Government
funding post
Williams - why it
is still at risk
Your speakers:
Alison O’Brien
Laura Vickers
Introduction
• Constitution establishes financial relationships
between the Parliament and the Executive
– (so too does that of the State)
• It also creates a financial relationship between
the Commonwealth and the States
• The principles underlying these relationships are
given context by legal history….
• …but that is not as important as the text and
structure of the Constitution
– (where it is there)
Expense governs everything
All state action costs money, directly or indirectly, and
questions of finance must sooner or later affect all public
policy and business as weighty, if not determining,
factors. 'Expense governs everything'. Finance may
therefore be said with truth to be the foundation of
government, in the sense that ways and means must be
found for everything which a government desires to do.
A good system of finance and good government are
interdependent.
Durrell, The Principles and Practice of the System of
Control over Parliamentary Grants (1917)
Parliament/ Executive financial
relationship - principles
• Bedrock of financial system is maintenance by
Parliament of control over grants it makes
• 3 fundamental principles (French CJ in Pape):
– Parliament must authorise any taxes
– All Crown revenue forms part of the Consolidated
Revenue Fund
– Only Parliament can authorise the appropriation of
any money from the Consolidated Revenue Fund
Parliament/Executive financial
relationship - practice
• The Executive has the initiative in taxation
and appropriation
• Control is (principally) with the Assembly
• 3 stages of finance affecting Assembly:
estimates, expenditure, accounting
• Until appropriation, monies are
administered at the direction of Parliament
Parliament/Executive financial
relationship - process
• See notes
What does an appropriation do?
• Financial, not regulative. Does not create
rights
• Legally segregates monies – merely
earmarking
• Not a source of spending power –
“necessary but not sufficient”
What does an appropriation do?
• Other restrictions
– Limited to specified purpose
– Imposes a maximum sum
– $ only available for specified period
• Conditions the lawfulness of Executive
expenditure
• Standing appropriations are different
Commonwealth/State financial
relationship
• What does the Constitution say?
– Section 94: After five years from the imposition of uniform duties
of customs, the Parliament may provide, on such basis as it
deems fair, for the monthly payment to the several States of all
surplus revenue of the Commonwealth.
– BUT: Surplus Revenue Case (1908)
– Section 96: During a period of ten years after the establishment
of the Commonwealth and thereafter until the Parliament
otherwise provides, the Parliament may grant financial
assistance to any State on such terms and conditions as the
Parliament thinks fit.
Commonwealth/State financial
relationship
• What does the Constitution mean?
– First uniform tax case (1942)
– Second uniform tax case (1957)
– BUT “Obamacare” decision
Legal history vs text and structure
• The principles underlying these
relationships are given context by legal
history….
• …but that is not as important as the text
and structure of the Constitution
– (where it is there)
Outline - Laura
•
•
•
•
•
Facts and issues of Williams
Scope of Cth spending power before and after
Cth response
Relevance of the financial relationship principles
Risks for existing and new funding arrangements
Facts of the case
• The school
• The program (via funding agreements, rather than
legislation)
• The agreement
• The payments
Questions asked of the Court
1. Did Mr Williams have standing to challenge the
Agreement, the appropriations, and the payments?
2. Is the Agreement invalid because it is:
• beyond the executive power of the Cth, or
• prohibited by s 116 of the Constitution (freedom of
religion)?
3. Was the drawing of money from Consolidated Revenue
to make payments under the Agreement authorised by
the relevant Appropriation Acts?
4. Were the payments made by the Cth to SUQ pursuant to
the Funding Agreement:
• beyond the executive power of the Cth, or
• prohibited by s 116 of the Constitution?
Questions asked of the Court
1. Did Mr Williams have standing to challenge the
Agreement, the appropriations, and the payments?
2. Is the Agreement invalid because it is:
• beyond the executive power of the Cth, or
• prohibited by s 116 of the Constitution (freedom of
religion)?
3. Was the drawing of money from Consolidated Revenue
to make payments under the Agreement authorised by
the relevant Appropriation Acts?
4. Were the payments made by the Cth to SUQ pursuant to
the Funding Agreement:
• beyond the executive power of the Cth, or
• prohibited by s 116 of the Constitution?
Questions asked of the Court
1. Did Mr Williams have standing to challenge the
Agreement, the appropriations, and the payments?
2. Is the Agreement invalid because it is:
• beyond the executive power of the Cth, or
• prohibited by s 116 of the Constitution (freedom of
religion)?
3. Was the drawing of money from Consolidated Revenue
to make payments under the Agreement authorised by
the relevant Appropriation Acts?
4. Were the payments made by the Cth to SUQ pursuant
to the Funding Agreement:
• beyond the executive power of the Cth, or
• prohibited by s 116 of the Constitution?
The Cth’s executive power to spend
and contract
Section 61 of the Constitution:
• The executive power of the Commonwealth is vested in
the Queen and is exercisable by the Governor-General
as the Queen's representative, and extends to the
execution and maintenance of this Constitution, and of
the laws of the Commonwealth.
The ‘Common Assumption’
Cth legislative power
(i) trade and commerce with other
countries, and among the States;
(ii) taxation; but so as not to
discriminate between States or parts
of States; (iii) bounties on the
production or export of goods, but so
that such bounties shall be uniform
throughout the Commonwealth;
(iv) borrowing money on the public
credit of the Commonwealth;
(v) postal, telegraphic, telephonic,
and other like services…
Cth executive power
The new requirements for the Cth
• statutory authority to enter into any contracts and or spend public
money
OR
• the agreement of the relevant States to accept a s 96 grant with the
Cth's preferred conditions.
NB: A program only needs to have some basis in statute - the statute
itself does not need to authorise each and every contract and
payment.
Exceptions to the requirement for
legislation/ s 96 grant
Contracts and payments in respect of
– prerogative powers
– administration of departments (including
possibly any longstanding policies)
– possibly, national emergencies or the need
for some unique national enterprise
How does this case fit with Pape?
Pape =
– The Commonwealth's power to appropriate money is
not sufficient to support its expenditure of that money
on any subject it liked.
– A separate source of power is required to justify such
expenditure.
Williams = don’t just need a source of power, need (in
most cases) actual legislation.
The Cth’s response
• Financial Framework Legislation Amendment
Act (No 3) 2012 (Cth)
• Valid? Not free from doubt.
• The Commonwealth must have legislative
power to support its spending, else it must a
s 96 grant
Why did the Court reject the
Common Assumption?
•
•
Two reasons:
– Federalism
– The role of Parliament, particularly the Senate
Rationales relevant to risk of ‘trickle down’ of principle
to State level
– State has plenary legislative power
– State Executive power not specified in Constitution
(Cth or State)
– BUT parliamentary scrutiny relevant
Risks for Victoria – are you:
• Receiving funding from the Cth does not have a specific
legislative basis?
• Working with organisations that receive direct Cth
funding?
• Negotiating with the Cth about a program not directly
inside the Cth’s legislative heads of power?
• Likely to restructure its funding arrangements with the
Cth in the future?
• Designing State funding programs?
• Delivering State funding programs that do not have an
express legislative basis? Which are not for the ordinary
services of government?
Are existing programs based on
s 96 grants OK?
Yes.
Constitution, s 96 - ‘… the Parliament may
grant financial assistance to any State on
such terms and conditions as the
Parliament thinks fit’.
Case references
• Auckland Harbour Board v The King [1924] AC 318
• National Federation of Independent Business v Sebelius, Secretary
of Health And Human Services (Obamacare decision) 567 US _
(2012)
• NSW v Bardolph (1934) 52 CLR 455
• NSW v Cth (Surplus Revenue Case) (1908) 7 CLR 179
• Pape v Commissioner of Taxation (2009) 238 CLR 1
• South Australia v Cth (First Uniform Tax case) (1942) 65 CLR 373
• Victoria v Cth (Second Uniform Tax case) (1957) 99 CLR 575
• Williams v Commonwealth [2012] HCA 23