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Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016



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ISSN 1328-8091

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BILLS DIGEST NO. 18, 2016-17 7 OCTOBER 2016

Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016 Paula Pyburne Law and Bills Digest Section

Dr Nitin Gupta Economics Section

Dr Alex St John Science, Technology, Environment and Resources Section

Contents

History of the Bill ................................................................. 2

Purpose of the Bill ............................................................... 2

Structure of the Bill ............................................................. 2

Background ......................................................................... 2

National Innovation and Science Agenda ................................ 2

Innovation Australia ................................................................ 3

Committee consideration .................................................... 4

Senate Selection of Bills Committee........................................ 4

Senate Standing Committee for the Scrutiny of Bills .............. 4

Policy position of non-government parties/independents ..... 4

Position of major interest groups ......................................... 4

Financial implications .......................................................... 4

Statement of Compatibility with Human Rights .................... 4

Parliamentary Joint Committee on Human Rights .................. 5

Key issues and provisions..................................................... 5

Establishment of Innovation and Science Australia ................ 5

Changes to the Board .............................................................. 5

New name ............................................................................. 5

Updated functions ................................................................. 5

Addition of Deputy Chairperson ............................................ 6

Streamlining Board functions ................................................ 6

Date introduced: 1 September 2016

House: House of Representatives

Portfolio: Industry, Innovation and Science

Commencement: On Royal Assent

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

October 2016.

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Programs relating to industry, innovation, science and research ................................................................................... 7

Creating programs ................................................................. 7

Arrangements relating to programs ...................................... 7

Term and conditions relating to program arrangements ...... 8

Constitutional considerations .................................................. 8

Other provisions ................................................................ 10

Direct management of the Board by the responsible Minister ............................................................................... 10

Concluding comments ....................................................... 10

History of the Bill The Industry Research and Development Amendment (Innovation and Science Australia) Bill 20161 (the first Bill) was introduced into the House of Representatives on 4 May 2016. However, the first Bill lapsed at the dissolution of the 44th Parliament on 9 May 2016.

The Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016 (the Bill) was introduced into the House of Representatives on 1 September 2016 in equivalent terms to those of the first Bill.

Purpose of the Bill The purpose of the Bill is to amend the Industry Research and Development Act 19862 (IRD Act) to change the name of the body known as Innovation Australia to Innovation and Science Australia; and to allow the Minister to create programs for industry, innovation, science and research and to authorise expenditure under those programs. The Bill also contains transitional and consequential amendments to the Income Tax Assessment Act 19973, the IRD Act, the Pooled Development Funds Act 19924, the Taxation Administration Act 19535 and the Venture Capital Act 2002.6

Structure of the Bill The Bill has one Schedule split into two Parts:

• Part 1 of the Bill amends the IRD Act to establish Innovation and Science Australia and to allow the Minister to create industry, innovation, science and research programs. In addition, the Bill inserts a legislative framework to provide legislative authority for Commonwealth spending in relation to those programs

• Part 2 makes consequential and transitional amendments to a number of statutes in relation to the amendments set out in Part 1.

This Bills Digest considers the amendments set out in Part 1 of the Bill only, those amendments made in Part 2 being relatively minor.

Background National Innovation and Science Agenda Innovation is widely seen as a crucial imperative for Australia as it seeks to transition away from a resources-based economy, and prepares for the challenges and opportunities of the 21st century. The Turnbull government has identified innovation as a strategic priority.7 The National Innovation and Science Agenda

1. Parliament of Australia, ‘Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016 homepage’, Australian Parliament website. 2. Industry Research and Development Act 1986. 3. Income Tax Assessment Act 1997. 4. Pooled Development Funds Act 1992. 5. Taxation Administration Act 1953. 6. Venture Capital Act 2002. 7. See, for instance, Liberal Party of Australia and the National's, The Coalition's policy to support innovative new businesses and jobs, Coalition

policy document, Election 2016.

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(NISA)8 was announced in December 2015 as the comprehensive, long-term framework to drive improvements in innovation outcomes.9 The NISA focuses on four key pillars:

• culture and capital to help businesses embrace risk and incentivise early stage investment in start ups

• collaboration, to increase the level of engagement between businesses, universities and the research sector to commercialise ideas and solve problems

• talent and skills, to train Australian students for the jobs of the future and attract the world’s most innovative talent to Australia, and

• Government as an exemplar, to lead by example in the way Government invests in and uses technology and data to deliver better quality services.10

In relation to the last of these key pillars, the NISA states:

We are getting the governance settings right, so that there is a single body responsible for researching, planning and advising government on the long-term strategic vision for innovation and science. We are establishing a new independent statutory board, Innovation and Science Australia, supported by a Chief Executive Officer accountable through the Industry Minister to a new Innovation and Science Committee of Cabinet, chaired by the Prime Minister. This will place innovation and science at the centre of policy-making.

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According to the Minister for Industry, Innovation and Science, Greg Hunt:

Innovation and Science Australia will help us to complete the first wave of the National Innovation and Science Agenda, pursue a second wave based on investment attraction and its 2030 Strategic Plan will guide our third wave. 12

Innovation Australia Innovation Australia is an independent statutory body established under the IRD Act to assist with the administration and oversight of the Australian Government's industry innovation and venture capital programs delivered by AusIndustry.13

Both the Australian Labor Party (ALP) and the Coalition have previously identified the need for an independent Board that can perform coordinating, administrative and governance functions that are seen as important for improving innovation in Australia. The creation of a new body to ‘coordinate the promotion of research and development and other economic innovations across the Government’ was first proposed in June 2006, by the ALP.14 However, it was the Howard government that established Innovation Australia with the enactment of the Tax Laws Amendment (2007 Measures No.5) Act 2007.15 Innovation Australia was formed by merging the functions of the Industry Research & Development Board and the Venture Capital Registration Board, in order to produce a consistent approach to program delivery and to improve effectiveness of the program.16

8. Australian Government, ‘National Innovation and Science Agenda’, National Innovation and Science Agenda (NISA) website. 9. C Pyne (Minister for Industry, Innovation and Science), Agenda to transform the Australian economy, media release, 7 December 2015. 10. M Turnbull (Prime Minister) and C Pyne (Minister for Industry, Innovation and Science), National innovation and science agenda, joint media release, 7 December 2015.

11. Department of the Prime Minister and Cabinet (PM&C), National Innovation and Science Agenda - welcome to the ideas boom, Commonwealth of Australia, PM&C, 7 December 2015, p. 15. 12. G Hunt (Minister for Industry, Innovation and Science), ‘Second reading speech: Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016’, House of Representatives, Debates, 1 September 2016, p. 246. 13. Department of Industry, Innovation and Science (DIIS), ‘AusIndustry programme summary’, Business.gov.au website, 27 September 2016;

DIIS, ‘Innovation Australia’, DIIS website. 14. C Bowen (Member for Prospect), Cascading tax concessions and building networks the key to an innovating Australia: Labor report, media release, 5 June 2006. 15. P Dutton (Minister for Revenue and Assistant Treasurer), Continuing to improve Australia’s tax system, media release, 16 August 2016; see

also L Neilson, Tax Laws Amendment (2007 Measures No. 5) Bill 2007, Bills digest, 42, 2007-08, Parliamentary Library, Canberra, 2007; Tax Laws Amendment (2007 Measures No.5) Act 2007. 16. Revised Explanatory Memorandum, Tax Laws Amendment (2007 Measures No. 5) Bill 2007, p. 269.

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Committee consideration Senate Selection of Bills Committee The Senate Standing Committee for the Selection of Bills determined on 15 September 2016 that the Bill not be referred to a Committee for inquiry and report.17

Senate Standing Committee for the Scrutiny of Bills At the time of writing this Bills Digest, the Senate Standing Committee for the Scrutiny of Bills had not considered either the first Bill or this Bill.

Policy position of non-government parties/independents It has been reported that, although the ALP does not oppose the establishment of Innovation and Science Australia per se, it considers that appointments to the Innovation and Science Australia Board would not make up for Coalition Government cuts to science and research.18

The Australian Greens (the Greens) have not opposed the establishment of Innovation and Science Australia. However, in the lead up to the 2016 Federal election, the Greens undertook to set up an Innovation Commissioner to work with industry, universities, business, government agencies and Innovation and Science Australia to advance the innovation agenda. Accordingly:

The Innovation Commissioner would also be responsible for developing a comprehensive Innovation Strategy, including a National Social Innovation Strategy. Without significant government policy and strategy the impact and value of Australia’s social enterprise sector will not realise its potential. 19

Position of major interest groups The specific matters dealt with in this Bill (the creation of Innovation and Science Australia) have attracted little commentary amongst major interest groups. At the time of the release of the National Innovation and Science Agenda policy statement, the Business Council of Australia welcomed the creation of Innovation and Science Australia along with the Innovation and Science Committee of Cabinet, saying that it would ‘provide a much needed whole-of-system view to the highest levels of government’.20

The move was also welcomed by Professionals Australia, the union representing many workers in science, technology and research:

Professionals Australia is very pleased to see that the Liberal Government will create a new board in the Industry Department called Innovation and Science Australia, as well as a new innovation and science committee of cabinet. We have long called for greater STEM expertise in policy making, and this step goes some way to achieving this. 21

Financial implications The Bill itself has no financial implications, as it does not make any alterations to appropriations or taxation.

However, the Government has indicated that it has already allocated an additional $8.1 million over four years between 2015-16 and 2018-19 to support additional activities of Innovation and Science Australia.22

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 201123 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.24

17. Senate Standing Committee for the Selection of Bills, Report, 6, 2016, The Senate, Canberra, 15 September 2016. 18. R Baxendale, ‘Innovation board unveiled’, The Australian, 16 March 2016, p. 6. 19. The Australian Greens (the Greens), Innovation nation - the bridge to the new economy, the Greens policy document, Election 2016. 20. Business Council of Australia, Response to National Innovation and Science Agenda, media release, 7 December 2015. 21. Professionals Australia, Innovation in Australia, Professionals Australia, Melbourne, December 2015, p. 8. 22. Explanatory Memorandum, Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016. 23. Human Rights (Parliamentary Scrutiny) Act 2011. 24. The Statement of Compatibility with Human Rights can be found at page 5 of the Explanatory Memorandum to the Bill.

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Parliamentary Joint Committee on Human Rights At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not considered either the first Bill or this Bill.

Key issues and provisions Establishment of Innovation and Science Australia A significant component of this Bill gives effect to the Government’s policy intent to establish a new board, Innovation and Science Australia, replacing the existing board known as Innovation Australia.25 Innovation and Science Australia assumes all of the functions of Innovation Australia26 in addition to taking responsibility for ‘providing whole of government advice on science, research and innovation matters’.27 This is in contrast to Innovation Australia’s current focus on ‘articulating … a business innovation perspective’.28 The Government’s intention is for Innovation and Science Australia to work closely with the two other sources of independent advice on science and research, being the Commonwealth Science Council and the Chief Scientist.29 This is consistent with the Government’s key objective of improving collaboration between academic researchers and business.30

Item 1 of Part 1 of the Bill changes the long title of the IRD Act from ‘An Act to encourage certain research and development’ to ‘An Act relating to industry, innovation, science and research, and for related purposes’.

Item 2 repeals and replaces the objects clause in section 3 of the IRD Act. The effect of the amendment is that the object of the IRD Act changes from a relatively narrow focus on promoting the development, efficiency and international competitiveness of Australian industry by encouraging innovation, research and development, and venture capital, to a much broader purpose of positioning Australia as a leading innovation nation. Under proposed section 3, the objects of the IRD Act will expand to also include facilitating the provision of independent strategic advice to Government regarding innovation, industry, science and research investment; supporting collaboration in the development and delivery of programs and authorising expenditure on programs relating to industry, innovation science and research.31

Changes to the Board Under the NISA, the Government seeks to tighten the links between investment and industry, innovation, science and research programs.32 To that end, the Bill amends Part II—Administration of the IRD Act to reflect changes to the functions, constitution and operation of Innovation and Science Australia as a Board.

New name First, item 13 of Part 1 of the Bill repeals and replaces section 6 of the IRD Act to establish Innovation Australia under its new name of Innovation and Science Australia. The application provision in item 39 of Part 1 of the Bill provides that a person who was a member of Innovation Australia (the Board) immediately before the amendment comes into effect continues as a member of Innovation and Science Australia (the Board).

Updated functions Second, item 14 updates the functions of the Board to broaden the scope of advice that it may give. The existing subsection 7(aaa) of the IRD Act is repealed and replaced by proposed paragraphs 7(aa)-7(ad) which give Innovation and Science Australia the broad functions of providing advice to Ministers and the Secretary of the

25. Australian Government, ‘Innovation and Science Australia’, National Innovation and Science Agenda website; Innovation Australia is established as a board by section 6 of the IRD Act. In addition existing section 4 defines the term Board as meaning Innovation Australia. Item 5 of Part 1 of the Bill amends the definition of the term Board to mean Innovation and Science Australia.

26. IRD Act, section 3. 27. Explanatory Memorandum, Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016, paragraph 4. 28. DIIS, ‘Innovation Australia: advice to Government’, DIIS website. 29. Australian Government, ‘Innovation and Science Australia’, op. cit. 30. PM&C, National Innovation and Science Agenda - welcome to the ideas boom, op. cit., p. 10. 31. IRD Act, proposed section 3 inserted by item 2 in Part 1 of the Bill. 32. G Hunt (Minister for Industry, Innovation and Science), ‘Second reading speech: Industry Research and Development Amendment (Innovation

and Science Australia) Bill 2016’, op, cit., p. 426.

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relevant Department about science, research and innovation policy. It also provides that the Board may commission and publish research in relation to science, research and innovation matters.33

The effect is to make Innovation and Science Australia a much broader, whole of government strategic advice and planning body for science, research and innovation. It also provides the government with a source of contestable advice in this area (the other sources of such advice being the Commonwealth Science Council and the Chief Scientist).

According to the Explanatory Memorandum to the Bill:

As part of its strategic advice, Innovation and Science Australia will undertake comprehensive audits and regular reviews of Australia's science, research and innovation system to assess and make recommendations to align government strategic priorities. It will also develop a long-term, 15 year National Innovation and Science Plan to identify science, research and innovation investment priorities and specific areas for policy and program reform.

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Currently paragraph 7(d) of the IRD Act provides that the functions of the Board are, amongst other things, any functions specified in a direction in force under existing section 19. (That section is repealed by item 28 in Part 1 of the Bill. Further discussion about this is below.) Item 15 repeals and replaces paragraph 7(d) of the IRD Act, so that it is a function of the Board to do anything incidental or conducive to the performance of any of its stated functions.

Addition of Deputy Chairperson Third, item 17 of Part 1 of the Bill amends the IRD Act to establish the position of Deputy Chairperson of the Board, intended to be held by the Chief Scientist.35 The Bill provides:

• that the Board will consist of a Chairperson, a Deputy Chairperson, a person who is performing the duties of an office or position in the Australian public service that has been designated by the Minister, and not less than three or more than 12 other members36

• that members of the Board will be appointed by the Minister rather than the Governor General37

• that the Deputy Chairperson will preside over Board meetings in the absence of the Chairperson38

• for persons to be appointed as acting Deputy Chairperson (or the Chairperson) on a temporary basis39

• that the Board as a whole, by resolution, may delegate any or all of its functions to the Chairperson, Deputy Chairperson, a member of the Board, a committee or a member of staff assisting the Board who is an SES employee 40or acting SES employee.41

This last amendment is of particular benefit because currently Innovation Australia has an active committee system which undertakes valuable work.42

Streamlining Board functions Fourth, existing sections 19, 19A, 19B and 20 of the IRD Act are repealed by item 28 of Part 1 of the Bill. Those sections currently provide for the Minister to give directions to the Board to take on additional functions or to provide advice about a matter under the Venture Capital Act or the Pooled Development Funds Act. Proposed

33. IRD Act, proposed paragraph7(ad). 34. Explanatory Memorandum, Industry Research and Development Amendment (Innovation and Science Australia) Bill 2016, op. cit., paragraph 4. 35. G Hunt (Minister for Industry, Innovation and Science), ‘Second reading speech: Industry Research and Development Amendment (Innovation

and Science Australia) Bill 2016’, op, cit., p. 426. 36. IRD Act, paragraph 9(1)(a), proposed paragraph 9(1)(aa), paragraph 9(1)(b) and proposed paragraph 9(1)(c). 37. IRD Act, paragraph 9(1)(a), proposed subsection 9(2), inserted by item 19 in Part 1 of the Bill. 38. IRD Act, proposed subsection 18(4), inserted by item 27 in Part 1 of the Bill. 39. IRD Act, proposed subsection 17(1A), inserted by item 26 in Part 1 of the Bill. 40. Section 2B of the Acts Interpretation Act 1901 provides that the terms SES employee and acting SES employee have the same meaning as in

the Public Service Act 1999. 41. IRD Act, proposed subsection 21(1), inserted by item 29 in Part 1 of the Bill. 42. DIIS, ‘Innovation Australia: committees’, DIIS website.

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section 19 streamlines the types of directions which the Minister may give to the Board. These directions include:

• conferring an additional function under the Venture Capital Act or the Pooled Development Funds Act43 and

• about the performance of functions and exercise of powers44

• directions in relation to:

- provision of technical assessments in relation to programs activities or proposals for programs activities45 - provision of a report or advice on a matter that relates to any of the Board's functions or powers; the operation of the IRD Act, the Pooled Development Funds Act or the Venture Capital Act, or the operation of the Commonwealth's income tax laws as they operate in relation to any of those statutes46 or

- policies and practices to be followed by the Board in the performance of its functions and the exercise of its powers.47 Importantly the directions given by the Minister under proposed section 19 are notifiable instruments and are, therefore, not subject to Parliamentary scrutiny. Nor are they subject to automatic repeal 10 years after registration.48

Programs relating to industry, innovation, science and research

Creating programs The Bill provides a framework for the Minister to create new programs by legislative instrument under the IRD Act.

Item 34 of Part 1 of the Bill inserts proposed Part IV—Programs relating to industry, innovation, science and research into the IRD Act, which would allow the Minister to prescribe, by legislative instrument, ‘programs in relation to industry, innovation, science or research’, which may involve the expenditure of Commonwealth money.49

The Constitution50 divides the legislative authority in Australia between the Federal and State governments. The Federal government is responsible for making laws about the matters allocated to it in the Constitution— primarily in sections 51 and 52—although there are other relevant sections. Relevant to this Bills Digest section 96 of the Constitution provides that the Parliament may grant financial assistance to any state on such terms and conditions as the Parliament thinks fit.

Within proposed Part IV, proposed section 33 empowers the Minister to prescribe programs in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs by legislative instrument.51 However, the Minister’s power is limited in that a program may only be prescribed to the extent that it is with respect to one or more legislative powers of the Parliament as set out above.52 For this reason, the legislative instrument must specify the legislative power or powers of the Parliament in respect of which the instrument is made.53

Arrangements relating to programs Proposed section 34 of the IRD Act provides that the Commonwealth may make, vary or administer an arrangement to carry out the programs authorised under proposed section 33 (including the power to spend money under those programs).54 For the purposes of this section the term arrangement includes a contract,

43. IRD Act, proposed subsection 19(1). 44. IRD Act, proposed subsection 19(2). 45. IRD Act, proposed paragraph 19(3)(a). 46. IRD Act, proposed paragraph 19(3)(b). 47. IRD Act, proposed paragraph 19(3)(c). 48. Legislation Act 2003, section 7. 49. IRD Act, proposed subsection 33(1). 50. Commonwealth of Australia Constitution Act. 51. A legislative instrument is subject to disallowance by the Parliament under section 42 of the Legislation Act 2003. 52. IRD Act, proposed subsection 33(2). 53. IRD Act, proposed subsection 33(3). 54. IRD Act, proposed subsection 34(1).

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agreement or deed. The power of the Commonwealth may be exercised by the Minister or by the accountable authority of a non-corporate Commonwealth entity.55

Although the Bill does not explicitly say, it would be reasonable to suggest that the power to administer industry, innovation, science and research programs would be conferred on Innovation and Science Australia under proposed section 36 of the IRD Act (see comments below).

Term and conditions relating to program arrangements Proposed section 35 of the IRD Act requires that the terms and conditions on which money may be payable by the Commonwealth under the arrangement must first, be set out in a written agreement between the Commonwealth and the other party, whether that party is a State, Territory or corporation—and second, that those terms and conditions must be complied with. Where the other party is a corporation, the terms and conditions of the arrangement must provide the circumstances in which the corporation must repay amounts to the Commonwealth.

Although the Bill does not explicitly say, it would be reasonable to suggest that the Innovation and Science Australia could be a party to an agreement on behalf of the Minister under proposed section 36 of the IRD Act.56

Proposed section 36 of the IRD Act allows a Minister to delegate his, or her, powers under proposed sections 34 and 35 to an official of a non-corporate Commonwealth entity—such as Innovation and Science Australia.57 Similarly, an accountable authority of a non-corporate Commonwealth entity may delegate any or all of his, or her, powers under section 34 or 35 to an official of any non-corporate Commonwealth entity.58

Constitutional considerations The proposed Part IV of the IRD Act gives the Minister broad discretion to establish programs—provided that they are in relation to industry, innovation, science or research and they are made with respect to one of the legislative powers available to the Commonwealth under the Constitution.

The construction of the Bill (and the inclusion in the Explanatory Memorandum that the Attorney-General’s Department—including the Australian Government Solicitor, Office of Constitutional Law and the Office of International Law have been consulted on the relevant provisions of the Bill) serves to highlight a broader issue with the Commonwealth’s legislative authority to provide funding to science and research in general.

The Constitution provides for several specific areas in which the Commonwealth has an explicit legislative power relating to science and research; these relate to astronomical and meteorological observations,59 fisheries in Australian waters beyond territorial limits,60 census and statistics,61 weights and measures,62 and benefits to students.63 However, except for benefits to students, these are narrow areas of science and research, and it would be difficult to argue that they comprise a more general power to legislate for science and research.

However, section 61 of the Constitution provides that the executive power of the Commonwealth extends to the execution and maintenance of the Constitution and the laws of the Commonwealth.

The executive power of the Commonwealth has been interpreted widely and may extend beyond the specific legislative powers listed in the Constitution. The Commonwealth derives additional power from the Constitution due to its status as a national polity.64 Justice Brennan noted in Davis v The Commonwealth:

55. Under sections 10 and 11 of the Public Governance, Performance and Accountability Act 2013, a non-corporate Commonwealth entity is a body that is legally and financially a part of the Commonwealth (such as a Department of State). Section 12 of that Act provides that an accountable authority is typically the administrative head of such an entity—for example, the Secretary of a Department or Chief Executive of a portfolio agency.

56. See also IRD Act, proposed subsection 35(4). 57. IRD Act, proposed subsection 36(1). 58. IRD Act, proposed subsection 36(3). 59. Ibid., s.51(viii). 60. Ibid., s.51(x). 61. Ibid., s.51(xi). 62. Ibid., s.51(xv). 63. Ibid., s.51(xxiiiA). 64. Victoria v The Commonwealth and Hayden (the AAP Case) (1975) 134 CLR 338, pp. 361-362, [1975] HCA 52.

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There is no reason to restrict the executive power of the Commonwealth to matters within the heads of legislative power. So cramped a construction of the power would deny to the Australian people many of the symbols of nationhood - a flag or anthem, e.g. - or the benefit of any national initiatives in science, literature and the arts. 65

The case of Davis v The Commonwealth concerned the validity of the Australian Bicentennial Authority, which was established as a company registered in the Australian Capital Territory. The High Court held that the commemoration of the Bicentenary is a matter falling within the province of the Commonwealth in its capacity as the national government. It further held that the executive power ‘extends to the incorporation of a company as a means for carrying out and implementing a plan or programme for the commemoration.66

Their Honours did, however, indicate some restrictions on the extent of this ‘national’ power. In their joint judgment, Chief Justice Mason and Justices Deane and Gaudron, stated:

... s. 61 confers on the Commonwealth all the prerogative powers of the Crown except those that are necessarily exercisable by the States under the allocation of responsibilities made by the Constitution and those denied by the Constitution itself. Thus the existence of Commonwealth executive power in areas beyond the express grants of legislative power will ordinarily be clearest where Commonwealth executive or legislative action involves no real competition with State executive or legislative competence.

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The establishment of the CSIRO is supported by this implied ‘nationhood’ power—that the executive powers of the Commonwealth include ‘activities peculiarly adapted to the government of a nation and which cannot otherwise be carried on for the benefit of the nation’,68 which included the pursuit of science and research. However, whether this implied power remains a sufficient constitutional basis for the existence of Commonwealth programs of science and research is uncertain. More recent opinion has cast doubt on the existence of the nationhood power, and whether it is applicable or necessary in the case of science and research:

The most difficult category is the fifth category, of funding for bodies such as national museums, art galleries, the Commonwealth Scientific and Industrial Research Organisation (‘CSIRO’) and other national institutions. Scientific research, the arts and culture can all be funded and supported at the state level, either directly by the states or through s.96 grants from the Commonwealth, so there is no real necessity for them to operate at the Commonwealth level. Nor is it readily apparent why a national scientific body produces any greater value to the nation than a state scientific body, such as one attached to a state hospital or university.

However, it is arguable that such Commonwealth bodies are supported by the prerogative power to establish, fund and regulate the public service and the departments and agencies by which it is organised. Just as the Commonwealth government can establish a Department of Education, even though it has no legislative power with respect to education, it may also be able to establish and run other public sector bodies such as the CSIRO, art galleries, sports institutes and the like. This does not give the Commonwealth Parliament power to make laws with respect to education, scientific research, art or sport. Rather, the Commonwealth could only rely on its executive power to establish such public sector bodies in order to enact laws incidental to the execution of this power — being laws with respect to the management, funding and operation of such bodies.

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The ability to prescribe these programs provides authority for the Commonwealth to spend money on these programs, although such money must first be appropriated in separate legislation. However, the power to spend such money on prescribed programs requires that the program is supported by a legislative power of the

65. Davis v The Commonwealth (1988) 166 CLR 79, p. 111, [1988] HCA 63. 66. Ibid., per Mason CJ, Deane and Gaudron JJ at paragraph 9. 67. Ibid., at paragraph 14. 68. Victoria v The Commonwealth and Hayden (1975) op. cit., pp. 361-362, quoted in M Spry, The executive power of the Commonwealth: its

scope and limits, Research paper, 28, 1995-96, Department of the Parliamentary Library, Canberra, 20 May 1996. 69. A Twomey, ‘Pushing the boundaries of executive power - Pape, the prerogative and nationhood powers’, Melbourne University Law Review, 34(1), 2010, pp. 313-343.

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Parliament.70 The legal authority of the Commonwealth to spend money in areas that are not explicitly supported by a constitutional head of power remains a source of considerable uncertainty.71

Other provisions Direct management of the Board by the responsible Minister Under the existing IRD Act, appointments, resignations and other administrative matters relating to the Innovation Australia board are directed to the Governor-General.72 The Bill deletes existing references in the IRD Act to the Governor-General and replaces them with references to the responsible Minister. This does not represent a substantial change, as convention requires the Governor-General to act only on the advice of Ministers.73 Allowing the responsible Minister to appoint and manage the Innovation and Science Australia Board directly, removes the need for the Minister to formally advise the Governor-General, and so has the effect of removing a level of administration from the process.

Item 36 of Part 1 of the Bill repeals and replaces section 46 of the IRD Act to simplify the requirement that the Board submit an annual report to the Parliament via the Minister.

Concluding comments The Bill makes changes to the IRD Act to allow Innovation and Science Australia, through the Minister, to become a whole-of-government advisory and coordination body for science, research and innovation. This could serve to strengthen science, research and innovation outcomes for Australia. However, significant questions regarding the constitutional basis for Commonwealth involvement in science and research more generally remain unresolved.

70. For a more detailed discussion of the spending vs appropriation powers of the Commonwealth, see M Hogg and C Lawson, ‘The watershed for Commonwealth appropriation and spending after Pape and Williams?’, Australian Journal of Administrative Law, 21(3), May 2014, pp. 145- 155.

71. See D Weight, ‘Commonwealth expenditure: legality and scrutiny’, Briefing book - key issues for the 44th Parliament, Parliamentary Library, Canberra, 2013, pp. 22-23. 72. Schedule 1, items 19, 22 and 24. 73. See ‘Governor-General's role’, Governor-General of the Commonwealth of Australia website, last updated 6 April 2016.

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