Well, it was claimed by Spencer's band mate at the time, who claimed he was in the room when the fax came. It would be pretty scndalous lie, and one that Spencer did not contradict, or clarify. I don't see why a band member who is a fan of Morrissey would make that up; especially considering that it could damage Spencer.
In fact, here's the interview that it appeared in. Actually, I got one part wrong. It was Morrissey who was faxing Spencer requesting to use the song. As usual, Morrissey was fighting over money with a collaborator, and the song that he eventually produced was clearly a jibe at Spencer's small stature.
Anyway, here's the quote:
Do you have any good Morrissey stories?
(laughs) Yeah, I got one. I don’t know if I should be telling this. Well, O.K., so Spencer and I were writing together in his apartment in the East Village one afternoon–and Spencer spoke liberally to me about his experiences with Morrissey, that he’s kind of an intense, strange person, and there are rumors that he’s a racist–not that I really believe it, maybe he just uses racist remarks to shock or whatever. Or maybe I’m just still a fan and I’m creating excuses for him. Anyway, at that stage in Morrissey’s life–this was the late 90s–he was big into faxing. It’s very ominous, faxing. I mean, there’s this big, scary machine sitting there and suddenly it just beeps and the grr grr grr of the paper coming through, it’s really a little frightening! So Spencer and I are writing a song together and off goes the fax machine in the other room. And Spencer goes in there and it’s Morrissey faxing to see if he can use this song that he and Spencer wrote together. I think Morrissey owed Spencer money then and things were all out of sorts. So Spencer faxes him back and says, you know, sorry mate but I don’t think that’d be best until we’ve got all the rights sorted out, et cetera, et cetera. And he comes back into the living room and he and I are pling-plonging away on our guitars. Then, after a little while, we hear beep! grrrrr grrrrr grrrrr and we both look at each other and Spencer goes in to get the fax, and he comes back with this piece of paper in his hands and in big, black letters scrolled across the page it reads, ‘YOUR LOSS JEW BOY.’ It was like a death threat the way it looked! (laughs) Poor Spencer, he was just devastated. He’s very sensitive, too. I think after that he and I just went to a bar, did some drugs, drank beer for ten hours.