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LWB242 Constitutional LawLecture 7: Spending Power

Spending Power81. All revenues or moneys raised or received by the Executive

Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the

purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution.

Introduction There have been two main views as to the proper interpretation of s 81:

Narrow view – appropriation for only purposes for which the Commonwealth may otherwise legislate under the Constitution.

Attorney-General for Victoria (Ex rel Dale) v Commonwealth (the Pharmaceutical Benefits case)

Wide view – appropriation for any purposes the Commonwealth itself determines.

Victoria v Commonwealth (the AAP case)

The controversy surrounding the proper interpretation of s 81 was begun to be resolved by the High Court in Pape v Commissioner of Taxation.

Scope of spending power

Pape v Commissioner of Taxation

Pape considered the validity of the Tax Bonus for Working Australians Act (No 2) 2009 (the Tax Bonus Act). Pape challenged the validity of the Tax Bonus Act and the payment to be made to him. The Commonwealth submitted that the Act was within power by virtue of any or all of the following:

(a) a substantive legislative power, founded in s 81 of the Constitution, to authorise the spending of appropriated funds, combined with s 51(xxxix), the express incidental power;

(b) the executive power (s 61) read with ss 51(xxxix), 81 and 83;(c) an implied ‘nationhood’ power;(d) the trade and commerce power (s 51(i)); (e) the taxation power (s 51(ii));(f) the external affairs power (s 51(xxix)).

Held, the Tax Bonus Act was valid. However, the court unanimously rejected ground (a). By majority (consisting of French CJ, Gummow, Crennan and Bell JJ; Hayne, Heydon and Kiefel JJ dissenting), the court upheld the Act on the basis of ground (b). Hayne and Kiefel JJ held that the Act was invalid but could be read down to fall within s 51(ii) (ground (e)); Heydon J held the Act invalid. in its entirety.

Spending power post-Pape

Relevantly, the two key issues in Pape v Commissioner of Taxation were:

does the Commonwealth have a spending power or appropriation power under s 81 (and 83)?;

the scope of the executive power.

Spending power post-Pape

Does the Commonwealth have a spending power or appropriation power under ss 81 (and 83)?;

Section 81 regulates the use of money received by the Commonwealth and provides for the appropriation of money – it is not a substantive power to spend (see French CJ at [81]; Gummow, Crennan and Bell JJ at [178], Hayne and Kiefel JJ at [289] and Heydon J at [601]). An appropriation merely permits the executive to spend.

The substantive power to spend Commonwealth money, which involves an exercise of the executive power of the Commonwealth, will need to be found elsewhere:

in legislation; or

elsewhere in the Constitution, including the executive power.

Spending power post-Pape

Scope of the executive power to spend covers:

matters within the legislative power of the Commonwealth;

spending related to the role and position of the Commonwealth as the national government (including spending to deal with national crises);

possibly all spending supported by an appropriation, provided it does not impermissibly interfere with the executive government of the States.

But in 2012, the High Court handed down its reasons in Williams v Commonwealth ...

Williams v Commonwealth

Williams v Commonwealth

The Scripture Union Queensland (SUQ), a public company, entered into the Funding Agreement with the Commonwealth to provide certain chaplaincy services at the Darling Heights State School in Queensland ("the School") in accordance with certain guidelines ("the NSCP Guidelines"). Those services included assisting the School and community "in supporting the spiritual wellbeing of students" and "being approachable by all students, staff and members of the school community of all religious affiliations". The Funding Agreement was entered into pursuant to the Commonwealth's National School Chaplaincy Program ("the NSCP"). The funding of the NSCP is not provided under legislation, but under a series of funding arrangements administered by the Commonwealth of which the Funding Agreement is one example.

Ronald Williams, the plaintiff, is the father of four children who attended the School. In 2010, Mr Williams commenced proceedings in the original jurisdiction of the High Court challenging the Commonwealth's authority to enter into the Funding Agreement with SUQ, to draw money from the Consolidated Revenue Fund ("the CRF") for each of the financial years from 2007-2008 to 2011-2012 inclusive, and to pay the appropriated moneys to SUQ pursuant to the Funding Agreement.

Held, by majority, the High Court held that the Funding Agreement and payments made to SUQ under that agreement were invalid because they were beyond the executive power of the Commonwealth.

In the absence of legislation authorising the Commonwealth to enter into the Funding Agreement, the Commonwealth parties relied upon the executive power granted by s 61 of the Constitution. Relevantly, s 61 provides that the executive power of the Commonwealth "extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth". A majority of the High Court held that, in the absence of statutory authority, s 61 did not empower the Commonwealth to enter into the Funding Agreement or to make the challenged payments.

In particular, a majority of the Court held that the Commonwealth's executive power does not include a power to do what the Commonwealth Parliament could authorise the Executive to do, such as entering into agreements or contracts, whether or not the Parliament had actually enacted the legislation.

A majority also held that s 44 of the Financial Management and Accountability Act 1997 (Cth) did not provide the Commonwealth with the necessary statutory authorisation to enter into the Funding Agreement or to make payments to SUQ under that agreement.

Activity

Reading: Williams v Commonwealth

Activity

Reading: Professor Anne Twomey, “Bringing down the House? Keeping school chaplains means a surrender to the Executive”

Activity

Discussion Forum

Activity

Online quiz