In July 2005, the Minister announced details of a scheme to provide incentives to local authorities to increase their business rates income. The statement set out five principles of the scheme, including that it had to be ‘fair, reflecting relative performance and not relative circumstances’, and that it should be as intelligible and transparent as possible. The statement continued that ‘business growth is measured in terms of increase in a local authority’s rateable value during a calendar year’. A public announcement from the Minister stated that the grant would be based on changes to rateable values ‘provided by the Valuation Office Agency’. The Department advised that the VOA would provide a list of rateable values (gross of appeals, and net of empty and part-empty property reliefs) at the end of the first year, which would be compared to the starting list.
In 2005, both claimant local authorities increased their business rates above the applicable floor by expansions and redevelopments of existing commercial properties, and they calculated that they should receive a grant of £200,000 and £800,000 respectively. However, no grant was awarded in either case. It subsequently became apparent that the VOA only used data recorded against certain ‘change codes’ to arrive at the change in an authority’s business rates for the year and that, as the same code (change code 20) recorded changes to rateable value due to alteration of hereditaments and due to successful appeals, data recorded thereunder had not been included in the VOA’s calculation. The authorities applied for judicial review.
Held, allowing the applications for judicial review, that there had been an unlawful departure from the scheme as announced. The scheme as promulgated gave rise to a substantive legitimate expectation on the part of the authorities that their actual rateable growth recorded (gross of appeals and net of empty and part-empty property reliefs) would be rewarded.