social Committee and the Committee of the Regions (TFEU Article 177).

The Structural Funds are part of the EU budget. How they are spent depends on a system of shared responsibility between the EU and the authorities of the Member States. The EU budget determines the amount of structural funding for each Member State. The Commission’s calculations refer to the regions of each Member State. Those regions are to be found in NUTS 2006/EU – 27. The NUTS 2 regions are second tier regions which broadly correspond to large counties in the UK. The UK has 37 NUTS 2 regions. Of these, four are in Scotland, two in Wales, and Northern Ireland is a single NUTS 2 region.

Regulations provide for the classification by the EU Commission of the regions of each Member State by reference to their development needs. Both the form and the basis of the classification have changed in the three 7 year periods commencing in the year 2000.

In this funding period three categories of priority region were identified. These were: Objective 1, Objective 2 and Objective 3 regions. The Objective 1 programme operated within areas of most need, determined according to whether GDP per capita was less than 75% of the community average. Merseyside and South Yorkshire were Objective 1 regions.

The 2006 regulation introduced a new categorisation of regions. Allocations in this period were to:

For Convergence, Phasing-in and Phasing-out regions, the European Commission determined the level of funding for each individual region using the 2006 Regulation methodology. The allocation for each NUTS 2 region was communicated to Member States by the Commission. A Member State had no material flexibility to further determine the allocation between the regions. However, in relation to Competitiveness regions each Member State was free to determine how the funds could be allocated among those regions, though this was subject to approval by the Commission.

The 2013 Regulation was in draft form when the decisions challenged were taken. It was subsequently adopted.

Yet again, the Regulation introduced three new categories of NUTS 2 to regions. These were:

“(a)

Less Developed regions, whose GDP per capita is less than 75% of the average GDP of the EU – 27;

(b)

Transition regions, whose GDP per capita is between 75% and 90% of the average GDP of the EU – 27;

(c)

More Developed regions, whose GDP per capita is above 90% of the average GDP of the EU – 27.”

(Article 90)

The methodology of categorising a region was thus altered such that it is now based on the “average GDP of the EU – 27.”

By reference to this classification the UK has:

Whereas in the 2007 – 2013 period Member States were not allowed to transfer resources between categories of regions (Article 22 of the 2006 Regulation), Article 93 of the 2013 Regulation permitted some reallocation. Paragraph 1 of Article 93 permitted a transfer up to 3% of the total allocation for a category of regions to other categories of regions. Subject to this there is therefore a ring fenced pot of funds for each of the three categories. (Footnote: ²)

Member States have greater discretion in the allocation of funds between the regions in each category. It is the exercise of that discretion by the Defendant which the Claimants seek to challenge.

In a press release the Minister announced in relation to “allocation of EU Structural Funding across the UK”:

“…

As a result of the new EU formula for allocating Structural Funds, agreed by the European Council in February, there would not have been a fair distribution across the UK, with each of the Devolved Administrations set to lose significant funding vital for economic growth.

In view of this the UK government has decided to reallocate EU Structural Funds to minimise the impact of sudden and significant cut backs in Northern Ireland, Scotland and Wales.

.…..

The Government is providing:

•

Northern Ireland with a total allocation of around €457 million, an uplift of €181 million compared to the amount that Northern Ireland would receive under the EU formula for allocation of the Funds to the UK.

•

Scotland with total funding of around €795 million. This represents an uplift of €228 million compared to the amount that Scotland would receive under the EU formula for allocation of the Funds to the UK.

•

Wales with total allocation of around €2.145 billion. This represents an uplift of €375 million compared to the amount that Wales would receive under the EU formula for allocation of the Funds to the UK.

•

England with a total allocation of around €6.174 billion.

This decision means that each administration is only subject to an equal percentage cut of around 5% in funding compared to 2007 – 13 levels. The government believes that this delivers the fairest deal for England, Northern Ireland, Scotland and Wales.”

Under the decision Northern Ireland was allocated €457 million, Scotland €795 million and England and Wales €6.174 million. As a result of the Second Decision (see attached), so far as England is concerned, after the 3% transfer to the only Less Developed region, Cornwall, the allocation fixed by EU law (2013 Regulation, Article 93) is:

On 27 June 2013 a written ministerial statement was published by the Secretary of State “confirming how the €6.2 billion England allocation of the … ERDF and … ESF will be allocated.” It continued:

“…

The Government has set allocations that deliver the fairest split of funding across England, as far as EU rules allow. Allocations by LEP area for ERDF and ESF are set out in the Annex ….

The government has today also confirmed the detailed allocations for the Highlands and Islands region in Scotland as €172 million and the allocation for West Wales as €1.783 million and for East Wales as €361 million.

All allocations are subject to final agreement on the EU Regulations and the EU 2014 – 2020 budget in the European Parliament. The European Commission will also need to agree the UK Government’s specific proposals.”

The LCR and SCR LEPs were allocated €221.9 million and €203.4 respectively for the 7 year period. As the LEPs do not precisely equate to the counties of Merseyside and South Yorkshire, these sums are equivalent to an allocation of €202 million for Merseyside and €178 million for South Yorkshire. (Footnote: ³)

The Claimants say that they were in the dark as to the methodology. They had not been consulted. (Footnote: ⁴) They received the methodology document pursuant to a Freedom of Information Act application. The Government decided not to consult on the Second Decision, though it did consult with the Devolved Administrations on the First Decision. The non-consultation was because the Government felt that there would be no useful feedback, as the decision concerned the allocation of money to individual regions. The Government was aware of the issues that arise in the Claimant Regions.

The methodology under the heading “2014 – 2020 Allocations Methodology”:

A central complaint of the Claimants is that the Defendant’s methodology in relation to the Second Decision was using the 2013 allocation as the baseline for the 2014 – 2020 allocation.

In the 2006 Regulation paragraph 6(b) to Annex II provided:

“6.

The allocations under the transitional support referred to in Article 8 will result from the application of the following parameters:

….

(b)

…75% of their individual 2006 per capita aid intensity level in 2007 and a linear reduction thereafter to reach the national average per capita aid intensity level for the Regional competitiveness and employment objective by 2011…”

The Defendant submits:

The Claimants take issue with the Defendant’s submission that it was the funding between 2007 – 2010 which was transitional. They submit that this is a serious matter and that the Defendant misdirected himself in relation to Article 8(2) and paragraph 6(b) to Annex II. The misdirection alleged is that in fact the transitional and specific basis of funding was throughout the whole of the period 2007 – 2013. In support of this the Claimants submit:

I do not accept the Claimants’ submission because:

The Claimants have obtained from the Defendant, pursuant to a disclosure request, the data for the Competitiveness regions in 2007 – 2013. Mr Eyres has carried out calculations by adding data for Merseyside and South Yorkshire. On his ranking, Merseyside is ranked third and South Yorkshire sixth most deprived out of the total of 34 Competitiveness regions. The Claimants submit that their allocation for 2013 was artificially low as a result of their special treatment as Phasing-in regions. They say that pursuant to paragraph 6(b) of Annex II to the 2006 Regulations, their 2013 allocation was a national average aid figure unrelated to their particular needs and characteristics. It did not take account of the uplift provided to Competitiveness regions in the North and Midlands that the Government considered to be in need of additional support. However:

I shall deal further with arguments based on the 2013 baseline later in this judgment, when I rule on the individual grounds of challenge to the Defendant’s discussions.

The Claimants made reference to what they described as the Commission’s allocation of funding to each of the UK regions. They complained that this had never been published. Counsel’s Skeleton Argument stated (paragraph 26) “However, recently, and following repeated requests, the Secretary of State’s estimate of that allocation has been disclosed by the Secretary of State. The disclosure confirms that EU allocation was €318 million for Merseyside (€116 million more than the Secretary of State proposes to pass on to Merseyside) and €236 million for South Yorkshire (€58 million more than the Secretary of State has allocated).”

The European Council’s agreement on the 2014 – 2020 EU budget was reached on 8 February 2013. At 2011 prices (not taking into account indexation) there was an overall reduction in the Structural Funds Allocation to the UK of some 5% compared to the 2007 – 2013 period. After the exclusion of funding for European Territorial Cooperation projects, €9.6 billion remained to be allocated in the UK.

This approach of the Claimants is misplaced for the following reasons:

The rationale for the First Decision is set out in Dr Baxter’s 1^st statement at paragraphs 37- 46.

After the permitted transfer of 3% of funds from the Transition and More Developed regions to the Less Developed regions, the Defendant first considered allocation as between the four countries comprising the United Kingdom. Ministers decided to apply the same level of Structural Funds reduction to each constituent part of the UK at the same level as applied to the UK’s Structural Funds allocation i.e. a reduction of some 5% in 2011 values.

Had the government followed the EU’s notional formula calculating allocations to categories of the UK regions then, compared to the 2007 – 2013 allocations, England would have had an increase of 7%, Wales, Scotland and Northern Ireland decreases of 22%, 32% and 43% respectively. Applying the overall 5% reduction in real terms funding to the UK as a whole (based on 2011 prices) to the devolved administrations had the consequences that (i) Northern Ireland, being a single NUTS 2 region, had the 5% reduction applied; (ii) the Scottish Government preferred the 5% cut to apply to both its more Developed regions and to its one Transition region. The UK Government accepted that this was an appropriate approach, as it would not be reasonable to require Scotland to increase spending for its wealthier regions at the expense of its poorest region.

The government was aware that this approach would reduce the amount of money available for the regions in England; further that it would limit the funding available for the Transition regions in England and that the allocation for Northern Ireland and Highlands and Islands would come out of the Transition budget. (Footnote: ¹¹) The context of this was an overall reduction in the funding for Northern Ireland and Scotland. The reasons for applying the cut equally as between the four countries included that the decision was easier for non-experts to understand (transparency), a single figure was applied to each country (simplicity), the same approach was taken to all four countries (consistency) and it took account of the status of the Devolved Administrations under the UK’s constitutional settlement (balance).

Although the government was aware that the approach would mean less for certain regions in England, they decided to concentrate on the “big picture within the UK” when trying to distribute the cut fairly as between the four UK nations.

The rationale for the Second Decision is set out in Dr Baxter’s first statement at paragraphs 47 – 59. She also deals in paragraphs 60 – 62 with the allocation within Scotland.

In the circumstances of the reduction to the overall EU programme and the limitations imposed by the 2013 Regulation, it was inevitable that there would be funding reductions to some regions. (Footnote: ¹²) The government considered four principal allocation options:

Option A (and Option D) had the attraction that, in the case of Transition regions, per capita Structural Funding allocations would be fully proportionate to GDP per capita. However Ministers felt that the resulting allocation would lead to unacceptably large changes for individual regions compared to the 2007 – 2013 allocations. Officials also spoke to the European Commission who indicated that it would be uncomfortable if the UK used their methodology, which was only to be used for determining the national “envelopes”, not the regional allocations.

Ministers’ awareness of the significant impact on Merseyside and South Yorkshire led them to consider whether to introduce a safety net. Ministers also saw a strong case for using a basket of indicators, based on latest economic data, to determine the allocations, applying also a suitable safety net. Having carefully considered this option they believed that this would result in an unacceptably large drop in funding in the North of England and an increase in funding in the South of England. Any safety net would have had to be set at a very high level. This would have dominated the methodology and rendered the baseline of indicators somewhat redundant. As a result, Ministers considered Option B to be preferable.

Dr Baxter’s evidence on this point was in paragraph 13 of her second statement. The Claimants did not accept it. At the end of the first day, I asked that Dr Baxter and Mr Eyres to meet so as to try to reach common ground. Although some common ground was reached, the meeting appeared to throw up more questions than it solved. Again I regard this as the type of factual dispute which was not clearly right/wrong, and so not capable of being subjected to the judicial process. (Footnote: ¹³)

Option B, in the opinion of Ministers:

In deciding on Option B rather than Option C, Ministers considered whether to use a formula based on a 2007 – 2013 average or to use the 2013 allocation as the baseline. They decided on Option B, in summary, for these reasons:

The Defendant also states that using Option C (average funding over the 2007 – 2013 period) would have resulted in Merseyside and South Yorkshire receiving uplifted funding some 10 years after their transitional period from Objective 1 status was supposed to have ended. It would have resulted in Transition regions with an equal or lower per capita GDP compared to Merseyside and South Yorkshire receiving far lower levels of funding.

Merseyside and South Yorkshire do not have the lowest GDP per capita among the nine English Transition regions. South Yorkshire has the fifth lowest and Merseyside has the third lowest. The Second Decision resulted in a 15% real terms increase in funding to all English Transition regions compared to the 2013 baseline. The Defendant recognised that, using the 2007 – 2013 period as an average, Merseyside and South Yorkshire would see a 65% cut in funding.

Dr Baxter said that at the time of the Second Decision Ministers also agreed the split of funding within Scotland. There were discussions between UK Ministers and the Scottish Government. The latter proposed that a further Scottish methodology would neither add clarity nor produce a more equitable settlement within Scotland, and that its preference was to adopt the 5% reduction across Scotland. Ministers were aware of the effect of this on the Highlands and Islands region. It had been a Phasing-out region but was now the only Scottish Transition region. Such an allocation within Scotland would mean that the Highlands and Islands region received a larger uplift in funding (compared to 2013) than the two English former Phasing-in regions (the Claimants).

According to Dr Baxter, the previous status of Highlands and Islands as a Phasing-out region means that it is not possible to compare it with the English Phasing-in regions because:

Ministers recognised that the Highlands and Islands region allocation of structural funding was declining over time, albeit at a slower rate than in Merseyside and South Yorkshire. Nevertheless Ministers decided to accept the Scottish Government’s proposal. The overall budget “envelope” had already been set for Scotland and it appeared to Ministers to be perverse to require Scotland to increase funding for its wealthiest regions at the expense of its poorest region.

Numerous figures have been placed before the court so as to demonstrate the effects on the Claimants of the 2014 – 2020 allocation to them as Transitional regions. Before embarking upon a discussion of the legal challenges, some analysis of and comment on these submissions is required.

The “striking features” of the allocation of which the Claimants complained in their Skeleton Argument (paragraph 5) were five in number. I shall briefly deal with these.

The allocation represents a reduction of 61% on the funds awarded to the Claimants in the previous funding period not withstanding that they remain amongst the most deprived in England.

The allocation is far below the amounts which the EU Commission “awarded to the UK in respect of those regions”

Every other English Transition region is to receive a significant 15% increase during 2014 – 2020 on the funding they received in 2007 – 2013. This compares with the 61% cut to Merseyside and South Yorkshire compared to 2007 – 2013.

The Claimants are to receive markedly less funding per head of population than other Transition regions with comparable development needs and markedly less than regions with much less severe development needs.

The statistics for this point are taken from paragraph 79 of Dr Baxter’s first statement in which there is a table dealing with the nine English Transition regions. That table shows:

The Claimants point in particular to the GDP per capita and allocation per capita of Cumbria and Tees Valley & Durham. The Defendant did not use the per capita GDP as the criterion for determining 2014 – 2020 Transition regions’ allocations. He allocated on the basis of the funding pattern in 2011 – 2013 determined by the Commission, applying the methodology set out in paragraph 6(b) of Annex II of the 2006 Regulation. That was the funding approach the EU had determined as appropriate to the economic circumstances and needs of the Claimants as Phasing-in regions. By reference to paragraph 6(b) the 2013 allocation (and that for 2011 and 2012) was based on the average per capita aid to Competitiveness regions. It is to be recalled that the Claimants would have been Competitiveness regions in 2007 – 2013, had it not been for their former Objective 1 status. That was why the specific Phasing-in status was applied to them. The tapered funds operated so that by 2011 they had been Phased-in so as to receive the average per capita aid to Competitiveness regions.

Although the Defendant did not use the percentage EU average GDP per capita as the basis of allocation in 2014 – 2020, the table shows that, very broadly, the allocation for the Claimants is not out of kilter with all other Transition regions. Unsurprisingly, given the actual basis of allocation, there are fluctuations. Nevertheless, the Lincolnshire and Merseyside allocations are extremely similar whereas Devon’s per capita allocation is low, even taking into account the fact that they are second highest in terms of average GDP per capita.

The effect of the First Decision is that the Transition regions in Scotland and Northern Ireland receive a far higher per capita allocation. Highlands and Islands have a GDP of 84.1% of EU average and will receive €478 per capita; Northern Ireland with an average EU GDP of 86.4% will received €252 per capita. [Note: the figure of €478 per capita for Highlands & Islands was provided by the Claimants. The figure is not accepted by the Defendant who consider the correct figure to be €387 per capita. Likewise, the Defendant considers that the correct figure for Northern Ireland is €259. The basis of challenge was not explained.]

The Claimant submits, and the Defendant does not dispute the following:

The Claimants submit that the principle of equality is a general principle of EU law and a right conferred by Article 21 CFR. The Defendant accepts the general principle.

As far as Article 21 is concerned, discrimination is prohibited if “based on any ground such as sex” etc. The list which follows is not exclusive because of the governing words “such as”. Nevertheless it gives a strong indication of the categories of grounds in respect of which discrimination is prohibited. My attention was not drawn to any previous case in which a public authority was a Claimant basing its claim on Article 21. Even adopting a purposive of construction of Article 21, I find it difficult to see how it is intended to protect public authorities. Even if I am wrong about that, I find it difficult to see how it is aimed at protecting public authorities in a case such as the present, where the decisions taken involved the allocation of funds between regions of a Member State. (Footnote: ²⁰)

My attention was drawn by the Claimants to authorities in which the EU principle of the equality can be said to be analogous to the form of discrimination recognised in the Thlimmenos v Greece [2001] 31 EHRR 15. (Footnote: ²¹)

The Claimants submit that in situations where similar cases are treated differently or different cases in the same way, then such decisions have to be objectively justified. This is made out if the inequality of treatment pursues a legitimate aim and is proportionate to the aim pursued.

Although the Defendant does not dispute that the general principles of equality and proportionality apply, he submits that in the present case they add little if anything to the irrationality challenge. I shall take the principle of proportionality first.

Bank Mellat is a good example of the framework within which a proportionality challenge may add significantly to a rationality challenge. That framework is that there is a specific legal standard and a decision by a public body which derogates from that standard. The court then has to address the question as to whether there is a legally justifiable basis for so derogating. (Footnote: ²³)

Although the Claimants do not accept this analysis, it seems to me to be correct. If so, the question is whether the Defendant’s decisions fit that particular mould. This depends on whether there is a specific legal standard imposed on the Defendant from which the Defendant’s decisions derogate. This is in issue. The Claimants say that the specific legal standard is that the EU funding must be used so as to reduce disparities between the levels of development of various regions. (Footnote: ²⁴) What this argument fails to recognise is that, save for Article 93, there is no legal standard imposed by EU law on the Defendant in his decisions as to how to allocate funds within the categories, including the Transition region categories. (Footnote: ²⁵) In fact TFEU provides the general aim and the 2013 Regulation, so far as material to this case, is addressed to the Commission in the decision it makes in the classification of regions. I do not accept that the Defendant is required, because of provisions in TFEU and the 2013 Regulation upon which the Claimants rely, either to follow or take into account as a material consideration the reduction of disparity between regions. For this reason the principle of proportionality does not add anything to a rationality challenge. There is nothing which requires the Defendant to use or take into account, in his allocation of funds amongst the regions in a particular classification, any overarching principle, and in particular any criterion based on EU average GDP. (Footnote: ²⁶)

As regards equal treatment, the Claimant’s submissions are based on the principle that like cases should not be treated differently and that different cases should not be treated in the same way. I shall deal in the next section of this judgment with the margin of discretion, and conclude that it is a wide margin. If, as I adjudge, the Defendant has to be afforded a wide margin of discretion in deciding whether cases are alike or not, then the equal treatment principle essentially stands or falls with the rationality challenge.

The Claimants rely on O’Brien v Ministry of Justice [2013] 1WLR 522; [2013] UKSC 6 (paragraph 69) for the principle that financial considerations can never amount to a sufficient justification for unequal treatment. They submit that a given cake must be shared out equally without discrimination; giving too much to some beneficiaries cannot be a defence that insufficient funds remain to enable equal treatment for others. The Supreme Court in O’Brien said in paragraph 69 “a discriminatory rule or practice can only be justified by reference to a legitimate aim other than the simple saving of cost.” (Footnote: ²⁷)In the present case the issue is not “saving of cost”; it is the allocation and distribution of fixed funds allocated to the UK by the EU. If the Defendant’s decision is a rational one and takes account of the principle that like cases should be treated alike and unlike cases differently, then the O’Brien case does not apply. The O’Brien situation that a Minister cannot discriminate if he/she chooses not to spend more money is not the present case.

There has been substantial dispute as to the appropriate intensity of review of the Defendant’s decisions. A useful starting point is the case of R (Sinclair Collis Limited) v Secretary of State for Health [2012] QB 394. At paragraph 181 Arden LJ said:

“Lord Neuberger MR has come to the same conclusion as I have, but, while there is much common ground, we have to some extent arrived there by a different route. Thus, where as I would, in the circumstances of this case, apply the same level of intensity to the decision of the Secretary of State as to that of Parliament relative to the issue of the compatibility of a ban on TVMs with Article 34 FEU, Lord Neuberger MR would apply a narrower margin of appreciation to the decision of the Secretary of State than to a Community institution or Parliament… Lord Neuberger MR has derived considerable assistance from the judgment of Lord Bingham CJ in Ex p Eastside Cheese Co…rather than directly from the jurisprudence of the Court of Justice on which Mr Paines relies. However, as Lord Neuberger observes at paragraph196 of his judgment, Lord Bingham's judgment is based on the jurisprudence of the Court of Justice and it is not therefore surprising that we should both apply a low level of scrutiny. For my part, I have utilised the "manifestly inappropriate" test, rather than the margin of appreciation.   I have preferred to use the terminology of the Court of Justice in order to avoid any suggestion of applying a lower test than that applied by the Court of Justice and so that my reasoning can be tracked into the Court's jurisprudence…”

Lord Neuberger of Abbotsbury MR said:

199.

…in Ex p Eastside Cheese Co [1999] 3CMLR 123, para 46 Lord Bingham CJ said:

“It is clear that the National Legislature has a considerable margin of appreciation, especially in legislating on matters which raise complex economic issues connected with the community’s fundamental policies.”

It is worth noting that this observation related to the Legislature, but it must also apply to the Executive, albeit with less force, in the light of what he had said at para 48.

200.

The breadth of the margin of appreciation in relation to any decision thus depends on the circumstances of the case and, in particular, on the identity of the decision-maker, the nature of the decision, the reasons for the decision, and the effect of the decision. Further, because the extent of the breadth cannot be expressed in arithmetical terms, it is not easy to describe in words which have the same meaning to everybody, the precise test to be applied to determine whether, in a particular case, a decision is outside the margin. It is therefore unsurprising that in different judgments, the same expression is sometimes used to describe different things, and that sometimes different expressions are used to mean the same thing.

The decisions in the present case were taken by the Executive and not by the Legislature. Therefore the observations of Lord Bingham CJ in Ex parte Eastside Cheese Co are relevant. However they do not, in my judgment, justify a narrow margin of appreciation in the circumstances of the present case because:

The reasoning and the policy of the Defendant are set out in the press release of 26 March 2013 and the written ministerial statement of 27 June 2013. The Claimants fastened on the words “the fairest deal for England, Northern Ireland, Scotland and Wales” (26 March 2013), “allocations that deliver the fairest split of funding across England” (27 June 2013) and, in the methodology that was provided subsequently, the statements that the Claimants “will receive a proportionate share of (England’s) budget for Transition regions but they will not enjoy special status over and above other (English) Transition regions” (paragraph 9). Building on that, the Claimants submitted that the Defendant did not achieve fairness or proportionality. However, the use of this terminology is not readily transferable into a strictly legal test, as the Claimants would contend. The Defendant had made political decisions with a view to pursuing social and economic objectives. In the political context he described his decisions as fair and proportionate. These words do not, as a matter of law, constitute a petard upon which he should be hoist.

Under this ground the Claimants criticise the Defendant’s methodology in not protecting the Claimants from the effects of “sudden and significant cut backs”. It is said that similarly placed based regions in Scotland and Northern Ireland were so protected compared to their 2007 – 2013 allocations.

The Defendant submits that (i) the EU average GDP per capita measure is only one of a range of approaches which the Defendant would have been entitled to adopt and (ii) there were material differences between the Claimants and these two regions and that he was entitled to adopt the approach that he did. Those are the issues for me to determine.

I accept that the Defendant was entitled to adopt a two stage approach. It is correct that, so far as the EU is concerned, the four constituent countries in the United Kingdom have no independent status as far as funding is concerned. The Defendant was here making a socio-economic decision which, given the margin of discretion, was rational and permissible. I have set out earlier in this judgment a summary of the justification under the heading “The First Decision: Rationale”. The rationale was clearly not based on EU average GDP per capita. However, for the reasons given, in my judgment the Defendant was entitled not to use or take into account, that measure and to adopt the approach he did. (Footnote: ³⁰)

If, as I have found, the Defendant was entitled not to take into account the EU average GDP per capita measure, then the criticism falls at first base. I will however briefly consider some other points of detail in relation to Scotland and Northern Ireland.

Northern Ireland was not a Phasing-in region in 2007 – 2013. It therefore had a flat funding profile in these years. There is no merit in comparing Northern Ireland with the Claimants since the Claimants were a Phasing-in region. One way of looking at the First Decision is that Northern Ireland, in 2011 prices, received 5% less than it had received in the 2007 – 2013 period when, as a Competitiveness region its funding had been flat (save for indexation). On the contrary, using a 2013 baseline, the English Transition regions received a 15% increase. Therefore, on this measure, comparing the Northern Ireland Transition region and the English Transition regions as a whole, Northern Ireland fared worse. (Footnote: ³¹)

As to the Highlands and Islands:

The Claimants accuse the Defendant of applying the same rule to different situations. I will now examine in summary their arguments supporting this contention.

In 2007 – 2013 the Claimants were Phasing-in regions. The other English transition regions for the period 2014 – 2020 had been Competitiveness regions. Given this background, what was the effect of taking the 2013 baseline for all nine English Transition regions for the period 2014 – 2020?

The Claimants had received additional Transitional funding in the years 2007 – 2010. Because of the tapering positions the Claimants say that the Competitiveness regions received substantially greater allocations in absolute terms (notwithstanding their greater prosperity) in 2013. However, the evidence upon which I have to work shows that, had the Claimants been Competitiveness regions, it cannot be said that their 2013 allocations would have been higher than they were. (Footnote: ³²)

It is correct that for the Competitiveness regions the 2013 allocation represented a substantially greater proportion of their 2007 – 2013 allocation (approximately 15%) than was the case for the Claimants. However, this was merely a result of the tapering provision and the fact that the Claimants had benefited from a much higher allocation throughout the period.

2013 was the highest allocation for the Competitiveness regions. However, their allocations in the 2007 – 2013 period were the same, except for indexation to take account of inflation.

The 2007 – 2013 allocation to the Competitiveness regions was not based on the individual economic characteristic of each region. It was based on the NUTS 1 region as a whole in which a Competitiveness region was located. The funding for the Claimants, as Phasing-in regions, was determined by the EU Commission. Their methodology was based on historical receipts and the downward taper.

I do not accept that there was any irrationality or breach of the principle because there was no material difference of treatment. The following points are worthy of summary statement:

Finally I deal with a factual matter. The Claimants sought to argue that allocating more money to the Claimants would not mean taking money away from the English Transition regions. They had carried out a calculation to support this. Dr Baxter addressed this point head on in paragraphs 15 – 20 of her Second statement, which I accept. She says that all the funds provided to the UK by the EU for the 2014 – 2020 period have been allocated. In fact €10,787 million have been allocated. The EU allocation was €11,638 million. If one deducts €865 million allocated to territorial cooperation, €10,772 million were left. Thus not only is there no unallocated budget available, but final allocations will need to be adjusted downwards slightly.

I have set out my ruling on the approach to the proportionality challenge in the Legal Principles section of this judgment.

The Defendants concede that the Claimants were hard cases. However they submit, and I accept, that the Defendant’s decisions were not unlawful. Both the First and Second Decisions were rational and therefore, in the context of this case, the decisions were proportionate. OR Also whatever the criteria had been adopted, this would have produced some hard cases.

Where, as here, there is no legal framework of any significance instructing the exercise of the Defendant’s discretion, the court has to exercise caution on this particular ground.

The Defendant had a wide discretion as to the allocation to the Transition regions. I reject the submission that the Defendant failed to take into account relevant considerations. He had no duty to consider the GDP of the Transition regions relative to the EU average when carrying out his analysis. Nor did the Defendant have any duty to consider the hypothesis of the Claimants having been Competitiveness regions in 2007 – 2013. (Footnote: ³³) Using a basket of economic indicators was considered but rejected.

The PSED requires a public authority to have “due regard” to the need to:

“(a)

Eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act;

(b)

Advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it…”.

The Defendant accepts that there was no consideration of the PSED prior to making either of the two decisions challenged. The authorities relied upon by the parties were under the legislation which preceded the Equality Act 2010. Neither suggested that this was material in the circumstances of the present case.

In R (Brown) the Secretary of State for Work and Pensions and another [2008] EWHC 3158 (Admin); [2009] PTSR 1506 (paragraph 89) the Divisional Court said that there was no statutory duty on a public authority requiring it to carry out a formal Equality Impact Assessment (EIA) when carrying out their function. At most it imposes a duty on the authority to consider undertaking an assessment, along with other means of gathering information, and to consider, whether it is appropriate to have one in relation to the function or policy at issue, when it will or might have an impact on disabled persons and disability.

The Defendant’s case is that the requirement under the PSED is to have “due regard” to the objectives set out in section 149(1) and that is the regard that is appropriate in all the circumstances (Footnote: ³⁴). This I accept.

The next stage of the Defendant’s argument is that where high level decisions are being taken as to budget levels or a spending envelope, detailed assessment of Equality Impact may be neither appropriate nor possible. For this proposition they rely upon two decisions, namely R (Fawcett Society) v Chancellor of theExchequer and others [2010] EWHC 3522 (Admin) and R (JG & MB) v Lancashire County Council [2011] EWHC 2295 (Admin).

It is true that in both these cases the decisions being taken were in relation to large budgets. However, in both cases it was an essential part of the judicial reasoning that the public authority’s decision was not a final one, and that the PSED could be carried out further down the line. (Footnote: ³⁵)

The Defendant further submits in relation to the argument that he did not have to have due regard to the Section 149(1) objectives in the circumstances of this case in that:

I reject these contentions by the Defendant. The Defendant’s decisions fixed the individual allocation for each region. Those allocations are in no sense preliminary or provisional. The fact that the individual regions would themselves have to consider the PSED when deciding how to use the funds allocated to them cannot absolve the Defendant from the PSED.

The Defendant has, after the event, carried out an Equality Impact Assessment. This cannot save the decision making. (Footnote: ³⁶) This analysis shows a correlation between funding per capita and disability. Given that the Claimants are, according to the Defendant “hard cases” in terms of the allocation given to them for 2014 – 2020, it seems clear to me that the Defendant should have had “due regard” to the s149(1)(a) and (b) objectives.

I therefore find that the Defendant breached the PSED.

For the above reasons the Claimants’ challenge to both decisions fails on all grounds, except that it succeeds on breach of the PSED. As to the consequences of this ruling and the appropriate Order, I will determine these after hearing further from Counsel for both parties.