The Audit Commission for England and Wales v Ealing Borough Council [2005] EWCA Civ 556

This appeal concerned the way in which the Audit Commission for Local Authorities and the National Health Service for England and Wales (the Audit Commission) exercised its powers under s99 of the Local Government Act 2003 to categorise the performance of local authorities.

The Audit Commission is required to produce a report on how the local authority has performed in exercising its functions.   In 2004 the Audit Commission notified the respondents Ealing London Borough Council (Ealing) that it had characterised its performance as ’weak’ on a scale of ‘poor’, ‘weak’, ‘fair’, ‘good’, and ‘excellent’.

Ealing challenged this view by bringing judicial review proceedings.  The court at first instance had decided in Ealing’s favour, that the Audit Commission had acted unlawfully by adopting a rule which automatically downgraded a local authority which had received a zero rating from the inspection report of another statutory body, the Commission for Social Care Inspectorate (CSCI).  The court held that the Audit Commission had refused to apply its own mind to the reasons why CSCI gave the authority that particular star rating and whether those reasons warranted downgrading.  The Audit Commission appealed against this decision.

The self-developed and non-statutory policy framework under which the Audit Commission makes its decision is known as the Comprehensive Performance Assessment (CPA) which combines judgments about a range of services as well as an overall corporate assessment of ability.  Under CPA rule 30(2) a local authority could not receive anything other than a “weak” rating if it failed to receive at least a rating of ‘fair’ on an inspection of its social services, education and financial standing.  In the range of ratings available to it, CSCI gave Ealing a rating of zero, the lowest score possible, which was not challenged by Ealing.  The CSCI rating is based on an assessment of adult and children’s services.

Ealing alleged that the Audit Commission had fettered its discretion by applying a strict rule based solely on the conclusion of the CSCI inspection.   It had not allowed for the possibility for an exception to this rule and had subordinated its own decision-making function to that of the CSCI.  Ealing were not contending that the Audit Commission should not make use of scores arrived at by specialist inspectorates such as the CSCI but that it should not allow other bodies to dictate to it the categorisation of a local authority in its own inspection report.

The key issue was whether the court said that under CPA rule 30(2) the Audit Commission had effectively unlawfully delegated its power to the CSCI.  There was nothing unlawful about having such a rule in absolute terms so long as it was a rational one.  By using the rule to determine an assessment of a local authority the Audit Commission was simply relying on the operating policy of the CSCI to provide a fair score.  It had adopted as its own a series of weightings, produced by the CSCI, which resulted in a star rating in an entirely predictable way.  It was entitled to do that.  It was not delegating its decision in any particular case to the CSCI.

This decision illustrates that there can often be a fine line between success and failure in a case such as this.

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