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Monday, 21 February 2011
Page: 606

Mr McCLELLAND (Attorney-General) (12:48 PM) —I note your statement, Mr Speaker, and I support the motion moved by the Leader of the House to affirm the constitutional principles as stated by you. I note that the Manager of Opposition Business has suggested various mechanisms to facilitate debate on the substance of the Social Security Amendment (Income Support for Regional Students) Bill 2010 without passage of the bill, but that is not the issue at hand. These are not mere technicalities; these are fundamental constitutional principles and I will focus on those.

In summary, under Australia’s constitutional arrangements, the government of the day is responsible for the management of public revenue and the budget. The government therefore initiates all financial initiatives in the parliament, and this is reflected, as has been noted, in sections 53 and 56 of the Constitution. Section 53 specifically provides that such laws shall not originate in the Senate. Section 56 states that such laws shall not ‘be passed unless the purpose of the appropriation has been recommended by message of the Governor-General’ to the House. The Governor-General’s message can only be given on the advice of the government of the day, and, as the Leader of the House has outlined, the House of Representatives standing orders reflect the government’s constitutional responsibilities. I will now run through those arguments in some detail. I also note that my letter to you, Mr Speaker, has been tabled.

The bill proposes to amend the Social Security Act 1991 and would have the effect of increasing the amount of youth allowance payments made from consolidated revenue under a standing appropriation. As has been noted, the explanatory memorandum itself suggests that the financial impact would be in the order of $90 million per year. The Leader of the House has referred to sections 53 and 56 of the Constitution. I will not reread those, but I will refer to the constitutional history that underpins those provisions. Essentially, the two provisions reflect the important principle of our constitutional heritage that the business of government in the Anglo-Australian context, reflecting our history and heritage, is conducted by the Crown—more commonly referred to in Australia as ‘the executive’. But that business, which necessarily requires a continual supply of money, is conducted with the approval and under the supervision of the parliament. Indeed, the constitutional history was noted by Attorney-General Barwick in his opinion on the operation of section 56 of the Constitution in advice dated 20 February 1962. Mr Barwick, as he then was, referred to the following extract from the British Budgetary System by Sir Herbert Brittain, which was published in 1959—a few years before Mr Barwick’s advice. It reads:

Underlying the Parliamentary procedure on Supply is a rule of the House of Commons which is of fundamental importance … ‘This House will receive no petition for any sum relating to public service or proceed upon any motion for a grant or charge upon the public revenue, whether payable out of the Consolidated Fund or out of money to be provided by Parliament, unless recommended from the Crown.’

That last phrase is crucial. On the basis of that historical analysis, the author concluded:

Only the Crown, therefore, can initiate proposals for expenditure and in the House the Crown’s right and responsibility in this respect are exercised by Ministers in the Government of the day.  No private member, on either side of the House, can exercise such initiative or move for an increase in any grant above the sum proposed by the Government.

Again, that indicates that the initiatives come from the Crown and are exercised by ministers of the government of the day.

Indeed, a review of this historical context makes it clear that the underlying purpose of these provisions is to ensure that the government of the day retains control over legislative initiatives for public expenditure. In his opinion, Attorney-General Barwick highlighted the rationale of these provisions by reference to Hearn’s Government of England, a historic edition of 1886 reflecting the history that we have inherited. That sets out:

It is … a fundamental rule of the House of Commons that the House will not entertain any petition or any notice for a grant of money, or which involves the expenditure of any money, unless it be communicated by the Crown.

This was to avoid, as the historic text describes:

… the scramble among the members of the Legislature to obtain a share of the public money from their respective constituencies, of the ‘log-rolling’, and of the predominance of local interests to the entire neglect of the public interest …

In other words, the executive having the overall functions of government in mind before proposing initiatives.

Consistent with this view, the Final report of the constitutional commission of 1988 saw section 56 reflecting the well-established principle of Westminster parliamentary democracy:

… financial initiatives are the preserve of the Crown. The Executive Government is charged with management of the public revenues and other public moneys and it alone may request public authorisation of expenditures. This request is formally communicated to the House by message of the Governor-General.

This ‘fundamental principle’ has been confirmed by the High Court of Australia in 2005, in Combet v Commonwealth. In their majority judgment, Gummow, Hayne and Callinan and Heydon noted:

… it is the Executive Government which begins the process of appropriation. This the Executive Government does by specifying the purpose of the appropriation by message to the House of Representatives.

Similarly in that case, Justice Kirby referred to a discussion of the issues in Lane’s commentary on the Australian Constitution and concluded that:

… the initiative for proposed appropriations belongs to the Executive Government, in accordance with s 56 of the Constitution.

The constitutional history that I have just run through is reflected in the standing orders, and in particular standing orders 180 and 147, which, again, the Leader of the House has outlined. I will not again describe those.

As has been indicated, there has been the controversy concerning: what is a law appropriating revenue or moneys? Indicating a degree of historic rivalry, yes, it is to be noted that the Senate’s view has not always corresponded with that of the House of Representatives on these matters, and the Senate has taken a different view in respect of this bill. The fundamental difference appears to relate to the question: what constitutes a law appropriating revenue or money? But, with respect, I think that the view of the Senate on this point is incorrect. I base my views on the weight of authority, including Attorney-General Barwick, to whom I have referred. The weight of authority is that the requirements under sections 53 and 56 are not confined to laws containing a clause explicitly appropriating the Consolidated Revenue Fund.

Laws that cause money to be expended under a standing appropriation are also covered, specifically a law that alters the purpose for which money may be expended under a standing appropriation—for example, by increasing the categories of person entitled to a benefit or changing the formula by which that benefit was calculated to increase the amounts that could be paid out is covered. This was a view adopted by the House of Representatives Standing Committee on Legal and Constitutional Affairs in its 1995 report on the third paragraph of section 53 of the Constitution. In the context of considering the first paragraph of section 53, the committee concluded:

… a bill which increases expenditure under a standing appropriation should not be originated in the Senate …

Indeed, more recently, in Pape v Commissioner of Taxation, the 2009 decision of the High Court of Australia, Justices Gummow, Crennan and Bell cited the following statement in the fifth edition of House of Representatives Practice 2005 when referring to appropriation bills:

… while not in themselves containing words of appropriation, would have the effect of increasing, extending the objects or purposes of, or altering the destination of, the amount that may be paid out of the Consolidated Revenue Fund under existing words of appropriation in a principal Act to be amended, or another Act.

Again, that refers to ‘the effect of increasing’ being particularly relevant.

Further, in the opinion by Attorney-General Barwick dated 20 February 1962, to which I have referred, and in a separate opinion that he gave on 26 November 1962, Mr Barwick set out a similar view in relation to section 55, reasoning that it is equally applicable to the principles of section 53. In that 26 November opinion he stated that, under section 56 of the Constitution, a Governor-General’s message is necessary ‘to the passage of a bill to increase benefits under the Social Services Act or to liberalise the conditions under which such benefits are payable’. I emphasise those words: ‘or to liberalise the conditions under which such benefits are payable’. With respect, Attorney-General Barwick was entirely correct on the history that I have outlined. It is clear that the purpose and natural consequence of the Social Security Amendment (Income Support for Regional Students) Bill would be to liberalise the conditions under which youth allowance benefits are payable and thereby to increase the amount of youth allowance payments paid from consolidated revenue under that standing appropriation in the Social Security (Administration) Act.

It follows that the bill is a proposed law for the appropriation of revenue or moneys within the meaning of section 53 of the Constitution and, as a result, could not properly have been introduced into the Senate and could not properly be passed by the Senate. On the same basis the bill is a proposed law for the appropriation of revenue or money within the meaning of section 56 and as such requires a message from the Governor-General to pass through the House of Representatives, and no such message has been obtained. It is clear, therefore, that there is no proper basis for the bill to proceed in the House of Representatives, and I support the motion moved by the Leader of the House.