Commonwealth spending back in the High Court’s sights

The High Court has given the Commonwealth two serious warnings that it needs to review its extensive spending program since 2009, but these have gone largely unheard. AAP/Lukas Coch

This week, the High Court heard Toowoomba man Ron Williams’ second challenge to the constitutionality of the Commonwealth’s funding of the National School Chaplaincy and Student Welfare Program.

While the challenge itself is to a relatively small federally funded program for the provision of chaplains (and more recently student welfare workers) in schools, it has brought the whole Commonwealth spending program back into the High Court’s sights.

Constitutional powers

The Commonwealth has an express constitutional power to provide funding to the states in Section 96 of the Australian Constitution. Pursuant to that section, the Commonwealth can attach whatever terms and conditions it thinks fit to that funding.

However, in a trend that can be traced back to prime minister Gough Whitlam’s “Australian Assistance Plan” and the direct funding of regional councils, the Commonwealth has increasingly avoided Section 96. Instead, it provides billions of dollars of direct funding to any number of persons and groups, including individuals, schools, sporting bodies, local councils and religious organisations.

Since 2009, the High Court has given the Commonwealth two serious warnings that it needs to review its extensive spending program. These have gone largely unheard.

The Pape challenge

In 2009, Bryan Pape challenged the constitutionality of Commonwealth spending on the “tax bonus” scheme (part of the federal stimulus response to the global financial crisis). The High Court told the Commonwealth that there must be a constitutional source every time the Commonwealth spent money.

In relation to the tax bonus payments, the High Court accepted that there was an implied constitutional power enlivened by the national emergency created by the downturn in the global economy. It added that this power would not always be there. The Commonwealth was on notice that its extensive spending program would have to be audited, and it said it would do so.

However, it appears the Commonwealth did not change its ways. No spending programs were discontinued. No spending programs were funnelled through the states using the grants power in Section 96.

Williams’ first challenge

The Commonwealth’s funding of religious groups was the next program that was brought before the High Court. Williams challenged the Commonwealth’s funding of Scripture Union Queensland to provide chaplaincy services at his children’s public school in Toowoomba. In 2012, the High Court found the funding agreement between the Scripture Union and the Commonwealth to be unconstitutional on the basis that it had not been authorised by statute.

In effect, the High Court created a new constitutional requirement for Commonwealth expenditures where these fell outside a number of specified areas, such as the ordinary course of administering a department. Commonwealth expenditure of public monies needed to be authorised by legislation in addition to parliamentary authorisation of expenditure through appropriations (that is, the budget).

On face value, the Williams decision was a win for democracy and federalism: the twin pillars on which the Australian Constitution rests. Democratic accountability of Commonwealth expenditure would be enhanced because it now required express parliamentary authorisation in addition to an appropriation.

From a federal perspective, the requirement for parliamentary authorisation also imposes constitutional limits on the Commonwealth’s legislative powers that restrict those expenditures in areas such as education, health and local government. These areas are not expressly within the Commonwealth’s legislative powers and are traditionally considered the remit of the states.

The government’s response

Unlike the Pape case, the Commonwealth responded to the Williams decision. The Commonwealth quickly added a provision to its financial management legislation that authorised the government to enter into funding arrangements and make grants that are listed in the regulations.

The initial list of arrangements and grants totalled more than 400 and was inserted into the regulations by the federal parliament. However, the government has made subsequent amendments and additions to the regulations. Regulations are delegated legislative instruments made by the government and only subject to parliamentary oversight after the fact, not parliamentary approval.

The then-Labor government responded to the first High Court challenge of the school chaplaincy program, but not in a way that was a win for democracy or federalism. AAP/Penny Bradfield

While there was a response, it was certainly not a win for democracy or federalism. Democratically, parliament passed the initial list of funding arrangements and grants, but from then on it was left to the executive to authorise its own spending programs.

The 400-plus programs and classes of programs listed span the full gamut of federal programs. The Commonwealth has not discontinued programs clearly outside the Commonwealth’s legislative competence, or funnelled these programs through the states.

Williams’ second challenge

The constitutionality of the remedial legislation is highly dubious. The second Williams challenge now gives the High Court the opportunity to review the government’s response to its initial decision.

As shadow attorney-general, George Brandis raised serious questions about its constitutionality during its passage through parliament. The Coalition, in opposition, nonetheless supported it.

Even the Labor government that introduced the legislation held serious doubts about its utility. The jettisoned constitutional referendum on financial recognition of local government, which was supposed to be held in 2013, was entirely directed at ensuring a solid constitutional foundation for federal grants to local governments.

Williams is a private citizen challenging a publicly funded religious program that he finds objectionable at significant personal cost. His personal determination and courage may herald a win for all Australians who believe in democracy and federalism.