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Point of law - Stephen Cirell and John Bennett - The CPAs Achilles heel

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18 March 2005

Ealing council was improving by leaps and bounds, the Audit Commission itself said so. So when its 'good' assessment was downgraded to 'weak', the London borough went to court and won

In the High Court last month, a ruling was handed down that could have profound implications for the Comprehensive Performance Assessment. It involved a challenge by the London Borough of Ealing to its CPA categorisation as a 'weak' authority.

What happened was that in the 2004 CPA refresh round, Ealing scored three for its overall service block assessment and three for its corporate assessment. Under the normal matrix, therefore, it would have ranked as a 'good' authority.

However, the Commission for Social Care Inspection had just given it a 'zero star' rating for its social care function because, although its current performance was as good as a number of 'two star' authorities, its capacity to improve was assessed less favourably.

This presented the council with a particular problem. As well as the normal matrix for calculation of CPA scores, there is a further series of hurdles. Superimposed upon the methodology are three 'rules' intended to hold authorities back, in specified circumstances, from the category they would otherwise attain under the system. One of the rules, the subject of the challenge in this case, provides that an authority must score at least two (one star) on education, social services and financial standing to achieve a category of 'fair' or above.

This meant that, notwithstanding substantial improvements in the authority's performance, evidenced by a superb 'direction of travel' progress from 'weak' through 'fair' to 'good', the authority was artificially and unfairly demoted. This would have a significant effect on the council, as the availability of freedoms and flexibilities (and indeed the imposition of more regulation) is dependent on CPA status.

Ealing was devastated. The facts led it to look carefully at what had been done and whether this could

be squared with the legal process of the CPA. They concluded that it could not.

The legal provisions underpinning the CPA are to be found in the Local Government Act 2003 but are rarely referred to. In short, there are three stages set down in section 99. First, the Audit Commission has to make 'findings' on the performance of local authorities. Then it has to use those 'findings' to 'categorise' councils into one of five bands and record that in a report.

Finally, the secretary of state has to make an Order using these categorisations, so putting them into law. Section 100 of the Act then sets down the provision linking exercise of powers to the CPA ratings.

So the statutory duty to make a holistic judgement on each authority is that of the Audit Commission alone. In doing so, of course, it can take into account the work of other key inspectorates, principally the CSCI and Ofsted, and use their findings as its own. If this were not the case, there would be no point in having specialised inspectorates.

Where the commission went wrong in the Ealing case was to permit its carefully crafted holistic CPA assessment of the council (categorising it as 'good') to be completely replaced by the CSCI's categorisation of its social care function (ie, that it was a 'no star' social care authority), and therefore relegate its CPA categorisation to 'weak.' This meant that it was allowing the conclusions on one function to override those on all the rest and for the CSCI to dictate absolutely the outcome of the CPA exercise. But Parliament has entrusted this duty to the Audit Commission, not the CSCI, and the commission had therefore acted unlawfully.

The judge in the case agreed and upheld Ealing's challenge. He indicated that where a statute permits a body to make a finding, judgment or discretionary decision, ordinary principles of statutory construction suggest that this must normally be done by the body itself, applying its own mind to determinative questions.

Ordinarily, therefore, it would be unlawful for a body to refuse to do so and/or to adopt a policy of doing what another body wanted (see, for example, Lavender v Minister for Housing and Local Government [1970] 1 W.L.R. 1231, DC), or of altering what it would otherwise do whenever another body had reached a particular conclusion.

The implications of this case go way beyond the handful of other authorities that are formally held back by one rule or another in the CPA. It shows that the commission can be successfully challenged where it has got it wrong, and highlights one of a number of areas of the CPA process that are highly controversial.

As is widely known, a new process has come in to deal with the CPA from this year. Although the commission is appealing the Ealing decision, it must now be very concerned that it will need to have a 'root and branch' review of that new process to ensure that there are no more hostages to fortune awaiting. After all, if the courts regularly strike down its categorisations, then the process loses credibility.

Stephen Cirell is head of local government and John Bennett is a consultant solicitor with Eversheds' Local Government Group. Stephen Cirell advised Ealing LBC in relation to this case, with Andrew Arden QC

PFmar2005

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