The Constitutional process for Government spending

After the budget announcement on Tuesday night we thought it might be time to take a closer look at what the Constitution says about Government spending.

Consolidated Revenue Fund

The big pot of money raised by the Government is called the Consolidated Revenue Fund and is outlined in Section 81 of our Constitution:

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. 

But before our Executive Government can spend any of this money they must make appropriations by law. This is stipulated in Section 83 of the Constitution:

No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law. 

On Budget night on Tuesday 12 May, the Treasurer Joe Hockey introduced the Appropriation Bills to the House of Representatives and gave his budget speech.

There are several Appropriation Bills and the first one Appropriation Bill (No. 1) allocated $80,966,414,000 for ordinary annual appropriations to undertake government operations. Among other things, the wages of Government employees is paid from this Appropriation Bill.

Section 54 of the Constitution states that:

The proposed law which appropriates revenue or moneys for the ordinary annual services of the Government shall deal only with such appropriation. 

This means that the Appropriation Bills for ordinary annual services must not contain anything extra. It is not possible for the Government to tack extra spending onto these bills and as such extra spending is contained in separate bills.

There are other Appropriation Bills:

The annual appropriations do not normally have a time limit placed upon them. The funds appropriated are available until they are either all spent or legislation is enacted to claw back any unused money.

What is the role of the Senate in this?

To make these appropriations into law they must also be passed by the Senate. There was talk among the cross-benchers last year that the Opposition should block the normal Appropriation Bills as they included budget cuts to the ABC and CSIRO. The consequence of this is called ‘blocking supply’ and results in the Government being unable to pay the wages of their staff. This occurred in 1975, eventually leading to the ‘Constitutional Crisis’ and the downfall of the Whitlam Government. As such there is an agreement between the two main parties to wave Appropriation Bills through the Senate.

What if the Senate wants to change something in an Appropriation Bill?

Section 53 of the Constitution outlines that the Senate cannot amend the Appropriation Bills:

The Senate may not amend proposed laws imposing taxation, or proposed laws appropriating revenue or moneys for the ordinary annual services of the Government. 

But the Senate can send the bill back to the House of Representative to be amended. Also in Section 53:

The Senate may at any stage return to the House of Representatives any proposed law which the Senate may not amend, requesting, by message, the omission or amendment of any items or provisions therein. And the House of Representatives may, if it thinks fit, make any of such omissions or amendments, with or without modifications. 

On budget night Mr Hockey made a huge announcement for small business

The treasurer stated:

I announce that, from 7:30pm tonight, small business can claim an immediate tax deduction for each and every item they purchase up to $20,000. From tonight, it can be instantly written off to reduce your tax liability.

How does this work? Wouldn’t he need to change legislation?

Yes, he does. But the Treasurer is expecting the Parliament to pass this legislation. The Opposition Leader Bill Shorten indicated in his budget reply speech last night (14 May 2015) that Labor would be waving the legislation through the Senate. However, the executive director of the Australian Institute Richard Denniss is warning people to be cautious before taking advantage of a scheme that is yet to pass parliament. He stated:

The scale and generosity of this proposal is unprecedented and, while the Treasurer has announced that it will begin [on budget night], history suggests he shouldn't take the Senate for granted.

Other legislative changes

There are many other measures in the Budget that will require legislative changes on top of the Appropriations Bills. This includes programs such as the higher education changes that have been stuck in the Senate since last year’s budget or the four week wait for the dole for under 25’s.

Special Appropriations are separate to the mentioned Appropriation Bills. They make up about 75% of the budget and are rolled out throughout the year. The Special Appropriations are included in the legislation of the new program.

Photo Attributed to GotCredit


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