The concept of ‘legitimate expectations’

The Irish  Times reported in yesterday’s edition on the debate in government over whether to try to effect savings in child benefit expenditure (which currently costs almost €2.5 billion per annum) through means testing or through taxing benefit payments. The report concluded that “briefing notes released under the Freedom of Information Act show senior officials are concerned about the legal implications of major changes to benefit payments. Concern has been expressed that the State could be vulnerable to legal action where recipients may have had a legitimate expectation a welfare benefit would continue.”

It seems to me that to claim a legitimate expectation that a welfare payment (or, presumably, any government payment) would continue would make government decision-making, whether in fiscal policy or welfare policy, totally unmanageable. At face value, it would seem to make any change to a government expenditure scheme, once introduced, impossible (and why stop at expenditure – did we not also have a legitimate expectation that the government would refrain from introducing an income levy?).

It is interesting to contrast this with payments which were actually cut in the budget. In agriculture, for example, annual payments for those farmers enrolled in the Rural Environment Protection Scheme (REPS) were cut by 17% in 2009. There is a much stronger argument against cutting these payments as these are contractual payments – farmers enter into an agreeement to follow certain environmentally-sensitive farming practices for a five year period, in return for a payment from  the State. However, the State has inserted a clause into the Regulation (away towards the end under Paragraph 28) that “The Minister reserves the right to vary, where occasion so demands, the amount of financial aid wherever specified in the Scheme subject at all times to the provisions of any relevant European Union legislation.” Given that farmers incur costly obligations on entering REPS, this unilateral right  on the part of the State to vary the amount of payments may appear rather extraordinary. Particularly given that if a farmer were to decide to leave the  Scheme in response to a change in payments, then aid already paid must be re-imbursed. If these farmers had no legitimate expectation that payments would continue at the level agreed at the start of the 5-year scheme despite a contractual agreement with the Department of Agriculture Fisheries and Food, it seems extraordinary that officials are fearful that any change to welfare payments might be challenged on the basis of ‘what we have, we hold’.

11 thoughts on “The concept of ‘legitimate expectations’”

  1. Good point. More corrupt utterances said to be from cabinet advisors. Yet we have cabinet secrecy. Corruption is obvious, but may not itself jeopardize our rating.
    But it does suggest that there is no chance of practical remedy. Unless the crumbs from the table are sufficiently rich. the gombeens will not allow it.
    Maybe Peter Sutherland can enlighten us?

  2. The doctrine of legitimate expectation, though its precise nature and ambit is contested, is generally held to apply to the exercise of administrative discretion delegated under legislative power. As far as I am aware it has no application to the exercise of legislative power by the legislature. From a legal perspective the doctrine could not therefore apply to the provisions of the Finance Act. It is clearly of considerable importance that the legislature can legislate freely, provided that it acts within the terms of the Constitution.

  3. Colin is absolutely correct re the non-application of the doctrine of legitimate expectations (at least the domestic law doctrine) to legislative action. Keane J confirmed that non-application in the Pesca Valentia case in 1990. The doctrine of legitimate expectations cannot be relied upon against the adoption of legislation until the doctrine is accorded the status of a constitutional principle. This can be regarded as an aspect of the separation of powers. Maybe the original intention had been to proceed by way of ministerial order?

  4. The thing I noted about the IT article is that SW favours taxation (administrative burden goes to Revenue, i.e. Finance) and Finance favours means testing (administrative burden goes to Social Welfare).

    I suspect the Sir Humphreys in Social Welfare might be torn between fobbing off a need for new personnel recruitment or the melee of intra-departmental redeployment onto Revenue, and the possibility that Revenue might assume the eligibility assessment role entirely with consequent diminution in the size of Social Welfare as a department.

    Personally, I don’t have much time for means testing. Having experienced it in my youth for both educational grants and employment benefits, it is frequently a pretty demeaning process, and the income that is included and excluded is often quite different – confusingly so – to how taxation is handled.

    I think all state benefits – student grants, rent allowance, unemployment assistance, child benefit etc. should be automatically notified as income to the Revenue Commissioners, with medical cards treated as BIK and assigned a value. Exemption and allowance rates should then be raised and re-structured to ensure equitable treatment of those on welfare and maintaining incentives to join the workforce.

    At present, “A” who has been on benefits for, say, three months and gets a paying job for the rest of the year pays no tax on that first three months of income, so “B” in a lower wage job whose income leaves net cashflow lower than benefits claimed by A (factoring for medical card eligibility and other social benefits) may pay more tax on the 12 months of working than “A” did for 9 months.

    I don’t have the mathematical model to prove this but I’d love to see that equation crunched, as phrases such as welfare entitlement lead me to think that incentive to work is going to become a key phrase in the next five years – already awareness of benefits fraud is percolating back up through media consciousness from bottom of page 10, where it had lain dormant since the mid 90s, to front page lead.

  5. I totally agree with the assertion that government would be impossible if their hands were tied legally with regard to expectations. It is extremely difficult for farmers in that Reps is cut and the building grants are being paid over three years. However, the government seems to think they cannot do anything about the pensions paid while earning a TDs salary or the long service increment due to the legal implications. The judges were able to excuse themselves from the ‘pension levy’ due to, I believe, a dubious interpretation of the law. I put forward the following scenario ‘Judges salary remain at the same level in 2009 and 2010 and the government introduces a new top rate of tax of 50%. Could the judges refuse to pay this tax because it will reduce their salary? I’d be interested in a response to this question.

    We have had many excuses in the vein of ‘he is entitled; legally we had no option; he didn’t do anything illegal; our hands are tied.

  6. The “legitimate expectations” argument is utterly spurious.

    Changes in Social Welfare rates announced in the budget are incorporated into an annual Social Welfare Act usually entitled The Social Welfare (Miscellaneous Provisions) Act. In contrast, budget tax changes are introduced by Financial Resolutions which are adopted on the day by the Dail, thereby giving immediate effect to e.g. excise duties. The Finance Act supercedes these Financial Resolutions in due course.

    I can only wonder what games the mandarins in Social Welfare are playing. It sounds like they’re throwing the kitchen sink at the prospect of serious social welfare cuts. I think it’s a symptom of Mary Hanafin not wanting to go down with Ernest Blythe by cutting pensions.

  7. Actually, I am not so sure that it is all that spurious. One could argue that the same deferential approach ought to be taken to financial resolutions by the courts as to legislation in applying the doctrine of legitimate expectations, but in fairness, the point does not appear to have been decided by the courts yet. The Irish Times article does also make the point about the difficulty of applying means tests, which I imagine is also a serious difficulty.

    On a non-legal note, the unfairness of making the extent of one’s contribution to the resolution of Ireland’s financial problems depend directly on how many children one has seems to have been little considered…

  8. @Gavin Barrett – I find it inconceivable that the judiciary could use the doctrine of “legitimate expectations” to block changes to social welfare rates or entitlements which have been embodied in an Act of the Oireachtas. It would precipitate a major constitutional crisis.

    There have been a series of instances in recent months where legal objections have been mooted to Government action on the current economic crisis. I’m thinking, for example, of obstacles facing the ODCE investigating Anglo-Irish, the proposed changes in pay and benefits for public representatives, and difficulties in dismantling tax shelters (the McCaughey CGT scam was particularly egregious).

    I am not suggesting anything draconian – even in dire circumstances we must respect legal rights – but it is crucial the legal system is not used to delay or impede the urgent economic measures which are endorsed by our legislature.

    In this case, I suspect that officials are using the fear of legal action to deter necessary change. It is a weakness of our system that there is no speedy way to settle this question definitively.

  9. Last night Tuesday April 22nd Conor Lenihan, on The Late Debate used ‘legitimate expectation’ to justify the continued payment of long service payments to TDs and also with reference to the ministerial pensions. Surely if it applies in the above it also applies in the reduction in REPs payments and the “pension levy” in the Public Sector?

    It seems a double standard is being applied. None of this affects me personally as I am currently abroad but is anybody analysing current norms in the context of “society elites” who are determined to maintain the staus quo and their share of the national cake while lower income groups are being “conned into taking the pain”.

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