Section 35 is intended to protect good governance and preserves a space for the government to consider policy options in private. Section 35(1)(a) FOIA states that: -

Section 35(1)(a) FOIA is a class-based exemption. Accordingly, it is not necessary for a public authority to demonstrate any prejudice arising from disclosure in order for the exemption to be engaged. The Upper Tribunal in Cabinet Office v IC and Morland [2018] UKUT 67 (AAC) made clear that the focus of s35(1)(a) FOIA was ‘on the content of the requested information and not on the timing of the FOIA request in relation to any particular decision-making process. There is no requirement on the face of the legislation that the policy-making process must still be live in order for the qualified exemption to bite’ (paragraph 29).

The Information Commissioner has also provided guidance on the application of s35(1)(a) FOIA which will be referred to below.

The exemption in s35(1)(a) FOIA is qualified by a public interest test by virtue of section 2(2) FOIA. Even if the exemption is engaged the public interest in disclosing the information may outweigh the public interest in withholding the information. The Tribunal should weigh the public interest in maintaining the exemption against the public interest in disclosing that information. Only if this weighing process favours maintenance of the applicable exemption(s) is the duty to communicate the requested information disapplied.

Section 42(1) FOIA states that:-

Section 42 is also qualified by a balance of public interest test by virtue of section 2(2) FOIA.

The appeal in this case is dated 6 June 2023. In the grounds of appeal, the Appellant argues that the Commissioner erred in concluding that:- (a) the exemption in section 35(1)(a) FOIA was engaged in relation to the withheld information; (b) the balance of the public interest favoured the maintenance of the exemption under section 35(1)(a); (c) the exemption in section 42(1) FOIA was engaged in relation to parts of the withheld information; and (d) the balance of the public interest favoured the maintenance of the exemption under section 42(1) FOIA

The Appellant complained that neither HMT nor the Commissioner identified the particular policy to which the withheld information is said to relate (grounds, para 44).

The Commissioner’s response is that there is no requirement that the specific policy must be publicly identified either by the public authority or the Commissioner in order for the exemption under s35(1)(a) FOIA to be engaged, and whether or not the policy is publicly identified has no bearing of any kind on the Commissioner’s analysis.

The Appellant also disputes the Commissioner’s finding that the policy in question was ‘live’ at the time of the Appellant’s request, since any such policy ‘must have been developed at the time of the introduction of the furlough scheme in March 2020, more than 18 months prior to the request’ and the request itself only sought information for the period between 1 April and 31 December 2020 (grounds, para 48).

The Commissioner responds that this is ‘no more than speculation’ and ‘also overlooks the obvious point that, at the time of the request, HMT was monitoring the pending claim in Stonegate, ‘the result of which may require either the government or the regulator to modify its policy position’ (see paragraph 25 of the decision notice).

The Commissioner argues that the question of whether the policy-making process is still ‘live’ at the time of the request is a matter that goes to the balance of the public interest, not to whether the exemption is engaged: see Morland as referred to above.

The Appellant goes on to say that the exemption under section 35(1)(a) FOIA can only apply to circumstances ‘where a change of policy is under active consideration given that all Government policy is to some extent under constant monitoring or review’ (grounds, paragraph 49).

The Commissioner responds that HMT’s position was that ‘policy work on this matter had been ongoing since the middle of 2020, as the situation regarding deductions became clearer’ and that this work continues (see decision notice paragraph 16, above), and that the ongoing litigation may require further changes (decision notice paragraph 25). The Commissioner, stated that he was ‘satisfied that the matter was live at the time of the request and that there was ongoing litigation (albeit a case to which HMT was not a party)’ (decision notice paragraph 35), and says that the Appellant’s claim that the monitoring of the proceedings was the ‘only basis’ on which the exemption was engaged (grounds, paragraph 50) is incorrect.

The Commissioner argues that the Appellant’s claims that the policy in question was ‘determined when the furlough scheme was introduced’ and that it was ‘well beyond the stages of formulation and development by 30 December 2020’ (grounds, paragraph 51) are ‘no more than speculation on its part and do not disclose any error of law by the Commissioner’.

The Appellant argues that even if the withheld information did engage the exemption under s35(1)(a), the balance of the public interest nonetheless favours its disclosure.

The Appellant points to a number of public interest factors in favour of disclosure (see ground, paragraphs 55(a)-(h) and 56) including (a) public interest in the government’s intentions concerning the identity of proposed beneficiaries; (b) details of the discussions between HMT, ABNI and insurance companies as yet undisclosed; (c) the fact that some third parties therefore had an opportunity to influence HMT’s policy; (d) the lack of information already in the public domain on this issue; (e) the interest of insured parties in understanding their legal rights and obligations; (f) the consequent pressure that lack of disclosure puts upon the civil justice system; (g) the public interest in taxpayers knowing how public funds are disbursed and to whom; and (h) the fact that the request was made two months after the furlough scheme had been wound up.

The Commissioner responds that Appellant does not suggest that the Commissioner failed to take any of these factors into account when assessing the balance of the public interest under s2(2)(b) FOIA, and that the Appellant’s complaint is that the Commissioner accorded greater weight to HMT’s arguments (as recorded above). The Commissioner notes that the decision notice, paragraph 38, went so far as to describe the weight to be given to safe space arguments as ‘ultimately compelling’.

The Appellant’s case is that this assessment was in error because the Commissioner provided ‘no explanation’ or alternatively ‘no sufficient explanation’ as to what the relevant live matter was (grounds, paragraph 59). The Appellant suggests that the Commissioner fell into error by taking into account the potential impact of disclosure on future decision making, rather than its impact on ‘a policy position which has already been taken’ (grounds, paragraph 59). The Commissioner describes this as ‘no more than a collateral attack on the Commissioner’s finding that the policy was ‘live’.

On behalf of HMT, Shannon Cochrane, Deputy Director of the Insurance and Pensions Markets team, gave evidence by way of a witness statement and orally at the hearing. Parts of her witness statement were redacted and were only available in the CLOSED bundle, and Ms Cochrane also gave evidence in a CLOSED session.

In her OPEN evidence, Ms Cochrane explained in her statement that:-

Ms Cochrane explained that:-

In relation to public interest arguments, Ms Cochrane said:-

Ms Cochrane was asked questions based on her statement. In her oral evidence Ms Cochrane accepted that she had not been directly involved in the policy formulation described in the statement and that her evidence is based on discussions with others and perusal of the relevant documents. She stood by the contents of her statement. She accepted that in paragraph 19 (as set out above) she stated that from ‘December 2020 and throughout 2021, HMT’s policy position was that the issue of whether furlough scheme payments should be deducted from claims should be determined by insurers on a case by case basis’. However, she said that this was not a fixed policy, and that as also stated in paragraph 19, the issues were kept under ‘active consideration’ throughout that period, and there was policy development and monitoring not least because of the ongoing Stonegate litigation.

Ms Cochrane emphasised the need for HMT to be able to ‘exchange advice and free and frank views with the operationally independent financial regulators’ as she set out in her witness statement at paragraphs 35 and 36.

In the CLOSED session (of there is a gist set out at Annex A) the Tribunal was referred to passages in the Disputed Information which HMT submitted showed that it related to policy which was being actively formulated and developed through the entire period April to December 2020.

The Appellant maintained the argument that the formulation and development of policy had ended in this case and warned against ‘scope creep’ as eroding the constraints on the application of the section 35(1)(a) FOIA exemption, and submitted that on HMT’s own pleaded case, the “issue of deduction of furlough payments from business interruption insurance claims” was formulated by September 2020. The Appellant argued that throughout both the Commissioner’s and HMT’s pleadings there is a confusion between (a) formulation and development of policy, (b) monitoring of a formulated policy and (c) modifying that formulated policy, and that these are quite separate and distinct phases. The Appellant’s case was that this happened for example where the Commissioner says that at the time of the request, HMT was monitoring the pending claim in Stonegate, ‘the result of which may require either the government or the regulator to modify its policy position’ (decision notice paragraph 25), thus running together all three stages of policy formulation/development, monitoring and modification.

The Appellant argues that HMT does the same: having acknowledged the formulation of a policy by September 2020, HMT then says that it continued to monitor developments and keep its policy position under review and the ‘issue’ remains live as there is ongoing litigation (as explained by Ms Cochrane in her statement).

The Tribunal accepts the evidence of Ms Cochrane that during the period April to September 2020, HMT was actively exploring and considering the issue of the treatment of government support payments in BII claims and formulating its policy position and response.

Although Ms Cochrane’s evidence is that the practical approach was to treat cases on a case-by-case basis there was a clearly a fluid situation which was being actively monitored and reviewed by HMT. Ms Cochrane’s evidence was that there were a number of policy options open to it.

In September 2020, HMT there was an industry response that certain types of grant would not be deducted. HMT set out its expectation that those grants should not be deducted and that other deductions should be considered by insurers having regard to the wording of particular policies and on a case-by-case basis.

From September 2020, we accept the evidence that HMT kept its policy under active review, monitoring developments in the form of industry responses and litigation, and coordinating with the FCA, with a view to adjusting its position or taking further steps if required. In our view given the uncertainty of the position, including in the light of ongoing litigation, there was really no other option but for HMT to be in a position to formulate and monitor policy during the period covered in the request for information. Having heard and read the evidence, we accept the description in the HMT skeleton argument (paragraph 22) that:-

Having found that the exemption in s35(1)(a) FOIA is engaged, the Tribunal must go on to consider whether the exemption can be maintained in the public interest or not.

There is clearly public interest in accountability and transparency in relation to HMT’s approach on the proper treatment of government support payments in BII claims. HMT says that it has addressed that public interest to an extent at least, acting in co-ordination with the FCA, by publishing both letters and statements in 2020 and 2021 setting out the Government and regulatory approach, and that in September 2020 HMT published the exchange of letters with the ABI explaining an agreed industry approach.

We accept that the public interest in disclosure is enhanced because the issue of the proper treatment of government support scheme payments, including furlough payments, in BII claims was novel and complex, and directly affected the public and private sectors as well as many individual insurers and insured businesses. It concerned large sums paid out of public funds.

We note that the Commissioner’s guidance explains that:-

We accept the evidence that the issue remained live at the date of the request and response, and litigation was on-going at the time of the request and has continued to date. There was an ongoing need to consider and respond to developments, and potentially introduce updated policy responses. The request itself was made less than 12 months after the withheld information was created and the issue was therefore very recent.

In general terms, we are of the view that HMT officials should not necessarily require a ‘safe space’ to discuss policy issues, and that the disclosure of information relating to such discussions should not always have a future ‘chilling effect’ on officials.

However, in this particular case we can understand the importance of maintaining a safe space for officials and ministers to consider and take advice on the issue, especially when responses were also being discussed with external bodies including the FCA as regulator. We agree with the HMT skeleton argument analysis that ‘Premature disclosure of on-going thinking and discussion, including frank discussion of legal options and advice, had the potential to distract from and undermine the policy process, and to disrupt both regulation and litigation of related issues’.

Having seen the withheld material (which of course the Appellant has not), we are able to address some of the other points which have been raised which it is said support the public interest in disclosing the information. Thus, the withheld material does not reveal the Government’s intention in implementing the furlough scheme in so far as the identity of proposed beneficiaries concerned. There is nothing in the withheld material which supports an assertion that lobbying by members of the insurance industry influenced HMT’s approach, as opposed to a reflection of reasoned legal thinking. We agree with HMT that disclosure would not properly assist in understanding of legal rights, prevent further litigation, or assist the public in knowing how monies raised through taxation are disbursed.

In our view and in the particular circumstances of this case, where a number of bodies were involved in the discussion of formulation and formulation of important live policy in a time of legal uncertainty and during a pandemic, the need to retain a safe space for the debate of policy issues away from external interference and distraction, outweighs the public interest factors identified and discussed above in favour of disclosure.

Having found that all of the withheld information in this case is exempt from disclosure by the proper application of ss35(1)(a) FOIA, it is unnecessary for the Tribunal to go and consider the application of s42(1) FOIA in relation to part of that information.

No substituted decision notice is issued in relation to the decision notice in this case and the appeal is dismissed.

In the closed session, the witness of behalf of HMT, Ms Cochrane, gave evidence on the content of the Disputed Information, and was asked questions on it by the Tribunal members.

Ms Cochrane expanded on her open evidence in response to questions from Ms Ivimy and the Tribunal. She stated in relation to the exchange of letters dated 25 September 2020 that from her experience she expected that HMT must have known the content of the letter in advance in order to provide a response so quickly, but she herself did not know what discussions preceded the letter.

It was agreed that paragraph 22 of the CLOSED witness statement could be put into OPEN. That paragraph states:

Ms Ivimy referred to a CLOSED skeleton argument totalling 5 pages. The CLOSED skeleton argument addressed: the content of the CLOSED bundle; the information in scope; what information was said to engage s. 35(1)(a) (all the information in scope) and s. 42 FOIA (some parts of the information); and the public interest test.

In oral submissions, Ms Ivimy: