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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Care England, R (on the application of) v Essex County Council [2017] EWHC 3035 (Admin) (01 December 2017) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2017/3035.html Cite as: [2017] EWHC 3035 (Admin)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/12/2017

Mr Justice Lavender:

(1) Introduction

1. The Claimant, which is a charity and a representative body for care home operators, seeks judicial review of a decision taken by the Defendant council on 22 July 2016 ("the July 2016 decision") to increase some of the fees which it pays to the operators of care homes. The Claimant was given permission to apply for judicial review on four grounds:

(1) The Claimant contends that the Defendant was in breach of its duty under subsections 5(1) and (2) of the Care Act 2014 ("the Act").

(2) The Claimant contends that the Defendant failed to follow relevant guidance issued by the Government.

(3) The Claimant alleges that the Defendant failed properly to consider whether the July 2016 decision complied with that duty and that guidance.

(4) The Claimant alleges that the July 2016 decision was Wednesbury unreasonable.

2. It was accepted that the third ground did not add anything to the first two. I say no more about it.
3. On 11 October 2017, less than a month before the hearing, the Defendant applied for permission to adduce a three-paragraph witness statement and to amend its grounds of resistance. The witness statement merely served to inform the Court of a recent decision by the Defendant ("the October 2017 decision"), to which I will return. The amendments served to insert a paragraph referring to the October 2017 decision, and to insert submissions to the effect that I should not quash the July 2016 under challenge, even if I found that the Defendant had acted unlawfully, in particular because of the requirements of good administration and/or pursuant to section 31(2A) of the Senior Courts Act 1981.
4. I did not rule on this application at the hearing, as I did not want the hearing to be distracted by a procedural issue. I heard submissions on these issues de bene esse, but on the understanding that the Claimant had not had an opportunity to challenge the October 2017 decision and that I should not assume that it was lawful. On that understanding, Mr Purchase was able to address the new issues raised, and on the same basis I grant permission for Defendant to make the amendments and to rely on the new witness statement.

(2) Section 5 of the Care Act 2014

5. Subsections 5(1) and (2) of the Act provide as follows:

"(1) A local authority must promote the efficient and effective operation of a market in services for meeting care and support needs with a view to ensuring that any person in its area wishing to access services in the market—

(a) has a variety of providers to choose from who (taken together) provide a variety of services;

(b) has a variety of high quality services to choose from;

(c) has sufficient information to make an informed decision about how to meet the needs in question.

(2) In performing that duty, a local authority must have regard to the following matters in particular—

(a) the need to ensure that the authority has, and makes available, information about the providers of services for meeting care and support needs and the types of services they provide;

(b) the need to ensure that it is aware of current and likely future demand for such services and to consider how providers might meet that demand;

(c) the importance of enabling adults with needs for care and support, and carers with needs for support, who wish to do so to participate in work, education or training;

(d) the importance of ensuring the sustainability of the market (in circumstances where it is operating effectively as well as in circumstances where it is not);

(e) the importance of fostering continuous improvement in the quality of such services and the efficiency and effectiveness with which such services are provided and of encouraging innovation in their provision;

(f) the importance of fostering a workforce whose members are able to ensure the delivery of high quality services (because, for example, they have relevant skills and appropriate working conditions)."

6. The Claimant relied, inter alia, on the words "the importance of ensuring the sustainability of the market" in subsection 5(2)(d). I will refer to this as "the sustainability factor".
7. The background to these provisions of the Act includes the following statement in paragraph 6.2 of "Building Capacity and Partnership in Care: An Agreement between the statutory and the independent social care, health care and housing sectors", which was published by the Department of Health in October 2001:

"Providers have become increasingly concerned that some commissioners have used their dominant position to drive down or hold down fees to a level that recognises neither the costs to providers nor the inevitable reduction in the quality of service provision that follows. This is short-sighted and may put individuals at risk. It is in conflict with the Government's Best Value policy. And it can destabilise the system, causing unplanned exits from the market. Fee setting must take into account the legitimate current and future costs faced by providers as well as the factors that affect those costs, and the potential for improved performance and more cost effective ways of working. …"

8. I note the refence in this passage to the Government's Best Value policy. It was acknowledged in the present case that councils such as the Defendant remain under an obligation to obtain value for money when commissioning placements in care homes.

(3) The Guidance

9. Subsection 78(1) of the Act provides as follows:

"A local authority must act under the general guidance of the Secretary of State in the exercise of functions given to it by this Part or by regulations under this Part."

10. The Secretary of State has issued guidance for the purposes of subsection 78(1), entitled "Care and support statutory guidance" ("the Guidance"). Chapter 4 of the Guidance is headed "Market shaping and commissioning of adult care and support". The introduction to chapter 4 states that it provides guidance on section 5 of the Act. It includes the following paragraphs:

"4.11 This statutory guidance describes, at a high level, the themes and issues that local authorities should have regard to when carrying out duties to shape their local markets and commission services. Market shaping, commissioning, procurement and contracting are inter-related activities and the themes of this guidance will apply to each to a greater or lesser extent depending on the specific activity. …"

"4.27 Local authorities should commission services having regard to the cost-effectiveness and value for money that the services offer for public funds. The Local Government Association Adult Social Care Efficiency Programme ( … ) has advice on these issues and may be helpful. …"

"4.31 When commissioning services, local authorities should assure themselves and have evidence that contract terms, conditions and fee levels for care and support services are appropriate to provide the delivery of the agreed care packages with agreed quality of care. This should support and promote the wellbeing of people who receive care and support, and allow for the service provider ability to meet statutory obligations to pay at least the national minimum wage and provide effective training and development of staff. It should also allow retention of staff commensurate with delivering services to the agreed quality, and encourage innovation and improvement. Local authorities should have regard to guidance on minimum fee levels necessary to provide this assurance, taking account of the local economic environment. This assurance should understand that reasonable fee levels allow for a reasonable rate of return by independent providers that is sufficient to allow the overall pool of efficient providers to remain sustainable in the long term. The following tools may be helpful as examples of possible approaches:

UKHCA Minimum Price for Homecare ( … )

Laing and Buisson toolkit to understand fair price for residential care ( … )

ADASS paying for care calculator ( … )"

11. I was also referred to paragraphs 10.27, 11.4 and 11.10 of, and paragraph 11 of Annex A to, the Guidance:

(1) Chapter 10 of the Guidance is headed "Care and support planning". The introduction to chapter 10 states that it provides guidance on sections 24 and 25 of the Act. Paragraph 10.27 provides as follows:

"In determining how to meet needs, the local authority may also take into reasonable consideration its own finances and budgetary position, and must comply with its related public law duties. This includes the importance of ensuring that the funding available to the local authority is sufficient to meet the needs of the entire local population. The local authority may reasonably consider how to balance that requirement with the duty to meet the eligible needs of an individual in determining how an individual's needs should be met (but not whether those needs are met). However, the local authority should not set arbitrary upper limits on the costs it is willing to pay to meet needs through certain routes – doing so would not deliver an approach that is person-centred or compatible with public law principles. The authority may take decisions on a case-by-case basis which weigh up the total costs of different potential options for meeting needs, and include the cost as a relevant factor in deciding between suitable alternative options for meeting needs. This does not mean choosing the cheapest option; but the one which delivers the outcomes desired for the best value.""

(2) Chapter 11 of the Guidance is headed "Personal budgets". The introduction to chapter 11 states that it provides guidance on section 26 of the Act. Paragraphs 11.4 and 11.10 provide as follows:

"11.4 It is vital that the process used to establish the personal budget is transparent so that people are clear how their budget was calculated, and the method used is robust so that people have confidence that the personal budget allocation is correct and therefore sufficient to meet their care and support needs. The allocation of a clear upfront indicative (or 'ball-park') allocation at the start of the planning process will help people to develop the plan and make appropriate choices over how their needs are met."

"11.10 The personal budget must always be an amount sufficient to meet the person's care and support needs, and must include the cost to the local authority of meeting the person's needs which the local authority is under a duty to meet, or has exercised its power to do so. This overall cost must then be broken down into the amount the person must pay, following the financial assessment, and the remainder of the budget that the authority will pay."

(3) Annex A to the Guidance is headed "Choice of accommodation and additional payments". Paragraph 11 of Annex A provides as follows:

"The personal budget is defined as the cost to the local authority of meeting the person's needs which the local authority chooses or is required to meet. However, the local authority should take into consideration cases or circumstances where this 'cost to the local authority' may need to be adjusted to ensure that needs are met. For example, a person may have specific dietary requirements that can only be met in specific settings. In all cases the local authority must have regard to the actual cost of good quality care in deciding the personal budget to ensure that the amount is one that reflects local market conditions. This should also reflect other factors such as the person's circumstances and the availability of provision. In addition, the local authority should not set arbitrary amounts or ceilings for particular types of accommodation that do not reflect a fair cost of care. Guidance on market shaping and commissioning is set out in Chapter 4. Local authorities must also have regard to the guidance on personal budgets in Chapter 11, and in particular paras. 11.22-11.24 on calculating the personal budget."

(4) The Facts

12. The Council currently spends about £120m per annum in providing residential or nursing care in care homes for about 4,000 elderly people. The Council does so by paying the operators of those care homes. The Council does this in discharge of the duties imposed on it by the Act. The Council also commissions placements in care homes for about 500 individuals who meet their own care home costs.

(4)(a) Commissioning Arrangements

13. The Council has commissioned placements in care homes under, broadly, three arrangements:

(1) Until 7 February 2016, the Council commissioned placements under two Framework Agreements: the OP Residential Care Agreement ("the OPRCA") and the Nursing Framework Agreement. I will refer to these as the Old Framework Agreements. The fees paid under the Old Framework Agreements were fixed, although different rates applied in different parts of Essex under the OPRCA. These fees were not increased between 2009 and 2016.

(2) Since 8 February 2016, the Council has commissioned placements under an integrated residential and nursing framework. I will refer to this as the New Framework. The fees paid under the New Framework were established by a tendering process, to which I will return.

(3) At all times, both before and after 8 February 2016, the Council has entered into spot contracts with care home operators for the ad hoc purchase of beds. The fees paid under these spot contracts were individually negotiated. As at April 2015, a little under half of the placements commissioned by the Council were commissioned under spot contracts. Since 8 February 2016, the majority of new placements have been under the New Framework rather than spot contracts.

14. In each case, the weekly fee payable to the care home operator was fixed when the placement was commissioned and there was no contractual provision requiring any increase in that fee. As at the end of July 2016, the average fee paid by the Council for a care home placement was £470 per week for residential care and £543 per week for nursing care. These fees are roughly equivalent to £24,440 or £28,236 per annum. Those residents whose resources exceeded specified amounts were required to contribute to these fees from their income and, where appropriate, capital.
15. The relevant provisions of the Act came into force on 1 April 2015. As I have said, the fees paid under the Old Framework Agreements had not increased since 2009. No application was made for judicial review of the Council's failure to increase those fees between April 2015 and July 2016.

(4)(b) The Care Home Market in Essex

16. There are over 450 care home operators in Essex, providing about 13,000 beds. Not all of these homes or beds are suitable for the elderly. The operators range from large chains to small local privately-owned homes.
17. As the Defendant recognised (in the Pricing Report to which I will refer), care home operators had come under increasing financial pressure in the years to 2016 and many providers reported that they were struggling to survive financially.
18. On the other hand, according to Councillor Dick Madden, there was by July 2016:

"… a declining trend in terms of the number of providers under review demonstrating that generally the quality of provision within Essex is high for this sector. In 2016, the Care Quality Commission (CQC) assessed 79% services inspected in Essex as either "good" or "outstanding". In March 2017 this figure had increased to 81% demonstrating an improving picture from a quality perspective and a favourable comparison to both regional and national figures; only 72% of providers nationally get this rating."

19. Councillor Madden also said that:

"There are very few care home closures in Essex and the majority of those that do close are as a result of quality issues rather than financial distress. Frequently, when a care home has closed it has been taken over by another provider which indicates that it is still seen as a viable operation financially."

20. The Council had by July 2016 provided assistance to the care home market in Essex in different ways, i.e. by providing staff training and by organising seven marketing exercises to assist in the recruitment of staff for care homes in Essex.
21. In the terms of paragraphs (a) to (c) of subsection 5(1) of the Act, Mr Purchase did not deny that in July 2016 any person in Essex wishing to access services in the market for provision of residential or nursing care:

(a) had a variety of providers to choose from who (taken together) provided a variety of services;

(b) had a variety of high quality services to choose from; and

(c) had sufficient information to make an informed decision about how to meet the needs in question.

22. This did not relieve the Defendant of the duty under subsection 5(2)(d) to have regard to the sustainability factor, but it is a relevant feature of the context in which that duty fell to be performed.

(4)(c) The National Living Wage

23. On 8 July 2015 the Chancellor of the Exchequer, the Rt. Hon. George Osborne MP, announced that the National Living Wage would take effect from April 2016. This meant an increase in the minimum wage of care home staff by 50p per hour, to £7.20 per hour.

(4)(d) The New Framework Tender Exercise

24. On 13 July 2015 the Council issued an invitation to tender for the New Framework. Care home providers were invited to tender at a range of fee levels:

(1) In the case of residential care, the range was from £401.31 per week to between £456.19 and £538.37 per week, depending on the location of the care home.

(2) In the case of nursing care, the range was from £420.91 per week to between £487.48 and £577.29 per week, depending on the location of the care home.

25. Tenders were invited by 27 August 2015. Tenderers were instructed to take into account the introduction of the National Living Wage. 115 care home operators submitted bids. Between them, these operators had 209 homes, with 8,000 beds. According to Councillor Madden:

"Different providers chose to bid at different points in the price matrix: some at the bottom, many within the middle of the range and some at the top of the matrix."

26. The Defendant did not provide any figures to give any more detail as to the level of bids. The Claimant's witness, Professor Martin Green OBE, said that those providers who did submit bids did so out of commercial fear of not being on the New Framework in term of future referrals from the Defendant. He also said that these providers were deeply concerned that the maximum prices provided for under the New Framework fell significantly below what their costs of care were and that this had caused or would cause them to rely increasingly heavily on cross subsidising the funding gap from other income sources. However, this evidence was not supported by details such as the names of any of the providers concerned or figures for their alleged funding gap.
27. There was no application for judicial review of the Defendant's decision not to use higher fee ranges in the New Framework tender exercise.

(4)(e) The Cost of Care Analysis

28. The Council carried out a cost of care analysis. The results of this analysis were available to the Council by 22 July 2016, although the report in which they were subsequently published ("the Cost of Care Report") is dated 26 August 2016. According to paragraph 2.1.2 of the Cost of Care Report:

"Laing and Buisson's 6^th Edition Fair Market Price for Residential and Nursing Care (October 2014 – March 2015) was used as the baseline position for the cost of care model and was adjusted for the impact of the increase to National Minimum Wage (NMW) in October 2015 (20p per hour increase to £6.70 per hour) and the introduction of National Living Wage in April 2016 (£7.20 per hour for workers aged over 25)."

29. As for the sources of information used in compiling the Cost of Care Report, paragraph 2.1.1 states as follows:

"A number of sources of information were considered to help inform the development of the cost of care financial model.

Data from other local authority cost exercises although a lack of detailed assumptions meant that comparisons were difficult to make

Returns from the cost breakdown template sent to Residential and Nursing providers. Only 20 returns were received and the level of information included was variable leading to difficulties in ensuring a like for like comparison

Data submitted from providers to support uplift requests which was used predominately to triangulate the findings rather than to develop the cost model in the first instance

Laing and Buisson's 6^th Edition Fair Market Price for Residential and Nursing Care (October 2014 – March 2015). This was used as the baseline position and was supported by a range of detailed assumptions which have been challenged and amended, where relevant, to account for Essex-specific intelligence and/or Council assumptions around 'efficient' models of delivery."

30. The bottom line of the Costs of Care Report are two figures described as the ""Ceiling" fair market price for homes meeting all standards for "new" homes in National Minimum Standards for Care Homes for Older People." The figure for residential care is £647.15. The figure for nursing care is £665.35. These figures are roughly equivalent to £33,652 or £34,598 per annum.
31. It is relevant to note that these figures include costs, profit and return on capital (which at least in part is intended to compensate operators for their rent or interest costs). The following breakdown illustrates this point:

	Residential Care	Nursing Care
A) Staff, including employer's on-costs	321.77	438.09
NHS FNC Funding Contribution		(113.12)
B) Repairs and maintenance	39.67	39.67
C) Other non-staff current costs	98.11	98.11
D) Corporate overheads @ 5% (of A-C)	22.95	23.14
Sub-Total (sum of A-D, less NHS contribution)	482.40	485.89
Operator's Profit (10% of A-D)	48.20	59.90
E) Return on accommodation @ 6% of capital costs	116.94	119.56
Total	647.15	665.35

32. The calculation of these figures involved estimates and assumptions. Those estimates and assumptions are subject to change. For instance, it appears from paragraph 3.3.8 of the Cost of Care Report that the estimated return on capital required to incentivise providers to invest in new care home capacity and to maintain and/or upgrade existing capacity to the latest physical standards has decreased considerably in recent years.
33. The Claimant placed considerable reliance on these figures, but did not go so far as to contend that the Defendant was obliged to increase the fees paid to all care home providers to these levels. The figures in the Cost of Care Report are described in that report as ""Ceiling" fair market prices". They are not described as, and do not purport to be, minimum fee levels below which the market for residential and nursing care in Essex is unsustainable.

(4)(f) The July 2016 Decision

34. Councillor Dick Madden was in July 2016 the Council's cabinet member for Adults and Children. He received a report dated 22 July 2016 ("the Pricing Report") which contained the following recommendations:

"2.1 Agree that residential placements for older people made on a spot contract before 1 August 2015 or under an old framework which are being paid at less than £647 per week be increased by £13.58 per week, or to £647, whichever is the lower.

2.2 Agree that nursing placements for older people made on a spot contract before 1 August 2015 or under an old framework which are being paid at less than £665 per week be uplifted by £13.79 per week, or to £665, whichever is the lower.

2.3 Agree that the uplifts above only be applied to all older people residential and nursing placements which are in force as of 1 July 2016.

2.4 Agree any uplift payable be backdated to 1 April 2016 when the National Living Wage (NLW) was introduced and increased costs were incurred by providers.

2.5 Agree that those people who meet the costs of their care are given a minimum 28 days notification of increased contributions required, with the increased contributions being collected for accommodation costs commencing 1 September 2016."

35. On 22 July 2016 Councillor Madden accepted those recommendations and decided to make those price increases. The fees paid by the Defendant under the Old Frameworks and under spot contracts made before 1 August 2015 therefore increased to an average of about £483.58 per week for residential care and £556.79 per week for nursing care.
36. The material considered by Councillor Madden in making his decision included the contents of the Pricing Report, the accompanying confidential appendix ("the Confidential Appendix") and Equality Impact Assessment and the Councillor's own knowledge and experience of the care home market in Essex, derived from his experience since 2014 as cabinet member for Adults and Children, as detailed in his witness statement. This included his experience of the New Framework tender exercise and the other matters to which I have already referred.

(4)(f)(i) The Pricing Report

37. The Pricing Report included the following analysis:

"3.2 The Older People's residential care provider market in Essex has come under increasing financial pressure over recent years as a result of numerous factors:

The Council has had a policy of 0% uplift on rates for a number of years, although the introduction of the Quality Improvement Fund on 1 April 2013 put an additional £8m per annum of funding into the Older People sector (not just Residential and Nursing);

The cohort of individuals accessing residential and nursing care display increasing levels of complexity as the Council's commissioning strategy is to support individuals to maintain independence for as long as possible. This means that the average costs associated with providing care have increased over time; and

Legislative changes affecting the cost of employing staff in recent times including mandatory pension requirements, changes to national insurance contributions and the increase in minimum wage (most recently the 50p per hour increase to a National Living Wage of £7.20 per hour) have resulted in cost pressures across the sector. This alongside other pressures for example insurance premiums and CQC registration costs means many providers report that they are struggling to survive financially.

3.3 National intelligence suggests that the Older People's residential care sector is struggling with regards to financial sustainability. Recent examples in the news include:

The losses incurred by the largest care home operator in Britain. At the end of April, Four Seasons Health Care reported an annual pre-tax loss of £264m, with credit rating agencies recently warning that it is likely the company will be taken over by its creditors. The low rates paid by local authorities is said to be one of the main contributing factors in the poor outlook for the company.

Research commissioned by BBC Radio 4's You and Yours programme which found that average profit per care home was under £18,000 before tax. The research suggests that low profits along with the debt typically carried by homes, up to 5,000 (25%) of homes in the UK are at high risk of closure within the next three years. The research also suggests the low profits are holding back operators from investing in homes.

The fact that nationally more than 7,000 beds were deregistered in the year to March 2016, and with only 3,000 new beds registered in the same period the 4,000 net loss is the biggest for a decade. Again, the low rates paid by local authorities are highlighted as one of the leading contributing factors."

38. The Pricing Report set out 3 options, as follows:

"4. Options

4.1 Status Quo (i.e. no uplift for existing placements)

There is no contractual obligation on the Council to uplift existing residential and nursing placements so one option would be to maintain rates at the current levels. This is not a recommended option as the Council does have an obligation under the Care Act to maintain a sustainable market of diverse provision and to ensure fees are at a sufficient level to enable providers to meet their legal obligations. Providers have had to absorb many cost increases over recent years including, amongst other things, normal inflationary pressures, pension auto-enrolment and year on year increases to National Minimum Wage. The recent introduction of National Living Wage makes is increasingly difficult for providers to maintain the current fee levels.

4.2 Affordable increase

The Council recognises the cost pressures faced by Social Care providers whilst also facing similar financial pressures itself. The second option would be to uplift existing placements that have not had the opportunity to reflect the increased cost of National Living Wage by an amount broadly equivalent to the impact of its introduction. This equates, according to the Council's cost model, to £13.58 for residential placements and £13.79 for nursing placement, subject to a cap of £647 for residential placements and £665 for nursing placements. This is the option recommended in this paper.

4.3 Full cost of care increase

The final option identified is to uplift all rates to the calculated cost of care figures of £647 per week for residential placements and £665 per week exclusive of Funded Nursing Care for nursing placements. This is not a recommended option as the financial impact on the Council would be a minimum of £25.7m per annum taking into account the likely increased contribution levels for full cost payers. The Council's financial situation does not allow this to be a viable option at this point in time."

(4)(f)(ii) The Confidential Appendix

39. Paragraphs 2.1 to 2.4 of the Confidential Appendix provided as follows:

"2 Financial implications

2.1 Within the £118.5m 2016/17 budget for residential and nursing care, £2.3m was notionally allocated for managing the impact of the National Living Wage (NLW) within the older people residential and nursing case sector.

2.2 Within the report, it is indicated the expected net cost of the recommendations is £1.6m. It is likely the actual cost when the recommendations are implemented will be lower as a result of placements changing or adults leaving residential care. Based on the average reduction seen over the last three months, net costs could fall by £63,000 over June and every month thereafter.

2.3 With an estimated net cost of £1.6m, this is within the £2.3m allocated notionally for NLW impact on this market sector (and part of £16.3m allocated across ECC) and therefore the recommendations are affordable within the MTRS.

2.4 The Adult Social Care forecast outturn as at the end of May predicts the £1.6m maximum cost will actually be met from within the budget for inflationary pressures and therefore at the current time it is assumed the NLW budget will not be required. The £1.6m cost is currently noted as a risk against the NLW budget and this will be kept under review."

40. The Claimant relied on the fact that the Confidential Appendix suggested that there was £2.3million in the Defendant's budget which was available to spend on increasing the rates paid to care home providers. However, Councillor Madden's evidence was that by July 2016 the annual overspend for Adult Social Care was predicted to be £8.7million, and the predicted overspend for the Defendant as a whole was £6.3million.
41. In addition, paragraph 1.10 of the Confidential Appendix provided as follows:

"Setting the rate below the calculation produced by the modified Laing & Buisson model is justified because:

(a) The Financial implications of uplifting to the cost of care figures for residential and nursing would be unaffordable and unsustainable within the Council's budgetary constraints.

(b) There is a need to ensure competition and encourage providers to operate at a lower cost if they can provide high quality services at those prices.

(c) Feedback from the market at various provider engagement events that have taken place towards the end of 2015 suggest that increases of this level (£12 to £15 per week) would be commercially acceptable to the market and ECC could continue to obtain a good supply of care services at this rate.

(d) If providers find that these historic placements are unaffordable they are able to request withdrawal from provision of this care."

(4)(f)(iii) The Equality Impact Assessment

42. Paragraph 3.2 of the Equality Impact Assessment included the following:

"The monetary figure of the proposed uplift comes from detailed financial analysis but is supported by evidence gathered as part of the Care Act work and is in line with what the market told us they would need to cover the increased costs resulting from the changes to National Living Wage."

43. The Claimant pointed to the difference between this statement and paragraph 1.10(c) of the Confidential Appendix and submitted that this statement more accurately reflected the more limited nature of the feedback which the Defendant had received. The Defendant did not provide more detail of this feedback in order to clarify this point.

(4)(g) The February 2017 Decision

44. On 16 February 2017 Councillor Madden decided to accept a recommendation to invite tenders for new placements under the New Framework at fees which were £6.58 (in the case of residential care) or £6.66 (in the case of nursing care) per week higher than the prices set out in the 2015 tender. Care home providers were therefore being invited to submit tenders at fees within the following ranges:

(1) In the case of residential care, the range was from £407.89 per week to between £462.77 and £544.95 per week, depending on the location of the care home.

(2) In the case of nursing care, the range was from £427.57 per week to between £494.14 and £583.95 per week, depending on the location of the care home.

45. No application has been made for judicial review of the February 2017 decision.

(4)(h) The October 2017 Decision

46. On 4 October 2017 Councillor John Spence, who had succeeded Councillor Madden as the cabinet member responsible for adult social care, decided to increase (with effect from 1 April 2017) the fees paid under the Old Framework Agreements or under spot contracts made before 1 August 2015:

(1) by £34.55 per week for residential care, subject to a maximum of £652.89 per week; and

(2) by £35.07 per week for nursing care, subject to a maximum of £665.63 per week.

47. The October 2017 decision may be the subject of future challenge. I have not assumed that it was lawful.

(5) Alleged Breach of Subsections 5(1) and (2)

48. There was some debate as to the nature of the duty imposed by subsections 5(1) and (2) of the Act. Before turning to the words of the section, it is appropriate to consider the context. A council such as the Defendant has a number of duties in relation to the provision of residential and nursing care under the Act. These include, in particular, the duty under section 18(1) to meet the needs for care and support of an adult who has been assessed as having such needs, who has been determined to meet the eligibility criteria and who meets the other specified conditions. Section 5 of the Act is one of seven sections (i.e. sections 1 to 7) of the Act under the heading "General responsibilities of local authorities". Councils such as the Defendant face many pressures on their resources. The Claimant accepted that affordability was a relevant factor when taking the July 2016 decision. Moreover, as I have said, it was common ground that, in expending public funds on the provision of residential and nursing care, the Defendant was under a duty to obtain value for money.
49. As for the wording of subsections 5(1) and (2):

(1) Paragraph 5(1) imposed a duty on the Defendant to promote the efficient and effective operation of a market in services for meeting care and support needs. It was common ground that such a duty did not confer specific rights on individuals (or, a fortiori, individual care home providers): see R (G) v Barnet London Borough Council [2004] 2 AC 208, at [91]. Moreover:

(a) As the Defendant's activities illustrate, there are means other than setting fees for promoting the efficient and effective operation of a market.

(b) In relation to fee levels, one aspect of promoting efficiency in a market can be ensuring that fees are not set too high.

(c) On the other hand, the sustainability factor can point towards ensuring that fees are not set too low.

(2) The duty was imposed for a specified purpose, i.e. with a view to ensuring that any person in Essex wishing to access services in the market had the three things specified in paragraphs (a) to (c) of subsection 5(1). As I have noted, that purpose was being met in July 2016. It is relevant to note that the statutory purpose was to benefit those elderly people in Essex who needed residential or nursing care. Benefitting care home operators was not the purpose of the duty (although it might be a consequence of compliance with the duty).

(3) It was in the performance of the duty imposed by section 5(1) that the Defendant was obliged by subsection 5(2)(d) to have regard to the sustainability factor.

(4) Mr Purchase emphasised the word "in particular" in subsection 5(2). He referred to Mummery LJ's judgment in R v City of Westminster Housing Benefit Review Board, ex parte Mehanne [2000] 1 WLR 16, 24, which was cited with approval by Lord Bingham in the same case at [2001] 1 WLR 539, at [13]. That case concerned the meaning and effect of the words "in particular" in a different statutory context, in which those words singled out one factor for special mention and thereby gave it the status of a mandatory consideration which carried the most weight in making a decision of the kind in issue in that case. That is not the case here. The words "in particular" in subsection 5(2) introduce a list of seven different factors, to all of which regard must be had when performing the general duty imposed by subsection 5(1) for the purpose stated in subsection 5(1).

50. Although the duty imposed by subsection 5(1) is general in character, it was common ground that it capable of being enforced in an appropriate case, albeit only as a general duty, rather than one conferring individual rights. Mr Sharland suggested that it was only enforceable by those it was intended to benefit, i.e. the elderly in Essex in need of residential or nursing care. However, the Claimant was given permission to apply for judicial review, and it was not contended at the permission stage that the Claimant lacked locus standi.
51. Mr Purchase submitted, in paragraph 42.1 of his skeleton argument, that the Defendant was in breach of its duty under section 5(1) because the July 2016 decision did not promote, but rather undermined, the efficient and effective operation of the market. This was an invitation to the Court to form a view about the substance of the July 2016 decision. It is best considered in the context of the allegation that the July 2016 decision was unreasonable.
52. As to whether the Defendant complied with its duty under section 5(2)(d), I ask the question, "Did the Defendant, when it was making the July 2016 decision, have regard to the importance of ensuring the sustainability of the market for residential and nursing care?" The answer to this question has to be "Yes". This is apparent from the terms of the Pricing Report, and was confirmed by Councillor Madden's evidence.
53. In paragraph 42.2 of his skeleton argument, Mr Purchase submitted that the Defendant did not have proper regard to the sustainability factor because it did not undertake sufficient inquiries to be properly informed in relation to the sustainability factor. Mr Purchase submitted that it was incumbent on the Defendant, in order to comply with its obligation to have regard to the sustainability factor, to conduct sufficient enquiries. He relied on Bracking v Secretary of State for Work and Pensions [2013] EWCA Civ 1345; [2014] EqLR 60, at [26], [60] and [70]. That was a decision about the public sector equality duty under section 149 of the Equality Act 2010.
54. There is no doubt that the Defendant did obtain information about the care home market in Essex. That is apparent from the Pricing Report, the Confidential Appendix, the Costs of Care Report and Councillor Madden's statement. I am not persuaded that the Defendant did so little to inform itself about the market that it cannot say that it had regard to the sustainability factor. In reaching this conclusion, I bear in mind what Sullivan LJ said in R (Members of the Committee of Care North East Northumberland) v Northumberland County Council [2013] EWCA Civ 1740; [2014] PTSR 758. That was a case about the fees paid by a local authority to care home providers, although it pre-dated the commencement of the Act. At paragraph 19, Sullivan LJ said:

"The emphasis in Ms Mountfield's submissions was on the sufficiency of the respondent's inquiries. There is no dispute that the respondent took some steps to equip itself with the relevant information. The appellant's contention is that those steps were insufficient. When considering the force of this submission, it is important to remember that provided some inquiry into the relevant factor to which due regard has to be paid is made by the decision-maker "it is generally for the decision-maker to decide on the manner and intensity of the inquiry to be undertaken into any relevant factor", see per Beatson J, as he then was, in R (on the application of Bevan & Clarke LLP) v Neath Port Talbot County Borough Council [2012] EWHC 236 (Admin) cited in paragraph 37 of the judgment below."

55. Sullivan LJ went on to question whether sufficient regard had been paid to this observation of Beatson J in a number of recent first-instance decisions in this area.
56. Another argument advanced by Mr Purchase was that the Defendant was in breach of subsection 5(2)(d) because it did not consider the possibility of an increase in fees which fell between options 2 and 3 in the Pricing Report, i.e. an increase which was greater than the actual increase (option 2), but less than the increase needed to take fees to the levels set out in the Cost of Care Report (option 3). This was not specified as a ground for judicial review in the Claimant's grounds for judicial review. Had it been, the Defendant's evidence might have addressed it in more detail.
57. However, Councillor Madden stated that, when making the July 2016 decision, his consideration was not limited to the matters set out in the Pricing Report. He also said that, when he made the decision, he was confident that the new fees would ensure the efficient and effective operation of the care home market, would ensure that it remained sustainable in the long term and would enable the various care homes to deliver the agreed care packages at the required quality of care. It is obvious that, if he had considered that option 2 was insufficient for these purposes, he could have explored alternatives between option 2 and option 3.

(6) The Guidance

58. The Claimant contended that the Defendant departed unjustifiably from the Guidance in five respects. I will address each of these in turn. First, however, I will say something about the nature of the Defendant's duty.

(6)(a) The Guidance: The Defendant's Duty

59. In relation to the Defendant's obligation to act under the general guidance of the Secretary of State, I was referred to the well-known passage from the judgment of Sedley LJ in R v London Borough of Islington, ex parte Rixon [1997] ELR 66, at 71:

"What is the meaning and effect of the obligation to 'act under the general guidance of the Secretary of State'? Clearly guidance is less than direction, and the word 'general' emphasises the non-prescriptive nature of what is envisaged. Mr McCarthy, for the local authority, submits that such guidance is no more than one of the many factors to which the local authority is to have regard. Miss Richards submits that, in order to give effect to the words 'shall … … act', a local authority must follow such guidance unless it has and can articulate a good reason for departing from it. In my judgment Parliament in enacting section 7(1) did not intend local authorities to whom ministerial guidance was given to be free, having considered it, to take it or leave it. Such a construction would put this kind of statutory guidance on a par with the many forms of non-statutory guidance issued by departments of state. While guidance and direction are semantically and legally different things, and while 'guidance does not compel any particular decision' (Laker Airways Ltd v Department of Trade [1967] QB 643, 714 per Roskill LJ), especially when prefaced by the word 'general', in my view Parliament by s.7(1) has required local authorities to follow the path charted by the Secretary of State's guidance, with liberty to deviate from it where the local authority judges on admissible grounds that there is good reason to do so, but without freedom to take a substantially different course."

60. This passage, including the last nine words, was referred to with approval in R (C) v Southwark London Borough Council [2016] EWCA Civ 707; [2016] HLR 36. However, the last nine words have been doubted in other cases: see R (Forest Care Homes Limited) v Pembroke County Council [2010] EWHC 3514 (Admin) at [29]; R (Members of the Committee of Care North East Northumberland) v Northumberland County Council [2013] EWHC 234 (Admin) at [34]; and R (X) v London Borough of Tower Hamlets [2013] EWHC 480 (Admin) at [31]-[32]. Given my other findings, I do not need to address this issue.

(6)(b) The Guidance: Paragraph 4.31

61. The Claimant contended that, contrary to paragraph 4.31 of the Guidance, the Defendant did not seek and/or have "evidence that fee levels for care and support services are appropriate to provide the delivery of the agreed care packages with agreed quality of care."
62. I do not accept this contention. The Defendant's day-to-day dealings with care home providers and the recent New Framework tender exercise provided ample evidence of this kind. I note, in particular, that, although the rates payable under the Old Framework Agreements had not been increased since 2009, the purposes set out in paragraphs (a) and (b) of subsection 5(1) were being met in July 2016.
63. The Claimant argued that the decision to close a care home is not one which is taken lightly, given the potential effects on vulnerable individuals. However, the fact that seven years without fee increases under the Old Framework Agreements had, according to Councillor Madden's evidence, resulted in few care home closures, and even fewer for financial reasons, is a potentially relevant consideration. The weight to be given to that consideration was a matter for the Defendant.

(6)(c) The Guidance: Paragraph 4.35

64. For substantially the same reasons, I reject the submission that the Defendant failed to observe paragraph 4.35 of the Guidance and set and/or decided to maintain "fee levels below an amount which is not sustainable for Providers in the long-term". This submission also overlaps to some extent with the argument, to which I will return, that the July 2016 decision was unreasonable.

(6)(d) The Guidance: Paragraph 11 of Annex A

65. The Claimant contended that the Defendant failed to comply with paragraph 11 of Annex A to the Guidance, by setting or maintaining "arbitrary amounts or ceilings for particular types of accommodation that do not reflect a fair cost of care".
66. Mr Purchase conceded that this allegation did not add much to the others. I agree, particularly as Annex A contains guidance on other matters, rather than section 5.

(6)(e) The Guidance: Paragraph 11.10

67. The Claimant contended that the Defendant failed to comply with paragraph 11.10 of the Guidance, in that the fees were not set at an "amount sufficient to meet the person's care and support needs."
68. Again, Mr Purchase conceded that this did not add much to the other allegations, and I agree. Chapter 11 of the Guidance contained guidance on section 26, not section 5. There was no evidence that individuals' care and support needs were not being met as a result of the rates paid by the Defendant.

(6)(f) The Guidance: General

69. The Claimant contended that the Defendant failed to comply with the Guidance because "the fees are set at a level which was significantly below the actual costs of providing care". These words were not taken directly from the Guidance. Rather, Mr Purchase submitted that they were derived from looking at the Guidance as a whole. However, the Guidance is lengthy and detailed. It is neither necessary nor appropriate to interpolate words which are not to be found in the Guidance.
70. In any event, the Claimants did not provide any evidence as to the actual costs to any actual care home provider of providing residential or nursing care. The Claimants relied instead on the Cost of Care Report. But, as has been seen, the figures in the Costs of Care Report were based on assumptions and estimates and included not only costs incurred by care home providers (e.g. on staff, repairs and maintenance and other non-staff current costs), but also profits and returns. The figures in the Costs of Care Report had also to be seen against the Defendant's experience of how the market for residential and nursing care was operating in practice.

(7) Irrationality

71. Finally, the Claimant contended that the July 2016 decision was Wednesbury unreasonable. I have already referred to the submission that the July 2016 decision undermined, rather than promoted, the market for residential and nursing care in Essex. In addition, Mr Purchase submitted that the reasoning in the Pricing Report was irrational, because it:

(1) did not recommend that rates should remain unchanged (option 1);

(2) recommended that some increase should be made in the light of the financial pressures on care home providers and the Defendant's duty under section 5; but

(3) recommended a limited increase (option 2) which addressed only one of the sources of those financial pressures (i.e. the introduction of the National Living Wage).

72. The July 2016 decision was a decision to increase the fees paid to care home providers (despite the absence of any contractual obligation to do so). The Claimant's case was that an increase in rates was a good thing from the point of view of promoting the sustainability of the market, but that the increase decided on in July 2016 was too small. The Claimant's case, therefore, must be that there was a certain level of increase which was necessary if the section 5 duty was to be met. What that level was (assuming there was one), and, in particular, whether it was more or less than the level of the increases decided on in July 2016, is not a judgment which this court could easily make on an application for judicial review, and certainly not on the evidence in this case.
73. As for the reasoning in the Pricing Report, it is appropriate to recall Councillor Madden's evidence that his consideration was not limited to the matters set out in the Pricing Report. It is also relevant to note the following:

(1) It does not follow that, because some increase in fees was considered appropriate, the increase had to be one which addressed in financial terms each of the sources of financial pressure experienced by care home providers. That is not a necessary consequence of having regard to the sustainability factor.

(2) The section 5 duty cannot be viewed in isolation. The Defendant faced other competing pressures and duties, including the limits on its resources and the duty to obtain value for money.

(3) Indeed, as I have said, the section 5 duty itself could be seen as requiring a council not to increase fees by too much. Mr Purchase disparaged what he called "a supposed need to promote competition", but the promotion of competition is inherent in the duty to promote an efficient and effective market.

(4) It was the Defendant's responsibility to strike a balance between these different considerations. The matters identified by Councillor Madden were all relevant to that exercise. The weight to be given to different factors was a matter for the Defendant.

(5) As I have said, the evidence before the Court does not justify a conclusion that the only rational way of having regard to the sustainability factor was to increase fees (which the Defendant was under no contractual obligation to increase) by more than the increases decided on in the July 2016 decision.

(8) Summary

74. For the reasons which I have given, this application for judicial review is dismissed.
75. I am grateful to both counsel for the clear and concise nature of their arguments, which greatly assisted me in my task.