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Over the past year, the government has allocated nearly $5 billion through measures hidden from public view, bypassing the senate. Experts now warn this may be illegal. By Karen Middleton.

Government spends ‘unlawful’ billions

Prime Minister Scott Morrison.
Credit: Lukas Coch / Getty Images

The federal government is allocating billions of dollars in grants and making significant policy changes in a way that is likely unlawful, legal experts warn, using a mechanism that bypasses parliament and obscures decisions from public view.

Some of the Coalition’s own senators are starting to push back forcefully against the growing use of such regulations – also known as “delegated legislation” – to authorise a stream of government grants and other policy moves.

In the past 12 months, almost $5 billion was allocated this way – nearly half of that immediately before and after last year’s federal election. This does not include the hundreds of millions more dollars handed out through the Community Sport Infrastructure Grant Program – which is at the heart of the sports rorts scandal – and via other separate schemes across government.

One of Australia’s most eminent constitutional experts, Sydney University law professor Anne Twomey, says the legal authority for governing by regulation is increasingly flimsy, in most cases – especially when allocating public money.

“Effectively, the Commonwealth is spending potentially billions of dollars unlawfully,” Twomey told The Saturday Paper this week. “The way the system is set up is that the Commonwealth knows there is pretty much no one with an interest who is going to challenge this.”

Issuing a regulation allows the government to change laws without parliament having a direct say, though each regulation must link back to a main piece of enabling legislation. The only way the senate can influence a regulation is to vote to disallow, or reject, it within 15 sitting days of it being tabled.

In the federal election period between March 1 and May 23 last year, almost $2 billion in grants across 20 programs were effectively rubberstamped through regulations. A further $1.75 billion in low-interest agricultural loans to farm flood victims was also authorised during the same period.

A separate regulation tabled in February last year granted specified “researchers” access to voters’ unlisted mobile phone numbers and their associated postcodes. Primarily said to be for health research, it included access for registered political parties and candidates, giving rise to privacy concerns.

While the parliament was out of session over the summer – between December 4, 2019 and January 16 this year – the government tabled regulations authorising another $476.145 million in grants to be rolled out over the next four years.

Before that, between November 21 and December 3, regulations authorised $79.5 million more in grants, including two one-off $10 million allocations to establish scholarships in memory of former prime minister Bob Hawke and former deputy prime minister Tim Fischer. There was also $19.8 million to establish the new Australian Space Agency, which Prime Minister Scott Morrison opened this week in Adelaide.

Historically, this funding would usually have been included in standalone legislation, meaning parliament would debate and amend if necessary before a vote.

Among the more recent spending allocations by regulation was the November bailout payment for a Victorian country nursing home – which subsequently closed anyway – in a Nationals-held electorate. The government refused to disclose the amount it gave the DP Jones home, arguing it was commercial-in-confidence. It is reported to have been about $400,000.

A separate $345,000 grant was made recently to News Corp to set up and run a children’s news website and competition called The PM’s Spelling Bee.

In total, since March 1 last year, the grants authorised by regulation were valued at $4.69 billion.

Some of these grants have been publicly announced and others have not.

The figures come from the senate standing committee for the scrutiny of delegated legislation, which is tasked with examining every regulation and alerting the senate to any concerns.

For the past year, the six-member committee of Liberal, Nationals and Labor senators – formerly chaired by now-retired Nationals senator John “Wacka” Williams and now chaired by Liberal senator and former minister Concetta Fierravanti-Wells – has been sounding an alarm about the use of regulations, including their constitutionality. These warnings have increased in recent months.

The committee has declared an intent to disallow a number of regulations while awaiting explanations, and in some cases changes, from relevant ministers.

It is yet to follow through and call for a disallowance vote on one of the government’s measures. But Fierravanti-Wells says she, her deputy chair, Kim Carr, from the ALP, and their colleagues are willing to do so if their warnings are not heeded. “Scrutiny of delegated legislation … will ensure that we not only respect the institution of the senate and the work of its committees, but we also uphold and promote the principles of parliamentary supremacy and the rule of law,” she told The Saturday Paper.

“This scrutiny includes examination of instruments, placing of notices of motion for disallowance in the senate and, where necessary, pushing for disallowance of instruments that fail to comply with these principles.”

While praising the committee’s work, Professor Twomey said her legal concerns about regulations were twofold.

She queried whether the government has the statutory authority to engage in the kind of spending increasingly included in regulations – specifically, whether some of these regulations actually align with criteria in their enabling legislation. She also doubts that they fall properly under the various constitutional heads of power that authorise federal government activity.

One power frequently being relied on to pass regulations is the “nationhood” power, which indirectly authorises the Commonwealth to engage in activities for the benefit of the nation that can’t be carried out otherwise.

But there are limits to that power and Twomey argues they are regularly being exceeded. “The Commonwealth has never really profoundly taken in this notion that they can’t just spend money on whatever they want to spend it on,” she said.

The High Court reinforced that principle in what has become known as the Williams case, which was in fact two cases involving a challenge to the Commonwealth government’s expenditure of taxpayers’ money to fund chaplains in public schools.

The plaintiff, Ronald Williams, had four children attending a Queensland state school that was part of the chaplaincy program.

The then Labor government had signed a contract with the Scripture Union organisation to deliver chaplaincy services at the school. In 2012, Williams challenged its authority to do so.

The High Court agreed that the federal government had exceeded its constitutional authority in the way it made the grants. A second case followed, confirming the principle.

An earlier case about tax bonuses, brought in 2009 by lawyer Bryan Pape, also highlighted problems with the way government payments were made.

“How many court cases does it take for the Commonwealth to accept that a lot of its spending is unlawful and to stop doing it?” Twomey asked. “We’ve been through three High Court cases and they’re still doing it.”

In the wake of these cases, governments have been more careful to either obtain authority from parliament via legislation or create an instrument – a regulation – each time, linking back to legislation already passed.

But the practice has become more and more loose, infringing various rights as well as potentially breaching the law, as the senate committee protested in a report last year from an inquiry it held on the subject. “As parliamentarians, we owe it to the Australian people to act independently, and to remove from the statute book delegated legislation which does not respect individual rights and liberties or the right of parliament to control the content of the law,” its report said.

It made a series of recommendations aimed at improving accountability and transparency.

The government accepted only part of one of the committee’s recommendations, rejecting the rest.

When the committee sought then to strengthen its own powers of scrutiny – including adding the power to scrutinise on constitutionality – the government tried to block Senator Fierravanti-Wells from speaking in the chamber.

With Labor and the crossbench in support, the committee’s changes went through.

The committee has warned repeatedly that new grants programs require new appropriations bills and must not be slipped through as “the ordinary services of the government” using a regulation the senate can’t amend.

The senate has a constitutional right to amend proposed laws that appropriate revenue for matters beyond ordinary services and has resolved previously that the definition of those does not include spending on new proposals.

The committee publishes reports every parliamentary sitting week, outlining all regulations about which it has concerns. Last week, it highlighted controversial new dairy industry regulations drafted when Bridget McKenzie was Agriculture minister.

Since Fierravanti-Wells took over in mid-2019, the committee also publishes a full list of every spending regulation and how much is involved.

Where it has concerns about these or any other regulations, it writes to the relevant minister and demands an explanation and response. Queries may include why the measure does not have its own piece of legislation, any privacy implications, whether the public has free access to relevant information and whether the regulation is constitutionally sound.

There are now about 1700 regulations produced every year.

Anne Twomey’s legal concerns go to the nature of the federal spending – in many cases, community-level grants for basic infrastructure that would normally be funded by state or local government.

“It’s completely and utterly wrong,” Twomey said. “It’s not appropriate to be spending it based on where a marginal seat is or whether it is targeted or not. It is absolutely appalling. This is completely irrelevant to what is in the public interest … The public would rightly think that public money would be spent in the public interest.”

Attorney-General Christian Porter rejected any suggestion that the Williams decision had been ignored. “Great time and resources are devoted to assessing the constitutionality of government spending of a variety of types,” he told The Saturday Paper. “Not only is Commonwealth expenditure rigorously evaluated as a matter of course before any money is spent, but all delegated legislation authorising expenditure is also subject to public scrutiny through the senate committee process. The results of that scrutiny are published by the committee and accessible to the public at large.”

However, Twomey’s legal concerns are echoed by two other eminent jurists – Melbourne University laureate law professor Cheryl Saunders, who is an expert in public administration, and Bret Walker, SC, a constitutional lawyer and among the nation’s most accomplished barristers.

“There’s all sorts of reasons to be concerned about delegated legislation,” Saunders said this week. “In the context of spending, the Commonwealth parliament’s reaction to Williams was unsatisfactory. The parliament did not take the opportunity to really clear up spending then … It’s never been cleaned up and, if anything, it’s got much worse in these new initiatives that are using grants for political purposes, which was never being done before.”

She said it undermined a valuable commodity: people’s faith in government.

Bret Walker represented Ronald Williams in his two High Court cases. He says any regulations authorising spending must clearly demonstrate their legal authority more directly than they often do.

“I strongly agree that is an essential test for the propriety of government spending and if it relies on delegated legislation, everything has to be lined up constitutionally and also as a matter of simple legislated authority,” Walker told The Saturday Paper.

“You can’t get authority to spend only by delegated legislation. It’s a really basic part of the machinery of government.”

Walker supports the use of legally sound delegated legislation.

But he is concerned about the growing resort to secrecy for everyday governance and governments’ increasing reluctance to face public scrutiny.

Last week, giving evidence to an unrelated senate inquiry into press freedom, Walker outlined his views about the need for scrutiny in the “free and confident society” that Australia purported to be.

“Freedom is, at least in comparative terms, something we might feel relaxed about,” Walker said. “I’m not at all relaxed about whether we are a confident society. That is, in relation to understanding what is being done in our name and understanding how the processes of government are actually achieving executive action – and in particular whether the rule of law is being observed as intimately as it should.”

He said he was particularly concerned about statutory authorities.

“I earnestly think that legislators should have towards the top of an agenda something which … is chronic. This is not a crisis, it’s something that we, bit by bit, boiling-frog style, are losing and that is an expectation – part of being free and confident, particularly confident – that we will have means of finding out what’s being done in our name and what’s being done, if you like, to us.”

It’s a reasonable expectation. The government doesn’t always make it easy. 

This article was first published in the print edition of The Saturday Paper on Feb 22, 2020 as "Government spends ‘unlawful’ billions".

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Karen Middleton
is The Saturday Paper’s chief political correspondent.

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