R v Secretary of State for the Environment ex p Hammersmith and Fulham LBC and others [1991] 1 AC 521
Facts
The Secretary of State used powers under the Local Government Finance Act 1988 to designate local authorities whose proposed expenditure he considered excessive and to impose limits. A number of councils challenged the decisions. They argued that the statute imposed an objective constraint which the minister's approach had exceeded and that the limits were irrational. The litigation concerned the allocation of responsibility for judging local spending within a national economic policy. It also raised the significance of the parliamentary role in the statutory process and the proper limits of judicial review.
Legal Issue
Whether the minister’s expenditure-limiting decisions complied with the 1988 Act, and how intensively courts could review the rationality of this national economic-policy assessment.
Held
The House of Lords rejected the councils' challenges. On the proper construction of the Act, the Secretary of State was authorised to formulate principles for deciding which expenditure was excessive. The court did not impose its own objective spending standard in place of that politically sensitive assessment. Lord Bridge explained that, once compliance with statutory requirements was established, a national economic-policy measure requiring parliamentary approval attracted very restrained rationality review. Intervention remained possible in extreme circumstances such as bad faith, improper motive or manifest absurdity. The judgment did not remove the initial inquiry into legal power or hold that every administrative decision involving expenditure was beyond the courts.
⭐ Legal Principle
Courts first enforce statutory limits, then recognise strong restraint in rationality review of national economic policy within a scheme requiring parliamentary approval. Hammersmith and Fulham did not exempt financial decisions generally from legality review.
Significance
Hammersmith and Fulham illustrates restrained rationality review of national economic policy adopted through a statutory process involving parliamentary approval. The restraint arises after the court checks whether the minister has stayed within the legislation. It is not a blanket immunity for any decision involving money. The case is useful alongside Nottinghamshire and Wednesbury when explaining variations in scrutiny. Students should identify the statutory allocation, the political nature of the judgement and the particular review ground, rather than assuming courts have no role in public expenditure.
Common exam questions about this case
Why did the minister have latitude when judging excessive expenditure?
The statute entrusted the minister with formulating principles for a politically contested assessment of local spending. There was no neutral numerical answer which the court could simply substitute. The House of Lords therefore recognised the national policy context while first checking that the minister had complied with the statutory framework.
Did the judgment exclude review for acting outside the statute?
No. The restraint described by Lord Bridge applied after compliance with express and implied statutory requirements had been considered. A minister could not rely on the economic nature of the policy to disregard those requirements. Legality and the intensity of rationality review remained distinct parts of the court’s task.
Were irrationality challenges to all financial decisions abolished?
No. The case concerned this particular statutory mechanism for national economic policy and parliamentary approval. The court referred to extreme cases such as bad faith, improper motive or manifest absurdity. It did not establish an immunity covering every benefits, procurement or local-budget decision simply because public money was involved.