Council wins appeal over commercial interests exemption and schools services

A borough council has won an appeal in the First-tier Tribunal against a decision notice of the Information Commissioner requiring disclosure of information relating to payroll and pension services provided by the authority to schools.

The requestor had written on 8 October 2015 to Poole Borough Council asking for: “….the names of the schools (including all types of school and academies) that are currently supplied with your Payroll/pensions service to be broken down by the actual service given to those schools and charges made for those services at each school”.

The council subsequently disclosed a list of schools, but did not provide the charges made at each school and the services rendered. Poole argued that the information was exempt under section 43(2) because it would be likely to prejudice its commercial interests.

The requestor then complained to the Information Commissioner about the part refusal of her information request.

The Commissioner considered the complaint and issued a decision note ordering disclosure of the information on the basis that s. 43(2) was engaged but that the public interest test favoured disclosure.

The council appealed. Before the Tribunal the parties accepted that s. 43(2) was engaged, there being a likelihood of prejudice to the commercial interests of the council.

Poole argued that the Information Commissioner, in undertaking the public interest balancing test under s. 43(2) FOIA:

  • Failed to have sufficient regard to, and place sufficient weight on, the commercially sensitive nature of the information; and
  • Erred in its assessment of the public interest in the disclosure of the information, and in so doing placed too much weight on the public interest in that disclosure.

In Council of the Borough and County of the Town of Poole v IC EA/2016/0074 the Tribunal upheld the council’s appeal on the basis that Poole was entitled to rely upon the exemption at s. 43(2) FOIA and not to have made disclosure (except for certain information the council accepted was not commercially sensitive). The FTT said the cumulative weight of the factors favouring non-disclosure outweighed the weight of those favouring disclosure.

In making its decision the Tribunal noted how most cases before in relation to s. 43(2) arose from circumstances in which the public authorities were the commissioners of services.

“The strikingly different aspect to this appeal was that the council was acting here in the competitive market for the provision of services to others,” it said. “The commercial interests at play were therefore those of the council itself, acting in a competitive market: not directly in the quest for value for money, but rather the purpose of maximising income to the council.

"Perhaps as a result, also strikingly, transparency and accountability were not the main factors at play in this appeal, rather, what was said to be the urgent need to maintain income to the council in the highly pressurised financial circumstances that currently face local government. Indeed, the backdrop to this appeal was an exhortation from Government to maximise trading and commercial services and for local government to act competitively in their relevant markets.”

The FTT said it was apparent, on the evidence before it, and witness testimony, that there was “(1) regular competition in the provision of payroll and pension services to academies and other public bodies; (2) that, pursuant to this regular competition, the council’s competitors could use the withheld information to gain an advantage and undercut them in tenders; and (3) this would make it more difficult for the council to secure contracts.”

The Tribunal pointed out that the commercially sensitive nature of the withheld information was supported by emails and the fact that the information was sought by a competitor, "demonstrating that it does have commercial significance”.

The FTT said it had formed the view that the Information Commissioner had not given adequate weight to the likely prejudice to the council’s commercial interests. This was because in forming his view in the decision notice, he had not been aware that most of the competitors were from the private sector ("he had been under the mistaken impression that the majority of the other providers were other local authorities").

The Information Commissioner had also not given adequate weight to the impact of the loss of this source of income on Poole’s wider services. The evidence from [a witness] on this point had been compelling, the FTT said. “It was clear that the economies of scale would enable the council to spread its costs, allowing for greater capacity and resilience to respond to institutional change, avoid reducing front line services and to maintain the policy of ‘survival through growth’. Whilst cuts would in the first instance likely fall on HR staff, the Commissioner did not seem to have given sufficient weight to the loss in terms of economies of scale and the impact this would have on wider front line services.”

The FTT accepted that the documentary evidence was “rather thin”, but went on to acknowledge that most evidence of prejudice to the competitive process would have been contained in oral conversations. “It was to be expected that such evidence would be difficult to adduce.”

The Tribunal added that it was considered “a matter of common knowledge that public authority providers of commercial services were (absent a ring fencing rule) able to cross subsidise other services and also that disclosure of price sensitive information in a situation in which contracts went out to tender annually, would put a public authority provider at a disadvantage.”

The FTT noted that whilst the short term impact of disclosure was likely to be a price cut which would be of benefit to the schools (and other public sector recipients of the services) and thereby the public purse, “it had not been presented with any evidence to substantiate that the long term position would remain so”.

The Tribunal did not consider it a realistic possibility (as asserted by the Commissioner), were the information to be disclosed, that local authorities would continue to feel able to refuse to disclose their own equivalent information.

“Given that the majority of the withheld information would likely be of a standard nature (that is, standard to local authority providers), it seemed a flawed analysis to assume that other local authorities would not end up being obliged to disclose their equivalent information and thereby suffer a similar disadvantage to the council,” it concluded. “As such, the Tribunal did not feel able to accept the Commissioner’s suggestion that other local authority providers of services would enjoy a stronger competitive position over the longer term.”

The Tribunal formed the view that it could not come to any conclusions on the long term effects of disclosure. “In this way, the Commissioner had overstated the potential benefit to the public purse in ordering disclosure. The Commissioner had argued that the Tribunal should not accept an argument with regard to prejudice to third parties on the basis that no evidence had been provided (Derry). The Tribunal found however that the issue here was rather in relation to the suggested benefit to public authorities, not prejudice to commercial interests of a third party. Second, the Tribunal accepted Mr Wilcox’s [a witness’] reference to studies showing that long term privatisation did not guarantee price reductions and in many cases led to greater pressure on the public purse.”

Taken together, the Tribunal found that the above findings led to a conclusion that the Commissioner had in this case not given sufficient weight to the likely prejudice to Poole’s commercial interest and given too much weight to the likely benefit to other public authorities flowing from disclosure. “In addition, he had erroneously taken into account the likely long term effects of such disclosure on competitor local authorities.”