24 November 2005
Key Points:
The High Court has held that departmental items in the Commonwealth's 2005-6 appropriations legislation need not be spent on departmental outcomes identified in each agency's appropriation schedule. Provided the money is applied for "departmental expenditure", the spending will validly fall within the appropriation.
Background
In May 2005, the Prime Minister announced that the Federal Government intended to introduce legislation into Parliament to reform workplace relations in Australia. Following union opposition to the proposal, in July 2005, the Federal Government commenced an advertising campaign promoting the need for reform. In Combet v Commonwealth [2005] HCA 61, the High Court considered whether the expenditure of money on the advertisements was authorised by the Appropriation Act (No.1) 2005-2006 (Cth). On 20 September 2005, the High Court rejected the challenge and, on 21 October 2005, the Court delivered its reasons.
Grounds for the challenge
The case did not involve a challenge to the constitutional validity of the appropriations legislation. It was accepted that the Appropriations Act was validly enacted under sections 81 and 83 of the Constitution. Rather, the case involved a very detailed and complex question of statutory interpretation. The 2005-6 Appropriations Act distinguished between expenditure on "departmental items" and "administered items". These amounts of money were included in appropriation tables alongside specified departmental outcomes. The expressions "departmental items" and "administered items" were, however, dealt with in the legislation in a way which tied the latter, but not the former, to those specified outcomes. The only limitation expressly identified for "departmental items" was that they be applied for "departmental expenditure". The argument advanced by the plaintiffs in Combet was that expenditure on the advertisements was not connected to the departmental outcome described as "higher productivity, higher pay workplaces". The assumption underlying this challenge was that promotional advertising for industrial relations reforms had to be connected with the departmental outcome in question.
Decision of the Court
In a joint judgment, Justices Gummow, Hayne, Callinan and Heydon rejected this assumption, holding that "departmental items" need not have any connection with the specified departmental outcomes. Provided that the expenditure on departmental items is applied for "departmental expenditure", the statutory requirements are satisfied. Since the plaintiffs had not contended that the advertising expenditure was not departmental expenditure, the majority held that the plaintiffs had not established a basis for relief. In reaching their decision, the majority relied heavily on a strict textual analysis of the Commonwealth legislation. They rejected arguments that their interpretation would dilute a necessary level of parliamentary control over expenditure by the government. Neither parliamentary practice nor the constitutional framework, it was said, required an interpretation different to that revealed by the strict textual analysis.
The other judges rejected the strict textual interpretation, instead requiring a showing that the expenditure had a rational relationship with the scheduled outcome. Of those three judges, Chief Justice Gleeson considered that there was such a connection given the broad statement of outcome and, thus, he agreed with the orders made in the joint judgment. Justices McHugh and Kirby reached the contrary conclusion.
Consequences for government
The decision in Combet means that, on the current scheme of appropriations, government agencies need not search for connections between their departmental items and the outcomes identified in their appropriations schedules. Provided their departmental items are applied for their departmental expenditure, they will be complying with the statutory requirements. In designing appropriations, conditioning expenditure on the basis of broadly defined outcomes, rather than more specific purposes or activities, is consistent with constitutional limits. Outcome-based appropriations may reflect changes in the theory and practice of public administration, but they are changes which are legitimately within the legislature's judgment. There might be a question as to whether an unconfined statement of purpose is one that satisfies constitutional requirements, however, at the very least, a scheme that appropriates money for "departmental expenditure" is one that meets constitutional standards.
Nevertheless, despite the absence of judicial oversight, this does not mean that government expenditure is uncontrolled. As the majority in Combet emphasised, spending decisions occur within a framework of legislative control. Budget estimates are subject to legislative scrutiny, and expenditure is subject to independent audit and review and legislative oversight. It also remains within the legislature's capacity to impose greater controls on spending if the current mechanism proves unsatisfactory. And, ultimately, the government is answerable to the electorate in relation to its spending decisions.
For further information, please contact John Carroll.
