Group of councils loses Court of Appeal battle over EU structural funds

A group of northern councils has lost a legal challenge in the Court of Appeal over the Government’s allocation of EU structural funds.

The four South Yorkshire and five Merseyside authorities claimed that two decisions by the Secretary of State for Business, Innovation and Skills in March and June 2013 had produced discriminatory and disproportionate funding cuts for their regions.

The authorities in the Merseyside region were allocated €202m but claimed that the European Commission had calculated its share to be €350m. The equivalent shortfall for South Yorkshire was around €90m.

In February this year Mr Justice Stewart ruled in the High Court that the Secretary of State had failed to comply with the public sector equality duty under s. 149 of the Equality Act 2010.

Mr Justice Stewart said: “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 [government] from the PSED.”

However, the judge dismissed the other grounds of challenge put forward by the claimant authorities, including that EU law principles of equal treatment and proportionality had been breached.

In Rotherham Borough Council & Ors, R (on the application of) v The Secretary of State for Business, Innovation and Skills [2014] EWCA Civ 1080, the Master of the Rolls said it was common ground that the Secretary of State was acting within the scope of EU law and that the EU law principles of proportionality and equal treatment applied.

The MR noted that it was also common ground that the margin of discretion allowed by EU law might be broad or narrow according to the circumstances of the case, in particular "the identity of the decision-maker, the nature of the decision, the reasons for the decision and the effect of the decision".

Lord Dyson said the judge had been right to hold that the margin of discretion was a wide one in the circumstances of the case.

The MR added that the Court of Appeal should only interfere if satisfied that the decisions were manifestly inappropriate or manifestly wrong. The submissions in this respect did “not – whether considered individually or in combination – come anywhere near demonstrating that the first and second decisions were irrational or manifestly inappropriate or manifestly wrong”.

On the principle of equal treatment, the question was whether there was a failure to treat like cases alike and unlike cases differently.

Lord Dyson said it became clear during the course of argument that the real issue between the parties was not about what the principle entailed. “Rather it is how it should be applied and, in particular, what margin of discretion should be afforded to the Secretary of State in applying the principle.”

He added: “Since this is not a case about justification, the central question is what margin of discretion (if any) should be afforded to the Secretary of State in deciding whether different categories are like or unlike each other.”

The MR said it was wrong to argue that once the decision-maker had chosen the economic indicators that he proposed to apply, he must then apply them in accordance with the equal treatment principle and he was afforded either no, or only a narrow margin of discretion.

“We do not accept this submission,” Lord Dyson said. “The Secretary of State was required to have regard to a number of different overlapping considerations, and the regulation does not prescribe the weight to be given to each of them.”

He added: “Overall, the exercise of comparing one region with another is or ought to be multi-factorial. It involves making a substantial number of value judgments of an economic and social nature. In our view, the decision-maker is entitled to a wide margin of discretion in making such a decision.”

Lord Dyson concluded: “The Secretary of State was entitled to a wide margin of discretion in deciding questions of comparability…. We are satisfied that the high threshold for interference by the court has not been crossed in this case.”

A Rotherham spokeswoman said the council was disappointed and would study the judgment.

Liverpool’s elected mayor Joe Anderson said: “I am disappointed with the decision but pleased that we have exposed the unfairness of the government allocating €120m less to Liverpool City Region than the European Commission had estimated we might receive.”

Mark Smulian