One of the more arcane ideas floated in the Governance stream at the 2020 Summit was to fix a major problem for Commonwealth budget appropriations created by the High Court in 2005 in the Combet case. There were plenty of lawyers present who agreed that it needed fixing, but amid the search for big ideas it slipped back into the pack and, by the end of the summit, had disappeared, lost in the forest-load of butchers paper carried off to the National Archives and sealed up for 30 years.
The issue, in simple, easy-to-understand, easy-for-lawyers-to-criticise terms, is this:
There’s a core principle of public sector finance, which is that, with some limited exceptions, Governments don’t spend money if it hasn’t been allocated by Parliament. That is, if Parliament says money is intended for one purpose, it isn’t spent on another purpose by the Government, or directed toward a purpose for which no money has been approved by Parliament.
In the late 1990s, the Commonwealth moved to accrual accounting, and in the 1999-2000 budget it began appropriating funding across its activities according to “outcomes”, which would explain what expenditure was intended to achieve. The specific Appropriation Bills by which Parliament authorised expenditure only referred to these Outcomes to explain how money had to be spent.
Right from the outset, outcomes were, for the most part, pretty nebulous and as Stephen Bartos has pointed out on a number of occasions, there were a damn sight fewer of them than there were programs, against which funding had been allocated under the pre-accrual framework. For example, in 2004-05, the Department of Workplace Relations’s $1.7b budget was spread across just two outcomes: “An effectively functioning labour market” and “Higher productivity, higher pay workplaces”. That is, any of that $1.7b arguably directed toward either of those goals was taken to be authorised.
Not exactly the most rigorous of accountability frameworks, really. Ministers could – and did – direct funding toward projects that had little or nothing to do with the relevant outcome. Funding appropriated for “Higher productivity, higher pay workplaces” was used to fund the Government’s pre-Workchoices advertising campaign, despite neither WorkChoices nor advertising being mentioned in the outcome, or for that matter any other Budget documentation for that year. This is what the ACTU and the ALP went to High Court over in 2005.
Still with me? Good work. Because it’s going to get trickier.
Money for outcomes comes in two forms – departmental and administered. Administered money is what goes out to the community in the form of grants and programs, or, if the Nationals are running things, barrels and barrels of prime pork. Departmental is the money required to administer programs – so that public service departments can function, in essence.
When Greg Combet and Nicola Roxon got to the High Court, most of the judges there had a rude shock prepared for them. Because of the wording of the standard appropriation bill used every year, they held, Departmental appropriations didn’t even have to relate to the outcome. It just had to be, well, spent by the department.
The effect of the Combet case was that the system for Parliament to ensure that taxpayers’ money was spent on what the government said it was going to be spent on – a basic tool of democratic accountability since the late 17th century, was in effect junked altogether by the High Court. Now, a Government can declare in the Budget that money will be allocated to be spent on one thing, but direct it entirely toward a wholly unrelated purposes, one which doesn’t even have to be identified.
A number of lawyers are of the view that the four High Court judges – and a fifth who held that the wording of the outcome was so vague that it could justify anything – had a shocker when they produced that decision. Two Senate Committee reports have also recommended the problem be fixed. But the only imminent remedy would be for the Government to change the wording of the standard appropriation act to make departmental appropriations at least link to the relevant outcome. Crikey received no reply when we sent a query along these lines to Lindsay Tanner’s office.
A more rigorous, permanent solution would be to shift entirely away from nebulous and facile outcomes toward a clearer description of the programs to be funded in each Budget. Kind of like we had back before accrual accounting. Plus ca change…
Pretty rusty legal theorist here but isn’t there a rule of administrative law about taking decisions for an improper purpose being beyond power ie ultra vires: That is Expropriation Act says for certain outcomes. Based on your factaul example above dept just spends it on something else flouting the budget Act implied purposes. The administrative decision by the dept surely is ‘an improper’ purpose vulnerable to standard judicial review because it contradicts the Parliament’s appropriation. If I’m reading you correctly you are saying the High Court held contrary to this quite simple logic, such that it’s all loose as a goose. Sounds quite perverse really. Were the judges really that fawning to the Howard executive regime? Does sound like a shocker. Since when did the executive/departments get to second guess the will of Parliament? It’s quite an affront to democracy as I understand it (admittedly many and varied creature).
Bernard, why do you think that accrual accounting was introduced in the first place, against considerable advice that it was totally inappropriate for public accounting purposes? We should insist on reversion to the historic accounting regime – can be fudged, but rather less blatantly.
There is a simple solution to the problem for most money spent by the government. Instead of departments being given the money to spend then give it to the people affected but require them to show that they have spent it how it was meant to be spent. For example instead of giving health dollars to health funds and to hospitals give it to the population at large. This will solve the federal, state, local government divying up of money because services will be paid for by the users not services provided by the government.
Obviously the media would be leeked to in the case of grossly inappropiate spending of taxpayers monies but porkbarrelling by the Howard and the prior Keating/Hawke governments was rife. Who were Roxon/Combet reresenting and what were they trying to achieve? I would like to see more stringent reasonable requirements on future government. I hope Bernard runs with this and that the issue gets traction. I suspect many like me simply did not know.