Alert | High Court delves into Australian Government spending to support its policies

21 June 2012

Since Federation the Australian Government has enjoyed an increasing revenue base often argued to be to the detriment of State Governments, helped in no small way by interpretations of the Constitution by the High Court of Australia.

It is not surprising therefore that over time the Australian Government has taken on a greater role in implementing public policy through spending the increasing revenue.

Yesterday the High Court delved into how the Australian Government should go about spending public funds to support its policies.

Implications of the Decision

The legal implications for future government policy implementation are unlikely to be significant. As the Federal Attorney-General has already noted, the High Court decision means the Government will need to revisit which of its funding programs are affected. Those policies will probably be able to be underpinned by a different legal process – the most likely being the passing of legislation or conditional grants to the States under section 96 of the Constitution. Other options may bubble to the top.

The practical implications are perhaps more interesting. Relying on legislation to support funding programs will increase pressure on any Government's legislative timetable and open up such initiatives to parliamentary committee scrutiny bringing with it challenges to have the funds paid in timely, efficient, effective and ethical manner as foreshadowed by section 44 of the Financial Management and Accountability Act. Relying on conditional grants to States may have the obvious political difficulties.

What was the case about?

The Federal Department of Education (under various names over the years) implemented a funding program to pay funds (under a funding agreement) to service providers to deliver chaplaincy services to State Government schools. The funding program is not underpinned by legislation. Mr Williams is a parent of four children attending a school that received the chaplaincy services. Mr Williams challenged the validity of the funding agreement.

What did the Court say about executive power?

The judgement of Chief Justice French takes us through a history lesson of the evolution of executive power as articulated in section 61 of the Constitution – recounting the deliberations of our most famous fathers of our nation – Barton, Griffiths, Clark, Deakin, Garran.

It is something of an understatement to say that the fathers of our Constitution were not terribly clear, nor unanimous, when it came to explaining the scope of executive power. The two view points:

  • The primary tension behind the legal arguments lay between the 'broad view' that Commonwealth Government can do things (in this context - spend public funds) on any subject matter that falls within the heads of legislative power described in the Constitution, and 
  • or the 'narrow view' that the Commonwealth Government can only spend public funds if doing so is to execute and maintain the Constitution and the laws passed by the Commonwealth Parliament - ie. usually (but not always) there is legislation supporting the spending of the public funds.

French CJ relied significantly on the principle that the Constitution reflects a federation – where the Commonwealth is empowered to take action but only after representatives of the people (the House of Representatives) and the States (the Senate) have had an opportunity review and authorise such actions (ie. the laws). To give the executive broad scope to take action without such review processes would be undermining the central federal nature of the Constitution.

Chief Justice French left one point hanging for another time.

One of Australia's foremost jurists, Owen Dixon (later to be Chief Justice of the High Court) fell into the broad view camp when making submissions to a Royal Commission into the Constitution in 1927. However he submitted on that occasion that the narrow view could be simply overcome by the Commonwealth passing a 'General Contracts Act'. French CJ resisted the temptation to indicate whether this was a good idea and this point was not canvassed by Justices Bell and Gummow.

In the Williams case, the Commonwealth tried to reach the same point by arguing section 44 of the Financial Management and Accountability Act 1997 provided legislative support for the spending of public funds. This was knocked on the head. That section of the FMA is directed to 'prudent conduct of financial administration' and not a source of power under which such administration occurs. It is not enough to say that an appropriation law supports the executive action.

The Court also concluded that it is not enough to rely upon an appropriation law to support the executive action.

Justices Gummow and Bell noted that section 96 of the Constitution can be a means to orchestrate financial assistance to a State upon conditions.

Author(s) Paul McGinness