CHAPTER 5

INAPPROPRIATE DELEGATION OF LEGISLATIVE POWER

The Constitution imposes on the Parliament the obligation to make laws. The fourth criterion in Standing Order 24 (1)(a) seeks to ensure Parliament carries out that obligation responsibly. The statutes that Parliament makes often include a delegation to the Governor-General (or others) of the power to make laws. It gives them the authority to make regulations or other instruments which are necessary or convenient for carrying out or giving effect to the provisions of the Act. The Committee's task under this criterion is to draw to the attention of the Senate occasions when Parliament's power may have been delegated inappropriately.

Threshold question: Is it legislative power that is delegated?

In applying this criterion, the question arises in some instances whether the power proposed to be delegated is a power to make what can legitimately be called subordinate legislation. There is a grey area, known sometimes as 'quasi-legislation', where it is difficult to determine whether the instrument which Parliament authorises someone to make is legislative in character or not. Such instruments might be ministerial guidelines, codes of practice, codes of conduct or practice statements. They are often described as to be made under a power to direct, determine, notify, order, instruct, declare, issue or publish.

A bill was introduced but not passed during the 37th Parliament which would have affected the task of identifying which instruments are legislative.

The Legislative Instruments Bill 1994 proposed that a register be established on which would be placed all instruments defined as legislative by the bill. One of the things the bill dealt with was the process by which instruments such as ministerial guidelines and directions would be categorised as legislative or otherwise. The bill provided that in cases of uncertainty the Attorney-General would issue a certificate declaring whether the instrument was legislative or not. If the Attorney-General saw it as legislative it would be placed on the Register and thereby be subject to Parliamentary scrutiny.

On the face of things this process could be seen as highly conducive to the Committee's task of identifying matters falling within criteria (1)(a)(iv) and (1)(a)(v). However, the Committee's duty as expressed in (1)(a)(iv) and (1)(a)(v) of Senate Standing Order 24 is 'to report, in respect of the clauses of bills introduced into the Senate, and in respect of Acts of the Parliament' whether they 'by express words or otherwise...

(iv) inappropriately delegate legislative power; or

(v) insufficiently subject the exercise of legislative power to parliamentary scrutiny.'

Accordingly the Committee must decide for itself whether or not a particular instrument is legislative in character without reliance on the decision of the Attorney-General. Otherwise it would, in contravention of Standing Order 24, be substituting the opinion of the Attorney-General for that of its own and would thereby deny the Senate its considered advice.

This would defeat the purpose of the Order.

The bill was not passed during the 37th Parliament but a bill of like effect has been introduced in the 38th Parliament and so these issues remain live.

Application of criterion set out in Standing Order 24 (1)(a)(iv)

The following are examples of where legislation contains provisions which inappropriately delegate legislative power.

(a) It may enable subordinate legislation to amend an Act of Parliament.

(b) It may provide that matters that should be regulated by Parliament are to be dealt with by subordinate legislation.

(d) It may give to the executive the unfettered control over whether and when an Act passed by Parliament should come into force.

(a) 'Henry VIII' Clauses

An express provision authorising the amendment of either the empowering legislation itself or any other Act by means of delegated legislation is called a 'Henry VIII' clause. The Macquarie Dictionary of Modern Law defines a 'Henry VIII' clause as 'a clause in an enabling Act providing that the delegated legislation under it overrides earlier Acts or the enabling Act itself; so named because of its autocratic flavour'. [1] Since its establishment, the Committee has consistently drawn attention to such clauses.

(b) Determination of Important Matters by Regulations

The Committee draws attention to provisions which inappropriately delegate legislative power of a kind which ought be exercised by Parliament alone.

An example of this is where Parliament confers the power on the executive government to define a word or phrase in an Act which is determinative of the way it is to operate. [2]

In such circumstances, the Committee will argue that the defining of the word or phrase is too crucial a matter to be left to subordinate legislation and ought be done by Parliament.

During the 37th Parliament there were a number of instances where bills provided that matters which the Committee considered ought be dealt with in the proposed act itself were to be determined by subordinate legislation and like instruments. In some cases this was to be done by entities other than ministers.

Exemptions from the Corporations Law

For example, changes to the Corporations Law were introduced by the Corporate Law Reform Bill (No. 2) 1992. Proposed sections 1084J and 1084K provided that exemptions from all or from any enhanced disclosure provision could be granted not only by regulations but also by the Australians Securities Commission. The Committee raised this matter with the Attorney-General. He said that he was redrafting the bill and the Committee's comments would be taken into account when this was being done.

The Attorney-General pointed out to the Committee that the corporations legislation contained a number of similar provisions. [3] He argued that the need to accommodate the development of new investment vehicles and changing business practices made such provisions essential. Alterations to the Corporations Law had to be made expeditiously. 'The effectiveness of the regulatory regime would be seriously compromised if it were necessary to seek parliamentary approval for every minor modification of the Corporations Law'. [4]

The Attorney-General's response was one the Committee frequently encounters. The response suggests that transferring the exercise of legislative power from the Parliament to another entity is justified on the grounds of expedition and convenience. In the case under discussion the legislation gave power to the Australian Securities Commission to grant exemptions without providing for its exercise to be subject to disallowance by either House or even for an account of its exercise to be tabled in Parliament.

A question of importance

Proposed amendments (new sections 9 and 10A) of the Student Assistance Act 1973, included in the Student Assistance Amendment Bill 1994, provided another example of an inappropriate delegation of legislative power. The Committee pointed out that the amendments legislatively established schemes for ABSTUDY and for the Assistance for Isolated Children (AIC) but provided scarcely any details of how people might qualify for them. Most of the relevant matters were to be dealt with by regulations.

The Committee considered that the bill itself should have dealt with more matters and left fewer to be provided for by regulations. It sought the Minister's advice on how a better balance could be achieved.

In replying to the Committee, the Minister acknowledged that the proposed new sections 9 and 10A of the Act left most of the legislation needed for the Schemes to be provided for by regulation. [5] These included:

the kinds of benefits that may be paid and their value;

conditions for getting benefits;

when benefits will be payable;

how benefits will be paid;

means tests relating to students, parents and spouses;

workload and progress requirements; and

how applications should be made for benefits.

The Minister went on to explain that the following important aspects of these schemes would continue to be dealt with directly by the Act:

recovery of overpayments;

provision of tax file numbers;

offences; and

power to obtain information.

The Minister expected that the prevailing rules would be subject to frequent amendments to implement policy changes. He claimed that these changes could be effected more efficiently and speedily by amendments to regulations rather than by amendments to the Act. The same approach, he said, had been adopted for AUSTUDY (see section 7 of the Act) and had worked well. For this reason, the Government considered the proposed mix of primary and secondary legislation which was to underpin the AIC and ABSTUDY schemes was appropriate.

The Committee remained unconvinced that the proposed balance between primary and secondary legislation was appropriate. In the Committee's view, one of the criteria for deciding whether a matter should be dealt with by primary or secondary legislation was its importance. Applying this test, it became apparent that the Government saw its powers to recover overpayments and to obtain information to be so important as to have them put in the Act but that it considered provisions which spelled out students' entitlements were of lesser moment and could be dealt with by regulation.

The Committee noted that it was open to question whether the same approach, when adopted for AUSTUDY, had worked well. The Minister had cited in favour of the proposal the efficiency and speed with which the expected frequent changes of policy could be translated into law by regulation. The Committee viewed this as a considerable weakness in the scheme because frequent amendments to the AUSTUDY regulations (and amendments to those amendments) had created a legislative maze which even the legally qualified found hard to negotiate and in which the student was irretrievably lost.

Further, in the Committee's view, policy changes effected by regulation were not subject to the same degree of public scrutiny as changes made by the Parliament. The Committee pointed out that the entitlements of social security clients are fully spelled out in primary legislation and adequately changed by amendments to the Act. If such a complex system could be created and maintained in primary legislation, an argument that student assistance entitlements had to be dealt with by regulation held little weight.

(c) Setting the Rate of a 'Levy' by Regulation

Under its fourth criterion, the Committee considers whether a particular delegation of legislative power is appropriate or not. An inappropriate delegation enables the executive, by regulation, to make laws that ought be made by Parliament.

For this reason, the Committee has consistently drawn attention to legislation which provides for the level of a 'levy' to be set by regulation. This creates a risk that the levy may in fact become a tax. [6] It is for Parliament to set a tax rate and not for the makers of subordinate legislation to do so. Where the level of a levy needs to be changed frequently and expeditiously the question arises as to whether this can best be done by regulation rather than by statute. If a compelling case can be made out for the level to be set by subordinate legislation the Committee seeks to have the enabling Act prescribe a maximum figure above which the relevant regulations cannot fix the levy or alternatively a formula by which such an amount can be calculated. The vice to be avoided is taxation by non-primary legislation. [7]

During the 37th Parliament there were eighteen bills which prompted the Committee to comment on this issue. One was the Ozone Protection Amendment Bill 1995. [8] The Committee referred to the explanatory memorandum and noted that an administration fee based on the principle of cost recovery was to be levied on licences issued under the proposed Act. The level of the fee was to be set by regulation. The Committee sought the Minister's advice as to whether the level of the fees could be dealt with by primary legislation.

The Minister responded:

Determining an accurate upper level fee at this early stage of the program would be most difficult.

The level of fees is not contained in the primary legislation because the primary legislation is difficult and time consuming to amend. [9]

The Committee asked the Minister to consider the matter further. It made clear that it was not asking for 'an accurate upper level fee' to be determined for a time in the extended future 'at this early stage in the program'; nor was it looking for minor adjustments in fee level to be made in primary legislation. It sought to have the proposed Act stipulate a maximum figure, or a formula by which one could be established, above which fees could not be set by regulation. This figure would be of such a level as to give those making the subordinate legislation sufficient leeway to meet the cost demands of the developing program but, at the same time, to ensure that the fee did not become a tax.

The Committee pointed out that the issue had been canvassed during 1988 when the then Minister introduced the Licence Fees Acts with respect to Ozone Protection which were still current. He had argued that uncertainty about the future made it necessary for the primary legislation to avoid stipulating any upper limit to the level of fees that could be fixed by the relevant regulations.

This uncertainty was seen as unfounded. Regulations were first made in 1989. In the ensuing 6 years the fees set by those regulations had been altered only once (in 1990).

The Petroleum (Submerged Lands) Fees Bill 1994 was the occasion of a similar discussion. The Committee pointed out that there had been no increases in fees over the four years their level had been subject to alteration by regulations. [10] Nevertheless, the need to have the absence of any upper limit to fees in the relevant primary legislation was stressed by its proposer.

A tax is a tax is a tax

Late in the 37th Parliament, the Primary Industries Charges Bill 1995 and the Primary Industries Levies Bill 1995 raised a fresh issue. The Committee has always taken the view that levies and charges were imposed to recoup discrete expenses such as the cost of an export promotion or administrative costs. The Committee has held that there is a difference between a law to recover such costs and a law giving an undefined power to raise money. Hence the Committee's concern to see that proportionality exists between the levy or charge imposed and the cost of the program that the levy or charge is seen as funding. Otherwise the purported levy might in reality be a tax. Some take the view that any imposition raising money is a tax. The Committee, however, has followed the distinction drawn in section 53 of the Constitution: 'But a proposed law shall not be taken...to impose taxation, by reason only of its containing provisions ...for the demand or payment...of fees for licences, or fees for services under the proposed law.' The Committee has been concerned wherever a bill proposes to allow an unfettered power to impose a levy or charge by regulation lest that power be used, not merely to recoup expenses, but to set a rate so high that it amounts to a tax. Accordingly, it has always sought to have the primary legislation prescribe either a maximum rate of levy or a method of calculating such a maximum rate.

The Primary Industries Charges Bill 1995 and the Primary Industries Levies Bill 1995 proposed a new system for imposing levies and charges throughout the portfolio. In place of over 50 individual Acts these two statutes would allow all levies and all charges to be imposed by regulations without the primary legislation setting out any maximum amount or method of calculating it. What set these bills apart were clauses which provided that rates would be set on a basis other than that of recouping expenses. Each bill granted the power to make an imposition without any limit on the amount. The relevant clause provided that the imposition of a levy or a charge was authorised only so far as the levy was a duty of excise or the charge was a duty of customs within the meaning of section 55 of the Constitution. This meant that each of these bills provided for the executive to exercise an unfettered power to impose a tax.

In its Sixteenth [11] and Eighteenth [12] Reports of 1995, the Committee reported to the Senate on its concerns with the bills and on the responses of the Minister to those concerns. The Committee maintained the view it expressed in its Sixteenth Report of 1995:

As imposing taxation is an important legislative function of Parliament, the question of whether it is appropriate to delegate that function is a matter for ultimate resolution by the Senate itself. Whether the need for flexibility outweighs the principle of retaining the power to impose taxes in Parliament itself is a matter for debate in the chamber. [13]

As the bills had not been passed before Parliament was prorogued, the new Parliament may have to address this question.

(d) Commencement by Proclamation - Office of Parliamentary Counsel Drafting Instruction No. 2 of 1989 [14]

The Committee is wary about legislation which provides that it is to commence on a date to be proclaimed rather than on one specified within its terms. Where it does, the date proclaimed should be no later than 6 months after Parliament passes the relevant measure. [15]

The Committee takes the view that Parliament as the elected holder of Federal legislative power has the responsibility to determine when the laws it makes are to come into force. In adopting this stance, the Committee is conscious of Office of Parliamentary Counsel Drafting Instruction No. 2 of 1989. The Drafting Instruction provides, in part:

3. As a general rule, a restriction should be placed on the time within which an Act should be proclaimed (for simplicity I refer only to an Act, but this includes a provision or provisions of an Act). The commencement clause should fix either a period, or a date, after Royal Assent, (I call the end of this period, or this date, as the case may be, the "fixed time"). This is to be accompanied by either:

(a) a provision that the Act commences at the fixed time if it has not already commenced by Proclamation; or

(b) a provision that the Act shall be taken to be repealed at the fixed time if the Proclamation has not been made by that time.

4. Preferably, if a period after Royal Assent is chosen, it should not be longer than 6 months. If it is longer, Departments should explain the reason for this in the Explanatory Memorandum. On the other hand, if the date option is chosen, [the Department of the Prime Minister and Cabinet] do not wish at this stage to restrict the discretion of the instructing Department to choose the date.

5. It is to be noted that if the "repeal" option is followed, there is no limit on the time from Royal Assent to commencement, as long as the Proclamation is made by the fixed time.

6. Clauses providing for commencement by Proclamation, but without the restrictions mentioned above, should be used only in unusual circumstances, where the commencement depends on an event whose timing is uncertain (eg enactment of complementary State legislation). [16]

If there is any deviation from the rules laid down in the Drafting Instruction, the Committee likes to see the reason for this set out in the Explanatory Memorandum. [17] Where the six months is said to be impractical, the Committee likes to see another period, such as a period of 12 months, specified rather than none at all. [18]

Footnotes

[1] See also Pearce, DC, Delegated Legislation in Australia and New Zealand (1977, Butterworths Pty Limited, Sydney), pp. 7-8; Craies on Statute law (Seventh edition) (1971, Sweet and Maxwell, London), p. 293. For a more discursive treatment, see Senate Standing Committee for the Scrutiny of Bills, Ten Years of Scrutiny (Australian Senate, Canberra, 1992), pp. 66-67 (per Mr Ian Turnbull, QC).

[2] See, for example, Alert Digest No. 7 of 1992 (Commonwealth Electoral Amendment Bill 1992); Alert Digest No. 14 of 1992 (Student Assistance Amendment Bill 1992).

[3] Senate Standing Committee for the Scrutiny of Bills, First to Ninth Reports of 1993 (Parliamentary Paper No. 451/1993), pp. 51-52.

[4] Senate Standing Committee for the Scrutiny of Bills, First to Ninth Reports of 1993 (Parliamentary Paper No. 451/1993), p. 52.

[5] Senate Standing Committee for the Scrutiny of Bills, First to Eighteenth Reports of 1994 (Parliamentary Paper No. 472/1994), p. 129.

[6] It should be noted in this context that the Office of Parliamentary Counsel apparently treats all levies as being taxes.

[7] Senate Standing Committee for the Scrutiny of Bills, First to Twentieth Reports of 1992 (Parliamentary Paper No. 546/1992), (Coal Mining Industry (Long Service Leave) Payroll Levy Bill 1992) pp. 180-185.)

[8] Senate Standing Committee for the Scrutiny of Bills, First to Nineteenth Reports of 1995 (Parliamentary Paper No. 493/1995), pp. 320-325.

[9] ibid., p. 322.

[10] Senate Standing Committee for the Scrutiny of Bills, First to Eighteenth Reports of 1994 (Parliamentary Paper No. 472/1994), pp. 110-112. A subsequent examination of the relevant Acts showed that there had been only one increase in the previous 23 years during which the legislation had been in force.

[11] Senate Standing Committee for the Scrutiny of Bills, First to Nineteenth Reports of 1995 (Parliamentary Paper No. 493/1995), pp. 340-346.

[12] ibid., pp. 378-387.

[13] ibid., p. 345.

[14] Previously, the Committee tended to draw attention to open-ended proclamation provisions under principle (1)(a)(ii). However, after consultation with the First Parliamentary Counsel, it is considered that the better view is that they should be drawn attention to under principle (1)(a)(iv), on the basis that they involve the legislature abrogating part of its legislative power to the Executive Government.

[15] See, for example, Senate Standing Committee for the Scrutiny of Bills, Alert Digest No. 6 of 1995 (Trade Marks Bill 1995).

[16] Senate Hansard, 12 April 1989, pp. 1464-1465.

[17] See, for example, Senate Standing Committee for the Scrutiny of Bills,First to Eighteenth Reports of 1994 (Parliamentary Paper No. 472/1994), (Agricultural and Veterinary Chemicals Bill 1993), pp. 48-49.

[18] ibid., (Australian Capital Territory Government Service (Consequential Provisions) Bill 1994), pp. 183-186.