JUDGMENT SUMMARIES

School and Nursery Milk Alliance Limited, a membership organisation representing the dairy, health and education sectors in relation to the provision of milk and non-dairy alternatives, has succeeded in a judicial review at the Court of Session challenging the legality of the Milk and Healthy Snack Scheme (Scotland) Regulations 2021 (as amended). A further hearing has been fixed for the Court to decide what orders to make in light of this decision.

Background

For many years, pre-school children in Scotland have received a publicly funded 189 millilitre (¹/₃ of a pint) serving of milk on each day they attend nursery school or other childcare setting. Until 1 August 2021, funding was provided under the Nursery Milk Scheme, a UK wide scheme. Since that date a new scheme has been operational in Scotland by virtue of the 2021 regulations. The new scheme is wider than the previous one, in that it provides for a non-dairy alternative to milk to be provided (for health, ethical or religious reasons) and for the provision of a healthy snack, neither of which was provided under the previous scheme. However, it also changed the way in which childcare settings receive funding. Rather than reimbursement of actual costs, childcare settings now receive an amount based on a weighted average, known as the Local Serving Rate (LSR), which has been set for each local authority area. The LSRs were based on data from the Scotland Excel Framework. Scotland Excel is Scotland’s procurement body for local authorities.

The petitioner’s argument

School and Nursery Milk Alliance Limited, the petitioner, challenged the legality of the new scheme; in particular, the manner in which the LRSs were fixed. It argued that under the previous scheme, many childcare settings chose to purchase milk from “agents” – specialist suppliers of milk to nurseries and schools. The LSRs were set at too low a level and many settings were unable to afford to purchase milk with their allocated funding. Many contracts with milk agents had been cancelled, and some suppliers were likely to exit the market, reducing competition. It submitted that the new scheme was unlawful in that:

• Scottish Ministers had not consulted fairly: they had not given the petitioner and others the opportunity to comment on the proposal to base funding on a weighted average, or on the rates at which the LSRs would be set, despite having said they would do so

   

• the scheme was irrational, principally because no account had been taken of the cost of non-dairy alternatives in fixing the LSRs; private childcare settings were unable to purchase milk through the Scotland Excel Framework, on which the LSRs had been based; and Scottish Ministers had proceeded on the basis of a Business and Regulatory Impact Assessment (BRIA) which stated erroneously that there would be no impact on competition.

Scottish Ministers’ argument

Scottish Ministers argued that the petitioner and other interested parties had been consulted, in 2018, and had commented on the scheme. There was no need for a further consultation on precisely how funding would be achieved. There were no errors in the BRIA, which should not be judged with the benefit of hindsight. Scottish Ministers had complied with their duty to investigate the factual background. The scheme was not irrational, because the figure brought out by the Scotland Excel data was higher than a figure brought out from claims data extracted from the old scheme. The purpose of the scheme – to provide greater access to free milk – was not compromised. Any anomalies could be resolved in year 2 of the scheme.

Decision

Lord Braid has upheld the petitioner’s case, ruling that in the particular circumstances, where the petitioner had been assured that it would be involved in the development of proposals, and had never had the opportunity to comment on the LSRs, it was unfair of the Scottish Ministers to proceed as they did. In addition, correspondence from Scottish Ministers had given the petitioner a legitimate expectation that it would be consulted further, and it was unfair of Ministers to depart from that position.

Additionally, Lord Braid agreed that the means by which the LSRs had been arrived at were irrational. It was irrational not to have inquired into, or taken account of, the cost of non-dairy alternatives. It was irrational for the respondent to base the LSRs on Scotland Excel data, when private childcare settings were unable to procure milk at Scotland Excel prices. It was also irrational to leave indirect costs, such as for refrigeration, or beakers, out of account. Scottish Ministers had erred in concluding there would be no impact on competition if the LSRs were fixed at the rates they were. Finally, Scottish Ministers were aware of anomalies in the funding, which were not consistent with one purpose of the new scheme which was to increase access to free milk throughout Scotland. It was irrational of them not to address those anomalies now.

The judgment published on the Scottish Courts and Tribunals website is the only authoritative document.