Fiduciary Government: Decentring Property and Taxpayers' Interests
| Published date | 01 June 1997 |
| Date | 01 June 1997 |
| DOI | http://doi.org/10.1177/096466399700600204 |
| Subject Matter | Articles |
FIDUCIARY GOVERNMENT:
DECENTRING PROPERTY AND
TAXPAYERS’ INTERESTS
DAVINA COOPER
University of Warwick, UK
For the proposition that there are any equitable rights in the ratepayers as such,
which can be enforced by the interference of a court of equity with the honest
administration of affairs, I know of no authority. The duty of the council is to
the local community as a whole ... they are public duties and must be judged
accordingly. (Atkin LJ., Roberts, ex p. Scurr, 726)
RUST
PRINCIPLES, often seen as the most archaic of legal concepts,
t have been gaining a new lease of life. Among them are fiduciary
relations, described by Frankel (1983) as increasingly characteristic of
modern life. Traditionally seen as regulating a limited set of relationships, fidu-
ciary duty is currently developing in a range of directions. While a main area
of application continues to be commercial enterprise, fiduciary duty is also
becoming increasingly significant in areas such as medicine and social work.
The potential of fiduciary duty to protect vulnerable parties has been articu-
lated by legal academics and practitioners who see in fiduciary principles a
way of restricting exploitation in relations of inequality: parent-child;
doctor-patient; first world-third world (e.g., see Bartlett, 1989; Grubb, 1994).
Yet, while the future possibilities of fiduciary duty remain unknown, its
use to date raises questions. Some have been highlighted in the context of
North America where governments have been held to owe a fiduciary duty
to indigenous peoples (Hurley, 1985; Leventhal, 1985; Bartlett, 1989; Slattery,
SOCIAL & LEGAL STUDIES ISSN 0964 6639 Copyright © 1997 SAGE Publications,
London, Thousand Oaks, CA and New Delhi, Vol. 6 (2), 235-257
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1992). The practical effects of identifying this duty may be the protection of
indigenous resources and traditional practices; however, the benefits are
limited by governments’ countervailing duties, interests and obligations.
There is also a cost in structuring state-community relations according to a
paternalistic legal structure, particularly for communities that have histori-
cally been marginalized (e.g. see Newton, 1982: 681-2).
Does fiduciary duty, then, simply entrench inequality further, or does it
offer a remedial structure progressive political forces can deploy? These ques-
tions cannot be answered in the abstract. In this article, I address them in the
context of local government. Within liberal discourse, government - national
and local - offers a paradigmatic example of a fiduciary or trust relationship
(e.g. see Locke, 1988). Resources are managed (not owned) by a powerful
body, exercising authority on behalf of a wider community. Yet, while other
countries have recognized a fiduciary duty between government and con-
stituents, in Britain no general, legally binding, fiduciary duty exists. The
only state body to owe constituents a duty is local government. However, as
leading case law declares, the duty is owed not to the community in general
but to local taxpayers in particular (for useful background, see Fennell, 1986).
The restricted character of local government’s fiduciary duty (LGFD) pro-
vides a prima facie answer to the question of whether fiduciary principles can
undermine social, political and economic inequality. If a special duty is owed
to those who pay tax, this seems clearly to privilege the interests of more
affluent constituents at the expense of electoral democracy, and minority
rights. Yet, as I argue here, taxpayers’ interests play a role that is rhetorical
rather than real in identifying local government’s duty. In other words, if the
fiduciary principle reinforces existing inequalities, this is not primarily
because taxpayers receive special consideration.
LGFD’s doctrinal and political importance, writers have argued, depends
on the judgments it facilitates (although rarely determines). Three tendencies
have been identified as particularly pronounced: (i) the promotion of market
relations (Fennell, 1986); (ii) the limiting of local government autonomy
(Loughlin, 1986: 74); and (iii) the expression of a ’gesellschaft framework’
(Dignan, 1983), in which individualism, private law principles and property
concerns prevail over collective social interests. Existing work in this area has
provided considerable assistance in interpreting cases and doctrine. However,
in the main, research has been located within administrative law, legal theory
and local government analysis: disciplinary bases which have inevitably
shaped the issues explored and perspective adopted.
My focus and argument, which draws also from feminist/poststructuralist
political theory and equity law, differs from existing work in three ways.
First, I argue the promotion of the market is not simply to do with the way
fiduciary duty is applied but goes to the very heart of its conceptualization.
Second, LGFD does not necessarily undermine local government practices.
This point can be made in two ways: first, many councils have internalized a
fiduciary identity, using it discursively to structure their own expenditure
commitments (Bridges et al., 1987: 87-9); second, LGFD is not always a
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constraining force. Councils ’hail’ their taxpayers as discursive weights in
struggles with other authorities (e.g. Secretary of State for Education and
Science, ex p. ILEA), and in relation to private commercial actors. This
became particularly prevalent in cases during the early 1990s, where councils
successfully defended their market practices on the grounds they were in the
ratepayers’ interests.
Third, LGFD does not simply promote a ’free market’ individualism.
Indeed, there is an irony in identifying this as an effect, since one of fiduciary
duty’s main functions within a commercial context is to regulate corporate
relations and practice (Beck, 1971; Bean, 1993; Bratton, 1993; Glover, 1995).
While different explanations are given for the deployment of fiduciary prin-
ciples within a commercial setting (e.g. see Shepherd, 1981: 56-8), their
general effect is to help shape and (re)produce particular market and business
structures. LGFD
plays a similar structuring role - at least at the level of legal
discourse. Representations of the taxpayer, and conceptualizations of fidu-
ciary duty express a normative paradigm of local government’s relationship
to its constituency, with both neo-liberal and neo-conservative implications.
The rest of this article develops these arguments further. I begin by setting
out the scope of local government’s fiduciary duty, and the character of its
breaches. The second section explores the nature of local taxpayers’ interests,
and the role they play in legal discourse. For if fiduciary duty is based on pro-
tecting the interests of a principal class, the way they and their interests are
depicted becomes legally and politically crucial. I then argue that the politi-
cal implications of LGFD are reinforced by the paradigm of fiduciary (and
trusts) deployed. Finally, I consider whether trust and fiduciary principles
can offer tools for challenging rather than maintaining local inequality. In
addressing this issue, I consider the municipal application of frameworks
developed in other contexts, and raise the ’juridification problematic’ of con-
structing counterhegemonic legal principles.
__ .
LOCAL GOVERNMENT’S FIDUCIARY DUTY
To provide a background for my main discussion, I outline here the princi-
pal elements of LGFD: the class to whom a duty is owed; the depiction of
their interests; the scope of the duty; and the character of its breach. As will
become quickly apparent, the local government cases discussed are not
framed in terms of traditional fiduciary concerns. While the courts often
imply a conflict of interest, this is usually taken to refer to a conflict between
the councillors’ need for funds to implement ideologically motivated
decisions and taxpayers’ interests in low taxes. This division contrasts with
the more conventional financial conflicts that occur in other fiduciary situ-
ations. The cases also do not deal with breaches in the form of secret profits
or unjust enrichment (Jones, 1968; Shepherd, 1981: 53-6). These issues do
arise in local government, for instance, where officials benefit financially
from decisions taken on their local authority’s behalf. However, although
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such conflicts have received attention in other jurisdictions (e.g. Lawrence,
1993), in Britain, discussion has been slight despite increasing relevance in a
context of increased municipal market activity.
LGFD is owed to a class rather than to individuals, and, as I have stated,
with few exceptions (e.g. Roberts, ex p. Scurr, St Albans C & DC), judgments
treat local taxpayers as the relevant class. This is despite the fact that local tax-
payers are not the only or, necessarily, main contributors to local government
funds. In 1993/4, the council tax provided only 15 percent of local authority
income; non-domestic taxes 20 percent; while charges - ignored within the
fiduciary relationship - contributed 11 percent (Chartered Institute of Public
Finance and Accountability [CIPFA], 1994). Since 1990, defining the tax-
payer class has varied as a result of changes to the character of local taxation.
In 1990, ratepayers became chargepayers (Local Government Finance Act,
1988), and, subsequently, council-tax payers (Local Government Finance
Act, 1992; see Sparkes, 1992; Sanderson, 1995).
Yet changes to the taxpayer class go beyond terminology. For most of...
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