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“Unreasonable public expenditure” in section 9 EA – which costs?

June 22nd, 2011 by Jane McCafferty

The Court of Appeal gave judgment today in a case which again considered the question of which costs are relevant when determining what constitutes “unreasonable public expenditure” in section 9 of the Education Act 1996; H v Kent CC [2011] EWCA Civ 709 (full judgment available here). 

Sullivan LJ’s judgment seeks to reconcile the apparently conflicting approaches to the identification of the costs to the public purse taken by Sedley LJ in the Oxfordshire and Slough cases (and by Underhill J in the Coventry case) as responses to extreme positions adopted in submissions.  The orthodox Oxfordshire approach was preferred, with the Court of Appeal holding that the LEA’s budgetary arrangements for an individual school would usually be a sensible starting point. If those arrangements made provision for the payment of an age weighted pupil unit (AWPU) to the school there was no reason on the facts of H why the FTT should not accept that the AWPU, together with any additional costs specifically incurred in respect of the child in question, were a fair reflection of the cost to the public purse of educating the child at that school.

The effect of section 9 is that parental choice is to be overridden where the choice would impose an avoidable burden on public funds. The FTT was called upon in H, as it often is, to quantify the respective costs of the two schools.  It did so by applying the orthodox approach set out in Oxfordshire whereby only the ‘marginal costs’ to the LEA are included and costs which would be incurred whether or not the child attended the school are excluded.  On the facts of H, these marginal costs were limited to the AWPU and some transport costs.  After the oral hearing of the appeal to the UT, the Court of Appeal’s decision in Slough was handed down.  Although Sedley LJ gave judgment in both Oxfordshire and Slough, he did not refer to the former in his judgment in the latter and there is, as Sullivan LJ acknowledged, at least an apparent inconsistency between the two decisions. 

In Slough, the LEA’s submission was that admission to a maintained school with space for the child was “cost-free”, apart from any special requirements she brought with her.  That submission goes too far in that it artificially assumes a place at a maintained school to carry a nil cost to public expenditure. However, Sedley LJ’s response to that submission in Slough also went too far when he expressed himself as follows: “Every element of a maintained school carries a cost in public funds.  The recurrent exercise for tribunals is to calculate what it is..” (emphasis added). Sedley LJ went on to approve the FTT’s decision that “whatever the notional per capita cost of the maintained school was” it exceeded the cost of the independent school.  This reference to a notional per capita cost did not sit easily with the marginal costs approach taken in Oxfordshire.

The appellant in H adopted a different, but equally artificial, position submitting that the tribunal was wrong to focus on the LEA’s budgetary allocation for the school rather than the expenditure of the school itself as “public expenditure”.  It was submitted that “public expenditure” in section 9 should always be determined by consideration of the school’s accounts, excluding fixed costs such as premises but including all variable costs in the school’s accounts.  Sullivan LJ rejected this submission.  Stepping back from the two extremes of fractionalising the entire LEA budget (rejected in Oxfordshire) and assuming a cost-free place at a maintained school (rejected in Slough and Coventry), Sullivan LJ held that whether a placement involved unreasonable public expenditure was a question of fact to be answered by the FTT in a common-sense way.  

The Court of Appeal held that it is for the FTT to decide what evidence it considers most helpful and it is entitled to have regard to other information, such as a school’s accounts, if it is not satisfied that the figures based on the LEA’s budgetary arrangements are a fair reflection of the cost to the public purse of educating the child at the school in question. Although they would not necessarily provide the definitive answer, the LEA’s budgetary arrangements for an individual school will usually be a sensible starting point. If those arrangements made provision for the payment of an AWPU to the school there was no reason why the FTT should not accept that the AWPU, together with any additional costs specifically incurred in respect of the child in question, for example transport costs or the costs of therapy or learning support if an additional therapist or LSA had to be employed by the school, or if an existing therapist or LSA at the school had to be paid to work additional hours, were a fair reflection of the cost to the public purse of educating the child at that school. It should only be in those cases where there was no AWPU payment by the LEA, or where the FTT was satisfied that, for some cogent reason, the AWPU plus any additional costs did not fairly reflect the cost to the public purse of placing the child in a particular school, that the FTT would consider it necessary to adopt some other method of calculating the public expenditure under section 9 EA. 

In one sense, the decision in H is welcome in that it largely restores the well-understood Oxfordshire approach.  However, it does leave the door open for parents to invite the FTT to depart from this approach where they can show a “cogent reason” for doing so on the facts.  No doubt such an invitation will become routine.  The danger for LEAs is that they must have their tackle in order in terms of evidence on costs and budgeting, including, if necessary, evidence of the school’s accounts. 

Finally, although Sullivan LJ neatly reconciled the inconsistencies in Slough and Oxfordshire as the result of extreme positions adopted in submissions, there remain less extreme, valid arguments of statutory construction and policy on the meaning of “public expenditure” in section 9 EA.  However, as the Court of Appeal has considered this issue three times in recent years and has now concluded that it is all a question of fact and common sense for the FTT, the opportunity may have been missed for a more analytical approach.