A tribunal decision has implications for whether public bodies can keep aspects of their financial activities confidential.
In February, a tribunal overturned a decision made last year by the Information Commissioner’s Office relating to the release of data on Thurrock Council’s borrowing and investment activities. The tribunal ruled that the council could not, after all, rely on an exemption under the Freedom of Information Act to keep confidential the details of its Public Works Loan Board borrowing and capital investment in the renewable energy sector, worth around £700m.
Under the FOIA, an exemption from the requirement to release information applies if it would be likely to prejudice the commercial interests of any person (including the authority holding the information). However, it is a qualified exemption, meaning it must be balanced against the public interest test: does the public interest in disclosing the information outweigh the public interest in maintaining the exemption?
The tribunal found that disclosure could cause Thurrock prejudice, including by reducing the money available for it to spend. However, the ruling also said: “The only reason why disclosure might damage the council’s reputation would be if there was a problem in relation to the way the money was invested, in which case the damage would not be unwarranted.”
The tribunal was not convinced that disclosure of the requested information would hurt Thurrock’s future investment opportunities, as “there is a large incentive for companies to obtain investment from local authorities, particularly one willing to invest significant sums like this particular council.”
Lastly, the tribunal said companies should be aware of FOIA disclosure risks when working with public bodies. But it conceded that “there may be companies who do not wish, for example, their interest rates and returns to be made public”. The tribunal found that, given the large sum of public money involved in the case, there existed “a very strong public interest in allowing public scrutiny of the council’s borrowing and investments to allow an informed member of the public to understand the exposure to risk that the council has as a result of borrowing and investment decisions.” It concluded that the “strong public interest in disclosure outweighs the public interest in maintaining the exemption”.
What does this interim decision mean for your authority?
- The commercial interest exemption is not insurmountable. There may be circumstances where the public interest in transparency and scrutiny, and therefore disclosure of information on local authority decisions, outweighs the public interest in maintaining the exemption.
- Consider alternative arrangements to secure confidential information. Commercially sensitive/confidential information can often be protected through contractual means.
- There are innovative ways for local authorities to generate income that do not come with the risks associated with debt-for-yield activity, such as joint ventures between local authority trading companies.
- Engage with residents and local businesses through consultation to save time and expense further down the line.
If your authority is borrowing funds to invest for future gain (debt-for-yield activity), you may be required to disclose detailed information relating to these investments. This could result in loss of future income-generating opportunities and reputational damage flowing from loss of investor confidence, along with other repercussions.
In an era where local authorities are stretched to breaking point after a decade of austerity, this decision appears to add to the mounting scrutiny faced by local authorities wishing to engage in debt-for-yield activity to raise much-needed income.
Originally published here in Public Finance – www.publicfinance.co.uk