Explainer: can the Senate block the budget?

Following the announcement of the budget, a mass of legislation to implement the new policies and allow the government to spend money is introduced into parliament. AAP/Lukas Coch

In the days since the Abbott government released its first budget, the Labor Party, the Greens and the Palmer United Party have all said they will block parts of it in the Senate.

Threats to block the budget bring back memories of 1975 when the opposition, led by Malcolm Fraser, used its numbers in the Senate to stall the passage of the appropriation bills (sometimes referred to as “supply”). This ultimately led to the then governor-general, Sir John Kerr, taking the extraordinary step of dismissing the Whitlam government.

But would blocking aspects of the Abbott government’s budget bring about a similar constitutional crisis, the likes of which we have not seen since 1975?

Following the announcement of the budget, a mass of legislation necessary to implement the new policies and allow the government to spend money is introduced into parliament. The legislation falls broadly into three categories:

  1. Appropriation bills (also known as the budget bills), which provide parliamentary approval for the government’s proposed expenditures;

  2. Bills that amend existing tax legislation, or add new taxes; and

  3. Bills that create or amend government schemes or services.

The implementation of the Abbott government’s budget depends upon the passage of all three types of legislation. Based on the mutterings from Labor and the minor parties so far, this year it will most likely be the latter two categories that receive the greatest attention on the floor of the Senate.

The appropriation bills

The government can’t simply take money from the Treasury. Parliament must pass legislation, known as “appropriation” legislation, authorising the government to dip into the Treasury’s coffers. On the night of treasurer Joe Hockey’s budget speech, three appropriation bills were introduced into parliament.

The first of these bills deals with the “ordinary annual services of the government”. This first bill provides government departments and agencies with the funding necessary to operate day-to-day services, including paying public servants’ wages.

The second bill deals with the authorisation of funds for items that are not “ordinary annual services of the government”. This will include, for example, funding for public works, the acquisition of sites and buildings or grants to the states.

The third bill provides money for the running of parliament itself.

The reason for multiple appropriation bills is that Section 54 of the Constitution requires that a bill dealing with the appropriation of money:

…for the ordinary annual services of the government shall deal only with such appropriation.

Other appropriations must, therefore, be dealt with in separate legislation. The reason for this is to prevent the government tacking important new programs onto these bills and forcing the Senate’s hand.

Blocking cuts to existing services

The way in which the legislation is structured to conform with the constitutional requirements has implications for senators seeking to block aspects of the budget.

For example, the money required to run organisations such as the ABC or the CSIRO is contained within the first appropriation bill as it is part of the “ordinary annual services of the government”. Senators seeking to block the budget cuts to the ABC or the CSIRO would need to vote against the first appropriation bill.

As constitutional law expert Anne Twomey has noted, it is unlikely that Labor would join the minor parties or independents in blocking supply in this way. As a consequence, the Senate blocking budget cuts to existing services seems doubtful, so we are unlikely to see a repeat of 1975.

Blocking the ‘debt levy’

The government’s “debt levy”, which proposes an increase to the top marginal tax rate by 2% for three years, is likely to face stern opposition in the Senate.

The debt levy is not included in the appropriation bills, but is instead part of a separate set of bills – primarily, the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014.

The proposed legislation dealing with the debt levy is separate to the appropriation bills because it is a function of two constitutional requirements and allows the Senate to scrutinise each proposed new tax separately. First, there is the aforementioned issue of Section 54 of the Constitution. In addition, Section 55 of the Constitution requires that laws dealing with taxation can only deal with taxation, and only one subject of taxation.

The effect of Section 55 is that where a government seeks to introduce taxes on different subjects, each tax must be dealt with in a separate bill.

Section 53 of the Constitution prevents the Senate amending bills dealing with taxation or the appropriation of money for the ordinary annual services of the government. However, it can request such amendments be made by the House of Representatives.

Given the vocal opposition to the debt levy, it would appear that non-government senators are more likely to reject the tax outright than to seek amendments from the lower house.

Blocking new or amended schemes or services

The Senate blocking supply of funding to existing schemes or services is unlikely. But what about where the budget has proposed changes to the scheme or service itself?

For example, could the Senate block the proposed A$7 GP co-payment or the establishment of the Medical Research Future Fund? These initiatives would require either new legislation or amendments to existing legislation. As such, they would be open to review by the Senate.

In the case of the proposed co-payment, amendments would presumably need to be made to the Health Insurance Act 1973. When scrutinising normal legislation such as this, the Senate has the same powers as the lower house.

The new Senate from July 1

The composition of the Senate is set to change on July 1 this year. This, coupled with the way in which the Constitution requires many of these budget measures to be dealt with in separate pieces of legislation, means that each initiative could receive close scrutiny from the Senate.

While the Senate is unlikely to block the appropriation bills and prevent the day-to-day running of services, the close scrutiny that other aspects of the budget are likely to receive could stall and frustrate some of the government’s key reforms.