Financial Management and Accountability Amendment (2014 Measures No 6) Regulation 2014 [F2014L00841] -Concluded matters [2014] AUSStaCSDLM 211 (19 November 2014)

• Financial Management and Accountability Amendment (2014 Measures No. 6) Regulation 2014 [F2014L00841]

Chapter 2

Concluded matters

This chapter lists matters previously raised by the committee and considered at its meeting on 19 November 2014. The committee has concluded its interest in these matters on the basis of responses received from ministers or relevant instrument-makers.

Correspondence relating to these matters is included at Appendix 1.

Financial Management and Accountability Amendment (2014 Measures No. 6) Regulation 2014 [F2014L00841]

Purpose	Amends the Financial Framework (Supplementary Powers) Regulations 1997 to establish legislative authority for government spending on certain activities across eleven portfolios
Last day to disallow	19 November 2014
Authorising legislation	Financial Framework (Supplementary Powers) Act 1997[1]
Department	Finance

[The committee first reported on this instrument in Delegated legislation monitor No. 10 of 2014. The committee drew the Senate's attention to various items added to Schedule 1AB of the Financial Framework (Supplementary Powers) Regulations 1997 (FFSP Regulations); and sought further information regarding the authority for the expenditure specified in the regulation]

Issue:

Addition of matters to Schedule 1AB of the FFSP Regulations—authority for expenditure

Scrutiny principle (a) of the committee's terms of reference requires the committee to ensure that an instrument is made in accordance with statute. This principle is interpreted broadly as a requirement to ensure that instruments are made in accordance with their authorising Act as well as any constitutional or other applicable legal requirements.

This instrument was made after the High Court's decision in Williams (No. 2) ([2014] HCA 23 (19 June 2014)) (Williams No. 2). The committee notes that, as a result of that decision, a question arises as to whether all the items of expenditure provided for by this instrument are supported by a head of power under section 51 of the Constitution. The committee considers that, in light of Williams No.2, the explanatory statement (ES) for all instruments specifying programs for the purposes of section 32B of the Financial Framework (Supplementary Powers) Act 1997 should explicitly state, for each new program, the constitutional head of power that supports the expenditure [the committee therefore requested further information from the minister in relation to the constitutional head of power for each program, grant, and arrangement specified in the instrument].

MINISTER'S RESPONSE:

The Minister for Finance and Acting Assistant Treasurer advised:

The Government acknowledges that, following the High Court's decisions in Williams v Commonwealth [2012] HCA 23; (2012) 288 ALR 410 (Williams No. 1) and Williams No. 2, it will often be the case that spending activities require legislative authority in addition to an appropriation. The Regulation represents one kind of legislative authority that can be provided. The Government does not agree, however, that this means explanatory statements must in effect set out the constitutional and other legal reasoning taken into account in formulating legislation and expenditure programmes. The validity of any legislation generally turns on judicial consideration of its text rather than on what is said in explanatory material.
It is of course true that the formulation of legislation and programmes often involves many complex issues; and the drafting of legislation, including subordinate legislation, is routinely undertaken having regard to a range of constitutional and other legal considerations. In some cases, basic constitutional underpinnings will be evident in provisions that describe the objective or scope of legislation. In others they will not be so obvious. Such variation in approach—in primary and subordinate legislation—is commonplace.
The Regulation here is a case in point. In some instances, the constitutional basis for a particular item will be clear from the text in the 'Purpose' or 'Objective(s)' column for that item in the table in the Regulation. For example, item 37 prescribes programmes for the advancement of Indigenous people and, as such, is clearly supported by the races power in section 51(xxvi). In other cases, the constitutional reach for a particular item is delineated by text in the 'Purpose' or 'Objective(s)' column which refers to the principal heads of power relied on to support the item. Item 15 is an example of this approach to drafting.
In order to meet the Committee's request in this case, and without being exhaustive, the attached table lists constitutional heads of power referenced by each of the items in the Regulation. In doing so, however, the Government is not purporting to provide any comprehensive statement of relevant constitutional considerations. Further, for the reasons outlined above, it is not the intention of the Government generally to provide information such as that set out in the attached table. That said, the Government will continue to draft legislation in the clearest possible terms, including in relation to constitutional application where appropriate.

COMMITTEE RESPONSE:

The committee thanks the minister for his response.

The committee would like to acknowledge the minister and the department for the substantial effort in providing a comprehensive and informative response to the committee's inquiry in relation to this regulation.

However, while recognising that its inquiries impact on the resources of ministers' offices and departments, the committee notes that in Williams No. 1 the High Court confirmed that executive authority to spend appropriated monies is not unlimited and therefore generally requires legislative authority. The parliament's response to that finding was to provide the current mechanism for authorising expenditure via the making of regulations that add programs to certain schedules of the FFSP Regulations.^[2]

An inescapable consequence of basing this response around the making of (disallowable) delegated legislation is that such instruments are subject to scrutiny by the committee in accordance with Senate Standing Order 23, which requires the committee to ensure that instruments do not breach a number of scrutiny principles.^[3] The committee does this through seeking information or undertakings from rule-makers, and this approach is underpinned by the disallowance process.

In this respect, the committee is concerned at the minister's advice that 'it is not the intention of the government generally to provide information such as that set out in the attached table [indicating the constitutional basis for spending]', on the basis that:

...the government does not agree...that...explanatory statements must in effect set out the constitutional and other legal reasoning taken into account in formulating legislation and expenditure programmes.

The committee emphasises its expectation that ESs identify a constitutional head of power for expenditure on programs added by regulation to schedules in the FFSP Regulations, derives not from any legislative prescription but from the Senate Standing Orders. As noted above, scrutiny principle (a) of the committee's terms of reference requires the committee to ensure that an instrument is made in accordance with statute. This principle is interpreted broadly as a requirement to ensure that instruments are made in accordance with their authorising Act as well as any constitutional or other applicable legal requirements.^[4]

In light of these remarks, the committee notes that, in Williams No. 2, the High Court stated:

...[section] 32B should be read as providing power to the Commonwealth to make, vary or administer arrangements or grants only where it is within the power of the Parliament to authorise the making, variation or administration of those arrangements or grants [emphasis added].^[5]

The committee therefore restates its expectation that, in light of Williams No. 2, the ES for all instruments specifying programs for the purposes of section 32B of the Financial Framework (Supplementary Powers) Act 1997 explicitly state, for each new program, the constitutional head of power that supports the authorisation of expenditure.

In relation to the information provided by the minister setting out the constitutional authority for the 54 programs added to Schedule 1AB by the regulation, the committee notes that a case has been made that each of the programs is supported by a relevant constitutional head or heads of power. The committee has therefore concluded its examination of the instrument.

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^[1] With effect from 1 July 2014, the Financial Management and Accountability Act 1997 was amended and renamed the Financial Framework (Supplementary Powers) Act 1997. The Financial Management and Accountability Regulations 1997 were renamed the Financial Framework (Supplementary Powers) Regulations 1997.

^[2] The committee notes that the regulations in this case are the means by which programs are added to certain schedules of the principal regulations; and that the provision authorising the spending of monies is section 32B of the Financial Framework (Supplementary Powers) Act 1997. The regulations do not of themselves provide the authority for spending in relation to programs.

^[3] The committee notes that it has previously raised other matters in relation to similar regulations. For example, in relation to scrutiny principle (c) (which effectively requires the committee to consider whether instruments of delegated legislation accord with principles of natural justice), the committee has on a number of occasions requested information regarding the exclusion of merits review under programs added to the relevant FFSP schedules. Such information is now generally provided as a matter of course in ESs.

^[4] As noted in Odgers' Australian Senate Practice, the committee interprets its scrutiny principles 'broadly to include every possible deficiency in delegated legislation affecting parliamentary propriety and personal rights' (Odgers' Australian Senate Practice, 13^th ed. (2012) 438).

^[5] Williams v Commonwealth [2014] HCA 23 (19 June 2014) [36].