Government by reptile fund: our institutions have stopped scrutinising public spending

If Parliament will not take control of a process by which it hands over money to ministers to spend in almost any old way they like, why should the High Court interfere to protect the politicians from themselves? Or, it seems, the people from the politicians?

The judges, properly, gave us their decision quickly, with their reasoning to follow at their leisure, possibly in some time given the urgency of a number of other cases before the court, including challenges to the right of a number of MPs and senators to sit.

But it seems clear from a reading of the transcript that the High Court has only a limited interest in checking potential excesses of government made manifest by dubious processes of authorisation and appropriation. The Solicitor-General, Stephen Donaghue, QC, seems to have been quite persuasive in arguing that the court should reject any notion that money put aside for urgent and unforeseen expenditure should be reserved only for expenditure that was urgent and unforeseen at the time of appropriation. Urgent and unforeseen, in context, mean nothing much more than a new project decided on by cabinet after the budget.

Nor did the court seem bothered about the fact that the process by which the Bureau of Statistics was conducting a "survey" was a conscious wheeze designed to get around a refusal by one house of Parliament to authorise and fund a compulsory plebiscite, or legal difficulties about ordering the Electoral Commission to conduct a poll.

The court has no view, as such, on the political wisdom of a same-sex marriage plebiscite, compulsory or voluntary. Nor on the political argy-bargy and posturing in the lead-up to government action. Judges were merely passing judgment on whether, constitutionally, the law could allow a direction to the ABS, and the giving of money to the ABS, to allow it to do what it was told.

(Nor did the court seem to think much, one way or another, about whether any of the plaintiffs – politicians or people wanting same-sex marriage – had standing to challenge the government's decision. With or without such standing, the government was acting within its powers, the court ruled. An authoritative decision on standing must await a day when the court holds that a government doesn't have the power to do something, but finds there is no one with the right to complain.)

The judges, properly, did not care whether the government's strategy of determining public opinion was wise or appropriate, or the best way of doing it. That's the government's lookout. But both houses of Parliament had passed an appropriation bill after the budget that, among other things, left a discretionary couple of hundred million dollars unallocated. The Appropriation Act authorised the finance minister to spend this money if an emergency came up, or an opportunity came up, or, it seems, for any old reason at all.

It is from such reptile funds – as John Le Carre once called such discretionary piggy banks – that prime ministers and others can suddenly announce fresh bribes to particular electorates, grants and exemptions to TV network proprietors on whose political favours they depend, or to throw money at some suddenly developing political crisis.

There could be a lot more controls over how such money was spent. More controls and transparency before the money was earmarked to particular causes. More accountability afterwards, including the asking of critical questions about value for money. Such controls could distinguish between crises and emergencies – say a serious flood, or cyclone, or sudden war against North Korea, when government might reasonably need some quick financial room to manoeuvre – and handouts to pet causes and brainstorms, which might need a higher threshold.

A House of Representatives controlled by the governing party may have no appetite for restricting ministers. (Though it should, because backbenchers on both sides suffer from the arrogance of their frontbenchers.) But a Senate in which government lacked a majority could impose such controls, and nothing in the constitution, which puts some slight restrictions on the Senate's power to amend money bills, could stop it.

But the legislature seems uninterested, even, usually, by way of political grandstanding. Even when it pretends it cares about control of expenditure – such as with its estimates committee processes – politicians rarely actually follow any money trail or ask detailed questions about particular pieces of expenditure. Rather, they use the licence of pretending to look at spending to ask particular departments any questions they want about policies and programs.

It's been a problem since Federation. But it has become much worse over the past two decades, from when government adopted accrual accounting, and the appropriation process pretended to be focused on "outcomes" rather than the authorisation of expenditure in ways that could be tracked and monitored.

For most of the 20th century, an appropriation bill might authorise spending $60 million on a particular bridge, or $223 million for salaries and administration costs in a particular agency. If extra money was needed during the year, it would be identified in subsequent appropriations, and the next year's budget papers would say how much was spent. It would be audited and, perhaps, there might be a public investigation and report on how efficiently and effectively the money was spent. The public could see a bridge.

There were always reptile funds, and ministers always had wide discretion over them. But there was once far more attention to having a final reconciliation of how the money in it was disbursed and dispersed.

Now, under "outcomes" appropriations, parliaments authorise hundreds of millions of dollars to vague and uncertain ends. They phrase them in ways that could mean anything, and often do.

The rot was rubber-stamped by the High Court in Greg Combet's case in 2005, perhaps the court's worst judgment this century, when it refused to intervene to prevent the Howard government spending tens of millions of dollars on political advertising promoting WorkChoices.

Parliament had granted the then Department of Employment and Workplace Relations $4.07 billion, to promote three outcomes. Outcome 1, for which it was given $3.2 billion, was to deliver "efficient and effective labour market assistance". Outcome 2, for which $230 million was granted, was for "higher productivity and higher pay workplaces". Outcome 3 ($630 million) was for "increased workforce participation".

So long as an expenditure could be said to have something to do with, or to be incidental to the production of such vague outcomes, it was capable of being regarded as authorised by law. That could include a trip to Rome, a bottle of Bollinger, the purchase of a computer, the lease of a building or a pay-out to a sexual-harassment victim. All so long as it could be claimed that these happened in the course of producing the desired outcome.

Government and departments pretend one can measure whether these outcomes were achieved.

Some judges would insist they have not created open appropriation slather. But if there are still constraints, they are not obvious. The judges in Combet's case did not, for example, require that the type of spending be explicit or implied in departmental portfolio statements.

It is possible that outcome budgeting and accrual accounting has had some positive effect on government accounting. It has not, however, served government accountability to Parliament and the public, or as a means of focusing on the lawfulness of government activity.

Even senior ministers on both sides of politics admit they have no idea, from words in modern appropriation acts, what expenditure is and isn't authorised. If a particular expenditure, or program, become a matter of political contention, it is not usually approached, even by critics, via the financial scrutiny system.

This is not to suggest that executive government itself is not focused on value for money, or on the type of spending it wants. There can be close scrutiny of programs, forwards and backwards, in the budget process, and sometimes, close examination for fraud or waste. But these are for purposes within the executive arm of government, and are often secretive and externally unaccountable. It does not really form a part of the checks and balances system, or of interchange between different arms of government.

Politicians, and that rarer subset – parliamentarians who actually care about the forms and processes of representative democracy – could play a more activist role in holding the executive to account. But the trends are in the opposite direction. Witness the abuse of question time, on the one hand by tame members of the government to serve up Dorothy Dixers, on the other to make rhetorical points rather than to seek information. Committees sometimes produce bipartisan harmony, but rarely in the cause of holding officials to account.

Indeed, all too often, politicians don't even make much use of the information they do get from budget and estimates processes. In many cases, agencies labour to produce extensive statements about their activities, only to find them pass unexamined through estimates. Regularly, one sees the estimates process approve, without questions, expenditure by the billions while getting diverted by trivia such as a prime minister's wine bill.

One should not, probably, blame the High Court for that. One should blame a tame Parliament that has long been deeply subservient to government, far too trusting of its bona fides, and all too careless about one of its primary constitutional roles: the close control of how revenue is gathered, and close scrutiny over how taxes are spent.

Two of the most fundamental clauses in the Australian constitution – entrenching principles over which there was civil war in Britain, an English king beheaded and another deposed, in the 17th century – have almost become dead letters in Australia, thanks to parliamentary inertia and a High Court that refuses to care if parliamentarians will not.

Section 81 of the constitution says: "All revenues or moneys raised or received by the executive government of the Commonwealth shall form one Consolidated Revenue Fund ..."

Section 83 says: "No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law."

Establishment of these principles in Britain, and the export of them to Australia after it was settled, put executive government – once upon a time the king and his ministers, not then responsible to Parliament – firmly under the control of the legislature, the representatives of the citizenry.

The king could raise no money, and spend no money, except by law – effectively the permission of Parliament. There could be no secret accounts or sources of revenue able to be spent without being subject to parliamentary accountability, scrutiny and control.

Other sections of the constitution, including section 44, which is now causing so many headaches for Barnaby Joyce and others, underlined these rules and restrictions on what executive government could do. The references in section 44 to the disqualification of parliamentarians holding "offices of profit under the Crown" owe their place to early 18th century efforts in the British Parliament to prevent the king, and his ministers, bribing politicians with jobs, extra salaries and sinecures.

These are constitutional protections, designed to prevent government going beyond its powers and oppressing its citizens. They are not bill-of-rights-style protections, promoting individual liberties. But they are part of the process of requiring that government act within the law, doing nothing that is not authorised by law.

The modern tendency of government is to reach further and further into the lives of its citizens. In recent months, for example, great power over police, secret police and a paramilitary customs force has been concentrated in one minister, without much in the way of obvious checks and balances. Politicians on both sides have been too little focused on how their kowtowing to ministerial demands for discretion and flexibility is building up an ever more unaccountable and authoritarian state. That, rather than a $120 million opinion poll, might be the real take-out from this week in the High Court.

Jack Waterford is a former editor of The Canberra Times. jwaterfordcanberra@gmail.com