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7.31.2009

The Spending Power in Australia

A recent decision of the Australian High Court has answered some questions about the source and scope of the federal spending power although many remain unresolved. Pape v Commissioner of Taxation [2009] HCA 23 also is of interest for a range of other purposes, including the interface between federalism and other institutional arrangements and comparative constitutional method.

The Australian spending power has developed differently to that of the two most closely comparable federations, the US and Canada, in part because of the chance inclusion in the original Constitution of an express power to make conditional grants to the States. The existence of this provision undercut the incentive to develop a more general power as a source of authority for payments to sub-national orders of government outside areas of Commonwealth regulatory authority.

Even so, the source of Commonwealth power to spend has been a long-standing issue when (as increasingly is the case) the Commonwealth prefers to spend directly, rather than going through the States. Past skirmishes exposed, but failed to answer the doctrinal question whether the source of any such power is the requirement for parliamentary appropriation (secs 81, 83) or the general executive power. In either case, there were further questions about the scope of a spending power and whether legislation enacted under the ‘incidental’ power could provide regulatory support for expenditure.

Pape revived these issues in the context of a taxpayer challenge to legislation that provided for the payments of ‘bonuses’ to low and middle income taxpayers as part of a package of stimulus measures in response to the global financial crisis. The challenge failed, by a narrow majority of 4-3, but the reasons of the Court, delivered some months later, made the outcome something of a pyrrhic victory. For the moment, at least, the federal power to spend parallels Commonwealth legislative power, supplemented by whatever attaches to ‘the character and status of the Commonwealth as a national government…in a federation’. As a short-term, urgent response to the global crisis, the tax bonuses did so and the incidental power was sufficient to give them legislative force. The validity of a raft of other spending programs remains to be worked out in later cases.

Following Pape, it is clear that the source of the power to spend is the federal executive power. The case thus also takes its place in a chain of Australian authority on the executive power more generally. The problem is as it always has been to combine an understanding of the depth of the executive power (vis-à-vis the legislature, in a parliamentary system) with its breadth (vis-à-vis the States, in a federation). Considered as a challenge to executive spending, Pape raised only the second dimension of the executive power. But considered as a response to a fiscal emergency, it potentially also raised the first, which may assist to explain why the court failed to clearly distinguish between the two. If this interpretation is correct, the reasons of the majority are woefully inadequate for tackling the question of depth. No doubt this is another aspect of the doctrine that will be further clarified in due course.
CS

1 comment:

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