I have referred before to the possibility of the Commonwealth spending money. Now, this sounds like a pretty straightforward thing to do, but it's not that simple. That is, the Commonwealth cannot spend money how and when it wants to.
Hello everyone, my name is Renato Costa and this is Aussie Law. Today, we will look at some constitutional provisions and cases that relates to the possibility of the Commonwealth executive appropriating and expending money. Today we will start a series of videos about the executives appropriation and expenditure.
So first let me start by saying that in a case called combat and Commonwealth Justice Mike Hugh of the High Court of Australia said that the provisions that we're about to read and learn from, they come from a long tradition in constitutional law and also they relate to the principle of responsible government. As he stated, the provisions give full effect to the victory of the houses of parliament over the right of the crown to spend monies at the crown's discretion. So from the outset we can already see that this topic relates to the principle of responsible government, right?
Now, let's read the provisions that he was referring to, starting with sections 53 to 56 of the Australian Constitution. In section 53, we see that laws appropriating monies or imposing taxation shall not originate in the Senate. This means that it's always in the House of Representatives that the appropriation and money bills will be proposed. Also, section 53 says that the Senate cannot even amend the laws that are imposing taxation or the appropriation bills that are for the ordinary annual services of the government. The section does say that the Senate can return the bill for the House of Representatives for it to be amended there, it just cannot amend it by itself.
Finally, section 53 says that it is only in this respect that the Senate and the House of Representatives are unequal. That means that any other kind of law can be proposed and amended by the Senate. Section 54 forbids appropriation bills for the ordinary annual services of the Commonwealth from dealing with any other matters. That is, those laws will only deal with their annual appropriation. In the same path, Section 55 says that taxation bills should only deal with matters relating to the imposition of tax.
And Section 56 basically says that the executive has to recommend the purpose of the appropriation before it is voted and proposed in the House of Representatives. Did you notice that all these provisions are in chapter 2 of the Constitution? This should give us a hint that they relate to the law-making process.
Indeed, these sections are about the procedure to appropriate money and impose tax. So, before the government can expend any money, it needs first to pass in appropriation law following these terms and conditions that are imposed in the Constitution. All in all, the executive needs an authorization of Parliament to appropriate and spend money.
But what are the appropriation bills? Why do they have this name? Section 83 of the Constitution says that no money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.
So, to withdraw money for the purposes of the Commonwealth, the executive needs to propose in the House of Representatives an appropriation bill. As expressed by Chief Justice Mason and Justices Brennan, Dean, Dawson and Tuhey in Brown and West, there are two types of appropriation bills. The special and standing appropriations and the annual appropriations.
Annual appropriations are appropriations for the service of the year. or in respect of the year. This is a unique opportunity for Parliament to scrutinize executive expenditure annually. And they consist of those major appropriations for the operation of the Commonwealth and its government.
They are made in the budget session in Parliament and they are also called supply bills. Special or standing appropriations, on the other hand, they will occur because they are in the Constitution like section 3 of the Constitution that talks about the salary of the Governor-General or as an implication of the Constitution, like section 72 of the Constitution about the salary of judges. But they also exist for some other purposes, like making some social security payments or financing projects.
Just so you have a sense of it, according to the Commonwealth Department of Finance, around 25% of all government expenditure is funded through the annual appropriation. The remaining 75% is funded through special or standing appropriations. Now, let's turn to section 81, because the money to be appropriated, it has to come from somewhere, right? We're taking it from somewhere and we're spending somewhere else. Section 81 of the Constitution says that all revenue and monies that are raised or received by the Executive Government of the Commonwealth will form one Consolidated Revenue Fund.
It's like this huge bank account where all of the money of the Commonwealth will go to. To be more precise, not all the money will go there. There are some minor exceptions, but the bulk of it will go.
to the consolidated revenue fund. However, do you think that the prime minister or the treasurer would just go into the internet banking app of the consolidated fund and manage to withdraw any amount that they want to? No. They have to follow the manner imposed by the constitution. And guess what?
The process to do that is laid out by the constitution in sections 53 to 56. In the beginning of the video, I said that for the commonwealth to spend money, It wasn't that simple. That holds true because there are these requirements in the Constitution that there needs to be a parliamentary approval for the Commonwealth to appropriate money. And also, section 81 says that for the appropriation to happen, this appropriation has to be for the purposes of the Commonwealth. But this expression, the purposes of the Commonwealth, is so broad. So what is its meaning?
In the pharmaceutical benefits case, the majority of the High Court of Australia adopted a narrow view to this expression. The justices restricted the scope of that expression according to the federal structure of the Constitution and the distribution of powers in sections 51, 52 and 122. Justice Williams even coined the phrase that the purposes of the Commonwealth were to be found in the four corners of the Constitution. In another case, the AAP case, discussions about this were also inconclusive. Justice Mason, however, said that there's a distinction between appropriation and expenditure. This is very important and we will come back to this when we talk about some other cases that relate to government spending.
It was also understood that the limits to the power of Commonwealth spending money were also dependent on the limits to the executive powers, including the nationhood powers. I've talked about the nationhood powers in some other videos that you can watch by clicking on the playlist that is appearing on your screen. In Davidson v. The Commonwealth, the High Court said that if an appropriation was for the exercise of executive powers under section 61, then it was for the purposes of the Commonwealth. The decision also confirmed the status quo after the AAP case, that the Commonwealth was free. to determine the purposes for which it could appropriate money.
All in all, the purposes of the Commonwealth have to be expressed. There cannot be appropriations in blank, appropriations for no designated purpose, merely authorizing expenditure with no reference to purpose. Another challenge to the power of the Commonwealth to spend money came later on in 2009 in a case called Pape and the Federal Commission of Taxation.
But, if you want to know more about this case, you have to subscribe to our channel and click the bell icon, and then wait for my next video. Well, these provisions and cases that we just looked at all mean one thing. Under the principle of responsible government, the Commonwealth executive can only spend money if this expenditure is authorized by the legislature.
And the legislature will have to have approved an appropriation from the consolidated revenue fund. I hope you enjoyed this video. If you did, don't forget to leave a like.
That's super important. And I hope to see you again soon. Until then, ciao!