Cutting fair process?
Date: March 1, 2011
Type: Commentary
Document:

Keynesian economics enjoyed an unexpected resurgence in the wake of the 2008 economic crisis. There was wide consensus that governments should spend to make up for the drop in demand resulting from the stock market and housing price meltdowns. Politicians’ affinity for ribbon cutting ceremonies being what it is, some concern was raised at the time that all this spending was more weighed to physical infrastructure projects than to work to build social and human capital. Opening a new road is invariably sexier than bolstering the capacity of an immigrant services agency.


By Peter Broder

Keynesian economics enjoyed an unexpected resurgence in the wake of the 2008 economic crisis. There was wide consensus that governments should spend to make up for the drop in demand resulting from the stock market and housing price meltdowns.  Politicians’ affinity for ribbon cutting ceremonies being what it is, some concern was raised at the time that all this spending was more weighed to physical infrastructure projects than to work to build social and human capital.  Opening a new road is invariably sexier than bolstering the capacity of an immigrant services agency.

But, in retrospect, operating in that environment might have been better than dealing with the one on the horizon.

Now that the zeitgeist has shifted, and the new mantra is retuning budgets to balance, voluntary sector groups are at high risk of severe cuts in the name of the need for financial restraint. Funding of social or human capital is often easier to drop than funding of nuts and bolts.

A less obvious but even more unfortunate side effect of this change in the landscape is that it offers government decision-makers the opportunity to use fiscal prudence as a smokescreen for advancing political agendas that are based more on ideological or electoral considerations than spending.

The recent kerfuffle over the procedural oddities surrounding the federal government’s move to defund the aid agency Kairos shows how murky the line between fiscal and political decisions can become, and of the need for safeguards against arbitrary conduct. Recent months have also featured enigmatic decisions around funding of immigrant support programs and other cutbacks for which no strong policy rationale was offered. In this context, developments in administrative law dealing the obligations of government officials to act fairly and properly in taking decisions bear watching.

Although not concerning a spending matter, Justice Hughes’ February 2011 holding in Public Mobile v. Attorney General of Canada quashing a Cabinet decision varying a Canadian Radio-television and Telecommunications Commission (CRTC) decision about the eligibility of particular company to operate as a telecommunications common carrier in Canada re-iterated that decision-makers (in this case, the Governor in Council) must act fairly and with due attention to the legislative framework for their actions.

A recent British case addressed spending decisions more directly.  In Luton Borough Council and others v. Secretary of State for Education, Justice Holman of the Administrative Court of High Court of Justice (Queen’s Bench Division) considered ministerial duties and obligations related to spending cuts and the lawfulness with which those cuts were made.  Canadian law in this area does not fully parallel that of Britain, but the decision is nonetheless timely and instructive.

In the case, complainant local authorities sought judicial review of a number of decisions related to withdrawal of funding for school infrastructure projects.  These decisions were taken by a Minister in the newly-elected government of David Cameron and were part of its broad efforts to curtail spending.  The grounds on which the decisions were challenged included that they were irrational, that the decision-making process had fettered the discretion of the Minister, that they breached the substantive legitimate expectations of the claimants, that the claimants were entitled to be consulted on the decisions and that the Minister had failed to do so and, lastly, that the Minister failed to discharge statutory duties under equality legislation applicable to the decisions.

The courts generally show a great deal of deference to elected officials in the choices they make where political, economic and social considerations have to be balanced.  It is well-established that courts ought not, in the words of one case cited by Justice Holman, “become an empire of a social and economic controversy that has been settled by due political process.” So it is not surprising that he declined to interfere with the decisions on the first three grounds put forward by the complainants.

On the last two grounds, however, Justice Holman upheld the complaints.  In the circumstances of the case, even though the language of the documentation around the funding arrangements made clear that underwriting of the various projects was subject to further approval processes, he ruled that the long-term nature of the dealings between the local authorities and the sums involved in the arrangements, required that there be a consultation process before the Minister took a final decision on terminating or continuing the funding.   Indeed, he called the failure to consult in these circumstances an “abuse of power”.

He further ruled that the decisions had not been taken by the Minister with due regard to their impact on women, minorities and the disabled under the applicable equity laws.  Various British acts require that public authorities consider whether decisions they take will advance specified legislative objectives with respect to fair treatment of these groups.  Justice Holman found that the Minister had not fulfilled his duties under these statutes.

In the result, the decisions were sent back to the Minister to be reconsidered after appropriate consultation and adequate consideration being given to the potential impact of the cuts on the specified disadvantaged groups.

It remains possible that after doing so the Minister will end up back at his original conclusions.  As well, because in Canada the legislative framework is different and we have our own administrative law jurisprudence, it is not clear that Justice Holman’s ruling would apply here.

That said, the case is a welcome reminder that, notwithstanding fiscal imperatives, governments are not free to act capriciously or arbitrarily in spending decisions.  If charities and not-for-profit groups do face heavy cuts as federal and provincial governments seek to trim their budgets in the coming years, Justice Holman’s ruling also suggests they should vigorously explore making use of the courts to ensure that public authorities have acted fairly and reasonably in such decisions.

Peter Broder is Executive Director of The Pemsel Case Foundation.  A version of this article was first published in LawNowmagazine, and can be found at http://www.lawnow.org/ . The views expressed do not necessarily reflect those of the Foundation.