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Public law and Regulation

Case reports and guidance on public law and professional regulation issues

31 JAN 2013

R (on the application of the members of the committee of Care North East Newcastle) v Newcastle City Council [2012] EWHC 2655 (Admin); (2012) PLLR 136

Care homes - local authorities - fixing rates - decision making process - actual cost - duty of consultation - discounts

A decision to fix rates payable to care home providers was unlawful where the local authority had failed to inform itself of the actual costs of providing services; had failed to consult fully; and had acted unlawfully in refusing to place residents with providers who refused to give discounts.

18 October 2012

Administrative Court

HH Judge Gosnell

(1)        The claimant (CNE), an unincorporated association representing care homes in the North East of England, challenged the actions of the defendant (N) in fixing rates to be paid for care home services at the same level as previous years, under sections 21(1) and 26(1) of the National Assistance Act 1948. CNE also challenged N's policy of refusing to place residents with providers who did not offer discounts on these rates.

(2)        CNE argued that N's decision on rates was unlawful on the basis that:

(i)         it had failed to inform itself of the true cost of providing services;

(ii)        it had acted irrationally in failing to take into account relevant considerations; and

(iii)       it had not complied with its duty to consult. CNE further argued that the policy of refusing to place residents with providers not willing to offer discounts on the rates was unlawful.

(3)        HH Judge Gosnell held that:

(i)         When making a decision on rates to be paid to care homes, a local authority was under a duty to have due regard to the actual cost of providing services, as well as other local factors. Bearing in mind that it is for a local authority to make decisions on the allocation of resources, a decision would be lawful where the local authority had asked itself the right question and had used an evidence-based system to inform itself of the actual cost prior to making the decision on rates, the court would not challenge the decision [49]. Although detailed reports had been prepared for N, the only factor taken into consideration in the decision not to raise the fees was a report from 2010. Some of the figures used in the cost model contained within the report had been altered by N. Although it was important for the court to avoid micromanaging the decision making process of the local authority, such assumptions had to be objectively justifiable [47]. The inaccuracy of the figures used and the almost total reliance of N on the report meant that N had failed to inform itself of the actual costs of providing services before setting its rates. N had acted irrationally or failed to take into account relevant considerations in altering the model [49] - [50].

(ii)        In order to properly fulfil the duty of consultation it was under, N either had to make a genuine attempt to acquire information on the actual cost of care and base its decision on that information, or consult providers on their proposals and reconsider the proposals in light of what they learned. The views of the providers had not been accurately reported to the decision makers, and the consultees had not been asked enough questions and were not aware of the reasons for N's decision until after the final decision had been made. Thus N had not fulfilled its duty to consult [54].

(iii)       The National Assistance Act 1948 (Choice of Accommodation) Directions 1992 and Circular LAC (2004) 20 make it clear that care home residents whose care is paid for by their local authority should exercise choice in where to stay. The local authority is obliged to set usual rates payable for care home services, but the policy of refusing to place residents with those providers who were not willing to discount the usual rate N abused its dominant market position in order to force down prices [56].

(iv)       The decision was to be quashed and a declaration issued that the decision to fix rates was unlawful. CNE was also entitled to a declaration that the refusal policy was unlawful [58] - [59].

Decision quashed; declaration that rate fixing decision was unlawful; declaration that refusal policy was unlawful.

Key paragraphs

[1] - [2] - Introduction

[3] - [13] - The legal framework

[14] - [19] - The factual history

[20] - [28] - The decision to fix the fees for 2012/13

[29] - [32] - Consultation

[33] - [34] - Efficiency savings

[35] - [50] - Analysis: grounds one and two

[51] - [54] - Ground three

[55] - [56] - Ground four

[57] - [59] - Remedy

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