• In the case of R v Secretary of State for the Environment ex p Hammersmith and Fulham LBC and others [1991] 1 ac 521, it was found that the judiciary cannot provide any input in the context of budget circumstances until the following three emerges from the case: bad faith, improper motive or manifest absurdity.
  • Unless the above three factors are found, the Wednesbury test for unreasonableness will be inapplicable.

Facts of the Case

  • D, the Secretary of State for the Environment, was authorised by section 100 of the Local Government Finance Act 1988 to create a budget ceiling on the amount that a local council can be in receipt of.
  • As such, D sought to place a budget ceiling on a total of 21 local councils.
  • 19 of the local councils applied for a judicial review in terms of the lawfulness and rationality of the decision. They asserted that the budget ceilings breached section 100 and that this section sought to limit D to keep under control any surpluses in the budget beyond what any “sensible” authority may deem suitable to be set themselves.


  • Were the budget ceilings imposed on the local authorities deemed as unlawful against section 100 of the 1998 Act?

Held by the House of Lords

  • The House of Lords dismissed the council’s claims because D’s authority to make decisions under the Act was based on the principles formed by himself as per section 100(4) and that there was no objective standard that needed to be closely followed when making such a decision.

Lord Bridge of Harwich

  • When construing how a Secretary of States’ actions should be performed, an objective standard cannot necessarily be the appropriate stance given a variety of factors which ought to be considered.
  • Additionally, where legislation itself deploys specific action on a minister, it cannot be subject to a challenge on the grounds of irrationality.
  • “If one asks, however, even in the circumstances of an individual case, whether a local authority’s budgeted expenditure for a year is excessive, it is plain that there can be no objective criterion by which to determine the answer. What is the appropriate level of public expenditure and public taxation is, and always has been, a matter of political opinion.” [594]
  • “The restriction which the Nottinghamshire case [1986] AC 240 imposes on the scope of judicial review operates only when the court has first determined that the ministerial action in question does not contravene the requirements of the statute, whether express or implied, and only then declares that, since the statute has conferred a power on the Secretary of State which involves the formulation and the implementation of national economic policy and which can only take effect with the approval of the House of Commons, it is not open to challenge on the grounds of irrationality short of the extremes of bad faith, improper motive or manifest absurdity.” [598]