Biased grants likely to be unconstitutional

The Liberal Party’s reputation as the party of fiscal rectitude and guardian of the tax-paters’ hard-earned money took a battering with this month’s revelations about the distribution of $2.8 billion across 11 federal grants schemes in the three years straddling the 2019 election.

The 11 schemes which all permitted ministerial discretion showed that the money overwhelmingly went to Liberal marginal electorates and virtually none went to safe Labor electorates.

Aside from the ethical and economic questions, there is a good argument that many, if not all, of the grants are unconstitutional and unlawful. More of that anon.

The fact that Prime Minister Scott Morrison defended the spending makes it worse, and indicates that he would again gladly indulge in this corrupting conduct in the lead up to the next election.

The ethics have been widely questioned.

On the economics side, the Coalition has always argued that it is best placed to spend public money wisely and in the national interest, but when you look at some of the grants made under Coalition ministerial and MPs’ remit you have to question that.

For example, in the seat of Robertson, a grant of $3000 was made to install a bench seat on Copacabana Beach, which would “promote a sense of community pride”.

Aside from the fact you could buy a bench seat at Bunnings for a lot less than $3000, what on earth is the Federal Government doing spending money on bench seats? Isn’t that the job of the local council?

Indigenous Affairs Minister Ken Wyatt’s marginal seat of Hasluck received a $7500 grant which went to the Midland Junction Poultry Society to extend its shed in a development that was claimed to “encourage more participation from members plus poultry exhibitors promoting the hobby to the wider community”.

What on earth is the Federal Government doing propping up a private poultry club? Usually, political parties have chook raffles to raise money, they should not be squandering public money on the private clubs that raise the chooks.

It does not sit well with Morrison’s mantra that the Government should get out of people’s lives. The national government certainly should not be involving itself with poultry societies and bench seats.

These exposures by The Sydney Morning Herald and The Age should have received much wider attention. Unfortunately, media rivalry has taken precedence over the public interest. News Ltd publications have virtually ignored the story. 

This is the same News Ltd that hounded Labor Prime Minister Kevin Rudd over his pink-batts and school-halls programs that were part of the stimulus package that saved Australia from the 2008 recession. And these were national programs. Moreover, the halls were built and electricity-saving insulation was installed. The grants exposed this month, on the other hand, show a government, in effect, bribing people to vote for it.

There is an important wider question here. What role does and should the Commonwealth play in the federation?

Australians generally are not well versed in constitutional niceties. Most people think that the Commonwealth is the all-powerful part of the federation and can do what it likes and spend whatever money it wants on whatever it wants.

No so. True, the Commonwealth has asserted more and more power and has accrued an ever-increasing size of the economy since federation, but its power is defined, delineated and limited under the Constitution. The states, on the other hand, have unlimited power, subject to only one thing: when the Commonwealth exercises what power it has under the Constitution, the states cannot legislate or act in a contrary way.

A good example is happening now with the pandemic. The Commonwealth Parliament under the Constitution has the power “to makes laws with respect to . . . quarantine”. It has done so, but to the extent it has left parts of the quarantine unregulated, the states can, and have, imposed their own laws: border closings, mask mandates and so on.

As it happens, the Constitution also defines the Commonwealth’s financial dealings. Its tax powers are almost unlimited. But its spending powers are constrained.

Section 81 says: “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.”

The words “for the purposes of the Commonwealth” and “subject to the charges and liabilities imposed by this Constitution” are critical.

The High Court has held that unless the Commonwealth can show some power in the Constitution (such as the range of legislative powers set out in Section 51, such as quarantine, defence, etc) to support what it is proposing, the Commonwealth cannot spend money on it.

In 2012 and 2014 the court twice struck out the wasteful and potentially dangerous School Chaplaincy program set up by the Howard Government. The Commonwealth cannot give money directly to schemes like that unless it can point to a constitutional power to support it. 

The only way the scheme could be revived was though Section 96 of the Constitution which permits the Commonwealth to give money to the states on whatever terms and conditions it wants: “here is the money but you must spend it on chaplains”. And that is what happened.

But the grants to Poultry Societies and the vast array of wasteful grants exposed this month were not done through the states, nor were many of them supported by any other constitutional power.

The trouble is that people who get the grants are not likely to mount a constitutional challenge to them. My guess is, however, that an unsuccessful grant applicant might have standing to challenge a successful grant and get the money repaid.

Legally, it would be a good idea because the Commonwealth should not act unlawfully. Politically, it would be an even better idea because it would keep the whole rotten, disgraceful, wasteful grants process in the public limelight.

It would also direct the Federal Parliament and Government to exercise themselves in the national interest and not misappropriate part of the national wealth in a parochial way for the benefit of the party in power to bribe voters to get its MPs re-elected.

Crispin Hull

This article first appeared in The Canberra Times and other Australian media on 21 December 2021.

One thought on “Biased grants likely to be unconstitutional”

  1. All levels of government give grants to their own electorates or self promotion. Gladys summed it up perfectly.

    Snowy Valleys council spent thousands of dollars on each stone monolith with all the councillors names on them at various places throughout the shire. I wrote to ICAC and they came back and said it was not corrupt.

    I also wrote to the local paper tatimes, which they published with photo of monolith, everyone in town had a laugh.

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