Key points

• The Social Security and Other Legislation Amendment (Miscellaneous Measures) Bill 2023 (the Bill) relates to legislative provisions in Chapter 2D of the Social Security Act 1991 (SSA) that authorise Commonwealth spending on employment programs and services.
• The Bill addresses potential problems in the drafting of Chapter 2D, which was inserted into the SSA by Schedule 2 of the Social Security Legislation Amendment (Streamlined Participation Requirements and Other Measures) Act 2022. The Explanatory Memorandum to that 2022 Act indicated that Chapter 2D was intended to provide statutory authority for expenditure on employment programs as an alternative to the existing statutory authorities for such programs, such as section 32B of the Financial Framework (Supplementary Powers) Act 1997 (FFSP Act).
• The Bill seeks to clarify that:
  • decisions made under Chapter 2D are not subject to review under the Administrative Decisions (Judicial Review) Act 1977, or merits review by the Administrative Appeals Tribunal
  • information obtained under Chapter 2D is not protected information under the SSA
  • in order for a program to be funded under Chapter 2D, it must be specified in a notifiable instrument made by the Employment Secretary
  • a payment under Chapter 2D is not a social security payment
  • Chapter 2D operates concurrently with the FFSP Act and
  • in general, the Social Security (Administration) Act 1999 does not apply to Chapter 2D.
• The overarching intention appears to be to ensure that decisions and payments made under Chapter 2D are treated in the same way as decisions and payments made under section 32B of the FFSP Act.
• The Minister has described these changes as technical amendments to ensure that the intent of the Social Security Legislation Amendment (Streamlined Participation Requirements and Other Measures) Act 2022 is properly achieved and that Chapter 2D operates effectively.
• The Senate Education and Employment Legislation Committee recommended that the Bill be passed. Both the Senate Standing Committee for the Scrutiny of Bills and the Parliamentary Joint Committee on Human Rights have raised concerns with elements of the Bill.

Introductory Info

Date introduced: 3 August 2023
House: House of Representatives
Portfolio: Employment and Workplace Relations
Commencement: Sections 1-3 and items 11 and 15 on Royal Assent; items 1-3, 5-10, 12 and 14 on the day after Royal Assent; items 4 and 13 on the seventh day after Royal Assent.

Purpose of the Bill

The purpose of the Social Security and Other Legislation Amendment (Miscellaneous Measures) Bill 2023 (the Bill) is to amend the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act), the Social Security Act 1991 (SSA) and the Veterans’ Entitlements Act 1986 (VEA) to clarify that payments which are made in accordance with Chapter 2D of the SSA are treated in the same way as those payments which are underpinned by section 32B of the Financial Framework (Supplementary Powers) Act 1997 (FFSP Act).

Background

Legislative power of the Commonwealth

Exclusive and concurrent powers

The Constitution gives the Commonwealth certain ‘exclusive’ legislative powers in relation to matters such as the Commonwealth public service and Commonwealth places[1] and the imposition of uniform duties of customs and excise, and bounties on production.[2]

In addition, under section 51 of the Constitution, the Commonwealth has certain enumerated legislative powers that are ‘concurrent’ with the legislative powers of the States—although an inconsistency between a Commonwealth law and a state law will see the Commonwealth law prevail ‘to the extent of the inconsistency’.[3] The enumerated powers of the Commonwealth under section 51 include:

• trade and commerce with other countries, and among the States (s51(i))
• taxation; but so as not to discriminate between States or parts of States (s51(ii))
• invalid and old-age pensions (s51(xxiii))
• the provision of maternity allowances, widows' pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorize any form of civil conscription), benefits to students and family allowances (s51(xxiiiA)
• matters incidental to the execution of any power vested by the Constitution in the Parliament or in either House thereof, or in the Government of the Commonwealth, or in the Federal Judicature, or in any department or officer of the Commonwealth (s51(xxxix)).

Executive power

The High Court has further held that the reference to the ‘executive power of the Commonwealth’ in section 61 of the Constitution, in combination with the incidental power of s51(xxxix), confers upon the Commonwealth legislative power for things that are ‘peculiarly adapted to the government of the country and which cannot otherwise be carried on for its benefit’.[4] This is sometimes referred to as the ‘nationhood power.’ Things that have been considered to be within the scope of this power have included celebration of Australia’s Bicentenary,[5] and an emergency fiscal response during a global economic crisis.[6]

High Court decisions

The Pape case

Until the High Court’s decision in Pape the prevailing view was that the Commonwealth had the power to appropriate monies to a purpose irrespective of whether or not the Commonwealth had any legislative power in relation to that purpose or matter.[7] The Commonwealth considered that section 81 of the Constitution confers a substantive power to spend money ‘for the purposes of the Commonwealth’, independent of any other Commonwealth power. This view was supported by statements of some justices in earlier cases including the Pharmaceutical Benefits Case[8] and the AAP Case.[9]

However, in Pape, the High Court held that section 81 (with section 83) confirms that parliamentary appropriation is a prerequisite for the lawful availability of money for expenditure, but those sections do not confer a ‘spending power’ on the Commonwealth. Authority to spend such money must be found elsewhere, either in the Constitution or in legislation enacted by the Parliament.

This decision confirmed that the power to appropriate and the power to spend were separate powers and that both were confined to the limits of the Constitution.[10]

Williams (No. 1)

After the decision in the Pape case, the High Court made two further determinations in Williams No. 1[11] and Williams No. 2.[12]

The central issue in Williams No. 1 was the scope of the executive power of the Commonwealth in relation to the Executive government’s capacity to enter into agreements or contracts that provide funding without any legislative basis.[13] The argument put forward by the Commonwealth was that, through the executive power, the Commonwealth could ‘contract’ to do anything that it could otherwise do through legislation.

In that case, the High Court invalidated an agreement made by the Commonwealth under the National School Chaplaincy Program. The majority also:

… invalidated the making of payments by the Commonwealth under that agreement, on the ground that they were not supported by the executive power of the Commonwealth. In particular, four of the justices did so on the basis that the Commonwealth executive government could not enter into agreements and make payments under the Program without legislative authority. Appropriation legislation was not sufficient: nor was subsection 44(1) of the Financial Management and Accountability Act 1997. [14]

Williams (No. 2)

At issue in Williams No. 2 was the constitutional validity of the payments made under the SUQ Funding Agreement further to the remedial legislation that was passed in 2012, notably s 32B of the Financial Management and Accountability Act 1997 (as the FFSP Act was then known), which provides the Commonwealth with a power to make, vary or administer arrangements and grants where these are specified in regulations.

Significantly, the High Court restricted its consideration and judgment to the specific issue of the SUQ Funding Agreement, with the joint judgment stating that:

it is not necessary to determine whether, as Mr Williams and some of the interveners submitted, s 32B of the FMA Act is wholly invalid because it constitutes an impermissible delegation of legislative power.[15]

The decision of the Court was that ‘In their relevant operation, the impugned provisions are not valid laws of the Commonwealth’.[16] In particular, it was found that that, in their relevant operation, the impugned provisions were neither laws with respect to the provision of benefits to students within section 51(xxiiiA) of the Constitution,[17] nor laws with respect to trading or financial corporations within section 51(xx).[18]

Effect and response

According to Hogg and Lawson:

The most significant effect of Pape and Williams has been to confirm that the Commonwealth's authority to spend amounts appropriated requires either an authority to be identified in the Constitution other than sections 81 and 83, or a valid law made under the Constitution. This marks a significant new imposition on the Commonwealth's financial activities because it imposes a strict limit on the areas in which the Commonwealth can spend its considerable financial resources.[19]

Currently, the FFSP Act confers on the Commonwealth, in certain circumstances, powers to make arrangements under which money can be spent; or to make grants of financial assistance; and to form, or otherwise be involved in, companies. The arrangements, grants, programs and companies (or classes of arrangements or grants in relation to which the powers are conferred) are specified in the Financial Framework (Supplementary Powers) Regulations 1997.

The powers in the FFSP Act to make, vary or administer arrangements or grants may be exercised on behalf of the Commonwealth by Ministers and the accountable authorities of non-corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

Operation of the SPROM Act

The Social Security Legislation Amendment (Streamlined Participation Requirements and Other Measures) Act 2022 (SPROM Act) inserted a new Chapter 2D into the SSA.[20]

The rationale for the amendment is set out in the Revised Explanatory Memorandum to the originating Bill as follows:

Currently, the Australian Government delivers numerous employment programs designed to assist unemployed people, under-employed people and people who are at risk of losing their jobs, to find and keep paid work, or more paid work. These include for example Jobactive, Relocation Assistance to Take Up a Job, Career Transition Assistance and the longstanding New Enterprise Incentive Scheme …

In common with many but not all Commonwealth programs the legislative authority for these programs is currently contained in the Financial Framework (Supplementary Powers) Regulations 1997, which are the responsibility of the Minister for Finance.

However, it is more appropriate for legislative authority for Commonwealth expenditure on employment programs to be contained in portfolio legislation administered by the Minister and department responsible for employment policy and programs. This will enhance transparency and accountability for that expenditure. [The Bill] amends the social security law accordingly.

Funding for employment programs will not be supported by the standing appropriation in the social security law. Instead, it will need to come from annual appropriations in the usual way. Government decisions in relation to these programs will therefore be subject to Budget processes, and will be published in the Employment Department’s portfolio budget papers. Parliament will continue to be able to scrutinise expenditure on, and the operation of, these employment-related programs through all of the usual mechanisms available to it, including the Senate Estimates process.[21] [emphasis added]

Current Bill

The purpose of this Bill is to amend certain statutes to make clear the interaction between Chapter 2D of the SSA and other provisions of the social security law. It is intended to ensure that payments supported by Chapter 2D are treated in the same way as they would be if they were instead supported by section 32B of the FFSP Act.

Senate Standing Committee on Education and Employment

The Bill was referred to the Senate Standing Committee on Education and Employment (Education and Employment Committee) for inquiry and report by 31 August 2023.[22] The Education and Employment Committee had received only one submission. In its Report, the Committee recommended that the Bill be passed.

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills (the Scrutiny of Bills Committee) noted that whilst certain amendments in the Bill:

… do not introduce the power to make payments or grants, they nevertheless rely on the broad discretionary power of the Employment Secretary to make arrangements and grants without any guidance on the face of the bill as to how this is to be exercised. Such an instrument effectively authorises the spending of public monies on the relevant grant or program. Scrutiny of such an instrument is therefore important for parliamentary oversight and control of Commonwealth expenditure.[23]

The Scrutiny of Bills Committee previously commented on Chapter 2D of the SSA when it was introduced in the Social Security Legislation Amendment (Streamlined Participation Requirements and Other Measures) Bill 2021.[24] At that time, the Committee expressed its view that, where it is proposed to allow the expenditure of a potentially significant amount of public money, the expenditure should be subject to appropriate parliamentary scrutiny and oversight.[25]

The Scrutiny of Bills Committee reiterated those concerns in its comments about the current Bill. It requested detailed advice from the Minister about:

• why it is considered necessary and appropriate to confer on the Employment Secretary a broad power to make arrangements and grants in circumstances where there is limited guidance on the face of the Bill as to how that power is to be exercised
• whether the Bill can be amended to include at least high-level guidance as to the terms and conditions on which arrangements or grants can be made
• why it is considered appropriate that instruments made under proposed subsection 1062A(1A) of the SSA are notifiable instruments and
• whether the Bill could be amended to provide that these instruments are legislative instruments to ensure that they are subject to appropriate parliamentary oversight.[26]

The Minister has responded to the Scrutiny of Bills Committee. The Committee thanked the Minister for his response and reiterated its concerns, leaving to the Senate as a whole ‘the appropriateness of the conferral of a broad discretionary power and the use of notifiable instruments’.[27]

Policy position of non-government parties/independents

Paul Fletcher, Manager of Opposition Business in the House of Representatives, expressed the Coalition’s support for the Bill, stating:

the Opposition recognises that this Bill is largely technical in nature and seeks to make certain fairly technical amendments to an act passed under the previous government which embodied and gave effect to the policy of the previous government.[28]

At the time of writing this Bills Digest no comments in relation to the Bill had been made by other members of non-government parties or by independents.

Position of major interest groups

At the time of writing this Bills Digest, no comments in relation to the Bill had been made by stakeholder groups.

Financial implications

According to the Explanatory Memorandum to the Bill, ‘there are no financial impacts associated with these amendments’.[29]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[30]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights (PJCHR) raised concerns with the proposed amendment to paragraph 1062B(k) of the SSA. Current section 1062B of the SSA sets out the constitutional limits with respect to an arrangement or grant made pursuant to section 1062A. In particular, paragraph 1062B(k) provides that an arrangement or grant referred to in section 1062A may be with respect to 'people to whom paragraph 51(xxvi) of the Constitution applies’. Item 8 of the Bill seeks to amend this paragraph by specifying 'Indigenous persons’ as the particular persons for whom an arrangement or grant may be made.[31]

The PJCHR noted that the Government’s Statement of Compatibility with Human Rights states:

Ensuring constitutional support for Commonwealth spending on programs aimed at removing barriers First Nations Australians might face in getting and keeping paid work engages the right to equality and non-discrimination. This is because such programs involve positive action on the basis of a protected status to reflect relevant differences between different groups. Such differential treatment is based on objective and reasonable criteria and seeks to achieve substantive equality.[32]

The PJCHR observed that ‘were the programs funded under Chapter 2D of the Act to be for the sole purpose of advancing the rights of Aboriginal and Torres Strait Islander peoples (on a temporary basis) and so constitute a 'special measure’ under international human rights law, such differential treatment would be permissible’.[33] However, the PJCHR noted that some programs that might be funded under Chapter 2D ‘may limit human rights, such as programs relating to the enforcement of mutual obligation requirements’ and that ‘there is nothing in the legislation itself that would restrict spending on programs to only those that benefit Indigenous persons, meaning that programs that are detrimental to, or limit the rights of, Aboriginal and Torres Strait peoples may also be funded’.[34]

Due to this possibility, the PJCHR considered that it was unlikely that the measure as a whole could be characterised as a ‘special measure’ for the purposes of international human rights law. Accordingly, it was necessary for the Committee to ‘consider whether the differential treatment arising from the measure could constitute unlawful discrimination’.[35] The Committee noted that differential treatment would not constitute unlawful discrimination if it is based on reasonable and objective criteria such that it serves a legitimate objective, is rationally connected to that objective and is a proportionate means of achieving that objective.[36]

Considering the provisions of the Bill as a whole, the Committee concluded:

While the measure pursues the important objective of achieving substantive equality, the committee is concerned that it is not accompanied by sufficient safeguards and notes that there may be less rights restrictive alternatives to achieve the stated objective. As such, the committee considers that there is a risk that the differential treatment of Indigenous persons would not be based on reasonable and objective criteria such that it would constitute lawful discrimination under international human rights law.[37]

The Committee suggested that its concerns with the Bill could be addressed if the Bill was amended ‘to restrict the funding of programs with respect to Indigenous persons to those that benefit, and do not discriminate against, Indigenous persons’.[38]

Key issues and provisions

The Government appears concerned that the way the SPROM Act was drafted might have consequences it did not intend. These include:

• decisions made under Chapter 2D could be subject to judicial review under the ADJR Act
• information about a person that was obtained by an officer under Chapter 2D might be treated as protected information for the purposes of the social security law and
• the Social Security (Administration) Act 1999 might be regarded as applying to Chapter 2D, including provisions that provide for merits review of decisions.

The Bill also seeks to identify additional heads of power to support the Commonwealth’s spending.

About Chapter 2D

Chapter 2D of the SSA as inserted by the SPROM Act allows for the Employment Secretary, on behalf of the Commonwealth:

• to make, vary or administer an arrangement for the making of payments by the Commonwealth, or
• to make, vary or administer a grant of financial assistance

in relation to various activities aimed at assisting unemployed or other persons to obtain and maintain paid work.[39]

Not subject to judicial review

Item 1 inserts proposed paragraph (f) into Schedule 1 of the ADJR Act. The Schedule lists the classes of decisions that are not decisions to which the ADJR Act applies. This is consistent with existing paragraph (he) of Schedule 1 which also excludes decisions under Part 2 of the FFSP Act from the operation of the ADJR Act. The Explanatory Memorandum to the Bill provides a succinct explanation of the rationale for the exclusion of the relevant Commonwealth spending decisions from judicial review (p. 7).

Protected information

Item 3 of the Bill makes it clear that information obtained by an officer under Chapter 2D of the SSA is not protected information as defined in subsection 23(1) of that Act. Protected information is accorded a higher level of protection than personal information receives under the Privacy Act 1988. According to the Explanatory Memorandum:

One of the main objects of the social security law is to ensure that Australians have access to a minimum essential level of benefits, playing an important role in alleviating poverty and promoting social inclusion. Parliament has afforded information obtained in pursuit of this object greater protection than the protection the Privacy Act affords to it. Information obtained under Chapter 2D is not obtained for any of the usual purposes of the social security law (p. 8).

Accordingly, information obtained under Chapter 2D of the SSA will be treated in the same way information would be if it was instead obtained under section 32B of the FFSP Act.

Notifiable instrument

Currently subsection 1062A(1) of the SSA lists the types of arrangement or grants of financial assistance that may be made under Chapter 2D. Item 4 amends the SSA to insert proposed subsections 1062A(1A) and (1B).

Under proposed subsections 1062A(1A) and 1062A(1B) a relevant arrangement or grant may only be made in respect of a program that has been specified in a notifiable instrument by the Employment Secretary. A notifiable instrument is subordinate legislation that is subject to the registration requirements of the Legislation Act 2003.[40] Importantly, notifiable instruments are not subject to parliamentary scrutiny, nor are they subject to automatic repeal 10 years after registration.[41]

As stated above, the Scrutiny of Bills Committee sought advice from the Minister in relation to the making of notifiable instruments under proposed subsection 1062A(1B) of the SSA. The Minister responded stating:

Section 1062A of the SS Act, as it currently stands, does not require that grants and arrangements be made in respect of a specified program…

…the Bill would ensure that section 1062A only applies to grants and arrangements made for the purposes of a program specified in a notifiable instrument that will be publicly available as it will be registers on the Federal Register of Legislation. It will list programs supported by section 1062A and provide a short description of such programs in a similar way that the FFSP Regulations do.

The introduction of a notifiable instrument therefore promotes greater transparency than the current provisions, by ensuring that the programs in respect of which funding is authorised are publicly available and able to be scrutinised. However, the requirement for a notifiable instrument will not impede may department’s ability to respond quickly and flexibility [sic] to changing labour market conditions and community needs when it needs to do so.

Application of the Social Security (Administration) Act

Proposed section 1062DA provides that the Social Security (Administration) Act 1999 (SSAA) (other than 3 specified sections, dealing with definitions, delegations and appropriation) does not apply in relation to Chapter 2D of the SSA.

According to the Explanatory Memorandum to the Bill:

… the Social Security (Administration) Act contains various provisions that apply in relation to the administration of the social security law that are not relevant to Chapter 2D which simply provides legislative authority for certain spending (12).

By way of example, the SSAA includes provision for internal review of decisions (Part 4) and review by the Administrative Appeals Tribunal (AAT) (Part 4A). The Government considers that decisions made under Chapter 2D of the SSA (which are ‘entirely discretionary decisions, typically to make grant- or procurement-related payments to service providers’) are:

entirely unsuitable for internal review or review by the Administrative Appeals Tribunal for all of the same reasons that decisions made in the exercise of the spending power in section 32B of the FFSP Act are unsuitable for such review. There is no reason to treat decisions made under Chapter 2D differently to those made under section 32B of the FFSP Act, and it was never the intent to do so. This amendment would make clear that merits review of Chapter 2D decisions is not available.[42]

Identifying additional heads of power

The High Court’s decision in Williams v Commonwealth No. 2 (Williams No. 2) made it clear that legislation intended to support spending, which also needed to be supported by a Commonwealth head of power .

Current section 1062B of the SSA sets out the constitutional limits with respect to an arrangement or grant made pursuant to section 1062A. Item 7 of the Bill attempts to strengthen the Commonwealth’s claim that all spending on employment programs and services is covered by relevant heads of power by adding references to Australia’s international obligations under the climate change treaties by making amendments to section 1062B. According to the Explanatory Memorandum to the Bill:

The Australian Government is committed to supporting individuals in Australia to get and keep paid work through Australia’s clean energy transition. To the extent that programs aimed at providing such support are intended to reduce Australia’s domestic emissions, they might derive constitutional support from the external affairs power in section 51(xxix) of the Constitution, as enlivened by the climate change treaties. The insertion of these paragraphs would provide additional support for spending on such programs.[43]

As discussed above, paragraph 1062B(k) provides that an arrangement or grant referred to in section 1062A may be with respect to 'people to whom paragraph 51(xxvi) of the Constitution applies'. Item 8 of the Bill seeks to amend this paragraph by specifying 'Indigenous persons' as the particular persons for whom an arrangement or grant may be made. The Explanatory Memorandum states:

This a technical amendment to ensure that Chapter 2D better engages with the Commonwealth’s races power in paragraph 51(xxvi) of the Constitution. Specifically, paragraph 51(xxvi) of the Constitution relates to “the people of any race for whom it is deemed necessary to make special laws”. Courts have held (for example, in Koowarta v Bjelke-Petersen (1982) 153 CLR 168 that a law enacted under section 51(xxvi) of the Constitution must be a special law for the people of a particular race. Accordingly, this amendment would identify “Indigenous persons” as the people of a particular race for whom Parliament intends to make a special law.[44]

As discussed above, the PJCHR has raised some concerns with this proposed amendment and has suggested that ‘the proportionality of this measure may be assisted were the Bill amended to restrict the funding of programs with respect to Indigenous persons to those that benefit, and do not discriminate against, Indigenous persons’.[45]

Other amendments

The Bill also makes a number of other minor amendments. These are discussed in the Explanatory Memorandum.