Judicial review highlights duty to consider true cost of care

Liam Fitzgerald, instructing Philip Rule KC, No 5 Chambers, acted for the successful claimant, SARCP, a body which represents care providers in Staffordshire and Stoke-on-Trent.

For the 2024/2025 annual indexation increase, the council conducted a consultation and decided to increase residential fees by 1.4%, the minimum required by the contract. The claimant argued, amongst other issues, that the increase was insufficient to cover the actual and increasing costs of care, including inflation and increases in the National Living Wage.

The court found that the decision was unlawful on five grounds, identifying the following five issues with the council’s decision:

1. The council failed to adequately take the results of the consultation into account in its decision.
2. In its decision, the council failed to take into account its statutory duties under the Care Act 2014.
3. The council failed to follow statutory guidance, and specifically the duty under s78 of the Care Act 2014 to follow the Department of Health and Social Care’s Care and Support Statutory Guidance, not properly considering the actual costs of care or inflationary pressures.
4. There was a breach of the Public Sector Equality Duty under the Equality Act 2010, as the council did not consider the potential discriminatory impact on disabled or elderly residents of care homes
5. The decision was irrational in comparison to the evidence and properly relevant matters. While the council had set a goal of ‘keeping people in their own homes’, it did not consider the needs of residents who were already in care homes and unlikely to return to their homes.

The court ultimately found that the council had made ‘overlapping failures to take into account consultation responses, s.5 CA and statutory guidance, the PSED and residents’ interests‘ in its decision. The court made a declaration of the unlawful conduct of the council, quashed the council’s decision and ordered the council to re-take its decision within 28 days, this time taking into consideration the relevant factors.

Issues

The council sought to argue, due to the existence of, and the terms of, the contract, that this was an issue of private law, and therefore not subject to the relevant public law standards. However, the court found that the ‘decision may have exercised private law rights under the contract, but it also exercised public functions: the discharge of the defendant’s ‘market-shaping duty’ in s.5 CA‘ [court’s emphasis in italics]. Although the matter involves a contractual discretion, and so the decision had a private law element, the council was ultimately exercising a public function as it derived it from statute. The court found that when setting the fee increase, the council had to be held to its statutory obligations under the Care Act 2014.

The judgment emphasised that the decision is amenable to judicial review as it is independent of the contract, and unlike in Supportways v Hampshire CC [2006] EWCA Civ 1035, has a ‘sufficient public law element‘. The court found public law elements in multiple areas of the claim, including the implications on third parties, the claimant not being the contracting party, and the claim raising public law grounds of challenge. It also found that SARCP’s challenge did not rely on any private law rights, as it had none under the contract, not being a party to the same.

The court also found that SARCP, as the claimant, had standing to bring a challenge, despite not being a party to the underlying contract. The council challenged the ability of SARCP, a body representing care providers but not a party to the contract itself, to bring proceedings. However, the court found that the claimant did have standing as the remedies it was seeking (i.e., the declaration and quashing order) were not remedies under the contract, but were properly public law remedies.

Whilst this case rests on its own facts, it is hoped that this judgment may reassure those seeking to challenge local authorities in similar circumstances that the court remains willing to hold local authorities to their public law standards and to allow representative bodies standing to bring challenges on behalf of the providers they represent.

Takeaways

The judgment makes it clear that when setting an annual increase to care home fees, local authorities must consider much more than solely their growing budgetary pressures.

Local authorities must not only follow a proper consultation exercise but must really consider the outcome of this in their decision to uplift fees. The court highlights that while the consultation response, in this case, did mention ‘the need to consider ‘the actual costs of care’,[…]inflation and National Living Wage increases, the impact of squeezing costs on standards and comparable authorities adopting higher increases‘, the decision did not acknowledge these and ‘effectively ignored them‘. For the consultation process to be adequate, local authorities must properly consider the responses from it before finalising their fee uplift proposals. They must evidence that they have considered factors such as the actual cost of care.

Local authorities must also ensure that they fulfil their statutory duties under the Care Act 2014, namely, as highlighted by this judgment:

• to promote the efficient and effective operation of a market with a view to ensuring a variety of providers and high-quality services;
• to take into account the importance of ensuring the market remains sustainable, for example by setting fees at a sustainable level and not just offering other support;
• to have regard to the importance of fostering continuous improvement in the quality of care services and the ability of providers to comply with CQC standards and improve quality given the pressures on overheads by low fees;
• to have regard to the importance of fostering a workforce able to deliver high-quality care, considering factors such as the rise in the National Living Wage; and
• to have regard for the importance of promoting the well-being of care-home residents due to the ‘indirect impact’ on them of local authority fees not covering the provider’s actual costs of care, either inhibiting providers from meeting all their needs and/or leading them to increase the level of ‘top-ups’ from residents or their families.

This judgment will be significant for care providers and local authorities alike and hopefully serves as a timely reminder to those empowered to make decisions relating to fees that the court will hold them to the appropriate standard. It highlights that local authorities, whilst under financial pressure, that are considering fees to set for providing services to meet the important needs of vulnerable adults, must continue to act under public law principles and consider the actual costs of the care placement and the interests of residents.

Equally, this case may empower care providers who are trying to run their care homes sustainably when faced with having to absorb increases in inflation and the National Living Wage. The judgment is available here.

For more information

We are committed to supporting providers in the health and social care sector, to ensure that they are paid properly for the publicly-funded work they do. For support on this, please contact Liam Fitzgerald.

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