Has the High Court imposed spending constraint on the Commonwealth?

In the Fairfax broadsheets this morning, constitutional law academic George Williams gives his reading of the High Court’s judgment in Pape v Commissioner of Taxation and the Commonwealth of Australia.

As readers may recall, earlier in the year UNE academic Bryan Pape challenged the constitutional validity of the government’s tax bonus payments. Unlike the whinging cultural offspring of the welfare state who missed out on it, Pape was among other things seeking an injunction stopping the ATO paying him the money.

The High Court decided against him, but as is common in constitutional cases there were many different arguments made. Williams argues that though the Commonwealth persuaded the Court on enough of these to get a verdict in its favour, comments made by the judges on their other arguments raise questions about the validity of other Commonwealth spending.

The issue here is that the Commonwealth has long spent money on things for which it has no legislative power under the Constitution. Various additional spending powers have been read into the Constitution as relating to the executive power of the Commonwealth or an implied ‘nationhood’ power. As Justice Mason put it in 1975:

there is to be deduced from the existence and character of the Commonwealth as a national government and from the presence of ss 51(xxxix) and 61 a capacity to engage in enterprises and activities peculiarly adapted to the government of a nation and which cannot otherwise be carried on for the benefit of the nation.”

This seems to be the main legal basis for general research funding in Australia (though research relating to subjects that are expressly Commonwealth powers would clearly be justified on the text of the Constitution).

On my quick reading of the Pape case, Chief Justice French and Justice Heydon are nationhood power sceptics. Justices Hayne and Kiefel reject the view that the Commonwealth can spend on anything it chooses, rejecting an argument by the Commonwealth that it has power from this source to legislate for the ‘national economy’. That’s four of seven going for constraint.

There are ways around constitutional issues, such as tied grants to the states, and arguably most of this spending survives less because it has a clear legal basis than because there is nobody to challenge it in the High Court.

I will wait with interest expert legal commentary on whether the status of research spending and other spending based on imaginative reading of the Constitution is called into question by this judgment.

11 thoughts on “Has the High Court imposed spending constraint on the Commonwealth?

  1. The commonwealth has power to legislate in the interests of students – so I suspect private schools are safe. In any event they have survived previous challenges.

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  2. I think it also goes to show how unclear and outdated our constitution is on alot of matters – That it requires such creative interpretation. Not just here, but also how the corporations power is interpreted in my view (but I’m not a constitutional law scholar). There’s a potential research strand for a think tank (progressive or conservative): The Australian Constitution: Fit for Purpose in the 21st Century.

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  3. Cathy – Private schools are funded via conditional state grants, and university tuition funding is safe via the benefits to students power than Sinc mentions.

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  4. Despite what I think about the cash bonuses, from a legal standpoint it seems to me that fiscal stimulus is an activity which cannot otherwise be carried on for the benefit of the nation.

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  5. “Unlike the whinging cultural offspring of the welfare state who missed out on it, […]”

    Yeah, it’s a bit tragic that those special pleaders in the business community and the RARA farmers still haven’t gotten over Howard losing power.
    Oh well, the Coalition won’t be out of power forever and the whingers will get their pork again some day.

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  6. Lordy, Andrew. Even on your own graph, anyone can see the trend actually begins in 2002/03 and there’s only the one data point for Labor’s time in office.

    You’d have won far more respect with a more honest “the trend to increasing corporate welfare remains unchanged since Labor came to power” rather than over-claiming and looking like one of The Australian’s rent-a-hacks.

    I do think there’s a bit of a difference between the sort of industry assistance the parties put their money toward: conservatives put their money into pork barrels for their donors (Manildra, et al), family (Howard’s brother, et al) and propping up their constituencies versus putting money into keeping the banks and economic system afloat after the free market ignored the lessons of The Great Depression overseas and the cards came tumbling down.

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  7. There is only one Labor datapoint, but the PC report mentioned in its text the huge surge that is yet to come but has been announced. If you go back to the earlier PC reports the Coalition cut industry assistance when it came to power in the 1990s. Manildra gets big handouts from Labor too (eg NSW govt). We are never going to completely get rid of corporate welfare, but until the last few years we had been making real progress in holding it down and creating schedules to wean industry off it. Both parties had a good overall record on this compared to most of 20th century Australia. While there may be ad hoc justifications for particular programs, the problem with so many happening at once is that we risk changing the culture again, so that business sees lobbying as a better route to profit than good products and services at competitive prices.

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  8. Do the judgements give any ‘green lights’ grounds for Pape (with whom I used to play cricket in the late 90s!) or others to pursue actions challenging Commonwealth spending on other grounds?

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  9. Grounds is one thing, ‘standing’ another – there is no automatic right to bring a case. As he was entitled to the tax handout Pape had a direct connection to this issue that would be harder to show in other cases. I’m going to wait on constitutional law experts to say in detail what might be read into this judgment.

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