Even with the approval of all the states to the diversion of the GST, the Prime Minister’s Rudd’s hospitals plan may hit serious constitutional difficulties.
In a public interest case courageously brought in 2009 by law academic Bryan Pape, the High Court recently indicated that there are real limits to the power of the Federal Parliament to appropriate moneys ( see this column, "High Court Performing Well," 14 September, 2010)
The case related to the Tax Bonus for Working Australians Bill, 2009 which was to provide, at a cost of $8.2 billion, financial support to about 8.7 million taxpayers. This support was to take the form of one-off payments ranging from $950 to $300 according to the taxable income of the recipients in the year ended 30 June 2008. The stated purpose was to “immediately support jobs and strengthen the Australian economy during a severe global recession."
While the court upheld this, there was a discussion concerning the appropriations power. This is to be found in section 81 of the Constitution which provides:
“All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution.”
In a leading case in 1975, the AAP case, there was a challenge to a Whitlam government plan to transfer moneys to regional councils for social welfare payments which the Commonwealth itself could not make under the existing social services powers in the Constitution.
….”purposes of the Commonwealth”….
In upholding the plan by a 4:3 majority, the Court was divided as to the meaning of the crucial words “purposes of the Commonwealth.”
Three judges thought this was to be determined by Parliament. Three judges thought the purposes were those set out in the constitution and could be reviewed by the court. In the Pape case, the view emerged that the power to allocate money to say, regional hospital boards (rather than the states) is restricted to the purposes of the Commonwealth ( section 81).
Put simply, deciding what is a purpose of the Commonwealth is no longer a matter for the politicians. .In seeking to bypass making grants to the states (section 96) the conditions for which are unlimited, the Commonwealth could leave itself open to a serious constitutional challenge. The Commonwealth could avoid this by making payments to the states on condition that they then paid the money as the Commonwealth directed. But this would require that the states co-operate.