Several contractors stand to benefit if the government loses a complex case heard last week against the way it scrapped the £55 billion Building Schools for the Future programme.
Six councils made their cases in the High Court against education secretary Michael Gove’s 5 July 2010 announcement that the nationwide construction programme would be axed.
About £7.5 bn of capital investment pledged by the previous Labour government was withdrawn, leaving 715 school projects without BSF funding.
Mr Gove allowed projects that had reached financial close to go ahead, along with follow-up projects that had secured outline business case approval after 1 January 2010.
Luton Borough Council and Nottingham City Council brought a joint claim against the decision. A legal document submitted to the court said: “The focus of the claimants’ challenge is that the secretary of state acted unlawfully in choosing (the retrospective date of) 1 January 2010 as the cut off point for saving projects which had OBC approval.”
The councils claimed Mr Gove acted irrationally in choosing the date, as it held no significance to the schemes. They also said the decision to stop their projects was in breach of their substantive legitimate expectation, as they had been granted outline business case approval.
Lawyers acting for Mr Gove argued that the use of a particular cut-off date was not in itself irrational, and there were “sound and sensible reasons” for choosing 1 January 2010.
They said the date conformed to a request from the Treasury for all ministers to look at public spending commitments made between that date and the general election. They added that Mr Gove considered using a May 2010 cut-off but decided it would be too expensive, as he was trying to minimise the cost of the BSF programme.
As the legal argument raged on Friday, Mr Justice Holman appeared increasingly exasperated with the breadth of the debate.
He said: “I am not conducting a public inquiry, yet the paperwork is enormous. A judicial review requires scrutiny but… we seem to have got sucked into an incredible amount of detail.”
A written judgement is expected within the next few weeks. While it will be too late for other councils to bring follow-up claims, defeat for the government could produce substantial work for contractors signed up to these six schemes.
The London Boroughs of Waltham Forest and Newham, Kent County Council and Sandwell Metropolitan Borough Council were the other four councils bringing claims. Bouygues, Laing O’Rourke, Kier and Interserve were the partners for their respective BSF schemes.
A number of outcomes are possible, with councils asking for the decision to stop their schools to be quashed and the government to reconsider the projects on their merits.
The six councils’ original BSF schemes were worth a combined total of about £3 billion.