MICHAEL KEATING. Can Parliament control Government Expenditure?-The Use of the Advance to the Minister of Finance

The High Court has upheld the Government’s decision to use the Advance to the Minister of Finance to pay for its survey of attitudes regarding same-sex marriage, and notwithstanding that funding for this survey was unlikely to gain parliamentary approval.  Furthermore, the Court found that while the Finance Minister’s decision must be “formed reasonably”, he “is not obliged to act apolitically or quasi-judicially” in determining access to the Advance. My concern is that this High Court decision may have tipped the balance too far against parliamentary control of government expenditure, which is a key feature of our democracy ever since Magna Carta. The question we now face is what should and can be done to restore this parliamentary control, while still allowing governments to respond to unforeseen and urgent circumstances?

Some time ago I posted an article on this blog (17 August), which raised the question: Is it legitimate to pay for a postal plebiscite using the Advance to the Minister of Finance? As I said in that previous article, the critical issue at stake here is whether Parliament has adequate control over government expenditures, if the government can use the Advance to the Minister of Finance (AMF) to circumvent Parliament’s refusal to appropriate funds for any specific purpose. As I see it, this is essentially what has happened with the survey of voter attitudes to same-sex marriage, which is now being funded from the AMF, notwithstanding that the Senate twice rejected the funding for a plebiscite which was intended to serve an identical purpose.

To me the fundamental issue at stake is that since Magna Carta, governments following the Westminster system have not been allowed to spend money without the amount and its purpose being approved by the legislature. This provision in our Constitution lies at the heart of our system of democratic accountability.

Nevertheless, the High Court did uphold the government’s use of the AMF to finance the survey of voter attitudes to same-sex marriage, and now that the Court has made public its reasons, it seems worth returning to consider this issue further.

A useful starting point is to consider why parliaments have allowed governments to appropriate money to the AMF, and in what circumstance should that money become available. The reality is that, as a matter of practical necessity, it has always been recognised the Treasurer (and now the Minister for Finance) should be given limited authority to pay for expenses which were unforeseen. Thus, as the High Court reminds us, the very first Act ever enacted enabled the Treasurer to “pay expenses of an unforeseen nature, which will afterwards be submitted for Parliamentary Appropriation” (my emphasis). Since 1901 the criteria for authorising an expenditure from the Advance to the Minister of Finance (AMF) have evolved so that such expenditures must now be both urgent and unforeseen.

The critical question then is how should the Minister for Finance determine whether or not a proposed expenditure is in fact urgent and unforeseen. The High Court in its consideration of this question cites approvingly past legal advice to the Commonwealth Government and the Parliament that:

  1. The decision whether the legal criteria of “‘urgent and unforeseen circumstances’ were met involves a matter of judgement, and [is] not simply a question of ‘fact’.”
  2. “The notion of need does not require that the expenditure be critical or imperative”; nor that “it arise from some source external to Government”.
  3. The “interpretation of what is urgent and unforeseen is a subjective judgement” by the Minister of Finance, and no-one else, although “the Minister is not free to form any opinion he pleases. His opinion must be not unreasonable and it must be formed having regard …. [for] the correct legal meaning of ‘urgently required’ and ‘unforeseen’ and for permissible purposes”.
  4. “But the Finance Minister is not obliged to act apolitically or quasi-judicially.”

In short, the Court found that the Minister for Finance has the sole power to determine that the conditions – urgent and unforeseen – required to access the AMF have been met to his satisfaction. While “The Finance Minister’s satisfaction must be formed reasonably and on a correct understanding of the law”, the Court also insists that this involves an essentially subjective judgement, and the Minister is not obliged to act apolitically or quasi-judicially. Furthermore, given that the Court upheld the Minister’s judgement in over-turning the clear will of the Senate that a plebiscite of voter attitudes to same-sex marriage should not be financed, it would seem that the Minister is only being asked to provide what is effectively little more than an affidavit that in his (subjective) judgement the expenditures were urgent and unforeseen. No further proof is necessary, and the Minister’s decision could not be over-turned.

The next question that I want to address is what, if anything, should be done in response to the High Court’s finding that expenditure for any purpose can be financed through the AMF, so long as the Minister declares that he is satisfied that the expenditure was urgent and unforeseen.

The first possibility would be to tighten the legislative restraints on access to the AMF. However, I am inclined to agree with previous legal advice and the High Court that constraining the use of the AMF by tightening the legislative requirements defining “urgent” and “unforeseen” will create new problems and may not achieve much, if anything.

On the other hand, what concerns me most is the High Court finding that “the Finance Minister is not obliged to act apolitically or quasi-judicially”, and that the expenditure does not need to be critical or imperative. That seems to me to undermine what I have always understood should be a very tight interpretation of the criteria urgent and unforeseen. Indeed, in my time as Secretary of the Finance Department (1986-1991), I believe that the relevant expenditures were critical and that the Minister for Finance did act apolitically and in a quasi-judicial manner. Indeed, the Department’s advice was based on that assumption, that is how he wanted it.

But the recent decision to provide funding for the same-sex marriage survey strongly suggests that the Minister has acted politically to achieve the government’s objectives in the knowledge that Parliamentary approval would not be forthcoming. That conduct is apparently legal, but I don’t think it is ethical, nor is it consistent with the requirements of democratic government. Accordingly, I think we need to consider what are the legislative possibilities to prevent a recurrence of expenditures being legally authorised when there is no prospect of parliamentary approval.

In this context it is important to note that historically it was a requirement for accessing what is now the AMF, that the Parliament would subsequently be asked to appropriate the money for the purpose on which it had already been spent. While this requirement had ceased when I was Secretary of the Finance Department, I think it continued to influence our advice: would Parliament later agree that this expenditure was urgent and unforeseen and thus be prepared to appropriate the funds concerned. In principle, I cannot see why such a requirement for subsequent parliamentary approval could not be reintroduced into the legislative provisions covering access to the AMF.

Some might argue, however, that if Parliament subsequently refused to appropriate the funds for the purpose initially financed from the AMF, it would very likely be impractical to seek restoration of the funding to the Budget. The counter to that argument, is that the requirement for parliamentary approval would act as a deterrent to using the AMF for purely political objectives, rather than to meet expenditure needs that were widely agreed to be urgent, unforeseen and indeed unavoidable.

Nevertheless, mindful of these potential difficulties with a requirement that subsequent parliamentary approval would be needed for any funding drawn from the AMF, in my previous article I canvassed an alternative type of constraint on the use of the AMF. This alternative would be based on the precedent provided by the requirement during the caretaker period immediately prior to an election, for any unavoidable decisions to be discussed with the Opposition (ie the alternative government). A similar restraint on the use of the AMF would be a legislative requirement to equally limit use of the AMF to expenditures which have been agreed with the Opposition Shadow Minister.

Again, some might object that these sorts of restraints would too much constrain governments from responding to an emergency. My answer would be that I query whether there is in fact an emergency, if a large proportion of the population don’t accept that an emergency exists. Furthermore, if there were truly some sort of national disaster it would not be all that hard to recall Parliament to obtain approval for the Government’s proposed course of action if that were the reason for dispute. The Government would control the House of Representatives, so presumably its legislation would pass there, and the Senate is not allowed to amend money bills, so it would be very difficult for the Senate to vote against what would effectively be a supplementary budget.

Nevertheless, if governments are not prepared to introduce these types of legislative constraints on the use of the AMF, then I think we are back to relying on the integrity of the Minister and his advisers in determining the appropriate use of the AMF. This is not an altogether unusual situation in public administration. For example, the ‘merit principle’ is or should be the foundation for determining public service promotions, but the assessment of “merit” also is subjective and we have to rely on the integrity of the decision-makers.

The question is rather can we ensure adequate monitoring of these sorts of decisions to put some pressure on to help ensure that they are made objectively, and are not subject to political or other vested interests. With public service promotions the Public Service Commissioner is an independent monitor of the system to guard against personal bias. Similarly, the Auditor General should monitor the use of the AMF, and it is to be hoped that the Auditor will report on decisions which in his judgement do not meet the criteria of urgent and unforeseen – even where the Finance Minister has decided otherwise. This reporting should, of itself, act as a deterrent to questionable decisions regarding access to the AMF. However, if that reporting by the Auditor General failed to restore tight control over access to the AMF, then the reporting might still act as a catalyst for a parliamentary committee to investigate further, and even consider the legislative solutions identified above.

Michael Keating, AC is a former Secretary of the Department of Finance and Prime Minister & Cabinet. This article has benefited from comments from Ernst Willheim, the former Head of the Office of General Council in the Commonwealth Attorney General’s Department. Naturally the responsibility for the views expressed remains with the author.

 

 

 

 

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3 Responses to MICHAEL KEATING. Can Parliament control Government Expenditure?-The Use of the Advance to the Minister of Finance

  1. John Thompson says:

    I think this matter is of great importance. In my view, the High Court’s decision permits Ministers of Finance far too much scope to authorise expenditure without parliamentary approval. (In the case of the same-sex marriage survey, the amount of the authorisation – $122 million – was a very substantial sum, an amount for an action that had been voted down by the Senate, and, in my view, was neither urgent nor unforeseen. This authorisation by Cormann establishes a very significant precedent.)
    I favour the requirement for the Auditor General to consider the use of the AMF for particular purposes, but would like to know if a proposal to use the AMF could be referred to the Auditor General before the Minister makes his/her decision.

  2. Julian says:

    Thank you Michael for your informative analysis of the facility known as the Advance to the Minister of Finance (AMF). I note the real issue here [as you have stated] is the adequacy or otherwise of Parliamentary control over government expenditures.

    I have no doubt that in the matter under discussion, simple expediency trumped ethics and that being so, it is that much easier to act similarly in the future. Consequently while I believe there is merit in your suggestion that: “the Auditor General should monitor the use of the AMF…”, I do wonder how this can best be achieved.

  3. Andrew Farran says:

    This issue is more serious than apppears to be appreciated. I agree with the concern expressed.
    It is fundamental that expenditure by the Executive should be authorised by Parliament and that the terms of that authorisation be precise enough to prevent circumvention and abuse and to ensure accountability.
    I am at a disadvantage in making this comment as there is High Court material on the issue in a case in the late 1930s but I am far away from the notes I used when university lecturing on Constitutional Law some time ago.
    As I recall there is a very strong judgment by Evatt J. and others in a case in the late 1930s on the basis of which they would have thrown out this use of the AMF. Time does not allow a search for sources just now. But it is a serious issue as the degree of latitude and self-assessment being allowed to the Executive in such matters these days is indeed disturbing.

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