PARLIAMENTARY CONTROL OF PUBLIC MONEY

William Angus Bateman

Gonville and Caius College

July 2018

This dissertation is submitted for the degree of Doctor of Philosophy

ABSTRACT: “PARLIAMENTARY CONTROL OF PUBLIC MONEY”

This dissertation analyses the idea that parliament controls public money in parliamentary constitutional systems of government.

That analysis proceeds through an historical and contemporary examination of the way legal practices distribute authority over public money between different institutions of government. The legislative and judicial practices concerning taxation, public expenditure, sovereign borrowing, and the government financing activities of central banks are selected for close attention. The contemporary analysis focuses on the design and operation of those legal practices in the United Kingdom and the Commonwealth of Australia, in the context of the boom-bust-recovery economic conditions experienced between 2005 and 2016.

The dissertation’s ultimate claims are explanatory: that “parliamentary control” is a poor explanation of the distribution of financial authority in parliamentary systems of government and should be jettisoned in favour of an idea of “parliamentary ratification”.

An empirically engaged methodology is adopted throughout the dissertation and (historical and contemporary) public sector financial data enrich the legal analysis. The dissertation acknowledges the impact of, but remains agnostic between, different economic and political perspectives on fiscal discipline and public financial administration.

The dissertation makes a number of original contributions. It provides a detailed examination of the historical development, legal operation and constitutional significance of annual appropriation legislation, and the legal regimes governing sovereign borrowing and monetary finance. It also analyses the way that law interacts with government behaviour in situations of economic emergencies (focusing on the Bank of England’s public financing activities since 2008), and the institutional and doctrinal obstacles facing judicial involvement in disputes concerning public finance (focusing on the Australian judiciary’s recent engagements with public expenditure legislation).

PREFACE

I declare that this dissertation is the result of my own work and includes nothing which is the outcome of work done in collaboration except as declared in the Preface and specified in the text.

I also declare that this dissertation is not substantially the same as any that I have submitted, or, is being concurrently submitted for a degree or diploma or other qualification at the University of Cambridge or any other University or similar institution except as declared in the Preface and specified in the text.

I further state that no substantial part of my dissertation has already been submitted, or, is being concurrently submitted for any such degree, diploma or other qualification at the University of Cambridge or any other University or similar institution except as declared in the Preface and specified in the text.

I further declare that this dissertation does not exceed the prescribed word limit for the relevant Degree Committee.

ACKNOWLEDGEMENTS

I extend deep thanks to Professor David Feldman for supervising my research. Without his generosity, patience and support this project could not have been completed.

I also wish to thank the funders and administrators of the Cambridge Australia Scholarship and the Cambridge Commonwealth Trust Scholarship, which supported me financially throughout my PhD.

I acknowledge the following people who have (over many years) shared their wisdom with me:

Jason Allen, George Blades, Timothy Boyle, Edward Cavanagah, Ben Folit- Weinberg, Mike Forster, Stephen Gageler, Mike Grainger, Georgia Huxley, Jonathan Ketcheson, Nicholas Kelly, John Liddicoat, Lachlan McCalman, Johannes Meyer, Leighton McDonald, Cameron Miles, Jacqualine Myint, Claire O'Callaghan, Felicitas Parapatis, Julia Powels, Jens van't Klooster, Barry Solaiman, James Stellios and Stefan Theil.

Marion Poerio provided boundless emotional, logistical and typographical support, for which I am extremely grateful. Mark Hammond, Kelsey Kerridge Fitness Centre, Tempelhofer Feld, Steak and Honour, Jack’s, Seven Wolves and the Yim Wah Express held together body and soul in the home stretch.

I dedicate my dissertation to Clara and Selena Bateman, and the memory of Alan Bateman.

CITATION AND STYLE GUIDE

Secondary sources

First citation: Author (Year), [Title of book or ‘Title of article’], pinpoint. Subsequent citations: as above, omitting the title. Cases

First citation: Case name (Year), pinpoint. Subsequent citations: Abbreviated case name (Year), pinpoint

Legislation

All citations: Title and year (Jurisdiction), section number. UK legislation: Regnal years replaced with “(UK)” for post-1801 legislation and all chapter numbers are omitted, unless necessary to distinguish Acts of the same calendar year. Full citations appear in the bibliography.

Government documents

All citations: Institution, Title (Year), pinpoint. General rules

Subsequent un-broken citations: ibid. Cross-references: marked by in-text parentheses: eg, “(see text at chapter 2, heading 2.2.2)” is marked as “(§2.2.2)”. Abbreviations

AGBP – Australian Government Budget Papers.

ABS GFS — Australian Bureau of Statistics, Government Finance Statistics’

ABS NA — Australian Bureau of Statistics, Australian System of National Accounts.

BHS — Mitchel (1998), British Historical Statistics

ONS NA — Office of National Statistics, National Accounts.

ONS PSF — Office of National Statistics, Public Sector Finance Statistics.

PESA — HMTreasury, Public Expenditure Statistical Analysis.

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PART I INTRODUCING PARLIAMENTARY CONTROL OF PUBLIC MONEY ...... 2 CHAPTER 1 SETTING THE PARAMETERS ...... 3 1.1 “PARLIAMENTARY CONTROL” ...... 3 1.2 “PUBLIC MONEY” IN “PARLIAMENTARY CONSTITUTIONAL SYSTEMS” ...... 17 1.3 “MAKING SENSE” OF PARLIAMENTARY CONTROL ...... 36 PART II LEGAL PRACTICES OF PUBLIC MONEY: HISTORICAL DEVELOPMENT ...... 48 CHAPTER 2 GROWING PARLIAMENTARY GOVERNMENT WITH PUBLIC MONEY .... 49 2.1 STATUTORY FINANCIAL AUTHORISATION ...... 49 2.2 PUBLIC DEBT, FINANCIAL INITIATIVE AND AUDIT ...... 75 2.3 JUDGES AND PUBLIC MONEY ...... 96 CONCLUSION ...... 114 CHAPTER 3 PUBLIC MONEY IN MODERN PARLIAMENTARY GOVERNMENT ...... 116 3.1 EXPORT OF THE LEGAL PRACTICES ...... 117 3.2 TWENTIETH CENTURY EXPANSION ...... 130 3.3 PUBLIC MONEY IN THE MODERN STATE ...... 156 CONCLUSION ...... 176 PART III LEGAL PRACTICES OF PUBLIC MONEY: CONTEMPORARY ANALYSIS ...... 178 CHAPTER 4 LEGISLATIVE PRACTICES (I): FISCAL AUTHORITY ...... 182 4.1 LEGISLATIVE DESIGN ...... 182 4.2 OPERATION OF THE LEGISLATIVE PRACTICES ...... 210 4.3 DISTRIBUTION OF FINANCIAL AUTHORITY ...... 226 CONCLUSION ...... 233 CHAPTER 5 LEGISLATIVE PRACTICES (II): DEBT AND MONETARY AUTHORITY . 235 5.1 LEGISLATIVE DESIGN ...... 235 5.2 OPERATION OF THE LEGISLATIVE PRACTICES ...... 252 5.3 DISTRIBUTION OF FINANCIAL AUTHORITY ...... 263 CONCLUSION ...... 269 CHAPTER 6 JUDICIAL PRACTICES ...... 271 6.1 LOPSIDED JUDICIAL INVOLVEMENT ...... 272 6.2 EXPENDITURE AND THE JUDICIARY ...... 281 6.3 TAXATION AND THE JUDICIARY ...... 293 CONCLUSION ...... 302 PART IV UNDERSTANDING PARLIAMENTARY CONTROL ...... 304 CHAPTER 7 EXPLANATORY FAILURE OF PARLIAMENTARY CONTROL ...... 305 7.1 FRAMEWORK OF PARLIAMENTARY CONTROL ...... 305 7.2 DEFICIT OF PARLIAMENTARY CONTROL ...... 316 7.3 ALTERNATIVE EXPLANATIONS ...... 331 CONCLUSION ...... 342 CHAPTER 8 NORMATIVE FUTURE OF PARLIAMENTARY CONTROL ...... 344 8.1 DISAVOWING DICEY ...... 344 8.2 KAMAKAZI CONTROL ...... 346 8.3 REFORM PROJECTS ...... 347

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PART I INTRODUCING PARLIAMENTARY CONTROL OF PUBLIC MONEY

This dissertation critically examines the idea that parliament controls public money in parliamentary constitutional systems of government, focusing on the way legal practices distribute authority over public money between different institutions of government.

It is composed of eight chapters (“§1–§8”), divided into four parts (“§I–§IV”).

Chapter 1 (in §I) introduces the core questions addressed by the dissertation and the methods used to answer them. It also identifies the legal practices adopted for analysis (taxation, appropriation, sovereign borrowing and monetary finance) and explains the dissertation’s major contributions.

Chapters 2–3 (in §II) examine the historical development of the legal practices of public money in the parliamentary constitutional tradition. Chapters 4–6 (in §III) examine the contemporary design and operation of those legal practices in Australia and the UK, between 2005–2015. Both the historical and contemporary analyses concentrate on the way legal practices distribute authority away from parliaments and towards executives.

Chapters 7–8 (in §IV) argue for the dissertation’s explanatory claims and sketch their normative implications. Chapter 7 argues that parliamentary control fails to explain the distribution of financial authority in parliamentary systems of government and proposes an alternative explanatory concept of “parliamentary ratification”. Chapter 8 concludes the dissertation’s analysis by briefly exploring the possible normative futures of public money in parliamentary constitutional government.

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CHAPTER 1 SETTING THE PARAMETERS

This chapter explains and defends each component of the research question addressed by this dissertation: whether the idea of parliamentary control of public money (§1.1) in parliamentary constitutional systems (§1.2) makes sense (§1.3).

1.1 “Parliamentary control”

The idea of “parliamentary control of public money” lies at the heart of this dissertation. It is introduced in three steps. First, its recent intellectual genealogy is explored (§1.1.1). Secondly, its position in applied and theoretical constitutional debates is surveyed (§1.1.2). Thirdly, the reasons for critiquing parliamentary control are explained and the general approach to that critique is introduced (§1.1.3).

1.1.1 A “system of parliamentary control”

The “idea”1 of “parliamentary control of public money” is not plucked from the air: it is central to contemporary understandings of the constitutional principles concerning public money in parliamentary constitutional systems. The most prominent early-adopter was AV Dicey.

Dicey’s law of public revenue

From the first edition of the Law of the Constitution, in his treatment of “[t]he Revenue,” 2 Dicey wrote of the “system of parliamentary control”3 which governed “the collection and expenditure of the revenue, and all things appertaining thereto”.4

1 The language of “idea” is generally used throughout this dissertation to describe “parliamentary control”, rather than “principle”, although the alternative usage is mostly interchangeable. 2 Dicey (1885), Introduction to the Study of the Law of the Constitution, 171 (references to Dicey are to the 1885 1st edition, re-published in Allison (2013), AV Dicey, The Law of the Constitution). 3 Ibid, 171, 173, 174, 175. 4 Ibid, 171. 4

That focus was novel. Earlier and (then) contemporary constitutional works, had not spoken in terms which allocated a totalising form of control to parliament over public money. Anson, Hearn, May and Todd had each devoted significant space to explaining the constitutional functions of the Crown (Monarch and executive) in relation to public finance, while recognising (almost as subsidiary) the role played by parliament in the annual processes of supply and taxation.5 Dicey swept aside the Crown’s financial role, and placed Parliament in a position of predominance in relation to tax, expenditure and audit.

Taxing, spending and auditing

On taxation, Dicey counselled “putting the hereditary revenue out of our minds” and re-styled the “extraordinary” revenue as “the Parliamentary revenue of the nation”.6 He (very briefly) canvassed the distinction between annual and standing taxes to make the “main point … that all taxes are imposed by statute, and that no one can be forced to pay a single shilling … which cannot be shown to the satisfaction of a judge to be due from him under Act of Parliament.”7 On expenditure, he refuted the “mediaeval notion” that money “granted” by parliament was “the King’s property”; explaining that, “at the present day”, the “whole of the public revenue is treated…as public income”.8 The “details of the methods according to which supplies are annually voted and appropriated” were glossed over en route to the point that “each item of expenditure” is “directed and authorised” by “some permanent Act” or “by special Acts passed prior to the appropriation Act and enumerated therein”.9

5 Eg Hearn (1886), The Government of England, chapters 8 and 9; Todd (Vol I, 1887), Parliamentary Government in England, volume 1, chapters 16 and 17; Todd (1889), volume 2, chapter 1; Anson (1907), The Law and Custom of the Constitution, volume 1, 230-237; Anson 1907), volume 2, 284-335; May (1851), A Practical Treatise on the Law, Privileges, Procedures and Usage of Parliament, chapter 21; Palgrave and Bonham-Carter (1893), Erskine May’s Treatise on the Law, Privileges, Proceedings and Usage of Parliament, chapter 22. 6 Dicey (1885) 172. 7 Ibid, 173. §2.1.2 examines some of the complications which attended that statement in 1885. 8 Ibid, 173. 9 Ibid, 174. 5

Dicey described the functions of the Comptroller and Auditor-General in overseeing the practical withdrawal and accounting for use of public funds as a “security… for the due appropriation of public revenue…for its being expended in the exact manner which the law directs.”10 Attention was given to the provisions of the Exchequer and Audit Departments Act 1866 (“Audit Act 1866”) which conferred powers on the Comptroller and Auditor-General as “comptroller” (to permit a withdrawal of money) and “auditor” (to scrutinise the accounts of departments to ensure that expenditure occurred lawfully). Both functions, Dicey wrote, completed the system of providing “parliament [with] complete control over the national expenditure.”11

Dicey placed the judiciary in the background to that system of parliamentary control: faintly pressing the point that a public official trying to collect tax without statute would “expose himself to actions or prosecutions”, just as an official trying to spend money without legislative authority “would find it difficult to avoid breaches of definite laws which would expose them to appear before the Courts.”12

1.1.2 Dicey’s legacies

Dicey’s treatment of the constitutional principles concerning public money left three intellectual legacies, which neatly encapsulate the way public finance would be understood in the British and Commonwealth constitutional traditions.

The first legacy was framing those principles within the language of “parliamentary control” rather than available alternatives: like the “[t]he Crown demands money, the Commons grant it and the Lords assent to the grant”.13 The language of “parliamentary control” was not unknown before Dicey,14 but its

10 Ibid, 171 (original emphasis). 11 Ibid, 174. 12 Ibid, 200. 13 May (1851), 411. 14 having been tossed about the House of Commons in relation to public expenditure from the 1840s (eg HC Deb 11 August 1848, cc 93-100) and following Gladstone’s financial reforms of the 1860s (eg HC Deb 08 June 1875, cc 1522-60) (§2.2.3). 6 elevation to a position of predominance was a ground-breaking (and lasting) step.

The second legacy was confining parliamentary control to taxation, expenditure and audit. Notably absent from Dicey’s “system of parliamentary control” was any consideration of the vast statutory law which had created the national debt or the impact of the Bank of England’s critical public financing role.15 His principal focus was the prohibitions on non-statutory taxation and expenditure which grew from the Bill of Rights 1688. His subsidiary focus was on the “securities” provided by public audit and account legislation, flowing from the Audit Act 1866.

Dicey’s strongest arguments for parliamentary control concerned the practice to tax (only) by statutes enforced by the judiciary.

His focus on tax is understandable. Tax is constitutionally significant because it is the revenue generating activity uniquely possessed by the state in virtue of its monopoly on lawful coercion. Everyone can bargain to raise funds, only the state can order people to fund it. But, even in Dicey’s time, tax was not the only (or most potent) method of raising public money. In the decade before The Law of the Constitution, large sums were routinely advanced from the Bank of England to the Treasury. In 1877, the Bank advanced the Treasury £1million, representing 1% of total public receipts and 19% of income tax receipts. In 1885, that number rose to £2.5million (1% total tax and 21% of income tax receipts).16 In the same period, average annual Treasury borrowing to fund general government services stood at ~£18million, representing ~22% of total public receipts and ~200% of income tax receipts.17 Both the advances from the Bank of England and the debt issued by the Treasury were authorised by legislation ignored by Dicey (§2.2).

15 Inconsequential references to the charging of the “National Debt” on the “consolidated fund” and the location of public revenue “in the Bank of England to the account of the Exchequer” exhaust Dicey’s treatment of those aspects of public financial management: Dicey (1885), 175, 176. 16 Wormell (1999), National Debt in England, volume VI, 120; BHS, 582-3. 17 BHS, 602, 582-3. 7

Annual appropriation legislation (the other part of Dicey’s principal focus) has an obvious constitutional significance: tethering the government’s annual spending programs to parliamentary will expressed through statute. Again, however, the story is more complicated. When Dicey wrote, the UK’s public debt- servicing expenditure was authorised under legislation which stood outside annual parliamentary processes.18 The amount of interest paid, and principal re- paid, was enormous. Between 1875–1885, public debt repayment averaged 35% of total public spending (military averaged 32% and civil 21%).19 The proportion of public expenditure authorised by “standing” (ie, non-annual) appropriation legislation would only increase as Dicey wrote the latter editions of his tome. Before the publication of his 8th edition, legislation was enacted providing authority for early welfare-state spending which stood wholly outside the annual parliamentary process (§3.2.1).20

Dicey’s third legacy was understanding parliamentary control as principally involving parliament and the judiciary; invoking his twin pillars of “parliamentary sovereignty” and the “rule of law”. His conclusion that the public revenue is “governed by law, or, what is the same thing, may become dependent upon the decision of the judges upon the meaning of an Act of Parliament,”21 is exemplary of his broader project to model the English constitution within the confines of the rule of law and parliamentary sovereignty.22 Thereby, Dicey framed the issue of the constitutionality of public money as one concerning only parliament and the judiciary.

Notably underplayed was the executive’s role, and the massive legal and administrative power held by the Treasury. Notwithstanding Dicey’s hostility to the growing British bureaucracy,23 that is a curious omission. He acknowledged

18 Notably the Act of 1787 (27 Geo III) which created the Consolidated Fund (§2.1.3). 19 BHS, 588, 602. 20 National Insurance Act 1911 (UK). 21 Dicey (1885), 178. 22 Ibid, 180. 23 Dicey attacked the “administrative methods” of the National Insurance Act 1911 (UK) on the basis that they “harmonise with the principle or the sentiment of collectivism”, which he earlier 8 select parts of the Audit Act 1866, but omitted those which delegated vast financial authority to the Treasury (§2.2.3): to determine how departmental accounts would be prepared; to refuse a department’s request for funds granted by parliament; to direct the Comptroller and Auditor-General to carry out audits; and to determine the terms of public borrowing (from the Bank of England) to make-up shortfalls in tax revenue (ss 12–14, 21–23). When Dicey wrote, those provisions bolstered the Treasury’s (rather than parliament’s) control over the administration of public expenditure (§2.2.2). Un-altered in all material respects, they endure today.

Dicey’s legacies were reflected in later scholarly and practical engagements with the constitutionality of public finance throughout the twentieth century.

Intellectual impact

When 20th century scholars turned to consider constitutional practice and principle concerning public money, “parliamentary control” formed the basic unit of thought, even though interest in the legal and constitutional dimensions of public finance waned throughout the century.

In 1917, a prominent text on public finance invoked “parliamentary control” as the dominant constitutional principle concerning public money, but never connected it to the extensive legislative provision made for sovereign borrowing or the debt-management role of the Bank of England.24

Jennings’s engagement with the distribution of constitutional power over finance was characteristically focused on the legislative and administrative structures which attended government activity,25 but he still framed his discussion of the “[c]onstitutional principles” attending public money using the language of the “financial control exercised by the Commons”.26 Jennings’ methodological move

called “evil” (in relation to old-age pensions): Dicey (1917), Law and Public Opinion in England During the Nineteenth Century, xxxv, xxxix. 24 Durrell (1917), The Principles and Practices of Parliamentary Grants, 3. 25 Rather than the judiciary: Loughlin (1992), Public Law and Political Theory, 168. 26 Jennings (1939), Parliament, 282; (1957), Cabinet Government, 283. 9 away from Dicey was evident in finance, as he recognised the importance of the Treasury, and focused on the details of legislation concerning annual and standing appropriations.27 But public borrowing and banking were not prominent parts of Jennings’ “functionalist-style”28 analysis of constitutions.

Wade and Phillips’ constitutional scholarship also drew on Dicey’s public finance legacies, focusing on “parliamentary control of expenditure and taxation”.29 Their gaze was, however, slightly broader than Dicey’s in two respects. First, they took account (albeit fleeting) of the constitutional position of sovereign borrowing, by commenting that the “raising of money by loans charged on the public revenue (Consolidated Fund) also requires the authority of an Act of Parliament”.30 Secondly, they paid greater attention to the “functions of the Treasury” in ensuring economy within the bureaucracy and enforcing parliamentary spending limits.31 Otherwise, they stayed within the Diceyan- mainstream.32

Modern explorations of public finance and English constitutionalism (canvassed in §1.1.3) recognise parliamentary control as the central constitutional principle regarding public finance, while also querying its effectiveness.33

Well into the third Millennium, parliamentary control (as understood by Dicey) was established at the intellectual core of the constitutional dimension of public finance, as two signal invocations reveal. The first is McEldowney’s description in the 8th edition of the Changing Constitution of “Parliamentary control of the purse” as a “basic principle of the [UK’s] constitution”.34 The second is the 14th

27 Ibid. 28 Loughlin (1992), 168. 29 Wade and Phillips (1931), Constitutional Law, 191; (1946), 155. 30 Wade and Phillips (1946), 106. 31 Wade and Phillips (1931), 190; (1946), 156. 32 Cf Wade’s remarks as editor of the 9th edition of: Dicey (1939), Introduction to the Study of the Law of the Constitution, 324, n2. 33 Eg, Harden (1993), ‘Money and the Constitution’; Turpin, and Tomkins (2011), British Government and the Constitution, 644. 34 McEldowney (2015), ‘Public Finance and the Control of Public Expenditure’; and the preceding 4 editions, (2011), 341; (2007), 364; (2004), 379; (2000), 190; McEldowney (2016), Public Law, 464. 10 edition of Halsburys’s Laws of England states the following (also as a “basic” constitutional principle):35 “Parliamentary control is exercised in respect of (1) the raising of revenue; (2) its expenditure; and (3) the audit of public accounts. Those bald statements of principle reveal the continued impact of the idea of parliamentary control of public money enunciated by Dicey.

Practical impact

“Parliamentary control” also features prominently in constitutional actors’ own explanations of the principles governing public money. The UK parliament spoke in those express terms in the long title of the National Audit Act 1983 (UK): “An Act to strengthen parliamentary control … of public money” (§3.3.3). The Commons recently explained one of its “core functions” as exercising “effective control” over “government expenditure”.36 New Zealand’s parliament spoke in the same terms in s 22 of the Constitution Act 1986 (NZ), entitled “Parliamentary Control of Public Finance”. The UK Treasury also speaks in term of “parliamentary control” over “government spending”,37 as have executive governments in Australia, Canada and New Zealand.38

Perhaps because of the relative infrequence of litigation concerning constitutional principles and public money (a matter examined in §6.1), judiciaries in the common law world have not often cast their doctrines in the express terms of “parliamentary control”. Instead, they have generally spoken in terms of the rules prohibiting non-statutory taxation and expenditure. In 1912, a judge of the Chancery Division stated, “[b]y the…Bill of Rights…it was finally settled that there could be no taxation in this country except under authority of an Act of Parliament.”39 In 1923, the Privy Council stated, “[a]ny payment out of

35 Blackburn (2014), ‘Constitutional and Administrative Law’, [470]. 36 Liaison Committee (2009), ‘Financial Scrutiny: Parliamentary Control over Government Budgets’. 37 HM Treasury, Alignment (Clear Line of Sight) Project (2009), 3. 38 Treasury Board of Canada, Guide on Grants, Contributions and Other Transfer Payments (2002), 22; New Zealand Treasury, A Guide to the Public Finance Act (2005); Commonwealth of Australia Department of Finance, Is Less More? Towards Better Commonwealth Performance (2012), 13. 39 Bowles v Bank of England (1912), 84. 11 the consolidated fund made without Parliamentary authority is simply illegal and ultra vires”.40 The substance of those statements has since been adopted by the common law canon,41 and each case is analysed later (§2.3.1 and §2.3.2)

There is, however, one particularly striking example of the judicial adoption (and operationalization) of “parliamentary control” by the High Court of Australia in (analysed in §6.2.2). There, the “principle of parliamentary control which underpinned the British financial system at the time of Federation and which had earlier been transported to the Australian colonies” was described as “cardinal”.42 That principle was held to possess juridical consequences: where it was flouted, government spending would be unlawful. “Parliamentary control” of public money has also featured (but in less robust terms) in the constitutional jurisprudence of the Supreme Court of Canada.43

Non-justiciable constitutional phenomena

Although the idea of parliamentary control is undeniably embedded in contemporary accounts of parliamentary constitutionalism, it does not enjoy a headline position.

The cause of that low-visibility is three-part: (i) most of the statutory law concerning public finance is obscure and poorly understood; (ii) most of that law is non-justiciable; and (iii) non-justiciable legal practices are generally under- analysed in contemporary constitutional scholarship.

With the exception of judicially developed principle of tax law, the law concerning public money lives almost exclusively in statutes, none of which are well understood. No textbook in Australia, Canada, New Zealand or the UK explains the form or function of the masses of annual and standing appropriation

40 Auckland Harbour Board v The King (1923), 327. 41 In re McFarland (2004), 1302; Steele Ford & Newton Respondents v Crown Prosecution Service (No 2) (1994), 33; Woolwich Equitable Building Society v IRC (1993), 177; Attorney-General v Great Southern (1925), 772; Attorney-General v Wilts United (1922). 42 Pape v Commissioner of Taxation (2009), [294]; Williams v Commonwealth (No 1) (2012), [219]. 43 Confédération des Syndicats Nationaux v Canada (2008), [21]; Re Eurig Estate (1998), [32]. 12 legislation in each jurisdiction,44 or the statutes under which sovereign borrowing occurs, or the legislation governing the public finance activities of central banks.45 Hidden within that intellectual void lies most of the legal practices concerning public money.

Taxation aside, disputes about those legal practices are (generally) non- justiciable (§6.1.3). Auditors-generals’ legislative powers have escaped judicial scrutiny,46 and the legality of expenditure under annual appropriation legislation falls within the core of subject-matter which is not appropriate for judicial resolution (§2.3.2). A fortiori, the legislation providing legal authority for sovereign borrowing and monetary financing (§6.2.3).47

Like other non-justiciable subject-matter, the legislation concerning public money has been passed-over in debates on the 20th century’s big constitutional ideas: parliamentary sovereignty, the rule of law and the separation of powers. Debates concerning parliamentary sovereignty have focused on parliament’s legislative sovereignty: exclusive plenary legislative authority over any subject- matter.48 Opponents of that conception of parliamentary sovereignty have emphasised the evident role of the judiciary in qualifying the extent of parliament’s sovereignty through its law-speaking and law-finding functions.49 The locus of battle is the ground between judiciary and parliament, not parliament and executive. Contemporary “rule of law” debates are typified by a

44 Scatterings can be found in parliamentary practice manuals and solitary chapters in larger legal treatments: Eg Jack (2011), Erskine May’s Treatise on the Law, Privileges, Proceedings and Usage of Parliament, Part 5 ; Bosc and Gagnon (2017), House of Commons Practice and Procedure, ch 18 (Canada); Wright and Fowler, (2012), House of Representatives Practice, ch 11 (Australia). 45 Cf Lastra (1996), Central Banking and Banking Regulation; (2015), International Financial and Monetary Law, focusing on the legal frameworks governing central banks’ monetary policy and prudential regulation, rather than public financial, functions. 46 The few existing cases have not been considered important enough to report: eg Bakewell v McPherson (1992) BC9200236 (Supreme Court of South Australia). 47 Eg National Loans Act 1968 (UK) ss 12(1) and (7), 20A, Sch 5(4); Commonwealth Inscribed Stock Act 1911 (Cth), s 3A; Financial Administration Act 1985 (Can), s 43; Public Finance Act 1989 (NZ), s 47. Exceptional cases exist at the supra-national level: Gauweiler v Deutscher Bundestag (c-62/14). 48 Goldsworthy (2001), The Sovereignty of Parliament. Arguments for a more nuanced perspective on parliamentary sovereignty frame their preferred position in a similar way eg Barber (2011), ‘The Afterlife of Parliamentary Sovereignty’. 49 The positions are collected in Knight (2009), ‘Bi-Polar Sovereignty Restated’. 13 preoccupation with the judiciary’s intellectual methodology,50 where attentions have concentrated on “thick/substantive” and “thin/procedural/formal” conceptions of the rule of law.51 Similarly, analyses of the separation of powers (outside America) have tended to be conducted by reference to the judiciary’s institutional independence from the non-judicial arms of government.52

As those debates are currently orientated, there is scant room to interrogate the idea of parliamentary control and its concern with legal phenomena not dealt with by judges.

1.1.3 Constitutional principle and public money

As the “concept of fundamental law in modern constitutional regimes” has been skewed towards “the institution of judicial review”,53 public law scholars interested in public money have begun cultivating greener pastures. Leaving the idea of parliamentary control largely un-scrutinised.

Public law and public money

The scattered offerings in the Diceyan-mould tend to be piecemeal treatments of discrete cases or statutes, such as Jaconelli’s analysis of Bowles v Bank of England (§2.2.1),54 and McEldowney’s critique of the Contingencies Fund (§3.2.1).55 While valuable, they only skim the surface of a much larger topic.

More comprehensive analyses of the structure of constitutional institutions vis- à-vis public money have not engaged directly with the Diceyan idea of parliamentary control.

50 A broader understanding of the rule of law as constituted by “the constant disposition to act fairly and lawfully” of the “settled ethical character” has not featured in Anglophone constitutional thought: Shklar (1987), Political Theory and the Rule of Law, 3, a position attributed to Dicey by Loughlin (1992), 151. 51 Craig (1997),’ Formal and Substantive Conceptions of the Rule of Law’. 52 Allison (2007), The English Historical Constitution, Ch 4. 53 Loughlin (2010), Foundations of Public Law, 288. 54 (2010), ‘The “Bowles Act” – Cornerstone of the Fiscal Constitution. 55 (1998), ‘Contingencies Fund and Parliamentary Scrutiny of Public Finance’. 14

Prominently, Daintith and Page’s treatment of public money in The Executive and the Constitution (1999) was inspired by sociological “systems theory”, and their modelling of constitutional principles and public money was heavily influenced by the idea of “structural coupling” of parliament and executive.56 Where issues of parliamentary “control” arose, they were viewed through that distinct methodological lens.57 For Daintith and Page, the constitutional principles and practices relating to public money appear as illustrations of broader principles concerning the “interdependence” of the British parliament and executive, as well as the executive’s “autonomy” (ideas explored in §7.3.2).

An in-depth analysis of constitutional principles and public money next appeared in Prosser’s Economic Constitution (2014). Building on Daintith and Page’s analysis, Prosser undertook a descriptive and normative analysis of the UK’s “economic constitution” with the assistance of “the concept of regulation as both an academic discipline and a concern of practical politics”.58 Prosser’s economic constitution explores a “catholic” “range” of domestic and international economic institutions:59 including the UK Treasury and its agencies,60 and the Bank of England (§2.2, §4.1-3, §5.1-2 examines the historical, and contemporary, law concerning those institutions).61 Prosser’s attention focused on the “realities” of institutional practices, rather than “basic requirement[s] of constitutional principle.”62 The outcome of that analysis produced both an “institutional map” of the economic constitution and a set of practical reforms, designed to boost values of “legitimacy, deliberation, and accountability”.63 Those intellectual dividends assumed the position of (although perhaps

56 Daintith and Page (1998), 4-5, citing Teubner (1992), ‘Social Order from Legislative Noise?’. Although seminal to Daintith & Page’s approach, the influence of systems theory on their project has been ignored by reviewers: McEldowney (2001) ‘Review’, Turpin (2000) ‘Review’, Himsworth (2001) ‘Review’. 57 Daintith and Page (1998), 105. 58 Prosser (2014), 1 7-8. An in-depth account of the “regulatory enterprise” can be found in Prosser (2010). 59 Prosser (2014), 15. 60 Including the “Debt Management Office” (3.3.3). 61 Prosser (2014), 22-26, 29-33, 36-37, 43. 62 Ibid, 84, 112. 63 Ibid, 13, 17. The dissertation’s jurisdictional focus (§1.2.3) precludes engaging with Nicol, The Constitutional Protection of Capitalism (2010), which focuses on the constitutional impact of ‘transnational regimes’. 15 undermined) parliamentary control as the central constitutional principle concerning “getting and spending” public money.64

Hidden in the scatterings of Dicyean treatments and the greener pastures of systems and regulation theory, lie deeply sceptical traces of parliamentary control: marking it out as a constitutional myth.65 Those accounts move in the intellectual tradition of Bagehot’s The English Constitution (1867) and its conclusion that the executive has the “financial charge” (an idea examined in §7.3.1). The missing integers in those provocative works are a detailed examination of the operation of the large body of law concerning public money, and an attempt to link such an examination to a reasoned conclusion that parliamentary control is more constitutional fiction than fact.

Distributing financial authority

This dissertation seeks to bring parliamentary control out from the shadows for analysis, confronting several challenges arising from the scarcity of background literature.

The first challenge is filling the information deficit regarding the legal practices (particularly legislation) concerning public money. The second is accepting that the existence of a vast body of legislation concerning public money does not end the inquiry into parliamentary control, but begins it. Those challenges are met through the detailed descriptive analyses in §II (historical development) and §III (contemporary operation) of the legal practices concerning public money.

The third challenge is settling on a conceptual lens through which to analyse parliamentary control. It is met by adopting several a priori propositions to narrow the analysis. First, constitutional power over public money concerns

64 Prosser (2014), 84, 111. 65 Eg Hills and Fellows (1932), The Finance of Government, 8 (the “misleading”, “anachronism” of “the control of Parliament [and Commons] over finance”); Harden (1993), 16 (the “supposed principle of parliamentary control”) and 33 (“the idea that Supply procedure gives Parliament control of public money is one of…[the] facets [of]…the great myth of the… Sovereignty of Parliament”). 16 activities which finance the state: providing sufficient economic resources to remain domestically and internationally viable, reaching beyond tax, expenditure and audit, to include public borrowing and monetary finance.66 Secondly, public financial activities result in quantifiable outcomes, and understanding the constitutional dimension of public finance is aided by reference to those outcomes. Thirdly, a constitutional inquiry into parliamentary control concerns the distribution of authority to engage in public finance activities between different institutions of government and the type of authority selected for focus is “legal authority over public finance”, or “financial authority” (§1.3.1 explains that choice).67

The dissertation’s descriptive Parts (§II and §III) show how the design and operation of legal practices concerning public money distribute legal authority between different institutions. Rather than starting with an idealised model of control, the method is to start by understanding the legal practices concerning public money: to see how they developed historically (§2 and §3); and how their design and operation distribute financial authority within parliamentary systems (§4 to §6).

After those descriptive questions are answered, the explanatory chapter (§7) undertakes the task of evaluating the extent to which the prevailing distribution of financial authority gives parliament "control" of public money. An interpretative framework for “parliamentary control” is articulated by identifying the ideal value of “financial self-rule” and then calibrating that value to the realities of life in parliamentary constitutional systems (§7.1). The application of that framework results in the conclusion that parliamentary control fails to explain the distribution of financial authority over public money (§7.2).

66 The connection between finance, economic resource use and viaibility is inspired by Daintith and Page (1999), 21. 67 Throughout the dissertation the language of “distribution” is used to denote “the allocation of authority to engage in financial activity”, rather than a more formal economic meaning of the “division of the aggregate produce of the industry of society among its individual members”: cf both usages in the Oxford English Dictionary Online, “distribution, n” (July 2018). 17

After analysing alternatives (executive control and interdependence of parliaments and executive), an idea of “parliamentary ratification” (wherein parliament “approves”, “ventilates” and “structures” public financial activity) is offered as the best explanation of the constitutional position of parliaments vis- à-vis public money (§7.3). The dissertation’s concluding chapter (§8) sketches possible normative and practical ways forward from the lessons learned by the descriptive and explanatory analyses.

Before setting-off on that analysis, the remainder of §1 explains the foundational concepts used throughout the dissertation: “public money” in “parliamentary constitutional systems” (§1.2) and the approach to “understanding” parliamentary control (§1.3).

1.2 “Public money” in “parliamentary constitutional systems”

This dissertation treats “public money” as the: “money used by central governments in parliamentary constitutional systems through their public finance activities (particularly taxation, expenditure, sovereign borrowing and monetary finance).”

Three aspects of that treatment require explanation: “money” (§1.2.1) made available through “public financial activities” of “central government” (§1.2.2) in “parliamentary constitutional systems” (§1.2.3).

1.2.1 Public monetary transactions

The following treatment of “money” is adopted: “money denominated in a currency recognised by a nation state (represented by accounting entries in a bank account or physical currency) which is received, outlaid or held (by electronic or physical means) by a central government”. That treatment 18 piggybacks on the understanding of “monetary transactions” by widely accepted government accounting principles. 68

It is deliberately pragmatic (rather than abstract) and requires two clarifications. The first concerns the relationship between that pragmatic treatment of money and the various legal, economic and philosophical conceptualisations of money. The second concerns the implication of focusing on “monetary transactions”, rather than “public sector assets values”.

Pragmatic treatment of money

Treating money pragmatically accommodates, but does not depend on selecting between, the various (and disputed) ways of classifying money as a matter of legal form, economic treatment and philosophical inquiry.

As a matter of legal form, “money” may be classified as material property (coins and notes) ultimately owned by a private or public bank,69 or immaterial property (a debt, or a chose in action)70 owned by and transferred between legal persons in the course of their commercial activities. Money may also be legally classified by reference to legislation establishing or recognising a national “currency”, prescribing the denomination of that currency as a particular “unit of account” (decimalised pounds and pence, or dollars and cents)71 and making payments in that currency a “legal tender”.72

68 See “monetary transactions” in the IMF Government Finance Statistics Manual (2014), 41, (for Canada, Australia and New Zealand); European System of Accounts (2010), 14 and HM Treasury, Financial Reporting Manual 2017-18), 7 (UK). 69 Proctor (2012), Mann on the Legal Aspect of Money, [1.46]. 70 Brindle and Cox (2018), Law of Bank Payments, 30–1. 71 Eg Currency Act 1982 (UK) s 1(1); Currency Act 1965 (Cth) s 8(1); Currency Act 1985 (Can), s 3; Decimal Currency Act 1964 (NZ), 5. 72 See Coinage Act 1971 (Cth), s 2; Currency and Bank Notes Act 1954 (UK); Currency Act 1965 (Cth), s 16; Reserve Bank Act 1959 (Cth), s 3; Currency Act 1985 (Can), s 8; Reserve Bank of New Zealand Act 1989 (NZ), s 27. A “legal theory” of money has been proposed based on that legal classification (with the addition of the legal authority of a central bank to regulate the monetary system): Proctor (2012), [1.68]. 19

As a matter of economic treatment, “money” may take a number of different forms.73 It may be treated as “currency”: the physical notes and coins in circulation.74 Money may also be economically treated as the accounting entries in a bank account, regardless of whether those entries are cashed-out as currency. The overwhelming majority of that form of money is created when private banking institutions accept deposits and issue credit to individuals and companies (“commercial bank money”). A smaller share of money qua accounting entry is created when a central bank extends credit or purchases assets, to a commercial financial institution (“central bank money”).75 Although the exact proportions are constantly shifting, the overwhelming majority of those three economic forms of money in existence today is commercial bank money, followed by currency, and then central bank money.76

“Money” may also be classified in many ways as a matter of philosophical or abstract inquiry; pursuant to “state”, “societal” and “institutional” theories of money. Each theory holds that money has certain stable features (as a store of value, and a universal means of exchange), but splits on how money holds those features. “State” theories of money hold that money only exists when it is issued under the “central authority of the state” and emphasise the need for money to be a “chattel”.77 A “societal” theory of money could hold that the authority to issue and recognise money stems from “the usage of commercial life or the confidence of the people”, rather than the state.78 An “institutional” theory of money may seek a middle ground between state and societal theories by

73 Parguez, and Seccareccia (2000), 'The Credit Theory of Money', in Smithin, (ed) What Is Money (2000) 101-23; Mcleay, Radia, and Thomas, (2014), 'Money Creation in the Modern Economy'. 74 Historically, currencies have taken different forms: “convertible” for another asset (such as gold) or inconvertible (where the only backing of the currency is the authority of the issuing government): Proctor (2012), [2.21]-[2.23]. 75 McLeay, Radia and Thomas, (2014). All three forms of money fall within the macroeconomic concept of the “money supply”, but although only the first and third (currency and central bank money) fall within the concept of the “monetary base” as the money over which a state has most immediate control: Eg Mishkin, et al (2013), The Economics of Money, Banking and Financial Markets, 52-55, 302. 76 McLeay, Radia and Thomas (2014), 15. Historically, the story is very complicated: Desan (2014), Making Money; Fox and Ernst (2016), Money in the Western Legal Tradition. 77 Proctor (2012), [1.17]. 78 Ibid, [1.29]. 20 concentrating on central banks (qua monetary authorities) as the institutional foundation for maintenance (but not creation) of social confidence in money.79

The various legal, economic and philosophical classifications of money can be hotly disputed, prominently in debates concerning the role of the state in controlling the money supply.80 A pragmatic treatment of money is not motivated by a desire to skirt those debates, but to reflect the matters relevant to practical “public financial activities” (explained at §1.2.2), all of which require engaging with the practical receipt or outlay of money, rather than its abstract conceptualisation.

The treatment of money as cash received and outlaid is critical to the practical operations of public bodies with responsibility for revenue and expenditure. Tax authorities accept the payment of tax by transfers of money (which may be physical or electronic) recorded as cash receipts to the revenue authority’s account.81 Legislative authorisation of withdrawals of currency from public accounts speak in practical terms of units of currency (pounds and pence, dollars and cents) and the expenditures of those amounts are recorded as cash outlays.82 Those records form of the basis of audit authorities’ scrutiny of the propriety and legality of uses of public money.83

The pragmatic treatment of public money is no less significant in relation to the debt finance responsibilities of treasuries and central banks. Annual cash receipts and outlays are base integers in calculating the extent of a government’s exposure to the sovereign debt market. Calculation of the annually required issue of sovereign debt begins with the determination of a government’s “net cash” requirement: the shortfall of fiscal receipts and outlays in a financial year. That amount is then adjusted to reflect government investment receipts and

79 Ibid, [1.30]. 80 Eg, Turner (2015), ‘The Case for Monetary Finance’; Wray (1998), ‘Modern Money’. 81 Eg ONS PFS (2017), PSA6SD. 82 Eg ONS PFS (2017), PSA6E. 83 Eg National Audit Office, Understanding Central Governments Accounts (2014). 21 debt re-financing requirements to arrive at the total annual amount of debt to be assumed: the public sector net borrowing/financing requirement.84

When received, funding from sovereign debt issues are recorded as cash receipts, and interest and principal are paid on bonds as cash outlays. In that sense, the amount of cash received and outlaid by the central government determines its exposure to (and reliance on) the sovereign debt market, which is a marker of a government’s economic strength. The administrative processes surrounding those matters rely on a pragmatic, rather than abstract, assessment of the amount of money required by the public sector.

The pragmatic treatment of money is also attuned to the core functions of monetary authorities, particularly those implicating public finance (examined in §5).85 When, for instance, a central bank creates money to purchase a sovereign bond, that money is accounted for as cash outlaid to the bond-holder upon purchase.86 And when, a government pays interest on a sovereign bond held by a central bank, or a central bank transfers money to a government,87 the public accounts will treat those movements as cash receipts or outlays and (in relation to the latter) the government’s net cash requirement will, respectively, increase or decrease.88

In each of those contexts, the money received or outlaid by public sector entities may be legally characterised as material or immaterial. It may have been created by private banks issuing credit, a central bank printing notes or creating a reserve in a private bank’s account. It may draw its authority from a combination of statutory command, social acceptance or the regular operation of a payments system overseen by a central bank. But (those abstract question aside), that form of money will always be treated as an economic unit in a currency recognised by

84 Eg ONS PFS (2017), 15. 85 Although central bankers do occasionally express views on the theoretical properties of “money”, cf McLeay, Radia and Thomas (2014) (quantitative easing) and Ali, et al (2014), ‘Innovations in Payment Technologies’ (2014) (digital currencies). 86 Eg ONS PSF (2017), PSA9. 87 Financing scenarios examined in §5.2. 88 Eg ONS PSF (2017), PSA2. 22 a nation state (represented by accounting entries in a bank account or physical currency) which is received, outlaid or held (by electronic or physical means): the pragmatic treatment of money.

Money ≠ asset value

The second clarification concerns the relationship between “monetary transactions” and “public sector assets values”.

The need for that clarification arises because of the adoption (commencing in the 1990s) of accrual accounting and budgeting in public sector finance: which concentrates on the present value of government assets and liabilities (on a going concern basis), rather than focusing on the receipt and outlay of cash.89 Under that approach (explored in §3.3.3), money held by governments may be accounted for as an asset which may appreciate or depreciate depending on, inter alia, internal and external fluctuation in the value of the relevant currency.90

By focusing on monetary “transactions”, this dissertation concentrates on the manner in which money is brought into public hands, and then spent, rather than the control of the “value” of a monetary asset once in public hands. Of course, public sector economists and accountants do not treat “money” and “assets” as dichotomous categories, and no such segregation is implied by my focus on the former rather than the latter.

1.2.2 Central government finance

Once the treatment of “money” is settled, it becomes necessary to explain the focus on the use of that money through “public finance activities (particularly taxation, expenditure, sovereign borrowing and monetary finance)”.

89 A useful entry-point to the immense literature on public sector accounting is Marti (2013), ‘Performance Budgeting and Accrual Budgeting’. 90 Complex issues arise in the division of external and internal reserve assets: Moghadam, Ostry and Sheely (2011), ‘Assessing Reserve Adequacy’. 23

That explanation requires three clarifications: (i) the meaning of “public financial activities”; (ii) the rationale for focusing on “central governments”; and (iii) the reasons for focusing on certain central government financial activities (taxation, expenditure, debt and monetary finance).

Financial activities

For the purposes of this dissertation, “public financial activities” refers to the “fiscal”, “debt” (and “cash”)91 “management” and “monetary” activities which result in receipt and outlay of money to the central government.92 Those terms provide helpful points of reference regarding the processes by which government receives and uses money, which are well developed in public finance and macroeconomic literature, as well as government practice.93

References to “fiscal” activity concentrate on the collection of revenue from taxation, fees, fines, rent and royalties and the expenditure of that revenue. That usage is reflected in the concept of “fiscal deficit”, which often refers to the gap between expected receipts and expenditure before having recourse to sovereign debt markets.94 Treasuries and finance departments have superintendence of the coordination of fiscal activities, but almost all government entities are involved in the practical business of collecting and spending money.

“Debt management” activity often refers exclusively to the sovereign borrowing undertaken by treasuries, usually through quasi-independent subsidiary agencies which grew from the 1990s (§3.3.2).95 Those activities involve filling

91 Williams (2013), ‘Government Cash Management: Good and Bad Practice’, 661; Wheeler (2004), Sound Practice in Debt Management, 39-41. 92 That definition is broader than that used by scholars of “public financial management”, because its “main focus” is not “expenditure management”: Allen, Hemming and Potter (2013) The International Handbook of Public Financial Management, 2. 93 See the general usage throughout Allen, Hemming and Potter (2013). 94 The precise metrics used to measure public debt and deficit are a matter of endless contest: Cf Irwin (2015), ‘Defining the Government’s Debt and Deficit’ and Blejer and Cheasty (1999), How to Measure the Fiscal Deficit. 95 Like the “Debt Management Office” in the UK, the “Australian Office of Financial Management”, and the “New Zealand Debt Management Office”. Canada’s debt-management functions are still performed by the Bank of Canada (§3.2.2). 24 the fiscal shortfall through the issue of “long-term” (“bonds” or “gilts”) or “short- term” (treasury “bills” or “notes”) debt instruments. Except where necessary to distinguish between the two forms of finance (§5.1.1), both will be collected under the general terms “debt management” and “debt finance”.

The practical outworking of debt management activity cannot be isolated from fiscal activity because the extent of a government’s debt exposure is assessed by reference to (present or future) shortfalls in fiscal collection (the net cash requirement) and its ability to service debt repayments (reflected in, both, the risk premia attached to its debt and its sovereign credit rating) is assessed by reference to its fiscal profile.96 Debt management activity may also require consideration of monetary policy, because (for example) public debt issues may affect the price stability of money, or central banks holding large amounts of government debt (through their monetary policy operations) may create distortions in the secondary market for government debt (§5.1.2).97

“Monetary” activities refer to the activities of government bodies which exercise “monetary authority”, being the power to issue money on behalf of the state.98 In most modern economies, that power is given to a central bank which enjoys varying degrees of independence from the rest of the executive government. A central bank’s monetary activities have traditionally centred on the provision of emergency finance to sovereigns and commercial banks (“lender of last resort”99) and influencing domestic inflation (“price stability”).100 A range of tools is used by central banks to influence price stability, which were historically focused on setting interest rates on short-term lending to private banks.101 More

96 In the UK, HM Treasury produces a “daily forecast of net [cash] flows” which is provided to the DMO which funds the “net cash position”: DMO (2017), ‘Debt Management Report 2017-18: Annex D, “The Exchequer Cash Management Remit for 2017-18’, 35. 97 See the joint Bank of England and Debt Management Office, Statement on Gilt Lending (2009). 98 Often called “monetary sovereignty”: Proctor (2012), Ch 19. 99 There is a slight novelty in referring to a central bank’s public finance roles as part of its lender-of-last-resort functions: cf Capie, Goodheart and Schnadt, ‘The Development of Central Banking’ (1994), 5. 100 Central banks’ other activities interlock, in varying degrees, with their monetary policy activities: “financial stability” activities (concerning prudential and disciplinary regulation of private banks); “issuing” activities (concerning the issue of physical currency); and “settlement” activities (concerning the provision of inter-bank clearing house facilities). 101 often called a central bank’s “open market operations”: Lastra, Rosa (2015), [2.129]. 25 recent adventures have included the purchase of large amounts of long-term government debt, described as “quantitative” (or “credit”) “easing”, carrying heavy implications for public finance (§5.2.3).

A central bank’s monetary activities can directly or indirectly make up for fiscal and debt shortfalls through a form of financing called “monetary financing”.102 In a broad sense,103 monetary financing occurs where “the central bank expand[s] the money supply (which is a non-debt-creating alternative to domestic borrowing)” in a way that accrues a financial dividend to the central government.104 That form of financing may be more or less direct. More direct monetary financing occurs when a central bank creates “money for the government to spend as an alternative to incurring debt” by “the central bank purchasing bonds directly from the government, extending it credit or printing currency to pay the government’s bills.”105 Less direct monetary financing occurs through the exercise of a central bank’s monetary policy operations which may result in a “profit transfer” to the government,106 or the contribution to more stable or productive conditions in the general economy, which boost fiscal capacity.107

At the level of macroeconomic policy, fiscal, debt management and monetary activities are theoretically and operationally “interdependent”,108 as the lively economic debates regarding the interaction of those activities illustrate. So it goes: too much tax can stifle economic production;109 too little production can reduce tax receipts;110 too much public expenditure can be inflationary;111 but

102 Hemming (2013), ‘The Macroeconomic Framework for Managing Public Finance’, 21. 103 Turner, (2015). 104 Hemming (2013), 21. 105 Ibid, 22. 106 Ibid. 107 Carpenter, and Demiralp (2012), 'Money, Reserves, and the Transmission of Monetary Policy. 108 Wheeler (2004), Ch 2; Fischer, and Easterly (1990), ‘The Economics of the Government Budget Constraint’. At a practical level, treasuries (and central banks) give immediate answers to those theoretical debates through macroeconomic models In the UK, the Office of Budget Responsibility and the Treasury use the same macroeconomic model (Office of Budget Responsibility, The Macroeconomic Model (2013)), but the Bank of England uses a different model (Bank of England, The Bank’s Forecasting Platform (2013)). 109 Hemming (2013), 18. 110 Dornbusch and Draghi (1990), Public Debt Management, 3. 111 Gordon and Leeper (2002), ‘The Price Level’. 26 direct government spending can stimulate an increase in production.112 Where fiscal stimulus outstrips tax revenue (for instance, where reduced economic productivity shrinks tax receipts), an increased debt issue can be required, which may itself be inflationary and require intervention by the monetary policy activities of a central bank.113

While this dissertation’s analysis of the way legal practices distribute authority over public financie could have implications for macroeconomic policy or theory, those implications are not the focus of analysis. Importantly, no position is taken regarding the relative virtues of any particular model of fiscal discipline, deficit spending, debt-sustainability or monetary finance.

Central government

For the purposes of this dissertation, “central government” refers to the unit of government which has primary responsibility for all public financial activities. As a practical matter, that means the unit of government with collected fiscal, debt management and monetary authority, and excludes subsidiary units of government: local, provincial and state governments. In non-federal constitutional systems, non-central governments will be “local” governments or “councils” (UK and New Zealand). In federal systems, non-central governments will be both “State” (Australian) or “Provincial” (Canada), which can contain a further sub-category of local and municipal councils.

It is readily acknowledged that non-central government bodies engage in public financial activities. States and provinces in Australia and Canada have taxation powers, can issue debt and enact annual expenditure legislation. In the UK and Canada, local government authorities also have powers to raise revenue through imposing “tax-like” duties and issuing debt instruments. All levels of government keep accounts and all are audited.

112 Keynes (1936), The General Theory of Employment, Interest and Money. 113 Lin, and Chu (2013), 'Are Fiscal Deficits Inflationary?'; Phelps (1973), 'Inflation in the Theory of Public Finance'. 27

Despite those shared features, the financial activities of central and non-central governments differ in important respects, the most important of which is the concentration of (practical and legal) responsibility for the national economy in central governments. Only central governments have final responsibility for coordinating the interrelated activities of financial management, monetary authority and practical access to sovereign debt markets.

Reflecting that concentration of power, the volume of money flowing through central governments far exceeds that flowing through non-central governments.114

Figure 1.1: central <-> non-central government expenditure (2010-2016)

114 The datasets underlying Figures 1.1 and 1.2 areONS PSF, ABS GFS, Statistics Canada, Canadian Government Finance Statistics (datasets 385-0033 and 385-0042) and StatsNZ, Government Finance Statistics (General Government): Year ended June 2016 and Local Authority Statistics: June 2017 Quarter). . 28

Figure 1.2: central <-> non-central government tax revenue (2010-2016)

Figures 1.1-1.2 illustrate the vast asymmetry of economic power of central and non-central governments over expenditure and taxation. In the collected group of Australia, Canada, New Zealand and the UK over 2010-2016, average central government spending accounted for a minimum of 78% (in the UK) and a maximum of 95% (in New Zealand) of total public expenditure.115 Over the same sample, central government tax revenues accounted for a minimum of 88% (in Canada) and a maximum of 97% in the UK.

Insofar as debt finance is concerned, central governments have an even larger share of economic power.116 Between 2010-2016, Australian non-central (State and local) government’s net debt in Australia averaged only 4% of combined central and non-central public sector debt. During the same period, Canadian non-central (Provincial and local) government gross-debt averaged only 3% of total Canadian debt liabilities. In the UK and New Zealand, non-central government debt accounted for under 1% of total public sector debt.

As a matter of economic impact, central governments are overwhelming the heaviest hitters.

A slight complication arises in referring to central banks as part of the “central government”. In important respects, modern central banks stand apart from central government, a position sometimes reflected in public sector statistics

115 Where the proportion of non-central government expenditure in Australia and Canada is averaged equally across each sub-national government. 116 ONS PSF, ABS GFS, Statistics Canada, Canadian Government Finance Statistics (datasets 385- 0033 and 385-0042) and StatsNZ, Government Finance Statistics (General Government): Year ended June 2016 and Local Authority Statistics: June 2017 Quarter). 29 which often renders separate figure excluding the central bank’s balance sheet from the central government’s finances.117 As a matter of legislative edict, central banks tend to be given significant operational independence from treasuries, although in no constitutional system is a central bank given wholly-plenary monetary authority (cf§5.1.2).

There are, however, good reasons to treat the monetary activities of central banks as part of the financial management activities of central governments. That is so because a central bank’s monetary activities can have very immediate impacts on central government revenues through direct and indirect monetary financing. Additionally, as §5.2.3 observes, there is a high degree of practical coordination between treasuries, debt management agencies and central banks, particularly in emergency situations. For those reasons, the public finance monetary activities of central banks are analysed together with central governments.

Selecting financing activities

Only some of the central government’s financing activities are selected for close analysis: tax, expenditure, sovereign borrowing and monetary finance. Excluded from that focus are some financing activities which enjoy some degree of notoriety, such as fiscal equalisation, non-taxation revenue and sovereign investment.

Fiscal equalisation is mentioned where appropriate (§3.3.1 and §4.1.2), but generally subsumed within the analyses of legal practices concerning the expenditure-side of fiscal activity.118 Legal practices concerning non-taxation revenue (fees, charges, rent and pecuniary penalties) are set aside because of their relatively insignificant contribution to central governments’ total economic

117 Eg ONS PSF (2017), PSA7A. 118 Rather than engaging with the extensive literature on fiscal equalization programs: Blöchliger and Charbit (2008), ‘Fiscal Equalisation’; Broadway and Watts (2004), ‘Fiscal Federalism in Canada, the USA and Germany’; Fenna (2008), ‘Commonwealth Fiscal Power and Australian Federalism’; McLean and McMillan (2002), ‘Fiscal Crisis of the United Kingdom’. 30 footprint.119 Sovereign investment (through sovereign wealth funds or other means) raises complex political, legal and economic issues which could not (unfortunately) be accommodated within this dissertation.120

1.2.3 Jurisdictional focus

The constitutional and legal practices concerning the public financial activities of central governments assume particular forms in different types of constitutional systems. The core focus in this dissertation is on “parliamentary constitutional systems”.

Parliamentary and congressional constitutional systems

The term “parliamentary constitutional systems” is used as a metonym for “Anglophone constitutional systems where the parliament: exercises supreme legislative authority; does not exercise direct governing authority; and is the principal democratic institution to which governing authorities are accountable.”

The United Kingdom’s constitution is the paradigmatic case of such a system, and derivations of that paradigm can be found throughout the constitutional systems of the former British Empire. The critical contrast is with congressional or presidential constitutional systems, in which the representative legislative body is allocated a far greater share of governing power, including over the use of public money.121 In the English-speaking world, the most prominent (and only) example of a congressional system is the United States of America.

As §3.1.1 explains, the USA did not import the idea of the executive’s financial initiative when it split with the UK’s constitutional tradition. Expenditure bills could be initiated by both houses of Congress without any Executive permission

119 Averaged between 2005-2016, non-tax receipts accounted for only 4% of total Australian receipts, and 6% of total UK receipts: ONS PFS, ABS GFS. 120 Balding (2012), Sovereign Wealth Funds; Bassan (2011), The Law of Sovereign Wealth Funds. 121 McKay and Johnson (2010), Parliament and Congress and Bradshaw and Pring (1973), Parliament and Congress. 31

(although the President retained a veto); leading to an allocation of financial responsibilities heavily skewed in favour of the Congress over the Executive Branch.

That constitutional distribution resulted in the development of very different legal practices concerning public money in the USA compared to parliamentary constitutional systems.122 The extent of difference is illustrated by the sophistication of USA legal publications regarding public expenditure. For almost 40 years, the US Government Accounting Office (USGAO) published “Principles of Federal Appropriations Law” (informally called, “The Red Book”), currently spanning three volumes and containing over 3,000 pages of detailed legal analysis regarding the operation of federal appropriations law.123

The heightened legal attention paid to public money in the USA is not confined to scholarly books. The USGAO also publishes a large volume of legal advice relating to public money via a publicly-searchable website,124 which links to US federal court decisions involving appropriations laws.125

No such body of legal publications or formal legal sources exists in the parliamentary constitutional systems. The meek contenders are chapters in books on parliamentary procedure devoted to “financial procedure”, like “Erskine May’s Parliamentary Practice”, Part 5 of which deals with financial procedure in around 90 pages.126

Constitutional divergence and convergence

Collecting a number of different constitutional systems under the usage “parliamentary constitutional system” is not a disguised attempt to minimise the

122 Bradshaw and Pring, (1973), 305; McKay and Johnson (2010), ch 6. 123 The Government Accounting Office is a loose analogy to the UK National Audit Office. 124 https://www.gao.gov/legal/appropriations-law-decisions/search. 125 Eg cases collected in USGAO, Opinion on Commodity Futures Trading Commission--Liabilities Outside of the Government's Control (2018), 4. 126 Jack (2011), 711-797. 32 significant differences between the distinct constitutional systems answering that general description: no “meta-Commonwealth” analysis is attempted.

Some parliamentary constitutional systems are unitary, and predominately “unwritten” with no established tradition of constitutional judicial review (like, New Zealand and the UK). Others are federal, written constitutional systems which have a strongly developed tradition of constitutional judicial review (like Australia and Canada). Some blend common law legal systems, with customary or religious legal systems (like Malaysia and Brunei Darussalam), while others (like Singapore) have relatively few divergences from the common law.

It is possible to accept that those differences are meaningful,127 but also recognise the analytical utility of analysing a constitutional idea from a broader perspective than that provided by a single constitutional system: using more than one constitutional system to illustrate trends across constitutional systems and as a check on a given interpretation of the constitutional idea under investigation.

That form of utility is particularly potent in the present context because of the substantial uniformity of constitutional organisation, the financial management activities of central governments and the legal practices concerning those activities in the relevant parliamentary constitutional system.

Significant uniformity exists in the written Commonwealth constitutions concerning public finance despite other radical differences in constitutional organisation (§3.1.3, §3.2.3). Similarly, despite other varying forms of governance, parliamentary constitutional systems share the same basic collection of public financial activities: obtaining a significant proportion of their fiscal revenues from taxation; issuing long and short-term debt; and having monetary authorities in the nature of central banks.

127 Stone (2014), ‘Constitutional Orthodoxy in the United Kingdom and Australia’. 33

There is also a similar (but weaker), degree of uniformity at the level of the legal practices of public money. At the level of legislative practice, despite differing quanta and subject-matter, substantially similar processes of standing and annual taxation and appropriation legislation exist, and the legislative regimes concerning sovereign borrowing, central banking and audit are constructed and operate in similar (but not uniform) ways.

Many (but not, all) of those shared legal practices have different formal sources. For instance, the formal source of the executive’s financial initiative is contained in a standing order in the UK (and NZ),128 and in an entrenched constitutional document in Australia (and Canada and elsewhere in the Commonwealth).129 Whether the limitation is imposed by a written constitution with particularly onerous amendment rules or self-imposed by a house of parliament, the limitation still exists and is observed.

In order to answer the research question, it is not necessary to prognosticate whether a house of parliament could amend a standing order, a parliament could amend or repeal a statute, or a constituent power could amend a constitution (and the flurry of attendant hypothetical factors). What matters is the actual (rather than potential) character of the legal practices, and the actual distribution of financial authority effected by those practices.

Australia and the United Kingdom

The UK and the Commonwealth of Australia are selected as jurisdictions of primary focus for the descriptive and explanatory analyses of the legal practices of public money undertaken in §II and §III.

Those jurisdictions are used as “illustrations”, not as “comparators”, although the relevant differences in the design and operation of the legal practices of public

128 House of Commons Standing Order 48 (UK), Standing Order 326 (NZ). 129 Commonwealth of Australia Constitution Act 1901 (UK), s 56; British North America Act 1867 (UK), s 54. 34 money are noted as the descriptive and explanatory analyses proceed in §III and §IV.

Selected for their dissimilarity as much as their similarity, Australian and UK constitutional traditions, legal practices and economic experiences concerning public money provide rich illustrations of shared and distinct issues concerning the distribution of financial authority in parliamentary constitutional systems.

At the level of constitutional background, the dissimilar features are famous. The UK is a unitary (but partially devolved) constitutional system, Australia is federal. Australia has a seminal written constitutional instrument, the UK does not. Australia has a well-established tradition of constitutional judicial review of legislation, while judicial review in the UK tends to focus on the validity of executive action.130 Points of significant similarity are, however, discernible: both operate under a system of responsible cabinet government; and in both systems the separation of powers doctrine is almost entirely confined to the institutional independence of the judiciary from the political branches of government. Most importantly, the Australian constitutional treatment of public money is strikingly similar to the UK’s (as §3.1 explains).

Similarly, the Australian and UK legal practices concerning public money have varying (not absolute) degrees of similarity. The UK has a far larger share of annual (over standing) taxation, than Australia (§4.1.3). Unlike the UK, Australia does not legally segregate its social welfare expenditure from general revenue and authorises a far greater proportion of its total budget through standing, rather than annual, appropriation legislation (§4.1.2). UK legislation also provides for both internal (devolution) and external (EU)-fiscal equalization programmes, while Australia only operates an internal-equalization program (§3.3.1). The UK’s historically significant reliance on sovereign debt is reflected in a comparatively more complex legal organisation of its debt finance activities than Australia’s (§5.1.1). Similarly, befitting the jurisdiction of a global reserve

130 Cf R (Jackson) v Attorney-General (2006); R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) (2009); R (Miller) v Secretary of State for Exiting the European Union (2017). 35 currency, one of the three largest global financial centres and the world’s second oldest central bank, the UK’s legal practices attending monetary finance are far more complex than Australia’s (§1.2.1, §5.1.2).

Australia and the UK have also experienced very different economic fortunes, particularly in the last 15 years, and the contemporary analysis in §4 and §5 is orientated to explaining the impact of that difference on the operation of the legal practices in each jurisdiction. From 2005-2016, the Australian and UK economies sat at opposite ends of the financial crisis spectrum.

Figure 1.7: GDP growth %change (2005-2016)

Of the five OECD parliamentary constitutional system, the UK suffered the sharpest and the deepest contraction in GDP growth, while Australia suffered the softest and the most shallow (with New Zealand and Canada in the middle).131

The similarities and dissimilarities between Australia and the UK enrich (rather than impoverish) the broader analysis.

Where they are more similar, the two jurisdictions illustrate important common themes, including: the distribution of large swathes of authority to executive agencies over accounting and audit (§4.3.1); the distributional impact of

131 Figure from OECD, Real GDP Forecast Indicator (2017), the black line is the OECD average. 36 standing appropriation for debt servicing expenditure during times of economic contraction (§4.3.2); the common experience of non-compliance with public expenditure legislation (§4.3.3); and the broad authority delegated to the executive over debt finance (§5.3.3).

Where their legal practices and economic fortunes are more dissimilar, the focus on more than one jurisdiction provides valuable illustrations of the varying distribution of financial authority. The UK’s economic misfortune from 2008 and the monetary financing activities of the Bank of England illustrate the special issues arising in relation to emergency public finance (§5.2.2). The Australian judiciary’s recent adventure with public expenditure litigation illustrates the boundaries of judicial involvement in public finance (§6.2.2, §7.2.1).

The dissertation’s core explanatory claim (that parliamentary control of public money does not explain the distribution of financial authority by legal practices of public money) is made expressly by reference to Australia and the UK (§7.2.2). However, the extent to which that claim can be generalised to other parliamentary constitutional systems is also broached, and some tentative conclusions are offered (§7.2.3).

1.3 “Making sense” of parliamentary control

This dissertation seeks to work out whether the idea of parliamentary control of public money “makes sense” in three stages.

The first stage is a descriptive analysis of the historical (§2–§3) and contemporary (§4–§6) manner in which the design and operation of the legal practices of public money distribute authority over public finance. The second stage is an explanatory analysis, examining whether the idea of parliamentary control provides a sensible explanation for the distribution of financial authority by those legal practices (§7). The final stage asks whether the idea of parliamentary control should continue to be understood as the central 37 constitutional norm of public money in parliamentary constitutional systems (§8).

Two issues require further explanation: the meaning of “legal practices” of public money and the reason for concentrating on those practices (§1.3.1); and the approach adopted to “understanding” the distribution of financial authority effected by the design and operation of those legal practices (§1.3.2).

1.3.1 Making “legal” sense

Focusing on the legal practices of public money (as opposed to the political or economic practices) is a way of making “legal” sense of the idea of parliamentary control.

Legal, legislative and judicial practices

The umbrella term “legal practices of public money” is used to refer to the total collection of the legal practices which concern public money. That term is embraced to distinguish legal practices from political and economic practices which may be norm-based, concern public money, but are never enacted (by parliament) or recognised (say, by the judiciary) as “legal”.132

The legal practices are examined in two categories. The first contains legal practices which are enacted in, derive from, or influence legislation (statutes, standing orders of houses of parliament, and delegated legislation):133 the “legislative practices of public money”. The second category contains legal practices articulated by judges in the course of resolving litigated disputes: the “judicial practices of public money”. No attempt is made, by the division of legislative and judicial practices, to draw a dichotomy between “judicial” and

132 The use of “legal practices” is inspired by Hart (1994), Concept of Law, 240. 133 The usage of “legislative” is slightly novel in two respects. First, it captures the rules which govern parliamentary procedure leading to legislation (“standing orders”). Secondly, itextends beyond Acts of parliament to include delegated legislation, reflecting the broad legal understanding of “primary legislation”: see Council of Civil Service Unions v Minister for the Civil Service (1985), 399. 38

“legislative” norms. The two categories of legal practices, of course, interact and some judicial practices are formulated by reference to legislative practices, and vice versa, a matter explicitly recognised, where appropriate (cf §2.3.2, §6.1).

Although the boundaries are not fixed, “legal practices” may be distinguished from political or economic practices by focusing primarily on formal legal norms (legislative and judicial), legal materials (legislation and judicial decisions), and the formal behaviours of the institutions from which those formal legal norms originate (parliament and the judiciary).

Political and economic approaches to parliamentary control

Focusing on legal practices distinguishes this dissertation from the work of political scientists and economists who have previously written on parliaments and public finance.

In the mid-20th century, two books were written which provided an historical and contemporary critique of the extent to which parliament could be understood practically to control public money: The Control of the Purse (1959) by Paul Einzig and The Politics of Financial Control (1966) by Gordon Reid. Both scholars were concerned with the practical operation of English central government finance and both were critical of the extent to which parliament controlled public money. Reid concentrated on the operation of the parliamentary processes regarding the progression of money bills in the United Kingdom from the Second World War to the 1960s. Einzig’s approach was broader and more overtly historical: canvassing the historical development of tax, expenditure, audit and the national debt in England.

Einzig’s conclusion was radical, that parliament never really possessed the power of the purse. Reid’s conclusion was more measured, that the organisation of English parliamentary procedure at the mid-20th century significantly hampered parliament’s capacity to control taxation and expenditure. Both works operated at a relatively high level of abstraction from the legal practices of public 39 money. Each noted the existence of taxation and appropriation legislation, but neither scrutinised their terms nor the detail of the legislative framework within which public borrowing and central banking occurred. As a political scientist and economist, their attentions focused more closely on the behaviour of political actors than legal practices.

Despite the worth of their contributions, neither Einzig’s nor Reid’s works proved particularly influential, only living-on from the 1970s in footnotes or lists of additional reading.134 The following decades saw scattered social scientific investigations of the role of legislatures in the annual budget process.135 None provided a sustained focus on parliamentary constitutional systems and none critiqued the position of parliaments within the process of public financial management with the same forthrightness as Einzig or Reid.

Parliaments’ institutional relationship to public finance was returned to in-detail by Wehner from 2003. Wehner’s body of work includes comparative analyses of the role of public accounts committees in the Commonwealth and the impact of cabinet structures on fiscal policy outcomes,136 but his most sustained work concerns a broadly comparative study of the role of legislatures in the budget process: Legislatures and the Budget Process (2010b).

There, Wehner offers an analytical framework within which to assess the impact of “institutional organisation” on “fiscal discipline”: to scrutinise whether “a pro- spending bias” increases with “the number of decision makers” involved in the budget process.137 His comparators are global (extending across “80 countries”) and his methodology includes “qualitative and quantitative” elements.138 His central claim is that “[i]nstitutional arrangements may constrain legislative choice without affecting fiscal outcomes, and it is even possible for such

134 Eg Dewar and Funell (2016), A History of British National Audit, 285; Wehner, ‘Assessing the Power of the Purse’, 785. 135 The citations are collected in Wehner (2006), ‘Assessing the Power of the Purse’. 136 Wehner (2003), ‘‘Principles and Patterns of Financial Scrutiny’; Wehner (2010a), ‘Cabinet Structure and Fiscal Policy Outcomes’ 137 Wehner (2010b), 13, 15. 138 Ibid, 16, 89. 40 constraints to have adverse effects on fiscal discipline.”139 Plainly put, there is no simple causal relationship between a particular institutional design (parliamentary or congressional systems) and a particular kind of fiscal discipline (balanced budgets).

The focus on legal practices adopted in this dissertation results in an investigation which is both shallower and deeper than Einzig, Reid and Wehner. It is shallower in its investigation of the political, economic and administrative aspects of the financial relationship between parliaments and governments.140 It is deeper in its analysis of the design and operation of law authorising the use of public money and the way that law distributes financial authority in parliamentary constitutional systems.

Importantly, concentrating on the role played by legal practices in distributing financial authority, shifts focus away from parliamentary processes concerning public money: including ministerial or bureaucratic accountability to parliaments (generally) and the work of public accounts committees in scrutinising reports of auditors-general (more specifically). While undoubtedly important,141 the choice not to focus on those parliamentary processes is made to concentrate attention on the (currently) overlooked legal aspects of the relationship between parliaments and executive governments. That choice does not assume that those mechanisms are irrelevant to constitutional principles concerning public money (§7.2.3) and does not result in wilful blindness towards the practical administration of parliamentary processes. For example, the adequacy of parliamentary resources and expertise to scrutinise the executive’s financial proposals (via estimates) is closely analysed (§7.2.2).

139 Ibid, 15 140 Its treatment of public administration details is also shallower than studies of expenditure planning by the UK Treasury: Thain and Thain (1995), The Treasury and Whitehall; Thain (2004), ‘Treasury Rules OK?’; Fawcett (2010), ‘Metagovernance and the Treasury’s Evolving Role within the British Core Executive (2010); Daintith and Page (1999), 142-154; Prosser (2014), 118-124. 141 And the subject of a growing literature: eg, Wehner (2003); Dewar and Funell (2016); White, and Hollingsworth (1999), Audit, Accountability and Government; Elliott, and Thomas (2017), Public Law, 644-652. 41

Features of the legal practices

Several features of the legal practices warrant breaking-up the analysis of the way they distribute financial authority into historical and contemporary accounts and examining their operation in the context of changing economic conditions.

First, legal practices of public money change frequently, often radically. Sometimes those changes are in response to considered slow-moving public reform projects (§2.2.3, §4.3.1), while other changes occur under urgent conditions, without significant public deliberation (§5.2.2). Understanding those practices requires both a long- and short-term historical perspective.

The long-term perspective is provided by the historical analyses in §II. §2 and §3 analyse the development of the legal practices in a broad-sweep, rather than describe (in piecemeal) every change in legislative drafting, legal principle or government practice. The short-term perspective is provided by locating the contemporary analysis of the legal practices in §III within a temporal “Reference Period” of 2005-2016, explained in-detail in §III’s introduction.

Secondly, the legal practices distribute financial authority through their “design” as well as their “operation” in response to economic plans and conditions. The design of the legal practices may distribute financial authority by conferring extremely broad authority on treasuries and finance ministries to determine the basis upon which public accounts, budgets and audits will be undertaken (§4.1.1) or conferring very broad statutory borrowing authority on treasuries (§5.1.1). The operation of legal practices may distribute financial authority by causing a change in the relative proportion of public expenditure authorised through annual and standing appropriation legislation (§4.3.2) or radically increasing the level of retrospective authorisation of expenditure (§4.3.3). Both the historical and contemporary examinations of the legal practices are undertaken with a view to design and operation.

42

1.3.2 Making “constitutional” sense

This dissertation does not use the “textbook” (“classificatory”)142 or “constructive interpretation”143 methodologies often associated with legal scholarship.144 Instead, it adopts an approach to constitutional legal inquiries which is:145 “interpretative, empirical, critical and historical. It must be interpretative because in the field of public law fact and value cannot be kept categorically distinct. It must be empirical in the sense of being rooted in an understanding of the realities of government and the function which law is expected to perform in relation to the political system. It must be critical both in subjecting various interpretations to rational scrutiny and to inquiry in respect of empirical understandings of the functions of government and law. Finally, it should be undertaken with a degree of historical sensitivity and with a sense of the changing needs of societies through time.” That diversified methodology is particularly valuable to the study of legal aspects of public money in parliamentary constitutional systems. It permits meaningful engagement with legislation (which is not designed for judicial determination) and the (historical and contemporary) economic and institutional context within which public finance occurs.

Descriptive analysis

Parts II and III provide descriptive analyses of the distribution of financial authority by the form and operation of legal practices of public money. That descriptive exercise has historical (§2-§3) and contemporary (§4-§6) components.

142 Sugarman (1986), ‘Legal Theory, the Common Law Mind and the Making of the Textbook Tradition’; Loughlin (1992), 22. 143 Eg Allan (2017), ‘Principle, Practice and Precedent’. 144 Cf Samuel (2009) ‘Interdisciplinarity and the Authority Paradigm’ and Vick (2004), ‘Interdisciplinarity and the Discipline of Law’. 145 Loughlin (1992), 36. 43

In that sense, the historical chapters do not aim to analyse how “parliamentary control” has developed, but rather how “legal practices of public money” have developed, and how they distribute financial authority. Methodologically, that use of historical material is designed to “help liberate our legal thinking from the tyranny of the old” by explaining what is “contingent”, rather than “necessary” about the distribution of financial authority in parliamentary constitutional systems.146

The contemporary chapters, §4–§6 analyse the detailed design and operation of the legal practices of public money in Australia and the UK between 2005-2016. A core objective is to examine the operation of those practices within the broader context of shifting economic conditions within that timeframe. To that end, §4.2 and §5.2 confront the interaction of economic conditions, public financial activities and the legal practices of public money, using public sector finance data gathered from official statistics agencies and (where there are gaps) wider government publications.

Approaching the question of the distribution of constitutional power over public money with an awareness of the broader economic context is critical because economic conditions heavily influence the financing activities of governments, and the operation of the legal practices concerning those activities.

Contractions in economic output often require increased public expenditure, and cause a fall of taxation receipts, which in turn increases reliance on borrowing and (in extreme cases) monetary financing. Expansions in output bring increased taxation receipts, a lower reliance on public expenditure, aggressive debt retirement and the confinement of monetary activity to more traditional avenues. Those shifting economic and financial sands reveal important insights regarding the distribution of financial authority by the legal practices, including variations in the proportional share of standing and annual appropriations (§4.2.2), deliberate executive non-compliance with annual appropriation legislation (§4.2.2), spikes in the utilisation of sovereign debt legislation (§5.2.2)

146 Allison (2013), ‘History to Understand, and History to Reform, English Public Law‘, 556. 44 and the construction of new legal practices to facilitate monetary financing (§5.2.3).

Explanatory interpretation

The chapters in §IV offer both explanatory and normative perspectives on “understanding” parliamentary control, in an effort to separate (insofar as possible) the “is” from the “ought” of constitutional principles and public money. Parliamentary control is not the best explanation of the distribution of financial authority in parliamentary constitutional systems (§7) and there are viable arguments for jettisoning it as a normative principle (§8).

The explanatory analysis in §7 is deliberately “critical”, rather than “constructive”, of parliamentary control: it does not try to re-construct or remodel “parliamentary control” by showing its “best light”.147

That critical analysis is also “interpretative”, because it offers an interpretation of the explanatory value of parliamentary control. To make the interpretative premises of the analysis as transparent as possible, §7.1 articulates an interpretative framework within which to evaluate the explanatory worth of parliamentary control. That framework is constructed by using a combination of normative and factual elements: starting with the ideal value of “financial self- rule”, which is then calibrated to the realities of life in a parliamentary constitutional system. §7.2 uses that framework to analyse the distribution of financial authority by the legal practices: recognising the existence of a significant deficit of “legal” and “effective” parliamentary control of public money. Accepting the deficit of parliamentary control, §7.3 argues that an idea of “parliamentary ratification” (where parliaments approve, ventilate and structure the executive’s financial activities) provides a better explanation for the distribution of financial authority in parliamentary constitutional systems than other possible candidates (“executive control” and “interdependence”).

147 Cf Dworkin (1998), Law’s Empire. 45

A consequence of that approach is that an analysis of the precise nature of parliamentary “control” is deferred until the design and operation of the legal practices of public money have been described and analysed.

Deferring the analysis of “control” recognises that different parts of the legal practices of public money appear to operate ex ante and ex post any particular “use” of public money (whether by taxing, spending, borrowing or creating money). A form of ex post control appears in the accountability functions of auditors-general and parliamentary public account committees. Ex ante control appears in the statutes which govern taxation, expenditure, sovereign borrowing and monetary finance which all assume that parliamentary authorisation (by statute) precedes any lawful use of public money. It could also be contended that a parliament’s power to force a government from office that cannot secure supply is a form of ex ante control.

Recognising those different forms of control does not require that a definitive claim be made at the dissertation’s outset that one form of “control” (ex ante or ex post) should be preferred. Making such a claim, before presenting the totality of the historical and contemporary evidence regarding the detailed design and operation of the legal practices of public money, risks skewing the analysis of the distribution of financial authority by reference to a ex ante or ex post idea of parliamentary control.

The core concepts underlying ex ante and ex post forms of control are not, however, totally ignored, but are integrated into the conditions of parliamentary control expressed in §7.1.3. That integration puts the core forms of ex ante and ex post forms of control into the perspective of the totality of the design and operation of the legal practices of public money, which is revealed by the empirical analyses contained in §II and §III.

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Normative critique

The dissertation holds back from making definitive normative claims regarding parliamentary control: whether it is the best or most desirable constitutional principle concerning public money. Evaluating the desirability of a constitutional norm is an enormous inquiry, implicating deep political and moral questions lying far beyond the scope of any single dissertation. The dissertation’s closing chapter (§8) does, however, sketch possible pathways for analysing the normative future of parliamentary control, focusing on accommodating the importance of maintaining the financial viability of public sectors with the representative function of parliaments. Those modest ambitions are informed by the need to formulate constitutional norms which face the reality of modern parliamentary government; fitting more closely within realist/pragmatist rather than idealist/formalist modes of constitutional thinking.148

1.3.3 Analytical dividends

The dissertation makes a number of original contributions to present understandings of the legal practices of public money and the distribution of financial authority in parliamentary systems of government.

The descriptive analyses in §II–§III provide the first detailed (and consolidated) examination of the law concerning appropriation, sovereign borrowing and monetary finance in parliamentary systems of government. Because of the information deficit observed in §1.3.3, that examination fills a large gap in the legal literature concerning the form and operation of the legal practices of public money.

That analysis is not limited to showing how the legal practices of public money are designed and operate, but also how they develop; contributing to understandings of the economic and political forces behind the creation of public

148 Compare McLean (2009), What’s Wrong with the British Constitution; with Allan (1994), Law, Liberty, and Justice; and Vermeule (2013), The Constitution of Risk. 47 finance law. The historical analysis (§2–§3) explores that legal development through a wide historical lens, showing how the legal practices of public money changed as the economic role of the public sector changed, through the slow shift in the UK’s public-financial profile: from predominately military and imperialistic; to providing welfare-state goods. The contemporary analysis (§4– §5) provides a more granular view of the development of public finance law in response to different economic conditions, particularly economic up- and down- swings.

The explanatory chapter’s (§7) main contribution is a systematic argument for the claim that parliaments do not control public money. Its subsidiary contribution lies in proposing another way of understanding the financial role of parliaments in parliamentary systems of government, “parliamentary ratification”.

Hopefully, those contributions could be useful additions to the social-scientific and theoretical literature concerning the practical and normative needs for large-scale delegation of governing authority from parliaments to executive governments in modern liberal democracies.149 They could also be integrated into the developing body of scholarship concerning the normative viability of constitutional models gestated in the 18-19th centuries in modern liberal democracies with advanced capitalist economies.150 The dissertation’s descriptive conclusions also could be used as the foundation for practical reform projects, and thereby form part of the emerging literature proposing the formulation of new legal bases for governments’ economic and financial activities which are fit-for-purpose in modern political, institutional and economic conditions.151

149 Epstein and O’Halloran (1999), Delegating Powers; Huber and Shipan (2002), Deliberate Discretion (2002); Richardson (2002), Democratic Autonomy 150 Vermeule (2013); Posner and Vermeule (2011), The Executive Unbound; Rubin (2005), Beyond Camelot; Scheuerman (2004), Liberal Democracy and the Social Acceleration of Time. 151 Prosser (2014). 48

PART II LEGAL PRACTICES OF PUBLIC MONEY: HISTORICAL DEVELOPMENT

This Part (§2–§3) analyses the historical development of the legal practices of public money and how those practices historically distributed financial authority in parliamentary constitutional systems of government. That exercise is limited to the selected financial management activities of taxation, expenditure, debt and monetary finance (§1.21).

§2 deals exclusively with developments in the UK from the Civil War to the early 20th century.152 Starting with the development of statutory taxation and expenditure, the analysis broadens to encompass statutory authorisation of sovereign borrowing, the executive’s financial initiative and the development (mid-19th century) of a systematic process of public accounts and audit. It concludes by reviewing the position of the judiciary vis-à-vis those developments.

§3 casts a broader net. It commences by surveying the legal practices’ export throughout the British Empire, before moving to consider major points of development in the 20th century. The topics selected for focus are: the durability of the legal practices as they were exported around the British Empire; modifications to the legal practices in response to the World Wars; the growth of the welfare state; gradual shifts in the legislative framework of sovereign borrowing and central banking in the mid-20th century; and the impacts of New Public Management philosophies in the closing decades of the 20th century.

Within the auspices of the dissertation’s total thesis, the aim is to take the developmental analysis of the legal practices up to the 21th century, in preparation for the descriptive analysis of Australia and the UK in §III.

152 References to the “UK” refer to the predecessor nations of England and Great Britain, unless greater specificity enhances the analysis. 49

CHAPTER 2 GROWING PARLIAMENTARY GOVERNMENT WITH PUBLIC MONEY

This chapter investigates the development of the legal practices of public money in England, Great Britain and the UK between the Glorious Revolution and the turn of the 20th century. It starts with the growth of legislative taxation and expenditure (§2.1), before moving to the development of statutory public borrowing, the executive’s financial initiative and the systematic public accounting and audit legislation of the mid-19th century (§2.2). It concludes by investigating the judiciary’s role in relation to those practices (§2.3).

That investigation is designed to answer two questions: why the practices came into existence (and were maintained); and what the detail of those practices reveals about the distribution of financial authority over public money in the paradigmatic parliamentary constitutional system. Demands of space require marking only the developmental milestone of legal practices which have endured and skirting-over numerous matters of great interest and undoubted importance.153

2.1 Statutory financial authorisation

Rather than repeating the familiar origin-story of Magna Carta to Shipmoney,154 the following account of the development on statutory financial authorisation focuses on three overlooked matters. First, the political and economic movers of statutory appropriation and taxation (§2.2.1). Second, the detailed design and operation of appropriation and taxation legislation (§2.2.2). Third, the way that such legislation distributed financial authority (§2.2.3).

153 Including, the history of the Civil List (Reitan (1966), ‘The Civil List in Eighteenth-Century British Politics’), the sudden disappearance of the Commissioners for the Reduction of the National Debt (created by the National Debt Reduction Act 1786 (26 Geo III), who last met in October 1860), the battles between the Exchequer and the Treasury (Dewar and Funnell (2016), chapters 2–4, and the growth of the professional civil service (Chester (1981), 123-166, 282– 311). 154 Eg Anson (1907), volume 1, 234-235, 265; Hearn (1886), chapter XIII. 50

2.1.1 Political and economic movers

A basic historical account of the development of the legal practices regarding legislative taxation and expenditure focuses on growing demands (from the 13th century) for representative consent to taxation, culminating in Art 4 of the Bill of Rights 1688: That levying Money for or to the Use of the Crowne by pretence of Prerogative without Grant of Parlyament for longer time or in other manner then the same is or shall be granted is Illegall. Both before and after 1688, the story is more complicated.

Feudal fiscal precursors

Prior to the 17th century, the legal practices concerning the Monarch’s income and expenditure flowed from a mixture of custom, prerogative and statute.155 The economically dominant sources of revenue flowed from certain remnants of feudal dues (later described as the “ordinary”, “hereditary” or “prerogative” revenues). Where that revenue fell-short of expenditure, the Monarch would claim rights to tax revenue (later called “extraordinary” revenue) through Parliament. Those claims would ignite many constitutional confrontations.

Early frictions resulted in various assertions of limitations on the Monarch’s rights to demand revenue, some of which survived in prominent documents, like Magna Carta.156 Despite the significance of those documents, the limitations they asserted were not observed with any regularity and established no settled practice that all taxation or expenditure would be the subject of parliamentary legislation.157

155 The old learning on those matters is complex: Maitland (1908), The Constitutional History of England, 93–96; Anson (1907), volume 2(2), chapter VII 124–134; Dowell (1884), A History of Taxation and Taxes in England, volume 2. 156 And later, less prominent, documents; Anson (1907), volume 2(2), 126-127; Maitland (1908), 179–181. 157 Baker, The Reinvention of Magna Carta (2017), 184–187. 51

Several factors underpinned the failure to establish such a practice. One was the economic significance of the Monarch’s non-statutory revenue.158 Another was that, before the 17th century, Parliament was in a developmental state.159 Although Parliament’s institutional character became fixed from the 14th century, its independence from the Monarch was tenuous.160 Importantly, it had little practical control over the management of the Monarch’s money, which was held in the royal custody of the Exchequer.161

Parliament, of course, had a role in taxation and expenditure prior to the civil war. Parliamentary legislation increasingly sought to regulate the monarch’s demands for revenue before the Civil War, and in the 1640s the Commons committees of “ways and means” and “supply” systematized parliament’s approach to the Monarch’s demands for greater taxation.162

There were also faint attempts to impose some form of legislative limitation on the Monarch’s spending prior to the Civil War. 163 Particularly optimistic accounts date that practice from 14th and 15th century statutes stating that certain streams of revenue should be used for particular military endeavours, or that a King should render accounts of his expenditure to the Commons.164 More sober accounts draw no fixed conclusions from those scattered practices because of the political weakness of Parliament in the face of powerful Monarchs, and the undisputed fact of the Monarchs right to spend without legislation.165 Exposing no settled practice, the allocation of constitutional superiority over public finance was, prior to the Civil War, a political question contested between monarchs and parliaments.

158 Braddick (1996), The Nerves of State. 159 The Crown in its dual personality (Loughlin (2010), Foundations of Public Law, 41–45; Kantorowicz (1997), The King’s Two Bodies, chapter 4; Maitland (1901), ‘The Crown as Corporation’), and the bi-cameral Parliament of Commons and Lords (Lyon (1980), A Constitutional and Legal History of Medieval England, 408–430, 535–536, 595–611; Loughlin (2010), 243–252). 160 Although with intermittent moments of greater influence: Maitland (1908), 177–179. 161 Anson (1907), volume 2(1), 173–175. 162 The former granting new taxes, the latter granting established taxes: Thomas (1971), House of Commons in 18th Century, 23-24. 163 Maitland (1908), 94. 164 Eg, Stubbs (1906), The Constitutional History of England, volume 2, 596. 165 Maitland (1908), 184; Einzig (1959), 77–79. 52

Dominance of statutory financial authorisation

Those contests rose to prominence as part of the momentous constitutional conflicts of the 17th century.

Lawyers’ focus on those conflicts tend to centre on the causes célèbres preceding the Civil War,166 particularly the lawsuit which grew from Charles I’s notorious decision (despite his assent to The Petition of Right 1628)167 to impose a tax, in the form of “ship money” payable in respect of non-coastal areas in peacetime.168 The legality of ship money was tested and affirmed in Hampden’s Case (1637).169 The popular opposition to the case caused the enactment of the Ship Money Act 1640 (16 Car 1), which voided the judgment and declared the imposition of ship money “contrary to and against the Laws and Statutes of this Realm the right of property the libertie of the Subjects.”170 That enactment was one of the chief causes of the escalation towards war and, upon the cessation of hostilities, the denial of the Monarch’s power to tax in the absence of legislation was a central plank in the political settlement of the Glorious Revolution which culminated in the Bill of Rights 1688.

Albeit exciting, the enactment of the Bill of Rights only provides a partial explanation for the growth of statutory financial authorisation. Certainly, it provides evidence of the political thinking underlying statutory tax and appropriation: a privileging of parliamentary self-government and a reduction in the power left to the monarchy following the Stuarts’ abuses. Some historians have described that thinking as “country ideology…persuasion… or interest ”:171 a political sensibility with a long and stout pedigree which jealously guarded rights and privileges—whether local, individual or

166 Also Bate’s Case (1606) 2 ST 371 and the Five Knights Case (1627) 3 How ST 1, see Poole (2015), Reason of State, 26-35. 167 Particularly, Articles 1, 2 and 10. 168 Mendle (1989), ‘The Ship Money Case’. 169 3 ST 826; Kier (1936), ‘The Case of Ship Money’. 170 It was also during this period that the view of direct taxation as trifurcated into “estates” ceased with the surrender of the clergy’s right to tax its estate to the laity: Anson (1897), 47-48. 171 Brewer (1989), Sinews of Power, 126; Brooks (1984), ‘The Country Persuasion and Political Responsibility’; Hayton (1984), ‘The “Country” Interest and the Party System, 1689-c1720’. 53

parliamentary—was suspicious of executive power and committed to the notion of responsible government. Country ideology’s “favourite measures” included:172 the encouragement of parliamentary scrutiny of the executive, the enactment of legislation to secure regular and frequent parliaments, the passage of bills to reduce the number of placemen and the size of the standing army, and the implementation of social and moral reform. All of these proposals spoke to the fear that more government would produce worse government.

Country ideology explains the continual growth of statutory authorisation of public expenditure in the form of annual “appropriation” legislation throughout the first decades of the 18th century. Appropriation legislation was an intimate part of bringing the monarchy (and its ministers) to parliamentary heel, particularly visible in the exchange of the Monarch’s hereditary revenues for a statutorily confined budget in the form of a “civil list” (§2.1.2).173

The Bill of Rights (and the political thinking underpinning it) cannot, however, explain why statutory taxation became the dominant form of public revenue, because it did not prevent the monarchy (or its ministers) from having resort to non-statutory sources of revenues. Financial realities, rather than political principles, best explain that matter. Brewer explains that non-statutory forms of revenue raising were “recognized either as economically undesirable or as politically unfeasible after the Glorious Revolution”.174 A large part of the economic undesirability of the ancient forms of revenue raising was the massive increase in 18th century public expenditure.175

As the 17th century closed, the spending needs of the English state spiked as a result of expensive military endeavours and, throughout the 18th and 19th centuries, the preponderance of public expenditure concerned two activities:

172 Brewer (1989), 126. 173 Maitland (1908), 433-4. 174 Brewer (1989), 73. 175 Braddick (2000), State Formation in Early Modern England, 246. 54 paying for war (and military costs of imperial expansion) and servicing war- debt.

Although the precise figures are contested,176 it is clear that the UK’s public expenditure increased significantly in absolute terms throughout the 18th century. Net public expenditure in 1692 stood at 7.1% of gross national income. By 1722, that figure had increased to 10.2%. By 1782, it was 24.7%.177

The respective shares of that expenditure yo-yoed through peace and wartime.178

Figure 2.1: UK 18th century expenditure (civil, military, debt)

Throughout peace and war, the overwhelming majority of expenditure concerned military expenses and debt repayment. Military expenditure peaked at 84% of total expenditure (in 1711), recording a median 48% and an average 51% throughout the century. Debt servicing costs peaked at 60% (in 1787), recording a median (and average) of 37% throughout the 18th century, while only dropping below 20% of total expenditure in eight years (1704-06, 1710-11;

176 UK historical economic data is a topic of constant academic revision: eg Allen (2016), ‘Revisiting England’s Social Tables Once Again’. 177 Data from Clark (2009), ‘The Macroeconomic Aggregates for England 1209-2008’. 178 Data for this and the following figure were collected from BHS, chapter XI. 55

1759-61). Civil expenditure remained largely flat through the same period, never rising above 23% (in 1725), recording a median of 10% of total expenditure and dropping below 10% for 35 years of the 1700s.

The sharp peaks of expenditure necessitated a sharp rise in revenue, which was met through a combination of increased taxation and debt issues secured against that taxation. Tax receipts collected from 1688-1697 (during the Nine Years War) doubled from the previous decade. By the 1740s (the War of Austrian Succession), that number had doubled again and by 1783 (the War of American Independence’s terminus) it had grown “sixfold”.179

Despite the sharp increase in tax receipts, the types of tax relied on (the “tax mix”) remained relatively limited, with “90 per cent of the state’s revenue in the century after the Glorious Revolution” being raised by three taxes: customs, excise and land tax.180 The land tax started the 18th century contributing around 50% of total receipts, and finished the century contributing around 20%.181 Excises started the 18th century at around 20% of total receipts and finished around 40%, while customs receipts hovered at between 20-30% during the same time period.182

Where tax fell short, sovereign borrowing grew in scale and complexity throughout the 18th century, particularly during war-time.183 Average annual public borrowing between 1739-48 (the War of Austrian Succession) was 414% of average annual tax receipts, and 34% of average annual expenditure. Between 1756-63 (the Seven Years War), those figures stood at 674% (tax) and 46% (expenditure). During the War of American Independence (1775-1783), average annual public borrowing levels were astronomical, standing at 955% of tax receipts, and 64% of expenditure.

179 Ibid, 74. 180 Ibid, 78. 181 Ibid, 79. 182 Ibid, 80. Excises were charged on domestic commodities, including “beer, spirits, wine, cider, malt, hops, salt, leather, soap, candles, wire, paper, silk and starch”: Ibid, 82. 183 The following relativities were calculated using the raw figures in Brewer (1989), 23-24. 56

With small adjustments, Britain’s 19th century public finance profile largely followed the patterns set in the previous century: the chief focus was funding the expenditure needs of military and imperial conquest through indirect taxes and sovereign debt.

Like spending patterns in the 18th century, 19th century spending on military and imperial activities (and servicing debt on those activities) constituted the overwhelming majority of public expenditure.

Figure 2.2: UK 19th century expenditure (civil, military, debt)

Nineteenth century military expenditure peaked at 68% in 1800 (rising close to that level again in 1901 at 63%), recording a median 34% and an average 37% throughout the century. Debt servicing costs peaked at 58% in the 1830s, recording a median 38% and average 40% through the 19th century, while never dropping below 20% of total expenditure. Civil expenditure in the 19th century never rose above 23%, wallowing at a median 12% and average 13% of total expenditure in the 19th century.

The UK’s taxation profile remained generally stable throughout the 19th century, as indirect tax continued to contribute to the overwhelming majority of fiscal receipts. Income tax spiked during wartime, but only contributed an average of 57 around ~12% of total fiscal receipts. Sovereign borrowing was extensive, although absolute numbers were lower than the 18th century.184

One constitutional consequence of those economic developments was that the non-statutory sources of revenue remaining at the end of the 17th century185 were robbed of any economic significance. From the latter-18th century, they began to be stamped-out by legislation,186 leaving only a messy residuum devoid of financial significance.187

Another constitutional consequence was the development of parliamentary procedures orientated towards systematising and regularising the executive’s enormously increased demand for expenditure.

Parliamentary financing

The priority given to Britain’s massively increased expenditure needs was reflected in the parliamentary processes concerning financial proposals, particularly the system of “grand committees” of “Supply” and “Ways and Means”. By the 18th century’s commencement, it was settled that Supply deliberated and voted on estimates of expenditure and Ways and Means deliberated and voted on the method of raising revenue necessary to fund those estimates: tax and borrowing.188

Three significant matters emerge from the parliamentary processes regarding financial authorisation.

First, the sequence by which government financial business moved through the Commons (starting in Supply and ending in Ways and Means) imposed a crude form of fiscal discipline: the total spending amount voted in Supply could not be

184 BHS, chapter IX. 185 Maitland (1908), 430–436. 186 Anson (1907), 120-121; Chitty (1820), A Treatise on the Law of the Prerogatives of the Crown 200-202; Binney (1958), British Public Finance and Administration 1774-92, 116–121. 187 Chitty (1820), 147-148 and 151-152. 188 May (1851), 419. 58 exceeded by revenue measures (tax and borrowing) approved in Ways and Means. That was effected at the level of practice by a requirement that Ways and Means was not “permitted to vote ways and means in excess of the expenditure voted by the committee of supply.”189 That form of fiscal discipline was directed towards minimising the tax burden, rather than deficit control, which would have required an inversion of the process, public expenditure (Supply) being limited by tax yield (Ways and Means).

Secondly, the financial committees produced legislation on expenditure, taxation and borrowing as part of an interlinked annual process. That interlinking of the core public finance activities in parliament reflected the fact that revenue legislation in the 17th and 18th centuries earmarked tax proceeds to expenditure on particular projects (usually military). The same earmarking occurred in 18th century tax legislation, often linking tax proceeds to the repayment of particular public debts. Legislative earmarking of particular taxes to particular expenditure objects continued through most of the 18th century.190 Its decline can be marked from 1787 when audit legislation created a single “Consolidated Fund” which pooled most tax receipts (§2.2.3).191 Thereafter, the Consolidated Fund became a central reference point for central government finances. It was the pool into which tax revenue flowed, from which annual appropriation legislation would authorise withdrawals of money (§2.1.2),192 and against which sovereign debt repayments were secured (§2.2.2).

Thirdly, Parliament’s practical financial power was concentrated in the Commons, although it often skirmished with the Lords. In 1671, the Commons resolved, ‘[t]hat in all aids given to the King by the Commons, the rate or tax ought not to be altered’.193 In 1678, the Commons further resolved “[t]hat all aids and supplies, and aids to His Majesty in Parliament, are the sole gift of the

189 May (1851), 415; Palgrave and Bonham-Carter (1893), Erskine May’s Treatise on the Law, Privileges, Proceedings and Usage of Parliament, 559. 190 Maitland (1908), 441; Redlich and Ilbert (1903), The Procedure of the House of Commons, 163– 164. 191 Act of 1787 (27 Geo III), ss 52–53. 192 Earlier annual Acts appropriated money from funds such as the sinking fund: Act of 1751 (24 Geo II). 193 Extracted in May (1844), 407. 59

Commons” and that any bills for raising or spending money “ought not to be changed or altered by the Lords.”194 The Lords acquiesced in, but never positively approved the Commons’ assertion.195 Furthermore, an ambitious exercise of the Commons’ powers over money bills led to the Lords assertion of its own right to reject supply bills to which other contentious matter had been ‘tacked’.196 That resolution did not end the controversy regarding tacking, and a final resolution regarding the inter-cameral rights in respect of money bills would await legislative developments in the early 20th century (§3.2.1).197

The various 18th and 19th century disagreements between the Houses were politically but not economically significant. Britain suffered no major financing crisis as a result of action by the Lords in blocking the spending and taxation bills approved by the Commons.

2.1.2 Legislative authorisation of tax and expenditure

By the mid-18th century, the legislative practices in relation to annual finance were settled.

The Treasury presented estimates of expenditure at the beginning of the parliamentary term and those estimates were debated and (invariably) voted in Supply. Then, Ways and Means would convene to approve supply (the practical release of funds to government) and revenue measures (taxation and borrowing) to finance the budget (cf §2.2.2). Ways and Means issued three types of financial legislation: Supply Acts and Appropriation Acts (each authorising expenditure), and taxation (later “Finance”) Acts. Because expenditure legislation was the key driver in that parliamentary process, it is best analysed before turning to taxation legislation.

194 Also extracted in May (1844), 407; Maitland (1908), 310. 195 Anson (1897), 266–268; Einzig (1959), 194–195. 196 Maitland (1908), 310; Einzig (1959), 196–199; May (1844), 410. 197 Parliament Act 1911 (UK); Enizig (1959), 309–317. 60

Annual expenditure legislation

The first type of expenditure legislation to emerge from the annual parliamentary financial processes was a “Supply” or “Consolidated Fund” Act.198 A Supply Act was passed after the approval of estimates and had two functions. Its “spending” function authorised the payment-out of a lump sum of money, which represented an aggregate of the estimates voted in Supply (without reference to quantum or subject-matter limitations). Accordingly, Supply Acts customarily provided that:199 there shall and may be issued and applied for or towards making good the Supply granted to Her Majesty for the Service of [1838]…the sum of [£8million] out of the Consolidated Fund” The other function of Supply Acts was to provide statutory authority for the Treasury to borrow and issue securities to the limit of the supply granted by the same Act. As §2.2.1 explains, that function imposed a legal limitation on sovereign borrowing by reference to the amount of annually approved expenditure.

The second type of annual expenditure legislation was the Appropriation Act, passed towards the conclusion of the parliamentary session. Like a Supply Act, an Appropriation Act authorised “supply” in aggregate, but took the further step of “appropriating” all amounts of supply granted throughout the parliamentary session to particular departments and programs. Appropriation Acts typically provided:200 [a]ll sums granted by this Act and the other [Supply Acts of the session] out of the … Consolidated Fund towards making good the supply granted to Her Majesty amounting…in the aggregate to [£46.9million] are appropriated and shall be deemed to have been appropriated as from the date of the

198 The division of Supply and Appropriation Acts is adopted for ease of reference given the shifting of financial legislation nomenclature between the 17th to 20th centuries (Supply Acts were sometimes called Consolidated Fund Acts). 199 Consolidated Fund Act 1838 (UK), s 1. 200 Consolidated Fund (Appropriation) Act 1874 (UK), s 3. 61

passing of the first [Supply Act of the session] for the purposes and services expressed in [the schedule].

While the precise content of Appropriation Acts developed throughout the 18th and 19th centuries, their basic structure remained constant.

A very early example is provided by an Appropriation Act of 1729.201 It began by listing line-items of public services and public offices:202 £986,025 for Half Pay to Sea Officers and other Naval Services £100,000 For Greenwich Hospital £90,249 For the Ordinance for Land service £1,352,138 For Land Forces, that is to say £784,983 For 22,955 Men, including Commission and Non- Commission Officers and Invalids for Guards, garrisons, and six Independent Companies for Service for the Highlands and other Land Forces relating to Forces for 1729 £160,357 For Forces and Garrisons in the Plantations, Minorca and Gibraltar and for Provisions for Garrisons at Annapolis Royal, Placentia and Gibraltar for 1729 £12,800 For Out Pensions of Chelsea Hospital for 1729 £20,739 For Extraordinaires £7,000 For Half Pay to reduced Officers of Land Forces and Marines for 1729 £241,259 For 12,000 Hessian for 1729 £50,000 For one Year’s Subsidy to the King of Sweden pursuant to Treaty, dated 14 March 1726 £25,000 For one Year’s Subsidy to the Duke of Brunswick Lunenburg Wolfenbuttel, pursuant to Treaty, dated 25 November 1727. £10,500,000 For cancelling like Sum in Exchequer Bills in pursuance of the Act of 1728 (1 Geo I, c 1)

201 Act of 1729 (2 Geo II). That Act was an example of “hypothecated” appropriation, earmarking receipts derived from alcohol duties, a loan from the Bank of England and a temporary land tax (Acts of 1728 (2 Geo II), cc 1, 3 and 4)) to the enumerated public service. 202 Act of 1729 (2 Geo II), s 6. 62

That list was followed by the “appropriation”: a statutory command that:203 The said Aids and Supplies provided…shall not be issued or applied to any Use, Intent or Purpose whatsoever, other than the Uses and Purposes before mentioned.

The “appropriation” effected by that Act imposes several forms of legal limitation on the use of money. The first was a “quantum limitation”: only “£100,000” (not £200,000) for Greenwich Hospital. The second was a “subject-matter limitation”: £784,983 for “22,955 Men” (not 25,000 men).

From their earliest iterations, Appropriation Acts imposed legal limitations on spending at a greater level of generality than appeared in the detail of the estimates presented to (and voted in) Supply.204 For example, the line-item appropriated by the Act of 1729 (above) to “£12,800 For Out Pensions of Chelsea Hospital for 1729” appeared in the following (more detailed) form in the estimates voted on by the Commons:205

203 Act of 1729 (2 Geo II)), s 14. 204 Chester (1981), 196. 205 Commons Journal 27 January 1728, 197. 63

[Estimate detail] Per For 365 Diem (l. Days (l. s, d) s, d) 3,003 Out-pensions, standing at present upon the £62.11,3 £22,835.6,3 Books of the Hospital, at 5d per Diem each 100 Letter Men, at 12d per Diem each £5.00 £1,825.00 50 Serjeants, at 9d per Diem each £1.17,6 £684.7,6 [Sub-total] £69.8,9 £25,344.13,9 From which deduct The Sum of [£12,500], which, by Estimation, may £12,500.00 be applicable towards defraying this Expence, out of the Poundage of the Forces for the Year 1729 [Total] Remains to be granted, upon account, for the Out- £12,844.13,9 Pensions of Chelsea Hospital, for the Year 1729

The legal limitation on expenditure imposed by the Appropriation Act applied only to the simple quantum and subject-matter expressed in the legislated line- item (“£12,800 For Out Pensions of Chelsea Hospital for 1729”), rather than the four line-items appearing in the estimate.206

As the administration of public finances developed in the mid-19th century, the legal limits of an Appropriation Act would be described as “heads” (or “votes”) of an estimate and the detailed line-items would be referred to as “sub-heads” of the estimate.207 Despite changes in the design of Appropriation Act, that basic division between (broad) legislated limits and (detailed) estimates endured.

206 Chester (1981), 196. 207 Chester (1981), 197. 64

The system of expenditure authorisation provided by Supply and Appropriation Acts had two signal features: it left an enormous degree of flexibility to the Treasury and was predominately retrospective.

Flexible annual appropriation

The high degree of flexibility left by annual appropriation legislation is illustrated by two practices: spending for “contingencies” and “virement”.

Appropriation for “contingencies” (spending for unspecified objects) dates clearly from the opening of the 19th century. For example, the Appropriation Act 1815 (UK) authorised spending of £200,000 for “such Expenses of a Civil Nature as do not form part of the Ordinary Charges of the Civil List”.208 Appropriation of “contingencies” replaced the dual limitations of quantum and subject-matter, with a simple quantitative-limit on unusual or unanticipated spending.

Over the next 5 decades, that general slush-fund regularised into a grant for “contingencies” in the annual Appropriation Act.209 The civil estimates for 1833-4 included an estimate “that a sum not exceeding [£140,000] be granted to his Majesty for making good the charge for civil contingencies”210 and s 17 of the Appropriation Act 1833 (UK) authorised “any Sum or Sums of Money not exceeding [£140,000], to make good the Sum required to defray the Charge for Civil Contingencies.” That amount represented ~3% of total civil expenditure (£4.7m) in 1833.

From 1862, Appropriation Acts began authorising expenditure “to defray the Charge which will come in course of Payment during [that financial year], for certain expenses which have heretofore been charged upon the Vote for Civil Contingencies”.211 That unusual shift in wording reflected the fact that the Treasury had begun maintaining a “Civil Contingencies Fund”, with a working

208 Durell (1917), 77. 209 Chester (1981), 193. 210 HC deb , 7 August 1833, c 427. 211 Appropriation Act 1862 (UK), s 25. 65 capital limited to £120,000 for urgent expenditure during the year.212 Thereafter, identifying the civil contingencies vote becomes more difficult, although enactments in the early 20th century dealt more explicitly with contingencies spending,213 and §3.2.1 explains how the civil contingencies fund came to be placed on a statutory basis in the aftermath of World War Two, becoming a form of standing appropriation.

Flexibility in appropriation legislation was also reflected in “the practice of virement, i.e. the transfer of funds allotted for one purpose or service to another.”214 Within the virement genus, two distinct species developed. The first was virement between the legal limits set by the Appropriation Act: “virement between votes”. The second was virement within an Appropriation Act’s legal limits, but between the line-items contained in an estimate: “virement within votes”.

Virement between votes most explicitly applied to military expenditure and thereby, the majority of public expenditure throughout the 18th and 19th centuries. Until the mid-19th century, it was undertaken without explicit statutory recognition. Things changed in 1846, when the Appropriation Act 1846 (UK) included the following provision (s 24): if the Exigencies of the Public assigned to any of the separate Services comprised in the aggregate Sum granted by this Act for [naval, army, or ordnance services], the Department in which such Necessity shall have arisen shall represent the Circumstances which may have led to it in Writing to the [Treasury] and it shall be lawful for such Department, [with the Treasury’s written permission], to apply in aid of the deficient Grant, a further limited Sum out of any Surplus…under other Heads of Service in the Same Department; Provided always, that the aggregate Sum [authorised for naval, army and ordinance services in the financial year] shall not be exceeded.”

212 Chester (1918), 193. 213 Civil Contingencies Fund Act 1919 (UK;) Finance Act 1921 (UK), s 52. 214 Chester (1981), 192. 66

By the enactment of that provision, parliament authorised breath-taking freedom of financial action.

It transformed the separate legislative appropriations for the army, navy and ordnance, into a single undifferentiated pool of funds for military expenditure.215 Although military expenditure stood at 28% of total expenditure in 1846, within 10 years it rose to 50% and would remain ~35% for most of the 19th century. In that sense, virement between votes operated to loosen (with Treasury approval) an Appropriation Act’s legal limits for a very significant proportion of total government expenditure.

The civil contingencies vote represented a form of “virement between votes”, to the extent that it permitted spending within an aggregate limit (and with Treasury approval) on any civil department or program. The comparatively small size of the civil contingencies vote to total expenditure (at ~0.16% for 1833) reflected the proportion of civil to military expenditure throughout most of the 19th century.

“Virement within votes” existed in relation to both military and civil expenditure from at least the mid-19th century and never received explicit statutory approval. Instead, it operated as a grey area between the “great detail” contained in the estimates and the “only legal limitation on the Treasury…that it should not exceed the sum stated” in the Appropriation Act.216 In that sense, the Treasury’s freedom to “vire” represented the extent of the legal limits imposed by an Appropriation Act. Administrative details of virement practice fluctuated throughout the 19th century, but it was confidently stated by the Chief Paymaster to the War Office in 1917 that:217 The power of deviation between sub-heads has never been explicitly given by Parliament...the accepted practice, which has never been seriously disputed is to regard the department as not being bound by the totals of the sub-heads of votes, subject to treasury approval

215 Chester (1981), 192-3. 216 Ibid, 196. 217 Durrell (1917), 297. 67

In addition to the flexibility built into annual appropriation legislation through contingencies and virement, large parts of that legislation operated retrospectively.

Retrospective annual appropriation

The most visibly retrospective aspect of annual expenditure legislation arose from the sequence in which it was enacted. Because Supply Act preceded Appropriation Acts, most of the money which was subject to the legal limitations in the Appropriation Act had already been spent under the aggregate authority provided by a Supply Act. As financial and parliamentary procedure developed throughout the 19th century, distinctions would arise between votes “on account” and “main” and “supplementary estimates”.218 Those developments did not alter the sequencing of Supply Act (when needed) and Appropriation Acts (at the end of the parliamentary session), and the retrospective nature of appropriation legislation.

The other retrospective feature of appropriation legislation was its authorisation of previous year overspends, which adopted the legislative jargon of an “excess vote” (§2.2.3). From the 1860s, excess votes appeared in almost every Appropriation Act. For example, a Supply Act enacted on 29 March 1901, authorised the issue of £5.2million for the services of two previous fiscal years (1899, 1900).219 The Appropriation Act, appropriated that sum along with the other supplies granted for 1901 and 1902, totalling £86.7milllion.220 The result was that almost 6% of the amount appropriated by the annual Appropriation Act had been spent two years before its enactment.

Excess votes are the most significant example of retrospective appropriation legislation because they represented the (known) amount of the government’s spending in violation of the legal limits set by an Appropriation Act. As §2.2.3

218 Ibid, 32-35, 47-53. Votes on account were a stop-gap vote authorising expenditure before the main estimates were presented. 219 Consolidated Fund Act (No 1) 1901 (UK), s 1. 220 Appropriation Act 1901 (UK), s 3 and Sch A. 68 explains, excess votes only became a systematic part of Appropriation Acts from 1866 onwards.

In terms of total financial impact, the full extent of retrospective appropriation is only revealed when the retrospective supply granted by Supply Acts is added to excesses, and then compared with the portion of supply prospectively appropriated by Appropriation Acts.221

Figure 2.3: Extent of retrospective appropriation, 1867-1878 There was no particular magic to the decade selected, and the balance between retrospective and prospective appropriation maintained the same general profile throughout the latter-19th century. Legally, the full degree of flexibility permitted by annual expenditure legislation was the aggregate of the practices concerning contingency spending, virement and excesses: because an excess vote would only arise when there was no opportunity to vire or fund from the contingencies vote.

221 The data for Figure 2.2 was collected from the Supply and Appropriation Acts 1867–1878. 69

Standing expenditure legislation

Alongside annual appropriation legislation, there grew another kind of legislation authorising public expenditure which was disconnected from the annual process of Treasury estimates and the voting of supply: standing appropriation legislation.

The original standing appropriation legislation concerned the expenses of the Monarch and select officials of state through the civil list. Because the Monarch was originally responsible for paying the salaries and emoluments of senior government officials, those salaries fell within the civil list grant. A clear example is provided by the Act of 1760, which granted a civil list to George III as well as “the salaries of the Lord Chancellor, the judges and of the Civil Service” (s 6).222 Gradually, charges relating to the operation of government were removed from the civil list and transferred to the Consolidated Fund as the professionalised public service grew and separated from the Royal Household in the 18th and 19th centuries,223 leading to separate standing legislation for salaries of senior government officials.224

As Britain’s public debt ballooned, a second form of standing appropriation appeared on the statute book: appropriation for the payment of interest and re- payment of principal on public debt. As §2.3.1 explains, from 1692 the statutes authorising sovereign borrowing also contained a statutory guarantee of the payment of interest and (if relevant) principal from the proceeds of particular hypothecated taxes. After the creation of the Consolidated Fund in 1787, the central pool of government revenue was subject to a standing appropriation to service the costs of sovereign debt (§2.2.3).225

222 Anson (1907), 163–166. 223 Chester (1981), 182-191. 224 Eg Public Revenues and Consolidated Fund Act 1854 (UK). The salaries of senior public officers last appeared in the Civil List Act 1837 (UK). 225 Act of 1787 (27 Geo III), s 53. 70

Accordingly, standing appropriation legislation authorised two categories of expenditure. The first, (senior government salaries) was institutionally (but not economically) significant. Compared to the total amounts of annually authorised expenditure, the amounts involved were small, but by guaranteeing the salary of senior officials, the parliament ensured their institutional independence from other parts of the executive.

The second kind of standing appropriation (sovereign debt servicing) was both economically and institutionally significant. Its economic significance lay in the volume of expenditure it authorised. As §2.1.1 observed, payments to service the national debt imposed an enormous economic burden throughout the 18th and 19th centuries. The institutional significance of the debt servicing standing appropriation lay in its role in providing “parliamentary security” (§2.2.1) for public borrowing and thereby ensuring the British government’s access to long and short-term debt markets.

In its original form, standing appropriation legislation provided for payment which was very tightly “bonded” to conditions set by parliamentary legislation. Salary payments under standing appropriations were tightly-bonded to parliamentary conditions, because they were limited by the prescribed amount of salary. Debt-servicing standing appropriations were also tightly-bonded because Parliament legislated extensively to set the interest rate, maturity and total amount of debt issued (as §2.2.1 observes).226

Although standing appropriations removed certain forms of expenditure from Parliament’s annual approval process, so long as they were bonded they did not represent a loss of parliamentary authority because parliamentary legislation determined the conditions under which expenditure would occur.

226 The terminology of “bonded” appropriation is distinct to “hypothecated” taxation. The latter denotes a link (by statute) of a particular revenue stream to a particular expenditure item. The former denotes the extent to which expenditure (irrespective of its original revenue) is conditioned by statutory conditions for payment rather than executive discretion. 71

As §3.2.1 explains, as habits of financial administration developed in the 20th century, another form of standing appropriation would come into existence, which provided standing authority to spend where conditions for expenditure were not tightly bonded by parliamentary legislation: “un-bonded” standing appropriations.

Taxation legislation

The popular hostility to taxation throughout the 18th and 19th centuries created a particular style of tax legislation: legislative tax limited by duration.

The critical importance accorded to time-limited taxation was reflected in the terms of Art 4 of the Bill of Rights: which declared extracting money “ without Grant of Parlyament for longer time or in other manner then the same is or shall be granted is Illegall.”227

Legislative sun-setting of a tax statute served two purposes: to ensure that Parliament met again to impose the tax when it ceased; and limit the imposition of state demands on private capital. A political tract from 1753 captures the mood: “as a general maxim, that a revenue for a certain and short term, was the best security that the nation could have for frequent parliaments”.228

Throughout the 18th and 19th centuries, not all taxes were limited by time. Many indirect taxes (customs and excises) were described as “perpetual”,229 in the sense that they did not cease at a pre-set time. At 1893, “customs duty upon tea” was the only “annual” indirect tax, while duties on malt (1822), tobacco (1826), offices and pensions (1836) and sugar (1846) were all made perpetual in the indicated year.230 The direct taxes (mainly on property) were, however, usually very tightly time-limited and required annual parliamentary approval before being collected. Although lower-yield through the 18th century, time-limited taxes increased in economic and political significance throughout the 19th

227 Emphasis added. 228 Burnet (1753), Bishop Burnet’s History of his Own Time, 549. 229 Palgrave and Bonham-Carter, (1893), 556 230 Ibid. 72 century. The land tax, was annually approved by Parliament, which legislated for its charge and rate,231 but it was less significant: accounting for 16% of total fiscal receipts in 1800 and only 8% in 1850.232

The increasing momentum behind time-limited taxes is well illustrated by the income tax. “Pitt’s” embryonic income tax was only imposed from 1797 to 1802.233 Thereafter, income tax was subject to a significant revision in the Income Tax Act 1803 (UK), and was imposed “during the present [Napoleonic] War, and until [6 May] next after the Ratification of a Definitive Treaty of Peace and no longer” (s 231). Peace ensued, and the tax ceased.

Income tax was next imposed by the Income Tax Act 1842 (UK), and was “charged until [6 April 1845] and no longer” (s 193). At the sunset date, Parliament enacted an Act of 1845, which imposed income tax for 3 years. An Act of 1848 continued the tax for the same period, and Acts of 1851 and 1852 (UK) charged the tax for a single year only, while a seven year charge to tax was imposed by an Act of 1853 (UK).

It was not until 1860 that annual charging of income tax became the norm, when an Act of 1860 provided that income tax “shall be charged, collected and paid for One Year commencing on [6 April 1860]” (s 1). The next financial year saw a cognate Act of 1861 (UK), charging income tax for a single year only and consolidating all annual legislative amendments of direct and indirect taxes: later known as the “Finance Act”.234

Insofar as tax administration was concerned, the 18th and 19th centuries saw many innovations, moving from a predominately privatised collection system of “tax farming” to a professionalised system of public revenue officials.235 Common

231 Brewer (1989), 81. 232 BHS, 581-582. 233 Harris (2009), Income Tax in Common Law Jurisdictions, chapter 5. 234 The reasons for the consolidation are can be found debated by the Commons in: HC Deb, 07 April 1913, cc 835-965. 235 Brewer (1989), 76-78; Pearce, (2009) ‘The Role of Central Government in Determining Liability to Income Tax in England and Wales’. 73 to both systems was the absence of parliament, which never acted as a tax administration body.

2.1.3 Distribution of financial authority

Throughout the 18th and 19th centuries, legislative practices of fiscal (tax and expenditure) activity became concrete: all lawful public expenditure and (economically important) taxation had to be authorised by Parliament through statute. Through those practices, Parliament retained a high-level of primary authority of financial activity, but delegated (and thereby distributed) large swathes of financial authority to the growing executive.

Primary and delegated financial authority

Viewed generally, the legislative practices of appropriation and taxation can seem to tether the executive’s economic freedom of action to Parliament’s will, expressed in legislation. That was certainly how Dicey understood them (§1.1.1).

A more detailed view reveals a more complicated set of practices. Annual appropriation legislation was extremely flexible and predominately retrospective. Standing appropriation legislation permitted the expenditure of vast sums with no annual parliamentary oversight. Taxation legislation was never wholly annual and relied on the executive to interpret and enforce its terms.

The difference between the general and detailed views exposes an analytically critical matter: the legislative practices concerning expenditure and taxation legislation presented a mixture of “primary” and “delegated” financial authority.

The extent of Parliament’s primary financial authority was set by the legal limitations imposed by the financial legislation it enacted. 74

Legal limits on annual spending were set by the subject-matter and quantum limit in Appropriation Acts. The flexibility of annual appropriation legislation provided for the delegation of significant authority over expenditure to the executive. The only primary authority maintained by Appropriation Acts was over the very general legislated line-items. To the executive (qua Treasury) financial authority was delegated to spend within those general limits, as recognised through virement and civil contingencies spending. Parliament also delegated formal legal authority to the executive by permitting the use of aggregate sums in Supply Acts which would only later be the subject of retrospective legal limitations in Appropriation Acts. In total, the detail of annual appropriation legislation reveals a relatively large degree of delegated authority over annual expenditure.

As they existed in the 18th and 19th centuries, standing appropriations did not provide for an extensive delegation of expenditure authority. Standing appropriations for executive salaries did not signal a delegation of financial authority to the executive, because they secured payment under conditions set by Parliament. Nor did standing appropriation for sovereign debt because the parliamentary determined (in the borrowing act) the conditions under which debt would be incurred and therefore under which it would be repaid (§2.2.1).

Given Parliament’s absence from any meaningful role in tax collection, an important limit on the executive’s delegated authority was temporal: authority to collect tax was partially delegated, but only to a particular point in time.

Context and blank spaces

The legislative practices of appropriation and taxation are undoubtedly significant, but a blinkered focus on them leaves large blank spaces regarding the development of the legal practices of public finance.

75

By the end of the 18th century, appropriation legislation could only be introduced with the support of the executive and large volumes of legislation was concerned with authorising long and short term borrowing to fund public expenditure. By the end of the 19th century, the accepted enforcement mechanism to keep government spending within the levels authorised by Parliament was a combination of treasury supervision of departments and audit by the Comptroller and Auditor-General. The Bank of England was (both) the UK’s official debt-manager and the principal source of short-term cash to the Treasury. Overseeing the whole process was the Treasury, which enjoyed pre- eminence within the executive to formulate spending proposals, borrow money, monitor public accounts and decide how and when appropriated funds should be spent.

§2.2 fills in those blank spaces.

2.2 Public debt, financial initiative and audit

Between the 1690s and the 1860s, legislative practices developed which placed the national debt on a statutory footing (§2.2.1), allocated the initiative in financial legislation to the executive government (§2.2.2), and provided a comprehensive and rationalised system of public accounts and audit (§2.2.3).

Alike the development of statutory expenditure and taxation, that set of practices grew from a combined commitment to parliamentary government and the need to rationalise and economise the public finances. Eighteenth century developments (statutory public borrowing and the executive’s financial initiative) grew to accommodate the military and imperial ambitions of the British state. Those practices which appeared in the second-half of the 19th century (mainly relating to public audit), responded to a need to rationalise the inefficient complexities of the public financial system which had developed in the previous century. Those practices significantly impacted on the distribution of constitutional power over public finance, particularly the balance of primary and delegated financial authority. 76

2.2.1 Statutory public borrowing

From the turn of the 18th century, it became settled practice to rely on parliamentary legislation to borrow money to fund the English (then British) state. Alike statutory taxation and appropriation (§2.1.1), that development was driven by the financial demands of Britain’s military and imperial expansion: the “fiscal-military state”.236

Three aspects of the legal practices of public borrowing are presently salient. First, the push of long and short-term public borrowing onto the statute book, from 1692. Secondly, the statutory establishment of the Bank of England which provided the British state with emergency finance and managed its debt, which unfolded throughout the 18th century. Thirdly, the provision of a standing appropriation to service existing and future public debt by reference to the consolidated fund which was only achieved in the 18th century’s closing decades.

Legislative borrowing authority

The late-17th century witnessed the establishment by statutory authority of the corpus of debt liabilities which would later be given the title “the National Debt”.237

Before that period, debt incurred by English monarchs did not necessarily have a legislative basis. Despite examples of parliament pledging specific tax revenue as security for borrowings, the Monarchs could obtain large amounts of debt- finance without parliamentary approval.238

That non-statutory foundation for public borrowing powers would not endure and the legal authority to issue both long and short-term public debt would come to have a settled legislative basis. That push onto the statute book occurred for two reasons. The first was a need for revenue which far outstripped fiscal

236 Brewer (1989), 130, or the “fiscal-naval state” O’Brien (2005), ‘Fiscal and Financial Preconditions for the Rise of British Naval Hegemony 1485-1815’. 237 Maitland (1908), 438-9. 238 Ashton (1957), ‘Deficit Finance in the Reign of James I’ and (1960), Crown and Money Market. 77 receipts, which caused large scale recourse to debt financing (as the economic review in §2.1.1 explained).239

The second, and critical, reason for the push of public borrowing onto the statute book was the parlous state of the Monarch’s personal credit. Charles II’s decision to force a haircut on certain of his creditor in the debt re-structuring episode known as the “Stop of the Exchequer” in 1672,240 was “undoubtedly a severe blow to the English Monarch’s financial prestige”.241 The lesson learned by disappointed financiers was that “had loans been ‘on parliamentary security’, instead of being backed only by the Crown’s promises, they would not have been repudiated.”242

Obtaining parliamentary security meant asking Parliament to enact legislation authorising the issue of debt and linking debt repayments to particular streams of revenue. The ground-breaking example of such a parliamentary secured debt issue occurred in 1692, with the passage of an Act of 1692 (4 W & M)authorising the raising of funds by way of a tontine or annuities:243 “A sum of £1m was to be lent to the government at an interest of 10% until midsummer 1700 and 7% thereafter. That interest was secured on new excise duties settled for ninety-nine years from 25 January 1693 — the period chosen was presumably a straight adoption of the term common in conveyances of land. The interest was to be paid to each contributor pro rata and tax-free during his own life or the life of someone he named (his nominee) until only seven nominees were left. It would then abate as each remaining nominee died. … The Act provided that if the £1m wanted had not been lent on a tontine basis by 1 May 1693, the rest could be taken up by the sale of 14% single-life annuities…tax-free. A contributor’s interest in both the tontine and the life annuities could be assigned to a third party.”

239 Dickson (1960), The Financial Revolution in England, 46-47. 240 Ibid, 44-45. As Dickson explains, the “stop” was only a “partial repudiation of part of the Crown’s debts”, eventually resolved by paying only “ten shillings in the pound with interest” and “other sectors of credit [administered by the Exchequer] — loans in anticipation of customs, excise and direct taxes — continued to function smoothly.” 241 Ibid, 43. 242 Ibid, 45; Kier (1955), The Constitutional History of Britain, 275. 243 Dickson (1960), 53. 78

From that Act, “it is usual to date the foundation of a national debt, a debt contracted upon the security of act of parliament.”244 Being established through tontines and annuities, that debt was long-term.

Where short-term debt was concerned, prior to the 1690s England obtained short-term finance from diverse sources, only some of which had parliamentary backing. Prior to the 1690s, the main sources of short-term debt (Exchequer “tallies” and “bills”) were not comprehensively regulated by legislation.245 The basic design of both forms of short-term debt was to pledge receipts from a particular tax to the holder of a tally or bill. As issues of short-term debt exceeded tax receipts in the 1690s, it was re-structured and secured by parliamentary legislation. For tallies,246 the critical enactment was an Act of 1697 which provided a consolidation of various Exchequer receipts into a general pool to satisfy outstanding tallies: the “First General Mortgage”.247 For Exchequer bills, the Land Bank Act 1696 (7 & 8 Wm III) provided “authority to make out” bills up to “£1,500,000 … carrying 3d% a day interest (4% p.a.)”.248 The needs of the War of Spanish Succession quickly exhausted the mandate provided by that Act and later enactments were required, authorising “new and much larger amounts” including “£5.6m” for “supply in 1707, 1709 and 1713”.249

Parliament’s involvement with the details of public borrowing only intensified throughout the 19th century. Discrete legislation continued to be passed authorising specific long- and short-term debt issues, often with very detailed provisions as to interest rate and maturity. An example for long-term debt to finance the Crimean War appeared in an Act of 1854 (UK) (s 1):

244 Maitland (1908), 439. 245 Other forms of very short-term credit (such as that provided by the City of London) were “authorized by Parliament and charged on specific direct taxes”, but were economically marginal: Dickson (1960), 343. 246 There was some evidence of parliamentary involvement in Exchequer tallies from 1665: Act of 1665 (7 Ch II); Ibid, 351. 247 Dickson (1960), 353-5. 248 Ibid. 249 Ibid, 373. 79

It shall be lawful for the Commissions of Her Majesty’s Treasury to issue Exchequer Bonds, bearing Interest from [8 May 1854]… at Three Pounds Ten Shillings per Centum per Annum, to be paid off at Par on [8 May 1858].

Sovereign debt was also authorized (as §2.1.2 noted) by annual expenditure legislation which contained detailed provisions regarding interest and maturity. Nineteenth century Supply Acts included provisions of the following kind:250 The Commissioners of the Treasury may borrow from time to time on the credit of the said sum of [£6million] any sum … of equal or less amount…and shall repay the moneys so borrowed with interest not exceeding [5%pa] out of the growing produce of the Consolidated Fund at any period not later than the next succeeding quarter to that in which the said sums were borrowed.

Short-term statutory debt continued to be dealt with on a piece-meal basis until the milestone enactment of the Treasury Bills Act 1877 (UK). That Act applied where “the Treasury have authority under any Act of Parliament (passed either before or after the passing of this Act) to raise money by the issue of Exchequer bills or of Treasury bills” (s 3). Within that confine, the Act conferred standing power on the Treasury to determine the rate of interest on all Treasury Bills,251 and charged the payment of all Treasury Bills on the Consolidated Fund. The Act also provided a standing authority to re-finance any short-term debt issued within the financial year (s 6), and permitted debt issues in any denomination and in any currency.252

Despite the prominence afforded the Treasury in most legislation concerning sovereign borrowing, much important debt finance work was done by the Bank of England.

250 Eg Consolidated Fund Act 1872 (UK), s 2. 251 The maturity of Treasury Bills being limited by s 4 to 12 months. 252 Wormell (1999), volume VI, 96-98. 80

Bank of England

The Bank was itself “instituted” as part of a major long-term debt financing of the ”war with France”:253 after the tontine Act of 1692, establishing the Bank was the next major parliamentary financing venture. Its founding Act of 1694 (5 & 6 W & M) (initially called the “Tunneage Act”, but later known as the “Bank Of England Act”), authorised the Treasury to borrow £1.2m at 10%pa secured against various taxes on imports and beverages (ss 16, 33), with any shortfall falling on “so much of any Treasure or Revenue” held by the Crown. In exchange for the provision of credit to a government whose financial fortunes were flagging, the subscribers were given stock and significant banking privileges as a corporation: importantly, capacity to deal in (ss 24-27): Bills of Exchange, or in buying or selling Bullion, Gold or Silver, or in selling any Goods, Wares or Merchandize whatsoever, which shall really and bona fide by left or deposited with the said Corporation for Money lent and advanced thereon Combined with a permission to issue assignable bills of exchange (s 28), that provision gave the subscribers significant powers to act as financers in London.

A since forgotten feature of the Bank of England Act 1694 was its regulation of the terms under which the Bank could lend money to the Crown (s 29): if the Governor…or other Members of the [Bank]…shall upon the account of the said [Bank]…advance or lend to theire Majesties…any su[m]me or su[m]mes of money by way of Loan…fonds of the Revenues now granted…other than…such fond…of the said Revenues only on which a creditt of Loan is or shall be granted by Parliament that then the said Governor … or other Members of the said [Bank]…being thereof lawfully convicted shall for every such offence forfeite treble the value of every such summe … of money soe lent… By that provision, parliamentary permission was required before the Bank could legally advance or lend money to the Crown.

253 McLeod (1875), Theory and Practice of Banking, 415. 81

Throughout the 18th century, the Bank served as one of the British crown’s lenders of last resort, through a process of trading cheap credit to the government for the grant of statutory banking privileges.254 In 1697, the Bank lent £1m in exchange for monopoly banking status in London, an extension of its incorporation, tax-exempt status for its stock and exemption from foreign attachment.255 In 1709, the Bank’s stockholders advanced £400,000 at 6% to the Crown and permission to double their capital stock, in exchange for a 4% haircut on the interest of their original stock.256 In 1713, the Bank advanced the Crown £100,000 secured on 3% Exchequer Bills in exchange for an extension of its Charter to 1742.257 In 1716, the Bank forgave around £256,000 of Crown debt in exchange for exemption from the usury laws and the indefinite prolongation of its existence as a corporation.258 In 1742, 20 years after absorbing part of the ruined loan portfolio of the South Seas Company in 1720,259 the Bank lent £1.6m interest free to the Crown in exchange for a monopoly on bank notes payable on demand or within 6 months of issue.260 In 1746, the Bank traded a cancellation of £986,000 Exchequer Bills in exchange for a 4% annuity.261 In 1746, the Bank swapped an “absolute gift of 100,000 to the nation, and a loan of 1m on Exchequer bills for two years at 3% interest” for a renewal of its charter for around 20 years.262 A subsequent charter renewal in 1781 was exchanged for an advance to the Crown of £2m at 3% for three years.263

A milestone was reached in 1793, when (under Pitt’s direction) legislation was passed which released the Bank from the statutory prohibition on advancing to the Crown without parliamentary approval.264 Thereafter followed a period of

254 McLeod (1875), 406–46. 255 Act of 1697 (8 & 9 Will III) 256 Act of 1709 (8 Ann). 257 Act of 1713 (12 Ann). 258 Act of 1716 (3 Geo I). 259 Detailed in McLeod (1875), 424-8. 260 Act of 1742 (16 Geo II). 261 McLeod (1875), 431. 262 Ibid, 433. 263 Ibid, 434. 264 Act of 1793 (33 Geo III). 82 high-volume (and essentially forced) lending by the Bank to the Crown, the diminution of the Bank’s gold reserves and a currency crisis in England.265

By 1819, the statutory restriction on the Bank lending to government without parliamentary approval was restored,266 but customarily displaced by annual finance legislation which permitted the Bank to absorb and re-sell a proportion of short-term Treasury debt authorised to be issued under Supply and Appropriation Acts.267

Eventually, standing authority to finance cash deficits was provided by a combination of the Audit Act 1866 (cf §2.2.3) and the Treasury Bills Act 1877. That latter Act cemented the Bank’s position as the agent for short-term public stock, providing that all Treasury Bills “shall be issued by the Bank of England”, granting the Bank an “allowance” for “the management of Treasury bills” and provided standing authority for the Bank to “lend to Her Majesty, upon the credit of Treasury bills, any sum or sums not exceeding in the whole the principal sums named in such bills” (ss 8, 11, 13).

The Treasury Bills Act illustrated the Bank’s preeminent status as the intermediary between the Treasury and the sovereign debt market: authorizing the Bank to be the chief agent for the Treasury’s debt issues by the mid-19th century. Parliament actively facilitated that position by enacting legislation which authorized the Bank to “take, accept and receive” debt instruments issued by the Treasury and “to advance or lend to Her Majesty” up to a certain credit limit.268

An enduring feature of that statutory practice was the growth of the Bank’s “Ways and Means Advances” to Treasury. Those advances were described by an internal Bank memorandum as being a power:269

265 McLeod (1875), 446. 266 Bank of England Act 1819 (UK), s 1. 267 Eg, Exchequer Bills Act 1838 (UK) s 7; Consolidated Fund Act 1848 (UK). 268 Consolidated Fund Act 1838 (UK) s 5. Words to a similar effect can be found throughout the 18th and 19th century statute books. 269 Wormell (1999), volume VI, 118. 83

given to the Treasury…to borrow temporarily…by statute… [i]n order to prevent a stoppage of the public services, which may arise by reason of insufficiency of revenue or other distributing emergency. Ways and Means Advances were not interest-free, but were repayable “without notice, whenever the state of the Exchequer balance admits of an issue.”270 Ways and Means Advances were not insignificant during the late-19th century (as §1.1.1 noted), and they increased exponentially during the World Wars (§3.2.1) and would occupy a critical monetary financing role in 2008 (§5.1.2).

Standing charge on the consolidated fund

The charging of all debt servicing expenditure on the consolidated fund (and Britain’s collected fiscal revenue) was a curious development. Although it had profound ramifications for Britain’s debt finance profile, it stemmed from discontent with a poorly managed system of public accounts, rather than a desire to bolster the efficiency of Britain’s public debt.

From the early 18th century, sovereign borrowing legislation linked the repayment of debt to receipts from a particular stream of tax revenue,271 creating an elaborate system of “hypothecated [secured] taxes”, wherein holders of public debt had an interest in “this or that mode of taxation”.272 That system had the benefit of confining the creditor’s rights against the British government to a limited stream of revenue, but it had damaged the health of Britain’s public administration, particularly in the opportunities for graft and waste which arose from the tangle of different public accounts which had to be kept to mark each fiscal receipt to each repayment (cf §2.2.3). So much was explained by the voluminous 13th Report of the Commissioners appointed to Examine, Take, and State the Public Accounts of the Kingdom, published in 1785 (“Audit Report (1785)”).273

270 Ibid, 120. 271 As in the tontine Act of 1692 (4 W & M) and the Bank Of England Act 1694 (5 & 6 W & M). 272 Maitland (1908), 441; Redlich and Ilbert (1903), The Procedure of the House of Commons, 163– 164. 273 Audit Report (1785), 55. 84

Earlier attempts had been made to consolidate fiscal receipts into a single fund in order to provide a consolidated source from which to pay down the national debt. In 1714 and 1716, various funds were created with the intention of pooling tax receipts to retire the national debt. 274 Those experiments failed, as successive governments raided the funds such that they were “no longer a means of debt reduction but an instrument in the management of the very funds [they] had been established to abolish”.275

The solution proposed in the Audit Report (1785) was simple: bring the overwhelming majority of revenue receipts into a single fund and secure all public debt against that fund. The consolidation would ensure that the “one great Fund of Revenue, composed of the Annual Income of the State will be the ample Security to every Public Creditor for the Payment of his Annuity; and the collateral Security to that Fund, the Property of the Nation.”276

An Act of 1787 (27 Geo III) met that report’s ambition, establishing the “Consolidated Fund” as the source of all major past and present tax receipts and then charged those pooled funds with all major past and future debt liabilities (ss 52–53).

The charging of debt issues on the Consolidated Fund provided a legal basis (additional to the requirement for legislative authorization of public borrowing) for the “parliamentary security” enjoyed by public-creditors. By the mid-19th century, provisions concerning “interest and repayment of principal money” closely prescribing the manner of re-payment from the Consolidated Fund were included within the discrete Acts authorizing the issue of long-term debt:277 The Interest on all Exchequer Bonds issued under the Authority of this Act…shall be charged upon and issued out of the growing Produce of the Consolidated Fund of the United Kingdom.

274 See, eg, Act of 1714 (1 Geo I) (‘aggregate fund’); Act of 1717 (3 Geo I) (‘sinking fund’); Dowell (1884), volume 2, 458. 275 Brewer (1989), 99, 276 Audit Report (1785), 64. 277 Act of 1854 (UK), s 4. 85

Annual appropriation legislation also secured short-term debt on the Consolidated Fund:278 Treasury may borrow from time to time on the credit of [the amount granted] any sums … not exceeding … the sum of [£5.4million], and shall repay the moneys so borrowed with interest not exceeding [5% p.a] out of the growing produce of the Consolidated Fund…Any sums so borrowed shall form part of the said Consolidated Fund.”

Impact on distribution of financial authority

Parliament delegated very little of its financial authority through the legal practices of sovereign borrowing. The detailed legislative treatment of the commercial structure of short and long-term debt, and the linking of that debt to the annual parliamentary supply procedure, maintained a large measure of primary authority. Although some authority was delegated by latter-19th century legislation giving Treasury standing powers to borrow to fund cash deficits and refinance debt, the mainstay of authority over debt-finance remained with Parliament. Similarly, Parliament maintained high levels of legal authority over the Bank of England’s public borrowing powers, by requiring advance statutory consent before finance could be extended to the Crown.

2.2.2 Executive financial initiative

From the 18th century’s outset, the executive was allocated the exclusive power to formulate, originate and amend most public financial legislation: the financial initiative. Thereafter, the Treasury would obtain practical responsibility for the preparation of the “budget” and legal responsibility for the oversight of financial activity by the rest of the executive (often called “treasury control”). Parliament’s hard-won authority to establish the legal conditions of public finances remained formally intact, but stripped of substance as the political force of parliamentary self-government was traded-off against the need for efficient and economical public finances.

278 Consolidated Fund Act 1872 (UK), s 3. 86

Rule by financial assembly

While it was clear from the 17th century’s conclusion that all economically effective taxation and public expenditure would require parliamentary legislation, it was not settled whether that constitutional practice necessitated a form of “financial rule by assembly”.

Precisely how unsettled was revealed in an episode of the parliamentary session of 1705-6 which saw the presentation of petitions to the Commons for specific grants “either claiming an arrear of pay as officers, or making some other demand upon the public”.279 Those petitions mainly concerned claims for funds for military expenses:280 promoted by Members who were friends to the parties, and carrying with them the appearance of justice or of charity, induced the rest of the House to wish well to, or at most to be indifferent to their success; and by this means large sums were granted to private persons improvidently, and sometimes without sufficient grounds. The Commons responded to that opportunism by resolving that: this House will receive no Petitions for any Sum of Money, relating to publick Service, but what is recommended from the Crown.”281 A mere resolution (without effect beyond a single session) did not stymie the practice of petitioning Parliament for funds, which gradually resumed. The final straw settled in 1713, when the 1706 resolution was enacted as a standing order the substance of which endured.282

Beyond the immediate causes of the 1706 resolution, Brewer explains that allocating the legislative initiative to the “Treasury front bench” was part of a broader move to allocate public financial responsibility to the growing executive:

279 Hatsell (1818), Precedents of Proceedings of the House of Commons, 241-2. 280 As disclosed in the Commons Journal, funding was sought for: “Army debentures” (21/11/1705 at 33) “Irish army arrears” (22/11/1705 at 33), “clothed” a “Marine regiment” (26/11/1705 at 39), “Irish arrears” (7/12/1705 at 56), (16/1/1706 at 90), “Army arrears” (18/12/1705 at 69), (14/1/1706 at 86), (22/1/1706 at 103), (24/1/1706 at 107), “Army debts” (15/1/1706 at 88), (17/1/1706 at 91), “Debentures on Irish forfeitures” (23/1/1706 at 106). 281 Hatsell (1818), 241. 282 Ibid, 242. 87

“if, under William, government fiscal policy was constantly thwarted, after 1702 it was almost never checked by parliamentary opposition.”283 The parliamentary practices which grew thereafter “gave the Treasury a monopoly over fiscal legislation”,284 which has been identified as the primary element in the “constitutional arrangement” which “gave the Treasury preeminence” in the “national financial arrangements”.285 The resulting constitutional position prevented the introduction of any financial legislation without Crown permission.

At the level of parliamentary procedure, a labyrinthine maze of standing orders and parliamentary custom immunized the Treasury’s expenditure (supply) and taxation (ways and means) proposals from scrutiny and amendment by the greater body of parliamentarians. The 1893 10th edition of May’s Treatise on the Law, Privileges, Proceedings and Usage of Parliament (co-authored by the Clerk of the Commons, Reginald Palgrave) explains that:286 The constitutional principle which vests in the Crown the sole responsibility over national expenditure, and which forbids the Commons to increase the sums demanded by the Crown for the service of the state is strictly enforced in the committees of supply and ways and means. That edition explains that the standing orders required that “no amendment” could “be proposed” (nor “a condition or an expression of opinion to a grant” or alteration of the “destination” of) to an estimate without withdrawing “the original estimate”. Presenting “a revised estimate,287 and proposed reduction to an estimate would only be permitted if “of a substantial and not of a trifling amount”.288

Those standing orders, coupled with the parliamentary sequence of annual finance legislation (first a Supply Act, then an Appropriation Act) reduced (almost to nothing) the opportunity to amend financial legislation. Because the

283 Brewer (1989), 121 284 Thomas, (1971) 69, 72. 285 Chester (1981), 205. 286 Palgrave and Bonham-Carter (1893), 580. 287 Ibid, 580. 288 Ibid, 583. 88

Appropriation Act was passed after aggregate sums of “supply” had already been legislatively granted by Supply Acts, amendments to change the quantum or subject-matter were ruled irrelevant and out of order.289

Taxation bills stood in a slightly different position. Although “[n]o augmentation of a tax or duty asked by the Crown [viz, Treasury]…can be proposed to [Ways and Means], nor tax imposed, save upon the motion of a minister of the Crown”290, the Commons could vote to reduce or refuse tax measures in Ways and Means. Procedural protections abounded for the right of parliamentarians to “propose…to reduce a burthen upon the people”.291

At the level of financial administration, the impact was profound. Treasury obtained control over the content and presentation of the estimates and thereby the power over the origination of expenditure, tax and borrowing legislation. The political impact of that power was evidenced in the importance attributed to the annual “Budget”.

The “Budget”

A considered study of the Commons in the 18th century observes that only conjecture supports the identification of an annual Budget prior to the 1750s.292 While the precise parliamentary out-workings of the Budget evolved considerably throughout the 18th century, by the 1770s it had consolidated into a presentation by the Chancellor of the Exchequer to Ways and Means of “the state of finances during the sessions, the ways and means he proposes of raising the supply, the certain and probable expenses of the year, the new taxes, and in general the revenue and sources of the empire.”293

Despite its political grandeur, the Budget did not necessarily indicate the commencement of legislation giving effect to the government’s financial

289 Ibid, 562. 290 Ibid, 589. 291 Palgrave and Bonham-Carter (1893), 567. 292 Thomas (1971), 78-9. 293 Ibid, 79. 89 proposals. “Many of the taxes would already have been voted by delivery of the budget speech” and the government’s expenses had already “been voted in the Committee of Supply”.294 In that sense, the Budget was more a political than legislative event.

Treasury control

As the 18th century progressed, the Treasury’s authority over the formulation of financial proposals would be fused with a monopoly on legal authority to control the broader executive’s use of public money. That monopoly would later be labeled “Treasury control”.295

Treasury control had two aspects:296 “legal control” (to ensure spending occurred within the legal limits set by an Appropriation Act) and “economic control” (to ensure economical spending options were pursued by the broader executive).

Although existing de facto from the 18th century’s beginning,297 from the 1770s, Treasury’s control received statutory backing.298 The early legal framework was provided by three Acts passed between 1783-1785 which gave the Treasury power to fix salaries of senior officers of the civil government, provide compensation for the former-holders of abolished venal-offices, and giving the Treasury significant powers over recently created audit officers.299 So significant was the extent of parliamentary regulation of the Treasury’s control functions, that the “Treasury was the first department to cease to exist purely or largely on prerogative powers”.300

Treasury’s legal control made it the predominant authority to ensure that the wider executive complied with appropriation legislation, while its economic

294 Ibid, 79. 295 Roseveare (1969), The Treasury; (1973) The Treasury 1660 – 1870. 296 Chester (1981), 204-5. 297 Brewer (1989), 76. 298 Chester (1981), 193-207. 299 Act of 1782 (23 Geo III); Act of 1783 (23 Geo III); Act of 1785 (25 Geo III). 300 Chester (1981), 199. 90 control gave it authority over the administration of executive departments, extending to “establishment, pay and conditions” of the civil Departments. The same degree of control was not enjoyed over military departments, although military estimates were required to be submitted to Treasury before being presented to Supply and Treasury approval was required before the War Office could vire between votes (§2.1.2).301

That concentration of legal and economic control in the Treasury conferred on it a special position within the executive. By 1810, senior Treasury officials explained the Treasury’s position as discrete from the wider executive: “a superintending and directing, not an executive department.”302 By 1855, it was confidently stated that the Treasury was:303 the chief office of the Government…two-thirds of the Civil Establishment are directly subordinate to it, and the expenditure of the remaining third is under its superintendence. No estimate can be laid before Parliament, no new appointment can be created, and no alteration can be made in any Civil or Military allowances, without its sanction. The whole Public Service is, therefore, either directly or indirectly subjected to the influence of this Office.” The only serious constraint on Treasury’s economic control was the high-level policy decisions of Cabinet, which the Treasury was (by ministerial hierarchy) bound to follow,304 but the position of the Chancellor of the Exchequer in Cabinet reduced the likelihood of conflict between Treasury and Cabinet.

Impact on distribution of financial authority

The twin developments of the financial initiative and treasury control in the 18th century had a profound impact on the distribution of financial authority.

By allocating the financial initiative to the executive, Parliament delegated to the Treasury the sole authority to formulate public financial proposals and to

301 Ibid, 206. 302 Ibid, 204 (quoting Assistant Secretary to HMTreasury, George Harrison). 303 Ibid, 208 (quoting Assistant Secretary to HMTreasury, Charles Trevelyan). 304 Ibid, 208. 91 originate appropriation and taxation legislation. No less momentous ramifications flowed from the legal practices concerning treasury control, whereby Parliament delegated to Treasury supervisory authority over the receipt and outlay of public funds by the broader executive government. By the exercise of that authority, Treasury assumed absolute superintendence over the broader executive’s use of money.

Once it is appreciated that the Treasury was (not only) the executive institution with practical authority to exercise the financial initiative and (also) possessed unrivalled superintendence over the broader executive’s use of money, it emerges as the “financial executive”: formulating the economic content of parliament’s financial legislation and directing the wider executive’s use of public money. As §3.1.2 explains, the Treasury’s position as the financial executive was exported throughout the British Empire; embedding financial executives within parliamentary constitutional systems.

2.2.3 Systematic public finance

The final set of legal practices concerned the establishment of consolidated and systematic institutions of public account and audit. Their development breaks into two time periods: before and after 1866.

Before 1866

From the 1700s-1866, the patchwork of enactments concerning expenditure, borrowing and Treasury control failed to provide a systematic legislative treatment of public finances and provided no system of audit which was independent of the Treasury. That patchwork was widely blamed for waste and graft in public finances.

92

Addressing those concerns, Parliament appointed Commissioners of Audit in the 1780s, whose statutory mandate charged them with recommending a “System of strict Economy in the Administration of the Public Revenue”.305

The activities of the Commissioners uncovered extreme maladministration of the public accounts. For example, they “discovered that the Pay Offices of the Navy and Army had been £75 million in arrears for more than twenty-four years”306 and that in 1780 “the expenses of Exchequer operations met from public funds was £8,000, but the fees and poundage collected from government departments and the public amounted to more than £82,000. This left £74,000 to be shared out amongst the aristocratic sinecurists.”307

In addition to recommending the establishment of the Consolidated Fund (§2.2.1), the Commissioners also recommended audit reforms designed to create an institutional buffer between the Treasury (as financial executive) and Parliament. The Board of Audit was created in 1785, significantly expanded in 1806 and eventually assume control over all audit functions in 1835. By 1856, it was combined with the Exchequer to create a “fused comptrolling and auditing body”,308 but its chief weakness remained its practical “domination” by the Treasury.309 Its institutional position was so weak that it could not report to Parliament, without first obtaining treasury permission.310

A large gap was left between the hope for, and reality of, efficient public finances. Gladstone drove the Audit Act 1866 through that breach.

After 1866

Gladstone’s role in systematising British financial administration has been the subject of wide scholarly analysis,311 and a recent review of the field concluded

305 Dewar and Funnell (2012), 61. 306 Ibid, 62. 307 Ibid, 65 308 Ibid, 100. 309 Ibid, 70. 310 Ibid, 68-72. 311 The sources are collected in Campbell (2004), ‘Sound Finance’, 14-19. 93 that he “set a standard in government finance that overshadowed all contemporary and subsequent Chancellors of the Exchequer”.312 That standard was set by reference to an “ideology” of “sound finance”, which imposed the “simple but strict” stipulates of “balanced budgets, imposition of taxation to make up a deficit, reduction of existing debt, accurate and transparent annual budget statements, and responsible Parliamentary control of expenditure.”313 Gladstone’s implementation of sound finance was so profound that it has been labelled a “fiscal constitution”.314

Gladstone’s fiscal constitution was not guided by perfecting representative democracy, but optimising financial efficiency. His reform project:315 was not primarily motivated by abstract or constitutional concepts about accountability to Parliament. Rather, the driving force…was his obsession with economy in public spending. He saw better information on departmental spending and an effective audit, preferably under Treasury direction, as key factors in controlling expenditure and eliminating extravagance and waste. Political and economic conditions made that project attractive, “particularly the increase in public expenditure on the Crimean War in the 1850s, as public expenditure grew by 58% in absolute terms: making demands for financial restraint in government even more popular.”316

The Audit Act 1866 was Gladstone’s legislative centrepiece and the “pinnacle of nineteenth-century developments in public financial accountability and audit”.317

It had 3 critical features.

The first was the creation of the office of “Comptroller and Audit-General” (“CAG”), as an officer appointed by the Crown, prevented from holding any other

312 Ibid, 9. 313 Ibid. 314 Daunton (2001), Trusting Leviathan, 104. 315 Dewar and Funnell (2012), 97. 316 Ibid. 317 Ibid 80. 94

Crown-office and dismissible only on address of Commons and Lords(s 3), with a salary paid from the Consolidated Fund (s 4). Thus, the CAG enjoyed a degree of institutional separation from the Treasury and the rest of the executive. The Audit Act 1866 did not, however, completely insulate the CAG from the Treasury. Prominently, the Treasury retained the power to staff the “Department of the Comptroller and Auditor-General” and to veto “orders and rules for the conduct of internal business” within that Department (ss 8 and 9).318

The second critical feature was the conferral of “comptroller” functions on the CAG, which were tethered to the Treasury’s economic control. The CAG’s comptroller functions involved scrutinizing Treasury requests for money under both annual (“supply”) and “standing” appropriation legislation (ss 13 and 14). The essential feature was to check that the Treasury’s requests were in conformity with legal limits set by appropriation legislation, which left (both) the Treasury’s authority to vire and its economic control of the broader executive untouched.

The third critical feature concerned the CAG’s audit functions, which involved examining whether expenditure had occurred in accordance with the legal limits of annual and standing appropriation legislation. Accounts of standing appropriations were prepared by Treasury, examined by the CAG and reported to Parliament (s 21).319 More detailed provision was made for preparation and audit of the “appropriation accounts…of the several supply grants contained in the Appropriation Act of each year” (s 22).320 The CAG was to examine those accounts and report to Parliament on any legally unauthorized expenditure.

Alike the CAG’s comptroller functions, the Audit Act 1866 left the Treasury wide authority in relation to the CAG’s audit functions. It imposed no freestanding obligation on executive departments to prepare “appropriation accounts”, rather the Treasury was given power to determine “by what departments such

318 The audit functions of the CAG were interlinked with the “Public Accounts Committee”, first appointed on Gladestone’s urging in 1861: Ibid, 104. 319 Only repealed in 1968 by the National Loans Act 1968 (UK), s 24 (§3.2.2). 320 Eventually repealed by the Government Resources and Accounts Act 2000 (UK), s 29 (§3.3.3). 95 accounts shall be prepared and rendered to the [CAG]” and left the “plan of account books and accounts…under the superintendence of the Treasury” (ss 22 and 23).321 The method of “examination” by the CAG expressly permitted the Treasury to retrospectively vire if the CAG discovered expenditure had been made without “the authority of the Treasury” (s 27).

The audit provisions of the Audit Act 1866 had a profound impact on financial administration of annual Appropriation Acts, particularly excess votes. Section 26 provided: Every appropriation account when rendered to the [CAG] shall…shall… contain an explanatory statement of any excess of expenditure over the grant or grants included in such account. The effectiveness of s 26 is illustrated in the subsequent reckoning of excess expenditure. Retrospective appropriation of excesses in 1869 stood at +10% of total annual appropriations and the estimates for 1870 include excesses going back to 1864.322

The Audit Act 1866 also affected matters beyond accounting and audit, most prominently in the standing statutory authority it provided for the Bank of England to advance money to the Treasury to fund cash shortfalls. Section 12 conferred authority on the Bank to advance short-term finance to the Consolidated Fund, upon a request of the CAG and Treasury “to an amount not exceeding in the aggregate of” any “deficiency in the” “income of the Consolidated Fund”. That provision wrapped-up the CAG in the process of parliamentary consent (to fund cash-deficits) for the purposes of the legislative regulation of the Bank’s lending to the Crown.323

321 The modern position of “departmental Accounting Officers arose from the deceptively simple provision in s 22 of the 1866 Act that the duty placed on departments to prepare and submit appropriation accounts ‘shall be construed as including any public officer or officers to whom that duty may be assigned by the Treasury’.”: Dewar and Funnell (2012), 113. 322 Commons Journal, 14 March 1870 cc 1954-1958. 323 Wormell (1999), volume VI, 121. It was repealed (without comment) by the Finance Act 1954 (UK). 96

Impact on distribution of financial authority

The Audit Act 1866 had important impacts on the distribution of financial authority in Britain.

The creation of the CAG, appropriation accounts and the establishment of a systematic process of financial scrutiny were limitations of the very significant authority enjoyed by the Treasury. The effectiveness of those limitations can be seen in the regular appearance from 1866 of excess votes: revealing the difficulty (after 1866) of concealing financial maladministration or profligacy within spending departments or the Treasury. Those aspects of the Audit Act 1866 distributed important shares of financial authority to Parliament.

Other aspects of the Audit Act 1866, however, did little to fill deficits in parliamentary financial authority. Importantly, the Audit Act 1866 did not quash Treasury’s legal control over the form of accounts used by departments or its economic control over departmental spending. Additionally, the cash-deficit borrowing authority in the Audit Act 1866, gave delegated short-term debt financing authority to the Treasury, although the need to seek the CAG’s permission limited the extent of that delegation. Critically, the Audit Act 1866 maintained the Treasury as the superintendent of government accounts: reinforcing its position as the financial executive.

2.3 Judges and public money

Throughout the 18th and 19th centuries, the judiciary engaged with various aspects of Britain’s public finances, but never assumed a systematically integrated position in the financial activities of government.

Taxation litigation represented the high point of judicial involvement, but judicial hostility to tax legislation did little to bolster Parliament’s revenue raising policies (§2.3.1). Mid-19th century explorations with judicial review of appropriation legislation failed to develop into a settled practice of judicial 97 review of public expenditure (§2.3.2) and no discernible judicial practices developed regarding the legal limits of public borrowing (by the Treasury) or lending (by the Bank) (§2.3.3).

2.3.1 Exchequer litigation

The growth in dominance of statutory taxation (§2.1.1) did little to change the judiciary’s established role as the constitutional guardian of claims to the legality of taxation, as judicial practice regarding taxation developed in the 17th century continued through the 18th century. From the 19th century, the judiciary pursued a pro-taxpayer position, which fitted the prevailing constitutional thought regarding the protection of property rights, and presented significant obstacles to the effectiveness of statutory taxation.

Continuity in judicial review of tax

The position of the common law judiciary as superintendents of the legality of crown demands for revenue was not materially affected by the settling of constitutional practices concerning statutory taxation (§2.1.1).

From a long time before the Civil War, the Exchequer (in its judicial mode)324 had exercised jurisdiction in cases between Crown and subject concerning the legality of public revenue. A “court of crown revenue”,325 the Exchequer was established “principally to order the revenues of the Crown, and to recover the King’s debts and duties”.326

Those duties involved giving answers to the questions “what thing belongs to the King, which brings revenue to him, and what not, and what is the law touching the same”.327 Prior to the 17th century, those answers did not predominately

324 “[T}he Revenue Side of the Exchequer”, described as distinct from the “Plea Side of the Exchequer” as “a general Court of Common Law for the adjudication of Civil Pleas: Price (1830), A Treatise on the Law of the Exchequer, 50, 51. 325 Subtitle of Price (1830). 326 Ibid, 2 quoting Blackstone. 327 Ibid, 3, quoting Plowden quoting The Case of Mines (1816). 98 concern parliamentary enactments, but on claims regarding the scope of common law and custom. With the push of taxation onto the statute book “arose the immense fabric of the present code of revenue statute law” (as contemporaneously described)328 and a concomitant downgrading of the relative importance of questions concerning the Monarch’s prerogative and hereditary legal entitlements. However, “[t]he writs and processes which had been framed for the getting in of the old revenue were applied, with certain necessary alterations, to the recovery of the new.”329

“The principle of all fiscal legislation”

As the role of the judiciary in resolving disputes between state and subject regarding taxation travelled into the realm of statutory taxation it developed a taxpayer- (or private-property-) protecting approach to the interpretation of tax legislation.

The principle underlying that approach was neatly expressed in Partington v Attorney General (1869),330 a 1869 case concerning the narrow question whether probate duty (an estate tax) was payable on an estate structured (creatively) across England and the USA. Although finding in favour of the revenue, Lord Cairns isolated the core taxpayer-protecting principle:331 As I understand the principle of all fiscal legislation it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. That general principle translated into a rule for the “strict”332 interpretation of taxation statutes.

328 Ibid, 26. 329 Ibid, 29. 330 (1869-70) LR 4 (HL) 100. 331 Ibid, 122. 332 Pryce v The Directors and Company of the Monmouthshire Canal and Rail Way Companies (1879), 206. 99

An 1875 text on statutory interpretation exposes the link between that rule of “strictness” and the judiciary’s taxpayer-protecting approach to tax legislation:333 The subject is not to be taxed unless the language by which the tax is imposed is perfectly clear and free from doubt. In a case of doubt the construction most beneficial to the subject is to be adopted. That same text exposes the potential (fiscal policy-protecting) flip-side to the taxpayer-protecting interpretation of tax statutes:334 [i]n America…revenue laws are not…construed with great strictness in favour of the defendant. They are regarded rather in their remedial character; as intended to prevent fraud, suppress public wrong; and promote the public good; and are so construed as to most effectually accomplish those objects. That attitude never wholly migrated across the Atlantic, and by the 19th century’s conclusion, the taxpayer-protecting approach of the common law judiciary became evermore potent.

Its acme was expressed in an early 20th century case:335 Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax. While the taxpayer protecting approach did not invariably lead to success for the revenue,336 it was the defining feature of the common law judiciary’s attitude towards tax legislation from the mid-19th century.337

333 Maxwell (1875), On the Interpretation of Statutes, 259. 334 Ibid, 261. 335 Commissioners of Inland Revenue v Duke of Westminster (1936), 19. 336 Cf Inland Revenue Commissioners v Sheffield and South Yorkshire Navigation Company (1916). 337 Stebbings (2009), ‘Consent and Constitutionality in Nineteenth-Century Taxation’. 100

The impact of the taxpayer-protecting principle is (also) the best way to understand the cause célèbre: Bowles v Bank of England (1913) (“Bowles”). Bowles concerned an attempt to prevent the Bank of England from withholding income tax on dividends payed on the plaintiff’s government shares. The essential question was whether the income tax on the dividend payments had been lawfully imposed.

Bowles contended that the (well-established practice) of collecting the tax on the basis of a Ways and Means resolution in advance of a Finance Act was prohibited by the Bill of Rights 1688. That argument was upheld by a single judge in Chancery:338 By the statute…usually known as the Bill of Rights, it was finally settled that there could be no taxation in this country except under authority of an Act of Parliament. The Bill of Rights still remains unrepealed, and no practice or custom, however prolonged, or however acquiesced in on the part of the subject, can be relied on by the Crown as justifying any infringement of its provisions. It follows that, with regard to the powers of the Crown to levy taxation, no resolution, either of the Committee for Ways and Means or of the House itself, has any legal effect whatever. The reasoning in Bowles has been properly criticised by Jaconelli on the basis that the critical articles of the Bill of Rights do not speak in terms of “Acts”, but “Grant[s]” of Parliament,339 and Ways and Means resolutions authorising the imposition of a tax was clearly a parliamentary “grant”.340

When, however, Bowles is understood in light of the taxpayer-protecting approach, its outcome becomes clearer: the judiciary upheld a tenuous, but legally plausible, technical avenue by which the taxpayer could avoid income tax.

338 Bowles (1913), 84. 339 Jaconelli (2010), 585. 340 It also clashed with almost half a century of uninterrupted parliamentary support for the process of administrating the tax collection system on the basis of ways and means resolutions, rather than legislation: Bowles (1913), 71-72, 74–75. 101

Impact on distribution of financial authority

The development of the judicial practices concerning taxation had a modest impact on the distribution of financial authority.

The growth in the dominance of statutory taxation did not materially alter the basic practice of judicial involvement in review of tax decisions. When statutory taxation predominated, the judiciary’s pro-taxpayer approach to fiscal legislation often led it to undercut the revenue collecting function of taxation. In that sense, that existence of judicial review of tax decisions did not provide an effective systematic mechanism for enforcing taxation legislation, nor generally bolster Parliament’s primary authority over taxation.

2.3.2 Suing the Treasury Viewed next to the judiciary’s embedded position regarding statutory taxation, the historical record of judicial review of appropriation legislation is sparse. For a moment (in the mid-19th century) the judiciary intervened to police the public purse, but withdrew after the enactment of the Audit Act 1866.

Treasury as “trustees for an individual”

In 1835, the King’s Bench ordered mandamus to force the Treasury to pay money out under an Appropriation Act: The King v Lords Commissioners of the Treasury (1835) (“Smyth’s Case”).

An Act of 1822 (UK) gave the Treasury exclusive power to grant public officials a “Superannuation Allowance” upon proof of “Infirmity of Mind or Body” (ss 2, 3), to be paid for out of annually granted supply. Mr Smyth was the former Paymaster of Exchequer Bills, who (upon falling ill) was given a letter by the Assistant Secretary to the Treasury promising him a superannuation allowance and that “my Lords will submit a vote to Parliament for granting to you a retired allowance.” 102

Mr Smyth’s pension was mentioned in the Treasury’s Supply estimates, but did not appear in the annual Appropriation Acts, which simply granted money generally “to defray the Charge of Retired Allowances and Superannuations to Persons formerly employed in the Public Offices or Departments of the Public Services”.341

Mr Smyth received none of the allowance and sought a mandamus against the Treasury to force payment.

Opposing payment, the Treasury’s core argument was that “[i]t is against principle that the Court should order a mandamus in the name of the King, directing the King to pay money.”342 Chief Justice Denman forthrightly rejected that argument:343 Lords of the Treasury…have the money, and have the control over it: but they seek to annex conditions to its payment, which they have no right to do. …They are officers under the Crown, but the Crown has no more to do with them, for this purpose, than with any other officers. They are merely parties who have received a sum of money as trustees for an individual, under the provision of an Act of Parliament. The other judges agreed, and Mr Smyth got his mandamus.344

From Smyth’s Case emerged the position that the Treasury held appropriated funds as trustees for the people or entities referenced in Supply estimates approved by Parliament. That principle’s potential was profound: appearing to open the way to judicial review of the Treasury’s public expenditure functions. That potential was recognized in a treatise on the prerogative writs published in 1853, which relied on Smyth’s Case for the principle that:345

341 Eg, Appropriation Act of 1834 (UK), s 17. 342 Smyth’s Case, 290-1. 343 Ibid, 294-5. 344 The Treasury’s revocation of Mr Smyth’s superannuation allowance was subsequently ruled lawful: R v Lords Commissioners of the Treasury (1836). 345 Tapping (1853), The Law and Practice of the High Prerogative Writ of Mandamus, 265. 103

if public officers, as the lords of the treasury, have the custody of money for a specific purpose, as for the payment of a pension, &c., and do not fulfill that purpose, a mandamus will be granted, commanding them so to do.”

Between 1835 and 1872, the Treasury fought hard against that principle, but failed to kill Smyth’s Case as a precedent, despite winning on factual findings,346 or distinguishable legal bases.347

There the matter rested, while other major amendments to the law concerning public money were made by Parliament, the most consequential for Smyth’s Case was the enactment of the 1866 Audit Act (§2.2.3).

Treasury as “servants of the Crown”

Smyth’s Case received its quietus in the 1872 decision, The Queen v The Lords Commissioners of the Treasury (1872) (“1872 Treasury Case”).

An Act of 1826 (UK) provided a crude form of funding for public prosecutions, by empowering a court hearing a felony charge to order payment of “such Sums of Money as to the Court shall seem reasonable and sufficient to reimburse such Prosecutor and Witnesses for the Expences that shall have severally incurred…in…carrying on the Prosecution” (s 22). Payment was to be made from the resources available to the County in which the prosecution occurred.

In 1836, the Commons resolved that half the costs ordered under the 1826 Act should be paid from the Consolidated Fund. From 1847 to 1870, the Committee of Supply voted sums “for prosecutions at assizes and quarter sessions, in England, formerly paid out of county rates”,348 and, in 1870, the Treasury “disallowed or reduced in amount fifty-one of the items in the bills returned”. Mandamus was sought to compel the payment of those amounts.

346 The King v Lords Commissioners of the Treasury; in re Hand (1836), 989-90. 347 Re Baron de Bode (1838), 792. 348 1872 Treasury Case, 387. 104

Opposing mandamus, the government’s counsel again attacked Smyth’s Case, repeating the argument that:349 there is no obligation on the Treasury to pay any sums; but they may pay them. These sums are given to the Crown, and there is no legal obligation on the Crown which this Court can enforce”. Supporting that familiar argument was “the meaning of the word “appropriated’” as “appropriated as between the Crown and the House of Commons”, so the: effect of the annual Appropriation Act is not to give any third person a right to the money; but it is to prevent the Crown from appropriating money given for one purpose to another.

Despite the general lack of support for that argument over four decades, by 1872, the Audit Act 1866 had changed the public finance landscape. At a macro- level, that Act set up a systematic process of public accounts and audit presided over by the CAG (§2.2.3). At a micro-level, the 1866 Audit Act had repealed (through an omnibus repeal), the 1822 Act upon which Mr Smyth’s superannuation had been granted. Those developments were critical to the resolution of the 1872 Treasury Case, where mandamus was refused and Smyth’s Case disavowed as a “very doubtful authority”.350

At the level of formal principle, the Court finally accepted the Treasury’s argument that:351 [money paid under an Appropriation Act] is paid to the Lords of the Treasury, as servants of the Crown; and … I cannot hesitate to say that there is any duty incumbent upon them [to pay money], except as servants of the Crown: because in that character they have received this money, and in no other. From that statement of principle the Court held that it had no jurisdiction to make an order against the Treasury because the duties imposed by an Appropriation Act were not:352

349 Ibid, 390. 350 Ibid, 395. 351 Ibid, 395, 398, 400, 402. 352 Ibid, 395. 105

dut[ies] at law which by any legal proceeding or by the exercise of the prerogative jurisdiction of this Court we can enforce. The total effect of the reasoning in the 1872 Treasury Case was that the prerogative writs would not issue against the Treasury in respect of their use of funds under an Appropriation Act, because they held money granted by appropriation legislation as “servants of the Crown”, and the prerogative writs would not issue against the Crown (or its servants).

The court’s desire to immunise the Treasury’s financial power from judicial review was particularly evident given its position regarding the legality of the Treasury in refusing to pay the items referred to in an Appropriation Act.

All judges held that grave errors of law had been committed in refusing to pay. Cockburn CJ described the Treasury’s actions as “monstrous”, resting on a “very great mistake” and of a “most unsatisfactory character”.353 Mellor J held that the Treasury had:354 disregarded the operation of the Appropriation Act. The clause provides for expenses of prosecutions at assizes; it is not as the Solicitor General suggested, that they “may” pay, it is that they are to pay a sum not exceeding the given sum. Lush J described the Treasury’s action as being in “violation of the terms of the Appropriation Act”.355

The fate of the mid-19th century experiment with judicial review of appropriations legislation was sealed in a tax decision of 1883 (in which Dicey appeared for the revenue) where the Court of Appeal condemned Smyth’s Case as unable to “be maintained on any ground” and “wrong”. 356 Thereafter, the judiciary would have no settled role in policing the legality of the Treasury’s actions in paying (or not) money under an Appropriation Act.

353 Ibid, 393, 395. 354 Ibid, 401. 355 Ibid, 402. 356 R v Inland Revenue (1884) 476, 480; The Queen v Secretary of State for War (1891), 338. 106

The rise and fall of judicial review of expenditure decisions under appropriation legislation in the mid-19th century was surely influenced by developments inside and outside the courts.

Inside the courts, the mid-19th century experiment in Smyth’s Case coincided with the flowering of ideas of public “trusteeship”, and the doctrinal growth of the “crown” as the legal personality of central government.357 The death of Smyth’s Case coincided with statutory developments which made it far easier to sue state officials in private law (rather than seek prerogative relief to secure the release of money). The lodestar was the Petitions of Right Act 1860 (UK), which provided a concrete avenue to sue the Crown for restitution of money or damages for breach of contract.358 That Act operated within (rather than adding to) the legal practices concerning annual appropriation. It expressly provided that the satisfaction of judgment debts or costs by the Crown were to be paid by the Treasury “out of any moneys…voted by parliament for that purpose” (s 14);359 requiring that payment of judgment debts be approved by appropriation legislation.

Looming over the chicanery of common law litigation were the changes wrought to the structure of British government in the 1860s, which included replacement of venal “offices” with a professional public service.360 Additionally, the Audit Act 1866 surely impacted the judiciary’s attitude to review of appropriation legislation, including its provision of an independent enforcement mechanism for the legality of public expenditure (the CAG), and the conferral of economic and legal Treasury control. Precisely how the judiciary would impose common law strictures on central government public expenditure under those circumstances was not clear and was never addressed.

357 Maitland (1901); McLean (2012), Searching for the State in British Legal Thought, ch 5. 358 Clode (1887), The Law and Practice of Petitions of Right, ch 9 and 10. 359 The same essential structure appears in the modern Crown Proceedings Act 1947 (UK), s 37. See generally, Hogg (2000), Liability of the Crown. 360 Chester (1981), 122-136. 107

Judicial disinterest with appropriations legislation

By the commencement of the 20th century the extent of the judiciary’s disinterest in appropriation legislation was illustrated by the Privy Council’s decision in Auckland Harbour Board v The King (1924) (“Auckland Harbour”).

That case involved a private law claim of the New Zealand central government against a statutory authority (the Auckland Harbour Board) for money paid by the government without legal authority. That claim was raised as a defence to the Harbour Board’s suit against the central government (by petition of right) which sought payment of money by the New Zealand central government.

The payment of the money had been authorised by a standing appropriation on the condition that a separate liability had arisen under an agreement between the central government and the Harbour Board. As events transpired, the separate liability never arose, but the central government eventually paid the money under authority of an annual appropriation Act; a payment approved by New Zealand’s Auditor-General. The central government later reversed its position, attempting to claw-back the money on the basis that the liability in the standing legislation had never crystallised. The statutory authority responded that the money was properly paid by an annual Appropriation Act and the Auditor-General.

Accordingly, the core of the case concerned the impact of standing and annual appropriation legislation.

The Privy Council held in favour of the central government, putting the annual appropriation legislation entirely aside, instead resolved the case by reference to the non-existence of the separate liability:361 It was said, and it appears to have been the fact, that the Controller and Auditor-General subsequently passed the sum handed over as having been payable out of public moneys appropriated in general terms for railway

361 Auckland Harbour (1924), 326. 108

services by the New Zealand Parliament in 1914. But this is not a sufficient answer to the contention that the payment was not authorized.

[the standing appropriation legislation] provide[d] that the sum…was to be payable to the appellants only on a condition…The provision which Parliament thus made was to be in itself a sufficient appropriation, but only operative if the condition was actually satisfied. Their Lordships have not been referred to any appropriation or other Act which altered these terms. If, as must therefore be taken to be the case, it remained operative, the authority given by Parliament is merely the conditional appropriation provided in [the standing appropriation legislation]…for a condition which was not fulfilled. Placing the annual appropriation Act aside, the Council then expounded its (famous) chunk of obiter:362 The payment was accordingly an illegal one, which no merely executive ratification, even with the concurrence of the Controller and Auditor- General, could divest of its illegal character. For it has been a principle of the British Constitution now for more than two centuries, a principle which their Lordships understand to have been inherited in the Constitution of New Zealand with the same stringency, that no money can be taken out of the consolidated Fund into which the revenues of the State have been paid, excepting under a distinct authorization from Parliament itself. The days are long gone by in which the Crown, or its servants, apart from Parliament, could give such an authorization or ratify an improper payment. Any payment out of the consolidated fund made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced. Although that statement has become notorious,363 it studiously avoided engaging with the detailed interplay of standing and annual appropriation legislation in

362 Ibid, 326-327. 363 Woolwich Equitable Building Society v Inland Revenue Commissioners (1993), 177; Lewis (2014), Judicial Remedies in Public Law, [15-127]; Mitchell (2010), ‘Recovery of Ultra Vires Payments by Public Bodies’, 756-764; Prosser (2014), 111. 109

New Zealand (which mirrored the British model in all relevant respects, cf §3.1.2).

In the court below, the Chief Justice of New Zealand engaged with that legislation and found against the central government on the basis that the money had been lawfully paid under the annual appropriation legislation, not the standing legislation, and so no question of illegality arose.364 Viewed in that way, Auckland Harbour falls within the judiciary’s general approach (post-1872 Treasury Case) of avoiding imposing judicial oversight of the legality of appropriation legislation.

Impact on distribution of financial authority

Despite early experiments, from 1872, the judiciary largely removed itself as an enforcer of parliamentary appropriation legislation, which meant that no bespoke jurisprudence developed akin to the taxpayer-protecting approach in tax litigation.

The net effect was to leave legal disputes regarding the expenditure-side of the relationship between parliament and the financial executive un-enforced by the judiciary. The question of compliance with appropriation legislation was left largely to the self-policing financial executive, with the audit oversight provided by the CAG, which was itself legally dependant on the financial executive in many important respects (§2.2.3).

2.3.3 Bankers cases

Even compared to the paucity of litigation concerning appropriation, the judicial record concerning sovereign borrowing is Spartan.

It breaks into two phases, before and after the Bankers’ Case.

364 Auckland Harbour (1919), 356-357. 110

Bankers’ Case

The Banker’s Case arose from the English sovereign default in 1672: the “Stop of the Exchequer” (§2.2.1).

The legal details of the Bankers Case are very complicated,365 but the litigation essentially concerned recovery of un-paid interest owed to holders of public debt.366 Critically, that debt had no parliamentary backing, simply being issued on the Monarch’s personal security (§2.2.1).367 After initial set-backs,368 the creditor plaintiffs obtained an order that the outstanding amounts be paid. The debt was not, however, satisfied, and they were left to petition parliament, which eventually appropriated funds to pay part of the debt, but left ~44% of the original capital “curtailed”.369

The Bankers’ Case had been lightly-touched by legal scholars,370 until Desan’s recent argument that the case changed “the legal design of public debt” on the assumption that “the courts could, and indeed should, protect [creditors’] interests…shifting the relevant positions of the sovereign, the courts and the creditors.”371 Vital to that argument is an interpretation that places the common law judiciary in the position of an enforcer of sovereign debts: “[t]he bankers could sue for their money; indeed, they had sued and won”.372

Curiously absent from Desan’s account is Parliament’s sovereign borrowing position,373 which provides critical context to the Bankers’ Case in two respects.

First, the conclusion of the Bankers Case (1700) post-dated the adoption of the settled practice of parliamentary security for public borrowing (1962-4)

365 Horsefield (1982), ‘The “Stop of the Exchequer” Revisited’, 518–521. 366 Desan (2015), 281–287. 367 Dickson (1960), 44-45; Horsefield (1982), 513–518. 368 Winning at first instance in the Exchequer (1691), losing on appeal in the Exchequer Chamber (1693) and wining in the Lords (1700). 369 Horsefield (1982), 522-523. 370 Eg Maitland (1908), 438-9 and Dicey (1885), 24. 371 Desan (2015), 287. 372 Ibid. 373 But acknowledging that the Bankers’ Case is “cryptic in the larger context”: Desan (2015), 287. 111 explored in §2.2.1. In that sense, whatever judicial doctrine the litigation may have spawned, a secure market in public debt securities was created by legislative rather than judicial action. Secondly, the judiciary accepted that the only remedial option for the creditors lay in parliamentary appropriation of debt-servicing costs, not judicial order and not monarchical (prerogative) expenditure.374 The fact that the amount eventually appropriated by Parliament was significantly discounted,375 further indicates Parliament’s (not the judiciary’s) position of predominance in controlling the terms of debt repayment.

Taking account of those two contextual matters, the Bankers’ Case emerges as providing support for viewing Parliament (not the judiciary) as the predominant constitutional institution providing the legal foundation of the 18th century sovereign debt market.

Judging the Bank of England

After the Bankers’ Case, judicial consideration of the legal limitations on the power to issue England’s public debt runs dry and the abundance of legislation authorising the Treasury to issue long and short-term debt (cf §2.2.1) was never the subject of serious judicial consideration.

The 18th and 19th centuries did, however, witness a modest body of litigation concerning the Bank of England, all of which treated the Bank as a “trading corporation” which did not act “for public purposes” or perform “public duties”376 and stunted the growth of a discreet jurisprudence concerning the Bank’s public financing functions.

During that time, the courts did engage with the legal character of the Bank’s promissory notes, including the circumstances in which the Bank should pay on presentation of a note which had been: stolen before presentation;377 cancelled

374 Act of 1701 (12 & 13 Will III). 375 To an average of 1.5%: Horsefield (1982), 523. 376 The King v The Governor and Company of the Bank of England (1819), 622-3. 377 De la Chaumette v The Bank of England (1831). 112 in the morning and cashed in the afternoon;378 and not indorsed by the drawer.379 Similarly the courts dealt with controversies concerning stock sold by, or registered in, the Bank, including, whether the Bank: had to pay out under stock transferred under a forged power of attorney;380 was liable in damages for failing to sell stock when directed;381 and could refuse an executor’s request to transfer public stock specifically bequeathed.382

Those cases treated the Bank as any other financial corporation,383 hinting at the judiciary’s attitude towards the Bank as a private financial intermediary, rather than an independent public financial institution, bearing obligations separate to the government on whose behalf it transacted.384

That hint is confirmed by two cases (of 1780 and 1819) where mandamus was (unsuccessfully) sought against the Bank.

The 1780 case concerned mandamus to compel the Bank to transfer public stock in circumstances where the administration of the deceased estate was complicated by a claim that the testator was a bastard whose stock reverted to the Crown upon death.385 Refusing mandamus, Lord Mansfield held that “[t]he bank is…in the nature of a stake-holder only. The real question is between the Crown… and the executors.”386 Implicit in that holding was that the Bank exercised no special public role in regard to public debt instruments.

378 Haward v the Bank of England (1722). 379 Governor and Company of the Bank of England v Newman (1703). 380 Davis v The Governor and Company of the Bank of England (1824). 381 Sutton, Bart v The Governor and Company of the Bank of England (1824). 382 Franklin v The Bank of England (1826). 383 Including in relation to proving debts in the administration of bankrupt estates (Ex parte The Bank of England, in the Matter of Richard Stephens, a Bankrupt (1818) and pecuniary liability for a failure to pay dividends (Foster v The Governor and Company of the Bank of England (1846); Partridge v The Governor and Company of the Bank of England (1846). 384 Cf, Governor and Company of the Bank of England v Davis (1826). The judiciary would, of course, recognise legislative obligations placed especially on the Bank: Sloman v Bank of England (1845). 385 The King, on the Prosecution of Parbury and Another, Executors of Dawes v The Governor and Company of the Bank of England (1780) 386 Ibid, 526. 113

In the 1819 action a stockholder in the Bank sought mandamus against the Bank itself to “to compel them to produce their accounts, for the purpose of declaring a dividend of the profits”.387 The application was peremptorily refused, with the King’s Bench deciding that the Bank was a “trading corporation” which did not act “for public purposes” or perform “public duties”.388 The judiciary’s attitude towards the public character of the Bank was pithily captured by Best J, whose entire reason for refusing relief was, “[i]f we were to grant this rule, we should make ourselves auditors to all the trading corporations in England.”389

Treating the Bank as a private institution followed naturally from the judicial perception of the Bank as a private financer of government, rather than itself a part of the apparatus of public finance. An 1840 House of Lords appeal illustrates that attitude in the context of judicial enforcement of the Bank’s statutory monopoly on carrying on a banking business of more than 6 persons within 65 miles of London:390 Booth v Governor and Company of the Bank of England (1840).

Booth arose from an action by the Bank to injunct the London Joint Stock Bank from issuing bills drawn by a “manager” not a “partner”, in contrived compliance with the statutory monopoly. Upholding the Bank’s entitlement to an injunction, the Lords stated that:391 “The exclusive privileges conferred on the Bank of England by Parliament are founded on a contract between that Body and the Public. For the original grant, and also for the renewal and confirmation of such privileges, the Bank of England has from time to time paid very large sums of money to the Public; and no member of that Public can justify either doing, or procuring to be done, any act which, for the protection of such rights and privileges, has been forbidden by law.”

387 The King v The Governor and Company of the Bank of England (1819), 620. 388 Ibid, 622–623. 389 Ibid, 623. 390 Act of 1833 (UK). 391 Booth (1840), 540. 114

That view of the Bank as a bargaining party with UK government positively affected its entitlement to an injunction:392 “The privilege granted to the Bank of England by Parliament is a positive right conferred upon that body for a valuable consideration, which the law will no more permit to be infringed by third persons without a responsibility” Rather than being a public institution, the Bank was understood as an arms- length negotiator with the Parliament and its “contracts” (which were actually “statutes”) would ground relief in equity’s auxiliary jurisdiction.

Impact on distribution of financial authority

Despite litigation on peripheral issues, the judiciary never became involved in enforcing the legislation conferring debt finance authority on the Treasury and Bank of England. While the Bankers Case evidences strong judicial support for parliamentary security of sovereign borrowing, the 18th and 19th century reports never really return to the topic. Judicial consideration of the Bank of England’s legal powers left it largely untouched by the slowly developing system of judicial review; treating the Bank as a private trading corporation, rather than a public institution with constitutional responsibilities regarding public debt.

Conclusion

By the 19th century’s end, the essential features of most of the legal practices concerning public money in the UK had become fixed.

Parliamentary authority was required for the highest value fiscal receipts (taxation) and all public expenditure. Expenditure planning drove parliamentary financial processes, which produced supply and appropriation legislation annually, and (a growing share) of time-limited taxation legislation. Sovereign borrowing would also proceed by way of parliamentary legislation (partially

392 Ibid, 544. 115 integrated into the annual process of supply and appropriation) and the Bank of England had important public lending functions which were (themselves) closely prescribed by parliamentary legislation.

Parliament delegated vast powers to the Treasury, which operated as a financial executive, standing apart from the wider executive where financial management was concerned. The Treasury’s delegated authority extended to the exclusive power to originate (and thereby determine the content of) taxation and spending legislation, to ensure the wider executive’s compliance with expenditure legislation, and to impose economic efficiency on the wider executive’s use of resources.

Parliament’s independent auditing institution (the CAG) was also tied up (legally and institutionally) with the Treasury, which determined the accounting basis upon which public audit would proceed, and had significant legal authority to direct the CAG in its administrative and audit functions.

The judiciary was only partially involved in settling disputes regarding public money, in its established role concerning taxation. However, the adoption of a taxpayer-protecting approach led less to the protection of parliamentary revenue, than the protection of private wealth from re-distribution.

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CHAPTER 3 PUBLIC MONEY IN MODERN PARLIAMENTARY GOVERNMENT

This chapter continues the historical investigation undertake in §2: analysing the development of the legal practices of public money and the impact of those developments on the distribution of financial authority.

It commences by analysing the export of the legal practices of public money from the UK throughout the British Empire in the 19th century (§3.1). It then investigates major developments occurring in the earlier-20th century, focusing on the impact of the World Wars (“WW1” and “WW2”), the welfare state, developing ideas of debt-management and the mid-century proliferation of written Commonwealth constitutions (§3.2). It concludes by reviewing the major changes to the legal practices in the latter-20th century, focusing on the convergence of (legislative and judicial) fiscal policies, the interaction of sovereign debt and monetary policies and the impact of New Public Management philosophies on the legal administration of public finance (§3.3). In-line with §2, only developmental milestones are marked.

The jurisdictional focus shifts at different points in the chapter. In §3.1, the focus is on developments to the legal practices of public money in the British colonies (and then dominions) in Australasia and North American. In §3.2, the UK re- enters the frame (joining Australia, Canada and New Zealand) in the analysis of the impact of welfare, wars and debt-management. In §3.2.1, the focus shifts to the wider commonwealth constitutional context, taking in the former-British colonies which obtained written constitutions from the 1950s. The chapter’s concluding analysis of the legal practices’ development in the latter-20th century focuses on Australia, Canada, New Zealand and the UK. Rather than attempt an exhaustive examination of each jurisdiction, the aim is to capture a broad overview of the ways in which the legal practices of public money maintained a discernibly similar distribution of financial authority while being exported to various parliamentary systems.

117

3.1 Export of the legal practices

From the early-19th century, the legal practices concerning public money were gradually exported throughout the British Empire. Prior to the conferral of responsible government in the British colonies, the most important developments appeared in the American divergence from British precedents (§3.1.1), which was not followed as legal practices were enacted into colonial (§3.1.2) and then federal (§3.1.3) written constitutions.

Throughout that process of export, the legal practices were adapted to local circumstances, but the distribution of financial authority was not meaningfully altered. Opportunities to vest a greater degree of financial authority in representative bodies (following American examples) were not taken up by colonial governments, fiscal federal mechanism in written constitutions operated within (rather than fundamentally altering) the core legal practices and judiciaries within the Empire did not adopt an expanded role in the financial activities of newly created constitutional systems. Overall, the distribution of financial authority between parliaments and the financial executives established by the end of the 19th century in the UK was exported, largely un-modified.

3.1.1 Transportation

Throughout the 18th century, many disputes regarding the powers of local colonial administrators and the British (“Home”) government concerned public finance.

A body of legal authority (consisting of legal opinions of senior British law officers and some judicial precedents) grew around the relative rights of the Home government and Parliament, colonial administrators and assemblies to impose taxation and spend money in the colonies. Although intricate, that body of law yielded a clear proposition regarding the distribution of financial authority over tax and expenditure: for settled colonies, no tax could lawfully be imposed, or money spent in the colonies without an Act of the Home Parliament 118 or a colonial representative assembly.393 In that sense, the distribution of financial power established in the UK was broadly replicated externally: giving parliaments power to approve taxation and expenditure, limiting financial rule by assembly via the executive’s financial initiative.

As the British Empire expanded, constitutional disputes of a financial character persisted, particularly in the North American colonies which would eventually declare independence in the 1770s.394 From those disputes a separate set of legal practices developed which established a divergent distribution of financial authority in post-Revolutionary America.

Congressional divergence

The American legal practices of public money followed British practice in two important respects. First, the USA Constitution conferred statutory power on the Congress over taxation and public borrowing (s 8(2)), debt-repayment and general public expenditure (s 8(1)). Secondly, the USA Constitution expressly prohibited public expenditure without statutory authorisation and required the rendering of accounts disclosing compliance (or non-compliance) with those statutes (s 9(7)).

Those provisions aside, the USA Constitution’s treatment of the legal practices of public money sharply diverged from late-18th century British practice. The most momentous divergence was to withhold the financial initiative from the President or Executive Branch, leaving the Congress free to originate appropriation legislation and formulate the expenditure proposals underlying that legislation. That adjustment of financial power between the Executive branch and Congress was deliberate: “if it were otherwise, the executive would

393 “Pratt-Yorke Opinion” (1757) in Chalmers Opinions of Eminent Lawyers (1814), 230–231; Campbell v Hall (1774), 212–214; Keith (1928), Responsible Government in the Dominions, 92–93, Todd (1883), Parliamentary Government in the British Colonies, 169–176. The position was different in relation to “conquered colonies”, which could still be taxed without legislation. 394 Keith (1930), Constitutional History of the First British Empire, 344–6, 350–8, 360-366, 383-5. 119 possess an unbounded power over the public purse of the nation; and might apply all its monied resources at his pleasure.”395

The other major divergences grew from federalism and bicameralism: both houses of Congress were permitted to originate appropriation legislation. That divergence gave the Senate (representing the States) a very significant share of the financial initiative regarding public expenditure.396 Giving the second parliamentary chamber co-extensive authority over public expenditure legislation was a sharp divergence from the established position in the UK, where all expenditure legislation originated in the Commons.397

Despite the sharp constitutional break between the USA and Britain, the treatment of public money in the USA Constitution remains significant as an alternative written constitutional model, devoid of the executive’s financial initiative, and without any exclusive power in the more representative parliamentary house to originate expenditure legislation.398

As events transpired, the colonies in the British Empire (which eventually obtained written constitutions) did not follow the American model, but adopted (largely unaltered) the legal practices of public money, replicating the distribution of financial authority, prevailing at Home.

3.1.2 Enactment

Responsible (self-) government in the Australasian and North American colonies brought a familiar set of legal practices: statutory appropriation and taxation (§2.1.2), statutory borrowing (§2.2.1), the executive’s financial initiative and

395 Story (1833), Commentaries on the Constitution of the United States, volume 3, 214. 396 A historical review can be found in Fisher (1979), ‘The Authorisation–Appropriation Process in Congress’. 397 The Senate’s co-extensive power over expenditure was not replicated in relation to taxation, as the House of Representatives was given exclusive power to originate taxation bills (s 7(1)). 398 The institutional complexity of that arrangement is revealed in Fenno (1966), The Power of the Purse. 120 treasury control (§2.2.2), prioritising the more representative parliamentary house (§2.1.1),399 and the statutory establishment of auditors-general (§2.2.3).

Prominent parts of those practices were enacted into written constitutions, the development of which followed a discernible trajectory, commencing with the Canadian Act of Union 1840 (UK) (“Act of Union”) and passing through the New South Wales Constitution Act 1855 (UK) (“NSW Constitution 1855”).400

Act of Union 1840

The first major Colonial enactment of the legal practices occurred in the 1840 Act of Union, which provided an early form of written constitution for the British colonies in Canada and an influential template for later constitutional treatments of public money.

The Act of Union grew from the settlement of a series of Canadian political disputes in the 1830s (culminating in rebellions in 1837-8), which were moved by a desire for a greater degree of self-rule or responsible government in the Canadian colonies.401 The UK government’s response to those disputes was published in a report of a special Governor-General sent to Canada to investigate: Lord Durham.402

Durham’s report attributed the rebellions to two sources: “an ill-contrived constitutional system”403 and tensions between English and French inhabitants of Canada. Both ills were to be cured by uniting Upper (majority-Anglophone) and Lower (majority-Francophone) Canada under “English laws and language… to trust its government to none but a decidedly English legislature…formed by a legislative union.”404 The legislative union would conform to “the principles of

399 Where bicameralism was implemented. 400 The New Zealand Constitution Act 1852 (UK) contained a similar treatment of financial matters (ss 25, 54, 65–66), but exhaustive examination is beyond the dissertation’s scope 401 Amongst other issues, including racial and class conflict: Kennedy (1922), The Constitution of Canada chapter XI. 402 Durham, Report on the Affairs of British North America (1839). 403 Ibid, 260. 404 Ibid, 288-289, 307. 121 the British constitution,”405 wherein all aspects of government (including financial affairs) would be modeled on “cabinet government in the British constitutional sense”.406

Durham only faintly sketched the legislative details, but singled-out the executive’s financial initiative for special attention. “[T]hat no money vote should be proposed without the previous consent of the Crown”407 was considered critical to protecting against the “scramble for local appropriations, which chiefly serves to give an undue influence to particular individuals or parties”.408 Thereby, no rule by financial assembly (along American lines) would be established in Canada.

Durhams’ commitment to a UK, rather than American, model of expenditure legislation was carried through into the Act of Union 1840.409 Section 57 gave the power to originate tax or appropriation Bills to the legislative assembly, but prohibited the enactment of “any Vote, Resolution, or Bill for the Appropriation of any Part…of the…Consolidated Revenue Fund, or of any…Tax” which had not “been first recommended by a Message of the Governor to the said Legislative Assembly”.

A consolidated fund (in line with the 1788 UK model) was created by section 50. Section 56 followed British practice, linking debt-servicing costs to consolidated revenue, by charging “the annual Interest of the Public Debt” on the newly- minted fund, thereby protecting “parliamentary security” for public borrowing. The other finance provisions of the Act of Union provided for a complex brokerage of financial power between the British colonial administration, the local population, and various religious bodies, including standing appropriations for the costs of revenue collection (s 51) and salaries of senior public officials (ss 52–54).

405 Ibid, 278. 406 Kennedy (1922), 175. 407 Durham (1839), 328. 408 Ibid, 287. 409 Kennedy (1922), 198. 122

The financial provisions of the Act of Union were, of course, an incomplete codification of the legal practices concerning public money existing in Britain in 1840: audit, for example, was left to be “directed by any Act” of the legislative assembly (s 51). But they provided an important reference point for the spread of the legal practices further afield in the Empire.

NSW Constitution 1855

The Act of Union’s model of financial provisions was transported to the Australian colonies as the terminus in a movement for constitutional reform towards popular sovereignty within those colonies or “responsible government”.410

From the turn of the 19th century, disputes had smouldered between the white- settler population of the Australian colonies and the Home government regarding the power to tax and appropriate. Financial autonomy had been withheld from the colony’s domestic political institutions by four constitutional documents enacted by the Home Parliament for the Australian colonies between 1823 and 1850.411

Between 1850-2, colonial temperatures boiled-over and the New South Wales Legislative Council sent a Declaration and Remonstration to the Commons, demanding responsible government, complete control over domestic revenues and financial control of the government, accompanied by an allusive threat of rebellion.412 The Home government eventually conceded and enacted the NSW Constitution 1855, a document drafted in the colony, containing a detailed set of financial provisions, largely replicating those in the Act of Union.

410 Melbourne (1963), Early Constitutional Development in Australia; Sweetman (1925), Australian Constitutional Development. 411 New South Wales Act 1823 (UK); Australian Courts Act 1828 (UK); New South Wales Constitution Act 1842 (UK); Australian Constitutions Act 1850 (UK). 412 Votes and Proceedings of the Legislative Council of New South Wales, 01/05/1851 and 10/08/1852: Twomey (2004), The Constitution of New South Wales, 7–11; Sweetman (1925), 256–270. 123

A “Consolidated Revenue Fund” was established, into which flowed all “Taxes, Imposts, Rates, and Duties, and all territorial, casual, and other Revenues of the Crown (including Royalties) from whatever Source arising within this Colony” (s 47). The fund was permanently changed by standing appropriation with the costs of its ‘collection, management and receipt’, and the salaries of senior officials (ss 49–50). The legislative assembly was given exclusive power to originate money bills (ss 1, 54), which was (again) limited by the executive’s financial initiative in line with established UK constitutional practice (s 54). Parliamentary security for public borrowing was recognised in the proviso that consolidation of revenue “shall not affect the Payment of the annual Interest, or Principal Sums [of] any outstanding Debentures” (s 53).

Alike the Act of Union, the 1855 Constitution did not provide a complete codification of the rules of public money (also omitting any meaningful treatment of audit: s 48), but its financial provisions provided the template for most of the remaining Australian colonial constitutions.413

Sub-constitutional colonial legal practices

Where colonial constitutional documents were silent on other parts of the legislative practices of public money, colonial legislative practice spoke loudly.

Parliamentary expenditure practice followed British traditions, as colonial legislatures voted on estimates prepared by financial executives and enacted annual expenditure legislation.414 Importantly, Australian, Canadian and New Zealand Appropriation Acts maintained the flexibility of their British parents, including retrospectively appropriating excesses from previous years. A particularly striking example of that practice comes from 19th century New Zealand appropriation legislation, which dealt with excesses by enacting a provision in annual appropriation legislation identifying the precise amount

413 Except the South Australian Constitution 1856 (SA); Tasmanian Constitution Act 1855 (Tas). 414 The fine-detail of 19th century Supply and Appropriation Acts differed. For example, New Zealand began enacting Supply (separate to Appropriation) Acts in the 1870s, while, by the 1880s, no such separate Acts were passed by the Canadian Parliament. 124

“issued…in excess or without appropriation by parliament” and declaring that the “application and discharge of the said sums are hereby sanctioned”.415

Colonial taxation practice followed English legislative precedents, although the precise tax-mix varied.416 Treasury control was also established in Australasia and Canada by legislation conferring authority on treasuries to determine the manner of keeping accounts and establishing auditors-general, styled on the British CAG.417

Legislation also contained the legal basis for public borrowing, debt issues and standing appropriations for debt-servicing. Treasuries were authorised to borrow by annual Acts, which often indicated the purposes for which money was to be borrowed, the total amount to be borrowed and (in some cases) the interest rates and maturity.418 Framework legislation provided the more granular provisions for public debt, but (in some cases) included standing authority to borrow when necessary to meet shortfalls in public receipts.419

Finally, the UK judiciary’s position vis-à-vis financial activities was largely replicated throughout Britain’s settler colonial empire. Colonial judiciaries were occasionally drawn into financial disputes,420 but no established practice of policing the boundaries of appropriation or public borrowing grew. Colonial cognates of the Petitions of Right Act 1860 (§2.3.2) were enacted which provided a statutory framework within which public officials could be sued for monetary amounts in private law and required that legislation appropriate funds for the payment of a judgment debt against the government. 421

415 Appropriation Act 1895 (NZ), s 13 and Sch 1. 416 The Australasian and Canadian colonies relied heavily on indirect taxes (customs and excises) and land tax: Di Matteo (2017), A Federal Fiscal History, 28; Dick (2014), ‘Taxation in Australia up until 1914’; Littlewood (2016), ‘In the Beginning: Taxation in Early Colonial New Zealand’. 417 Eg, Audit Act 1870 (NSW); Audit Act 1858 (NZ); Audit Act 1878 (Can) c 7. 418 Eg, New Zealand Loans Act 1904 (NZ); Loan Act 1888 (Can); Public Works Loan Act 1884 (NSW). 419 Eg, New Zealand Consolidated Stock Act 1877 (NZ); Loans Fund Amalgamation Act 1879 (NSW); Public Debt – Loans Act 1872 (Can). 420 Alcock v Fergie (1867). 421 Finn (1987), Law and Government in Colonial Australia; Crown Suits Act 1881 (NZ). 125

3.1.3 Entrenchment

As the British colonies in Australasia and Canada evolved into Dominions, written federal constitutions were enacted which were entrenched against implied repeal and contained “Finance” chapters for the newly created federal polities: the British North America Act 1867 (UK) (“BNA 1867”) and the Commonwealth of Australia Constitution Act 1901 (Cth) (“Australian Constitution”).

The development of each federal constitution had distinctly different trajectories,422 but both finished products contained foundational similarities to late-19th century British and colonial practices: no money could be drawn from consolidated revenue unless appropriated by legislation; only the executive could introduce appropriation and taxation bills; and such bills had to originate in the (more-representative) lower house of parliament.423

Australian and Canadian federal constitutions did, however, provide two opportunities for divergence from the existing distribution of financial authority, financial-federalism and judicial review, neither of which effected a material change to the distribution of financial authority exported to their predecessor colonies.

Federal dynamics and public money

In their fusion of parliamentary government with federalism, the Canadian and Australian constitutions provided for financial aspects of federalism in several different ways.424

422 Kennedy (1922), The Constitution of Canada; La Nauze (1990), The Making of the Australian Constitution . 423 BNA 1867 ss 102, 53–54; Australian Constitution, ss 52–53, 56, 81, 83. In Australia, the Senate was prevented from “amend[ing]” a bill for the “ordinary annual services” of the Commonwealth government: s 53. 424 Broader context can be found in Birch (1955), Federalism, Finance and Social Legislation. 126

One (basic) federal-financial provision was made by the distribution of legislative powers over financial affairs. The BNA 1867 gave the Canadian federal government legislative power over “public debt and property”, “the raising of money by any mode or system of taxation”, “the borrowing of money on the public credit” and “currency and coinage” (s 91), while the provinces were given legislative power over “Direct Taxation within the Province,” and the “borrowing of Money on the sole Credit of the Province” (s 92). The Australian Constitution gave the Commonwealth government legislative power over “Taxation”, “Borrowing money on the public credit of the Commonwealth”, “Currency, coinage and legal tender” (s 51(ii), (iv), (xii)) and exclusive power to impose “customs and excise” (s 90). Another (relatively basic) federal-financial provision was conferring ex facie unlimited constitutional power on the federal governments to make “grants” to the sub-federal governments, which the Australian Constitution provided in s 96.

The most complex federal-financial provision was to oblige the federal polity to make quantitatively-fixed payments to the sub-federal polities. The BNA obliged Canada to pay the Provinces prescribed sums and a per-capita grant annually (s 118). The Australian Constitution’s obligatory federal payments system operated in a tiered fashion. From 1901-11, Australia was obligated to pay the States 75% of its customs and excise revenue (s 87). From 1902-1907, Australia was also required to pay to each State all revenue collected therein, but allowed to keep a residue sufficient to operate government departments in the State (ss 89-93). After 1907, the Australian Constitution provided that “the Parliament may provide, on such basis as it deems fair, for the monthly payment to the several States of all surplus revenue of the Commonwealth” (s 94).

All of those federal-financial provisions share an important distributional similarity: they did not follow American constitutional practices regarding financial federalism. Canadian and Australia senates would not have co-equal power over expenditure, nor would federal parliaments have the financial initiative (§3.1.1). That matter is particularly significant given the Canadian and Australian adoption of American precedents regarding the enumeration of 127 divided legislative powers and the clear assumption that the judiciary would be the ultimate guardian of constitutional power.425

Federal judicial review

The other opportunity for significant diversion from the distribution of financial authority fixed in British and colonial contexts was the position of the Canadian and Australian judiciaries as the guardians of the federal division of powers. In neither jurisdiction, however, did federal judiciaries take the opportunity to become more involved in matters of central government finance than their British or colonial predecessors.

No new ground was broken in regard to taxation, as the British judiciary’s historically ingrained position (§2.3.1) regarding taxation disputes was adopted by Canadian and Australian courts in policing the division of taxation power between federal and sub-federal polities.426 Nor did Canadian and Australian judiciaries develop an entrenched institutional role of resolving disputes regarding appropriation (§2.3.2), even where federal jurisdictional boundaries were at stake. A powerful illustration of that phenomenon appeared in Australia in 1908: New South Wales v The Commonwealth (1908) (“Surplus Revenue Case”).

That case concerned the lawfulness of the Australian Commonwealth government’s attempt to avoid paying “surplus revenue” to the States as required by the revenue-sharing provision in the Australian Constitution.427 In 1908, the Commonwealth enacted the Surplus Revenue Act 1908 (Cth), which deemed money appropriated to government “trust accounts” (to be spent in later years) to be “expenditure” (s 5) and thus not form part of any balance or surplus

425 Kennedy (1922); Williams (2005), The Australian Constitution. 426 Significant cases in both Canadian and Australian constitutional jurisprudence concern taxation: Baxter v Commissioners of Taxation (NSW) (1907); D’Emden v Pedder (1904); Fortier v Lambe (1895) 25 SCR 422; Rattenbury v Land Settlement Board [1929] SCR 52. 427 “the Parliament may provide, on such basis as it deems fair, for the monthly to the several States of all surplus revenue of the Commonwealth”. 128 payable to the States. Several States challenged the validity of that legislation in the High Court of Australia.

The High Court held against the States on the basis that once money was legislatively appropriated from the Commonwealth consolidated revenue fund, it could not form any part of a ‘surplus’ and thus was not payable to a State pursuant to the relevant revenue-sharing provision, s 94. 428 That holding entirely defeated the federal-financial purpose of s 94 because (as a matter of economic-reality) the money had not been spent by the Commonwealth, but simply transferred to a particular bank account for future expenditure.

Most of the Court’s reasons turned on extremely technical matters of textual interpretation, but the reasons of Isaacs J (a future Chief Justice) clearly indicated the Court’s disinclination to becoming embroiled in the financial aspects of federalism:429 Undertakings decided upon by the Commonwealth may from their nature require deliberation as to final form, and if, before actual commitment to details, time for consideration is taken, can it reasonably be said, that although the cost is fixed, and the required money expressly appropriated to the purpose, that money is still in the eye of the law "surplus revenue" distributable perforce among the States? This would leave the Commonwealth with its purpose bare and barren, and incapable of fulfilment until fresh means were sought. It is no answer to say other moneys would probably reach the Treasury, because they may be needed for other purposes. The argument, if acceded to, would probably either drive the Commonwealth to hasty and ill considered action so as to actually disburse its revenue, in satisfaction of its purposes, or else compel it to find fresh ways and means, possibly burdensome. The gravamen of that reasoning is that the (tolerably clear) intention of the Australian Constitution’s revenue-sharing provisions would have to give way to the financial viability of the Commonwealth government. The net distributional

428 Surplus Revenue Case (1908), 191, 193, 199, 205. 429 Ibid, 202. 129 effect of the High Court’s interpretation was to remove the Australian judiciary from becoming involved in policing the federal financial aspects of public expenditure, replicating the British judiciary’s disinterest identifiable by the late- 19th century (§2.3.2).430

Impact on distribution of financial authority

In their export throughout the British Empire, the legal practices of public money maintained a strikingly similar structure and distribution of financial authority.

The most visible impact of the legal practice’s export was to render core parts of the legal practices of public money concrete, by entrenching them in written constitutions or enacting them in statutes. Enacting the prohibition on public expenditure without legislative appropriation and the executive’s financial initiative in the Act of Union and NSW Constitution 1855 embedded the core parts of the distribution of fiscal authority in constitutional models which would be used as precedents later-on (including for written Commonwealth constitutions in the mid-20th century (§3.2.3)). The non-entrenchment of certain legal practices (particularly in relation to statutory borrowing, treasury control and auditors-general) did not signal a diversion from British practice, as ordinary legislation (and parliamentary practice) filled any gaps. That fusion of constitutional and ordinary legislation replicated the UK’s distribution of financial power between parliaments and financial executives.

So too did the entrenchment of parts of the legal practices of public money in written federal constitutions. Enacted federal-financial provisions operated within the auspices of British (rather than American) financial administration models and federal judiciaries exhibited no greater inclination for involvement in disputes concerning public money than their British and colonial predecessors.

430 Later cases in Australia bear out that preference: Commonwealth v Colonial Ammunition Co Ltd (1924); New South Wales v Bardolph (1934). 130

Accordingly, the export of the legal practices of public money throughout the British Empire illustrated the durability of the distribution of financial authority between parliaments and financial executives prevailing in the mid-19th century UK.

3.2 Twentieth century expansion

The first half of the twentieth century witnessed three major developments in the legal practices of public money in parliamentary constitutional systems with impacts on the distribution of financial authority in the UK and throughout the parliamentary constitutional world.

First, the legislative practices concerning taxation and public expenditure developed to accommodate the financing needs of total war and the welfare state (§3.2.1). Secondly, debt- financing began to be authorised by standing (rather than annual) legislation and central banks were established as wholly public institutions with financial supervision and monetary policy functions in addition to their sovereign debt management role (§3.2.2). Thirdly, the legal practices concerning public money proliferated throughout the Commonwealth as part of the post-War de-colonisation of the British Empire and were entrenched in written Commonwealth constitutions as a (form of) constitutional boilerplate (§3.2.3).

3.2.1 Welfare and wars

The World Wars and the development of the welfare state in the first half of the twentieth century fundamentally altered the profile of government finances, and brought enduring changes to the legal practices concerning public money.

Total war required total financing commitment, and WW1 and WW2 saw significant absolute increases in fiscal activity between 1900 and 1947.431

431 The data in Figures 3.1 and 3.2 were collected from BHS, chapters XI and XVI. 131

Figure 3.1: UK public expenditure and revenue as percentage of GDP 1900->1947

Between 1913 and 1915, expenditure moved from ~10% to ~50% of GDP. Between 1940–1946, it rose from ~20 to ~70% of GDP. Tax receipts increases on a similar (but less extreme) trajectory: moving from ~10 to ~15% of GDP between 1914-1918, and then from ~20% to ~40% between 1940 and 1945.

Total war also saw extreme spikes in public debt reliance, as sovereigns moved to fill the fiscal gap.

132

Figure 3.2: UK sovereign debt as percentage of GDP 1900->1947 The UK’s gross debt increased from <50% of GDP in 1914 to ~150% by 1919. It spiked again from an inter-war low of ~140% of GDP in 1920 to ~270% in 1946.

However, the 20th century witnessed a more general fiscal expansion, disconnected from financing total war. The scale of that non-military fiscal expansion is vividly illustrated when the growth of expenditure and tax revenue (as % of GDP) is corrected to remove the distortions of total-war financing.432

432 The data concerning expenditure and sovereign borrowing in Figures 3.3 — 3.6 was drawn from Tanzi and Schuknecht (2000), Public Spending in the 20th Century, Chapter II. 133

Figure 3.3: peacetime public expenditure and revenue as percentage of GDP c1900->2000 In both Australia and the UK, expenditure and tax revenues finished the 20th century consuming around double their late 19th century share of GDP. In both jurisdictions, expenditure started the 20th century at between 9-18% of GDP, and finished between 35–45%. Taxation rose from 9–17% of GDP around 1900 to 35–40% by the 1990s.

The steady increase in both expenditure and tax levels during that period, reduced reliance on debt finance. 134

Figure 3.4: sovereign debt as percentage of GDP 1870-1996 In 1913, the UK’s gross sovereign debt stood at ~78% of GDP. It dropped to that level again in 1960 (after rising to ~190% in 1937), and continued to fall in the 1970-80s to ~20%. Australian’s gross debt burden followed a similar trajectory, hitting an inter-war peak of ~155% of GDP in 1937, then dropping throughout the 1970-80s to ~20% of GDP. The fate of sovereign debt financing after the 1990s is dealt with in-detail in §5.2.

The 20th century’s non-military fiscal expansion is largely explained by the financing requirements of welfare-state programs, as public health and social protection took over from military expenditure as the most significant spending activities of governments. 135

Figure 3.5: Australian public expenditure % GDP 1900->2000 136

Figure 3.6: UK public expenditure % GDP 1900->2000 The absolute and relative increases in welfare-state expenditure in Australia (~2-18%) and the UK (~4–19%) are reflective of expenditure profiles in advanced economies throughout the 20th century, including other parliamentary constitutional systems like Canada and New Zealand.433

Those changes in the financing activities of government, brought with them changes to the legal practice concerning public money of enduring significance, which shifted the distribution of financial authority.

Paying for total war

The financing needs of WW1 and WW2 had three major impacts on public finances, the first was economic (entrenchment of income taxation as the

433 Which is the argument presented in Tanzi and Schuknecht (2000). 137 dominant form of taxation revenue and the use of monetary finance as an emergency financing measure), the second and third concerned the legal practices of public money: the enactment of statutes providing standing borrowing authority for the majority of public revenue and (in the post-War reconstruction phase) the statutory regularisation of contingencies expenditure.

A core economic impact of the World Wars was the establishment of income tax from a low-yield to a systemically-critical source of tax revenue. As §2.1.2 observed, income tax was an established (but not economically dominant) part of the UK’s 19th century tax-mix. That quickly changed as income tax rates spiked in WW1 and again in WW2.434 The economic need for an expansion of the tax base drove the enactment of income tax legislation where it was formerly absent.435 Another important economic impact of the World Wars was the enormous reliance on monetary finance. During WW1 (and its aftermath), Ways and Means Advances (cf §2.2.1) “assumed…a permanent character”.436 In 1917, the Bank advanced ~£160million to the Treasury: amounted to 126% of customs and excise receipts, 78% of income and property tax and 28% of total public income.437 In 1919, the Bank advanced over ~£240million to the Treasury: amounting to 85% of customs and excise, 82% of income and property tax and 27% of total public income.438 Those enormous monetary injections occurred without noticeable changes in the legislative practices of monetary finance.

The second major impact of the World Wars concerned the legal practices of sovereign borrowing. The critical ground-broken was the enactment of legislation conferred standing authority on treasuries to raise money by borrowing, without any pre-set quantitative restrictions.

The UK enacted legislation (the War Loan Acts 1914 (UK) and 1915 (UK)) during WW1 which conferred authority on the Treasury to borrow “any money

434 Clark and Dilnot (2002), ‘Long Term Trends in British Taxation and Spending’. 435 As it was in Australia (Income Tax Act 1915 (Cth)) and Canada (Income War Tax Act 1917 (Can)). 436 Wormell (1999), volument III) 291. 437 Ibid. 438 Ibid, 295 recording fortnightly drawings as high as £26.5million. 138 required for raising the supply” for 1915 and 1916 (ss 1(1)). The only quantitative limitation on the assumption of public debt would be the total expenditure needs of the fiscal year. Those Acts also gave the Treasury power to determine the price and maturity structure of public debt:439 to create and issue any securities…bearing such rate of interest and subject to such conditions as to repayment, redemption, or otherwise, as they think fit. In accordance with (by then) well-established practices, the repayment of debt issued under the War Loan Acts was charged on the Consolidated Fund. The same general phenomenon (legislation providing extremely broad sovereign borrowing authority disconnected from annual financial processes) was discernible in Australia, New Zealand and Canada throughout the same period.440

The conferral of that extremely broad standing authority was a prominent divergence from previous parliamentary practices to legislate for the quantum and commercial structure of long-term debt.441 Its propriety was contested in the Commons debate during the inter-War period, with members protesting that broad statutory borrowing powers caused Parliament to “part with its control”, by leaving “Treasury’s…power uncontrolled by this House…[t]o create a new debt”.442 Despite those protests, similarly broad borrowing powers were conferred on HMTreasury by the National Loans Act 1939 (UK) to refinance debts incurred under the War Loan Acts, and then by War Loan Acts passed during WW2.443

The third major impact of the World Wars on the legal practices concerned expenditure in the UK, particularly the enactment of legislation which provided a standing statutory basis for the use of the Contingencies Fund, previously being part of the annual supply process (§2.1.2). The Miscellaneous Financial Provisions Act 1946 (UK) supported the post-War financial reconstruction of the UK, and its

439 War Loan Act 1914 (UK) s 1(2) and War Loan Act 1915 (UK) s 1(6). 440 Eg, War Purposes Loan Act 1917 (NZ); War Loan Act 1914 (Cth); Loan Act 1942 (Can). 441 The Boer War saw borrowing powers delegated to HMTreasury, but they were less plenary than the War Loan Acts of WW1: eg Loan Act 1901 (UK). 442 HC Deb, 14 March 1934, c 519 (John Hills, former Financial Secretary to the Treasury). 443 Eg National Loans Act 1941(UK); Wormell (1999), volume VI, 245. 139 most enduring significance lay in its provisions concerning the contingencies fund.444

As McEldowney has noted,445 the design of that Act is unusual. Ex facie, it provided authority for the issue of funds from the Consolidated Fund to the Contingencies Fund, rather than from the Contingencies Fund itself. However, the Act announces a set of purposes for which those issues would occur (s 3):446 (i) “making advances in respect of urgent services in anticipation of provision being made by parliament”; (ii) “making advances in anticipation of the realisation of receipts in connection with any services for which provision is so made or to be made”; and (iii) “for making temporary advances to any Government Department for the provision of any necessary working cash balances in connection with any such services”.

In addition to those enumerated purposes, the Act set two additional limitations on the Contingencies Fund’s use. The first was temporal, providing spending authority only to 31 December 1950. The second was quantitative, limiting the total use of the fund to £250m.

Practical use of the Contingencies Fund remained in the discretion of the Treasury, which applied a number of prudential limitations. One limitation was that the contingencies fund should not be relied upon to authorise expenditure unless the relevant expenditure occurred pursuant to “powers or duties…defined by some specific statute” (pursuant to the Concordat 1932 between the Public Accounts Committee and the Treasury). Another has been described as the second reading “convention” or “practice”: that the contingencies fund should not be used unless a bill authorising expenditure has passed second reading in the Commons.447

444 It also including extended the Treasury’s standing borrowing power to finance supply for 1947 (s 1) and provided standing appropriations for the cost of war repairs (s 2). 445 McEldowney (1988) 235. 446 See, HM Treasury, Contingencies Fund Accounts (2005-2016). 447 For detail on both limitations, see House of Lords: Select Committee on the Constitution, The Pre-emption of Parliament, Ch 2; and HM Treasury, Managing Public Money (2013), Annex 2.4. 140

That statutory foundation of the Contingencies Fund endured (§4.2.2), and was bolstered by later legislation which eliminated the temporal restriction, increased the quantitative limitation (to 2% of the previous fiscal years annually appropriated expenditure), and set a minimum working capital of the Contingencies Fund (of £1.5million).448

Financing the welfare state

The growth of the welfare state had two major impacts on the legal practices of public money. The first, the enactment of the Parliament Act 1911 (UK), was unique to the UK. The second, the establishment of standing financial authorisation for welfare benefits, had a wider impact.

The Parliament Act 1911 was enacted in response to the House of Lords’ decisions to block the Liberal “Peoples’ Budget” of 1909, a notorious constitutional conflict.449 One seminal driver of the conflict was the resistance of landed interests in the Lords to increased property taxes to fund social welfare (mainly pension) reforms.450 The Lords rejection of a Finance Bill caused an election to be held to establish a clear electoral mandate for the re-distributive budget. After that mandate was established, the Lords eventually passed the Finance Bill, but the damage to the Lords’ political prestige was such that the Monarch supported a liberal proposal to flood the Lords with new progressive peers to dilute landed interests. That threat underlay the Lords decision to agree to the Parliament Act 1911,451 which curtailed their rights to block “money bills”,452 essentially creating a form of financial unicamerialism in the UK.453

448 Miscellaneous Financial Provisions Act 1955 (UK); Contingencies Fund Act 1970 (UK); Contingencies Fund Act 1974 (UK). 449 For a technical analysis of the Parliament Act 1911, see Jaconelli (1991), ‘The Parliament Bill 1910–1911’. 450 McLean (2009), 94. 451 The question of “home rule” in Ireland was also mixed-up with the Parliament Act 1911: McLean (2009), chapters 4 and 5. 452 Defined sufficiently broadly to include taxation, statutory borrowing and supply and appropriation bills: s 1. 453 The Lords do retain important veto powers depending on when a money bill is introduced: McLean (2009), chapter 4. 141

While that history is well-trodden, it is worthwhile placing those developments in the context of the broader parliamentary constitutional tradition. First, the Parliament Act 1911 did not deprive the UK Parliament of its power to refuse to enact financial legislation, but only the power of the unelected upper-house.454 Secondly, by curtailing the Lords’ power to block supply, the UK’s upper house was placed in weaker position than upper houses in Australia and Canada (which retained their formal power to block supply). Thirdly, the course of the people’s budget revealed an important point regarding the distribution of financial authority: parliamentary powers to refuse to enact financial legislation serve the constitutional function of destroying governments and forcing elections (cf§7.2.2), rather than (the far less drastic) function of controlling the financial activities of central governments.

The second major impact flowing from the growth of the welfare state concerned the enactment of new models of statutory welfare funds, which provided standing legislative authority for welfare benefit expenditure.

Although often marked to the post-War period, statutory “welfare fund” models pre-existed both World Wars. British models date from the National Insurance Act 1911 (UK), which established a system of (both) “national health” and “unemployment” insurance.455 The financing of health and unemployment benefits would be met from direct contributions (from potential beneficiaries and employers) and money annually voted by parliament (ss 3 and 85).

The amounts received from contributions and annual parliamentary grants were paid into two funds: all “the sums required to meet expenditure properly incurred [in relation to health] benefits…shall be paid out of [the National Health Insurance Fund]” (s 54) and “out of [the unemployment fund] shall be paid all claims for [unemployment benefit]” (s 92), with any deficit to be filled from general revenue. In that way, early national insurance legislation largely

454 Described by Anson as “merely [giving] statutory force to existing practice”: (1912), ‘The Parliament Act and the British Constitution’, 681. 455 Micklethwait (1976), The National Insurance Commissioners, 7. 142 separated the funding of welfare benefits from annual parliamentary financial processes.

That welfare fund model was largely replicated in the major post-War enactment, the National Insurance Act 1946 (UK), which established the enduring scheme of “national insurance contributions” (NICs). The Beveridge Report (recommending that Act) explained that the “finance of the Plan for Social Security is based…on a continuance of the tripartite scheme of contributions established in 1911”.456 A “Social Insurance Fund” would be established, into which money would flow from “insured persons and their employers”, and “a contribution from the National Exchequer out of monies raised by general taxation.”457

The ensuing National Insurance Act 1946 (UK),458 gave effect to that proposal, creating a “National Insurance Fund”, into which flowed contributions (from employers, insured persons and annually voted supply) and out of which flowed all expenditure necessary for the payment of benefits (s 35).459 Its presently critical feature was that (both) the revenue and expenditure sides of welfare funding were authorised by standing (rather than annual)460 legislation. In the UK, that basic system would endure through many iterations of national insurance legislation after 1945 (§4.1.2 and §4.1.3).461

A slightly different path was taken in relation to UK public health financing. The National Health Service Act 1946 did not establish a fund akin to the National Insurance Fund. Instead, the funds necessary to operate the National Health Service (“NHS”) were to be paid “out of moneys provided by Parliament” (ss 52- 54). In that sense, the general tax base was to be the funding-source for public health services, and the expenditure on those services would be provided

456 Beveridge,’ Social Insurance and Allied Services’ (1942). 457 Ibid, 109. 458 The latter National Assistance Act 1948 (UK) (establishing means tested entitlements) assumed the financing provisions of the National Insurance Act 1946. 459 National Insurance Act 1946, s 35. 460 With the qualification that a supplement (from annually voted expenditure) in the event of a shortfall remained a legal possibility. 461 Eg National Insurance Act 1965 (UK), ss 2, 83. 143 through the annual supply process. However, from the establishment of the National Insurance Fund a proportional contribution of NICs was paid to the NHS.462 That process was explicitly placed on a statutory basis in 1957,463 which legally-linked a proportion of public health funding to welfare contributions authorised by standing legislation and (thereby) removed those funds from the annual parliamentary financial process.

A welfare fund model also underpinned Australia’s and New Zealand’s major welfare-state financing legislation, although it relied less directly on insurance contributions.464 New Zealand’s Social Security Act 1938 (NZ), established a welfare fund similar to the UKs (ss 103 and 106), but was repealed after only 28years, when the Social Security Act 1964 (NZ) threw welfare expenditure back onto New Zealand’s annual supply process (s 124).

The Australian National Welfare Fund Act 1943 (Cth) established a “National Welfare Fund” and a standing appropriation of the Australian Consolidated Revenue Fund to the credit of that fund to the lesser of £30m or ¼ of the total personal (ie, non-company) income tax collected in a fiscal year (s 5). The fund would source expenditure for “health services, unemployment or sickness benefits, family allowances, or other welfare or social services” (s 6), including invalid and old-age pensions, maternity allowances and “pharmaceutical benefits”.465

Eventually, Australia’s welfare-state expenditure was removed from a welfare fund model, but the standing authority which originated in that model endured as Australia enacted standing (rather than annual) appropriation legislation for most of its welfare-state expenditure.466

462 HC Deb, 24 March 1958, c 54. 463 National Health Contributions Act 1957 (UK) c 54; National Health Service Contributions Act 1965 (UK) c 34. 464 Canada’s welfare legislation created a much more complex funding system of interlinked federal and provincial grants, which defies easy summary and is put aside here: Federal- Provincial-Territorial Directors of Income Support: Social Assistance Statistical Report (2016). 465 Invalid and Old-Age Pensions Act 1943 (Cth), s 18; Maternity Allowance Act 1943 (Cth), s 3; Pharmaceutical Benefits Act 1944 (Cth), s 17. 466 National Welfare Fund Repeal Act 1985 (Cth). 144

Impact on distribution of financial authority

The financing needs of total war and the welfare state had profound impacts on the distribution of financial authority in parliamentary systems of government.

The three developments associated with war financing (concerning income tax/monetary finance, sovereign borrowing and contingencies expenditure) had a mixture of distributional effects. Although economically significant, the developments concerning income tax and monetary finance were essentially neutral from the perspective of the distribution of financial authority. Notwithstanding the heavy reliance on those financing activities, the legal frameworks through which they authorised remained largely static.467 A similarly neutral effect followed the statutory reinforcement of the Contingencies Fund. The Miscellaneous Financial Provisions Act 1946 established Contingencies Fund expenditure as a form of standing appropriation, but left the Treasury’s very significant discretion in contingencies expenditure un-disturbed. The development of extremely broad wartime statutory borrowing, however, shifted financial authority towards financial executives and thereby, distributed debt finance authority away from parliaments.

The development of the legal practices wrought by the welfare state also presented mixed distributional results.

The end-point of the 1909-11 skirmishes between Commons and Lords was to deprive one House of the UK Parliament of the formal authority to block supply. As a matter of strict constitutional form, that development was monumental, but it simply confirmed the political reality of the Commons’ position of financial predominance.

The establishment of standing authority for welfare finance created a new arena for distributional battles between parliaments and financial executives: welfare- state expenditure. As the 20th century progressed and welfare state expenditure

467 although the tax was introduced where it had hitherto been absent in Australia and Canada. 145 increased, the standing appropriations provided by welfare fund models would permit the authorisation of ever-larger swathes of public expenditure outside the annual parliamentary process. However, so long as parliamentary legislation provided a clear basis for the payment of welfare-state expenditure, the standing appropriation provisions would be tightly-bonded (§2.1.2).

3.2.2 Developing debt management

Between the World Wars and the 1980s, there were two significant developments of the legal practices concerning debt and monetary finance: the severance of legislative authority over sovereign borrowing from the annual process of financial approval; and the proliferation of public central banks.

Growth of standing borrowing authority

From the beginning of the 20th century, authorisation of public borrowing occurred through two forms of legislation.

Long-term sovereign borrowing and debt issues were generally authorised pursuant to annual legislation or special-purpose Acts. The precise form of annual borrowing legislation varied in different jurisdictions. In the UK, it was attached to Supply Acts (§2.1.2), which conferred authority on the Treasury to borrow to a pre-set limit of supply (§2.2.1). In Australia, New Zealand and Canada, sovereign borrowing occurred pursuant to annual Loan Acts (§3.1.2), which conferred authority to borrow pre-set amounts (and, occasionally, pre-set purposes). Exceptional legislation like the UK War Loan Acts represented anomalous divergences from that position (§3.2.1).

Sovereign borrowing for short-terms (to finance cash-deficits) was more commonly authorised by standing legislation. The UK Treasury relied on a combination of the Audit Act 1866 and the Exchequer Bills Act 1877 to that end, and similar versions of that legislation appeared elsewhere in the 146

Commonwealth.468 Alike the Treasury Bills Act 1877, Australia, New Zealand and Canada also enacted standing framework legislation which set out the basic framework for sovereign borrowing, none of which provided stand-alone authority to issue sovereign debt.469 Accordingly, by the mid-20th century, the general position was that legislation connected to the annual parliamentary financial processes (or discrete Act authorising a single debt-issue) was required to issue new long-term debt.

UK legislation enacted in 1968 fundamentally changed that position: the National Loans Act 1968 (UK).

That Act had several enduring features.470 Replacing the sovereign debt servicing functions of the Consolidated Fund, it created the National Loans Fund, through which would flow proceeds from, and repayment of, central government debt (s 1).471 Any shortfalls in the National Loans Fund would be topped-up from the Consolidated Fund and the two funds would be balanced daily (s 18).

Most significantly, the National Loans Act also gave the Treasury standing power to borrow and issue debt securities, on any terms as to interest or maturity it considered necessary: 12 Power of Treasury to Borrow (1) Any money required— (a) for providing the sums required to meet any excess of payments out of the National Loans Fund over receipts into the National Loans Fund; and (b) for providing any necessary working balance in the National Loans Fund,

468 Eg, Treasury Bills Act 1914 (Cth); Loan (Temporary Revenue Deficits) Act 1953 (Cth). 469 Loans Securities Act 1919 (Cth); Commonwealth Inscribed Stock Act 1911 (Cth); New Zealand Loans Act 1953(NZ); Consolidated Revenue and Audit Act 1931 (Can). 470 The National Loans Act 1968 also provided the legal authority for central and local government debt management (ss 3-6) and the UK’s domestic responsibilities under the Bretton Woods monetary system (s 7). 471 And loans to local authorities (ss 12–13). 147

may be raised in such manner and on such terms and conditions as the Treasury think fit, and money so raised shall be paid into the National Loans Fund

Because of the daily balancing of the Consolidated and National Loans Funds, the operative effect of the limitations in s 12(1)(a) and (b) was to limit the Treasury’s power to borrow by reference to shortfalls between fiscal receipts and outlay or the total requirement for debt finance. Accordingly, s 12 of the National Loans Fund gave the Treasury standing authority to borrow any money to fund a cash or fiscal deficit, a matter emphasised in the Commons debate on the Bill:472 [b]ecause Parliament controls utterly and wholly the payments into and out of the Fund [referring to the fiscal deficit], it thereby controls the Treasury’s borrowing powers.

But [Parliament] does not have to refer to them on each occasion. The Bill will give power to the Treasury to borrow the excess, but that Treasury borrowing is absolutely controlled by Parliament. An excess is the difference between two items. If one controls each of the two items, one automatically controls the difference between them. Those broad powers to borrow were supplemented by equally wide powers to determine the rates of interest, maturity and denomination of debt securities (§5.1.1).

The other momentous aspect of the National Loans Act 1968 was its treatment of lending by the Bank of England to HMTreasury (s 12(7)): The Bank of England may lend any sums which the Treasury have power to borrow under this section, and section 1 of the Bank of England Act 1819 (loans by Bank to Crown to require authority of Parliament) shall cease to have effect. With that pen-stroke, the statutory requirement to obtain parliamentary pre- approval before the Bank could finance the Treasury was written out of the

472 HC Deb 11 December 1967, vol 756 c 45. 148 statute book. (§2.2.1) That obliteration of a ~250years tradition reflected the reality that (by 1968) the Bank was not an arms-length commercial entity bargaining with government (§2.3.3), but a public monetary authority: or “central bank”.

Public central banking

The development of central banking in the 20th century has been the object of a very large secondary literature,473 and caution should attend an attempt to draw general conclusions regarding the motivations for the development central banking and the scope of central banks’ statutory (and economic) functions.

Some core themes, are, however, discernible.

Between the 1930s and 1960s, the existing parliamentary systems (Australia, Canada, New Zealand and the UK) either created public central banks,474 or vested those already existing,475 with a legislative monopoly on currency issues, responsibility to oversee the stability of the private banking (and financial) system, and execute monetary policy. Like the Bank of England, those central banks were statutorily appointed as sovereign debt management authorities.476 Each central banking statute provided for a governance structure under which the bank would be managed by a board of appointed public officials, who would report to, consult with, or be directed by, treasuries.477

473 Entry points are Singleton (2011), Central Banking in the Twentieth Century and Capie, Goodhart and Schnadt (1994), ‘The Development of Central Banking’. 474 Reserve Bank of New Zealand Act 1933 (NZ) (establishing the Reserve Bank of New Zealand); Bank of Canada Act 1934 (Canada) (establishing the Bank of Canada). 475 Bank of England Act 1946 (UK) (nationalising the Bank of England, and continuing its functions); Reserve Bank Act 1959 (Cth) (re-constituting the existing Commonwealth Bank of Australia created as a trading bank by the Commonwealth Bank Act 1911 (Cth) as an exclusively public central bank). The Bank of England possessed a form of statutory monopoly on the issue of paper currency from the Bank Charter Act 1844 (UK). 476 Treasury Bills Act 1877 (UK) and National Loans Act 1968 (UK) (§2.2.1, §3.2.2); Reserve Bank Act 1959 (Cth), ss 8(d)–(e), 27; Reserve Bank of New Zealand Act 1933 (NZ), s 13(f)–(j), s 22; Bank of Canada Act 1934 (Can), 23. 477 Bank of England Act 1946 (UK) s 4; Reserve Bank Act 1959 (Cth)s 11; Reserve Bank of New Zealand Act 1933 (NZ), s 23; Bank of Canada Act 1934 (Can), ss 7–13. 149

The position of central banks in providing finance to central governments (as opposed to simply acting as a sovereign debt agent) received scant attention.

Outside the UK (§2.2.2), only New Zealand provided a meaningful statutory regulation of the capacity of central banks to provide monetary finance to the central government. Section 14(i) of the Reserve Bank of New Zealand Act 1933 provided “that it shall not be lawful for the Bank to: (i) Grant accommodation, either directly or indirectly, to the Treasury…by way of discounts, loans, advances, overdrafts, or otherwise, in excess of one- half of the revenue or estimated revenue for the year…of the Treasury… That restriction on monetary financing survived for around 30 years, before being repealed by the Reserve Bank of New Zealand Act 1964.

Canada would later enact a similar provision in s 18(j) of the Bank of Canada Act 1985 (Can), providing that “the Bank may”: make loans to the Government of Canada…but such loans outstanding at any one time shall not…exceed one-third of the estimated revenue of the Government of Canada for its fiscal year…and such loans shall be repaid before the end of the first quarter after the end of the fiscal year of the government that has contracted the loan… Aside from the ~15 words of s 12(7) of the National Loans Act 1968, the Canadian provision was (and is) the only detailed statutory limitation on the monetary financing activities of Australian, Canadian, New Zealand and UK central banks.478

Impact on distribution of financial authority

The mid-20th century developments of the legislative practices of sovereign borrowing and central banking had large distributive effects.

478 The secondary literature on the legal powers of central banks to provide monetary finance is sparse: Cottarelli (1993), Limiting Central Bank Credit to Government (1993); Jácome, Luis et al (2012), ‘Central Bank Credit to the Government’. 150

Severing treasuries’ power to borrow from the annual supply process, and limiting that authority to borrow only by reference to deficit-financing, conferred standing authority to determine the economic terms on which debt finance would be obtained. When that authority was combined with the standing appropriation for debt servicing costs, a large portion of public expenditure (debt servicing costs) became un-bound from legislative conditions for payment.

As public central banks were established by statute they obtained the primary position as government debt manager, and a source of short-term government finance. But those responsibilities were often conferred without any explicit legislative regulation of lending to treasuries without parliamentary consent (except in Canada).479

Both developments distributed financial authority away from parliaments.

3.2.3 Constitutional boilerplate

From the 1940s-1980s, a large number of former British colonies obtained independence and adopted written constitutions. The provision made by those constitutions for financial matters reflected many of the legal practices of public money obtaining in Britain and drafted into the written constitutions of Australia and Canada: providing a kind of constitutional boilerplate for financial matters. The widespread adoption of that constitutional boilerplate replicated the distribution of financial authority obtaining elsewhere in the Commonwealth, despite wide variations in other aspects of constitutional government in the Commonwealth.

An exhaustive analysis of each Commonwealth jurisdiction is beyond the scope of this work. The following general analysis is designed to reveal how the legal practices of public money spread throughout parliamentary constitutional

479 During the same period, administrative and scholarly attention focused increasingly on the “constitutional position of the central bank” through the prism of “monetary policy”, rather than providing finance to government: eg Goodhart (2003), ‘The Constitutional Position of the Central Bank’. 151 systems, and thereby established a (prima facie) similar distribution of financial authority to that prevailing in the UK, Australia, New Zealand and Canada.

Commonwealth proliferation

All the written Commonwealth constitutions have a finance chapter, or discernible set of financial provisions, which contain a strikingly similar set of features.480

They all make provision (familiar from the Australasian and Canadian constitutions) for: a consolidated fund into which general state revenue flows; prohibitions on expenditure without appropriation; the executive’s financial initiative; and (where bi-cameral) the introduction of money bills into the more representative house.481

The post-War Commonwealth constitutions, however, went further and provided a wider swathe of provisions which entrenched more of the legal practices of public money than their Australian and Canadian pre-cursors.

Prominently, many of those written constitutions provide for entrenched treatment of an annual budget, by providing detailed provisions for the presentation of an “annual finance statement” to the parliament.482 That statement typically includes “estimated receipts and expenditure” for that year, as well as a breakdown of the proportion of that expenditure from standing and annual appropriations. Ancillary to the annual finance statement, most Commonwealth constitutions include provisions regarding supplementary and excess expenditure, as well as votes on account and some form of contingency provisions.483 They also include an explicit proscription on borrowing without

480 Except those which derive from civil law traditions: eg, Mozambique and Cameroon. 481 Eg Constitution of Barbados 1966, ss 54-55, 107, 109; Constitution of the Independent State of Papua New Guinea, ss 209-212; Constitution of the Kingdom of Swaziland Act 2005, ss 111-112, 198-199. 482 Eg Constitution of Kiribati 1979, s 109; Constitution of Lesotho 1966, s 112; Constitution of Malaysia 1963, s 99. 483 Eg Constitution of Malawi 1966, ss 177-179; Constitution of Mauritius 1968, ss 105-107; Constitution of Pakistan 1973, ss 84-85. 152 statute,484 or expressly charge debt repayments on the consolidated fund.485 Some of the more recently amended constitutions enshrine some form of central bank independence.486

The additional treatment given to financial matters in the post-War Commonwealth constitutions provide a far greater level of entrenchment of the legal practices, but (in their essence) they replicate the core features of the legal practices followed elsewhere in the Commonwealth.

That simple fact can be recognised without making any claim regarding constitutional homogeneity within the Commonwealth. While each former- British colony passed through a unique constitution-making process,487 it is impossible to review those constitutions’ finance provisions and ignore the overwhelming commonalities, which were put there intentionally by their drafters.

“Simplified version of the British system”

In describing the forthcoming constitution of Nepal in 1958, Jennings said the following about the finance provisions:488 The financial system contemplated is now customary in countries operating parliamentary government, but has been simplified to suit the condition of Nepal.

There is nothing new in Chapters V [“Legislative Procedure”] and VI [“Financial Procedure”] of Part V of the Constitution … It seems that a simplified version of the British system would best suit the conditions

484 Eg Constitution of Uganda 1995, s 159; Constitution of the Republic of the Seychelles 1993, s 153; 485 Eg Constitution of Sierra Leone 1978, s 133; Constitution of Malta 1964, s 106. 486 Constitution of Kenya 2010, s 231, which does not deal with monetary finance. 487 Cf Phillips (1985), West Indian Constitutions: Post-Independence Reform; Obrien (2014), The Constitutional Systems of the Commonwealth Caribbean; Elias (1962), The British Commonwealth: The Development of its Laws and Constitutions (Vol 10, Ghana and Sierra Leone); Tan (1999), ‘A Short Legal and Constitutional History of Singapore’; Harding (1996), Law, Government and the Constitution in Malaysia; Basu (1965), Commentary on the Constitution of India (Vol 1). 488 Kumarasingham (2015), Constitution-Maker - Selected Writings of Sir Ivor Jennings, 105, 113 (emphasis added). 153

of Nepal. The essence has been retained without the complications which have resulted from a long constitutional history. That sensibility is evidenced by the treatment of federal-financial mechanism within the financial boilerplate of many Commonwealth constitutions. Alike Canada and Australia, those mechanisms were designed to operate within (rather than re-model) the distribution of financial authority between parliaments and financial executives.

So much is illustrated by the federal-financial provisions of the constitutions of India (independent in 1947), Malaysia (independent in 1957) and Nigeria (independent in 1960).

As a commentator on the Indian Constitution noted, “the broad principles of financial legislation obtaining in England have been adopted in our Constitution.489 Those principles were entrenched in the “Finance” provisions of the Indian Constitution, most prominently that “the Executive cannot raise money by taxation, borrowing or otherwise, or spend money without the authority of parliament” and “none but a Minister” or “the Government” can “make a demand for a grant, ie, either to raise money or to authorise its expenditure”.490 Embedded within those provisions India’s complex federal- financial provisions for the “Distribution of Revenues between the Union and the States” operated.491

The same embedding of bespoke fiscal distribution provisions within boilerplate financial provisions can be found in the Constitution of Malaysia. Commenting on that constitution (in draft), Jennings said that there were “precedents in certain of the Commonwealth Constitutions” which could provide “[m]achinery for consultation between the Central Government and the States and Settlements on certain financial matters”.492

489 Basu (1965), Constitution of India, 692 (original emphasis). 490 Ibid, 638. 491 Constitution of India 1950, ss 268-273. 492 Kumarasingham (2015), 79. 154

The written Constitution of Malaysia did indeed accommodate the federal nature of the compact in its finance provisions,493 including: a prescription of federal and state expenditure responsibilities (ss 82 and 98); the establishment of a “National Finance Council” (s 108) as a forum through which to resolve financial disagreements between federal and state governments;494 and allocation of responsibilities concerning the making of “grants” to the State (s 109) and the “assignment of taxes and fees to the States (s 110).

Like India, those bespoke federal-financial mechanisms were located within the financial boilerplate provisions: described by the Report of the Federation of Malaya Constitutional Commission (the “Reid Commission”) as a “technical matter”, but one of “considerable constitutional importance”.495 Federal and state “Consolidated Funds” were established into which “All revenues and moneys howsoever raised or received by the Federation [or a State] shall, subject to [law] … be paid into and form one fund, to be known as the Federal or [State] Consolidated Fund” (s 97). The Federal Consolidated Fund was charged with “pensions”, “all debt charges for which the Federation is liable” and “any moneys required to satisfy any judgment…against the Federation” (s 98). The remaining features of the boilerplate provisions were also enacted, including provision for: the “annual financial statement” (s 99), “supply bills” (s 100), “supplementary and excess expenditure” (s 101), a “contingencies fund” for “urgent and unforseen” expenditure (s 103); a prohibition on withdrawing money from any consolidated fund without statutory authorisation (s 104); audit of public accounts by an Auditor-General (ss 105-107); and a prohibition on public borrowing otherwise than by “federal [or State] law” (s 111).

The Constitution of Nigeria also brokered the necessary compromises between regional and central finance, within the broader context of the boilerplate provisions. That Constitution provided for a detailed revenue sharing arrangement, including requiring the federal government “to pay to each Region [50%] of the proceeds of all mining royalties and rent accruing therefrom” and

493 Vohrah, Koh and Ling (2004), The Constitution of Malaysia, 383-431. 494 Harding (1996), 176-179. 495 Reid Commission (1957), [151]. 155

“the proceeds of all excise duties on tobacco, motor spirits or diesel oil, less those…attributable to Lagos, are paid to the regions [sic] in proportion to the estimated distribution for consumption in each Region”.496

Despite those detailed revenue sharing provisions, the familiar form of the boilerplate financial provisions appear as the ultimate structure within which financial authority is exercised: a consolidated fund, prohibitions on taxing or spending, provision for an annual financial statement, a public debt charge on the consolidated fund, supplementary and excess appropriation, contingencies and audit.497

Impact on distribution of financial authority

The analysed sample of Commonwealth constitutions provides a snapshot of the export of the legal practices of public money throughout the post-War written constitutions of newly independent former-colonies.498

That snapshot illustrates the ubiquity of the legal practices (entrenched as financial boilerplate), within which the design of financial innovations operated. While consolidated funds were established and all taxation, expenditure and borrowing required legislative authorisation (§2.1.2, §2.2.1), the executive’s financial initiative continued to limit the power of parliaments to originate financial legislation and appropriation practice expressly accommodated a high degree of flexibility (in contingencies, supplementary and excess expenditure) (§2.1.2).

To that degree, like the legal practices’ export to Australian and Canadian constitutional systems(§3.1.3), the written Commonwealth constitutions

496 Elias (1967), The British Commonwealth: The Development of its Laws and Constitutions (Vol 14, Nigeria), 254. Constitution of Nigeria 1963, Chapter IX, Part 2. 497 Elias (1967), 258-260. The same retention of the essential aspects of the legal practices concerning public money, despite the existence of various amendments to suit local circumstances can be seen in Sri Lanka (Cooray (1973), Constitutional and Administrative Law of Sri Lanka (Ceylon), 154-170). 498 Given the constraints of space, no definitive conclusions can be drawn regarding the distribution of financial authority in each Commonwealth nation. 156 entrenched a strikingly similar distribution of financial authority inherited from the mid-19th century UK.499

3.3 Public money in the modern state

The final stage of development occurred as the legal practices of public money developed to fit the financing needs of the modern state. Tax doctrine shifted away from the taxpayer-protecting approach (§2.3.1) and fiscal equalisation programs grew in prominence (§3.3.1). Developments in the monetary policy functions of central banks drove significant changes in the legal practices of debt and monetary finance (§3.3.2). New Public Management philosophies drove developments in public accounting, fiscal responsibility and appropriation legislation, which carried a mixture of distributional effects (§3.3.3)

3.3.1 Fiscal convergence

During the latter half of the 20th century a number of instances of “convergence”500 occurred in public financial activity.

From the 1970s, the OECD parliamentary systems (Australia, Canada, New Zealand and the UK) adopted a remarkably similar tax mix for their highest- impact revenue-sources: individual and corporate income tax; capital gains tax; value-added (or sales) tax; domestic consumption taxes (excises); and customs duties. While that form of fiscal convergence was economically and politically significant, it did not significantly alter the existing legal practices concerning taxation.

Not all parliamentary systems followed identical institutional paths. Prominently (and importantly for §4 and §5), Australia hived-off supervision over

499 The extent to which conclusions regarding the precise distribution of financial authority can be drawn is examined in §7.2.3. 500 Cf Tanzi (2012), ‘Tax Systems in the OECD’; Becker and May (2009), ‘The Evolution and Convergence of OECD Tax Systems’. 157 expenditure management to a newly created Department of Finance,501 leaving responsibility for macroeconomic policy, taxation, sovereign borrowing and monetary functions within the Treasury.502 No new legal powers were created,503 but a dual-financial executive came into existence (composed of a treasury and a finance ministry).

More significantly to the legal practices of public money, were two (lower- profile) types of convergence in fiscal activities. The first concerning a move by common law judiciaries away from the taxpayer-protecting approach. The second concerned the legislative implementation of fiscal equalisation programs.

Tax litigation

By the mid-20th century, the taxpayer-protecting approach (§2.3.1) had grown two limbs, one for the “strict-interpretation” of tax statutes, the other for a “legalistic-characterisation” (ignoring the economic substance) of complex transactions for the purposes of tax assessment.504 That approach, the “Westminster doctrine”,505 was discernible throughout the common-law world.506

From the 1980s, common law judiciaries started walking back Westminster. The seminal cases were WT Ramsay Ltd v Inland Revenue Commissioners (1982) (“Ramsay”) and Furniss (Inspector of Taxes) v Dawson (1982) (“Furniss”). Both cases involved circular transactions designed to avoid tax on capital gains from sales of real property:507 whereby assets performed a series of legal steps, but remained in the same economic place.

501 Hawke and Wanna (2010), ‘Australia After Budgetary Reform’, 69. 502 O'Faircheallaigh and Wanna (1999), Public Sector Management in Australia, 76. 503 Section 7 of the Acts Interpretation Amendment Act 1976 (Cth) deemed references to the Australian treasury in existing audit legislation to extend to the newly created finance department. 504 Inland Revenue Commissioners v McGuckian (1997), 999. 505 McGuckian (1997), 1001. 506 Anderson v Commissioner of Taxes (Vict) (1937) and Mullens v Federal Commissioner of Taxation (1976) (Australia); Buckley & Young Ltd v Commissioner of Inland Revenue (1978) (New Zealand); Pioneer Laundry & Dry Cleaners Ltd v The Minister of National Revenue (1939) and Covert v Minister of Finance of Nova Scotia (1980) (Canada). 507 Under the Finance Act 1965 (UK). 158

Lord Wilberforce’s speech in Ramsay jettisoned both aspects of the Westminster doctrine. The strict interpretation approach was simply written out of the law books: What are "clear words" is to be ascertained upon normal principles: these do not confine the courts to literal interpretation. There may, indeed should, be considered in the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded. The legalistic-characterisation approach was disavowed in a classically-crabwise piece of common law reasoning. Lord Wilberforce described the Westminster doctrine as “cardinal” and then proceeded to explain why it had been misapplied for half a century:508 While obliging the court to accept documents or transactions, found to be genuine, as such, [the Westminster doctrine] does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have effect as part of a nexus or series of transactions, or as an ingredient of a wider transaction intended as a whole, there is nothing in the doctrine to prevent it being so regarded. The “context” to which Wilberforce referred was that “ capital gains tax was created to operate in the real world, not that of make-belief”.509 Given that the taxpayer had received a letter from his accountant stating that “the scheme is a pure tax avoidance scheme and has no commercial justification”,510 the approach newly enumerated in Ramsay led the revenue to victory.

The practical impact of Ramsay was forthrightly explained by Lord Diplock in a later case:511 It would be disingenuous to suggest, and dangerous on the part of those who advise on elaborate tax-avoidance schemes to assume, that Ramsay's case did not mark a significant change in the approach

508 Ramsay (1982), 324-5 (emphasis added). 509 Ibid, 326. 510 Ibid, 328. 511 Inland Revenue Commissioners v Burmah Oil Co Ltd (1982), 32-33. 159

adopted…to a pre-ordained series of transaction…into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax which in the absence of those particular steps would have been payable ... [T]he approach to tax avoidance schemes of this character sanctioned by Ramsay entitles your Lordships to ignore the intermediate circular book entries and to look at the end result. In Furniss the “approach…sanctioned” in Ramsay crystallised into a discrete legal doctrine: “steps inserted which have no commercial (business) purpose apart from the avoidance of a liability to tax…the inserted steps are to be disregarded for fiscal purposes.”512 That doctrine would eventually be labelled, “fiscal nullity”.513

The doctrinal developments of Ramsay and Furniss were mirrored in other common law jurisdictions, which also shifted from strict to purposive interpretation of taxation legislation and away from a legalist approach to characterisation of tax-evasive transactions.514

Despite their importance, the total significance of Ramsay and Furniss was limited in several ways. First, old habits died-hard in lower-courts staffed by tax specialists, who continued to apply a taxpayer-protecting approach, despite admonitions to the contrary from apex courts.515 Secondly, much tax legislation had been drafted in response to the (highly-technical) Westminster approach, with the result that a purposive approach to tax legislation often required using pre-Ramsay techniques of interpretation. A point explained by the Supreme Court of Canada:516 There is no doubt today that all statutes, including the Income Tax Act, must be interpreted in a textual, contextual and purposive way. However, the

512 Furniss (1984), 527. 513 Craven (Inspector of Taxes) Appellant v White [1989] AC 398, 423. 514 John v Federal Commissioner of Taxation (1989) (for Australia); and Canada Trustco (2005) (for Canada). 515 Eg Sherdley v Sherdley (1986), 738 describing Westminster as the “true test” and then being overturned by Sherdley v Sherdley (1988). 516 Canada Trustco Mortgage (2005), 11. 160

particularity and detail of many tax provisions have often led to an emphasis on textual interpretation.

Thirdly, statutory cognates of the “fiscal nullity” doctrine had begun to appear in general anti-avoidance rules (“GAAR”).517 An exemplar GAAR was introduced in 1988 by s 245 of the Canadian Income Tax Act, which operated to “deny a tax benefit” to a person who used an “avoidance transaction”, which was defined to mean “any transaction” or “series of transactions”: that, but for this section, would result, directly or indirectly, in a tax benefit, unless the transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the tax benefit. In jurisdictions which enacted GAAR legislation, common law doctrines of fiscal nullity operated only as back-up principles, where legislation did not close the tax-evading loophole.518

Despite those limitations, from the 1980s it was clear that common law judiciaries had marched-back the extremities of the taxpayer-protecting approach which had ruled tax disputes since the 19th century.

Expenditure equalisation

The other area of development of the legal practices concerning fiscal activity related to the growth of expenditure equalisation programs. Expenditure equalisation programs could be operated domestically (transferring money from central to non-central governments) or internationally (transferring money outside the nation-state to supra-national governments, like the European communities, or international organisations, like the International Monetary Fund).

517 See generally: Fernandes (2016), ‘A Principled Framework for Assessing General Anti- Avoidance Regimes’. 518 The UK did not obtain a GAAR rule until 2013: Finance Act 2013 (UK), part 5. 161

Both domestic and international equalisation programs operated in the UK, and the European aspect of its international program had a powerful impact on the legal practices concerning appropriation.

Section 2(3) of the European Communities Act 1972 (UK) provided the legal basis for financial transfers to the (then) European Communities: There shall be charged on and issued out of the Consolidated Fund or, if so determined by the Treasury, the National Loans Fund the amounts required to meet any Community obligation to make payments to any of the Communities or member States, or any Community obligation in respect of contributions to the capital or reserves of the European Investment Bank or in respect of loans to the Bank, or to redeem any notes or obligations issued or created in respect of any such Community obligation… That provision established a standing appropriation for all payments in satisfaction of obligations under European law: authorising the UK’s contribution to the EU budget, a matter determined according to European (rather than domestic) legal instruments.519

The 1970s also saw the development of the UK’s domestic equalisation program: the “Barnett Formula”.520 The Barnett Formula initially produced no legally discernible impact on the UK’s appropriation legislation.521 As devolution progressed in the 1990s, the UK’s domestic equalisation program had a discernible impact on annual appropriation practice, as the UK’s annual estimates began to provide individual estimates for transfers to the devolved administrations. By the close of the 1990s, transfers to the devolved administrations appeared as “Non-Budget Voted Expenditure”, being voted, but not forming part of the annual budget.522

519 The legal and institutional frameworks are explained in European Union (2014), European Union Public Finance, chapter 8. 520 As McLean and McMillan explain, there was an older HMTreasury formula in operation from around 1888: (2003) ‘The Distribution of Public Expenditure Across UK Regions’, 45-46. 521 Portions of funding allocated according to the Barnett Formula were not separately marked in annual appropriation legislation, but subsumed within departmental grants. 522 McEldowney (2015), 351. 162

Australia operated fiscal equalisation programs since federation (§3.1.3). For most of that time, the amounts transferred had been determined by the financial executive’s initiative, and approved by annual appropriation legislation. To that extent, like the UK’s devolution transfers, Australia’s domestic-equalisation programs operation within the legal practices concerning public expenditure. However, as the 20th-century closed, large parts of Australia’s domestic equalisation program were authorised by standing appropriations, which linked certain State’s entitlements to funds to a statutorily pre-set formula. A prominent example was the New Tax System (Commonwealth-State Financial Arrangements) Act 1999 (Cth), which authorised “financial assistance” to States derived from “goods and services” tax (“GST”) revenue according to pre-set formulae.523

Impact on distribution

The changes to the legal practices brought by the fiscal policy convergences of the later-20th century has several impacts on the distribution of financial authority in parliamentary constitutional systems.

The shift in the judicial attitude to tax legislation (away from the taxpayer- protecting approach) changed the position of the judiciary vis-à-vis parliamentary fiscal policy enacted into legislation. As judges became less concerned with protecting taxpayers from the 1980s, the prospect of an effective enforcement mechanism for parliamentary fiscal policy increased.

The various expenditure equalisation programs which came into existence from the 1970s had a mixed impact on the distribution of financial authority. Some

Part 4 Grantsprograms, like the to the States domestic equalisation transfers under the Barnett Formula Division 1 GST revenue grants

Section 13 did not bring an overt change in legal practices concerning expenditure because

they operated within the annual appropriation processes. Standing legislation Part 4—Grants to the States authorising equalisation programs also provided mixed results. The Australian Division 1—GST revenue grants

13 GST revenueequalisation of GST revenue occurred pursuant to grants relatively tightly-bound Subject to this Act, each State is entitled to the payment, by way of financial assistance, for a GST year, of a grant worked out using 523the The easiest to formula: understand concerned GST-linked health funding was contained in s 12: ⎡⎤ Adjusted State⎢⎥ GST Total hospital population× revenue+ grants ⎣⎦⎢⎥ – State hospital Adjusted total population grant

where: adjusted State population means the estimated population of the State on 31 December in the GST year (see subsection 7(1)) multiplied by the relativities factor (see section 9) for the State for that year. adjusted total population means the sum of the adjusted populations of all of the States for the GST year. GST revenue means the GST revenue for the GST year (see section 5). State hospital grant means the hospital grant for the State for the GST year (see section 6). total hospital grants means the sum of the hospital grants for all of the States for the GST year. Note: See also Schedule 1 which deals with transitional GST years.

12 A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 163 standing appropriations (as the criteria for payment were set by legislation). In contrast, the UK’s European equalisation occurred via un-bonded standing legislation (as the criteria for payment was set in international agreements and subject to negotiation by the executive). The latter type of legislation distributed financial authority away from parliaments and towards executives vested with authority to negotiate (or manage) levels of expenditure.

A similar shift of authority is discernible in relation to debt and monetary finance in the 20th century’s closing decades.

3.3.2 Sovereign borrowing and monetary policy

Between 1980 and 2000, legislation stapled and de-stapled sovereign debt and monetary policy, according to the fluctuating theories about the proper relationship between central banks and central governments. From the early 1980s, sovereign borrowing legislation began to confer massively-expanded authority on treasuries to borrow and issue debt. In the 1990s, as central banks were given independence over monetary policy their debt-management functions were carved-out and given to treasuries. Both developments accrued financial authority to financial executives and away from parliaments.

Plenary borrowing powers

The most overt example of the legal fusion of debt finance and monetary policy occurred in the UK in 1982, with an amendment of the National Loans Act which hollowed-out the deficit-financing limitation on the UK Treasury’s borrowing powers (§3.2.2).

The Finance Act 1982 (UK) inserted the underlined text into s 12 of the National Loans Act:

164

“12 Power of Treasury to Borrow (1) Any money which the Treasury consider it expedient to raise for the purpose of promoting sound monetary conditions in the United Kingdom and any money required— (a) for providing the sums required to meet any excess of payments out of the National Loans Fund over receipts into the National Loans Fund; and (b) for providing any necessary working balance in the National Loans Fund, may be raised in such manner and on such terms and conditions as the Treasury think fit, and money so raised shall be paid into the National Loans Fund

The proffered justification for the addition of the new borrowing power was that the deficit-financing limit on borrowing imposed by s 12 prevented the issue of new sovereign debt for the sole purpose of monetary policy operations.524 So the government explained to the Commons:525 When the constraint imposed by section 12 of the Act, which has no coherent relationship with monetary policy, is reached, the Government of the day would be unable to vary debt sales to influence monetary conditions, with adverse consequences for the conduct of monetary policy… It is quite inappropriate that a section in the National Loans Act should impose such an incidental limitation on our freedom of action in this connection. Additional to attacking its economic merits, 526 the opposition attacked the constitutional impact of the Treasury’s new borrowing powers:527 The clause gives the Chancellor of the Exchequer a new power, not merely to fund the differences between Government revenues and expenditure, but to borrow without limit, providing that his purpose is linked to the purpose of

524 selling that debt at a particular rate of interest in order to control the money supply. 525 HC Deb 12 July 1982 vol 27 sc 657, 659. 526 The core disagreement was whether the supply of broad money had “any real effect on what has happened to the real economy.” (HC Deb 12 July 1982 vol 27 c 671 (Joel Barnett)). 527 HC Deb 12 July 1982 vol 27 c 662 (Peter Shore). 165

promoting sound monetary conditions in the United Kingdom. There is no definition of sound monetary conditions in the United Kingdom. Therefore, it is a wholly open-ended clause, granting unlimited powers to the Chancellor to borrow money for any purpose that he thinks fit, provided only that the label "promoting sound monetary conditions" is attached. It is a remarkable extension of Treasury power with no limit written into the clause. Despite that opposition, the amendment to the National Loans Act was carried, and s 12 (as amended) continues to underlie the UK’s sovereign debt issuance (§5.1.1).

Other jurisdictions gradually followed the UK’s lead in broadening financial executives’ statutory borrowing powers. In 1989, New Zealand enacted the Public Finance Act 1989 (NZ) which conferred a quantitatively unlimited authority to borrow and issue sovereign debt “if it appears to the Minister to be necessary or expedient in the public interest to do so” (s 47). By the mid-1990s, Canadian public borrowing authority was limited only by reference to a pre-set “debt-ceiling”, provided in standing (rather than annual) legislation.528 Australia’s adoption of (essentially plenary) sovereign borrowing legislation is examined in §5.2.2.

Central bank independence and debt management agencies

The other development concerning statutory borrowing powers occurred in the 1990s and was linked to the growth of central bank “independence”.529 Although the precise form of central bank independence varied by jurisdiction, it (generally)530 coincided with the removal of debt-management functions from central banks (§2.2.1 and §3.2.2) and the creation of debt-management “agencies” within treasuries.

528 Cf Borrowing Authority Act 1996-1997 (Can). 529 Goodhart (2010), ‘The Changing Role of Central Banks’. 530 Canada is the notable exception, which retained its debt-management and monetary financing responsibilities under the Bank of Canada Act 1985. 166

The UK’s experience is illustrative of that trend:531 in 1998 legislation gave the Bank of England operational independence over monetary policy, while removing its debt-management functions to the statutory “Debt Management Account” (“DMA”) operated by the Treasury.532 Administratively, the shift appeared simple: the Treasury’s functions would be exercised by an agency called the “Debt Management Office” (“DMO”).533

Matters were, however, more complex at the level of legal authority.534

First, the Bank’s of England’s standing authority to issue short-term debt under s 8 of the Treasury Bills Act 1877 was repealed (§2.2.1).535

Secondly, the National Loans Act was amended to insert Sch 5A, which created the DMA. The link between the Bank’s “independence” and the creation of the Debt Management Account was explained as “avoid[ing] any perceptions of conflicts of interest between [the Bank's monetary policy operations and Treasury’s debt and cash management operations].”536

Confusingly, the provisions of Sch 5A never mention the DMO, although its legal existence was clearly contemplated. The clearest suggestion comes from the (highly unusual) s 158 of the Finance Act 1998: Any powers which relate to Treasury securities and which are conferred on the Treasury in a capacity other than issuer may be exercised by them, and no rule of law preventing a person contracting with himself shall prevent them exercising the powers.

531 Although some jurisdictions came earlier (like New Zealand which established the New Zealand Debt Management Office in 1988) and later (like Australia, which established the Australian Office of Financial Management in 2001). 532 Bank of England Act 1998 (UK) ss 10-12; Finance Act 1998 (UK) ss 158-161. 533 Prosser (2014), 104. 534 The same changes were made in Australia and New Zealand without discernible amendments to the legislation governing sovereign borrowing and central banking. Canada never stripped its central bank of public debt-management functions. 535 Finance Act 1998 (UK), s 159. 536 HC Deb 25 Oct 1999, c 710; HMTreasury, The Future of UK Government Debt and Cash Management (1997); Treasury Select Committee, Government’s Cash and Debt Management (2000). 167

That contorted provision was designed to support the shadowy existence of the DMO, without providing for its legal separation from the Treasury.

Thirdly, the Treasury (qua DMO) was given broad powers in relation to the DMA: (1) If the Treasury consider it expedient to raise money for the purpose of exercising their functions with regard to the Debt Management Account they may raise it in such manner and on such terms as they think fit, and money so raised shall be paid into the Account.” (2) [and may] create and issue securities [at] such rates of interest and subject to such conditions as to repayment, redemption and other matters as they think fit. The “functions” of the DMA were very broad, including (cl 1(1), Sch 5): (a)securing over time that sums are available to meet any daily shortfalls in the National Loans Fund and that any daily surpluses in that Fund are used to the best advantage; (b)facilitating the raising of money under section 12 of this Act; … (c) promoting the liquidity, stability and efficiency of the market in securities issued under section 12 of this Act and the market in Treasury bills issued under the Treasury Bills Act 1877 … (e)securing the general management of debt so far as it takes the form of such securities and bills. Like the National Loans Fund and Consolidated Fund, the DMA was daily balanced with the National Loans Fund, essentially to provide arms-length financing of the credit account of the Consolidated Fund (Sch 5(11)(2)).

Those momentous changes did not, however, affect the Bank’s monetary finance authority. Section 12(7) of the National Loans Act remained un-repealed, leaving the Bank’s authority to finance the Treasury to fund deficit spending (§3.2.2) and to ensure “prudent monetary policy” was untouched. In that fashion, the ancient financing channel between Bank and Crown remained alive, saving the Ways and 168

Means Advance (carrying an debit balance of ~14billion in 1998) from retirement (§5.2.2).

Impact on distribution of financial authority

The developments of the legal practices concerning debt management and monetary policy had significant impacts on the distribution of financial authority.

The expansion of the UK Treasury’s debt issuing power in the 1983 amendments to the National Loans Act effectively removed the previous deficit-financing limitation. The 1998 National Loans Act amendments (de jure creating the DMA and de facto the DMO) further expanded those powers, giving legislative imprimatur to essentially unlimited public funds management powers by the Treasury, and leaving the (now independent) Bank of England’s monetary finance authority intact (a matter analysed in §5.2.2).

Each of those developments further distributed financial authority away from parliaments and towards financial executives.

3.3.3 “New public [financial] management”

The cluster of approaches to the liberalisation of government administration often called “New Public Management” (“NPM”)537 grew apace throughout the 1990s.538 NPM has been described as:539 a model of reform which privilege quantification and results and in which accounting has a central role. It is a model in which mimicry of private sector practices is advocated. NPM reforms were not adopted with the same speed or intensity across all parliamentary systems. Australia and New Zealand have been identified as “high

537 Hood (1995), ‘The “New Public Management” in the 1980s: Variations on a Theme’. 538 For pre-1998s developments, Dewar and Funnell (2016), 196-211. 539 Lapsley, Mussari and Paulsson (2009), ‘On the Adoption of Accrual Accounting in the Public Sector’, 720. An entry-point to the significant literature on NPM can be found in Ferlie, Lynn and Pollitt (2005), Oxford Handbook of Public Management (2005). 169 intensity adopters”,540 while Canada’s attitude to NPM reform projects has been described as “extremely slow” and “less extensive” than “other Anglo-Saxon countries”.541 The UK stands somewhere in the middle.542

NPM reforms impacted the legal practices of public money in three main areas: (i) government accounting; (ii) the enactment of fiscal responsibility and whole- of-government account legislation; and (iii) annual appropriation legislation.

Accounting and public management

A particularly visible (early-) NPM reform involved statutory support for “performance” or “value for money” auditing. In the UK, that step was expressly taken in 1983 with the enactment of Part II of the National Audit Act 1983, which conferred an explicit power on the CAG to “carry out”: examinations into the economy, efficiency and effectiveness with which any department, authority or other body to which this section applies has used its resources in discharging its functions That development illustrated a broader movement to amend audit legislation to confer the same “value for money” auditing authority on auditors-general.543

The second NPM impact on accounting practices was the re-branding of “audit” legislation as “management” or “administration”, and the restructuring of that legislation to confer broad “managerial” powers on treasuries, finance ministries and departments in the use of their financial resources and financial reporting conventions. Prominent examples were the Australian Financial Management and Accountability Act 1996 (Cth) (“FMA Act 1996”) (which replaced the Audit Act 1901 (Cth)) and the UK Government Resources and Accounts Act 2000 (UK)

540 Carlin (2005), ‘Debating the Impact of Accrual Accounting and Reporting in the Public Sector’, 309–36; Day (2009), ‘Implementation of Whole-of-Government Reports in Australia’, 229–34. 541 ACCA (2014), Whole of Government Accounts: Who is Using Them’, 9 citing Pollitt and Bouckaert, Public Management Reform (2004). 542 Pollitt and Bouckaert (2004), Public Management Reform. 543 Audit Amendment Act 1979 (Cth), Auditor-General Act 1977 (Can);Public Finance Act 1977 (NZ); Glynn, (1985), ‘Value for Money Auditing - An International Review and Comparison’; Dewar and Funnell (2017), 201-222. 170

(“Resources Act 2000”) (which superseded most of the audit provisions of the Audit Act 1866).544

The third, and most momentous, impact of NPM thinking on public accounting was the move from cash to accrual (or “resource”) based accounting within government through the 1990s.

The simple difference between the two methods of account is that cash accounting “records cash payments and receipts when they are made or received” and accrual accounting records “expenses as they are incurred and income as it is earned.”545 But, accrual accounting also provides for marking the value of public sector assets and liabilities against income and expenses, thus seeking to capture a snapshot of the value of public sector entities as “going concerns”.546 Accounting for cash-flow is an element of accrual accounting, but it can be obscured by a focus on recording net-cash-flow and occasionally replaced by measures of “revenue” and “expenses”, within which the real cash-flows figures are adjusted to take account of future cash receivables (revenue) or netted-off against costs of collection (expenses).547

By the 1980s, accrual accounting was widespread in the private sector, and was gradually implemented within government throughout the 1990s. In some jurisdictions, the implementation of accrual accounting was backed by legislation, in Australia through the FMA Act 1996 and in the UK through the Resources Act 2000.548 In others, it occurred at the level of administrative practice.549

The change in accounting methods produced very significant differences in the reporting of public financial activity, as illustrated by the Australian

544 Hollingsworth and White (2001), ‘Public Finance Reform’. 545 Connolly and Hyndman (2006), ‘The Actual Implementation of Accruals Accounting’, 273. 546 Eg HMTreasury, Financial Reporting Manual (2017/18), 5. 547 Eg Australian Bureau of Statistics, Australian System of Government Finance Statistics (2005), 19. 548 Likierman (2003), ‘Planning and Controlling UK Public Expenditure on a Resource Basis. 549 Baker and Rennie (2006), ‘Forces Leading to the Adoption of Accrual Accounting by the Canadian Federal Government. 171 government’s financial reporting using cash and accrual methods in FY2000/01 and FY2010/11.550

2000/01 Receipts/Revenue Outlay/Expenses Fiscal surplus $million Cash $182.996 $177,123 $5,872 Accrual $186,106 $186,106 $6,007 Variation $3,110(+accrual) $8,983(+accrual) $135(+accrual)

2010/11 Receipts/Revenue Outlay/Expenses Fiscal deficit $million Cash $302,024 $346,102 -$47,463 Accrual $309,204 $355,667 -$51,760 Variation 7,180(+accrual) 9,565(+accrual) $-4,297(+accrual) Figure 3.7: Australia cash and accrual accounting In FY2000/01, the difference between cash and accrual accounting produced an $135million variation in the fiscal surplus. In FY2010/11, that difference produced a ~$4.3billion variation in the fiscal deficit. Whatever be its abstract accounting value, the adoption of accrual accounting added layers of complexity and confusion to the reporting of public financial activity with no appreciable benefit to parliaments’ authority to set the legal conditions of public financial activity.

Fiscal responsibility laws

NPM thinking also impacted on the legal practices of public money via the enactment of “fiscal responsibility legislation” (FRL) and statutes providing for whole-of-government accounts from the early-1990s.

Until the 1990s, the process of budget planning, which integrates fiscal, debt management and monetary policy, was largely untouched by positive law. That situation changed with the passage of legislation which provided for a “Charter”

550 Data drawn from AGBP, Supplementary Tables 1 (2001 and 2010). 172 of “Budget” or “Fiscal” “Responsibility” (in the UK and New Zealand) or “Honesty” (in Australia).551

At the level of strict legal form, the various FRLs enacted are not identical, but their two core features are strikingly similar.

First, FRLs announce substantive norms relating to economic planning, orientated towards a relatively conservative view of the relationship between public expenditure, debt and monetary policy.552 In Australian and New Zealand FRLs those substantive norms are set in primary legislation,553 while the UK’s FRL confers power on HMTreasury to set the relevant standards of budget “responsibility” which must be approved by Parliament.554 Secondly, in support of those substantive norms, FRLs provided a set of disclosure norms, requiring government bodies to publish reports indicating their compliance with the FRLs substantive norms.555

When viewed against the existing legal practices regarding financial authorisation of fiscal activities, the salient features of FRLs are a failure to inter- lock with the processes for statutory authorisation of revenue and expenditure, nor impose any hard-legal limitation on financial executives’ use of public money. The substantive norms in FRLs are concerned with the economic efficiency and effectiveness of public finance, rather than the legislative authorisation of fiscal activity. While the disclosure norms provide a deal of useful information regarding a government’s economic viability, they do not link that viability to a government’s compliance with (say) appropriation legislation.

551 Budget Responsibility and National Audit Act 2011 (UK); Charter of Budget Honest Act 1998 (Cth); Fiscal Responsibility Act 1994 (NZ); generally see, Corbacho, and Schwartz (2007), ‘Fiscal Responsibility Laws’. 552 Thornton (2009), ‘Do Fiscal Responsibility Laws Matter?’. 553 Charter of Budget Honesty Act 1998 (Cth), ss 1, 4 and 5; Public Finance Act 1989 (NZ), s 26G. 554 Budget Responsibility and National Audit Act 2011 (UK), s 1. 555 Budget Responsibility and National Audit Act 2011 (UK), s 2-4 (disclosure occurring mainly through the “Office of Budget Responsibility”); Charter of Budget Honesty Act 1998 (Cth), Part 5 (disclosure occurring directly to by the treasury and finance departments to Parliament). 173

The same essential point applies to the “whole of government accounts” prepared pursuant to NPM-influenced managerial legislation. In 1989, the Public Finance Act 1989 (NZ) required the NZ Treasury to provide “consolidated annual financial statements”, which were then audited and tabled before parliament (Pt III). By 1996, the same basic system was applied in Australia, with the backing of the FMA Act (Pt 8). By 2000, the UK followed suit, requiring whole-of- government accounts be prepared, audited and tabled under the Resources Act 2000 (ss 9–11). The critical distributional point is that (like FRLs) the legislation supporting whole-of-government accounts does not require those accounts to relate actual public financial activity to the legal basis for authorisation of those activities (such as attempting to aggregate excess expenditure).

Appropriation practice

The final impact of NPM reforms on the legal practices of public money concerned appropriation legislation, which underwent a number of significant changes in the 1990s.

The first change was the reflection of accrual accounting in annual appropriation legislation. By FY1999/00, Australian estimates were presented entirely on an accrual basis and the UK followed suit by FY2000/01. From that time, the appropriation legislation in both jurisdictions has framed legal limitations on public expenditure by reference to accrual budgets, rather than cash limits.556 As part of that shift, annual appropriation legislation also began framing its subject- matter limitations by reference to performance “outcomes”, rather than specific spending activities or programs.557

The second change occurred in relation to retrospective authorisation in appropriation legislation, which came in two steps. The first step was the reduction in the importance of the distinction between Supply Acts and Appropriation Acts. In the UK and New Zealand, the distinction was maintained,

556 UK appropriation legislation has, however, maintained a cash-accounting legal limit by including an appropriation for “net cash requirement(s)”, determined by reconciling the accrual budget limits to cash (§4.1.2). 557 Webber (2004), ‘Managing the Public's Money: From Outputs to Outcomes - and Beyond’. 174 but the time-gap (and thereby the extent of retrospective authorisation) was reduced between the passing of a Supply Act and the appropriation of the aggregate sum authorised for spending in an Appropriation Act. In Australia (and Canada), the distinction was eliminated altogether as annual appropriation legislation fulfilled the dual role of granting supply and appropriating that supply.558

Authorisation of excess expenditure (the other retrospective aspect of annual appropriation legislation) continued to appear in UK appropriation legislation (and NZ and Canada),559 but disappeared in Australia.

From 1996, Australia enacted no legislation retrospectively authorising excess expenditure, despite the continued identification of excess expenditure by Auditors-General.560 Australia has disclosed in correspondence that it takes the legal position that such retrospective authorisation is prohibited by the Australian Constitution.561 If that is so, then Australia was in breach of its constitution between 1901-1996: an unlikely outcome. Perhaps more importantly, the disappearance of Australian excesses coincided with the enactment of NPM legislation: the FMA Act in 1997.

Whatever be its cause, the disappearance of retrospective appropriation for excesses coincided with a greater use of “supplementary additional estimates”, a form of supplementary appropriation which provides authorisation for expenditure within a very short window (often one week) before the end of the relevant financial year. Although not strictly “excess”, that expenditure is certainly “irregular”.

558 By the 1990s, Australia and Canada no longer passed regular Supply Acts. 559 Eg Appropriation (Confirmation and Validation) Act 2014 (NZ); Appropriation Act, No 5 2014- 15 (Can). 560 Australian National Office of Audit, Audit Report No 56 2004-2005 (2005), 151. 561 Email on file with author. 175

Impact on distribution

Collectively, the developments of the legal practices driven by NPM reforms made no discernible progress in distributing financial authority towards parliaments and away from financial executives.

The accounting NPM reforms (accrual accounting, financial management legislation and whole-of-government accounts) built a set of legal practices focused on ensuring (one version) of economic efficiency in public resource management. That focus neglected the position of parliamentary legislation as the ultimate legal source of authority to engage in public financial activities.

The battery of FRLs enacted throughout the 1990s did nothing to re-concentrate financial authority in parliaments. By focusing on one particular form of fiscal discipline, those FRLs were concerned exclusively with minimising economic deficits, rather than parliaments’ capacity to authorise taxation and expenditure. At base, they were wholly unconcerned with the constitutional relationship between parliaments and executives.

Nor did the NPM reforms of appropriation legislation distribute authority to parliaments. True, those reform stripped away layers of arcane legislative history, particularly in collapsing the functions of Supply and Appropriation Acts into a single legislative creature. But other changes of appropriation practice produced a less cheery picture. In the extreme Australian case, NPM influenced appropriation practice coincided with the elimination of retrospective authorisation of excesses, reducing the Australian parliament’s total involvement in authorising public expenditure.

In total, the NPM reforms (may)562 have improved the quality of economic management, but they obscured (or at least confused) parliaments’ a priori functions in authorising public economic activity.

562 Lapsley, Riccardo and Paulsson (2009), ‘On the Adoption of Accrual Accounting in the Public Sector. 176

Conclusion

By the end of the 20th century, the legal practices of public money had been exported to around ~40 nations and their core features had remained essentially intact. Parliamentary legislation underpinned all taxation, expenditure and borrowing. However, financial executives remained responsible for generating the economic content of that legislation, and its legal form contained very large measures of flexibility.

Within those broad parameters, certain parts of those practices did, however, undergo significant development.

As the economic profile of the public sector changed in response to the World Wars and the welfare state, so did the legal practices. Heavy reliance on war-time debt financing was authorised by sovereign borrowing legislation cast in extremely broad terms. In the UK, a standing appropriation for war-damage placed contingencies expenditure on a statutory basis, but gave wide authority to the Treasury in determining when contingencies spending would occur. In Australia and the UK, large swathes of welfare state expenditure were authorised by standing appropriation, thereby reducing the total amount of financial activities subject to annual parliamentary approval. Each of those developments shunted financial authority over fiscal activity towards financial executives and away from parliaments.

As the 20th century progressed, legislation was enacted conferring extremely broad powers on treasuries to borrow and issue sovereign debt, most prominently the UK’s enactment of the National Loans Act 1968 which severed HMTreasury’s authority to borrow and issue debt from the annual parliamentary process. Legislation established public central banks as government debt- managers, but failed meaningfully to regulate the provision of monetary finance to government. As central banks were given “independence” in the 1990s, their debt-management roles were taken in-house to treasuries, further expanding 177 financial executives’ portfolio of financial authority, and further distributing debt financing authority away from parliaments.

Each of those developments distributed very significant authority to financial executives (and away from parliaments) over debt and monetary finance.

The latter part of the 20th century provided a set of developments with mixed distributional effects.

Judiciaries’ shift away from a taxpayer-protecting approach to taxation disputes and the integration of expenditure equalisation programs into annual appropriation had (largely) neutral distributional effects. However, the UK’s enactment of standing appropriation legislation in support of EU financial payments effected a significant distribution of fiscal authority away from parliament. By the end of the 1990s, NPM reforms had shifted the centre-of- gravity in public finance away from parliamentary authorisation and towards economic efficiency.

The distributional conclusion left less authority in parliaments and more in financial executives, with judiciaries only peripherally involved in disputes concerning public money.

Armed with that conclusion, the analyse turns to examine how (the detailed design and operation of) legal practices distribute financial authority in Australia and the UK (during a concrete time-frame) in the dissertation’s next part: “Legal Practices of Public Money: Contemporary Analysis”.

178

PART III LEGAL PRACTICES OF PUBLIC MONEY: CONTEMPORARY ANALYSIS

The chapters (§4-§6) in this part analyse the contemporary design and operation of the legal practices of public money in Australia and the UK between 2005- 2016. §4 and §5 concentrate on legislative practices, and §6 concentrates on judicial practices. In total, they claim that those legal practices distribute a predominance of financial authority to financial executives. That descriptive claim forms the basis of the dissertation’s claims concerning the explanatory viability of parliamentary control (§7).

The Reference Period: 2005-2016

As §1.3.2 observed, a signal feature of the legal practices of public money is their frequent change in response to the varying financing needs of government and developing economic circumstances. Alert to that feature, the descriptive analysis of the contemporary legal practices is situated within a temporal “Reference Period”: from 2005-2016.

Two analytical benefits accrue from confining the analysis to that Reference Period.

First, the 10-year period traverses a sufficiently large sample of public financial activity to avoid in-year generalisations: like, “50% of expenditure occurs pursuant to standing appropriations”, when the actual balance of annual/standing appropriations is constantly shifting (§4.3.2).

Secondly, examining the shifting design and operation of the legal practices between 2005–2016 illustrates the way those practices operate in three very distinct periods of economic fortune; revealing the relationship between changing economic conditions and the distribution of financial authority.

From 2005-2007, both Australian and UK economies boomed: GDP growth sat between 2.1% – 3.4% in the UK and 3.2% – 3.8% in Australia. Those years 179 represent the Reference Period’s “Boom Phase”. Between 2008-2011, both economies suffered significant shocks. UK GDP growth shrank from 2.4% in 2007 to -4.2% in 2009. In the same period, Australian growth dropped from 3.8% to 1.9%. Popularly labelled the “financial crisis”563, those years represent the “Bust Phase”. From 2011, both economies began digging themselves out of trouble, but never reached pre-Bust levels of GDP growth. Between 2012-2016, the UK’s GDP began growing at between 2.1% and 3.1% and Australia’s at between 2.1% and 3.9%: the “Recovery Phase”.

Those economic events had vivid impacts on public finances.564

Figure II.1: financial activities and GDP 2005-2016 (UK) Figure II.1 shows the relationship between changes in economic output and public financial activities. The right axis tracks UK annual GDP growth%: displaying the massive contraction in FY2008–2009, and a slow recovery towards pre-Bust levels therafter. The left axis tracks gross annual central government expenditure, tax revenues and debt issue (£billions): displaying the opening of a large fiscal deficit in FY2008/09 and the spike in short- and long- term debt issues. From FY2009/10, GDP re-bounds while the fiscal deficit begins slowly to close from FY2010/11, as tax yields begin to increase, expenditure drops and debt reliance is eased.

563 Black (2010), ‘The Credit Crunch and the Constitution’, 93. 564 Data for this figure and the UK figures in §4.2 are drawn from the datasets at ONS PFS (2005- 2016); ONS NA (2005-2016); Debt Management Office, Gilt Market: Gross and Net Issuance History (2017); Debt Management Office, Money Markets: Issuance of Treasury Bills and Treasury Bill Stock (2018). 180

Figure II.2: financial activities and GDP 2005-2016 (Aus) Figure II.2 shows the same relationship in Australia.565 The fiscal deficit opens in FY2008/09, as GDP drops and debt reliance increases. As GDP begins to recover around FY2011/12, the fiscal deficit narrows, although debt reliance does not wholly diminish, because of a second GDP dip in FY2012/13.

The impact of those economic conditions on the design and operation of the legal practices is dealt with in §4.2 and §5.2.

Organisation

§4–§5 divide the legislative practices concerning public money during the Reference Period according to financial activity (fiscal, debt and monetary finance): examining fiscal activity (tax and expenditure) in §4; and debt and monetary finance in §5. The purpose behind that division is to follow the legislative practices up to (§4) and then beyond (§5) the point of fiscal balance.

The examination of the judicial practices in §6 does not track that same structure, because litigation occurs “episodically”566 rather than systematically.

565 Data for this figure and the Australian figures in §4.2 are drawn from the datasets at ABS GFS (2005-2016); ABS NA (2005-2016); Australian Office of Financial Management Historical Data Tables (2005–2016). 566 Mashaw (2005), ‘Between Facts and Norms’, 508. 181

Instead, §6 compendiously examines the content (or lack of content) of judicial practices concerning fiscal, debt and monetary activities and the impact of those practices on the distribution of financial authority effected by the legislative practices.

Given the spread of the analysis over two jurisdictions, specific references the UK’s Treasury are shortened to as “HMTreasury”, the Australian Treasury to “AUTreasury”, and the Australian Department of Finance to “AUFinance”.

182

CHAPTER 4 LEGISLATIVE PRACTICES (I): FISCAL AUTHORITY

This chapter analyses the contemporary legislative practices in Australia and the UK concerning fiscal activity (tax and appropriation) during the Reference Period and argues that those practices distribute a significant degree of financial authority to financial executives and away from parliaments.

It unfolds in three steps.

§4.1 opens by investigating the design of the legislative practices concerning fiscal activity. §4.2 then examines the operation of those practices in the Boom- Bust-Recovery economic conditions of the Reference Period. §4.3 concludes by evaluating the impact of the legislative practices’ design and operation on the distribution of financial authority.

4.1 Legislative design

Given the diversity of legislative practices concerning fiscal activity, they are helpfully examined in three categories. First, legislative practices concerning the “structure” within which fiscal activity occurs: the financial initiative, the keeping and auditing of public accounts and reporting on fiscal activity (§4.1.1). Second, legislation authorising fiscal outlays: standing, annual and excess appropriation legislation (§4.1.2). Third, legislation authorising fiscal receipts: focusing on standing and annual taxation legislation (§4.1.1).

4.1.1 Initiative, accounts and audit

Both Australian and UK fiscal activity was authorised within a general structure concerning the initiation of expenditure legislation, the keeping and auditing of public account accounts and the release of information regarding fiscal activity. The core observation is that the legal basis of that structure conferred significant 183 authority on financial executives. The distributional impacts of that observation are analysed in §4.3.1.

Financial initiative

Predictably, the impact of the financial executive’s initiative throughout the Reference Period was profound, as Australian and UK financial executives determined the economic and legal content of expenditure and taxation legislation. Expenditure planning and financial forecasting was undertaken in both jurisdictions by financial executives though multi-year “spending reviews” or “expenditure review committees”.567 Those processes were composed of mainly technical economic forecasting, tailored to each governments’ preferred political agendas.

As Prosser has explained in a detailed examination of the UK’s spending review process between 1998 and 2010, financial executives engage in wide political and technical choices regarding the allocation of resources in formulating the content of spending review. Quoting from the 2010 “Spending Review”, Prosser explains that the:568 2010 SR was explicitly presented as part of “a radical programme of public service reform”, thereby incorporating goals other than economic management, and was linked to a number of other reviews, notably in the fields of defence and social security, which clearly do involve the making of fundamental policy choices. Major reform proposals have been incorporated in the SR process in areas as diverse as defence, social security, education and public sector management. Thus the SR is clearly a major element in a process designed to shape both institutional structures and behaviour in the public and private sectors. Despite the structural significance of the spending review process, parliamentary involvement in it was minimal: “the estimates approved by Parliament reflected

567 The UK conducted its spending reviews in 2007, 2010, 2015. The Australian expenditure review committee met annually. 568 Prosser (2011), ‘“An opportunity to take a more fundamental look at the role of government in society": the Spending Review as regulation’, 598. 184 decisions already taken in the spending review process, which had received hardly any Parliamentary scrutiny.”569

The legislative (as opposed to economic) impact of the financial executives’ initiative on the legal practices of public money is best illustrated by reference to a reform projects undertaken in the UK during the Reference Period, which fundamentally altered various parts of the parliamentary processes of annual financial authorisation.570

In 2007, the Governance of Britain Green Paper proposed simplifying “the reporting of Government expenditure to Parliament”: a proposal followed by an HMTreasury memorandum in 2008 under the title Alignment ‘Clear-Line-Of- Sight’ Project (CLOS). CLOS’s stated aim was to align the presentation of financial information in departmental accounts, estimates presented to, and expenditure legislation passed by, the UK Parliament.

CLOS effected two salient changes to the legal practices of fiscal activity.

The first change was to de-clutter the UK estimates. Prior to CLOS, annual estimates presented a hotchpotch of information regarding public sector expenditure. They included the core accrual accounting concepts of current (“resource”) and “capital” expenditure, split between “departmental” and “managed” expenditure. But those concepts did not express the legal limits of voted expenditure. Instead, those limits were expressed as “requests for resources” (“RfR”), although the “sub-head” of each estimate referred to departmental, managed, resource and capital expenditure. After CLOS, the references to RfR were scrubbed, and estimates simply expressed legal limits on voted expenditure by reference to the core accrual accounting concepts. The change was mostly cosmetic, but did clean the estimates of confusing detail and aligned the presentation of information to the UK parliament with information in departmental accounts.

569 Ibid, 607. 570 Australian annual legislative practices regarding financial legislation did not experience the same seismic shift during the Reference Period. Its detailed are examined in §4.1.2. 185

The second change was more thoroughgoing.

CLOS replaced the (300+ year-old) system of separate Supply and Appropriation Acts (§2.2.2, §3.3.3) with two annual expenditure Acts: Supply and Appropriation (Main Estimates) Act (“Main Estimates Act”) and Supply and Appropriation (Anticipation and Adjustments) Act (“Anticipation and Adjustments Act”). The Main Estimates Act granted “supply” and then “appropriated” the totality of the main estimates for the impending financial year. The Anticipation and Adjustments Act granted supply and appropriated the supplementary estimates and retrospectively appropriated excess spending.571

CLOS is a powerful illustration of the contemporary potency of the financial executive’s initiative concerning expenditure legislation. The UK parliament’s role in enacting annual expenditure legislation remained in place, but the form and content of that legislation was radically altered. Those radical alterations were conceived, driven and instituted by HMTreasury, with only minimal consultation from the UK parliament.572

CLOS was also significant for what it failed to reform. It did not clarify the legal basis for devolution payments (§3.3.2), which continued to appear as “Non- budget voted expenditure” in the Main Estimates and Anticipation and Adjustments Acts. Nor did it require that the legislative basis for standing expenditure be identified in estimates, leaving a reader to search the statute- book to find a possible Act to authorise “non-voted” expenditure. Additionally, CLOS selectively presented critical “financing aggregates” in estimates, omitting any accurate comparison of the total amount of estimated expenditure authorised by annual and standing legislation.

571 And “votes on account” (§2.2.2). 572 See “Financial Scrutiny: Parliamentary Control over Government Budgets” (2009) in response to HMTreasury, “Alignment (Clear Line of Sight) Project” (2009). 186

Accounts and audit

Throughout the Reference Period, Australian and UK legislation delegated authority to financial executives to determine the core accounting and budgetary concepts underpinning legislative authorisation of the use of public money, and required auditors-general to use those accounts as the basis of public audit.

In the UK, the legal basis for HMTreasury’s superintendence over the accounting systems underlying departmental budgets and accounts was s 5 of the Resources Act 2000 which commands a “government department for which an estimate is approved by the House of Commons” to prepare “resource accounts…in accordance with directions issued by [HMTreasury]”. Section 5(3) required HMTreasury’s direction-issuing power be exercised to ensure that resource accounts “present a true and fair view”, “conform to generally accepted accounting practice” and provide an “explanation of the difference between an item appearing in a department’s estimate and a corresponding item appearing in or reflected in the department’s resource accounts”.

During the Reference Period, s 5 directions were communicated to departments in a “Dear Accounting Officer” letter, directing that departments prepare resources accounts “in compliance with the … Government Financial Reporting Manual issued by HM Treasury”. The total effect of that legal framework was to impose an obligation on departments to prepare accounts in accordance with the “Government Finance Reporting Manual” , a document prepared by HMTreasury.

In Australia, the same total effect was achieved in materially identical ways by two legislative schemes during the Reference Period: the FMA Act 1997 (from 2005-2012) and the PGPA Act 2013 (2013-2016).573

The Australian method of delegation empowered the “Finance Minister” to make “orders” or “rules” to give effect to “financial reporting” of departments and

573 Despite those changes of legislative frameworks none of the core concepts upon which those processes operate changed. 187 required Departments to “ensure that accounts and records” as well as “annual financial statements” were prepared in a way that complies with orders or rules made by AUFinance.574 The financial reporting documents eventually made were “Commonwealth Entities Financial Statements Guide[s]” , transmitted to public sector entities.

The system of accounts established by financial executives in both jurisdictions formed the basis for audit by auditors-general.

In the UK, s 6 of the Resources Act 2000 provides the CAG’s “resource” audit mandate, which requires the CAG to “examine resource accounts to ensure” the “accounts present a true and fair view” and “that money [and resources] provided [and authorised] by Parliament has been expended for the purposes intended by Parliament”. The CAG’s capacity to make those determinations was, however, limited by the accounting concepts established by HMTreasury pursuant to s 5 of the Government Resources Act 2000. In Australia, the same position is achieved by the Auditor-General’s audit of “annual financial statements” being expressed in the FMA Act 1997 (ss 56–57) and the PGPA Act 2013 (ss 43–44) and similarly dependant on the accounts prepared in accordance with AUFinance’s directions.575 Accordingly, auditors-general in both jurisdictions were legally obliged to rely on the financial executives’ own systems of account in determining the regularity of public expenditure.

Some (non-statutory) mechanisms existed outside the formal processes of audit which permitted public officials to notify parliaments of potentially un-lawful uses of public money. One such mechanism in the UK was the practice whereby departmental accounting officers sought “written” directions to spend money if they considered a Ministerial direction to pay money fell short of the following criteria: “regularity”, “propriety”, “value for money” and “feasibility”. Only the “regularity” criteria raised an issue relating to legal authorisation to spend

574 FMA Act 1997, s 49 and the PGPA Act 2013, s 42. 575 The UK’s CAG’s reports were appended to departmental reports laid before the UK’s Parliament, while the Australian Auditor-General simply appended a 1/2-page audit “opinion” to departmental annual reports. 188 money, with the remainder focusing on political, economic and practical problems attending expenditure. Once issued, Ministers were required to inform Treasury, CAG and Public Accounts Committee of the existence of a written direction.

During the Reference Period, there was only 1 “regularity” written direction (in 2010) responding to a concern that ex gratia payments by the Ministry of Justice to people suffering from asbestos related diseases was outside the terms of annual appropriation legislation.576 The CAG concluded that the payments were intra vires the relevant appropriation legislation.577 No written directions relating to regularity were issued for the various excesses subsequently identified by the CAG (§4.2.1, 4.2.3).578

Reporting on the public funds

Australian and UK legislation imposed no obligation on financial executives to provide a detailed report of central governments’ compliance with financial legislation in its use of public money.

Throughout the Reference Period, Australian and UK fiscal responsibility legislation (“FRL”) and whole-of-government account legislation provided no meaningful contribution to the determination of the broader executive government’s compliance with financial legislation. The Australian FRL legislation was materially un-amended from 1998 to 2015. Within the same period, the UK had three budget responsibility Acts, with one only remaining extant for 13 months.579 Recalling §3.3.3, the FRLs in Australia and the UK did not inter-lock with the processes for legislative authorisation of public revenue and expenditure; nor impose any substantive legal limit on financial executives uses of public money.

576 Institute for Government, Ministerial Directions (2015). 577 Ministry of Justice, Resource Accounts 2009-2010 (2010), 51-52. 578 Institute for Government, Ministerial Directions: datasets (2015). 579 Finance Act 1998 (UK); Fiscal Responsibility Act 2010 (UK); Budget Responsibility and National Audit Act 2011 (UK). 189

The same basic observation applies to the Australian and UK legislation concerning whole-of-government accounts during the Reference Period. Sections 9 and 10 of the Government Resources Act 2000 require HMTreasury to prepare (and the CAG to examine) whole-of-government accounts. That examination is limited to whether the accounts “present a true and fair view, and conform to generally accepted accounting practice subject to such adaptations as are necessary in the context.”580 A cognate whole-of-government account structure was imposed by Australian legislation, wherein “annual financial statements” prepared by AUFinance must simply “comply with the accounting standards” and “present fairly the consolidated financial position, financial performance and cash flows”.581 Importantly, both jurisdictions’ whole-of-government-account legislation imposed no requirement to relate the whole-of-government’s economic behaviour to the legal bases upon which that behaviour was authorised.

Some UK legislation did provide for a piecemeal reporting on the use of public “funds”. Section 21 of the National Loans Act required that accounts of the Consolidated Fund, National Insurance Fund and National Loans Fund be presented to Parliament, and an annual Commons order imposed the same requirement on the Contingencies Fund accounts.582 While those accounts represented the major sources of fiscal receipts and outlays,583 there was no legal requirement (or administrative practice) to report their relationship with annual or standing appropriation legislation.

The critical observation is that no legislation in either jurisdiction required the reporting of absolute figures regarding the aggregate balance of expenditure

580 s 9(4)(a) and (b). 581 FMA (ss 55 and 56) and PGPA Acts (ss 48 and 49). 582 Eg, House of Commons Paper No. 56 of 2015-16, “That there be laid before this House an Account of the Contingencies Fund, 2015-16, showing (1) a Statement of Financial Position, (2) a Statement of Cash Flows and (3) Notes to the Accounts”. 583 Accounts were also presented to parliament for the “National Lottery Distribution Fund” (which financed between 0.2–0.4% of total expenditure) and the “Exchange Equalisation Fund”, which did not provide domestic finance: Exchange Equalisation Account Act 1979 (UK). 190 pursuant to annual and standing appropriation legislation.584 Nor was such aggregate information presented as a matter of financial executives’ delegated legislative authority to publish accounts of public-sector financial activity in either jurisdiction. The only way to arrive at those figures is to extract financial data from the individual accounts of funds (in the UK) and budget papers (in Australia), and then independently performing the necessary arithmetic.

4.1.2 Outlays

Throughout the Reference Period, both Australian and UK public expenditure occurred pursuant to a mixture of annual and standing appropriations legislation, although the precise legal design of those types of appropriation legislation varied between the two jurisdictions.

Before turning to those design features, it is illuminating to provide a brief overview of the financial profile of the two jurisdictions during the Reference Period.

Financing profile

Most public expenditure in both jurisdictions occurred in relation to five general categories: welfare-state (social security benefits, health, education, housing and recreation), economic affairs (including, debt-servicing and investment), defence, fuel, transport and agriculture, and civil order (justice and policing).585

584 No legislation in either jurisdiction required that financial executives report on the use of their powers to refuse to pay money requested by departments. 585 Data for the following two figures were collected from: PESA (2005-2016) datasets 6.1–6.6; ABS GFS (2005-2016). 191

Figure 4.1: Average public expenditure by activity

In both jurisdictions, the dominant expenditure category was welfare-state spending (62% in Australia, 64% in the UK), a situation which reflects the historical growth of the welfare state observed in §3.2.1.

Both Australia and the UK authorise their expenditure pursuant to standing and annual appropriation legislation, and the balance of those two types of authorisation varied significantly between the jurisdictions.586

586 All figures concerning annual and standing in this chapter are drawn from the following sources (unless otherwise indicated): AGBP (2005-2016); HMTreasury, Consolidated and National Loans Fund Accounts (2005-2016), HMRC, National Insurance Fund Accounts (2005- 2016) HMTreasury, Contingencies Fund Accounts (2005-2016), Department for Culture, Media and Sport, National Lottery Distribution Fund Accounts (2005-2016) 192

Figure 4.2: Average balance of annual and standing expenditure

The dominant reason for the difference between Australia’s and the UK’s balance of standing and annual appropriations is that Australia authorises virtually all (~86%) of its welfare-state expenditure (welfare, health and public education and pensions) through standing appropriations.587

587 Additionally, Australia authorises a large portion of its domestic equalisation transfers through standing appropriations, whereas the UK’s devolution grants are authorised through annual appropriation legislation (§3.3.1). 193

Figure 4.3: Welfare state expenditure – standing/annual appropriation

The UK only authorises a minority portion of its welfare-state expenditure (social security benefits, pensions and ~15% of health funding) through standing appropriations.

Over the Reference Period both jurisdictions authorised most of their central government staff salaries and operational expenditure through annual, rather than standing, appropriation. Australian central government staff expenditure averaged 8% of annual expenditure. In the UK, the same expenditure was 16% of annual expenditure.

Standing appropriations

There were two important features of the legal practices of standing appropriation legislation in Australia and the UK: the types of expenditure authorised by standing appropriations; and the degree to which that expenditure 194 was “bonded” (conditioned on criteria set by legislation) or “un-bonded” (conditioned on criteria determined by executive discretion) (§2.1.2).

Organised by descending level of economic impact throughout the Reference Period, standing appropriation legislation in Australia and the UK falls into three categories: (i) welfare-state expenditure; (ii) debt-servicing and financial administration (including revenue-support and investment); and (iii) inter- governmental payments.

Figure 4.7: share of standing expenditure by activity 2005-2016

Again, welfare-state expenditure occupies the largest share of standing appropriations in both Australia (69%) and the UK (64%).

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Welfare-state standing appropriations

The totality of the UK’s standing welfare-state expenditure was authorised by ss 162 (for NHS expenditure) and 163 (for welfare benefits) of the Social Security Administration Act 1992 (UK) (“SSA Act 1992”).588 Section 162 provides standing authority for the annual transfer of a proportional component of NICs (before reaching the National Insurance Fund) to the Department of Health. Although legally intricate, the economic effect of s 162 is to block-grant the NHS’s governing bodies via the Department of Health:589 contributing an average ~24% to the Department’s annual expenditure during the Reference Period.590 Section 163 provides standing authority to pay a wide swathe of benefits and pensions from the National Insurance Fund, including unemployment benefits, sickness benefits, invalidity benefits, retirement pensions and state pensions.591

Standing appropriation of Australian welfare-state expenditure occurred under a battery of legislation, covering welfare, public health and public education. For welfare benefits and various pensions (including age and disability pensions) that authority was provided by s 242 of the Social Security (Administration) Act 1999 (Cth).592 For Australia’s state pensions (“superannuation”) that authority was provided by s 18 of the Superannuation Act 1990 (Cth). Both followed a generally similar structure to s 163 of the UK’s SSA Act 1992.

Standing authority for the public subsidy of Australian health services operated in a slightly different (more “managerial”)593 way. Public subsidies for medical

588 A standing appropriation is also provided for “Social Fund” payments by s 168 for the purpose of making payments under Social Security Contributions and Benefits Act 1992 (UK) s 138, mainly consumed by “Winter Fuel Payments”. 589 The full scope of s 162 provided for: (i) a fixed contribution from NICs to the NHS; (iii) limited provision for amendment of the amount of that contribution by order of the Secretary of State with the content of the treasury; (iii) the allocation of the NHS contribution between English, Welsh and Scottish NHS costs is within the discretion of the Treasury; and (iv) the payment of costs incurred in collecting the NHS Contribution into the Consolidated Fund. Although. 590 Department of Health, Annual Reports and Accounts (2005-2015). 591 SSCBA, s 20; Pensions Act 2014 (UK), Part 1. 592 By reference to the detailed legislative criteria for welfare benefits set in the Social Security Act 1991(Cth). 593 About which there exists a large literature: See Germov (2005), ‘Managerialism in the Australian Public Health Sector’. 196 practitioner fees were authorised by conferring broad authority on the Health Minster to make regulations setting the subsidy limit and then a standing appropriation for the payment of those subsidies.594 Standing appropriation legislation for pharmaceutical subsidies operated in a similar way, but delegated greater autonomy to an executive body to determine the amount of subsidy.595 That process of delegating authority to a minister (or delegate) to set the relevant subsidy for which standing appropriation authority was provided also underpinned Australian government subsidies for aged care facilities and private health insurance.596

Legislation authorising Australian education funding followed similar principles. Funding levels for primary and secondary schools and universities were set by agreements negotiated by the responsible minister (or delegate) and then for standing appropriations authorised payments under those agreements.597

Financial administration standing appropriations

The next most economically significant category of standing appropriations in Australia and the UK concerned debt-servicing and financial administration (including tax payments, investments and unanticipated expenditure).

In both the UK and Australia, standing appropriations authorised debt-servicing expenditure, via s 12(4) of the National Loans Act 1968 in the UK and s 13AA of the Commonwealth Inscribed Stock Act 1911 (Cth).598 Neither provision imposed any clear quantitative limitation on the amount of payment authorised (§3.2.2), with the effect that both Australian and UK legislation provided unlimited authority to pay interest and principal on long and short-term government

594 Health Insurance Act 1973 (Cth) ss 46AC, 125: Health Insurance (General Medical Services Table) Regulation 2016 (Cth). 595 National Health Act 1953 (Cth) s 137: The Pharmaceutical Benefits Remuneration Tribunal. 596 Aged Care Act 1997 (Cth) and the Private Health Insurance Act 2007 (Cth). 597 Australian Education Act 2013 (Cth), s 126 (secondary schools); Higher Education Support Act 2003 (Cth), s 239-12 (University funding and student fee subsidies) 598 Standing appropriation of debt servicing costs appeared in lesser-used Australia sovereign debt legislation: Loans Securities Act 1919 (Cth), s 4; Treasury Bills Act 1914 (Cth), s 6. 197 debt.599 Broadly similar standing appropriation legislation supported funding of tax authorities in both jurisdictions, with the core effect of providing tax agencies with standing authority to re-pay money paid without a lawful basis, or to grant tax concessions or credits: Commissioners for Customs and Revenue Act 2005 (UK), s 47; and Taxation Administration Act 1953 (Cth), s 16.

The remaining standing appropriations for “financial administration” differed in the two jurisdictions. UK legislation provided standing appropriation legislation for unanticipated spending through the Contingencies Fund (§3.2.1),600 and, from 2009, the Banking Act 2009 (UK) provided a standing appropriation for “Treasury support for banks”, to be used “if the Treasury are satisfied that the need for the expenditure is too urgent to permit” reliance on the parliamentary supply process (s 228). Australian legislation did not provide standing appropriations for contingencies or bank bail-out spending, but did provide standing authorisation for expenditure on “investments”.601

Inter-governmental standing appropriations

The third most economically significant category of standing appropriation legislation concerned inter-governmental transfers. In the UK, s 2 of the European Communities Act 1972 (UK) (§3.3.1) provided the core legal basis for standing authorisation of inter-government expenditure in pursuance of the UK’s financial obligations to the EU.

In Australia, standing appropriation legislation for inter-governmental transfers split across the Reference Period.

Between 2005 and 2008, a large proportion of inter-governmental spending in Australia occurred pursuant the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 (Cth). That Act provided for the distribution of a proportion of a set amount of GST revenue from the Commonwealth

599 §5.1.1 examines the Australian and UK legislative practices authorising the issue of sovereign debt. 600 Miscellaneous Financial Provisions Act 1946 and the Contingencies Fund Act 1974. 601 FMA Act 1997, s 39 and the PGPA Act 2013, s 58. 198 government to the States (§3.3.1). Although the Act provided general formulae for distribution, an executive body determined those formulae’s inputs, and (in that way) the conditions of payment were partially determined by the executive.602

From 2009, the preponderance of inter-governmental transfers (of GST and other revenues) in Australia occurred pursuant to the standing appropriation in s 22 of the Federal Financial Relations Act 2009 (Cth). That Act operates by conferring power on the Prime Minister to enter into agreements with the States regarding inter-governmental transfers and providing standing appropriation for payments of those amounts.603 From that point, the preponderance of Australian inter-governmental transfers were determined by executive agreement, rather than legislative prescription.

Bonded and un-bonded standing appropriations

During the Reference Period, Australian and UK standing appropriation legislation expressed points of commonality and difference in their balances of bonded and un-bonded expenditure (§2.1.2).

Both UK and Australian standing appropriations for welfare-benefit and revenue-support expenditure were tightly-bonded, because of their strong link with conditions for payment set in primary social security and taxation legislation. Standing appropriations for debt-servicing, and inter-governmental transfers in both jurisdictions were far less-bonded, as the conditions for payment were set by processes of executive negotiation, rather than statutory direction.

602 Inter-governmental transfers to support State-government operated health care were authorised pursuant to a managerial framework, permitting negotiation and agreement between federal and state governments regarding the extent of transfers, subject to a quantitative limitation initially set at $31.8billion and raised to 52.7billion by 2009: Health Care (Appropriation) Act 1998 (Cth). 603 Parts 3, 3A and 5 (negotiations) and s 22 (appropriation. 199

Australian and UK standing appropriations for health were both largely un- bonded, but for slightly different reasons. The UK’s NHS block-grant appears as a funding injection to the Department of Health, without any strict statutory conditions on expenditure. Australian appropriation for health funding operated on the premise of price-setting models set by the executive, largely as a matter of their discretion, leaving the precise amount paid largely to the executive. For the same reason, Australian standing appropriations for education was largely un- bonded.

When placed in the context of each jurisdiction’s larger balance of annual and standing appropriations, the economic wash-out is that Australia authorises a far larger amount of its total expenditure through un-bonded standing appropriations than the UK.

If Australia’s un-bonded standing expenditure items (debt-servicing, health, education and inter-governmental transfers) are aggregated, they contribute ~54% of average total standing expenditure (and ~41% of average total expenditure). Whereas, UK un-bonded standing expenditure items (health, contingencies, debt-servicing and inter-governmental transfers) only contribute to ~40% of total standing expenditure (and ~10% of total expenditure). Despite those differences, in both jurisdictions un-bonded standing appropriations amount to substantial levels of total standing and total public expenditure, whether measured in absolute or relative terms.

Annual appropriation

There were three important features of the legal practices of annual appropriation legislation in both jurisdictions: the estimates supporting that legislation; the formulation of that legislation; and the manner of authorising excesses or irregular expenditure.

200

Estimates

In the UK, two types of estimates were presented: “main” and “supplementary” estimates.604 The UK’s main and supplementary estimates followed the tradition of dividing estimates of expenditure into the (very general) “head”, providing the legal limits for expenditure, and the (far more detailed) “sub-head”, providing the non-legal limits enforced through HMTreasury’s virement authority.

Australian estimates followed the same essential structure, but with a different nomenclature. Australia’s version of the UK’s “main estimates” were called of “Budget Papers” showing “Agency Resourcing” and “Portfolio Budget Statements”. Supplementary estimates were titled “Portfolio Additional Estimates Statements”.

Both UK and Australian estimates had several common features.

First, they presented all forms of departmental income and expenditure, indicating which parts would be authorised by annual and standing appropriation legislation.

The jurisdictions differed, however, in their treatment of the legal basis and economic impact of standing and annual appropriations. Australian estimates expressly displayed the title of the standing legislation from which funds would be drawn, whereas the UK’s estimates simply referred to “non-voted” expenditure without expressly identifying the legislation authorising that expenditure. Additionally, the UK’s estimates displayed no aggregation of the total amount of expenditure to be authorised by standing appropriation, while the “Agency Resourcing” tables in Australia’s Budget Papers displayed aggregate figures of estimated expenditure pursuant to standing appropriations.

604 Before 2011 (and the finalisation of CLOS), supplementary estimates were further divided in “winter” and “spring” versions, but from 2011-2016 only a single version of supplementary estimates was presented: HM Treasury, Main Supply Estimates (2005-2016); HM Treasury, Supplementary Estimates (2005-2016). “Votes on account” (short-term authorisation before the presentation of main estimates) were also presented (§2.2.1): HM Treasury, Votes on Account (2005-2016). 201

The second commonality was that the estimates in both jurisdictions presented the accounting details of departmental expenditure using the core accounting concepts fixed by the financial executive: accrual/cash accounting for current/capital account, of departmental/managed expenditure (§3.1.1).

The UK’s estimates divided expenditure into five categories: “resource” and “capital” “departmental expenditure limits” ("RDEL” and “CDEL”); “resource” and “capital” “annually managed expenditure” (“RAME” and ”CAME”); “non- budget voted expenditure” (“NBVE”), being devolution payments; and a “net cash requirement” (“NCR”), being the reconciliation of accrual budgets to cash required in a given year. Australian estimates expressed the same basic divisions, under different labels: “departmental” expenditure (RDEL); administered expenditure (RAME); non-operating expenditure (CDEL and CAME); and a reconciliation of accrual to cash (NCR)

The third common feature was that both jurisdictions’ estimates accommodated some form of virement, in providing a far more granular treatment of the estimated allocation of funds within departments (§2.1.2). The UK’s estimates provide a detailed treatment of the scope of virement, indicating how and when HMTreasury will exercise its power to vire.605 Australia’s estimates contain no similar treatment, and the circumstances under which individual departments and AUFinance vire is wholly unexplained by the estimates.606

Annual appropriation legislation

Throughout the Reference Period, Australian and UK annual appropriation legislation was enacted following the presentation of main and supplementary estimates.

605 Eg, HMTreasury, Central Government Supply Estimates 2014-15 (Main Supply Estimates) (2014), 8: “Departments may redistribute (vire) sums between sections as long as they are within the same budgetary limit, although departments may not vire if the amount is significant in relation to the Estimate as a whole or if the expenditure is novel or contentious.” 606 Australian annual appropriation legislation provided for a (virement-like) adjustment of appropriations through an “advance to the Finance Minister”, the nuance of which is beyond the scope of this dissertation: see Joint Committee of Public Accounts, Advance to the Minister for Finance (1988). 202

Australia’s main estimates were given legal form in Appropriation Acts (No 1) (mainly, public sector salaries and operating costs) and Appropriation Act (No 2) (mainly, capital expenditure and inter-governmental transfers). Appropriation Acts (No 3) and (No 4) tracked that division for Australian supplementary estimates.607 From 2005-2011, UK appropriation legislation followed the historical pattern of a supply Act (“Consolidated Fund Act”) and then an Appropriation Act for both main and supplementary estimates. Post-CLOS (§3.1.1), only two Acts were passed, the Main Estimates Act and the Anticipation and Adjustments Act.

Pre-CLOS, the UK’s technical manner of expressing legal limits on expenditure was to include a general appropriation “for the services and purposes specified in Schedule 2” of the Appropriation Acts, and then to enumerate those services and purposes in the RfR of the relevant spending department or agency:608

607 That division of appropriation Acts reflects the operation of s 53 of the Australian Constitution which prevents the Senate from amending appropriation Bills for the “ordinary annual services of government”. Accordingly, the Senate may not amend Appropriation Bill (No 1) and (No 3), but may amend Appropriation Bills (No 2) and (No 4). Examination of the nuance of that distinction is beyond the dissertation’s scope. 608 Eg, Appropriation Act (No 2) 2006 (UK). 203

Post-CLOS, legal limitations on expenditure were designed by linking aggregate sums in the Schedule to the six budgetary limits expressed in the estimates (RDEL, CDEL, RAME, CAME, NBVE, NCR) of the annual appropriation legislation.609

609 Eg, Main Estimates Act 2012 (UK), s 3. 10 Supply204 and Appropriation (Main Estimates) Act 2012 (c. 13) Schedule — Appropriations for financial year 2012-13

Department of Health, 2012-13 Department of Health Supply and Appropriation (Main Estimates) Act 2012 (c. 13) Schedule — Appropriations for financial year 2012-13

Department of Health 89,993,955,000

Departmental Expenditure Limit 88,069,604,000 4,495,435,000 Expenditure arising from: Revenue and capital expenditure for National Health Services (NHS) bodies including strategic health authorities and primary care trusts under their unified budgets, services provided by NHS Trusts and NHS Foundation Trusts. Expenditure by bodies on research and development. Subsidies and grants to public corporations.

Other centrally managed health and social service expenditure to and on behalf of the NHS, local authorities and other national bodies.

Forming, investing in or providing loans or guarantees to companies that will provide facilities or services to the NHS.

Payment to local authorities for use in local area agreements.

Services provided to or on behalf of devolved governments and other government departments. Non departmental public bodies expenditure on health and social care protection, training and regulation functions.

Revenue and capital expenditure on administration of the Department, non departmental public bodies, primary care trusts, special health authorities, strategic health authorities, agencies and certain expenditure on behalf of the Department for Work and Pensions and the NHS.

Centrally managed expenditure on local government services, prison health services, medical, scientific and technical services, services for disabled persons, education and training, grants to voluntary organisations and other bodies, information services, healthy start programme, health promotion activities (including funding through the Department for Culture, Media and Sport). Grants to local authorities. Medical treatment given to people from the United Kingdom in the European Economic Area and other countries.

The Australia technique of setting legal limitations Home Office inspection of laboratories. Payments and subscriptionswas closer to the UK’s pre to international organisations. -

CLOS practice: including a Associated depreciation and anygeneral provision in the body of the other non cash costs falling in DEL items. annual appropriation Income arising from:Act “appropriating” the sums towards the “outcomes” in the Charges for accommodation, sales of goods and services, income generation schemes; local authorities schedules, and then differentiating each legalunder joint financing arrangements; fines and penalty notices;-limit by way medical and of a linedental education-item in the levy. Licensing of software, use of NHS logo, settlement of legal claims, dividends and interest from loans schedule by reference to departmenand investments, intellectual property, researchtal or administered expenditure: and development, prescription fraud charges,610 NHS prescriptions, dental and ophthalmic fraud charges.

Recoveries from patients in respect of incorrect claims for eligibility for general ophthalmic services; rebates and discounts from manufacturers under the pharmaceutical price regulation scheme and purchasing and supply agency arrangements.

Sales of medicines, vaccines, antivenoms, antitoxins and equipment, premiums applied to the sale of stock.

Social exclusion programmes and agenda for change programme.

Income from the Scottish Government, the Welsh Assembly Government, Northern Ireland, Channel Islands and Isle of Man for services provided for devolved or reserved work.

Provision of policy and advice to other countries and care trusts. Maintenance of the National Joint Registry, conference and meeting events, prison health services, contributions to substance misuse funding, use of radio communication bandwidth. 610 Eg Appropriation Act (No 1) 2011-2012 (Cth). 205

Excess and irregular expenditure

Both Australia and the UK provided discrete avenues of legislative approval of excess and irregular expenditure.

Before 2011 (pre-CLOS), the UK retrospectively authorised excesses in the first Appropriation Act, after 2011 (post-CLOS), retrospective appropriation of excesses occurred in the Anticipation and Adjustments Act. As §3.3.3 noted, Australia replaced retrospective appropriation of excesses with appropriation of “supplementary additional estimates” which often occurred within 1 week of the 206 conclusion of the financial year (§3.3.3). Throughout the Reference Period, that form of appropriation appeared in Appropriation Acts (No 5) and (No 6).

In the UK, “Statement[s] of Excesses” were presented by HMTreasury to the UK parliament (via the Public Accounts Committee) which contained detailed explanations of the circumstances under which excess expenditure occurred.611 For particularly extensive excesses (cf §4.2.3), departments provided separate explanations to Parliament. In Australia, estimates of irregular appropriations were presented to Parliament as “Portfolio Supplementary Additional Estimates Statements”. Unlike the position in the UK, they contained no meaningful information regarding why expenditure was incurred so late in the financial year that it could not be included in the main or supplementary estimates.612

4.1.3 Receipts

Throughout the Reference Period, the entirety of Australian, and the majority of UK, tax receipts were levied and collected under standing legislation.

Financing profile

Although the precise proportions of their tax-mixes differ, Australia and the UK shared fundamentally similar profiles from fiscal receipts.

In both jurisdictions, the largest share of fiscal receipts accrued from individual (rather than company) income tax payments.613

611 HMTreasury, Statements of Excesses (2005-2016). 612 Nor was any meaningful explanation given in the Australian Auditor-General’s reports: Auditor-General, Financial Statement Audits (2005-2017). 613 Data in the following figures was collected from ONS PSF (2005-2016) and ABS GFS (2005- 2016). 207

Figure 4.8: Tax-mix

Because of the UK’s system of NICs, the proportional contribution of income tax is lower than Australia, where social-security revenue is not segregated from general tax revenue. If NICs are classified as a form of income tax receipt,614 the balance evens. Adopting that convention, both jurisdictions collect ~80% of their fiscal receipts from the same four sources: income tax, “value-added” or “goods and services” tax, corporations tax, and (collectively) excises on petrol, alcohol and tobacco.

Standing taxes

Throughout the Reference Period, ~65% of UK and 100% of Australian tax receipts were authorised by standing legislation.

The largest source of standing UK tax receipts flowed from VAT (~20% of total receipts), charged by Value Added Tax Act 1994 (UK) s 1. The standard rate of

614 Which may occur if reform proposals to fully integrated NICs into the UK’s income tax system succeed: Commons Library, ‘National Insurance Contributions (NICs)’ (2017).614 208

VAT was set by s 2(1) as 20% per supply.615 NICs provided the UK’s second largest standing source of fiscal receipts (~19%). Liability to pay NICs was imposed by the Social Security Contributions and Benefits Act 1992 (UK), which provided four different liability rules for each “class” of NICs.616 Liability for each class of NICs accrued without any annual parliamentary enactment.

After NICs and VAT, three excises constituted the UK’s most significant source of tax revenue: fuel (~5%); tobacco (~2%); and alcohol (~2%) duties. Those excises were charged by standing legislation,617 although the precise rates for those excises were subject to amendment by the annual Finance Act. The remaining taxes (contributing ~7.5% of tax revenue) were also all standing.618

The major categories of Australia’s tax were all authorised by standing legislation: income tax (including individual, company, capital gains components),619 GST, and excises and customs duties.620 Throughout the Reference Period, annual legislation was enacted to amend the standing tax statutes to reflect variations in budget policy,621 but did not make the taxes they amended “annual” in any meaningful sense.

Annual taxes

Around 35% of the UK’s total average fiscal receipts during the Reference Period derived from two annual taxes: income tax (~28%); and corporation tax (~8%).

615 Cf s 29A (reduced rate, 5%). 616 Class 1 NICs were payable on earning from employment (s 6), classes 2 and 4 on profits from self-employment (ss 11 and 15), while class 3 contributions were voluntary but were necessary to qualify for certain defined benefits (s 13). 617 Hydrocarbon Oil Duties Act 1979 (UK), s 2; Tobacco Products Duty Act 1979 (UK), s 2 and the Alcohol Liquor Duties Act 1979 (UK), ss 5, 36, 45, 62. 618 Council tax (Local Government Finance Act 1992 (UK), s 6), business rates (Local Government Finance Act 1988 (UK), s 54), stamp duty on land and share transfers (“reserve tax”) (Finance Acts 2003 (UK) and 1986 (UK)), capital gains tax (Taxation of Chargeable Gains Act 1992 (UK), s 1), and the inheritance tax (Inheritance Tax Act 1984 (UK), s 1). 619 Income Tax Act 1986 (Cth). 620 A New Tax System (Goods and Services Tax) Act 1999 (Cth); Excise Act 1901 (Cth), the Excise Tariff Act 1921 (Cth), the Customs Act 1901 (Cth) and the Customs Tariff Act 1995 (Cth). 621 Eg Tax and Superannuation Laws Amendment (2014 Measures Act No 5) 2015 (Cth). 209

The UK legislative practices relating to the charge and rate of income and corporations tax are relatively complicated by legislation which gave rise to overlapping legislative schemes for imposing income tax: the Provisional Collection of Taxes Act 1968 (UK)622 and the annual Finance Act. Both schemes are interlinked with, and can only be understood in light of, annual parliamentary processes.

Those processes commence with the introduction of a ways and means resolution, the content of which typically provided:623 That income tax is charged for the tax year 2018-19. After debate on that motion, a series of ways and means resolutions are put to a vote, taking the following form:624 Resolved, That for the tax year 2018-19 the main rates of income tax are as follows— (a) the basic rate is 20%; (b) the higher rate is 40%; (c) the additional rate is 45%. Each of those ways and means resolutions are appended with the declaration that: And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968”

Those resolutions engage s 1(2) of the Provisional Collection of Taxes Act 1968 (UK): (2)…where the House of Commons passes a resolution which— … (b) contains a declaration that it is expedient in the public interest that the resolution should have statutory effect under the provisions of this Act, the resolution shall…have statutory effect as if contained in an Act of Parliament...

622 enacted in response to Bowles v Bank of England (§2.3.1). 623 HC Deb, 22 November 2017, c 273. 624 Under Standing Order 51(3); HC Deb, 22 November 2017. 210

That provision provides seven months of lawful authority to collect taxes, and sunsets within thirty days unless a Bill for the relevant tax is read a second time or amended (s 1(2) and (3)).625

The practical effect of those resolutions and the Provisional Collection of Taxes Act is to charge income tax on the strength of a Commons resolution, but only until another Act is passed. That is the first legislative basis for charging income tax.

The second legislative basis for imposing income tax commences when a Finance Act transform the ways and means resolutions imposing income tax into statutory provisions. For example, s 1 of the Finance Act 2012 (UK) provides: (1) Income tax is charged for the tax year 2012-13, and for that tax year— (a) the basic rate is 20%, (b) the higher rate is 40%, and (c) the additional rate is 50%. That form of imposing income tax displaces the operation of the Provisional Collection of Taxes Act and provides a secure statutory foundation for future liability.

The legislative practices concerning the charge to and rate of corporation tax follow the same basic structure, charging corporations tax by a combination of ways and means resolutions, the Provisional Collection Act and the annual Finance Act.626

4.2 Operation of the legislative practices

The operation of legislative practices concerning fiscal authorisation in Australia and the UK during the Boom (§4.2.1), Bust (§4.2.2) and Recovery (§4.2.3) phases

625 Authority also ceases if the Commons rejects a Bill (or clause in a Bill) providing for the tax, an Act comes into force renewing or varying the tax, and if parliament is dissolved or prorogued (s 1(5)). 626 A general framework was provided by s 2 of the Corporations Tax Act 2009 (UK) and s 3 of the Corporations Tax Act 2010 (UK). 211 illustrated the differential impact of those practices on the distribution of financial authority in varying economic conditions.

4.2.1 Boom

Throughout the Boom Phase, the stability of Australian and UK economic conditions was reflected in the (relatively) stable operation of the legal practices of fiscal activity.

Figure 4.10: Australian fiscal balance <–> GDP growth In Australia, receipts outpaced expenditure (creating a modest fiscal surplus), tracking GDP growth.

212

Figure 4.11: UK fiscal balance <–> GDP growth In the UK, expenditure slightly outstripped receipts creating a modest fiscal deficit, which remained steady despite a slight slow-down in growth.

In that sense, the operation of the legal practices concerning fiscal authority during the Boom represent a form of benchmark regarding the stable operations of the legal practices concerning fiscal activity. The comparatively stable economic conditions of the Boom Phase did not, however, eliminate excess and irregular expenditure.

Overspending in the Boom

The largest economic share of UK excesses during the Boom Phase arose from actuarial adjustments or forecasting errors, although economically lower-impact excesses were recorded stemming from legal and administrative errors.627

627 No Australian excesses were meaningfully recorded (or retrospectively authorised) throughout most of the Reference Period (§3.3.3), although significant levels of irregular appropriation (through very late additional supplementary estimates) occurred. 213

In FY2004/05, the Department of Work and Pensions recorded a ~£188million “overspending on housing benefits”: 0.3% over its total main estimate. Of that amount, ~£41million was overspent on an unanticipated increased uptake (~60%) by “temporarily homeless people” of “more expensive, leased accommodation rather than bed and breakfast accommodation” as provided by local authorities “in line with government policies”. The remaining ~£146million was overspent as a result of failed forecasting of recoveries from benefits (maintenance payments for non-resident parents) irregularly obtained.

In FY2005/06, excesses of ~£788million were recorded by the NHS pension scheme, representing (i) ~£586million spending beyond forecast for hospital services of general practitioners and (ii) ~£202million on lower than forecast receipts (ie, payments into the pension scheme).628 Both were results of actuarial re-adjustments, leaving a total ~4% spend over main estimates.

In FY2006/07, excesses of ~£81million were recorded for the Teachers’ Pension Scheme, resulting mainly from higher than anticipated “service costs”: ~1%over main estimates. In the same year, ~£20.8million of excess expenditure was recorded by the Ministry of Defence: ~0.06% over its main estimate. The “main contributing items were the firing…of a greater number of Hellfire missiles in Afghanistan than originally forecast.”629

In addition to excesses resulting from actuarial adjustments or forecasting errors, the Boom Phase also saw the UK record excesses resulting from legal and administrative errors.

In FY2005/06, the Assets Recovery Agency (covering civil confiscation) overspent by ~£6.7million. The overspend occurred through in-house legal errors regarding the use of confiscated sums to pay expenditure: advising that

628 HMTreasury, Statement of Excesses (2005-2006), 2. 629 HMTreasury, Statement of Excesses (2006–2007), 2–3. 214 the agency could apply confiscated sums to expenditure, and failing to advise “that parliamentary approval was also required through the Supply process”.630

In FY2007/08, the Department for Transport overspent by ~£3million as a result of an administrative error in drawing funds for works on the Crossrail project. In FY2006/07, the Department obtained an advance from the Contingencies Fund in anticipation of the enactment of the Crossrail Act 2008 (UK). Those funds were lawfully used for that year, but in FY2007/08, the Department again spent on Crossrail projects without legal authority under the annual Appropriation Acts or the Contingencies Fund legislation.631

The UK’s experience of overspending during the Boom reveals the important observation that governments spend in excess of legal limitations, even during rosy economic fortunes. The distributional impact of that observation is examined in §4.3.3.

4.2.2 Bust

During the Bust Phase, in both Australia and the UK economic output contracted sharply, tax receipts plummeted, expenditure increased: opening large fiscal deficits.

630 HMTreasury, Statement of Excesses (2005-2006), 3. Whether that form of excess would occur after the commencement of CLOS is questionable. 631 HMTreasury, Statement of Excesses (2007-2008), 3. 215

Figure 4.13: Australian fiscal balance <–> GDP growth

As Australian GDP growth dropped in FY2008/2009, the fiscal surplus turned quickly to deficit, which widened and steadied at ~$70billion.

216

Figure 4.14: UK fiscal balance <–> GDP growth

From the Bust’s commencement, the UK experienced an enormous contraction in growth, and a large fiscal deficit opened.

Those economic conditions correlated with two major developments in the operation of the Australian and UK legal practices of fiscal authority. First, in both jurisdictions, the relative proportions of standing (to annual) appropriation expenditure shifted significantly. Secondly, in the UK, the level of excess expenditure sharply spiked.

Shift in balance of standing/annual expenditure

In both Australia and the UK, the Bust Phase’s economic conditions affected the balance of standing over annually appropriation expenditure. As both economies contracted, tax yields dropped, and governments undertook large borrowing programs to fund significant fiscal expansions to stimulate domestic production and meet the increased reliance on welfare programs.632

632 Office of Budget Responsibility, Crisis and Consolidation in the Public Finances (2014), 86–90. 217

Those financing activities had a discernible impact on the balance of standing and annual appropriations in both Australia and the UK immediately from the commencement of the Bust Phase, which continued through the Recovery Phase.633

Figure 4.15: Australia shifting share of standing appropriation

633 The data sources for the following figures were identified in fn 585 above. 218

Figure 4.16: UK shifting share of standing appropriation

Figures 4.15 and 4.16 show the gradual increase in the share of standing appropriations as a percentage of total appropriation throughout the Reference Period. In Australia, standing appropriation grew from a low-share of ~70% in 2005 to ~79% in 2015. In the UK, the share of standing appropriation grew from ~19% to 23% over the same period. While those increases stayed steady through the Recovery Phase,634 the origin of their shift lay in the Bust Phase.

The impact of the change in economic conditions during the Bust is revealed when the %growth in standing appropriation is charted chronologically and in comparison with %GDP growth.

634 During the Recovery Phase (2011-2016), Australian standing appropriations stayed between 75-80% of total appropriations, and the UK’s share stayed between 22-24%. 219

Figure 4.17: Australia variation of %share of standing appropriation <–> GDP

Figure 4.18: Australia variation of %share of standing appropriation <–> GDP 220

Although the precise trajectory of the increase in the %share of standing appropriation varies in Australia and the UK, in both contexts, that share spiked at two points.

First, standing expenditure increased sharply at the commencement of the Bust Phase (FY2008/09): with Australia recording a ~6%, and the UK a ~8%, increase. Secondly, standing appropriation increased again at the conclusion of the Bust Phase (FY2010/11): with Australia recording a ~3% increase, and the UK a ~15% increase. Across the eight years of the Bust and Recovery Phases, the UK experienced a slightly higher average growth in the share of standing appropriations (~2%) than Australia’s (~1.4%).

In both jurisdictions, those increases resulted from increased reliance on standing appropriation legislation to respond to the Bust Phase’s economic contractions.

The UK’s ~8% increase in FY2008/09 occurred largely as a result of one factor: emergency spending by HMTreasury on bank bailouts. In that year, ~£10.9billion was spent in reliance on the standing appropriation provided by the Contingencies Fund, ~£8.4billion of which was spent by HMTreasury on various bank-bailouts.635 HMTreasury also drew on the (newly enacted) Banking Act to draw ~£1.9billion on bank-bailouts.636 When aggregated, those payment amounting to ~2.7% of total expenditure in FY2008/2009, while the expenditure from the Contingencies Fund amounted to 0.6% in FY2007/2008.

The latter (~15%) increase in FY2010/11 occurred as a result of the spending from the National Loans Fund on debt-servicing. Between 2009-2011, debt spending from the National Loans Fund began a slow march upwards, increasing from ~£21billion to ~£38billion in absolute terms and from ~4% to 6% of total expenditure. As debt-servicing costs compounded, that %share remained relatively steady between 2011-2015 at ~6% of total expenditure.

635 HMTreasury, Contingencies Fund Account (2008-2009), 13,14, HMTreasury, Annual Report and Accounts (2008-2009), 222. 636 HMTreasury Annual Report and Accounts (2008/09), 173. 221

Sovereign borrowing considerations also explain the relative increase of standing Australian appropriation. The initial (FY2008/09) increase occurred as a result of Australia’s commencement of a substantive sovereign borrowing program (§5.2.2) during the Bust Phase, as debt servicing costs moved from ~2% to 8% of standing expenditure and ~1% to ~3% of total expenditure. The FY2014/15 spike in standing expenditure occurred as a result of a large debt- retirement program.

In relation to both jurisdictions, the critical observation is that the share of expenditure occurring pursuant to standing appropriations increased as economic output contracted and debt-servicing costs spiked. The distributional impacts of that observation are analysed in §4.3.2.

Emergency overspending

The second major event concerned enormous excess spending during the Bust in the UK.

In FY2008/09, HMTreasury exceeded the legal limits set by appropriation legislation by ~£23.8billion. That excess represented spending without lawful authority of 119% of the legal limit originally imposed on HMTreasury,637 which amounted to ~6% of the total appropriated for the entire UK central government in FY2008/09 (~£429.9billion) by the main estimates.

The stunning increase in the relative levels of overspending caused by that excess is illustrated when it is aggregated with other Bust Phase excesses and compared with the total excesses in each Phase of the Reference Period.

637 The original total resource limit was ~£20.9billion and actual total expenditure was ~44.8billion: HMTreasury, Annual Report and Accounts (2008-2009), 172. 222

Figure 4.19: UK aggregate excesses

That overspending occurred as a result of HMTreasury’s underwriting of the Asset Protection Scheme,638 which was designed to inject public funds into two insolvent UK banks: RBS and Lloyds.639

HMTreasury justified the ~£23.8billion overspend as necessary because it “could not estimate” the total amount of solvency support for RBS and Lloyds until it was “too late… to seek extra resources from Parliament”.640 However, the CAG reported that HMTreasury “knew from the outset that [the Asset Protection Scheme] would result in a significant loss”,641 and (to that extent) there was a degree of volition in HMTreasury’s decision not to seek authorisation from parliament through the normal process of parliamentary supply.

638 HMTreasury, Annual Report and Accounts (2008-2009), 169. 639 National Audit Office, The Asset Protection Scheme (2010), 14, HMTreasury. Annual Report and Accounts (2008-2009), 241, 243. 640 HMTreasury. Annual Report and Accounts (2008-2009), 173. 641 Ibid, 173. 223

In absolute and relative terms, the size of HMTreasury’s 2008/09 overspend was enormous, and its circumstances indicated that it was deliberate. It was also a desperate financing measure, given that HMTreasury had exhausted all other lawful forms of emergency finance: including drawing on the Contingencies Fund to its maximum extent, and virements from other sub-heads of ~£980million.642 Its distributional impact is examined in §4.3.3.

4.2.3 Recovery

During the Recovery Phase, the lost proportion of economic output began to swing back, and tax revenue began a slow-march back to pre-Bust levels, although debt-servicing costs compounded.

Figure 4.20: Australian fiscal balance <–> GDP growth

642 Ibid, 194. 224

Figure 4.21: UK fiscal balance <–> GDP growth

The Recovery Phase’s major event was the recording of significant excesses expenditure in Australia and the UK (although the relative size of those excesses in the UK was smaller than recorded in the Bust Phase).

Excess by maladministration

Alike the Boom Phase, the Recovery Phase saw the return of excess and irregular expenditure in the UK and Australia.

During the Recovery Phase, Australia changed its reporting policy and began releasing more specific information regarding its levels of excess expenditure. In FY2011/12, ~$1.4billion was spent in excess across 9 agencies,643 with the large majority of those excesses resulting from the provision of misleading information from members of the public “including personal information such as estimates of income and employment status” in relation to “payments such as

643 Auditor-General, Audit Report No 16 2012-13 (2012), 75. 225 welfare benefits and superannuation entitlements.” Those excesses were economically insignificant (~0.4% of total expenditure), and (like UK excesses during the Boom Phase) appeared to arise from the difficulty of administering a complex bureaucracy.

In the UK, the Recovery Phase also revealed economically significant excess expenditure occurring as a result of legal and administrative errors in administering public funds. In 2014, the UK Ministry of Defence (UKMoD) disclosed that it had breached its annual appropriation limits every year between 2007-2013 as a result of administrative errors.644

Between 2007-2013, the supply vote for the UKMoD was conditioned on a maximum number of members of the reserve naval forces under the Reserve Forces Act 1996 (UK) (“troop-limit”). The size of the troop-limit varied, but ranged between: 1,139 and 2,020.645

The troop-limit formed a subject-matter limitation on the UKMoD’s annual expenditure imposed by the relevant Appropriation Acts between 2007-2013. From 2007-2011, the troop-limit was attached to the UKMoD’s “Request for Resources 1”: a legal limitation on an annual average ~£30billion during that period (being ~86% of the average total defence appropriation of ~£35billion). From 2012-2013, the troop-limit was attached to the UKMoD’s RDEL: a legal limitation on an annual average of £36billion (being ~73% of the average total defence appropriation of £49billion).

After the UKMoD reported those excesses,646 they were appropriated by ss 6-11 of the Anticipation and Adjustments Act 2014. The “token sum” of £1000 was retrospectively appropriated for each financial year the troop-limit was breached. Focusing on that number significantly distorts the total size of economic resources affected by the UKMoD’s illegal expenditure. The aggregate amount affected by the breach of the troop-limit was ~£814billion. That total

644 HMTreasury, Statement of Excesses (2012-2013), 1-2. 645 See (the un-paginated) Ministry of Defence, Excess votes 2007-08 – 2012-13 (2014) 646 Ibid. 226 figure represented ~140% of the total prospective appropriations in the Main Estimates Act 2014, and ~115% of total UK public expenditure in FY2014/15. The distributional impact of the UKMoD excesses is analysed in §4.3.3.

4.3 Distribution of financial authority

Several aspects of the design and operation of the legal practices during the Reference Period concerning fiscal activities distribute a significant degree of financial authority away from parliaments and towards financial executives: the extent of financial authority delegated by the design of fiscal legislation (§4.3.1); the operation of the legal practices in response to significant economic contraction (§4.3.2); and the extent of non-compliance with appropriation legislation (§4.3.3).

4.3.1 Delegating fiscal authority

The design of the legislative practices concerning fiscal activity distributed significant power to financial executives by delegating predominate authority over the formulation of financial proposals, the form of public accounts and legislation (appropriation and tax) which authorises fiscal activity.

Delegation of authority over structure of public finances

First, legislation concerning the structure within which fiscal activity occurs (§4.1.1) (initiating fiscal legislation, keeping and auditing public accounts and reporting on fiscal activity) delegates the preponderance of authority to the financial executive.

The financial initiative prevents parliaments from formulating independent financial proposals and translating those proposals into legislation. Financial executives’ exclusive power to control the content of expenditure legislation gives them power to control the breadth of the legal limits in appropriation legislation and (thereby) financial executives’ freedom to vire. Additionally, 227 financial executives’ legal power over the form of public accounts provides it with the authority to determine the core budgetary and accounting concepts against which fiscal activity will be measured, and upon which public audit is undertaken.

The distributional impact of that delegated authority can be seen in the shortcomings concerning reporting on the public funds. Core aggregates of financial activity and financial authority are simply never reported, let alone reported in a manner which places them in meaningful context, such as presenting: (i) relative balances of annual and standing expenditure; and (ii) excesses as a relative percentage of total expenditure for department and the public sector. The Australian practice of not reporting any excess expenditure for the first 6 years of the Reference Period evidences financial executives’ powers to determine the extent and accuracy of reporting on the use of public funds.

That combination of authority in financial executives deprives parliaments of any meaningful authority to formulate public financial proposals, and to ensure that public financial activity is carried out in accordance with those proposals.

Delegation of authority over outlays and receipts

Australian and UK legislation concerning fiscal outlays (§4.1.1) reserved only marginally greater authority for parliament. Wide swathes of fiscal authority were delegated to financial executives through: standing appropriations (particularly those which are un-bonded to legislatively fixed criteria for payment); the degree of flexibility in annual appropriation legislation; and retrospective appropriation of excesses. Legislation in both jurisdictions concerning fiscal receipts also delegated financial authority to the extent that it is standing rather than annual.

Extent of delegation

The extent of fiscal authority delegated by Australian and the UK legislation during the Reference Period may be measured in various ways. 228

The most basic measure could focus on the extent of delegation of fiscal authority by the design of the structural legal practices of fiscal activity (through the financial initiative, accounting and reporting legislation).

On that measure, there is very little dividing the two jurisdictions.

To be sure, there were some variations in the degree of information released by the two jurisdictions. The UK released more detailed financial information concerning public expenditure (in the reporting of the various funds from which public expenditure was made), but Australia releasing more detailed legal information (particularly by clearly identifying the legal basis of standing appropriations in the estimates). Those variations pale, however, in comparison with the common power held by Australian and UK financial executives to formulate financial proposals, originate financial legislation, determined the basis of public accounts and the extent of public financial information released.

A more sophisticated measure could focus on the lawful capacity of financial executives to undertake fiscal activity if parliament were not convened, or failed to pass any tax or appropriation legislation in a given fiscal year. On that measure, there is a greater extent of fiscal authority delegated in Australia than the UK: the “executive’s self-financing capacity”.

If the Australian parliament failed to enact any taxation or appropriation legislation, Australia could continue collecting 100% of its taxation and meet ~70-80% of its expenditure on a very large set of welfare-state activities (health, education, welfare) and debt servicing. In contrast, if no taxation or appropriation legislation were enacted by the UK parliament, the government would lose legal authority for ~25-30% of its tax receipts (income and corporation tax) and only lawfully be able to meet ~20-30% of its total expenditure (confined to payment of welfare benefits, pensions, a minority of public health expenditure and some debt servicing).

229

Yet another (more sophisticated) measure could focus on the share of unbounded standing appropriations relative to total expenditure. On that measure, the delegation of the expenditure side of fiscal authority is far greater in Australia (~40% of total expenditure) than the UK (~10% of total expenditure).

There are, however, limits to both of those measures of the delegation of fiscal authority to the executive, the most prominent of which is that public servant salaries and departmental operating budgets are approved through annual appropriations in Australia (exclusively) and the UK (predominately)647. The practical consequence is that although the executive could finance many social programs through standing appropriations, it could not finance the administrative structure through which they are operationalised.

Each of the three measures (alone or combined) does, however, make clear that in both Australia and the UK, the design of the legal practices delegates a significant degree of fiscal authority to financial executives and away from parliaments.

4.3.2 Economic conditions and fiscal authority

The operation of the legal practices in response to financing needs during economic contractions also distributed financial authority away from parliaments (and towards financial executives).

Economic contractions and annual/standing balance of expenditure

Compared to periods of economic expansion, during period of sharp economic contraction the proportion of expenditure authorised by standing appropriations increases relative to annual appropriations, an effect which can linger throughout periods of economic recovery. That shift was discernible in both Australia and the UK (§4.2.2), although the peaks and troughs were more

647 Accommodating the possibility that the standing NHS contribution could be used to pay staff salaries. 230 extreme in the UK, correlating with the more extreme economic contraction it experienced during the Bust Phase.

In both Australia and the UK, the main cause of the shifting balance was the increased reliance on un-bonded standing appropriation (concerning debt- servicing and contingencies) relative to bonded standing appropriations (financing welfare-state expenditure and tax credits) and annual appropriations. Because of the expenditure though un-bonded standing appropriations, the total amount of economic resources available for approval through the parliamentary process shrunk relative to total economic outlays.

It could be argued that those effects should simply be understood as the legal expression of the financial reality of increased debt issues during an economic downturn: a larger amount of total economic resources is devoted to debt servicing because the amount of sovereign debt spending has increased proportionally to total spending. While that is a trite economic explanation, matters are more complicated at the legal of legal authority.

The automatic diversion of debt servicing expenditure (and the proportional reduction of the total amount of economic resources passing through the annual parliamentary process) only occurred because of a legislative decision to authorise debt repayment by a standing, rather than an annual, appropriation. If debt servicing appropriations were not standing, then parliaments would have a greater capacity to decide the conditions under which debt repayment occurred and, thereby, the proportional allocation of financial resources to debt servicing as opposed to other expenditure programs through the annual appropriation process.648

648 The other side of that counter-factual is examined in §5.3.1: that a lower degree of financial authority would be distributed away from parliament if it had a meaningful role in authorising debt issues. 231

Extent of economic impact on the legislative practices

Although both jurisdictions experienced the same shift in the balance of standing and annual appropriation, the precise extent of that shift on the distribution of financial authority in Australian and the UK was not static.

Different measures produce different results. Australia experienced a higher absolute increase in the share of standing appropriations over the Reference Period (9%). The UK’s increase was smaller (4%), although the UK’s average annual growth in the share of standing appropriations was slightly higher (~2%) than Australia’s (~1.4%). On either measure, it is clear that economic conditions had a non-negligible impact on the distribution of financial authority away from parliaments and towards financial executives.

The distributional impact was to reduce the resources available for annual parliamentary approval where economic output contracted sharply. Put differently, the legal practices operated in response to economic contractions by shrinking the size of parliament’s potential financial authority to influence financial or economic policy.

4.3.3 Overspending: bureaucracy, emergency and maladministration

The final distributional point concerns overspending (by excess or irregular expenditure): the Australian and UK executives spent in excess of parliamentary authority at all points of the Reference Period, but on a far larger scale when presented with an economic emergency.

Accidental and deliberate overspending

Australian and UK excesses during the Reference Period demonstrates that non- compliance with appropriation legislation can be accidental or deliberate.

232

Deliberate non-compliance occurred where financial executives simply choose not to comply with appropriation legislation. The most prominent form of deliberate non-compliance appeared in the UK’s ~£23.8billion overspend during the Bust Phase. While (arguably) economically necessary, that expenditure represented a low-point of the UK parliament’s financial authority, because no question of maladministration arose: HMTreasury simply decided to spend ~£23.8billion without parliamentary approval because it took the view that payment was too urgent to be slowed-down by parliamentary processes.

Accidental non-compliance occured where the size and complexity of government creates conditions wherein strict compliance with appropriation legislation is largely impossible. Economically significant forms of that kind of non-compliance occurred in both Australia and the UK throughout the Reference Period. The most (economically) significant accidental excess occurred as a result of maladministration by the UKMoD between 2007-2013. Other (less economically momentous) accidental excesses occurred in the UK and Australia (from 2011) as a result of actuarial re-assessments of pension programs, revised legal positions and misunderstanding legal requirements applying to spending.

Each form of accidental excess demonstrates the practical difficulties of ensuring strict compliance with appropriation legislation in a complex bureaucracy (a matter examined in §7.2.2). Those difficulties included financial executives’ inability to: monitor whether the broader executive was complying with appropriation legislation (UKMoD excesses); and the difficulties of departments in accurately forecasting their financial liabilities (NHS pension excesses), the legal scope of their own resource use (Crossrail excesses) or the exigencies of war (Hellfire missile excesses).

Overspending in constitutional perspective

Appropriation of excess expenditure represents a hard case for an analysis of the distribution of financial authority.

233

Viewed with maximum optimism, that practice illustrates parliaments’ authority through the legislative censure of executive overspending. Viewed less optimistically (and informed by government practice), retrospective appropriation of excesses illustrates the practical limitations of parliaments’ authority over public expenditure: compliance or non-compliance is entirely in the hands of the financial executive. Where non-compliance is accidental, financial executives’ own limitations over public expenditure are revealed. Where non-compliance is deliberate, the hard-limits of parliaments’ authority over the financial executive are revealed.

The experience during the Reference Period indicates that governments fail to comply with expenditure legislation in good and bad economic fortune as a result of maladministration and forecasting difficulties. The experience of the UK during the Bust Phase indicates that in extreme economic circumstances financial executives will deliberately refuse to comply with legal limitations in financial legislation. In that sense, parliaments’ financial authority is observably weaker in times of economic emergency.

Conclusion

The design and operation of the legislative practices of fiscal authority in Australia and the UK during the Reference Period effected a significant distribution of financial authority away from parliaments and towards financial executives.

The extent of that distribution varies according to some differences in the Australian and UK legislative practices, and differing economic conditions of the Boom, Bust and Recovery. On some measures, the distribution of financial authority away from parliament is greater in Australia than the UK, given Australia’s far greater reliance on un-bonded standing appropriations. On other measures, however, very significant shares of financial authority were distributed away from parliaments in both jurisdictions, particularly by the 234 design and operation of the legislative practices concerning the financial initiative, accounts and financial reporting.

Additionally, both jurisdictions witnessed distributions of financial authority away from parliaments as the combined result of economic conditions and the existence of standing appropriations for debt-servicing and emergency expenditure.

Significant overspending also occurred in both jurisdictions, with the largest total overspend occurring the UK as a result of the economic contraction of the Bust Phase. That overspending reveals the practical inability of parliaments (and in some cases, financial executives) meaningfully to constrain the broader executive to the legal limits set in appropriation legislation.

In total, a significant share of fiscal authority was distributed away from parliaments and to financial executives, which grew during periods of significant economic contraction.

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CHAPTER 5 LEGISLATIVE PRACTICES (II): DEBT AND MONETARY AUTHORITY

This chapter argues that the Australian and UK legislative practices concerning debt and monetary finance distributed financial power further away from parliaments and towards executive agencies during the Reference Period. Two main legislative features evidence that distribution. First, legislation delegated broad financial authority to treasuries to borrow and issue debt. Secondly, legislation failed meaningfully to regulate monetary financing, leaving the monetary financing functions of financial executives and central banks largely autonomous of parliaments.

That argument progresses in the same 3-step structure as §4.1-§4.3.

It commences by investigating the design of Australian and UK legislative practices concerning debt and monetary finance (§5.1). It continues by analysing the operation of those practices during the Boom, Bust and Recovery Phases (§5.2). It concludes by evaluating the impact of the legislative practices’ design and operation on the distribution of financial authority (§5.3).

5.1 Legislative design

Before turning to the examine the design of the legislative practices of sovereign debt (§5.1.1) and monetary finance (§5.1.2), it is helpful to provide a brief overview of the financial contribution made by those forms of finance to contextualise their relative significance to the financial activities of central governments.

5.1.1 Sovereign borrowing

Both Australia and the UK relied heavily on sovereign borrowing during the Reference Period and the legislation authorising that activity delegated very large swathes of authority to financial executives. 236

Financing profile

As §1.2.2 observed, the broad expression “sovereign borrowing” encompasses short and long-term public debt issues. Shorter-term debt instruments generally mature in <1 year, are described as “bills” or “notes” and trade in the “money- market”.649 Long-term sovereign debt instruments generally mature over longer durations (between 1–15 years), are described as “bonds” or “gilts”, and trade in the “debt-market”.650 Governments use short-term debt to finance shortfalls in projected fiscal receipts (tax “smoothing” or “cash management”) and long-term debt to finance the gap between planned expenditure and fiscal receipts (a “fiscal” or “structural” deficit).651

A government’s recourse to sovereign debt markets will change with its economic fortunes. Obviously, governments in economic trouble, with large multi-year fiscal deficits, require both short-term debt (to smooth tax receipts) and long-term debt (to finance expenditure, including debt-servicing costs). Governments in good economic fortune, with small or no fiscal deficits, may still issue short-term debt (to smooth fiscal receipts). Governments in extremely good economic fortune, running multi-year fiscal surpluses, may have no need for short-term debt (because of accumulated fiscal receipts and dividends from public assets), but require long-term debt for reasons having little to do with public financing (like maintaining the competitiveness of their sovereign debt market).

At various points in the Reference Period, Australia and the UK relied on sovereign borrowing in each of those ways.652

649 Choudhry (2001), The Bond & Money Markets, 513. 650 Ibid, 203-247, 513. 651 William (2013), ‘Debt and Cash Management’. 652 The data (displayed on a gross issuance basis) in the following figures are collected from the same sources as those in Figures II.1 and II.2. 237

Figure 5.1: Australia debt issues <–> GDP: 2005-2016

Figure 5.2: UK debt issues <–> GDP: 2005-2016

238

Lower-yield forms of debt finance may be raised through “retail” offerings to the general public. The UK’s most prominent retail debt financing occurs through “National Savings and Investments” (“NS&I”), where the government borrows money from the general public, and some institutional investors.

The financing contribution of NS&I products is miniscule in comparison to other forms of debt finance.

Figure 5.3: NS&I financing contribution653 Because of NS&I’s economic insignificance, the legislation governing its operation is not dealt with in-depth here.654

Authority to borrow and issue debt

UK and Australian legislation conferring authority to make sovereign debt issues had three signal features.

First, the statutory authority to borrow money and issue securities for those borrowings is conferred in extremely broad terms. In the UK legislation, that breadth of power is expressed through a combination of s 12 and Sch 5A items 3 and 4 of the National Loans Act:

653 Representing gross revenue contributions by Treasury Bills, NS&I products and gilts: National Savings & Investments, Annual Report and Accounts (2015-2016). 654 Although it shares much in common with other legislation governing sovereign borrowing, including: having broad powers to issue, and determine the cost of, debt; and supported by a standing appropriation: National Savings Bank Act 1971 (UK); National Debt Act 1972 (UK). 239

12 Power of Treasury to borrow (1) Any money which the Treasury consider it expedient to raise for the purpose of promoting sound monetary conditions in the United Kingdom and any money required— (a)for providing the sums required to meet any excess of payments out of the National Loans Fund over receipts into the National Loans Fund, and (b)for providing any necessary working balance in the National Loans Fund, may be raised in such manner and on such terms and conditions as the Treasury think fit, and money so raised shall be paid into the National Loans Fund. … (2) For the purpose of raising money under this section the Treasury may create and issue such securities, at such rates of interest and subject to such conditions as to repayment, redemption and other matters (including provision for a sinking fund) as they think fit. … Financial instruments 3(1) For the purposes of exercising their functions with regard to the Debt Management Account the Treasury may— (a)acquire (and arrange to acquire) and hold securities issued under section 12 of this Act; … Borrowing 4 (1)If the Treasury consider it expedient to raise money for the purpose of exercising their functions with regard to the Debt Management Account they may raise it in such manner and on such terms as they think fit, and money so raised shall be paid into the Account. Together, those provisions confer power on HMTreasury to borrow money and issue securities for that borrowing through the DMA. As §3.3.2 explained, that function is de facto carried out by HMTreasury qua DMO.

240

Australian sovereign debt legislation conferred similarly broad power on AUTreasury. Australian sovereign debt legislation developed significantly during the Reference Period (§5.2.2) in response to the financial crisis, but the final power to borrow and issue securities was contained in ss 3A and 4 of the Commonwealth Inscribed Stock Act: 3A Authority to borrow (1) The Treasurer may, from time to time, borrow money on behalf of the Commonwealth by issuing stock denominated in Australian currency. … 4 Power to create stock (1) The Governor-General may, by writing signed by him or her, create stock, Treasury Bonds, Treasury Notes or other prescribed securities from time to time for: (a) raising money by way of loan; or … (2) Stock created pursuant to paragraph (1)(a) shall not be issued or sold unless: (a) authority to borrow the moneys to be raised by the issue or sale is granted by section 3A of this Act or by any other Act; or Those provisions conferred authority to borrow and issue debt of relatively similar breadth to those conferred by the National Loans Act.

Secondly, the very broad powers to borrow and issue debt were limited only by reference to the Australian and UK treasuries’ subjective opinion regarding the financing needs of the government.

In the UK, the National Loans Act prescribes the government’s financing needs by reference to deficits in the Consolidated Fund or the National Loans Fund, pursuant to the deficit-limitation contained in s 12(1)(a) and (b). However, as §3.3.2 explained, that limitation was superseded by the inclusion of the words “sound monetary conditions” in s 12(1). As the Commons debate on those words pointed out, the definition of sound monetary conditions is for HMTreasury to determine without legislative guidance. 241

In Australia, even broader powers to borrow were conferred on AUTreasury. Section 3A of the Inscribed Stock Act provides only the facultative language “may, from time to time, borrow”, thus conferring authority to borrow without any express limitation regarding deficit restriction or monetary policy.655

Thirdly, Australia’s and the UK’s legislation conferred similarly broad authority on their treasuries to determine the commercial structure of sovereign debt and the administrative structure of the sovereign debt market.

Neither jurisdiction contained significant legislative treatment of the commercial structure of sovereign debt issues. Short-term debt may be issued as “discount instruments” (like Treasury Bills): when HMTreasury issues a £10million 3- month treasury bill at 5%, the counter-party pays £9.5million to HMTreasury, and receives £10million from HMTreasury 3 months later.656 Long-term debt instruments (like gilts and bonds) often have a different commercial structure. When Australia issues a $10million fixed-rate 2% long (15years) bond, the counter-party pays $10m to AUTreasury, and receives $200thousand every year for 15 years (in interest), and then $10million at maturity, from AUTreasury.657

Australian and UK legislation concerning sovereign debt wholly delegates to treasuries the power to determine those matters of commercial structure. The National Loans Act simply provides that the “the terms and condition” of borrowing and rates of interest and … conditions as to repayment, redemption and other matters” are to be determined as HMTreasury “think fit” (s 12(1) and (3)).

The Commonwealth Inscribed Stock Act similarly provides that the: manner in which, the prices at which and the terms and conditions (including terms and conditions as to redemption and interest) on which

655 The Loan (Temporary Revenue Deficits) Act 1953 (explained in §3.2.2) was in-force during the Reference Period, but does not appear to be used by Australia in issuing debt. 656 Choudhry (2001), 513. 657 Australian Office of Financial Management, Information Memorandum Treasury Bonds (2014). 242

stock may be issued and sold shall be as directed by the Governor-General [on advice from AUTreasury]

Australian and UK sovereign borrowing legislation also gives treasuries total freedom to determine the currency in which sovereign debt may be issued. The National Loans Act provides “for the avoidance of doubt” that: it is hereby declared that the power to raise money under this section extends to raising money either within or outside the United Kingdom and either in sterling or in any other currency or medium of exchange, whether national or international A similarly broad power to determine the currency of issue is contained through the inter-linking of the broad borrowing authority contained in the Commonwealth Inscribed Stock Act and the Loans Securities Act 1919 (Cth), the latter of which provides: 6A Currency in which moneys may be borrowed Where under an Act the Treasurer has authority to borrow moneys, the Governor–General may authorize the Treasurer to borrow the moneys in whole or in part in currency other than Australian currency, and, in that case, the Treasurer is empowered to borrow the moneys accordingly.

Australian and UK treasuries exercised those power by issuing debt denominated in non-domestic currencies. A particularly exotic example of HMTreasury’s exercise of that power occurred with the issue of a Renminbi denominated long-term debt-product in 2014 (RMBB)658. The RMBB was issued for 3 years (2014-2017), for CY3billion (~£340million) at a rate of 2.7% interest and its terms and conditions provided that “creation and issue of the [RMBB] was authorized pursuant to the National Loans Act 1968”.659

Finally, Australian and UK sovereign borrowing legislation fails to deal with the conditions of operation for the primary market in sovereign debt. In the UK, only

658 Although described as “Notes” in their offering circular, the RMMB were for a far longer duration (3 years) than other UK short-term debt and thus were more “bond-like”: HMTreasury, Offering Circular (17 October 2014), 1 659 Ibid, 18. 243 a select group of financial institutions can directly purchase gilts from HMTreasury (via the DMO): “Gilt Edged Market Markers” (GEMMs). The eligibility criteria to be appointed a GEMM (and the attendant privilege of having access to the UK’s primary gilt market) are determined by HMTreasury without any legislative direction. The apparent financial rationale for that intermediation is to assure the government a total subscription to its debt,660 but the effect is to confer significant privileges on a select group of private financial organisations to determine the terms of the secondary market in government debt.

Australia has a more-open primary sovereign debt market, selling to both large financial institutions, and other registered organisations, but the majority of debt is still sold wholesale through intermediaries.661

5.1.2 Monetary finance

Although both the Bank of England and the Australian Federal Reserve Bank made some contribution to public finances during the Reference Period, the Bank of England’s contribution was far more extensive. Notwithstanding that variation, there was a general absence of clear legislative practices governing the monetary financing activities of either central bank.

Financing profile

Central banks may provide two kinds of monetary finance to central government: ordinary (or “vanilla”) and highly-unusual (or “exotic”) monetary finance.

The most obvious form of finance provided by a central bank is the transfer of cash proceeds of ordinary central bank operations to government, the central bank’s “dividend” to government.662

660 Choudhry (2001), 216. 661 Through “Registered Bidder Agreements”: OECD (2013), Sovereign Borrowing Outlook (OECD). 662 Capie, Goodhart and Schnadt (1994), 55. 244

Central bank dividends are “vanilla” in several respects. They are simply the economic product of the ordinary agency functions of central banks (printing money, settling inter-bank transactions, supervising the financial sector and engaging in monetary policy operations) and, in that sense, are akin to a fee for the central bank’s services. Additionally, central bank dividends only provide a very modest contribution to central government finances. During the Reference Period, the Australian Reserve Bank paid an annual average dividend of ~$1.3billion (0.9% of average income tax receipts, and 0.7% of total receipts),663 while the Bank of England paid an annual average dividend of ~£288.2million (0.19% of income tax, 0.05% of total receipts).664

Central banks may also provide monetary finance to governments beyond a dividend payment. Long-standing examples include the provision of short-term credit facilities, of which the Bank of England’s Ways and Means Advance (“WMA”) to the National Loans Fund is a prime example (§2.2.1, §2.2.3, §3.2.1). Depending on the conditions under which they are used, central bank overdrafts may be more vanilla (where the advanced amounts are small, at market-interest, for a very short-duration) or more exotic (where the amounts are large, low- interest, long duration).

Very exotic monetary finance occurs through absolute cash transfers to government with no statutory obligation to repay. Since 2011, the direct transfer of cash-balances accruing from the Bank’s quantitative easing (“QE”) program to the Consolidated Fund (“QE Transfers”) is an example of that very exotic form of monetary finance.

The monetary financing functions of central banks are contentious because of the economic thinking concerning their inflationary effects. So it goes, funding public expenditure through cash transfers from a central bank increases the

663 Australian dividend data collected from Reserve Bank of Australia, Annual Reports (2005- 2016). 664 UK dividend data collected from Bank of England, Annual Reports and Accounts (2005-2016). 245 money supply, increasing prices and debasing the currency.665 That economic thinking (orthodox through much of the 1990s) is reflected in some legal instruments regulating or prohibiting monetary finance.666 Reflecting that economic orthodoxy, significant (exotic) uses of overdraft facilities only occur when both fiscal and short-term debt receipts cannot fund planned expenditure and there is no generally acceptable framework within which (very exotic) outright cash-transfers should occur.

Both kinds of monetary finance did, however, occur in the UK between during the Bust and Recovery Phases.667

Figure 5.4: WMA drawing 2008

Figure 5.4 shows the UK’s ~£19.5billion drawing on the WMA during late-2008, which made a large contribution to the bail-out of Bradford and Bingley.668

665 The technical economic arguments are collected in Turner, (2015), ‘The Case for Monetary Finance’. 666 Cotarelli (1993), 3–5, most prominently Art 123 of the Treaty on the Functioning of the European Union. 667 Data for the WMA in the figures throughout §5 are drawn from Bank of England, B72A Ways and Means Advance: Weekly and Quarterly Outstanding figures: 2006-2017 (2017). 668 Cross, Fisher and Weeken, ‘The Bank’s Balance Sheet during the Crisis’ (2010), 36. 246

Figure 5.5: QE Transfers 2013-2016

Figure 5.5 shows the QE Transfers from FY2013 to 2016 as a proportion of other comparable income streams.669

Legal framework of central bank dividends

The payment of a divided by the Bank of England was authorised pursuant to s 1(4) of the Bank of England Act 1946 (UK), which provides for the payment of 25% of the Bank’s after tax profit from its banking functions. A more flexible legislative framework underpinned the Reserve Bank of Australia’s dividend payments. Section 30 of the Reserve Bank of Australia Act 1959 (Cth) provides for so much of the “net profits” of the Bank to be “paid to the Commonwealth” as the “Treasurer, after consultation with the Reserve Bank Board, determines”.

669 Data for the QE Transfers in the figures throughout §5 are drawn from ONS PSF, PSA9 Bank of England (BoE) Asset Purchase Facility Fund (APF) including Term Funding Scheme (TFS) (2017). 247

Those provisions leave the total amount of the dividend hostage to the fortunes of the relevant central bank’s operations, but represent a clear legislative prescription of a central bank’s public financing contribution in ordinary economic circumstances.

Legal framework of central bank overdrafts

No such clear legislative treatment attends the Bank of England’s use of the WMA during 2008-2009, other than the 18 words of the National Loans Act, s 12(7).670

As §3.2.2 noted, since 1968, none of the Bank’s constitutive statutes have provided detailed treatment of the conditions under which the Bank can made advances to HMTreasury (in excess of the dividend). However, s 12(7) of the National Loans Act provides that the Bank “ may lend any sums which the Treasury have power to borrow under this section”.

That provision links the Bank’s authority to lend money to the treasury’s powers to borrow money. Accordingly, the Bank may lend HMTreasury (via the National Loans Fund) the total amount of the any cash or fiscal deficit, or to “promote sound monetary conditions” in the UK. Accordingly, s 12(7) of the National Loans Act could authorise the maintenance of the WMA, which is paid into the National Loans Fund,671 but it imposes no meaningful limitations on the amount (or conditions) of finance provided.

Legal framework of QE Transfers

An even wider void of clear legislative treatment attends the legal basis for the QE Transfer’s between the Bank and HMTreasury from 2013, which can only be understood in the broader economic and institutional context within which QE was undertaken.

670 The legislation governing the Reserve Bank of Australia’s makes no provision of credit to the government. 671 Bank of England, Annual Accounts (2008–09), 98. 248

Economically, QE is the label given to the processes by which a central bank creates central bank money (§1.2.1) to purchase financial assets with the objective of boosting the liquidity of private financial markets and thereby increasing the total amount of money circulating in the economy.672 The assets purchased through QE are mostly government bonds issued by the treasury (and denominated in the currency) of the same state as the QE-operating central bank. A number of central banks commenced QE programs from 2008.673 The Bank of England began its QE program in March 2009 and is on-going.

Between 2005 and 2016, the Bank’s newly created reserves have been used to purchase UK bonds (gilts) worth ~£435bn and non-government bonds worth ~£10bn.

672 That description is a simplification and its economic characterisation is contested: cf Borio and Disyatat ‘Unconventional Monetary Policies: an Appraisal’ (2009). 673 QE-like processes have been undertaken by the Bank of Japan (since the early 2000s), the US Federal Reserve (from 2008) and the European Central Bank (from 2010): Borio and Disyatat (2009), 9; Lenza, Pill and Reichlin (2010), ‘Monetary Policy in Exceptional Times’; Ahearne (2002), ‘Preventing Deflation’. 46 Part Three Evaluating the government balance sheet: borrowing

249

Figure17 shows the proportion of gilts held by the Bank of England, as a holder of gilts in the Asset Purchase Facility, has increased from 0% at 31 March 2008 to 25% at 31 March 2016 Figure 17 Distribution of gilt holdings by sector

The proportion of gilts held by the Bank of England, as a holder of gilts in the Asset Purchase Facility, has increased from 0% at 31 March 2008 to 25% at 31 March 2017

Holding (%) 100

90 29 27 32 30 80

70 5 5 5 8 60

27 28 50 29

40 49 30 25 20 26

20

10 16 15 11 13

0 31 March 2008 31 March 2011 31 March 2014 31 March 2017 Date of holding Financial Institutions Bank of England Insurance Companies and Pension Funds Households & Other Overseas Holdings (Rest of World)

Notes 1 ‘Households & Other’ includes households, public corporations, and local government entities. 2 Information is based on market value, which means that some of the movement in holdings will reflect changes in market prices. Source: National Audit Office analysis of Debt Management Office and Office for National Statistics information Figure 5.5: QE asset purchases effect on UK debt portfolio674 Figure 5.5 illustrates that the market impact of QE amounted to the Bank funding the purchase of ~30% of the total UK sovereign bonds on issue.

At an economic level, understanding QE requires focusing simply on “the Bank”. At an administrative and legal level, the picture is more complex.

Operationally, QE asset purchases are carried out by a UK registered corporation (wholly owned by the Bank),675 the Bank’s “QE Subsidiary”, which holds the ~£435billion of UK bonds purchased through QE and will sell those bonds when QE is unwound.

674 National Audit Office, Evaluating the Government’s Balance Sheet (2017), 46. 675 Bank of England Asset Purchase Facility Fund Limited. 250

At the commencement of QE, HMTreasury and the QE Subsidiary executed a “deed of indemnity” which provides that “any financial losses as a result of the asset purchases are born by HM Treasury, and any gains are owed to HM Treasury”.676 Since it began operation in January 2009, the QE Subsidiary has suffered no losses, but has accumulated a large cash surplus on account of HMTreasury (qua DMO) paying interest instalments on the bonds held by the QE Subsidiary.

The opportunity of using that cash surplus to fund general government expenditure was raised by HMTreasury in 2011, when it formally requested that the QE Subsidiary transfer all cash balances in its accounts to HMTreasury. Although initially cagey, HMTreasury was eventually explicit about the deficit- financing role of those cash-transfers:677 holding large amounts of cash in the APF is economically inefficient as it requires Government to borrow money to fund these coupon payments. Transferring the net income from the APF will allow the Government to manage its cash more efficiently, and should lead to debt interest savings to central government in the short term. An HMTreasury press-release was even more explicit:678 any net coupon income transferred from the APF to the Exchequer should be used solely to pay down government debt. By early 2017, HMTreasury stated that QE Transfers were “surrendered to the Exchequer to fund the operations of government.”679 Under those arrangements, the QE Subsidiary transferred ~£72billion to HMTreasury between 2013 and 2017.680 That sum represents very exotic monetary financing.

676 Bank of England Asset Purchase Facility Fund Limited, Annual Report and Accounts (2016– 2017), 4. 677 Osborne to King, Transfer of Excess Cash from the Asset Purchase Facility to HM Treasury (9 November 2012) (added emphasis) 678 HMTreasury, Changes to Cash Management Operations (9 November 2012). 679 HMTreasury, Annual Report and Accounts (2016-2017), 22 680 The Treasury currently estimates future receipts from the QE Subsidiary of £51.2billion: Ibid, 16. 251

Understanding the legal framework for the QE Transfers requires understanding (part of)681 the legal basis of QE.

The first relevant legal step in the QE program was the incorporation (in 2008) of the QE Subsidiary under the UK Companies Act 2006 (UK) as a wholly-owned subsidiary of the Bank, and staffed with officers of the Bank as it directors.682 Section s 3A of the Companies Act conferred generic legal powers on the QE Subsidiary to buy, hold, sell and encumber property. Additional powers were conferred by the QE Subsidiary’s Memorandum of Association, relevantly including powers, “To enter into any arrangements with any government … that may seem conducive to the attainment of the Company’s objects”683 and “To lend or advance money and to give credit and to enter (whether gratuitously or otherwise) into guarantees and indemnities of all kinds…in such circumstances and on such terms and conditions as the board of directors thinks fit”.684

The second step was the Bank making a “loan” to the QE Subsidiary, which represented the proceeds of the newly created central bank reserves.685 The third step involved the QE Subsidiary purchasing gilts and corporate bonds on the secondary market using the loan proceeds transferred from the Bank.

The fourth step involves the legal framework governing the QE Transfers to HMTreasury. That legal framework was provided by a document executed by the QE Subsidiary and HMTreasury, described in various Bank and HMTreasury documents as a “deed of indemnity”,686 the terms of which are not publicly available. The fifth step involves the QE Subsidiary paying QE Transfers to

681 Other legal issues (beyond this dissertation’s scope) are implicated by QE, including the exercise of the Bank’s powers under the Bank of England Act 1998 and the supranational monetary structure overseen by the European Central Bank. 682 Bank of England Asset Purchase Facility Fund Limited, Certificate of Association (30 January 09). 683 Bank of England Asset Purchase Facility Fund Limited, Memorandum of Association (30 January 09), [3.2.10]. 684 Bank of England Asset Purchase Facility Fund Limited, Memorandum of Association (10 February 2009), [3(q)]. 685 There is no express legislative conferral of power on the Bank to create central bank reserves. 686 HMTreasury, Annual Report and Accounts (2016-2017), 87–88, 135; Bank of England Asset Purchase Facility Fund Limited, Annual Report and Accounts (2016-2017), 4, 6. 252

HMTreasury, which has confirmed that the amounts transferred from the QE Subsidiary to HMTreasury “form part of the Consolidated Fund”.687

Beyond those steps, there is no publicly available information regarding the legal basis for the QE cash-transfers.688 Both the Bank and HMTreasury resist freedom of information requests for further information concerning the legal basis of the QE Transfers, particularly the terms of the deed of indemnity (citing exemptions based on prejudice to the UK economy and monetary policy).689 That leaves very significant gaps in the (publicly available) legal framework governing the public- financing aspects of QE.

5.2 Operation of the legislative practices

The operation of the legislative practices concerning debt and monetary finance during the Boom (§5.2.1), Bust (§5.2.2) and Recovery (§5.2.3) illustrates how those practices distribute financial authority between parliaments and financial executives in different economic conditions.

5.2.1 Boom

As Figures 5.1 and 5.2 display, during the Boom Phase, both the UK and Australia’s debt management activities were generally modest, reflecting the fact that neither government was plunging into severe deficit spending, and nor experiencing cash-flow problems.

Australia’s fiscal surpluses obviated the need for any meaningful debt issues and no short-term debt was issued for cash-management purpose between 2005-

687 HMTreasury, Response to FOI Request (FOI2017/20111). 688 The Bank of England and Financial Services Act 2016 (UK) provides for the audit of a “company in which the Bank has an interest…where the Treasury gives an indemnity…in respect of an activity or series of activities undertaken by the company” (s 7C). Reports of the QE Subsidiary appear to have been audited on that basis, but provide no further information about the content of the deed of indemnity. 689 Bank of England, Responses to FOI Requests (V234121, 03/01/18) (V232714, 06/12/17); HM Treasury, Responses to FOI Requests and internal review decisions (FOI2017/22486, 31/01/18) (FOI2017/20111, 11/12/17), (R07/18, 28/02/18). 253

2009. Australian legal practices reflected the absence of any long-term debt during the Boom Phase, by the absence of any annual Loan Act during the Boom (§3.2.2). On the monetary finance side, both Australian and UK central banks made their statutorily required dividend payments, which were modest and made no exceptional contribution to consolidated revenue.

5.2.2 Bust

During the Bust Phase, three events occurred which had important impacts on the distribution of authority over debt and monetary finance.

Assuming sovereign debt

The first important event occurred when the Australian and UK governments sharply increased their reliance on long and short-term debt from the commencement of the Bust.

Figure 5.6: Australia and UK total absolute borrowing 2005-2016

The left vertical axis tracks gross debt issues in Australia, showing increase in long-term debt from below $5million in FY2007/08 to almost $60billion in FY2010/11, and short-term debt from $0 to over $60billion in the same period. 254

The right axis represents UK debt issues, showing long-term debt growing from ~£70billion to over £230billion between FY2007/11, and short-term debt growing from ~£90billion to over £250billion in the same period.

The far larger absolute size of the UK’s annual debt issues throughout the Bust Phase reflects the UK’s lack of a fiscal surplus and the sharper contraction of fiscal receipts, relative to Australia’s, during the Reference Period.

However, when sovereign debt issues are viewed through the prism of annual growth, the similarities between Australian and UK sovereign debt experiences during the Bust Phase is revealed.

Figure 5.7: Australia and UK borrowing growth rate Growth in sovereign debt spiked radically in both Australia and the UK between 2008–2009. In that 12-month period, long-term debt grew in Australia by around 510% and by around 140% in the UK. Short-term debt grew by over 300% in the UK.690

The important (albeit predictable) distributional observation is that financial executives’ use of their very broad powers to borrow and issue sovereign debt spike as economic conditions contract.

690 To permit relative comparison with the growth rate of other sovereign debt reliance, the presentation of Australian short-term debt in Figure 5.7 is altered from its actual percentage growth (18billion%: being the percentage increase from $0 to $18billion in a single year), and represented at 180%. 255

Emergency monetary finance

The second major event of the Bust Phase was the provision of very large short- term monetary finance in the UK.

In December 2008, the Bank of England advanced £19.5billion to HMTreasury, which HMTreasury then gave to the crashing UK bank, Bradford & Bingley. The size of the monetary injection from the Bank to the HMTreaury can only be appreciated in relative terms.

Figure 5.8: WMA and other receipts The ~£19.5billion monetary injection by the Bank was +200% of the UK’s monthly income tax receipts in the preceding month (~£9billion) and ~300% of the UK’s monthly VAT receipts (~£7billion) in the same month.

The repayment burden imposed on the UK’s government by that monetary injection is also best appreciated in comparative perspective. 256

Figure 5.9: WMA repayment and other expenditure

In the 12 months surrounding the ~£19.5billion WMA monetary injection, HMTreasury re-paid around ~£24billion to the Bank.691

Before the WMA monetary injection, ~£13billion of the outstanding WMA was re-paid in early 2008. The last month of those payments (March 2008), saw public expenditure on re-paying the WMA standing at almost ~97% of central government staffing costs and ~120% of total national insurance benefit payments.

After the WMA monetary injection, ~£9billion was re-paid, consuming a lower (but still significant) proportion of relative public expenditure: ~40% of staffing costs and ~48% of national insurance benefits.

Other than impliedly acknowledging that the WMA was paid through the creation of central bank money,692 the Bank refuses to release any further information regarding the WMA.693

691 reflecting an outstanding balance of ~£13.5billion at January 2008. 692 Bank of England, Response to FOI Request (V233383). 693 Perhaps out of concern that it (prima facie) breached Art 123 of the Treaty on the Functioning of the European Union: “Overdraft facilities or any other type of credit facility with…the central 257

Liberalising debt legislation

The third major event of the Bust Phase was a significant change to the legal practices concerning debt finance in Australia.

Prior to the Reference Period (as §3.2.2 explained), Australian legislation authorised long-term debt issues through the passage of an annual Loan Act. From 1996, Australia ceased enacting an annual Loan Act, as it started a 12-year run of large fiscal surpluses accruing from historically exceptional mineral sales to China.

In 2008, Australia fundamentally amended its sovereign debt legislation by conferring a general authority on AUTreasury to borrow and issue debt securities, in similar term to the general authority conferred on HMTreasury by s 12 of the National Loans Act. That amendment was achieved by conferring a plenary power to borrow on the AUTreasury in s 3AA of the Commonwealth Inscribed Stock Act.

Counter-intuitively, Australia’s move from annual to standing sovereign borrowing authority was not caused by the need for deficit financing, because it was enacted before Australia experienced any contraction in fiscal receipts. Instead, the change was the result of lobbying by private financial interests who were seeking to park their wealth in Australia dollar denominated assets, because of the credit contractions occurring in North America and Western Europe.

That motive was alluded to in the Australian government’s second reading of the Bill to liberalise AUTreasury’s borrowing powers:694

banks of the Member States…in favour of …central governments…shall be prohibited”: cf Protocol 15, Art 10. 694 Second Reading Speech, Commonwealth Securities and Investment Legislation Amendment Bill 2008 (2008). 258

Over recent months, demand for the bonds has intensified due to the strength of the Australian economy and exchange rate, together with global credit concerns that have increased the demand for high-quality securities.

As a result, the Treasury bonds available on issue have become more tightly held and it has become more difficult for dealers to obtain some lines of stock and maintain an active market in them. More illuminating, was the boast of a senior investment banker that the amendments were exactly “what we asked for”.695

The broad power to issue debt to permit a safe-harbour for offshore capital in AUD-denominated bonds was not, unlike s 12 of the National Loans Act, limited by a deficit-financing condition. Instead, Australia inserted a statutory “debt- limit” in s 5 of the Commonwealth Inscribed Stock Act: The total face value of stock and securities on issue under this Act and the Loans Securities Act 1919 at any time must not exceed $75 billion. When that debt-limit was enacted, in 2008, Australia had borrowed $49.3billon through bonds and had a total debt portfolio of $60.4billion.

Within a year (in 2009), an amendment permitted AUTreasury to increase that limit to $125billion by a written declaration (which was not subject to parliamentary veto).696 By EOFY09, $78.4billion in bonds was outstanding, and the total debt portfolio had risen to $101.1billion.

In 2011, the Act was amended again to lift the debt-limit from $75billion to $250billion, and AUTreasury’s discretionary power was entirely removed.697 By EOFY2011, $161.2billion in bonds was outstanding, and Australia’s debt portfolio had risen to almost $200billion.

695 “head of debt markets at Macquarie Bank”: Parliament of Commonwealth of Australia, Bills Digest No 129 (2007–08). 696 Commonwealth Inscribed Stock Amendment Act 2009 (Cth). 697 Appropriation Act (No. 2) 2011–2012 (Cth), s 18. 259

Australia’s liberalisation of its sovereign debt legislation continued into the Recovery Phase, as the debt financing consequences of the severe contraction in fiscal receipts during the Bust Phase continued to be felt. In 2012, legislative amendment lifted the debt-limit to $300billion,698 as the amount of outstanding bonds rose to $205.3billion and the total debt portfolio lifted to $233.9billion. The debt-limit received its quietus in 2013 when it was entirely repealed,699 leaving AUTreasury unlimited by any ex facie restriction on its capacity to issue sovereign debt. In the fiscal year after its repeal, Australia had almost $300billon in outstanding bonds and a portfolio position of $319.4billion.

Australia’s experience in liberalising its sovereign debt legislation during the Reference Period shows the impact of economic conditions (necessity) on the legal practices of debt finance.

Figure 5.10: liberalising Australian sovereign borrowing legislation Over the eight-year span of the Bust and Recovery phases, Australia fundamentally altered its sovereign borrowing legislation five times, to accommodate the massive expansion of its sovereign debt portfolio. During that period, the annual compound growth rate of Australia’s sovereign debt issue was 44% and size of its sovereign debt portfolio increased 400%.

698 Appropriation Act (No. 2) 2012–2013 (Cth), s 18. 699 Commonwealth Inscribed Stock Amendment Act 2013 (Cth). 260

5.2.3 Recovery

The Recovery Phase saw a continuation (but relaxation) of the Bust trends.

Between 2012-2016, both Australia and the UK continued to issue large amounts of short and long term sovereign debt, although both trended towards a reduced reliance on debt financing. Despite that trend, the cost of debt-servicing remained high and, in the UK, those debt-servicing costs drove a sustained monetary financing program through the QE Transfers.

Long-term monetary finance

In January 2013, the QE Subsidiary began making QE Transfers to the Consolidated Fund via HMTreasury.

Initially, the QE Transfers made a very significant contribution to UK’s public receipts.

Figure 5.10: QE Transfers and major receipts 2013

During the first 10 months of 2013, QE Transfers stood at a month average of 31% of income tax, 46% of NICs and 41% of VAT receipts. Compared to less 261 significant (but still structurally critical) receipts, the scale of monetary finance provided by QE Transfers is more starkly illustrated.

Figure 5.11: QE Transfers and minor receipts 2013

From January–October 2013, QE Transfers stood at a monthly average of 184% of corporation tax receipts, and 106% of total excises (being the aggregate of, 495% of alcohol, 659% of tobacco and 182% of fuel duties). The enormous scale of the 2013 QE Transfers were the consequence of un-paid accumulation of cash balances in the QE Subsidiary’s account between 2009-2013.

After those (initially enormous) monetary injections, the relative contribution to consolidated revenue of QE Transfers reduced over the remainder of the Reference Period. 262

Figure 5.12: QE Transfers and major receipts 2013-2016

Between FY2013 and FY2017, QE Transfers stood at an annual average of 9% of income tax, 13% of NICs and 12% of VAT receipts.

263

Figure 5.13: QE Transfers and minor receipts 2013-2016

Between FY2013 and 2017, QE Transfers stood at an annual average of 137% alcohol, 154% tobacco, 53% fuel duties and 817% of National Lottery receipts.

Long-term monetary finance by the Bank during the Recovery Phase cannot be viewed in isolation from the enormous debt burden undertaken during the Bust Phase, because HMTreasury’s public explanation for the QE Transfers focused on debt servicing.

Figure 5.14: QE Transfers and minor receipts 2013-2016 For the calendar years 2013-2016, the contribution of QE Transfers to net interest repayments stood between a high of 80% in 2013, and a stable ~20% for the following years.

5.3 Distribution of financial authority

Three main aspects of the design and operation of the legislative practices concerning debt and monetary finance distribute financial authority towards the 264 financial executive: the extensive delegations provided by sovereign debt legislation (§5.3.1); the paucity of legislative treatment of monetary finance (§5.3.2); and the total absence of any meaningful legislative treatment of the conduct of public finance in conditions of economic emergency (§5.3.3).

5.3.1 Delegation and sovereign borrowing

Australian and UK sovereign borrowing legislation delegated debt finance authority by conferring power to assume sovereign debt in extremely general, almost plenary, terms, totally unconnected to any meaningful parliamentary processes of authorisation.

Broad borrowing authority

UK (throughout the Reference Period) and Australian (by the conclusion of the Recovery Phase) sovereign borrowing legislation conferred power on financial executives to borrow when necessary. The deficit-financing basis of the UK’s National Loans Act could have provided some meaningful limitation on HMTreasury’s power to borrow, but the potential role was superseded by the “sound monetary condition” basis for sovereign borrowing. That position was replicated in Australia after the gradual removal of any quantitative limitation on AUTreasury’s legislative power to borrow.

Those broad grants of authority to borrow were disconnected from any annual parliamentary processes. Any suggestion that deficit financing formed a practical limitation on sovereign borrowing is negated by two instances of sovereign borrowing in the Reference Period. The first is Australia’s debt issue while still running a fiscal surplus prior to the economic contraction of the Bust Phase in 2008, which was undertaken to serve the economic interests of large private financial institutions (rather than finance a fiscal deficit). The second is the UK’s issue in 2014 of the Chinese currency denominated RMMB, which appears to serve a more rational purpose of boosting London’s position as a centre for eurobond financial intermediation, rather than deficit financing. 265

Economic conditions

Economic conditions impacted sovereign borrowing legislation in two ways.

The first (and most obvious) was that the broad legislative authority conferred by sovereign borrowing legislation was more robustly exercised during periods of immense economic contraction to meet the needs of deficit financing. The second form of impact was the liberalisation of Australian sovereign borrowing legislation in response to the massive deficit financing requirements throughout the Bust and Recovery Phases.

The important distributional conclusions are that financial executives exercise a greater share of debt finance authority during economic contractions, and that parliaments will facilitate an even greater share where necessary.

Extent of delegation of debt finance authority

Sovereign borrowing legislation has two major impacts on the extent of the delegation of total financial authority, both of which were equally present in Australia and the UK.

The first impact is on the expenditure side of fiscal activity. As §4.2.2 observed, Australian and UK sovereign debt-servicing expenditure is authorised by standing appropriations. Because the conditions under which sovereign debt is assumed are delegated to the financial executive, those standing appropriation provisions are un-bonded by any meaningful legislative authority. In that sense, the wide degree of delegation of debt finance authority increases the degree to which expenditure is authorised without parliamentary involvement. Thereby, the legislative practices of sovereign borrowing further shunt the distribution of fiscal authority away from parliaments and towards financial executives.

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The second impact concerns the interlocking of debt finance authority with fiscal authority. Recalling the “executive self-financing” measure of the extent of delegation of fiscal authority in §4.3.1 the distribution of fiscal authority in the UK is less extensive than Australia’s, but the delegation of debt finance authority to HMTreasury gives the UK financial executive legal power to continue financing the state even if annual company or income tax legislation were not passed.

In that sense, the delegation of debt finance authority brings some level of equalisation to the extent of delegation of financial authority in Australia and the UK by providing Australian and UK financial executives a legal basis to continue funding public sector activities without any annual parliamentary legislation.

Of course, economic factors would constrain the extent to which the UK could debt finance its government in the absence of income or corporation taxes. But, the breadth of the legal authority possessed by financial executives to assume sovereign debt boosts their capacity to self-finance and distributes a greater share of total financial authority away from parliaments.

5.3.2 Mysterious monetary finance

A different set of distributional impacts arises from the design and operation of Australian and UK legislative practices concerning monetary finance during the Reference Period.

Although both jurisdictions had clear legal frameworks regarding the operation of vanilla monetary finance (dividend payments), the low economic impact of those forms of monetary finance reduced their total distributional impact.

Faintly-touched by legislation

More significantly, neither jurisdiction had satisfactory legal frameworks regarding the more exotic (higher-impact) forms of monetary finance. 267

The UK legislative practices contained the possibility for meaningful legislative treatment of exotic monetary finance through the conferral of authority on the Bank of England to lend HMTreaury money which it could lawfully borrow under s 12(7) of the National Loans. No such recognition of, or legal foundation for, the monetary finance role of the Reserve Bank of Australia appeared in the Reserve Bank Act. In that sense, the design of the legislative practices in the UK made more meaningful provision for the reality of exotic monetary finance.

However, the bare permission conferred by a single provision in the National Loans Act failed to provide any meaningful legal regulation of the important details of monetary finance. It contained no indication of permissible commercial structure (interest rate, maturity, denomination or conditions of the loan), nor did it provide any basis upon which to report to parliament that monetary finance was being obtained. Given that s 12(7) permitted monetary finance up to and beyond the level of fiscal deficit, the absence of any meaningful regulation left a carte blanche power to provide an unlimited amount of monetary finance.

Untouched by legislation

The legislative practices of public money failed entirely to touch the exotic monetary finance provided by the QE Transfers in the UK during the Recovery Phase.

The legal basis for the QE Transfers was provided by private law frameworks, particularly UK corporations legislation and general law powers to enter into contracts (via the “deed of indemnity”). None of those frameworks provided any ex ante legal conditions regarding the critical financial integers of the QE Transfers: their size, their duration, their relationship to other public financial activities (such as the fiscal-deficit, volume of sovereign borrowing or tax receipts). Nor did those private law frameworks provide any legal conditions concerning the transmission of information to Parliament regarding the QE Transfers. 268

The absence of any meaningful form of legislative foundation for the QE Transfers (particularly given their enormous size and open-ended duration) causes a large distribution of monetary finance authority away from the UK’s Parliament and towards (combined) HMTreasury and the Bank of England.

The net distributional result is to shift financial authority away from parliament and towards the financial executive.

Extent of distribution of monetary finance authority

As was observed in relation to the impact of economic conditions on the legislative practices of fiscal authority (§4.3.2), the UK’s more extreme reliance on monetary finance during the Reference Period was a product of the UK’s experience of a more severe economic contraction during the Bust Phase.

The critical commonality in the legislative practices of monetary finance in the two jurisdictions is the absence of any meaningful legislative treatment of exotic monetary finance. That shared absence provides no reason to conclude that the Australian Reserve Bank would behave any differently in response to the same economic conditions that the UK faced from 2008.700

5.3.3 Emergencies and financial authority

The final distributional impact concerns the absence of any legislative treatment of emergency financing powers, leaving financial executives in a position to behave largely autonomously during economic emergencies.

The experience of the UK during the Bust Phase indicates that in economic emergencies debt issues and monetary finance work together, because monetary finance only becomes necessary when sovereign access to debt and money markets is impossible, as it was in late 2008.

700 The RBA has an overdraft facility, but refuses to release information relating to its use by the Commonwealth government. 269

The critical distributional point is that the large statutory delegations of debt- finance authority and the total absence any legislative framework for monetary finance means that the interaction of debt and monetary finance in economic emergencies is un-governed by law. To that degree, financial executives (and central banks) become autonomous, in the sense of creating their own rules. The distributional impact is to strip parliaments of all financial authority during economic emergencies.

Conclusion

The design and operation of the legislative practices of debt and monetary finance provided for the distribution of very large shares of financial authority away from the Australian and UK parliaments during the Boom, Bust and Recovery Phases.

Despite differing legal forms, the legal substance of the Australian and UK sovereign borrowing legislation effected a strikingly similar delegation of authority over the size, timing and commercial structure of debt finance to financial executives. That delegation effected a substantial distribution of financial authority away from parliaments, by depriving them of any meaningful role in the acquisition of sovereign debt and, thereby, increasing the self- financing capacity of financial executives (§4.3.2).

The Reference Period also witnessed the impact of radically different economic conditions on the legislative practices of debt finance, particularly in the liberalisation of Australian sovereign borrowing legislation in response to the deficit financing needs of the Bust and Recovery Phases. The total result was a further distribution of financial authority over debt finance away from the Australian Parliament. That impact reflects a similar development in the UK during the Bust and Recovery Phases concerning the design of fiscal legislation (§4.2.2, §4.2.3).

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Both Australian and UK legislative practices concerning monetary finance lacked any meaningful provision for exotic monetary finance or legislative treatment of emergency finance. The absence of those legislative practices left the UK financial executive in a position to act largely autonomously of Parliament during the economic emergency experienced in FY2008/09, and when drawing on exotic monetary finance in its aftermath.

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CHAPTER 6 JUDICIAL PRACTICES

This chapter argues that the judicial practices concerning public money do not substantially change the distribution of financial authority effected by the legislative practices: leaving the financial executive in possession of the preponderance of financial authority in relation to fiscal, debt management and monetary finance.

That argument is built on three premises. First, only a small proportion of public finance activities are touched by judicial practices. Secondly, attempts to increase the ambit of judicial involvement (in respect of expenditure) have failed to effect any meaningful change to the distribution of financial authority. Thirdly, where the judiciary has a role in enforcing legal authority over public finance (in relation to tax), it may (but not will) distribute financial authority away from financial executives towards parliaments.

The chapter’s structure tracks those three premises.

It opens by offering an explanation for the lopsided distribution of judicial practices across different public finance activities: explaining why disputes concerning tax legislation are more justiciable than disputes concerning appropriation, debt and monetary finance legislation (§6.1). It then examines an attempt by the Australian judiciary to expand its involvement in disputes concerning appropriation and public expenditure, and the failure of that attempt to effect a meaningful re-distribution of financial authority over expenditure (§6.2). It closes by analysing the capacity (and incapacity) of common law courts to provide a systemically reliable mechanism to enforce parliamentary authority over taxation (§6.3).

A caveat must be lodged regarding the scope of the chapter’s treatment of taxation law. No attempt is made to synthesise the entire body of enacted and judicially-decided law concerning taxation, a task far beyond this dissertation’s limited remit. Instead, the focus is on the general approach of apex courts to 272 interpreting tax legislation (in-line with the examination of the historical development of position regarding taxation disputes (§2.3.1, §3.3.1)).701

6.1 Lopsided judicial involvement

The extent of the judiciary’s actual involvement with public money makes little sense if approached with the Diceyan assumption that all uses of public money “may become dependent upon the decision of the judges upon the meaning of an Act of Parliament” (§1.1.2). As §2.3 explained from an historical perspective, the judiciary is heavily involved in taxation disputes (§6.1.2), but almost entirely absent from disputes concerning public expenditure, sovereign borrowing or monetary finance (§6.1.3).

The lopsided involvement of the judiciary can be understood as resulting from three factors. First, judges have a greater interest in becoming embroiled in some public finance activities (tax) than others (expenditure, debt and monetary finance). Secondly, some public finance activities (particularly appropriation) are governed by legislation which is designed in such a way that the judiciary cannot effectively review conformity with its terms. Thirdly, other public financial activities (particularly debt and monetary finance) occur in a technical context which makes disputes about their legality extremely difficult to submit to the judiciary.

6.1.1 Justiciability and public money

To bring some intellectual order to that confluence of factors it is helpful to draw a distinction between “principled” and “practical” justiciability, where: principled justiciability represents the judiciary’s principled reasons for restraining from passing judgment on a given dispute; and practical justiciability means the practical capacity for a given dispute to be submitted to the judiciary.

701 No such caveat is required for the decided law concerning appropriation, debt or monetary finance, due to the general scarcity of caselaw concerning those activities (for the historical reasons examined in §2.3.2, §2.3.3 and §3.1.3). 273

Principled justiciability

Traditionally (in the common law world) justiciability is understood as a principle applied by judges in determining whether a dispute should be resolved by judicial determination:702 justiciability is a principle of “judicial restraint”.703

As the ambit of judicial review of government increased throughout the mid-20th century, various doctrines developed to identify government action which would fall outside the judiciary’s remit,704 to which various technical labels have attached including “standing”,705 and “deference”706. For reasons of space, all of those doctrines are described here as “justiciability”.

Justiciability doctrines can be justified in many ways. Occasionally, the crude distinction between “political judgment” and legal determination is invoked.707 More often the concept of the separation of powers appears:708 [i]n a … system … concerned with the separation of powers … decisions about social and economic policy, particularly those concerned with the equitable distribution of public resources … are ordinarily recognised by the courts to be matters for the judgment of the elected representatives of the people. Applying justiciability principles (informed by that justification), often results in the judiciary restraining itself from determining disputes concerning matters of social and economic policy or recognizing “a built-in latitude (or margin of discretion)” when ruling on those matters.709

702 King, ‘Justiciability of Resource Allocation’ (2007). 703 King, ‘Institutional Approaches to Judicial Restraint’ (2008a). 704 Council of Civil Service Unions v Minister for the Civil Service (1985), 410; Shergill v Khaira (2015), [41]. 705 R v Inland Revenue; ex parte National Federation of Self-Employed and Small Businesses Ltd (1982). 706 R (Lord Carlile of Berriew) v Secretary of State for the Home Department (2015), [22]-[34]. 707 A v Secretary of State for the Home Department (2005), [29]. 708 R (Hooper) v Secretary of State for Work and Pensions (2005), [32]. 709 R (Public Law Project) v Lord Chancellor (2016), [33]. Cases raising issues of “the allocation of finite financial resources” has a broader impact on the development of substantive legal principles: X (Minors) v Bedfordshire County Council (1995), 737. 274

Specifically applied to disputes about public money,710 a number of factors may underlie a principle of justiciability justified on the separation of powers.711 Chief amongst those factors is the existence of an historically-grounded constitutional practice wherein other public institutions have had exclusive “competence”712 (or “custody”) of a legal dispute’s subject-matter. That factor is often explicitly relied upon by judges in statements like: “the allocation of public resources is a matter for ministers, not courts”;713 and the “reallocation of resources or additional expenditure” are “matters for decision by Parliament, not the courts.”714

Another (related) factor may be the absence of judicial “expertise" concerning the subject-matter of a dispute.715 Expertise is connected to ideas of competence or custodianship in two ways: a lack of expertise may arise as a result of the historical practice allocating disputes to another institutional custodian; and the lack of expertise may only be relative to the superior expertise of personnel in that other institution.716

Yet another factor may be that the “consequences” of a dispute go well beyond the judiciary’s ambit to foresee or predict. That aspect of judicial restraint saw its most thoughtful expression in Fuller’s idea of “polycentricity”:717 A pull on one strand will distribute tensions over a complicated pattern throughout the web as a whole. Doubling the original pull will, in all likelihood, not simply double each of the resulting tensions but will rather create a different complicated pattern of tensions. This would certainly occur, for example, if the doubled pull caused one or more of the weaker

710 Applied to different subject-matter, it may have different justifications: Mohammed (Serdar) v Ministry of Defence (2017), [79]; Shergill (2015), [42]; Prebble v Television New Zealand Ltd (1995) 711 The use of “factors” here is inspired by King’s “multi-factoral” and “institutional” approach to judicial restraint: King, ‘Institutional Approaches to Judicial Restraint’ (2008a). 712 Jowell (2003), ‘Judicial Deference and Human Rights: A Question of Competence”. 713 Regina v Secretary of State for the Environment, Transport and the Regions (2001), 395 (Bingham). 714 In re S (Minors) (2002), 297, 314 [43]. 715 Kavanagh (2008), ‘Deference or Defiance’, 192. 716 King, (2008a), 423. 717 Fuller (1978), ‘The Forms and Limits of Adjudication’, 395; cf King (2008b), ‘Pervasiveness of Polycentricity’. 275

strands to snap. This is a "polycentric" situation because it is "many centered" – each crossing of strands is a distinct centre for distributing tensions Helpfully, Fuller singled out public expenditure decisions as a key example of a polycentric decision:718 In allocating $I00 million for scientific research it is never a case of Project A v. Project B, but rather of Project A v. Project B v. Project C v. Project D…bearing in mind that Project Q may be an alternative to Project B, while Project M supplements it, and that Project R may seek the same objective as Project C by a cheaper method, though one less certain to succeed, etc.” Disputes with strong polycentric elements should (on Fuller’s) account be resolved by more deliberative “parliamentary methods which include an element of contract in the form of the political ‘deal’…an accommodation of interests".719 To whit, political, rather than judicial, resolution of resource-use disputes should be preferred. Another (highly contested)720 factor lying behind principled judicial restraint is that certain types of rights (civil and political) are more appropriately protected by the judicial system than others types of rights (social or economic).

Each of those factors are tailored for deployment in a principled justiciability analysis: wherein a judge faced with a dispute regarding public money may take into account factors including: long-standing historical practice has given another institution (like parliament) custody of the dispute; another institution has superior expertise (like auditors-general or financial executives); the dispute is polycentric (will cause re-allocation of budgeted expenditure); and whether the case concerns clearly defined private property rights (taxation) or larger issues of economic distribution (monetary finance).

That type of principled justiciability analysis is a necessary but not sufficient explanation for the lopsided distribution of judicial practices concerning public

718 Fuller (1978), 395. 719 Ibid, 400. 720 Cf King, Judging Social Rights (2012). 276 money. That is so because many of the legal practices have never been litigated (§2.3.3), indicating that broader matters are in play than the common law judiciary’s preference to be (or not be) involved in a given legal dispute.

Practical justiciability

Some public financial activities have a low practical capacity to be submitted to judicial resolution. Factors affecting that capacity are (i) the design of financial legislation (“legislative design”) and (ii) technical aspects of financial administration which are external to the legislative or judicial practices (“externalities”).721

Legislative design may negatively or positively affect practical justiciability. Some financial legislation is framed in relatively clear (or more “formal”722 qua calculable) terms and contain an express mechanism to funnel disputes regarding financial activity to the judiciary: a “positive” legislative design.723 Other legislation may be vague, nebulous or “informal” and omit any mechanism funnelling disputes to the judiciary: a “negative” legislative design.724

Externalities may also be positive or negative. Some public financial activities take place at a slow-speed and under technical conditions which permit transparency of financial information, together allowing for the meaningful operation of judicial processes before the subject-matter of the dispute is rendered irrelevant as a matter of economic reality: “positive” externalities. Other public financial activities take place under conditions of such speed, urgency and secrecy that that there is (either) no notification of effected

721 “Externality” here means “qualities external to legislative or judicial practices”, rather than the technical economic meaning of a “side-effect or consequence (of an industrial or commercial activity) which affects other parties without this being reflected in the cost of the goods or services involved; a social cost or benefit”: cf both usages in Oxford English Dictionary Online, “externality, n” (July 2018). 722 Tamanaha (2004), On the Rule of Law, chapter 7. 723 Cf the contrary view that “vague” legal standards should not negatively effect the assessment of justiciability: King (2012), 297. 724 The possibility that vague or nebulous legislation could lead to interpretative disputes and, thereby, provoke judicial review is acknowledged. 277 potential litigants or insufficient time for judicial processes to unfold: “negative” externalities.

Spectrum of justiciability

While the presence or absence of principled and practical justiciability factors assists in explaining the lopsided distribution of judicial practices across different public finance activities, no single factor is controlling of justiciability.

Even where the legislative design points extremely strongly towards non- justiciability (where jurisdiction is deliberately not conferred on the judiciary) the judiciary retains the power to determine its own involvement: as in the resolution of a dispute despite the presence of a strongly-worded ouster clause.725 In that sense, a legal dispute concerning financial authority may be more or less justiciable (when justiciability is viewed as principled and practical).

The core point is that an assessment of justiciability appears not as a binary choice, but as a position on a spectrum of more or less justiciable disputes.

6.1.2 More justiciable disputes

Of all disputes regarding public money, taxation disputes are the most clearly justiciable.

Taxpayer vs taxman disputes

Taxation disputes between taxpayer and revenue authority are evidently justiciable, from the perspective of principled and practical justiciability.

All principled justiciability factors point strongly to justiciability. The judiciary’s historical position as the final custodian of taxation disputes is deeply embedded

725 Anisminic Ltd v Foreign Compensation Commission (1968); Plaintiff S157/2002 v Commonwealth (2003). 278

(§3.3.1), and, flowing from that position, there is a large bank of expertise concentrated in the judiciary regarding taxation legislation.726

The consequences of the judicial determinations of taxation disputes appear to be constrained to the parties before the court, at least insofar as a “pay-first, litigate later” rule is in force.727 Additionally, taxation disputes directly implicate the protection of private property rights: a classic concern of the common law judiciary (§2.3.1).728

As a matter of practical justiciability, taxpayer disputes are facilitated by a positive legislative design which expressly provides for judicial review as the end-point of an elaborate statutory review and appeal process.729 Externalities are also positive, including: administrative processes which give taxpayers advance notice of tax collection; highly transparent reasoning processes concerning assessment of tax liability; and (from the perspective of the government finance agencies) the opportunities to have recourse to alternative methods of revenue-raising (money markets) in the event of a taxpayer withholding or successfully contesting tax.

For that collection of reasons, taxpayer vs taxman disputes sit at the most justiciable end of the spectrum of justiciability.730

6.1.3 Less justiciable disputes

Disputes about other public financial activities are far less obviously justiciable.

726 As is witnessed by the profusion of decided cases, secondary literature and university programs concerning taxation law. 727 As is the default in both Australia (Taxation Administration Act 1953 (Cth), ss 14ZZR, 14ZZM) and the UK (Finance Act 2014 (UK), Part 4). 728 Which appears sufficient to override the (the obvious) counter-point that the outcome of a tax disputes has ramification for distributive justice and thus implicating social and economic rights. 729 Eg Smailes (2017), Tolley’s Income Tax 2017-2018, chapter 5. 730 Other taxation disputes are less evidently justiciable, particularly those where the legality of a tax agency’s decisions are challenged by a litigant other than a taxpayer: R v Inland Revenue; ex parte National Federation of Self-Employed and Small Businesses Ltd (1982). 279

Appropriation

From the perspective of principled justiciability, legal disputes concerning appropriation legislation are only marginally justiciable.

There has not been any settled practice of judicial review of appropriation legislation for ~150 years (§2.3.2) and other institutions have had custody over the legal limits of appropriation legislation.731 Financial executives (through their virement authority) have custody over the wider executive’s compliance with appropriation legislation (§2.2.2). Auditors-general have (since the mid- 19th century) had custody (on behalf of parliaments) over auditing financial executives’ financial behaviour (§2.2.3). Those long-standing institutional features have created a void of judicial expertise regarding appropriation legislation. Except in a wholly exceptional case (where money is appropriated for the use of a single legal entity), the consequences of a legal decision regarding public expenditure are intrinsically polycentric, which (in turn) implicates questions concerning the distribution of economic resources outside the judiciary’s traditional concern with civil and political rights.

From the perspective of practical justiciability, the position of appropriation legislation is strongly skewed away from justiciability. The design of appropriation legislation makes no provision for funnelling disputes towards the judiciary. Nor is it framed in clear, formal, terms, but rather a hotchpotch of legal and non-legal limitations (§2.1.2), which are designed to facilitate the exercise of wide delegated authority by financial executives (§4.1.2).

Negative externalities abound in the administration of appropriation legislation. The most prominent is the size and complexity of modern bureaucratic government which can conceal matters critical to determining the legality of the wider-executive’s compliance with appropriation legislation (like, the UKMoD

731 There is, of course, a settled practice of judicial review regarding legal entitlements to be paid money by a government (especially, in the form of welfare payments). That practice does, not, however touch the discrete question of whether a payment falls within the scope of an appropriation. 280 troop-limit breaches of annual appropriation legislation between 2007-2012 (§4.2.3)). Another negative externality is the necessary speed and secrecy attending the economic conditions in which government spending sometimes must occur (like, the UK’s bank-bail-out expenditure in 2008 (§4.2.2)).

Analysed through the prism of both principled and practice justiciability, it is clear that disputes concerning appropriation fall towards the less-justiciable end of the justiciability spectrum.

Debt and monetary finance

Disputes concerning the legality of debt and monetary finance are even less evidently justiciable, than appropriation legislation.

Those disputes fall at the least-justiciable end of the principled justiciability spectrum, given that financial executives have historically possessed exclusive custody over sovereign borrowing and monetary finance (§2.3.3), providing scant opportunity for the judiciary to develop any expertise in the complex economic thinking underlying sovereign debt management and central banking.

Practical non-justiciability factors point more powerfully towards non- justiciability. The legislative design of sovereign borrowing legislation is characterised by extremely broad discretions, conditioned on states of satisfaction regarding monetary policy and fiscal deficits (§5.1.1), and monetary finance occurs in the absence of any meaningful legislative regulation (§5.3.2). The negative externalities are overwhelming. Where sovereign borrowing authority is conditioned on deficit-financing (as it was in the UK between 1968 and 1983, §3.2.2), the identification of legal non-compliance with that authority would require the judiciary to have access to minute-by-minute cash- management information. Similarly, the speed with which monetary finance may be required, and the complexity of modern financial markets make meaningful 281 involvement by the judiciary in disputes about monetary finance wildly impracticable.

For that collection of reasons, disputes concerning debt and monetary finance fall at the least-justiciable end of the justiciability spectrum.

Distributional consequences

The important distributional consequence of the absence of judiciaries from those disputes is that judicial practices have a very limited capacity to impact (positively or negatively) on the legislative practices’ distribution of the preponderance of financial authority away from parliaments and towards financial executives.

Without evidence of judicial practice, that distributional consequence is relatively speculative, as it assumes that the low-justiciability of appropriation, sovereign borrowing or monetary finance disputes, forever closes the door to judicial review. That assumption is faulty because the judiciary may take a more active approach to those disputes, especially where they arise from government action in patent violation of legal principles like unreasonableness, fraud or improper purpose (which are less-integrated into the legislative design or technical operation of appropriation, sovereign borrowing or monetary finance).732 Were such an active approach taken, judiciaries’ capacity to impact the distribution of financial authority could (potentially) be increased.

Fortunately, the Australian judiciary took such an active approach to disputes concerning appropriation (and public expenditure generally) during the Reference Period, providing a useful case-study to test the abstract conclusions regarding judiciaries’ capacity to impact the distribution of financial authority.

6.2 Expenditure and the judiciary

732 The “Pergau Dam” case is an example of such a dispute (involving a decision to spend public money against all economic advice and in the absence of legal advice), although it did not concern the judicial review of appropriation legislation: R v Secretary of State for Foreign Affairs ex parte World Development Movement Ltd [1995] 1 All ER 611. 282

As §2.3.2 and §3.1.3 observed, the 19th and 20th century precedents were clear: neither the British, nor Australian judiciaries, had any meaningful role in policing appropriation legislation. Between 2005-2014, the High Court of Australia attempted (but failed) to change that position.

In hindsight, that attempt followed a discernible trajectory. It began (§6.2.1) with the Court’s recognition that annual appropriation legislation could not be effectively judicially reviewed in two cases (between 2005–2009) concerning public expenditure on political advertising (Combet v Commonwealth (2005) (“Combet”)) and fiscal stimulus (Pape v Commission of Taxation (2009) (“Pape”)). It continued (§6.2.2) as the Court built a new constitutional rule requiring additional statutory authorisation for public expenditure in a 2012 case concerning public funding for school chaplains (Williams v Commonwealth (No 1) (2012) (“Williams (No 1)”)). It concluded (§6.2.3) as the Court accepted a legislative-fix that failed meaningfully to change the distribution of financial authority over public expenditure in the 2014 sequel to Williams (No 1): Williams v Commonwealth (No 2) (2014) (“Williams (No 2)”).

6.2.1 Attempted expansion

The High Court’s attempt to expand the judiciary’s role in policing the legality of appropriation legislation began in the 2005 case of Combet concerning a challenge to the legality of expenditure for political advertising under an annual appropriation Act.

Political advertising

The Combet plaintiffs (a shadow front-bencher and the head of a union body) sought declarations that a line-item in an annual appropriation Act did not authorise the use of money on advertising the virtues of contemplated industrial legislation (introduced by a conservative government). They also sought 283 injunctions to prevent the Australian financial executive from paying money to any departments to fund that political advertising.

Recalling §3.3.3, the relevant Australian appropriation legislation was heavily influenced by NPM philosophies, and was cluttered with confusing terminology relating to outputs and outcomes.

Appropriation Act (No 1) 2005-2006 (Cth) identified “[h]igher productivity, higher pay workplaces” as an “outcome” for which funds (called “Departmental items”) could be applied as “departmental expenditure” of the Department of Workplace Relations (ss 4, 7, 15, Sch 1). The Department’s estimate (its Portfolio Budget Statement (§4.1.2)), gave limited further guidance regarding that outcome: “providing policy advice and legislation development services to government" and "supporting employers and employees in adopting fair and flexible workplace relations practices”.733 The total amount appropriated to that outcome was $140,131,000: within the total departmental appropriation of $1,447,552,000.

The plaintiffs argued that the use of funds for advertising the virtues of proposed industrial legislation did not fall within the outcome of “higher productivity, higher pay workplaces”.

The Court (by a 5:2 majority) rejected that argument.

Four-members of that majority held that the Appropriation Act imposed no subject-matter limitation on the relevant expenditure. Holding that the Act:734 imposes no narrower restriction on the scope of the expenditure … it does not matter whether any part of the $140,131,000 (or the $1,447,552,000) is spent otherwise than on activities leading to higher productivity or higher pay workplaces … , so long as it is ‘departmental expenditure’.” That interpretation was based on a “note” in the Appropriation Act:

733 Combet (2015), [27]. 734 Ibid, [128], [163]. 284

The amounts set out opposite outcomes, under the heading “Departmental Outputs”, are “notional”. They are not part of the item, and do not in any way restrict the scope of the expenditure authorised by the item.

Gleeson CJ, the other majority judge, held that the “relevant outcome is stated with such breadth” that “[p]ersuading the public of the merits of [industrial] policy and legislation” fell within its terms.735 Two dissenting judges held that spending for the advertising program did not fall within the expression “higher pay, higher productivity workplaces”.736

The majority reasons in Combet could be criticised on many grounds. At the level of technical legal analysis, the critical “note” to the Appropriation Act did not (under Australian law), form part of the Act.737 At the level of practical judicial economy, the Court failed to identify the meaning of “departmental expenditure”, the critical criterion of legality. At the level of financial administration, the Court appears to have wholly misunderstood the rationale for dividing expenditure into “departmental” and “administered” streams (explained in §4.1.1).

However, the majority’s reasoning was not entirely devoid of a rational foundation, particularly given Australia’s extensive-integration of NPM philosophies in its appropriation legislation (§3.3.3). All judges who rejected the plaintiffs’ claim recognised the impact of NPM-motivated reforms on the design of appropriation legislation, particularly the “recent development in the theory and practice of public administration is the trend towards "outcome appropriations" as a means of stating the purposes for which governments spend public money.”738

More broadly, the majority judges alluded to the difficult of imposing judicially discernible limitations on political or administrative concepts used in Appropriation Acts. Gleeson CJ was clearest, pointing to a funding “outcome” for

735 Ibid, [29]. 736 Ibid, [36], [172]. 737 Ibid, [201], [285]) 738 Ibid, [6], [55]. 285 the Australian Centre for International Agricultural Research (within the Department of Foreign Affairs and Trade):739 The relevant outcome is: "Agriculture in developing countries and Australia is more productive and sustainable as a result of better technologies, practices, policies and systems". Plainly, that outcome is likely to be affected by a host of factors beyond the control or influence of the Australian Government. Furthermore, opinions may be divided upon whether agriculture at one time is "more productive and sustainable" than at another, or upon whether certain technologies, practices, policies and systems have been made "better". This is a description, in the broadest political terms, of an objective of governmental activity. Whether a particular form of expenditure on goods or services (output) is likely to contribute to that objective might be contestable. For such a contest to give rise to a justiciable issue, as distinct from a political or scientific controversy, the issue could not be formulated appropriately by stating the outcome and asking whether the expenditure would contribute to it. The generality, and the value-laden content of the outcome would make that impossible.

The majority also drew upon the increasing flexibility and breadth of appropriation legislation in justifying its conclusion that the “outcomes” in the Appropriation Act did not impose any legal limit on “departmental expenditure”:740 at least since the mid-1980s the chief means of limiting expenditures made by departments of State that has been adopted in annual appropriation Acts has been to specify the amount that may be spent rather than further define the purposes or activities for which it may be spent. There is, therefore, nothing in the relevant constitutional framework or in past parliamentary practices which suggests some construction of the Appropriation Act (No 1) 2005-2006 different from the construction required by its text.

739 Ibid, [12]. 740 Ibid, [161]. 286

Whatever be Combet’s technical legal holding, the lesson it taught the Australian High Court was clear: annual appropriation legislation could not be subjected to ordinary judicial review.

Fiscal stimulus

Four years after Combet, the High Court returned to consider the legal character of appropriation legislation in Pape.

Pape concerned a constitutional challenge to the payment of a “tax bonus” by the Australian government. The tax bonus was designed as a form of direct-fiscal stimulus to buffer the Bust Phase’s economic shockwaves. The legal basis for the payment of the tax bonus was the Tax Bonus for Working Australians Act (No 2) 2009 (Cth), which provided for the payment of three categories of tax bonus according to a person’s taxable income in the last year of the Boom (s 6).741 The payments were to be made by the Commissioner of Taxation, in the form of tiered tax credits.

Pape raised many complex issues,742 including whether the payment of the tax bonus fell outside the federal-financial division of the Commonwealth of Australia’s legislative power (§3.1.3). One of the Australian government’s responses was that the provision of the Australian Constitution prohibiting appropriation without legislation provided constitutional authority to spend any money which had been appropriated “for the purposes of the Commonwealth”,743 and those purposes extended to “the fiscal management and monetary management of the national economy”.744 So it went, because the

741 a tax bonus of $900 was payable if taxable income was below $80,000; $600 if below $90,000; and $250 if below $100,000. 742 Appleby and McDonald (2011), ‘The Ramifications of Pape v Federal Commissioner of Taxation (2011); Twomey (2010), ‘Pushing the Boundaries of Executive Power. 743 Section 81: “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”. 744 Pape (2009), 9. 287 payments were supported by appropriation legislation designed to respond to an economic emergency, they were constitutionally valid.

That argument was rejected on a number of grounds, including that appropriation legislation governed only matters between parliament and executive (echoing the 1872 Treasury Case: §2.3.2) and (so) the constitutional provision for appropriation legislation (s 81) did not provide “power to spend” on matters affecting the national economy.745

That position was reached by express reliance on the Court’s experience of appropriation legislation in Combet.

Majority judges, Gummow, Crennan and Bell JJ, held that Combet “illustrates” that “the description given to items of appropriation provides an insufficient textual basis for the determination of issues of constitutional fact and for the treatment of s 81 as a criterion of legislative validity”.746 Chief Justice French spoke in a similar vein when he stated that “the validity of an appropriation act is not ordinarily susceptible to effective legal challenge".747

The Pape majority’s reliance on Combet had broad doctrinal ramifications.748 Post-Combet, the Court could not (and so would not) judicially review the legality of appropriation legislation. That position was extremely significant, given the Australian judiciary’s dogged commitment to a version of the separation of powers doctrine built around the proposition that “[i]t is, emphatically, the province and duty of the ... judicial department to say what the law is.”749 The Court’s statements regarding the difficulties of engaging in litigation about

745 Ibid, [133], [366]. 746 Ibid, [197]. 747 Ibid, [100]. 748 That matter has been overlooked: not unreasonably, given that the Court’s reasons were 614 paragraphs long and referenced by 725 footnotes. 749 Taggart (2008), ‘”Australian Exceptionalism” in Judicial Review’. 288 appropriation legislation indicates that it would no longer say what the law of public expenditure is.750

Learning hard lessons about appropriation legislation

Combet and the Pape indicate the difficulties faced by the judiciary in engaging in judicial review of appropriation legislation. Combet illustrates that difficulty in application, as the Court struggled to make sense of the “generality, and the value-laden content” of legal limitations in appropriation legislation. Pape illustrates the High Court’s principled acceptance of those difficulties by enunciating a general position that the judiciary should stop trying to apply ordinary judicial techniques to appropriation legislation.

The Court’s educational take-away was that it could not impose effective judicial rules on public expenditure by reference to appropriation legislation. The constitutional effect was to recognise (as a matter of practice and law) an appropriation-legislation-sized gap in the rule of (judicial) law.

6.2.2 Building new principles

The Court’s response to that rule of law gap was to construct a constitutional rule that would require parliaments to pass a new kind of expenditure- authorising statute (additional to appropriation legislation) in a case concerning the legality of public expenditure on school chaplains: Williams v Commonwealth (No 1).

School chaplain funding

Since 2007 the Australian government had provided direct funding support for school chaplains, of ~$41million annually, through the federal Department of Education Science and Training.751 The parent of a child attending a school receiving that funding contested its legality, contending that the payments were

750 The Court had avoiding giving definitive answers to this question in the past: New South Wales v Bardolph (1934); Victoria v The Commonwealth (1975); Davis v The Commonwealth (1988). 751 Williams (No 1) (2012), [10]. 289 beyond the Commonwealth governments federally-limited legislative powers, and also contrary to the idea of “parliamentary control”.

Alert to the limitations arising from Combet, the plaintiff conceded that the contested chaplain funding fell within the scope of an annual Appropriation Act. The critical question became whether the Australian Constitution required additional expenditure-authorising legislation to authorise the chaplain payments, or whether the non-statutory “Executive power of the Commonwealth” (s 61) provided authority for the chaplain funding.

A bare majority of the Court (French CJ, Gummow, Bell and Crennan JJ) held that such additional legislation was required, and its absence made the payments to school chaplains unlawful. They arrived at that position on two bases, that additional authorising legislation was required to effectuate: “parliamentary control” over the executive; and the federal division of constitutional power.

Both bases echoed the hard lessons learned in Combet and Pape. The Court’s focus on federal considerations included a consideration of the difficulties (identified in Pape) of undertaking judicial review of appropriation legislation. French CJ described the difficulty of judicially reviewing appropriation legislation as a negative “consequence to the Federation”, which could only be rectified by requiring additional legislative authorisation of expenditure.752 Gummow, Bell and Crennan JJ reasoned in essentially the same manner, when they relied on Pape for the proposition that appropriation legislation provided no “power” to spend public money.753

The Court’s reliance on the mooted principle of parliamentary control also assumed the limitations acknowledged in Combet and Pape regarding the judiciary’s capacity to review compliance with appropriation legislation. The Court accepted that (post-Pape) appropriation legislation provided no power to spend money and thus provided an insufficient basis for parliament to control

752 Williams (No 1) (2012), [37]–[39]. 753 Ibid, [157], [530], [538]. 290 public money.754 The core assumption was that parliament’s capacity to control public money must be judicially enforceable.

Rule of law gap-filling

The Court’s judicial-weaponisation of “parliamentary control” in Williams could be criticised from many angles. Perhaps the most powerful criticism is that (as a matter of historical fact) any “control” parliament had over the executive government’s expenditure was exercised through appropriation legislation rather than anything additional to that legislation (§2.1.2). Next in line, is the long-standing judicial practice (since 1872) of leaving parliaments and financial executives alone to hash-out their disputes regarding public expenditure (§2.3.2). A significant rebuttal against the Court’s reliance on federal considerations to justify its conclusions is the fact that the existence of legislation has never been a sine qua non to effective judicial review of limitations imposed by federal (or any other legal) constraints in a common law legal system, as the well-established practice of judicial review of the prerogative amply demonstrates.

Given the critical weaknesses of the technical reasoning in Williams, the case is probably best understood as a response to the rule of law gap that opened after Combet and Pape. Viewed in that way, the case stands as an attempt to fill the gap left by appropriation legislation by requiring that a new form of legislation be enacted authorising public expenditure, which (unlike appropriation legislation) the judiciary can enforce.

Aftermath

The Commonwealth’s legislative-fix to Williams (No 1) involved inserting s 32B into its financial management legislation: the FMA Act (§4.1.1):

754 Ibid, [157], [189], [191], [222]. 291

32B Supplementary powers to make commitments to spend public money etc (1) If: (a) apart from this subsection, the Commonwealth does not have power to make, vary or administer: (i) an arrangement under which public money is, or may become, payable by the Commonwealth; [and] … (b) the arrangement or grant, as the case may be: (i) is specified in the regulations; or (ii) is included in a class of arrangements or grants, as the case may be, specified in the regulations; or (iii) is for the purposes of a program specified in the regulations; the Commonwealth has power to make, vary or administer the arrangement or grant. The effect of that provision was to confer (ex facie) unlimited power on the Australian financial executive to make regulations which would (by circular drafting) confer authority “to make, vary, administer” funding. The Australian financial executive quickly exercised that power, and amended the Financial Management and Accountability Regulations 1997 (Cth) to provide specific authorisation for the school chaplain payments.755

The successful plaintiff in Williams (No 1) was not satisfied with that outcome and commenced new proceedings contending that the chaplain payments remained unlawful: Williams (No 2).

Williams (No 2) raised a large number of legal issues, but three are of present moment: first, whether the Australian federal government had constitutional power to make chaplain payments as “benefits to students and family

755 Item 407.013 of Schedule 2 of those Regulations: “National School Chaplaincy and Student Welfare Program”. 292 allowances”756; secondly, whether the legislative-fix to Williams (No 1) also flouted the principle of “parliamentary control”; thirdly, whether Williams (No 1) was manifestly flawed and should be overturned.

The Court held in favour of the plaintiff on the first issue, finding that the payments were made to “chaplains” not to “students”.757 On the second issue, it refused to extend its holdings regarding “parliamentary control” in Williams (No 1) to the federal government’s legislative-fix.758 Critically, that holding amounted to an implied approval of the legislative-fix. On the third issue, it refused to overrule Williams (No 1),759 but also held-back from endorsing the earlier- holding regarding “parliamentary control”. Indeed, the phrase was not uttered once in Williams (No 2), with the court simply holding that the issues in Williams (No 1) should not be re-explored.760

The aggregate result of Williams (No 2) was to leave the legislative-fix in place, and it has been churning away ever since,761 with the financial executive determining as (a matter of delegated authority) the legality of public expenditure, behind a façade of “parliamentary control”.

6.2.3 Failing to re-distribute financial authority

The Australian experiment with expanded judicial review of public expenditure demonstrates the significant difficulties accompanying a judicial attempt to review the expenditure-side of fiscal activity. By approving the legislative-fix to Williams (No 1), Williams (No 2) accepted that a wholesale delegation of the power to approve planned expenditure by the parliament to the financial executive sufficed to secure “parliamentary control”.

756 Under section 51(xxxiiiA) of the Australian Constitution. 757 Williams (No 2) (2014), [48]. 758 Ibid, [36]. 759 Ibid, [66] 760 Ibid, [69]. 761 The current Financial Management Regulation stands at ~200 pages, approving over 800 spending programs. 293

The end-point of the Australian adventure was to leave the distribution of financial authority over expenditure undisturbed. The Australian Parliament continued to enact annual Appropriation Acts after the Williams litigation subsided, that legislation was formulated and administered by the Australian financial executive, which also set the conditions for the wider executive’s expenditure, with the audit oversight of the Australian Auditor-General chugging-along unimpeded. The legislative fix to Williams (No 1) was simply appended to those deeply-embedded practices by technical amendments to delegated legislation by the same financial executive which originates appropriation legislation.

Viewed in the larger context of the legislative practices of public expenditure, such a result seems inevitable. Given the ~140 year gap between the 1872 Treasury Case and Combet, there was no real bank of expertise in the judiciary (and the practicing legal profession) regarding annual appropriation legislation. During that time, a system of legislative appropriation grew which was mainly retrospective, accommodated extreme flexibility (through virement) and relied on financial executives to formulate the content of spending proposals, the basis of public accounts and the supervision of the wider-bureaucracy’s use of money (§2.2.2–2.1.2). Those features developed without any judicial oversight or involvement (§2.3.2).

In that sense, the Williams cases represent the durability of the distribution of financial authority in parliamentary systems of government, and the inability of a common law judiciary (this late in the historical record) to disturb the status quo.

6.3 Taxation and the judiciary

From the perspective of both tax doctrine (§6.3.1) and public financial administration (§6.3.2), judicial review of tax disputes is not a systematic mechanism to enforce parliament’s fiscal policy objectives enacted in tax legislation (§6.3.3). In that manner, judicial review of tax decisions does not 294 significantly shift the actual (as opposed to potential) distribution of financial authority away from financial executives to parliaments.

6.3.1 Doctrinal perspective

Since the fall from prominence of the taxpayer-protecting approach (§3.3.1), it could be contended that tax litigation distributes financial authority to parliaments, by holding tax agencies to the boundaries set by legislation.

However, the replacement approaches do not (invariably) lead judiciaries to give predominance to fiscal policy objectives enacted in tax legislation. That is illustrated in two doctrinal contexts: the refusal of judiciaries to establish any general “revenue-protecting” doctrine in tax disputes; and their concentration of statutory “purpose” as the organising concept for the determination of tax liability.

No revenue-protecting doctrine

Given the judicial strides (post-Ramsay) away from the taxpayer-protecting approach (§3.3.1), the judiciary appeared headed towards a revenue-protecting doctrine in tax disputes (similar to the USA doctrine noted in §2.3.1). However, recent apex court cases evidence the limits of that trend.

The most prominent UK example is MacNiven v Westmoreland Investments Ltd (2003) (“MacNiven”), where the House of Lords walked-back Ramsay and Furniss, and reinstituted a measure of the taxpayer-protecting approach in Duke of Westminster (§3.3.1).

Like Ramsay and Furniss, MacNiven concerned a circular-transaction where cash moved between different legal entities, but stayed still as a matter of economic substance. The technical legal question was whether a circular payment of interest “made for no commercial purpose other than gaining a tax 295 advantage”,762 was deductible by virtue of the words “payments…of yearly interest” in the Income and Corporations Taxes Act 1988 (UK). The taxpayer lost at first instance, won on appeal, and won again in the House of Lords.

Before the Lords, the appellant revenue-agency urged the Lords to adopt a revenue-protecting approach to tax legislation deriving from Ramsay and Furniss: When a court is asked (i) to apply a statutory provision on which a taxpayer relies for the sake of establishing some tax advantage (ii) in circumstances where the transaction said to give rise to the tax advantage is, or forms part of, some pre-ordinained, circular, self-cancelling transaction (iii) which transaction though accepted as perfectly genuine (i e not impeached as a sham) was undertaken for no commercial purpose other than the obtaining of the tax advantage in question then [absent contrary legislative language] there is a rule of construction that the condition laid down in the statute for the obtaining of the tax advantage has not been satisfied." That submission was roundly rejected by the leading speech of Lord Hoffman, on a number of grounds.

First, it was said that the revenue-protecting approach could not be adopted because “the courts have no constitutional authority to impose such an overlay upon the tax legislation”.763 Secondly, the words “payments of yearly interest” could not be disregarded “simply on the ground that [payments occurred]…solely for tax reasons.”764 Thirdly, focusing on tax advantages would not “promote clarity of thought” because tax legislation does not have “a penumbral spirit which strikes down devices or stratagems designed to avoid its terms or exploit its loopholes”.765

762 MacNiven (2003), [13]. 763 Ibid, [29]. 764 Ibid, [59]. 765 Ibid, [52]. 296

Together, those reasons amounted to a forthright rebuttal of any revenue- protecting approach, and were joined by an admonition of UK revenue agencies’ legal positions post-Ramsay and Furniss:766 …there was a tendency on the part of the Inland Revenue to treat [Ramsay and Furniss’s]…words as if they were a broad spectrum antibiotic which killed off all tax avoidance schemes, whatever the tax and whatever the relevant statutory provisions…

The extent to which MacNiven resiled from the doctrinal shift in Ramsay and Furniss was emphasised in later applications of the case in Barclays Mercantile Business Finance Ltd v Mawson (2005) (“Barclays”). Barclays (again) concerned a series of payments which “circulate[d] within the Barclays group”, which sought to exploit the purchase price of a sale-and-lease-back agreement as a capital allowance.767 Although the taxpayer lost in Barclays, the Supreme Court stridently endorsed MacNiven’s, holding that there was a “need to avoid sweeping generalisations about disregarding transactions undertaken for the purpose of tax avoidance”.768 Speaking extra-curially, Lord Hoffman described MacNiven and Barclays as having “killed off the Ramsay doctrine as a special theory of revenue law and subsumed it within the general theory of the interpretation of statutes.”769

The “general theory” to which Lord Hoffman referred was “the modern approach to statutory construction…to have regard to the purpose of a particular provision and interpret its language, so far as possible, in a way which best gives effect to that purpose”.770 Although the purpose of tax legislation may be generally understood to raise revenue for central government, the judicial adoption of a “purposive” approach to the interpretation of tax legislation does not invariably lead to that simple end.

766 Ibid, [49]. 767 Barclays (2005), [18]. 768 Ibid, [37]. 769 Hoffmann (2005), ‘Tax Avoidance’, 203. 770 Barclays (2005), [28]. 297

That result follows from the difficulty of identifying a coherent (or unified) “purpose” of a given taxation provision:771 To say that its general purpose is to raise revenue is of no rational assistance in solving a problem of interpretation of one of its provision… the purpose is not to raise as much revenue as possible, regardless of the consequences. The purpose is to raise revenue according to an intricate pattern of fiscal policy, which is almost constantly changing, and some of whose elements may be inconsistent. The core difficulty is that tax law is not only used to generate revenue for government, but also to provide positive incentives for economic behaviour, by conferring concessional tax treatment on certain types of transactions. In that way, many contested provisions of tax legislation will have mixed-purposes of generating revenue and boosting certain economic behaviour. Given those multiple purposes, judges can be “compelled by necessity to construct potentially fictional legislative intentions in order to interpret laws that are ambiguous, obscure,…[and] uncertain”.772 In that sense, statutory “purpose” provides an uncertain guide to judicial interpretation of tax legislation.

Correlation not causation

Although non-exhaustive, the brief review of doctrinal approaches to tax law discloses two important observations. The first is that (despite resiling from the extreme late-19th century position) judiciaries continue to adopt doctrinal techniques to tax disputes which are protective of taxpayers who establish economically-contorted commercial structures in order to evade tax. The second is that the conception of statutory “purpose” used by judiciaries does not invariably reflect parliamentary fiscal policy enacted in tax legislation.

In those circumstances, a claim that the judiciary enforces parliamentary fiscal purpose enacted in tax legislation is significantly weakened. At best, judicial resolution of tax disputes enforces (or protects) tax legislation to the extent of

771 Gleeson (2009), ‘The Meaning of Legislation, 32. 772 South (2014), ‘Are Legislative Intentions Real?’, 854. That idea is derived from a broader (and older) claim that statutory “purpose” is a flawed idea because of the diversity of political views and compromises which result in a statutory text: Radin (1930), ‘Statutory Interpretation’, 870. 298 correlation between the doctrinal techniques of tax law and the fiscal policy choices enacted into legislation, rather than dogged obedience by the judiciary to parliamentary fiscal policy.

6.3.2 Financial perspective

From the point of view of financial management, judicial review of tax decisions appears as an even less powerful mechanism for enforcing parliamentary fiscal policy enshrined in legislation. That point can be illustrated in two ways: the low-impact of judicial review on public receipts; and the negligible position of judicial review in the measure adopted by tax agencies to close “tax gaps”.

Cash shortfalls and tax receipts

Judicial review of taxation decisions could have significant impacts on public sector receipts, but the experience of Australia and the UK during the Reference Period indicates that actual likelihood of losing material revenue streams as a result of judicial review of tax decisions is low.

The highest-quality (publicly-available) material indicating the impact of judicial review of tax on public revenue are the predictive measures used by revenue agencies to quantify their exposure to legal risk and hedge against it by provisioning for legal claims.

During the Reference Period, Her Majesty’s Revenue and Customs (“HMRC”) annually provisioned for between ~£19million and ~£80million for outstanding legal claims where the amount in dispute was quantifiable, and there appeared to be reasonable certainty of outcome.773 While those figures may seem substantial, they are economically insignificant when compared to the total annual receipts of HMRC during the same period (between ~£418billion and ~£575billion) and the UK central government’s fiscal deficit (~£27billion and ~£201billion).

773 Data collected from HMRC, Annual Reports and Accounts (2005-2016). 299

HMRC also reported a larger provision for legal claims of a more speculative nature as contingent liabilities. Those figures were much higher. From 2008 (when quantified contingent liabilities began being reported) to 2015, HMRC provisioned for between ~£7.1billion (2015) and ~£81.2billion (in 2010). Annually averaged between 2008-2015, HMRC’s contingent liabilities provision stood at 5% of total tax receipts and 20% of the fiscal deficit.

The Australian Taxation Office (“ATO”) only records contingent liabilities, but its provisioning for legal claims against tax debts largely matches the proportional share of contingent provisioning by HMRC.774 Between 2005-2016, the ATO provisioned for contingent liabilities of between ~$8billion and ~$3billion relating to tax disputes. The average annual amount was ~$5.9billion, which stood at ~2% of total average annual tax receipts and ~10% of the annual fiscal deficit between 2009-2015 (when Australia swapped its surplus for a deficit).

The wash-out of those figures is that revenue agencies take the position that the quantifiable (likely) loss of tax revenue from litigation is economically insignificant and the only material impact on tax receipts is by highly speculative claims. Several interpretations of that conclusion are available, including that Australian and UK tax authorities are: highly compliant with (the judiciary’s likely interpretation of) tax legislation; confident that taxpayers are unlikely to take strong positions if unauthorised tax collection occurs; or very imprudent in their liability provisioning.

On any measure, potential tax litigation does not appear as a material threat to public financial security.

774 Data collected from Australian Taxation Office, Annual Reports and Accounts (2005-2017). 300

Tax agency mitigation measures

From the perspective of maximising the tax yield, judicial review hardly registers as an enforcement mechanism, in comparison to the internal measures adopted by tax agencies to boost taxpayer compliance.

Revenue agencies adopt a range of measures to close the “tax gap”: the variation between tax yields in a world of total compliance with tax legislation and the actual tax yield. HMRC describes its understanding of the tax gap to rest on parliamentary fiscal policy: “The ‘theoretical tax liability’ represents the tax that would be paid if all individuals and companies complied with both the letter of the law and our interpretation of Parliament’s intention in setting law.”775 The causes of the tax gap are numerous, including: “criminal attacks”; “evasion”, “hidden economy”; “avoidance”; “legal interpretation”; “non-payment”; “failure to take reasonable care”; and “error”.776

The reported UK tax gap stands at ~6% of total tax receipts, or ~£34billion. That is a conservative estimate which omits “ghosts”, “moonlighters”, the “hidden economy” and avoidance measures for income tax, NICs and capital gains tax.777 That total figure does not spread evenly across all tax categories: for self- assessed “business taxpayers” of income tax, the tax gap is 26% (£4.8billion); for “hand-rolling tobacco duties” it is 32% (£600million); for corporations tax it is 6.4% (£3.3billion), of which 8% (£1.9billion) is attributable to small/medium- sized businesses and 5% (£1.4billion) is attributable to large businesses.

The reported Australian tax gap is lower (~3% of total tax receipts)778. Also omitting estimated avoidance activity, that figure is spread across a number of tax categories. The gap is: 7.3% ($4.5billion) for GST; 5.8% ($2.5billion) for large

775 HMRC, Measuring Tax Gaps (2017), 12. 776 Ibid, 16. 777 HMRC classifies ghosts as “individuals whose entire income is unknown to HMRC” and moonlighters as “known to us in relation to part of their income, but have other sources of income that HMRC does not know about”: Ibid, 11. 778 Calculated from the (non-aggregated) estimates released by the ATO: Australian Taxation Office, Addressing the Gap (2017). 301 corporation income tax; 1.9% ($3.1billion) for individual income tax; 5.6% ($594million) for tobacco excise.

Both HMRC and the ATO take a number of measures to close the tax gap, many of which are premised on improving the relationship between tax agencies and taxpayers. A parliamentary review into HMRC’s measures identified relationship-building with taxpayers and public education as the most important measures. A number of measures may also focus on “behavioural”779 and technological measures: such as focusing on “enhancing digital services”, improving “data-matching capability” and educational programs including advance alerts to taxpayers which may be facing compliance issues.780

While prosecution of criminal violations of tax legislation are nominated as strategies to close the tax-gap, ordinary civil litigation (ie, judicial review of tax decisions) does not feature as an enforcement mechanism. Given the judiciary’s failure to adopt a revenue-protection approach to taxation disputes, that should come as no surprise.

6.3.3 Episodic vs systemic enforcement

Judiciaries could be viewed as tax enforcement mechanisms from two perspectives. They could be understood as restraining revenue agencies from exceeding their statutory mandates. In the post-Ramsay world, however, judiciaries are committed to enforcing a judicially-constructed “purpose” of tax legislation, which may (but will not necessarily) involve giving effect to the fiscal policy of tax legislation. Judiciaries could also be viewed as enforcement mechanisms by supporting revenue agencies in carrying out the fiscal policy objectives of tax legislation. However, revenue agencies do not view judiciaries in this way, and rely on a swathe of other measures in closing tax-gaps and thereby increasing compliance with parliamentary fiscal policy.

779 Cf Oliver (2014), Behavioral Public Policy. 780 Australian Taxation Office, Addressing the Gap (2017). 302

On either view, judicial review of tax disputes (and the judicial practices it generates) do little to distribute financial authority over taxation to parliament and away from financial executives, as revenue agencies remain the institution with principal authority to enforce tax law.

From the perspective of the distribution of financial authority, the core observation is that judiciaries are not a systematic mechanism for enforcing the financial executive’s compliance with the limits of parliamentary fiscal policy enacted in tax legislation, despite their well-embedded role in resolving disputes regarding taxation.

Conclusion

Judicial resolution of disputes concerning the legislative practices of public money do not significantly alter the distribution of financial power between parliaments and executives in Australia and the UK. That is so as a matter of actual and potential judicial practice in both jurisdictions.

Judiciaries only have a meaningful role in relation to tax disputes, and, even in that limited context, they do not occupy the role of a systematic enforcement mechanism. The judiciary is essentially uninvolved in disputes regarding appropriation, sovereign borrowing and monetary finance legislation, leaving those financial activities outside the judiciary’s purview. Where attempts have been made to break new ground, they have failed to effect any meaningful change in the distribution of financial authority.

In total, the distribution of the predominance of fiscal, debt and monetary finance authority to financial executives (and away from parliaments) by the legislative practices of public money is materially unaffected by the presence of judicial review.

303

The impact of that conclusion on the explanatory force and normative future of the idea of parliamentary control is examined in the dissertation’s final part: “Understanding Parliamentary Control”.

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PART IV UNDERSTANDING PARLIAMENTARY CONTROL

The chapters in this part §IV use the descriptive conclusions of §II–III concerning the distribution of financial authority by the legal practices of public money as the basis for an explanatory interpretation of the idea of parliamentary control.

The main claims are made in the explanatory chapter (§7). First, that the idea of parliamentary control is a very weak explanation for the distribution of financial authority effected by the legal practices of public money. Secondly, that the best explanation for that distribution is “parliamentary ratification”: parliaments ratify decisions of financial executives regarding public money, by “approving” financial planning and activity, “ventilating” financial executives’ use of economic resources and providing a legal “structure” for financial executives’ activities.

The dissertation’s concluding chapter (§8) holds back from making definitive claims regarding the normative future of the idea of parliamentary control. Instead, it sketches possible pathways for analysing the normative future of parliamentary control which focus on accommodating the importance of maintaining the financial viability of central government with the primary representative function of parliaments.

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CHAPTER 7 EXPLANATORY FAILURE OF PARLIAMENTARY CONTROL

This chapter argues that the idea of parliamentary control fails to provide a compelling explanation for the distribution of financial authority effected by the design and operation of the legal practices concerning public money.

It commences (§7.1) by proposing an analytical framework within which to interpret the degree to which parliaments have “control” of public money and explains the relationship of that framework to the descriptive conclusions reached in §4-§6 regarding the distribution of financial authority in modern parliamentary constitutional systems. That framework is then used to argue (§7.2) that there is a significant “parliamentary control deficit” in the distribution of financial authority in those systems, which varies according to the design of the legal practices of public money and the economic conditions in which they operate.

The chapter concludes (§7.3) by evaluating alternative conceptions of the distribution of financial authority, concluding with the argument that “parliamentary ratification” provides a better explanation of the financial authority distributed to parliaments in parliamentary constitutional systems.

7.1 Framework of parliamentary control

As §1.3.3 foreshadowed, constructing a framework of parliamentary control serves the analytical purpose of bringing (greater) intellectual transparency to the analysis of parliamentary control’s capacity to explain the distribution of financial authority.

The construction process takes place in three steps.

First, the importance of building the framework by reference to a set of concepts which stand apart from both (i) the legal practices and (ii) the distribution of 306 financial authority is explained (§7.1.1). Secondly, the ideal value of “financial self-rule” is explained, and then calibrated to the realities of life in a parliamentary constitutional system (§7.1.2). Thirdly, the necessary conditions of the framework of parliamentary control are identified, including both “legal” and “effective” conditions of control (§7.1.3).

7.1.1 Legal practices, distribution and control

A framework of parliamentary control which is analytically separate to (i) the legal practices of public money and (ii) and the distribution of financial authority provides a conceptual yardstick for working out how lopsided the distribution of financial authority must be for parliaments to lose or gain control of public money.

Parliamentary control > legal practices

Parliamentary control must mean more than the sum of the legal practices existing at any one time.

That simply accords with the way constitutional participants (politicians and judges) use the idea of parliamentary control as a yardstick to assess the desirability of a development of the legal practices: amendment to “law X threatens or protects parliamentary control”. So much was evident in the Commons’ debate on Bills broadening HMTreasury’s borrowing powers (§3.3.2). It was also evident in the use made of the idea of parliamentary control by the High Court in Williams (No 1) to assess the constitutionality of legislation concerning government spending (§5.2.2).

Additionally, it cannot rationally be said that parliamentary control exists where any parliamentary legislation is enacted concerning public money: a parliament’s enactment of a single-section statute providing that “the treasury may raise and 307 spend money as it considered necessary” could not sensibly be considered “control”.

Parliamentary control > distribution of financial authority

Similarly, parliamentary control must mean more than the distribution of financial authority. While it is clear that a large proportion of financial authority is distributed away from parliament by the design and operation of the legal practices, that descriptive conclusion does not yet answer the question of “control”, because the idea of control could still accommodate a very-lopsided distribution of financial authority.

Perhaps, parliaments could remain in control despite losing all authority over debt and monetary finance to financial executives, but maintaining all authority over fiscal activities. Or, perhaps, parliamentary control only requires parliaments to retain authority over the accounting basis of public financial activity, and could accommodate the distribution of all substantive financial activities to financial executives.

Analysing those postulates is best done by reference to a concept of “parliamentary control” which is analytically separate to the distribution of financial authority.

Constitutional values and context

A useful way of steering between the difficulties of reducing an explanatory concept of parliamentary control to (i) the existence of legal practices or (ii) the distribution of financial authority is to build an explanatory framework of parliamentary control which is both “normative” (incorporating the reasons why parliamentary control is valuable) and “practical” (calibrated to the institutional realities of modern parliamentary government). Such a framework recognises that constitutional ideas (even used in a descriptive or explanatory mode) are 308 not simple descriptions of human practices – they are normative, in the dual sense of being value-rich and guides to action.781

For present purposes, that requires identifying the values which parliamentary control could serve, explaining how an idealised model of control would secure those values and then calibrating that idealised model to the institutional context of modern parliamentary constitutional systems. The resulting framework can then be as used as way to evaluate whether the idea of parliamentary control succeeds in explaining the distribution of financial authority effected by the design and operation of the legal practices of public money.

7.1.2 Financial self-rule in parliamentary government

Parliamentary control of public money is valuable because it safeguards a form of “financial self-rule”, by ensuring that the primary representative institution in a parliamentary constitutional system has the authority to control the economic activities of the body politic. The ultimate political value safeguarded is democracy.

Democracy, parliaments and financial self-rule

Approached in the abstract, “democracy” is a deeply-contested idea. A smorgasbord of models have been proposed, ranging from “a general equality of status, or a rough equality of economic condition”782 to “deliberative democracy”, which itself contains an intricate sub-stratum of models including “liberal deliberativism”, “civic republicanism” and “radical democracy”.783 No attempt is made here to articulate a new theory of democracy or synthesise those various models. Instead, the extremely modest claim is made that each model is built around an idea of “self-rule”, whether expressed as “rule by the people”784 or “self-governing”.785

781 Loughlin (1992), 56. 782 Waldron (2012) ‘Democracy’, 187. 783 Talisse, ‘Deliberation’ (2012), 214. 784 Waldron (2012), 188 785 Talisse (2012), 212. 309

Removed from the thin-air of political philosophy, self-rule is intimately tied-up with representative parliaments. Although they are imperfect, “[e]lected legislatures are most directly subject to influence by the public” and for “that reason, they have a natural primacy”,786 as democratic institutions. Objections to parliaments’ democratic primacy have focused on the practical constraints of modern electoral systems (providing only sporadic “verdict[s] of the people”)787 and the tendency of majoritarian electoral systems to lead to oppression of electoral minorities.788 While those objections are certainly meaningful, they do not entail giving “up on the idea that the ordinary lawmaking operations of government instantiate rule by the people.”789

Importantly, scepticism of parliaments’ democratic bona fides has not disconnected the bond between parliaments and democratic self-rule in much juristic constitutional thinking.790 As Allan writes about the UK’s constitution:791 The ideological basis of the United Kingdom constitution consists in the notion of the political sovereignty of the people. Political power rests, in the last resort, with the electorate: Parliament exercises its legal sovereignty in recognition of its supreme political authority. In a world of limited economic resources, parliamentary self-rule necessarily entails that parliaments have institutional primacy over the economic resources consumed by the functions of governing. Therein lies the “financial” aspect of self-rule.

Financial self-rule is valuable from a number of different perspectives. For those interested in protection of private property, it is critical that representative bodies have the sole capacity to permit expropriation of private property in the form of taxation. Financial self-rule is also valuable from the perspective of those primarily interested in re-distribution of wealth and investment in public

786 Richardson (2002) Democratic Autonomy, 179. 787 Cf Manin (1997), The Principles of Representative Government, chapter 5. 788 Eg Dworkin (1998), 356. 789 Richardson (2002). 790 Although highly skeptical accounts exist: Harden (1993), 33. 791 Allan (1985), 129. 310 services. In that sense, the value of financial self-rule is not tethered to a particular economic model, but rather safeguards the institutional mechanism through which political decisions can determine whether public financial (and macroeconomic) activity should be governed by any particular economic doctrine.

Applied to public financial activities, one ideal form of financial self-rule could hold that parliaments have total control over the use of economic resources by public officials, in order to carry out political projects involving the allocation (or re-distribution) of economic resources. At a practical level, that would require parliaments to formulate and execute financial proposals. The “financial proposal” side of that ideal form of control would require parliaments to formulate (through debate and deliberation) the financial metrics of an annual budget: determining the required levels of taxation, expenditure, debt and monetary finance, integrated into wider macroeconomic policy. The “execution” side would require parliaments to have practical control over the disbursement of public funds, the collection of taxes, the negotiation of public debt and the conditions under which any instance of monetary finance occurred.

Sensible though those ideals may be in theory, a framework of parliamentary control designed to evaluate the real distribution of financial authority must calibrate the ideal forms to the contextual facts of life in parliamentary constitutional systems. Two contextual facts are critical to that calibration exercise: parliaments are not “governments” and parliaments are not “enforcement” institutions.

Financial self-rule in context

In modern parliamentary constitutional systems, parliaments are not “governments”. As a matter of legal and practical authority, parliaments are not the public institutions directly responsible for governing the conduct of the people living in the society over which they have legislative jurisdiction.

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In the (increasingly) distant past, parliaments had a set of functions which gave them a reasonable share of practical governing power, including passing private legislation on local matters.792 While some vestiges of those functions remain,793 modern parliaments’ primary function is debating and voting on legislation of general application and their subsidiary functions are supervising government departments and other public sector agencies and convening hearings into matters of general public importance.794

It is departments and agencies of the public sector which perform practical governing functions, by administering legislation enacted by parliament, making delegated legislation, independently formulating administrative programs in the absence of legislative direction and managing the conduct of the large mass of public sector employees. The last function (managing public sector employees) is particularly significant, as it demonstrates the (absolute and relative) differences in institutional size and complexity between parliaments and the wider public sector.

In 2017, 5.2million people were employed in the UK public sector (or ~17% of total UK employees).795 In Australia over the same period, ~2million people (or ~16% of total Australian employees) were employed in the public sector.796 The UK Parliament seats ~1,400 members (~750 in the Lords and ~650 in the Commons), and employs ~2000 people. The Australian Parliament seats 226 members (150 in the House of Representatives and 76 in the Senate), and employs around ~1200 people. That enormous differential in the personnel of parliaments and the wider public sector illustrates the limited-reality of parliaments’ non-governing role.

792 See Sayles (1988), The Functions of the Medieval Parliaments of England. 793 Like their penal jurisdiction: Blackburn and Kennon (2003), Griffith & Ryle on Parliament: Functions, Practice and Procedures, 133-5. 794 Horne and Le Sueur (2016), Parliament: Legislation and Accountability. 795 ONS, Public and Private Sector Employment; Headcount (2018). 796 ABS, DO001_2016-17 Employment and Earnings, Public Sector, Australia, 2016-17 (2017); ABS, Labour Force, Australia (2018). 312

The second critical contextual fact is that parliaments are not enforcement institutions. Despite vestigial judicial functions (mainly manifest in parliamentary contempt powers, and quasi-judicial parliamentary committee hearings), parliaments do not possess formal or practical responsibility for enforcing legislation (undertaken by parts of the executive) or resolving legal disputes (the responsibility of the judiciary).797

The third critical contextual fact is that economic conditions do not remain invariably stable. Whether caused by financing needs of military conflict (like the World Wars), the adoption of an economically transformative social program (like, the welfare state) (§3.2.1) or systemically contagious financial risk taking (like the widespread financial risk-taking which caused the economic contraction during the Reference Period) (§4.2.2), economic conditions can change very suddenly and very severely.

The ideal forms of parliamentary control must be calibrated to those three contextual facts of life in parliamentary constitutional systems. Because parliament does not govern society or enforce law, it cannot hold total control of the formulation of financial proposals or absolute control over their execution. Because economic conditions cannot invariably remain stable, there must also be some allowance for the financing needs of government in divergent economic conditions.

7.1.3 Legal and effective parliamentary control

A framework of parliamentary control, which calibrates the underlying value of financial self-rule to the contextual facts of life in a parliamentary constitutional system, consists of “conditions” of “legal” and “effective” control.

797 At the level of strict legal form, judicial functions passed to the judiciary in Australia upon the enactment of the Australian Constitution (and its vesting of “judicial power” in the “federal judicature” (s 71)). In the UK, a judicial appendage of the House of Lords continued to exercise judicial functions until 2009 upon the entry into force of the relevant provisions of the Constitutional Reform Act 2005 (UK). 313

The conditions of “legal control” refer to the necessary design and operation of formal legal practices which must be present to confer “parliamentary control”. The conditions of “effective control” refer to the political, economic and institutional conditions which are necessary to make formal legal control “effective”.

Legal control

Four conditions are proposed for the existence of legal parliamentary control.

First, parliament must hold the “primary” legal position over public finance: “primary-position condition”. That condition has several aspects (“planning”, “legislative”, “temporal”), each of which is recognises parliaments’ primacy as financially self-governing institutions, while also recognising the reality that modern parliaments are not governing bodies.

The “planning” aspect requires that parliaments have the primary responsibility for formulating financial proposals. That role need not be exclusive, but it must extend far beyond simply rubber-stamping financial proposals formulated elsewhere. Without that responsibility, parliaments would not have any real impact on the economic outworking of public finance, and would lose any meaningful capacity to execute financial self-rule.

The “legislative” aspect requires that parliaments set the preponderance of the terms under which fiscal, debt and monetary activities are authorised through primary (rather than delegated) legislation. Requiring that parliaments exercise their legal authority through legislation recognises that modern parliaments exercise their institutional functions through enacting legislation. Requiring that the preponderance (but not totality) of financial activity be authorised by primary legislation recognises that parliaments may delegate authority to financial executives over a subordinate share of the legal conditions under which financial activity is legally authorised.

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The “temporal” aspect requires that financial authority (provided by parliamentary legislation) must cease according to a pre-set timeframe so that a sustained-stoppage of parliamentary financial processes (whether by non- convening parliament, or internal-obstruction) halts the executive’s lawful authority to use public money. Without that temporal aspect, once formally authorised by legislation, financial activity could continue in perpetuity and thereby sever the link between a given temporal parcel of representative authority and financial activity.

The second condition of legal control is that financial legislation must be designed in a manner which (ex ante) gives financial executives a reasonable basis to determine how to comply with the terms of legal authority and gives parliaments the capacity to assess (ex post) whether the financial executive has actually complied: the “formal law condition”. Legislation setting the limits of financial authority will be relevantly “formal” if designed in sufficiently clear and general terms that its addressees can meaningfully predict the way it operates, which (in turn) permits them to calculate the manner in which they should behave, in order to behave legally.798 That understanding of formal, “calculable”, law was famously propounded by Fuller and his 8 “standards” of “legal excellence”799 generality, publicity, prospectivity, intelligibility, consistency, practicability, stability and congruence with government behaviour. Each of which is formulated to optimise the extent to which individuals subject to law can predict the operation of, and comply with, law:800 the “guideposts by which men coordinate their actions”.801

The formal law condition is necessary to ensure that parliamentary legislation provides a meaningful basis to check the executive in carrying out public financial activities. It recognises the reality that (a) parliaments will delegate

798 The descriptive and normative aspects of legal “formality” are helpfully collected in Tamanaha (2004), On the Rule of Law, chapter 7. For a critique of the empirical accuracy of the guidance capacity of formal law, see Braithwaite, ‘Rules and Principles’ (2002). 799 Fuller, Morality of Law (1969), 46-81 or “desiderata”, Rundle, Forms Liberate (2012), 69. 800 formal law qua calculable, individuated and generally applicable norms is critical to the understanding of “good law” from a number of theoretical perspectives: Lovett (2016), A Republic of Law, 210-211 tracing it to Dicey, Hayek, Fuller, Rawls, Raz, Finnis. 801 Rundle, Forms Liberate (2012), 136. 315 some measure of financial authority to financial executives through legislation and (b) financial executives’ capacity to follow law is boosted by legislation which is which more (rather than less) formal.802

The third condition of formal control is that there must be some legislative accommodation of the position of public finances in economic emergencies: the “emergency condition”. The emergency condition simply recognises the reality that economic conditions are not invariably stable, and that parliament should (ex ante) have expressed a view on the manner in which financial authority should be exercised in the event of an economic emergency.

The fourth condition of formal legal control is that there must be some effective legal mechanism for enforcing parliament’s primary authority and to keep the financial executive within the lawful boundaries of its delegated authority: the “enforcement condition”. Some (but not necessarily a single) mechanism must exist to enforce the totality of the financial authority conferred by parliamentary legislation: enforcing parliamentary legislation over fiscal, sovereign borrowing and monetary activities. Such an enforcement mechanism must also be legally independent of the financial executive and vested with legal authority sufficient to independently determine whether the financial executive has exceeded the limits of parliamentary primary authority or self-established limits of its delegated authority.

Effective control

For parliamentary control to be effective the conditions of legal control must be supported by certain institutional and economic conditions: the “effectiveness conditions”.

The first effectiveness condition is that parliaments must have sufficient economic, temporal and intellectual resources to scrutinise financial executives’ financial proposals and use of economic resources: “parliamentary resourcing

802 Scheuerman, ‘The Rule of Law and the Welfare State’ (1994). 316 condition”. That effectiveness condition supports the primary-position condition of legal control by ensuring that parliaments have the necessary resources to effectively instantiate the planning, legislative and temporal aspects of public finance.

The second effectiveness condition is that financial executives must be situated in a bureaucratic context which permits compliance with legislative conditions on the use of public money and permits financial executives effectively to oversee the wider bureaucracy’s use of resources: “bureaucratic context condition”. That condition supports the formal law and enforcement conditions by ensuring that limits on financial authority set by parliamentary legislation can (and will) be followed by the financial executive.

The third effectiveness condition is that public financial activities must occur in an economic context which permits parliamentary and enforcement processes sufficient time for deliberation on, and scrutiny of, financial proposals without economic catastrophe: “economic context condition”. That condition supports each of the primary-position, formal law and enforcement conditions, by ensuring that parliaments have a realistic capacity to formulate financial proposals, enact those proposals into legislation and that economic conditions will not render wholly nugatory attempts to execute and enforce that legislation.

7.2 Deficit of parliamentary control

Applying the framework of parliamentary control to the descriptive conclusions of §III reveals a significant deficit of legal (§7.2.1) and effective (§7.2.2) control, the size of which can vary (both) across different constitutional systems and within the same constitutional system according to differences in the design of the legal practices and their operation in different economic condition (§7.2.3).

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7.2.1 Legal control deficit

There are fatal difficulties with understanding parliamentary control as secured by the distribution of financial authority effected by the legal practices of public money in Australia and the UK.

Control by legislation

The design and operation of the legislative practices of public money in both Australia and the UK do not meet the conditions of legal control.

The primary-position condition is wholly un-met. The planning aspect is entirely defeated by the location of the financial initiative in the Australian and UK financial executives, which deprives parliaments of any meaningful role in formulating financial proposals and originating financial legislation.

The legislative aspect is defeated by the delegation of significant levels of financial authority to financial executives. The highest degree of delegation appears in relation to: un-bonded standing appropriations; the accounting basis of government finances (§4.3.1); authority to undertake sovereign borrowing (§5.3.1); and authority to engage in exotic monetary finance (§5.3.2). Lower (but still significant) delegations of financial authority occur in relation to the virement capacity of financial executives (§2.1.2) and standing taxation (§4.1.3). Although the Australian and UK parliaments retain a degree of financial authority through some of the legislative practices (particularly tightly-bonded standing appropriations (§4.1.2) and annual taxation (§4.1.3)), they are insufficient to retain the predominate share of primary legislative authority.

The temporal aspect of the primary-position condition is defeated by the combined extent of standing legislative authority over taxation, appropriations and debt-financing. In each context, legislation authorises financial executives to undertake very large amounts of total public financing activity without any guaranteed future involvement by parliament (§4.3.1). 318

The formal law condition is generally un-met because the preponderance of the legislative practices of public money are not designed in a way that provides strongly-calculable limitations on financial authority. That shortcoming is particularly evident in the broad grants of fiscal authority in annual appropriation legislation (leaving extremely wide room to vire §6.2.1), the plenary grants of debt-financing power in sovereign borrowing legislation (leaving treasuries largely at liberty to borrow (§5.1.1)) and the paucity of legislation regulating monetary finance (failing to guide treasuries and central banks in providing exotic monetary finance (§5.3.2)). Some legislative practices are, of course, more formal than others, particularly tightly-bonded standing appropriation (§2.1.3) and tax legislation, both of which provide strongly- calculable legal norms concerning fiscal activity. However, when viewed in the context of the totality of legislation concerning public financial activities, those more-formal legislative practices fail to compensate for the preponderance of very-informal public finance legislation.

The legislative practices of public money also fail to meet the emergency condition of legal control, as both Australia and the UK entirely lack legislation providing for public financing in states of economic emergency. To be sure, some Australian and UK legislation may be responsive to emergency conditions. Obvious examples being the legislation establishing the Contingencies Fund and the Australian legislation providing a standing appropriation for expenditure on “investments” (§4.2.2). Similarly, the annual appropriation legislation which retrospectively authorised HMTreasury’s ~£23billion emergency overspend was (in a loose sense) related to emergency financing (§4.2.2).

Importantly, however, those legislative practices fail to provide any coordinating role for the various public financial activities which are implicated by emergency conditions. Most significantly, they fail entirely to address the two most important sources of revenue drawn upon by the UK during the emergency conditions of the Bust Phase: debt and monetary finance (§5.3.3).

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The enforcement condition is also not met, despite the presence of legislation conferring jurisdiction on the judiciary over tax disputes and the giving of audit responsibilities to auditors-general. Audit legislation first confers wide authority on financial executives to determine the basis upon which public accounts will be kept, and then staples auditors-general’s audit functions to those public accounts (§4.1.1). Although auditors-general can complain to parliament about financial executives’ accounting standards, the vicissitudes of administering a complex bureaucracy can materially limit the capacity of (both) auditors-general and financial executives to identify irregularities in financial processes (§4.2.3). Nor does the design of the legislative practices permit the judiciary to act as a systematic enforcement mechanism of the legislative authority for carrying out financial activities (§6.1.3).

Control by judges

The judicial practices of public money also fail to meet the conditions of formal control.

As §6 argued, the judicial practices do not meaningfully disturb the distribution of financial authority effected by the legislative practices of public money. By parity of reasoning, if the legislative practices fail to meet the conditions of legal control, than so too must the judicial practices.

However, even placing that conclusion aside, the judicial practices fail to satisfy the one condition of formal control to which they most obviously apply: the enforcement condition. First, the judiciary only enforces a very select part of the parliamentary legislation concerning public finance (§6.3.1). Only the revenue- side of fiscal activity is directly subject to judicial involvement, leaving the legality of financial executives’ public expenditure, sovereign borrowing and monetary finance activities outside the judiciary’s enforcement jurisdiction. Secondly, where judiciaries resolve disputes concerning tax legislation, they do so in a way which fails to provide a systematic, enforcement mechanism, which is not necessarily designed to pursue a revenue-protecting objective (§6.3.1). 320

Deficit of legal control

Applying the conditions of legal control to the Australian and UK experiences during the Reference Period, it is clear that the distribution of financial authority fail to meet any of the primary-purpose, formal law, emergency and enforcement conditions, leaving a large deficit of legal control.

The Australian and UK deficit regarding the primary-position condition was equally large. The planning aspect of that condition was equally undermined by the financial executive’s possession of the financial initiative, which deprived each parliament of any meaningful role in formulating financial proposals or originating financial legislation.

The Australian distribution of financial authority falls further away from meeting the temporal aspect of the primary-position condition than the UK, particularly in regard to fiscal authority. Australia’s heavy reliance on standing appropriations and standing taxation means that parliamentary financial processes could halt, but many state activities could continue (§4.3.1). In comparison, the UK’s maintenance of a (minority) proportion of annual taxation (§4.1.3) and a far smaller reliance on standing appropriation (§4.1.2) gives the UK’s financial executive a far lower capacity to execute fiscal activities without annual parliamentary approval. On that measure, Australia has a wider legal control deficit than the UK.

When, however, debt and monetary finance are added to the picture, the variation in the legal control deficit narrows, as both Australian and the UK sovereign borrowing legislation confer plenary power to assume debt-finance (§5.3.1) and both systems share a similar distribution of monetary finance authority towards the financial executive, given the absence of a meaningful legal framework governing monetary finance in both jurisdictions (§5.3.2). The variation between the two jurisdictions is also narrowed because neither the Australian nor UK judiciary plays a meaningful role in enforcing parliamentary legislation concerning public money (§6.3). 321

7.2.2 Effective control deficit

In addition to the deficit of legal control, the institutional and economic context within which the legal practices of public finance are located fail to meet the effectiveness conditions of parliamentary control: leaving a wide deficit of effective control in both jurisdictions.

Parliamentary resource condition

Parliaments have insufficient resources to scrutinise financial executives’ financial proposals and use of economic resources. That shortfall is most starkly revealed in the limitations on parliaments’ time and expertise.

By (long-ago) ceding the financial initiative to the executive (§2.2.2), the UK’s parliament deprived itself of the expertise-bank necessary effectively to scrutinise the financial executive’s financial proposals. Constitutional systems (including Australia) to which the executive’s financial initiative was exported (§3.1.2 and §3.2.3), developed parliaments with the same expertise-gap.

While some parliamentarians may be particularly financially literate, individual knowledge cannot rival the vast institutional expertise possessed by financial executives concerning public finance, the scale of which is evidenced by the complexity of the macroeconomic models used by treasuries.803

The control deficit left by that expertise gap is widened by the temporal limitations on parliaments’ practical capacity to absorb, scrutinise and formulate counter-positions to the financial executive’s financial proposals.

Those limitations are starkly illustrated via the processes surrounding review of estimates of expenditure in Australia and the UK.

803 The UK’s macroeconomic model is publicly released, while only some parts of Australia’s macroeconomic model are in the public domain. 322

For FY2014/15, the Australia financial executive presented 6 annual appropriation Bills to parliament, seeking appropriation approval for ~$90billion in funds for ~140 spending entities. The legal limits on expenditure contained in the Bills’ schedules included over 400 line-items. Those line-items were explained in over 7000pages of Portfolio Budget Statements presented by 18 departments. Nine days were set aside for public hearings on that material.

For the same fiscal year, the UK financial executive presented 2 annual appropriation Bills to parliament, seeking appropriation approval for ~£571.4billion across ~60 spending entities. The information explaining those Bills was contained in main and supplementary estimates (and supporting material) of around 1500pages in length. Three days were set aside for public scrutiny of that material.

Assuming an average reading rate of ~1page/minute for 2hours/day,804 an Australian parliamentarian will read the estimates (once, without performing any calculations) in ~58 days. On the same basis, a UK parliamentarian will read the UK estimates in ~13 days.

Bureaucratic context condition

Modern bureaucratic conditions make strict compliance with public finance law (particularly appropriations legislation) a practical impossibility.

That practical impossibility is illustrated by the UK and Australian overspending during the Boom and Recovery Phases arising from forecasting errors and actuarial adjustments. The FY2005/06 ~£788million (~4%total budget) overspend of the NHS Pension scheme (§4.3.1) resulted from an overshoot of anticipated use of medical services and an undershoot of payments into the pension fund. The FY2006/07 ~£81million(~1%total budget) overspend by the Teachers’ Pension Scheme resulted from an overshoot of “service costs” and the

804 Taking the prevailing scientific view of 200-400 words/minute for “college-educated adults who are considered good readers”: Rayner et al (2016), ‘So Much to Read, So Little Time; How Do We Read, and Can Speed Reading Help’, 4. 323

~£20.8million UKMoD overspend resulted from (literally) overshooting the forecasted number of planned hellfire missiles in an active conflict zone.

The FY2011/12 Australian overspends resulted from the provision of incorrect information by members of the public in connection with welfare-state expenditure programs, as did the FY2004/05 overspends in the UK (relating to undershooting of forecasted recoveries of irregular payments)

Those overspends are significant because they demonstrate the practical difficulty of the financial executive strictly complying with legal limits contained in appropriation legislation. Social and economic factors determine the extent of drawing on public pension and welfare schemes which are far beyond financial executives’ capacity to forecast with iron-clad accuracy. Additionally, in each of those cases strict compliance would have come at immense social cost: ceasing provision of welfare-state services (removing homeless people from temporary accommodation), stopping teachers’ and doctors’ pensions payments and constraining operational military decisions.

Economic context condition

The economic context in which public financial activities are carried out does not permit parliamentary (or any enforcement) processes sufficient time for deliberation on (and scrutiny of) financial proposals or financial activity without causing catastrophic economic damage.

On the expenditure side of fiscal activity, a failure to pass annual legislation authorising public expenditure would have catastrophic economic consequences. In the UK, it would cause a failure to pay the salaries of ~17% of the total employed population (public sector employees), leading to a massive contraction in total economic output by removing a substantial proportion of the consumer base’s spending capacity.805 It would also cause the practical collapse of tax revenues on two grounds: as revenue agencies require employees to undertake

805 It would also lead to the government being in standing breach of employment contracts for that proportion of the total employed population. 324 the practical task of collecting taxation; and as income taxation is lost on ~17% of the working population. Finally, the non-payment of public servants would also lead to the practical failure of a number of “automatic stabilisers”806 by removing the workforce behind the administrative arms of the welfare state. Each of those catastrophic economic realities makes failure to pass an annual expenditure law a practical impossibility.

On the revenue side of fiscal activity, the failure to enact (or the repeal of) income and corporations tax legislation would also have catastrophic economic impacts for governments, by depriving them of the largest standalone revenue stream (48% in Australia and 38% in the UK).

The economic impact of that financing hole can only be fully appreciated in granular terms.

Take the expenditure requirements of the UK in Q1 2007, during rosy economic fortunes. Income and company tax receipts stood at ~£131.5billion. If those taxes hadn’t been collected in that quarter, there would have been a gap of around 46% of total receipts (~£142.7billion); 54% of total expenditure (~£121.1billion) and 147% of total central government expenditure on goods and services (including public sector salaries) (~£44.7billion). Accordingly, only three months shortfall of income and corporations tax would have led to an enormous compounding shortfall in vital public expenditure.

The extent of that shortfall can be seen in comparison with the contraction in tax receipts in the darker moment of the UK’s economic emergency in Q2 2008. In that quarter, income and corporations tax receipts shrunk by ~£23billion on Q1 2007: a 24% contraction in financing contribution. That contraction resulted in an 11% reduction of income and corporations taxes’ contribution to total receipts (~£121.7billion or 35%), 22% reduction in contribution to total expenditure (~£136.4billion or 31%) and +50% of spending on goods and

806 payments which keep the economy moving in times of economic contraction, like welfare benefits: Dolls, Fuest, and Peichl (2010), ‘Social Protection as an Automatic Stabiliser’. 325 services (~£46.3billion or 92%). The contraction of tax receipts contributed to the enormous increase in the UK’s public sector borrowing requirement, which stood at £25.4billion, which was a ~£32billion increase on Q1 2007 net borrowing of –£7.4billion.

In other words, removing the legal basis of income and corporation tax for a single financial quarter would (if government complied) create a funding emergency of immensely greater proportions than the funding shortfall caused by the economic emergency faced by the UK during the Bust. Like the position with expenditure, the failure to pass (or sudden repeal of) income or corporations tax legislation is an economic impossibility.

The impossibility of submitting financial executives’ proposals and activities to parliamentary deliberation and judicial enforcement without causing economic catastrophe is also illustrated in the context of economic emergencies. Again, the UK’s experiences during 2008-2009 provide the clearest example.

Between November 2008 and April 2009, the UK deliberately spent ~£23.8billion without legal authority and borrowed ~£19.5billion from the Bank of England (most likely in breach of EU law and economic orthodoxy). Both were emergency financing measures in response to extremely grave liquidity crisis and prudential regulatory failings in the City of London.

They were also significant diversions from regular financial practice, which would have (in a world in which parliament had effective control of public money) been submitted to the Commons for debate or to the courts for enforcement. However, to go through those processes would have been impracticable and likely self-defeating, in the sense that a slow response time would likely have led to more banking collapses and the destruction of a core aspect of the UK economy. Economic conditions demanded a response from the financial executive which was economically effective, but deprived Parliament of any meaningful role. 326

Deficit of effective control

The institutional and economic context in which the legal practices of public money are located leave a wide deficit of effective control in both Australia and the UK.

Unlike the situation in relation to legal control, there is no appreciable variation in the extent of the effective control deficit between the two jurisdictions. While the detailed structure of the parliaments and bureaucracies in each jurisdiction differs, the imbalance of power between the two sets of institutions is strikingly similar, as are the economic conditions in which public finance activities must be undertaken.

7.2.3 Nature and extent of the control deficit

The important point to be drawn from the application of the framework of parliamentary control to Australia and the UK is not one of comparative ranking (“the Australian control deficit is higher/lower than the UK’s”), but one of common interpretative failure: parliamentary control is a poor explanation of the distribution of financial authority in both jurisdictions.

Complexities of comparison

While the exact size of the Australian and UK control deficit was not uniform throughout the Reference Period, assigning a definitive ranking to the two jurisdictions is fraught with difficulty.

Most of the legal practices in Australia and the UK were fundamentally similar, leaving largely similar (but not identical) control deficits. The complicating matter is that the largest variations in those control deficits stemmed from different factors during the Reference Period. From the perspective of the legal practices’ design, the biggest factor was Australia’s extensive reliance on standing appropriations (particularly the un-bonded variety) (§4.1.2). From the 327 perspective of the operation of the legal practices, the largest factor was the measures adopted by the UK during the Bust and Recovery Phases (the ~£23.8billion excess, ~£19.5billion WMA and the QE Transfers) (§4.2.2, §5.2.3).

Rather than comparing apples (Australia without an economic emergency and with large un-bonded welfare state expenditure) and Thursdays (the UK with an economic emergency and lower un-bonded welfare state expenditure), the more satisfactory conclusion is that: the idea of parliamentary control fails to explain the distribution of financial authority in both jurisdictions during the Reference Period.

Variation across constitutional systems

Generalising that specific conclusion beyond Australia and the UK in 2005-2016 is not straightforward.

The export analysis in §3.1 and §3.2.3 observed the fundamental similarities in the basic design of the legal practices of public money throughout the many parliamentary constitutional systems to which they were exported. Combining that observation with the analysis of Australia and the UK during the Reference Period suggests a broader conclusion that all parliamentary constitutional systems will have a deficit of parliamentary control over public money.

It is, however, also clear from the detailed analysis in §4–§6 that the size of any control deficit will vary according to shifts in the legal practices’ design and operation in different economic conditions. Accordingly, a conclusive analysis of the size of any particular deficit of parliamentary control will depend on a detailed jurisdiction-by-jurisdiction analysis.

Such an analysis is far beyond the scope of this dissertation, although tentative conclusions can be surmised by inference from (and analogy with) the Australian and UK experience.

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By way of (superficial) example, New Zealand and Canada’s financial executives hold the financial initiative and have extensive authority over the formulation and control of public accounts.807 Those matters of legal design allow a strong analogy to be drawn with Australia and the UK. The profile of other Canadian and New Zealand legal practices makes drawing analogies less straightforward. New Zealand (like the UK) has a low relative level of standing (“permanent”) appropriations,808 but (like Australia), has no annual income taxation and (like both Australia and the UK) has sovereign borrowing legislation conferring plenary debt-finance authority and no meaningful legislative treatment for monetary finance.809 Canada (like Australia and unlike the UK) relies heavily on standing (“statutory”) appropriations and has no annual taxation,810 while (like both Australia and the UK) has very broadly framed sovereign borrowing legislation,811 but (unlike Australia, the UK and New Zealand), make extensive legislative provision for monetary finance.812 From that superficial review, meaningful variations in the size of the legal control deficit in both Canada and New Zealand can be expected.

From the perspective of effective control, there is little reason to doubt that the institutional and economic conditions in Canada and New Zealand would be meaningfully different to Australian and the UK. Assuming that Canadian and New Zealand parliaments are small and poorly resourced (compared to financial executives), bureaucratic functions are undertaken in complex institutional contexts (which prevent strict compliance with financial legislation) and economic realities prevent large scale diversions from existing patterns of financial authorisation (without economic catastrophe), it is safe to posit the existence of a large deficit of effective control.

807 Standing Order 326 (NZ); Public Finance Act 1989 (NZ), Parts 3 and 4; BNA 1867, s 54; Financial Administration Act 1985 (Can), part II. 808 Reported at ~15% of total expenditure in FY2014/15: Harris et al (2017), Parliamentary Practice in New Zealand, 526. 809 Public Finance Act 1989 (NZ), Part 6. 810 Calculated at ~60% of total expenditure in FY2017/18: Treasury Board, Tabled Expenditure Authorities (2018). 811 Financial Administration Act 1985 (Can), Part IV. 812 Bank of Canada Act 1985 (Can), s 18(j). 329

Two propositions (requiring further contemplation) arise from that superficial extension of the lessons learned in Australia and the UK to other parliamentary constitutional systems. The first is that the existence and extent of a deficit of parliamentary control may not correlate with the existence of written federal (Australia and Canada) or unwritten unitary (New Zealand and the UK) constitutional. The second is that significant differences may arise in parliamentary constitutional systems with highly-varied cultural and economic profiles, like the Commonwealth constitutional systems identified in §3.2.3.

Variation within a single constitutional system

An additional complicating factor is that economic conditions will also impact on the size of control deficits within (rather than between) constitutional systems.

The Australian and UK experiences during the Reference Period indicate that when economic output is expanding or stable, the size of the control deficit is likely to be smaller than during economic contractions.

During the Boom Phase in Australia and the UK, the design of the legal practices stayed relatively constant and their operation maintained a stable (albeit uneven) distribution of financial authority between parliaments and financial executives. As economic output rapidly contracted in the Bust Phase, the design and operation of the legal practices shifted, causing the control deficits in each jurisdiction to expand, in a way that endured into the Recovery Phase. Turbulent economic conditions caused the enactment of new legislative practices in both the UK (standing appropriations for bank-bailouts) and Australia (standing plenary sovereign debt authority) which shifted legal control towards the financial executive. In both jurisdictions, the operation of sovereign debt legislation shifted the distribution of financial authority away from parliament and towards the financial executive, by increasing the proportional share of un- bonded standing appropriations.

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Where economic conditions veer from an economic contraction to an economic emergency, the control deficit can open even wider. In a single fiscal year (FY2008/09 in the UK), ~6% of the total amount appropriated was deliberately spent by the UK financial executive without statutory authority and ~£19.5billion was raised by monetary finance from the Bank of England without any parliamentary involvement. The effects of that emergency continued throughout the Recovery Phase as the UK raised enormous levels of monetary finance through the QE Transfers without any meaningful parliamentary involvement (through legislation or otherwise).

The important general observation is that in the size of the control deficit appears to correlate inversely to economic contraction: during good economic times, the control deficit shrunk; while in bad economic times, the deficit widened. Generalising that observation to other parliamentary constitutional systems is (of course) contingent on the particular design of the legal practices and the institutional context in which they are located. But, assuming a largely similar distribution of financial authority, it can be surmised that the same correlation between economic contraction and a widening control deficit will hold.

Implications for financial self-rule

The most important (and obvious) implication of identifying a deficit of parliamentary control, is that the level of financial self-rule instantiated in the relevant parliamentary constitutional system is significantly reduced. As parliaments lose control of public money, their position as an institutional mechanism to steer public financial (and macroeconomic) activity is proportionally weakened.

While other mechanisms may exist to support parliaments’ financial self-ruling, such as ministerial and bureaucratic accountability, the loss of parliamentary control through the legal practices of public money remains a significant 331 detraction from parliaments’ potential as the primary financial self-ruling institution.

The normative implications of that loss are sketched in §8.1.

7.3 Alternative explanations

Given the explanatory failure of parliamentary control, it is worth examining alternative ideas which more adeptly explain the lopsided distribution of financial authority in parliamentary constitutional systems.

That examination proceeds by evaluating the strengths and weaknesses of the ideas of “control by financial executive” (§7.3.1) and “interdependence” of parliament and financial executive (§7.3.2). Drawing lessons from both, the idea of “parliamentary ratification” is proposed as the best explanation of the distribution of financial authority in parliamentary constitutional systems (§7.3.3)

7.3.1 Control by financial executive

Some legal scholars have occasionally have hinted at (but not fully developed) the idea that the “executive”, rather than the parliament, is in control of public money.813 While that idea has much to commend it, there are good reasons for rejecting it as the best explanation of the distribution of financial authority in parliamentary constitutional systems

Executive control

The clearest argument in support of executive control was made by Walter Bagehot in The English Constitution (1867), as an aspect of his broader critique of English constitutional conditions in the mid-19th century.

813 Eg, Turpin, and Tomkins (2011), 644–647. 332

Adopting a deeply sceptical attitude towards the English constitution, Bagehot depicted its customs and practices as an artifice of rules which channelled political power through “dignified” and “efficient” parts.814 The dignified parts were those ceremonial and formal constitutional practices which “excite and preserve the reverence of the population” by being “very complicated and somewhat imposing, very old and rather venerable”,815; including the Queen,816 the Lords817 and Commons.818 Chief amongst the efficient parts was the “efficient secret” of the “close union, the nearly complete fusion of the executive and legislative powers [in] … the cabinet.”819 That understanding of the organisation of constitutional authority reflected Bagehot’s broader intellectual approach: focusing less on legal formality and more on political and economic practicalities.

Applying his approach to public finance, Bagehot quickly jettisoned the notion that parliament controlled public money. Setting aside the “legal technicalities” of “financial legislation”, he concentrated on the impact of the financial initiative, concluding that:820 the principal peculiarity of the House of Commons in financial affairs is nowadays not a special privilege but an exceptional disability. On common subjects any member can propose anything, but not on money — the minster only can propose to tax the people. From that “truth”, Bagehot concluded that the Commons had no “special function with regard to financial different from its functions with respect to other legislation.”821

For Bagehot, the Cabinet was in financial control. “The ministry is (so to speak) the breadwinner of the political family and has to meet the cost of philanthropy

814 Bagehot (1867), 5. 815 Ibid, 5, 8, . 816 in whose absence “English government would fail and pass away”: ibid, 34. 817 particularly its “reverence”: ibid, 68-69. 818 as “very stately”: ibid, 94. 819 Ibid, 9. 820 Ibid, 97. 821 Ibid. 333

[civil expenditure] and glory [military and imperial expenditure].” In that political reality, Bagehot saw another constitutional “truth” that: 822 when a cabinet is made the sole executive, it follows it must have the sole financial charge, for all action costs money, all policy depends on money, and it is in adjusting the relative goodness of action and policies that the executive is employed. As §2.2.2 observed, while the 19th century British Cabinet controlled the ultimate questions of financial policy, the Treasury held the “financial charge”. From that perspective, Bagehot is best understood to be referring to the financial executive’s (rather than Cabinet’s) control of public money.

Pros and cons

The descriptive analyses undertaken in §II and §III, provides support for and against a wholesale adoption of Bagehot’s understanding of the distribution of financial authority.

In strong support of the idea, stand the financial executive’s responsibility for the formulation of financial legislation, the maintenance of public accounts and the breadth of its functions concerning sovereign borrowing. Deliberate non- compliance with appropriation legislation (§4.3.3) and the autonomous authority over monetary finance (§5.3.2) also support Bagehot’s understanding of executive control. Additionally, the absence of judicial review of expenditure, debt management and monetary finance presents as an absence of any hard judicial check on significant parts of the executive’s financial authority (§6.1.3).

However, detailed analysis of the legal practices also provides strong responses against the idea of executive control.

Most prominently, parliaments retain a meaningful institutional position in setting the legal standards under which financial executives may execute their responsibilities over economic resources. That must be so, unless the entire body

822 Ibid, 98. 334 of financial legislation is an artifice: a position which is difficult to maintain in the face of retrospective appropriation of excesses which evidence the financial executive’s commitment to treating the legal limitations on public expenditure imposed by parliament as something more than artifice (§4.3.3).

Further grinding against the idea that executives control public money is the enactment of (high economic impact) bonded standing appropriation legislation, like welfare benefit or tax credit legislation (§3.2.1, §4.1.2). Once enacted, that legislation removes large swathes of the state’s resources from the financial executive’s economic planning discretion.823 As §3.2.1 explained, that occurs because the criteria for payment of welfare benefits and tax credits are legally pre-determined by parliament and practically dependant on the extent of demand in the general population for welfare benefits or eligibility for tax credit (matters outside executive control). The impact of that constraint will, of course, vary with the proportional significance of bonded standing appropriations. The smaller the proportion of bonded standing appropriations relative to total expenditure, the greater the executive’s autonomy over the formulation of financial proposals, because there will be a larger amount of funds to be authorised through un-bonded or annual appropriations.

Finally, the executive’s financial control is limited by the formal and effective responsibilities of various other institutions. Where emergency monetary finance is required, financial executives must contend with the independent institutional authority of central banks, which influence the conditions under which the financial executive obtains monetary finance. The QE Transfers (examined in §5.3.3) occurred pursuant to a process of negotiation between HMTreasury and the Bank of England, rather than the use of formal legal authority to command the Bank to behave in particular ways.824

823 As §3.2.3 explained, the same reasoning does not apply to un-bonded standing appropriations, because the executive retains the capacity to determine the conditions under which spending will occur. 824 Exactly how such power could be exercised is unclear given that HMTreasury has no power to direct the Bank “in the public interest…in relation to monetary policy”: Bank of England Act 1946 (UK), s 4. 335

Where the collection of taxation is required, the financial executive must contend with the judiciary, which may shift its attitudes to executive claims to recover revenue through taxation. As §6.3.2 concluded, the judiciary may adopt an attitude to taxation legislation which is supportive of tax authorities, but there is no guarantee that such an attitude will be adopted.

For that collection of reasons, “control by financial executive” does not provide a fully compelling explanation of the distribution of financial authority by the legal practices of public money.

7.3.2 Financial interdependence

Pulling back from Bagehot-esque absolutism, an alternative model of distribution of financial authority in parliamentary government has been proposed: that parliaments and executives are “interdependent” in financial affairs.

Interdependent constitutional systems

The most sophisticated articulation of the idea of the interdependence of parliament and executive derives from Daintith & Page’s work on the constitutional position of the British executive (§1.3.3). The result of their analysis of the British executive’s institutional behaviour leads them to conclude that in finance (as in many other areas), the relationship between parliament and executive is one of “interdependence” rather than hierarchy.825

Daintith & Page’s idea of interdependence revolves around “external” and “internal” “controls”. Legislation is a form of external control, as is the possibility of judiciary review of matters concerning public finance. Executive directions regarding the use of public resources (like value for money directives, procurement guides, and internal financial manuals) are “internal” controls.

825 Daintith and Page (1999), 7, 107, 142, 201. The idea of “interdependence” is also present in their notion that the executive is an “autonomous body which can manage its own resources save where Parliament ordains otherwise”: Daintith and Page (1999), 39. The explanatory utility of interdependence and autonomy are recognised in Prosser (2014), 21. 336

Their conclusion is that both of those controls operate in an interdependent manner because there “is little or no difference between the interests of Parliament in financial control and those of the people within government entrusted with these tasks.”826

With some modifications it is possible to apply Daintith and Page’s idea of interdependence to the distribution of financial authority effected by the legal practices of public money.827

Making progress

As an explanatory concept applied to the legal practices of public money, “interdependence” makes significant progress on the idea of control by financial executive. It provides a conceptual model which accommodates the legal and institutional connections between parliaments and financial executives insofar as public money is involved. However, difficulties arise in adopting interdependence as a way to explain the distribution of financial authority by the legal practices of public money.

The strongest degree of interdependence of parliaments and financial executives appears in relation to fiscal activities. However, difficulties arise in adopting interdependence as a way to explain the distribution of financial authority by the legal practices of public money.

In ordinary times, parliaments are dependant on financial executives to formulate financial proposals, to administer expenditure legislation, oversee the broader executive’s use of resources and to cooperate with auditors-general. Financial executives are dependant on parliaments to enact financial legislation (formalising their financial proposals), legally validate non-compliant behaviour (through retrospective authorisation of overspending) and provide legal legitimacy to their fiscal activities. In emergencies, however, the degree of inter-

826 Daintith and Page (1999), 105. 827 Modification is necessary because (unlike the approach adopted in this dissertation) Daintith and Page’s idea of internal control draws no clear distinction between administrative and legal practices regarding public money (§3.3.1). 337 dependence in fiscal activities is markedly reduced. Financial executives spend as necessary to avoid economic catastrophe and turn only to parliaments when the emergency has abated (§4.3.3).

There is a much lower degree of interdependence in relation to debt finance activities, and virtually none in relation to monetary finance.

Sovereign borrowing legislation evidences a diminishing degree of interdependence between parliaments and financial executives. Sovereign borrowing legislation enacted annually by parliament (§3.2.2) does, of course, make the financial executive’s debt financing decisions dependant on parliament.828 Legislation with a deficit-finance or strict quantitative limitations (§3.2.2 and §5.1.2) only makes financial executives dependent on parliaments to the extent that the operation of expenditure and fiscal revenue legislation contributes to fiscal or cash deficits or financing requirements exceed the pre-set quantitative limit.829 Sovereign borrowing legislation which contains no formal deficit-finance or quantitative limitation (§5.1.2) leaves financial executives independent of parliaments in acquiring debt finance.830

Parliaments’ position in relation to monetary finance (particularly the exotic variety) fits even less comfortably within a concept of interdependence. The absence of any settled practice regarding monetary finance,831 leaves central banks essentially unguided by legislation in that function.832 Although clearly coordinated with HMTreasury, the Bank of England’s monetary financing actions from 2008 were essentially independent of the UK parliament (§5.3.2).

For that collection of reasons, the idea of interdependence is a valuable improvement on executive control, but should not stop the search for the best

828 as the UK did until 1968, Australia did until 2008. 829 UK between 1968-1983, and Australia between 2008-2013. 830 UK post 1983, and Australia post-2013. 831 Exceptional cases like Canada aside. 832 Placing aside legislation concerning central bank dividend payments. 338 explanatory idea for the way legal practices distribute financial authority in parliamentary systems of government.

7.3.3 Parliamentary ratification

The idea of “parliamentary ratification” is proposed as the best way to explain the distribution of financial authority in parliament constitutional systems: by “approving”, “ventilating” and “structuring” uses of public money.

Parliament approves (rather than formulates) financial proposals of the executive, while providing one forum for the ventilation of the executive’s use of economic resources, and passing legislation which permits the financial executive to structure its financial activities by reference to legal norms.

A conclusion that the distribution of financial authority is best explained through the prism of parliamentary ratification implies a far more limited measure of financial self-rule, than parliamentary control.

Approving

The distribution of financial authority permits parliaments to “approve” the executive’s financial activities, ex ante resource use.

Ex ante approval occurs through parliaments’ approval of financial executives’ proposals for expenditure and taxation by the enactment of financial legislation. Approval (modelled in that way) recognises that financial executives, rather than parliaments, formulate the fiscal proposals upon which appropriation and taxation legislation are premised. Once formulated, those proposals are presented to parliament as financial fait accompli. While parliaments retain the formal capacity to refuse to approve those financial proposals, the practical spending needs of government limit their available choices to approving (and maintaining confidence in a government) or refusing (and leading to the downfall of a government). 339

Parliaments may have stronger and weaker roles in approving the financial executive’s proposals. In approving the expenditure side of financial proposals, that role is limited to the binary act of enacting or refusing to enact appropriation legislation. In relation to taxation, that approval role is more textured. Although the financial executive retains the capacity to formulate the taxation side of financial proposals, parliaments do have a meaningful capacity to alter the economic and legal content of taxation legislation.

Ventilating

The distribution of financial authority permits parliament to “ventilate”833 the executive’s financial activities by providing one avenue through which formal statements of public resource use may be released to the public.

Ventilation best explains the distribution of financial authority to parliaments ex post action by the financial executive, as financial executives use the transmission of public sector accounts (post audit) to parliaments as a means of ventilating their use of public money.

“Ventilating” rather than “auditing” or “accounting” reflects the legal and practical limitations on the institutions of parliamentary accountability. Auditors-general necessarily rely on accounting and internal control mechanisms of financial executives, and parliaments rely on auditors-general to provide an independent check on the total bureaucracy’s use of public resources. In both cases, the executive’s financial judgments fundamentally frame the auditing and accountability processes. “Ventilating” also avoids the contortions of understanding parliament as “enforcing” the terms of financial authority. Given the limitations of the institutional and economic context in which public financial activity occurs, the best parliament can hope for is the passive release of information regarding the executive’s use of public resources.

833 This usage is inspired by Daintith and Page (1999), 105. 340

Structuring

Finally, the legal practices of public money permit the legal “structuring” of public financial activities, by providing a set of discernible standards within which the financial executive must comply if its financial activities are to be legally authorised.

Parliamentary legislation helps to “structure” financial executives’ activities in two senses. First, it establishes a set of conditions which limit the lawfully permissible actions of the financial executive itself, and thereby sets a baseline of legal legitimacy for the financial executive’s own actions. Secondly, it provides a set of conditions which can be used by financial executives to evaluate the financial activities of the broader executive.

As was argued in analysing the formal law condition (§7.2.1), the legislative practices of public money are designed in different ways, some of which are more formal than others, and the manner in which different legislative practices structure the financial executive’s activities varies accordingly.

Legislation concerning taxation is the most formal of all financial legislation, being composed of precisely framed legislative norms concerning tax liability. Bonded standing appropriation legislation provides the next most formal set of legislative norms, where the legality of payment is determined by clearly expressed legislative conditions (say, concerning eligibility to receive welfare benefits or tax credits).

Annual appropriation legislation is noticeably less rigid than tax and bonded standing appropriation legislation, however it still provides a basis upon which financial executives may structure the expenditure side of their fiscal activities. While the legal limits of annual appropriation legislation are wide and flexible (and in that sense more “informal”), they are the ultimate reference-point against which the more detailed non-legal limits set by estimates operate. In that fashion, annual appropriation legislation provides a set of standards which 341 permit financial executives to structure their own internal rules for expenditure control and thereby control the broader executive’s expenditure functions. That function of annual appropriation legislation is particularly prominent where overspending is retrospectively authorised. Viewed from the perspective of parliamentary ratification, excesses appear as a means for financial executives to bring order to the wider bureaucracy’s use of resources, rather than providing a mechanism for parliaments to assert their authority regarding illegal behaviour.

Un-bonded standing appropriation and sovereign borrowing legislation is far more informal, in the sense that it contains few legally discernible limitations. In that sense, un-bonded standing appropriation and sovereign borrowing legislation provides a far weaker structuring basis for financial action. Some structuring function is still served by sovereign borrowing legislation, as it concentrates legal authority in the financial executive, preventing other parts of the executive from engaging in sovereign borrowing and limiting the public actors which may acquire debt finance.

The legal practices concerning monetary finance provide only a nominal structure of financial executives’ actions. Because of the paucity of legal practices concerning monetary finance, financial executives are left largely autonomous in their decisions regarding the engagement with central banks’ monetary powers as a public finance lever.

Ratification and financial self-rule

A conclusion that parliamentary ratification (rather than control) is the best explanation for the distribution of financial authority has obvious implications for the extent to which the value of financial self-rule is protected by the legal practices of public money.

The approval aspect of parliamentary ratification secures a measure of representative accountability in the use of economic resources, but is limited by 342 the location of the financial initiative in executives and the vast institutional imbalance of power between parliaments and financial executives.

The ventilation aspect of parliamentary ratification also secures some measure of representative involvement, but is also limited by financial executives’ legal authority to choose the conditions under which disclosure of financial information will occur and their comparatively superior institutional resources to scrutinise wider bureaucracies’ uses of resources.

The structuring aspect of parliamentary ratification only secures financial self- rule to the extent that parliaments determine the form and content of financial legislation. Given the location of the financial initiative in executives, the structuring aspect of parliamentary ratification is really a question of financial executives “self-binding”. Viewed in that way, the degree of financial self-rule secured by the structuring aspect of parliamentary ratification is rather low.

In total, a significantly lower-level of financial self-rule is secured by parliamentary ratification than it would be by parliamentary control.

Conclusion

Two core conclusions are drawn from the explanatory interpretation of parliamentary control.

First, because parliamentary control fails to provide a strong explanation of the distribution of financial authority in parliamentary constitutional systems, a Diceyan understanding of the constitutional principles of public finance cannot be meaningfully brought forward to the present day. In that sense, the idea of parliamentary control can be understood as suffering from “explanatory failure”. Secondly, parliamentary ratification is a more compelling explanatory idea than executive control or interdependence of parliament and executive, which evidences a partial protection of financial-self rule.

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Given its explanatory failure, it could be contended that parliamentary control should simply be erased from the constitutional lexicon, or replaced with an idea of parliamentary ratification. That contention’s central weakness is that the normative aspect of a constitutional idea is separate to its explanatory aspect. For a constitutional idea to “guide” constitutional behaviour, it need not resemble the current organisation of a constitutional system.

Accordingly, it remains to be seen how the relative explanatory failure of parliamentary control and explanatory success of parliamentary ratification should impact the future of constitutional principles and practices of public money.

The dissertation’s concluding Chapter 8: “The Normative Future of Parliamentary Control” explores that issue.

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CHAPTER 8 NORMATIVE FUTURE OF PARLIAMENTARY CONTROL

This (short) chapter concludes the dissertation’s analysis by shifting focus from parliamentary control’s explanatory failure and towards its “normative” future. It begins by taking-stock of the consequences of parliamentary control’s explanatory failure (§8.1), before turning to sketch select issues which may arise in future research projects which engage in theoretical (§8.2) and practical (§8.3) ways with constitutional ideas and public money.

8.1 Disavowing Dicey

The most obvious consequence of parliamentary control’s explanatory failure is to disavow Dicey’s financial legacies (§1.1.2).

Given that the historical record reveals no halcyon days of parliamentary control it is doubtful whether Dicey’s “system of parliamentary control” (§8.1.1) was ever meaningfully reflected in late-Victorian constitutional practice. Admittedly, that epoch can appear as a high-water-mark of parliamentary control. Gladstone’s Audit Act 1866 clarified the division of audit and comptrolling functions between parliament, CAG and HMTreasury, and established institutional frameworks to deal with excess expenditure (§2.2.3). Around the same time, annual legislative processes regarding taxation solidified in the enactment of annual Finance Acts (§2.1.2). Sovereign borrowing was linked to the annual parliamentary supply process (§2.1.2) and specific parliamentary authority was required before the Bank of England could lend money to the Crown (§2.2.1).

When, however, the full panoply of 19th century legal practices are compared to their 21st century relatives, the Diceyian idea of parliamentary control is very difficult to maintain.

As in 2005-2016, the executive’s financial initiative reserved to HMTreasury the totality of financial planning authority, leaving Parliament to rubber-stamp 345 financial proposals (§2.2.2). Annual appropriation legislation contained all the flexibility of its modern descendants, and went further in its recognition of virement between military votes and the extent of its retrospectivity. Excesses were significant (§2.1.2). Standing appropriation legislation was less prominent than in modern times, but total amounts of public expenditure authorised by standing appropriation for debt repayment (~35%) was similar to modern levels of standing welfare-state expenditure in the UK.

Also similar to modern UK conditions, only a portion of tax was charged through annual legislation (§2.1.2), and even after the Audit Act 1866, the CAG’s audit functions were legally and practically dependant on HMTreasury’s legal and economic control over the wider executive’s accounts and use of resources (§2.2.3). The judiciary adopted a hostile approach to parliamentary fiscal policy in its resolution of tax disputes (§2.3.1), and played no role in enforcing appropriation legislation or disputes concerning debt and monetary activities (§2.3.2, §2.3.3).

In that respect, the descriptive and explanatory analyses permit (legal) constitutional doctrine to set aside the conceptual frameworks adopted by Dicey insofar as public finance is concerned.834

Once freed of parliamentary control as an explanation of the distribution of financial authority, the natural next question is what position parliamentary control should occupy in normative analyses of legal practices and public money.

Two kinds of normative analyses may arise. One is practical and could focus on the design of legal norms concerning public money. Should new kinds of appropriation legislation be enacted concerning public money? Should the judiciary adopt an (invariable) revenue-protecting approach to taxation disputes? Should legal restrictions on central banks public finance activities be moulded to accommodate economic reality? Each of those questions raises

834 That claim is similar to those made regarding Dicey’s understandings of (and battles against) French administrative law: Allison (2013), xvii, fn 35. 346 technical and political issues deserving close attention by policy-makers and academics and debated by parliaments.

Another kind of normative analysis is more abstract, but no less significant to the practical distribution of financial authority in parliamentary constitutional systems. Should parliamentary control be retained or jettisoned as the organising constitutional principle of public finance?

8.2 Kamakazi control

Evaluating the desirability of a constitutional norm is a complicated exercise, the outcome of which will vary widely depending on methodological starting-points. With that rider, two arguments are sketched for jettisoning the idea of parliamentary control as a constitutional norm qua a useful guide to constitutional action.

The first argument is that instituting parliamentary control would radically hamper the capacity of governments to remain economically viable in modern economic circumstances. That argument would be built on two premises, each warranting close scrutiny.835 First, public financial viability in the face of modern economic circumstances requires the delegation of vast authority to financial executives, exercisable at high-speed without significant obstruction from other institutions.836 Secondly, instituting parliamentary control would radically undercut those requirements, thereby reducing the financial viability of the public sector. In short, instituting parliamentary control would be a financial suicide pact.

The second argument concentrates less on the negative outcome of achieving parliamentary control, and more on its demerits as a conceptual guide to

835 A core empirical assumption is that parliaments will always obstruct rapid financial decision- making and a core normative assumption is that maintaining the present economic order is preferable to instituting radical parliamentary rule. 836 Drawing on the normative and empirical work of Scheuerman, (2004) and Posner and Vermeule (2011). 347 constitutional action directed towards boosting financial self-rule. Parliamentary control provides a faulty guide towards financial self-rule because it promotes the use of action which conflicts with deeply-embedded institutional features of modern parliamentary government. In contrast, parliamentary ratification guides constitutional action towards the end of financial self-rule in a way that accommodates the institutional constraints of parliamentary government. On that basis, parliamentary ratification provides a better normative guide to financial self-rule than parliamentary control. That argument’s core assumption is that a constitutional norm with a realistic capacity to secure a partial-degree of financial self-rule (parliamentary ratification), is preferable to one with no foreseeable capacity to secure a higher-degree of financial self-rule (parliamentary control).

Both arguments approach the normative future of parliamentary control in an anti-idealist way: assuming that the public sector’s economic viability is more important than rule by financial-assembly; and that strongly-embedded institutional structures are constraints on, rather than objects of, constitutional norms.

They also assume that constitutional norms are designed to operate over the medium term (10-50 years). Over a longer-term (50-100 years), the institutional constraints which are presently too large to permit meaningful implementation of parliamentary control, may shift significantly. If they did, parliamentary control may not be an empty or economically futile aspiration.

8.3 Reform projects

Future reform of the legal practices of public money orientated towards boosting financial self-rule would be a complex project, but starting-points are discernible.

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A significant first step would be to enact legislation which provides a general framework within which public financial activities are legally authorised: a “financial framework law” (“FFL”).

Various partial versions of that reform have been tried. The Audit Act 1866 provided an early example of a FFL (§2.2.3). Financial chapters of written colonial and dominion constitutions concretised some higher-level legal practices, and integrated them within a larger set of legal constitutional norms (§3.1.2). The financial boilerplate provisions of the latter-Commonwealth constitutions went further by integrating a detailed legal prescription of financial practice within a written constitutional document (§3.2.3). However, none dealt in any meaningful sense with the full set of public financial activities, leaving debt and monetary finance out in the cold (§1.2.2).

A FFL could address the respective division of financial responsibilities between different institutions, permitting parliamentarians (and the public) a consolidated view of which institutions have authority to undertake public finance activities, and the limits of that authority. That form of statute would produce a measure of “institutional coherence” for legal authority over public money and provide a consolidated legal text against which future “deliberations” could occur regarding the exercise of financial activities.837

A FFL could also address currently under-regulated areas of financial activity. It could require that financial executives clearly identify the core aggregates of projected expenditure under standing and annual appropriation (cf§4.1.1) and that all estimates be presented in relative terms: to total expenditure (eg, annual health estimate as ~21% of total expenditure); to other categories of expenditure (eg, annually authorised education expenditure as ~70% of annual health expenditure as ~40% of standing health expenditure); and relative to GDP (eg, defence expenditure as ~1.5% of GDP). Those changes to the legal requirements of financial reporting would allow parliaments (and the public) to

837 Prosser (2014), 245-250. 349 make informed assessments of the proportional significance of any particular financial proposal.

FFLs could also deal in a more transparent and rational way with non- compliance with financial legislation, particularly excesses. As §4.3.3 observed, not all forms of financial non-compliance are alike. Deliberate non-compliance may stem from perceived needs of financial urgency (§4.2.2), but also from aggressively adopted legal positions or a desire to keep financial activity within the executive secret (as the secrecy surrounding the QE Transfer deed of indemnity demonstrates §5.1.2). Similarly, accidental non-compliance may take different forms. Non-compliance caused from maladministration (the 2007-2013 MoD excesses, §4.2.3) may be not equivalent to non-compliance caused by failed financial forecasting (the Boom Phase Work and Pensions excesses, §4.2.1) or non-compliance caused by legal errors (the Boom Phase Asset Recovery Agency excesses, §4.2.1).

Those different forms of deliberate non-compliance may require carefully calibrated treatment. Severe sanctions could be imposed on deliberate excesses: perhaps by withholding retrospective authorisation until a public hearing occurred into the reasons behind the non-compliance. Accidental excesses arising from maladministration could be met with a lower sanction: perhaps conditioning any retrospective authorisation on the production of evidence of necessary governance reforms. In response to non-compliance arising from forecasting shifts, the most sensible response may be to authorise expenditure by reference to actuarial thresholds, rather than cash-limits, and thereby removing the scope for excess expenditure altogether.

A FFL which boosted the self-ruling terms of parliamentary ratification should also accommodate the different financing needs of ordinary and emergency economic conditions. That could involve a structure for modifying the allocation of responsibilities for the legal authorisation of public financial activity in response to severe shifts in economic markers. Where a waxing of financial executives’ authority is necessary, a FFL attuned to emergency financing needs 350 could provides a rational process through which parliaments can retain some degree of involvement ex ante, perhaps by declaring a state of public financial emergency, and thereby shifting greater authority to the financial executive. Formal limitations could be set around the financial executive’s emergency powers, perhaps by removing legal expenditure limits set before the emergency, but imposing a stronger ex post reporting and hearing regime.

The most pressing area of reform concerns monetary financing and any FFL would need to provide a clear and rational basis (which is currently entirely absent) for the public financing activities of central banks (§5.3.3). Given the economically-critical position of central banks and the diversity of tasks they perform (§1.2.2), detailed consideration of that reform is far beyond the scope of a single dissertation (or academic discipline).838

However formulated, future analyses of parliamentary constitutionalism and public finance can proceed without the distorting assumption that parliaments do (in fact) control public money through legal practices.

838 Cf Goodhart and Lastra, ‘Populism and Central Bank Independence’ (2017). TECHNICAL APPENDIX

Historical financial data (§§II, IV)

Pre-1947 data for the UK’s tax receipts, public expenditure, sovereign borrowing and national accounts were drawn from British Historical Statistics (1988), chapters XI (Public Finance) and XVI (National Accounts) and Clark, ‘The Macroeconomic Aggregates for England 1209-2008’ and accompanying data- sets.

Data concerning excesses and retrospective appropriation 1867-1878 were collected from Supply and Appropriation Acts 1867–1878.

Pre-1947 data for Ways and Means Advances were collected from Wormell, National Debt in Britain: 1850–1930 (1991), volumes III and VI.

1900–2000 expenditure and taxation data for Australia and the UK were collected from Tizo and Schuknecht, Public Spending in the 20th Century (2000), chapters I–III.

Contemporary financial data (§§I, III, IV)

Australia

Fiscal balance data were collected from the Australian Bureau of Statistics, Government Finance Statistics (datasets “55120DO002” (expenses and revenue on an accrual basis)), and Supplementary Tables 1 of Budget Papers No 1 (2005- 2017 (receipts on a cash basis)). GDP data collected from the Australian Bureau of Statistics, Australian System of National Accounts (dataset “55120DO002”).

All data concerning the balance of annual and standing appropriation expenditure were collected from annual appropriation legislation 2005-2016, Budget Papers No 4 (2004-2017) and departments’ Annual Reports (2005-2017). To compensate for gaps in the reporting of aggregate standing appropriation data for FY2004/05 and FY2005/06 the data for those years are determined by applying a discount factor of 35% to the totals stated in the Agency Resourcing Tables of Budget Papers No 4 for those years, in order to create an identity with later years.

All sovereign borrowing data were collected from the Australian Office of Financial Management, Historical Data Tables (2005–2016).

Tax provisioning data were collected from Australian Taxation Office, Annual Reports and Accounts (2005-2015).

UK

Fiscal receipts and outlays data were collected from Office of National Statistics, Public Sector Finances (2017) (datasets PSA1–PSA9), HMTreasury, Public Expenditure Statistical Analyses (2013–2017) (datasets 6.1–6.6) and FOI Requests to HMTreasury. GDP data collected from the Office of National Statistics, United Kingdom National Accounts.

All data concerning the balance of annual and standing appropriation expenditure were collected from Consolidated Fund Accounts (2005-2016), National Loans Fund (2005-2016), Contingencies Fund Accounts (2005-2016), National Lottery Distribution Fund Accounts (2005-2016), National Insurance Fund Accounts (Great Britain and Northern Ireland) (2005-2016), Statements of Excesses (2005-2016), Main and Supplementary Estimates (2005-2016); and annual appropriation legislation, 2005-2016.

Sovereign borrowing data were collected from Debt Management Office data- generating tool: https://www.dmo.gov.uk/data/

Monetary finance data were collected from Bank of England’s “Bank Stats” (https://www.bankofengland.co.uk/boeapps/database/) and FOI Requests to Bank of England and HMTreasury.

Tax provisioning data were collected from HMRC (and HMEC), Annual Reports and Resource Accounts (2005-2015).

Canada and New Zealand (§I)

Central and non-central government expenditure, tax revenue and debt figures drawn from Statistics Canada, Canadian Government Finance Statistics (datasets 385-0033 and 385-0042) and StatsNZ, Government Finance Statistics (General Government): Year ended June 2016 and Local Authority Statistics: June 2017 Quarter). BIBLIOGRAPHY

This bibliography has two main sections.

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The second section, “Works Consulted”, contains references to primary and secondary material consulted (but not cited) in the dissertation. Those references are subdivided geographically.

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5 131. Likierman, A (2003), ‘Planning and Controlling UK Public Expenditure on a Resource Basis’, 23 Public Money & Management 45. 132. Littlewood, Michael (2016), ‘In the Beginning: Taxation in Early Colonial New Zealand’ (available at SSRN: https://ssrn.com/abstract=2762003). 133. Loughlin, Martin (1992), Public Law and Political Theory (Clarendon Press). 134. Loughlin, Martin (2003), The Idea of Public Law (OUP). 135. Loughlin, Martin (2010), Foundations of Public Law (OUP). 136. Lovett, Frank (2016), A Republic of Law (CUP). 137. Lyon, Bryce (1980), A Constitutional and Legal History of Medieval England (2nd ed, Harper & Row). 138. Maitland, FW (1901), ‘The Crown as Corporation’, 17 Law Quarterly Review 131. 139. Maitland, FW (1908), The Constitutional History of England (CUP). 140. Manin, Bernard (1997), The Principles of Representative Government (CUP). 141. Mashaw, Jerry (2005), ‘Between Facts and Norms: Agency Statutory Interpretation as an Autonomous Enterprise’, 55 University of Toronto Law Journal 497. 142. Maxwell, Peter (1875), On the Interpretation of Statutes (William Maxwell and Sons). 143. May, Erskine (1844), A Practical Treatise on the Law, Privileges, Procedures and Usage of Parliament (1st ed, Butterworths). 144. May, Erskine (1851), A Practical Treatise on the Law, Privileges, Procedures and Usage of Parliament (2nd ed, Butterworths). 145. McEldowney, John (1988), ‘The Contingencies Fund and the Parliamentary Scrutiny of Finance’, Public Law 232. 146. McEldowney, John (2001), ‘Review’, 64 Modern Law Review 135. 147. McEldowney, John (2016), Public Law (Sweet & Maxwell). 148. McEldowny, John (2015), ‘Public Expenditure and the Control of Public Finance’ in Jowell, Jeffrey, and Oliver, Dawn, The Changing Constitution (8th ed, OUP). 149. McKay, William and Johnson, Charles (2010), Parliament and Congress (OUP). 150. McLean, Iain and McMillan, Alistair (2003), ‘The Distribution of Public Expenditure Across UK Regions’, 24 Fiscal Studies 45. 151. McLean, Ian (2009), What’s Wrong with the British Constitution (OUP). 152. McLean, Janet (2012), Searching for the State in British Legal Thought: Competing Conceptions of the Public Sphere (CUP). 153. McLeod, Henry (1821), Theory and Practice of Banking (Longmans, Green, Reader, & Dyer). 154. Melbourne, ACV (1963), Early Constitutional Development in Australia: New South Wales 1788-1856, Queensland 1859-1922 (2nd ed, University of Queensland Press). 155. Mendle, Michael (1989), ‘The Ship Money Case, The Case of Shipmoney, and the Development of Henry Parker's Parliamentary Absolutism’, 32 The Historical Journal 413 156. Micklethwait, Robert (1976), The National Insurance Commissioners (Steven & Sons). 157. Mishkin, Fredrick (2013), The Economics of Money, Banking and Financial Markets (Pearson). 158. Mitchell, Brian (1988), British Historical Statistics (CUP). 159. Mitchell, Charles (2010), ‘Recovery of Ultra Vires Payments by Public Bodies’, Public Law 747. 160. Nicol, Dany (2010), The Constitutional Protection of Capitalism (Bloomsbury). 161. O'Faircheallaigh, Ciaran and Wanna, John (1999), Public Sector Management in Australia (MacMillan). 162. O’Brien, Patrick (2005) ‘Fiscal and Financial Preconditions for the Rise of British Naval Hegemony 1485-1815’ (LSE Department of Economic History Working Paper No 91/2005).

6 163. O’Connell, DP and Riordan, Ann (1971), Opinions on Imperial Constitutional Law (Law Book Company). 164. O'Brien, Derek (2014), The Constitutional Systems of the Commonwealth Caribbean (Hart). 165. OECD (2013), Sovereign Borrowing Outlook (OECD). 166. Oliver, Adam (2014), Behavioural Public Policy (CUP). 167. Palgrave, Reginald and Bonham-Carter, Alfred (1893), Erskine May’s Treatise on the Law, Privileges, Proceedings and Usage of Parliament (10th ed, William Clowes and Sons Ltd). 168. Pearce, John (2009), ‘The Role of Central Government in Determining Liability to Income Tax in England and Wales’ in Tiley, John (ed) Studies in the History of Tax Law - Volume 4 (Hart Publishing). 169. Phillips, Fred (1985), West Indian Constitutions: Post-Independence Reform (Oceana Publishing). 170. Pollitt, Christopher and Bouckaert, Geet (2004), Public Management Reform: A Comparative Analysis (OUP). 171. Poole, Thomas (2015), Reason of State: Law Prerogative and Empire (OUP). 172. Posner, Eric and Vermeule, Adrian (2011), The Executive Unbound: Life after the Madison Republic (OUP). 173. Proctor, Charles (2012), Mann on the Legal Aspect of Money (7th ed, OUP). 174. Prosser, Tony (2010), The Regulatory Enterprise (OUP). 175. Prosser, Tony (2011), ‘"An opportunity to take a more fundamental look at the role of government in society": the Spending Review as regulation’ [2011] Public Law 596. 176. Prosser, Tony (2014), The Economic Constitution (OUP). 177. Radin, Max (1980), ‘Statutory Interpretation’, 43 Harvard Law Review 863. 178. Rayner, Keith et al (2016), ‘So Much to Read, So Little Time; How Do We Read, and Can Speed Reading Help’, 17 Psychological Science in the Public Interest 4. 179. Redlich, Josef and Ilbert, Courtenay (1903), The Procedure of the House of Commons: A Study of its History and Present Form: Volume 3 (Archibald Constable & Co Ltd). 180. Reid, Gordon (1966), The Politics of Financial Control (Hutchinson). 181. Reitan, EA (1966), ‘The Civil List in Eighteenth-Century British Politics: Parliamentary Supremacy versus the Independence of the Crown’, 9 Historical Journal 318. 182. Richardson, Henry (2002), Democratic Autonomy: Public Reasoning about the Ends of Policy (OUP). 183. Roseveare, Henry (1969), The Treasury: the Evolution of a British Institution (Allen Lane). 184. Roseveare, Henry (1973), The Treasury 1660-1870. The Foundations of Control (Barnes and Noble). 185. Rubin, Ed (2005), Beyond Camelot: Rethinking Law and Politics for the Modern State (Princeton University Press). 186. Rundle, Kristen (2012), Forms Liberate: Reclaiming the Jurisprudence of Lon Fuller (Hart). 187. Samuel, Geoffrey (2009), ‘Interdisciplinarity and the Authority Paradigm: Should Law be Taken Seriously by Scientists and Social Scientists’, 36 Journal of Law and Society 431. 188. Sayles, GO (1988), The Functions of the Medieval Parliaments of England (Hambledon Press). 189. Scheuerman, Bill (1994), ‘The Rule of Law and the Welfare State: Towards a New Synthesis’, 22 Politics and Society 195. 190. Scheuerman, William (2004), Liberal Democracy and the Social Acceleration of Time (Johns Hopkins University Press).

7 191. Shklar, Judith (1987), ‘Political Theory and the Rule of Law’ in Hutchinson, AC and Monahan, P (ed) The Rule of Law: Ideal or Ideology (Carswell). 192. Singleton, John (2011), Central Banking in the Twentieth Century (CUP). 193. Smailes, David (2017), Tolley’s Income Tax 2017-2018 (LexisNexis). 194. Smithin, John (2000), What Is Money? (Routledge). 195. South, Jim (2014), ‘Are Legislative Intentions Real?’, 40 Monash Law Review 853. 196. Stebbings, Chantal (2009), ‘Consent and Constitutionality in Nineteenth-Century Taxation’ in Tiley, John (ed) Studies in the History of Tax Law - Volume 3 (Hart Publishing). 197. Story, Joseph (1833), Commentaries on the Constitution of the United States (1st ed). 198. Stubbs, William (1906), The Constitutional History of England: in its Origin and Development (Clarendon Press). 199. Sugarman, David (1986) ‘Legal Theory, the Common Law Mind and the Making of the Textbook Tradition’ in William Twining (ed), Legal Theory and Common Law (Basil Blackwell Press). 200. Sweetman, Edward (1925), Australian Constitutional Development (Macmillan & Co. Limited and Melbourne University Press). 201. Taggart, Michael (2008), ‘“Australian Exceptionalism” in Judicial Review’, 36 Federal Law Review 1. 202. Talisse, Robert (2012), ‘Deliberation’ in Estlund, David (ed) The Oxford Handbook of Political Philosophy (OUP). 203. Tamanaha, Brian (2004), On the Rule of Law (CUP). 204. Tan, Kevin (1999), ‘A Short Legal and Constitutional History of Singapore’ in Tan, Kevin, The Singapore Legal System (2nd ed, Singapore University Press). 205. Tanzi, Vito (2012), ‘Tax Systems in the OECD: Recent Evolution Competition and Convergence’ (International Center for Public Policy Working Paper Series, Georgia State University, Working Paper No 10/12). 206. Tanzi, Vito and Schuknecht, Ludger (2000), Public Spending in the 20th Century (CUP). 207. Tapping, Thomas (1853), The Law and Practice of the High Prerogative Writ of Mandamus (T&JW Johnson). 208. Teubner, Gunther (1992), ‘Social Order from Legislative Noise’ in Teubner, Gunther and Febbrajo, Alberto, European Yearbook in the Sociology of Law: State, Law and Economy as Autopoetic Systems (Giuffre). 209. Thain, Wright and Thain, Colin (1995), The Treasury and Whitehall: The Planning and Control of Public Expenditure, 1976–1993 (OUP). 210. Thomas, PDG (1971), The House of Commons in the Eighteenth Century (Clarendon Press). 211. Thornton, John (2009), ‘Do Fiscal Responsibility Laws Matter? Evidence from Emerging Market Economies Suggests Not’, 12 Journal of Economic Reform 127 212. Todd, Alphaeus (1884), Parliamentary Government in the British Colonies (Longmans, Green and Co). 213. Todd, Alphaeus (1887), Parliamentary Government in England: Its Origins, Development and Practical Operation (2nd ed, Longmans, Green and Co). 214. Tuner, Adair (2015), ‘The Case for Monetary Finance — An Essentially Political Issue’, 16th Jacques Polak Annual Research Conference. 215. Turpin, Colin and Tomkins, Adam (2011), British Government and the Constitution (CUP). 216. Twomey, Anne (2004), The Constitution of New South Wales (Federation Press). 217. Twomey, Anne (2010), ‘Pushing the Boundaries of Executive Power — Pape, the Prerogative and Nationhood Powers’, 34 Melbourne University Law Review 313. 218. Vermeule, Adrian (2013), The Constitution of Risk (CUP). 219. Vick, Douglas, (2004), ‘Interdisciplinarity and the Discipline of Law’, 31 Journal of Law and Society 163.

8 220. Vohrah, Koh and Ling (2004), The Constitution of Malaysia (5th ed, Malayan Law Journal). 221. Wade, ECD and Phillips, Godfrey (1931), Constitutional Law (1st ed , Longmans, Green and Co). 222. Wade, ECD and Phillips, Godfrey (1946), Constitutional Law (4th ed, Longmans, Green and Co). 223. Waldron, Jeremy (2012), ‘Democracy’ and Talisse, ‘Deliberation’ in Estlund, David (ed) The Oxford Handbook of Political Philosophy (OUP). 224. Webber, David (2004), ‘Managing the Public's Money: From Outputs to Outcomes — and Beyond’, 4 OECD Journal on Budgeting 101. 225. Wehner (2003), ‘Principles and Patterns of Financial Scrutiny: Public Accounts Committees in the Commonwealth’, 41(3) Commonwealth and Comparative Politics 21. 226. Wehner (2006), ‘Assessing the Power of the Purse: An Index of Legislative Budget Institutions’ 54 Political Studies 767. 227. Wehner (2010a), Legislatures and the Budget Process: The Myth of Fiscal Control (Palgrave Macmillan). 228. Wehner (2010b), ‘Cabinet Structure and Fiscal Policy Outcomes’, 49 European Journal of Political Research 631. 229. White, Fidelma and Hollingsworth, Kathryn (1999), Audit, Accountability and Government (OUP). 230. White, Fidelma and Hollingsworth, Kathryn (2001), ‘Public Finance Reform: The Government Resources and Accounts Act 2000’, Public Law 50. 231. Williams, John (2005), The Australian Constitution: A Documentary History (Melbourne University Press). 232. Williams, Mike (2013), ‘Debt and Cash Management’ in Allen, Richard, Hemming, Richard and Potter, B (eds) The International Handbook of Public Financial Management (Palgrave Macmillan). 233. Wormell, Jeremy (1999), National Debt in Britain 1850–1930, Volumes 1–9 (Rutledge). 234. Wray, Randall (1998), ‘Modern Money’ (Levy Economics Institute Working Paper No 252). 235. Wright, BC and Fowler, PE (2012), House of Representatives Practice (Parliament of Australia).

Cases

236. A v Secretary of State for the Home Department [2005] 2 AC 68. 237. Alcock v Fergie (1867) 4 W W & A'B (L) 285. 238. Anderson v Commissioner of Taxes (Vict) (1937) 57 CLR 233. 239. Anisminic Ltd v Foreign Compensation Commission [1968] 2 AC 14. 240. Attorney-General v Great Southern and Western Railway Co (1925) 41 TLR 576. 241. Attorney-General v Wilts United Dairies Ltd (1922) 91 LJKB 897. 242. Auckland Harbour Board v The King [1919] Gazette Law Reports (NZ) 352. 243. Auckland Harbour Board v The King [1924] AC 318. 244. Bakewell v McPherson (1992) BC9200236 (Supreme Court of South Australia). 245. Barclays Mercantile Business Finance Ltd v Mawson (Inspector of Taxes) [2005] 1 AC 684. 246. Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR 1087. 247. Bowles v Bank of England [1913] 1 Ch 57. 248. Buckley & Young Ltd v Commissioner of Inland Revenue [1978] 2 NZLR 485. 249. Campbell v Hall (1774) 1 Cowp 204 [98 ER 1045]. 250. Canada Trustco Mortgage Co v Canada [2005] 2 SCR 601. 251. Commissioners of Inland Revenue v Duke of Westminster [1936] AC 1.

9 252. Commonwealth v Colonial Ammunition Co Ltd (1924) 34 CLR 198. 253. Confederation des syndicats nationaux v Canada (Attorney General), [2008] 3 SCR 511. 254. Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374. 255. Covert v Minister of Finance of Nova Scotia [1980] 2 SCR 774. 256. Craven (Inspector of Taxes) Appellant v White [1989] AC 398. 257. D’Emden v Pedder (1904) 1 CLR 91. 258. Davis v The Commonwealth (1988) 166 CLR 79. 259. Davis v The Governor and Company of the Bank of England (1824) 2 Bingham 393 [130 ER 357]. 260. De la Chaumette v The Bank of England (1831) 2 Barnewall and Adolphus 385 [109 ER 1186]; (1829) 9 Barnewall and Cresswell 208 [109 ER 78]. 261. Ex parte The Bank of England, in the Matter of Richard Stephens, a Bankrupt (1818) 1 Swanston 10 [36 ER 277]. 262. Fortier v Lambe (1895) 25 SCR 422. 263. Foster v The Governor and Company of the Bank of England (1846) 8 Queen's Bench Reports 689 [115 ER 1032]. 264. Franklin v The Bank of England (1826) 1 Russell 575 [38 ER 221]. 265. Furniss (Inspector of Taxes) v Dawson [1984] AC 474. 266. Gauweiler v Deutscher Bundestag (c-62/14). 267. Governor and Company of the Bank of England v Davis (1826) 5 Barnewall and Cresswell 185 [108 ER 69]. 268. Governor and Company of the Bank of England v Newman (1703) 12 Modern 241 [88 ER 1290]. 269. Haward v the Bank of England (1722) 1 Strange 550 [93 ER 693]. 270. In re McFarland [2004] 1 WLR 1289. 271. In re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291. 272. Inland Revenue Commissioners v Burmah Oil Co Ltd [1982] STC 30. 273. Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991. 274. Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617. 275. Inland Revenue Commissioners v Sheffield and South Yorkshire Navigation Company [1916] 1 KB 882. 276. John v Federal Commissioner of Taxation (1989) 166 CLR 417. 277. MacNiven v Westmoreland Investments Ltd [2003] 1 AC 311. 278. Mohammed (Serdar) v Ministry of Defence [2017] 2 WLR 2879. 279. Mullens v Federal Commissioner of Taxation (1976) 135 CLR 290. 280. New South Wales v Bardolph (1934) 52 CLR 455. 281. New South Wales v Commonwealth (1908) 7 CLR 179. 282. Pape v Federal Commissioner of Taxation (2009) 238 CLR 1. 283. Partington v Attorney General (1869-70) LR 4 (HL) 100. 284. Partridge v The Governor and Company of the Bank of England (1846) 9 Queen's Bench Reports 396 [115 ER 1324]. 285. Pioneer Laundry & Dry Cleaners Ltd v The Minister of National Revenue [1939] SCR 1. 286. Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476. 287. Prebble v Television New Zealand Ltd [1995] 1 AC 321. 288. Pryce v The Directors and Company of the Monmouthshire Canal and Rail Way Companies (1879) 4 App Cas 197. 289. R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2009] AC 453. 290. R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681. 291. R (Lord Carlile of Berriew) v Secretary of State for the Home Department [2015] 1 AC 945.

10 292. R (Miller) v Secretary of State for Exiting the European Union [2017] UKSC 5. 293. R (Public Law Project) v Lord Chancellor [2016] AC 1531. 294. R v Inland Revenue Commissioners (1884) 12 QBD 461. 295. R v Inland Revenue Commissioners, ex parte National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617. 296. R v Lords Commissioners of the Treasury (1836) 4 Ad & E 976 [111 ER 1050]. 297. R v Secretary of State for Foreign Affairs ex parte World Development Movement Ltd [1995] 1 All ER 611. 298. R. v The Lords Commissioners of the Treasury; in re Hand (1836) 4 Ad & El 984 [111 ER 1053]. 299. Rattenbury v Land Settlement Board [1929] SCR 52. 300. Re Baron de Bode (1845) 8 QB 208 [115 ER 854]. 301. Re Euring Estate [1998] 2 SCR 565. 302. Regina v Secretary of State for the Environment, Transport and the Regions [2001] 2 AC 349. 303. Sherdley v Sherdley [1986] 1 WLR 732. 304. Sherdley v Sherdley [1988] AC 213. 305. Shergill v Khaira [2015] AC 359. 306. Sloman v Bank of England (1845) 1 Holt Equity Reports 1, 9 [71 ER 649]. 307. Steele Ford & Newton Respondents v Crown Prosecution Service (No 2) [1994] 1 AC 22. 308. Sutton, Bart v The Governor and Company of the Bank of England (1824) Ryan & Moody 52 [171 ER 940]. 309. The case of Mines (1568) 1 Plowden 310 [75 ER 472]. 310. The King v Lords Commissioners of the Treasury; in re Hand (1836) 4 Ad & E 984 [111 ER 1053]. 311. The King v Lords Commissioners of the Treasury; in re Smyth (1835) 4 Ad& E 286 [11 ER 794]. 312. The King v The Governor and Company of the Bank of England (1819) 2 Barnewall and Alderson 620 [106 ER 492]. 313. The King, on the Prosecution of Parbury and Another, Executors of Dawes v The Governor and Company of the Bank of England (1780) 2 Douglas 524 [99 ER 334] 314. The Queen v Lords Commissioners of the Treasury (1872) 7 QB 387. 315. The Queen v The Secretary of State for War [1891] 2 QB 326. 316. Victoria v The Commonwealth (1975) 134 CLR 338. 317. Williams v Commonwealth (No 1) (2012) 248 CLR 156. 318. Williams v Commonwealth (No 2) (2014) (2012) 252 CLR 416. 319. Woolwich Equitable Building Society v IRC [1993] AC 70. 320. WT Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300. 321. X (Minors) v Bedfordshire County Council [1995] 2 AC 633.

Legislation (including delegated legislation and standing orders)

322. A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 (Cth). 323. A New Tax System (Goods and Services Tax) Act 1999 (Cth). 324. Act of 1665 (7 Ch II) c 1. 325. Act of 1692 (4 W & M) c 3. 326. Act of 1697 (8 & 9 Will III) c 20. 327. Act of 1697 (8 & 9 Wm III) c 20. 328. Act of 1701 (12 & 13 Will III) c 12. 329. Act of 1709 (8 Ann) c 1. 330. Act of 1713 (12 Ann) c 11. 331. Act of 1714 (1 Geo I) c 12. 332. Act of 1716 (3 Geo I) c 8.

11 333. Act of 1717 (3 Geo I) c 9. 334. Act of 1729 (2 Geo II) c 18. 335. Act of 1742 (16 Geo II) c 13. 336. Act of 1751 (24 Geo II) c 47. 337. Act of 1760 (1 Geo III) c 1. 338. Act of 1782 (22 Geo III), 82. 339. Act of 1783 (23 Geo III), c 82. 340. Act of 1785 (25 Geo III), c 52. 341. Act of 1787 (27 Geo III) c 13. 342. Act of 1793 (33 Geo III) c 32. 343. Act of 1822 (3 Geo IV) c 113. 344. Act of 1826 (7 Geo IV) c 64. 345. Act of 1833 (3 & 4 Will IV) c 98. 346. Act of 1845 (8 & 9 Vict) c 4. 347. Act of 1848 (11 & 12 Vict) c 8. 348. Act of 1851 (14 & 15 Vict) c 12. 349. Act of 1852 (15 & 16 Vict) c 20. 350. Act of 1853 (16 & 17 Vict) c 34. 351. Act of 1854 (17 Vict) c 23. 352. Act of 1854 (17 Vict) c 23. 353. Act of 1860 (23 Vict) c 14. 354. Act of 1861 (24 Vict) c 20. 355. Act of Union 1840 (3 & 4 Vict), c 35. 356. Acts Interpretation Amendment Act 1976 (Cth). 357. Acts of 1728 (2 Geo II) cc 1, 3 and 4. 358. Aged Care Act 1997 (Cth). 359. Alcohol Liquor Duties Act 1979 (UK) c 4. 360. Appropriation Act (No 1) 2005-2006 (Cth). 361. Appropriation Act (No. 2) 2006 (UK) c 24. 362. Appropriation Act (No. 2) 2011–2012 (Cth). 363. Appropriation Act (No. 2) 2012–2013 (Cth). 364. Appropriation Act 1815 (55 Geo III) c 187. 365. Appropriation Act 1833 (3 & 4 Will IV) c 96. 366. Appropriation Act 1846 (9 & 10 Vict) c 116. 367. Appropriation Act 1862 (25 & 26 Vict) c 71. 368. Appropriation Act 1895 (NZ). 369. Appropriation Act 1901 (1 Edw VII) c 21. 370. Appropriation Act of 1834 (4 & 5 Wil IV) c 84. 371. Appropriation Act, No 5 2014-15 (Can). 372. Audit Act 1858 (NZ). 373. Audit Act 1870 (NSW). 374. Audit Act 1878 (Can). 375. Audit Amendment Act 1979 (Cth). 376. Auditor-General Act 1977 (Can). 377. Australian Constitutions Act 1850 (13 & 14 Vict) c 59. 378. Australian Courts Act 1828 (9 Geo IV) c 83. 379. Australian Education Act 2013 (Cth). 380. Bank of Canada Act 1934 (Can). 381. Bank of Canada Act 1934 (Can). 382. Bank of England Act 1694 (5 & 6 W & M) c 20. 383. Bank of England Act 1819 (59 Geo III) c 76. 384. Bank of England Act 1946 (9 & 10 Geo 6) c 27. 385. Bank of England Act 1998 (UK) c 11. 386. Bank of England and Financial Services Act 2016 (UK) c 14.

12 387. Banking Act 2009 (UK) c 1. 388. Bill of Rights 1688 (1 & 2 W & M) c 2. 389. Borrowing Authority Act 1996-1997 (Can). 390. British North America Act 1867 (30 & 31 Vict) c 3. 391. Budget Responsibility and National Audit Act 2011 (UK) c 4. 392. Charter of Budget Honesty Act 1998 (Cth). 393. Civil Contingencies Fund Act 1919 (9 & 10 Geor V) c 6. 394. Civil List Act 1837 (1 & 2 Vict) c 2. 395. Coinage Act 1971 (Cth). 396. Commissioners for Customs and Revenue Act 2005 (UK) c 11. 397. Commonwealth Bank Act 1911 (Cth). 398. Commonwealth Inscribed Stock Act 1911 (Cth). 399. Commonwealth Inscribed Stock Amendment Act 2009 (Cth). 400. Commonwealth Inscribed Stock Amendment Act 2013 (Cth). 401. Confirmatio Cartarum 1297. 402. Consolidated Fund (Appropriation) Act 1874 (37 & 38 Vict) c 56. 403. Consolidated Fund Act (No 1) (1901) (1 Edw VII) c 1. 404. Consolidated Fund Act 1838 (1 Vict) c 21. 405. Consolidated Fund Act 1848 (11 Vict) c 3. 406. Consolidated Fund Act 1872 (35 Vict) c 11. 407. Consolidated Fund Act 1872 (35 Vict), c 1. 408. Consolidated Revenue and Audit Act 1931 (Can). 409. Constitution of India 1950. 410. Constitution of Kenya 2010. 411. Constitution of Kiribati 1979. 412. Constitution of Lesotho 1966. 413. Constitution of Malawi 1966. 414. Constitution of Malaysia 1963. 415. Constitution of Malta 1964. 416. Constitution of Mauritius 1968. 417. Constitution of Nigeria 1963. 418. Constitution of Pakistan 1973. 419. Constitution of Sierra Leone 1978. 420. Constitution of the Republic of the Seychelles 1993. 421. Constitution of Uganda 1995. 422. Constitutional Reform Act 2005 (UK) c 4. 423. Contingencies Fund Act 1970 (UK) c 56. 424. Contingencies Fund Act 1974 (UK) c 18. 425. Crown Proceedings Act 1947 (10 & 11 Geo VI) c 44. 426. Crown Proceedings Act 1947 (10 & 11 Geo VI), c 44. 427. Crown Suits Act 1881 (NZ). 428. Currency Act 1965 (Cth). 429. Currency Act 1982 (UK) c 3. 430. Currency Act 1983 (UK) c 9. 431. Currency and Bank Notes Act 1954 (2&3 Eliz II) c 12. 432. Currency and Banknotes Act 1928 (18 & 19 Geo V) c 13. 433. Customs Act 1901 (Cth). 434. Customs Tariff Act 1995 (Cth). 435. European Communities Act 1972 (UK), c 68. 436. Exchange Equalisation Account Act 1979 (UK) c 30. 437. Exchequer and Audit Departments Act 1866 (29 & 30 Vict), c 39. 438. Exchequer Bills Act 1838 (1 Vict) c 12. 439. Excise Act 1901 (Cth). 440. Excise Tariff Act 1921 (Cth).

13 441. Federal Financial Relations Act 2009 (Cth). 442. Finance Act 1921 (11 & 12 Geo V) c 32. 443. Finance Act 1965 (UK) c 25. 444. Finance Act 1998 (UK) c 36. 445. Finance Act 2003 (UK) c 14. 446. Finance Act 2012 (UK) c 14. 447. Finance Act 2013 (UK) c 29. 448. Finance Act 2014 (UK) c 26. 449. Financial Framework (Supplementary Powers) Act 1997 (Cth). 450. Financial Management and Accountability Act 1997 (Cth). 451. Financial Management and Accountability Regulations 1997 (Cth). 452. Fiscal Responsibility Act 1994 (NZ). 453. Fiscal Responsibility Act 2010 (UK) c 3. 454. Government Resources and Accounts Act 2000 (UK), c 20. 455. Health Care (Appropriation) Act 1998 (Cth). 456. Health Insurance (Diagnostic Imaging Services Table) Regulation 2016 (Cth). 457. Health Insurance (General Medical Services Table) Regulation 2016 (Cth) 458. Health Insurance Act 1973 (Cth). 459. Higher Education Support Act 2003 (Cth). 460. Hydrocarbon Oil Duties Act 1979 (UK) c 5. 461. Income and Corporations Taxes Act 1988 (UK). 462. Income Tax Act 1803 (41 Geo III) c 122. 463. Income Tax Act 1842 (5 & 6 Vict) c 35. 464. Income Tax Act 1915 (Cth). 465. Income Tax Act 1986 (Cth). 466. Income War Tax Act 1917 (Can). 467. Inheritance Tax Act 1984 (UK) c 51. 468. Invalid and Old-Age Pensions Act 1943 (Cth). 469. Land Bank Act 1696 (7 & 8 Wm III) c 31. 470. Loan (Temporary Revenue Deficits) Act 1953 (Cth). 471. Loan Act 1888 (Can). 472. Loan Act 1901 (UK) (1 Edw VII), c 12. 473. Loan Act 1942 (Can). 474. Loans Securities Act 1919 (Cth). 475. Local Government Finance Act 1988 (UK) c 41. 476. Local Government Finance Act 1992 (UK) c 14. 477. Maternity Allowance Act 1943 (Cth). 478. Miscellaneous Financial Provisions Act 1946 (9 & 10 Geo VI), c 40. 479. Miscellaneous Financial Provisions Act 1955 (4 & 5 Eliz II) c 6. 480. National Audit Act 1983 (UK), c 44. 481. National Debt Act 1972 (UK) c 65. 482. National Debt Reduction Act 1786 (26 Geo III) c 31. 483. National Health Act 1946 (9 & 10 Geo VI) c 81. 484. National Health Act 1953 (Cth). 485. National Health Contributions Act 1957 (UK) c 54. 486. National Health Service Contributions Act 1965 (UK) c 34. 487. National Insurance Act 1911 (1 & 2 Geo V) c 55. 488. National Insurance Act 1946 (9 & 10 Geo VI) c 67. 489. National Insurance Act 1965 (UK) c 51. 490. National Loans Act 1939 (2&3 Geo VI) c 117. 491. National Loans Act 1941 (4 & 5 Geo VI) c 18. 492. National Loans Act 1968 (UK) c 13. 493. National Savings Bank Act 1971 (UK) c 29. 494. National Welfare Fund Act 1943 (Cth)

14 495. National Welfare Fund Act 1943 (Cth). 496. National Welfare Fund Repeal Act 1985 (Cth). 497. New South Wales Act 1823 (4 Geo IV) c 96. 498. New South Wales Constitution Act 1842 (5 & 6 Vict) c 76. 499. New South Wales Constitution Act 1855 (18 & 19 Vict) c 54. 500. New Zealand Constitution Act 1852 (15 & 16 Vict) c 72. 501. New Zealand Loans Act 1904 (NZ). 502. New Zealand Loans Act 1953 (NZ). 503. Old-Age Pensions Appropriation Act 1908 (Cth). 504. Parliament Acts 1911 and 1949 (1 & 2 Geo V) c 13 and (12, 13 & 14 Geo VI) c 103. 505. Pensions Act 2014 (UK) c 19. 506. Petitions of Right Act 1860 (23 & 24 Vict) c 34. 507. Pharmaceutical Benefits Act 1944 (Cth). 508. Private Health Insurance Act 2007 (Cth). 509. Provisional Collection of Taxes Act 1968 (UK) c 2. 510. Public Finance Act 1977 (NZ). 511. Public Finance Act 1989 (NZ). 512. Public Governance, Performance and Accountability Act 2013 (Cth) 513. Public Revenues and Consolidated Fund Act 1854 (17 & 18 Vict) c 94. 514. Public Works Loan Act 1884 (NSW). 515. Reserve Bank Act 1959 (Cth) 516. Reserve Bank of Canada Act 1985 (Can). 517. Reserve Bank of New Zealand Act 1933 (NZ). 518. Ship Money Act 1640 (16 Car 1) c 14. 519. Social Security (Administration) Act 1999 (Cth). 520. Social Security Act 1938 (NZ). 521. Social Security Act 1964 (NZ). 522. Social Security Act 1991(Cth). 523. Social Security Administration Act 1992 (UK) c 5. 524. Social Security Contributions and Benefits Act 1992 (UK) c 4. 525. Social Services Consolidation Act 1947 (Cth). 526. Superannuation Act 1990 (Cth). 527. Surplus Revenue Act 1908 (Cth). 528. Tax and Superannuation Laws Amendment (2014 Measures Act No 5) 2015 (Cth). 529. Tax Bonus for Working Australians Act (No 2) 2009 (Cth) 530. Taxation Administration Act 1953 (Cth). 531. Taxation of Chargeable Gains Act 1992 (UK) c 12. 532. Tobacco Products Duty Act 1979 (UK) c 7. 533. Treasury Bills Act 1877 (40 & 41 Vict), c 2. 534. Treasury Bills Act 1877 (40 Vict) c 2. 535. Treasury Bills Act 1914 (Cth). 536. Treaty on the Functioning of the European Union C-326 (26/10/2012). 537. Value Added Tax Act 1994 (UK) c 23. 538. War Loan Act 1914 (4&5 Geo 5) c 60. 539. War Loan Act 1914 (Cth). 540. War Loan Act 1914 (Cth). 541. War Loan Act 1915 (5 & 6 Geo V) c 55. 542. War Purposes Loan Act 1917 (NZ).

Government publications

543. Commonwealth Auditor-General, Financial Statement Audits (2005-2017).

15 544. Australian Bureau of Statistics, Australian System of Government Finance Statistics (2005). 545. Australian Office of Financial Management, Annual Reports and Accounts (2005- 2016). 546. Australian Office of Financial Management, Information Memorandum Treasury Bonds (2014). 547. Australian Taxation Office, Addressing the Gap (2017). 548. Australian Taxation Office, Annual Reports and Accounts (2005-2017). 549. Bank of England and Debt Management Office, Statement on Gilt Lending (6 August 2009). 550. Bank of England Asset Purchase Facility Fund Limited, Annual Reports and Accounts (2015-2017). 551. Bank of England Asset Purchase Facility Fund Limited, Certificate of Association (30 January 2009). 552. Bank of England Asset Purchase Facility Fund Limited, Memorandum of Association (30 January 2009). 553. Bank of England Asset Purchase Facility Fund Limited, Memorandum of Association (10 February 2009). 554. Bank of England, Annual Reports and Accounts (2005-2016). 555. Bank of England, The Bank’s Forecasting Platform (Working Paper No 47, 2013). 556. Beveridge, William ‘Social Insurance and Allied Services’ (1942). 557. Commissioner of Audit, 13th Report of the Commissioners appointed to Examine, Take, and State the Public Accounts of the Kingdom (1875). 558. Commons Journal (1705, 1706, 1870). 559. Commons Library, ‘National Insurance Contributions (NICs)’ (2017, Briefing Paper No 4517) 560. Commonwealth of Australia, Budget Papers (2005-2017). 561. Debt Management Office and Debt Management Account, Reports and Accounts 2005-2015. 562. Department for Culture, Media and Sport, National Lottery Distribution Fund Accounts 2005-2015 563. Department of Finance, Commonwealth Entities Financial Statements Guide (2012- 2018). 564. Department of Finance, Consolidated Financial Statements (2005-2015). 565. Department of Finance, Is Less More? Towards Better Commonwealth Performance (2012). 566. Department of Health, Annual Reports and Accounts (2005-2015). 567. Durham (Lord), Report on the Affairs of British North America (1839). 568. Federal-Provincial-Territorial Directors of Income Support: Social Assistance Statistical Report (2016). 569. House of Commons Debates (7 August 1833). 570. House of Commons Debates (11 August 1848). 571. House of Commons Debates (8 June 1875). 572. House of Commons Debates (7 April 1913). 573. House of Commons Debates (14 March 1934). 574. House of Commons Debates (24 March 1958). 575. House of Commons Debates (11 December 1967). 576. House of Commons Debates (12 July 1982). 577. House of Commons Debates (12 July 1982). 578. House of Commons Debates (25 Oct 1999). 579. House of Commons Debates (22 November 2017). 580. House of Commons Debates (28 November 2017). 581. HM Treasury, Alignment (“Clear Line of Sight”) Project (November 2008). 582. HM Treasury, Alignment (Clear Line of Sight) Project (2009, Cm7567).

16 583. HM Treasury, Annual Reports and Accounts (2005-2015). 584. HM Treasury, Consolidated Fund Account and National Loans Fund Account 2005 (2005). 585. HM Treasury, Consolidated Fund Accounts (2006-2016). 586. HM Treasury, Contingencies Fund Accounts (2005-2016). 587. HM Treasury, Exchange Equalization Fund Accounts (2005-2015). 588. HM Treasury, Government Finance Reporting Manual (2004-2016). 589. HM Treasury, Main Supply Estimates (2005-2016). 590. HM Treasury, Managing Public Money (July, 2015). 591. HM Treasury, National Loans Fund Accounts (2005-2016). 592. HM Treasury, Offering Circular (2014). 593. HM Treasury, Public Expenditure Statistical Analysis (2010-2017). 594. HM Treasury, Statements of Excesses (2005-2015). 595. HM Treasury, Supplementary Estimates (2005-2016). 596. HM Treasury, Votes on Account (2005-2016). 597. HMEC, Annual Reports and Accounts (2005-2015). 598. HMRC, Annual Reports and Accounts (2006-2015). 599. HMRC, National Insurance Fund Accounts (Great Britain) (2005-2016). 600. HMRC, National Insurance Fund Accounts (Northern Ireland) (2005-2016). 601. HMTreasury, Annual Report and Accounts (2008-2009). 602. HMTreasury, Changes to Cash Management Operations (Press Release, 9 November 2012). 603. HMTreasury, Dear Accounting Officer Letters (2005-2016). 604. HMTreasury, Financial Reporting Manual (2017/18). 605. HMTreasury, Government Finance Reporting Manual (2004-2016). 606. HMTreasury, The Future of UK Government Debt and Cash Management (1997). 607. House of Commons Paper No 56/2015-16. 608. House of Commons, “Financial Scrutiny: Parliamentary Control over Government Budgets”, (2009, HC804). 609. Joint Committee of Public Accounts, Advance to the Minister for Finance, (Report No 289, 1988). 610. Malaya Constitutional Commission, Report of the Federation of Malaya Constitutional Commission (1957). 611. Ministry of Defence, Excess votes 2007-08 – 2012-13 (2014, HC1075). 612. National Audit Office, Evaluating the Government’s Balance Sheet (2017, HC526). 613. National Audit Office, The Asset Protection Scheme (2010). 614. National Audit Office, Understanding Central Governments Accounts (2014). 615. New Zealand Treasury, A Guide to the Public Finance Act (2005). 616. Office of Budget Responsibility, Crisis and Consolidation in the Public Finances (Working Paper No 7, 2014). 617. Office of Budget Responsibility, The Macroeconomic Model (Briefing Paper No 5, 2013). 618. Osborne, George to King, Mervyn, ‘Transfer of Excess Cash from the Asset Purchase Facility to HM Treasury’ (9 November 2012). 619. Parliament of Commonwealth of Australia, Bills Digest No 129 (2007–08). 620. Reserve Bank of Australia, Annual Reports (2005-2016). 621. Second Reading Speech, Commonwealth Securities and Investment Legislation Amendment Bill 2008 (4 June 2008). 622. Secretary of State for Justice and Lord Chancellor, Green Paper: “The Governance of Britain” (2007, Cm 7170). 623. Treasury Board of Canada, Guide on Grants, Contributions and Other Transfer Payments (2002). 624. Treasury Select Committee, Government’s Cash and Debt Management (22 May 2000).

17 625. United States Government Accountability Office, Office of the General Counsel, Principles of Federal Appropriations Law (USGAO, 3rd ed, 2014). 626. USGAO, Opinion on Commodity Futures Trading Commission-Liabilities Outside of the Government's Control, (B-328450, 2018). 627. Votes and Proceedings of the Legislative Council of New South Wales (1851 and 1852).

Official statistics

628. Australian Bureau of Statistics, Australian System of National Accounts: Time Series Workbook 55120DO002) (27 October 2017). 629. Australian Bureau of Statistics, DO001_2016-17 Employment and Earnings, Public Sector, Australia, 2016-17 (9 November 2017). 630. Australian Bureau of Statistics, Government Finance Statistics DO002_201617 (26 April 2018). 631. Australian Bureau of Statistics, Labour Force, Australia (2018). 632. Bank of England, B72A Ways and Means Advance: Weekly and Quarterly Outstanding figures: 2006-2017 (6 December 2017). 633. Bank of England, BEAPFF Gilt Purchase Operational Results (9 January 2018). 634. Debt Management Office, Gilt Market: Gross and Net Issuance History (27 September 2017). 635. Debt Management Office, Money Markets: Issuance of Treasury Bills and Treasury Bill Stock (6 Jan 2018). 636. HM Treasury, Public Expenditure Statistical Analysis, Tables 1–10 (2010-2017). 637. HMTreasury, Public Expenditure Statistical Analyses: Tables and Datasets (2013– 2017). 638. Office of National Statistics, Public and Private Sector Employment; Headcount (1 May 2018). 639. Office of National Statistics, Public Sector Finances (20 October 2017). 640. Office of National Statistics, United Kingdom National Accounts (31 October 2017). 641. Statistics Canada, Table 385-0033: Canadian Government Finance Statistics (CGFS), Statement of Operations and Balance Sheet for the Federal Government (21 November 2017). 642. Statistics Canada, Table 385-0042: Canadian Government Finance Statistics (CGFS), Statement of Operations and Balance Sheet for the Consolidated Governments (21 November 2017). 643. StatsNZ, Government Finance Statistics (General Government): Year ended June 2016 (16 December 2016). 644. StatsNZ, Local Authority Statistics: June 2017 Quarter (6 September 2017). 645. Treasury Board, Tabled Expenditure Authorities (2018).

Freedom of information requests

646. Bank of England, Response to FOI Request (V232714, 06/12/17). 647. Bank of England, Response to FOI Request (V233383, 06/12/17). 648. Bank of England, Response to FOI Request (V234121, 03/01/18). 649. Bank of England, Response to FOI Request (V236840, 24/01/18). 650. HM Treasury, Internal Review Decision, (R07/18, 28/02/18). 651. HM Treasury, Response to FOI Request (FOI2017/20111, 11/12/17). 652. HM Treasury, Response to FOI Request (FOI2017/22486, 31/01/18). 653. HM Treasury, Response to FOI Request (FOI2018/00228, 24/01/18).

18 Annual financial legislation

United Kingdom

654. Appropriation Act (No. 2) 2005 (UK) c 8 655. Appropriation Act (No. 2) 2006 (UK) c 24 656. Appropriation Act (No. 2) 2007 (UK) c 10 657. Appropriation Act (No. 2) 2008 (UK) c 8 658. Appropriation Act (No. 2) 2009 (UK) c 9 659. Appropriation Act (No. 2) 2010 (UK) c 12 660. Appropriation Act (No. 3) 2005 (UK) c 21 661. Appropriation Act (No. 3) 2008 (UK) c 19 662. Appropriation Act (No. 3) 2010 (UK) c 30 663. Appropriation Act 1873 (36 & 37 Vict) c 79 664. Appropriation Act 2004 (UK) c 9 665. Appropriation Act 2005 (UK) c 3 666. Appropriation Act 2006 (UK) c 6 667. Appropriation Act 2007 (UK) c 1 668. Appropriation Act 2008 (UK) c 3 669. Appropriation Act 2009 (UK) c 2 670. Appropriation Act 2010 (UK) c 5 671. Appropriation Act 2011 (UK) c 2 672. Consolidated Fund Act (No. 2) 2004 (UK) c 38 673. Consolidated Fund Act 2004 (UK) c 1 674. Consolidated Fund Act 2005 (UK) c 23 675. Consolidated Fund Act 2006 (UK) c 24 676. Consolidated Fund Act 2007 (UK) c 31 677. Consolidated Fund Act 2008 (UK) c 33 678. Consolidated Fund Act 2009 (UK) c 27 679. Consolidated Fund Act 2010 (UK) c 39 680. Finance Act 1982 (UK) c 39. 681. Finance Act 1986 (UK) c 41. 682. Finance Act 2013 (UK) c 29. 683. Supply Act 1873 (36 & 37 Vict) c 26 684. Supply Act 1873 (36 & 37 Vict) c 3 685. Supply and Appropriation (Anticipation and Adjustments) Act 2012 (UK) c 1 686. Supply and Appropriation (Anticipation and Adjustments) Act 2013 (UK) c 12 687. Supply and Appropriation (Anticipation and Adjustments) Act 2014 (UK) c 5 688. Supply and Appropriation (Anticipation and Adjustments) Act 2015 (UK) c 10 689. Supply and Appropriation (Main Estimates) Act 2011 (UK) c 10 690. Supply and Appropriation (Main Estimates) Act 2012 (UK) c 13 691. Supply and Appropriation (Main Estimates) Act 2013 (UK) c 28 692. Supply and Appropriation (Main Estimates) Act 2014 (UK) c 28

Australia

693. Appropriation (Drought and Equine Influenza Assistance) Act (No 1) 2007-2008 (Cth). 694. Appropriation (Drought and Equine Influenza Assistance) Act (No 2) 2007-2008 (Cth). 695. Appropriation (Economic Security Strategy) Act (No 1) 2008-2009 (Cth). 696. Appropriation (Economic Security Strategy) Act (No 2) 2008-2009 (Cth). 697. Appropriation (Implementation of the Report of the Expert Panel on Asylum Seekers) Act (No 1) 2012-2013 (Cth).

19 698. Appropriation (Implementation of the Report of the Expert Panel on Asylum Seekers) Act (No 2) 2012-2013 (Cth). 699. Appropriation (Nation Building and Jobs) Act (No 1) 2008-2009 (Cth). 700. Appropriation (Nation Building and Jobs) Act (No 2) 2008-2009 (Cth). 701. Appropriation (Northern Territory National Emergency Response) Act (No 1) 2007- 2008 (Cth). 702. Appropriation (Northern Territory National Emergency Response) Act (No 2) 2007- 2008 (Cth). 703. Appropriation (Tsunami Financial Assistance and Australia-Indonesia Partnership) Act 2004-2005 (Cth). 704. Appropriation (Tsunami Financial Assistance) Act 2004-2005 (Cth) 705. Appropriation (Water Entitlements and Home Insulation) Act 2009-2010 (Cth) 706. Appropriation (Water Entitlements) Act 2009-2010 (Cth) 707. Appropriation Act (No 1) 2004-2005 (Cth). 708. Appropriation Act (No 1) 2005-2006 (Cth). 709. Appropriation Act (No 1) 2006-2007 (Cth). 710. Appropriation Act (No 1) 2007-2008 (Cth). 711. Appropriation Act (No 1) 2008-2009 (Cth). 712. Appropriation Act (No 1) 2009-2010 (Cth). 713. Appropriation Act (No 1) 2010-2011 (Cth). 714. Appropriation Act (No 1) 2011-2012 (Cth). 715. Appropriation Act (No 1) 2012-2013 (Cth). 716. Appropriation Act (No 1) 2013-2014 (Cth). 717. Appropriation Act (No 1) 2014-2015 (Cth). 718. Appropriation Act (No 1) 2015-2016 (Cth). 719. Appropriation Act (No 1) 2016-2017 (Cth). 720. Appropriation Act (No 2) 2004-2005 (Cth). 721. Appropriation Act (No 2) 2005-2006 (Cth). 722. Appropriation Act (No 2) 2006-2007 (Cth). 723. Appropriation Act (No 2) 2007-2008 (Cth). 724. Appropriation Act (No 2) 2008-2009 (Cth). 725. Appropriation Act (No 2) 2009-2010 (Cth). 726. Appropriation Act (No 2) 2010-2011 (Cth). 727. Appropriation Act (No 2) 2011-2012 (Cth). 728. Appropriation Act (No 2) 2012-2013 (Cth). 729. Appropriation Act (No 2) 2013-2014 (Cth). 730. Appropriation Act (No 2) 2014-2015 (Cth). 731. Appropriation Act (No 2) 2015-2016 (Cth). 732. Appropriation Act (No 2) 2016-2017 (Cth). 733. Appropriation Act (No 3) 2004-2005 (Cth). 734. Appropriation Act (No 3) 2005-2006 (Cth). 735. Appropriation Act (No 3) 2006-2007 (Cth). 736. Appropriation Act (No 3) 2007-2008 (Cth). 737. Appropriation Act (No 3) 2008-2009 (Cth). 738. Appropriation Act (No 3) 2009-2010 (Cth). 739. Appropriation Act (No 3) 2010-2011 (Cth). 740. Appropriation Act (No 3) 2011-2012 (Cth). 741. Appropriation Act (No 3) 2012-2013 (Cth). 742. Appropriation Act (No 3) 2013-2014 (Cth). 743. Appropriation Act (No 3) 2014-2015 (Cth). 744. Appropriation Act (No 3) 2015-2016 (Cth). 745. Appropriation Act (No 3) 2016-2017 (Cth). 746. Appropriation Act (No 4) 2004-2005 (Cth). 747. Appropriation Act (No 4) 2005-2006 (Cth).

20 748. Appropriation Act (No 4) 2006-2007 (Cth). 749. Appropriation Act (No 4) 2007-2008 (Cth). 750. Appropriation Act (No 4) 2008-2009 (Cth). 751. Appropriation Act (No 4) 2009-2010 (Cth). 752. Appropriation Act (No 4) 2010-2011 (Cth). 753. Appropriation Act (No 4) 2011-2012 (Cth). 754. Appropriation Act (No 4) 2012-2013 (Cth). 755. Appropriation Act (No 4) 2013-2014 (Cth). 756. Appropriation Act (No 4) 2014-2015 (Cth). 757. Appropriation Act (No 4) 2015-2016 (Cth). 758. Appropriation Act (No 4) 2016-2017 (Cth). 759. Appropriation Act (No 5) 2004-2005 (Cth). 760. Appropriation Act (No 5) 2005-2006 (Cth). 761. Appropriation Act (No 5) 2006-2007 (Cth). 762. Appropriation Act (No 5) 2007-2008 (Cth). 763. Appropriation Act (No 5) 2008-2009 (Cth). 764. Appropriation Act (No 5) 2011-2012 (Cth). 765. Appropriation Act (No 5) 2013-2014 (Cth). 766. Appropriation Act (No 5) 2014-2015 (Cth). 767. Appropriation Act (No 5) 2016-2017 (Cth). 768. Appropriation Act (No 6) 2004-2005 (Cth). 769. Appropriation Act (No 6) 2005-2006 (Cth). 770. Appropriation Act (No 6) 2006-2007 (Cth). 771. Appropriation Act (No 6) 2007-2008 (Cth). 772. Appropriation Act (No 6) 2008-2009 (Cth). 773. Appropriation Act (No 6) 2011-2012 (Cth). 774. Appropriation Act (No 6) 2013-2014 (Cth). 775. Appropriation Act (No 6) 2014-2015 (Cth). 776. Appropriation Act (No 6) 2016-2017 (Cth). 777. Appropriation Act (Parliamentary Departments) 2004-2005 (No 1) (Cth). 778. Appropriation Act (Parliamentary Departments) 2004-2005 (No 2) (Cth). 779. Appropriation Act (Parliamentary Departments) 2005-2006 (Cth). 780. Appropriation Act (Parliamentary Departments) 2006-2007 (Cth). 781. Appropriation Act (Parliamentary Departments) 2007-2008 (Cth). 782. Appropriation Act (Parliamentary Departments) 2008-2009 (Cth). 783. Appropriation Act (Parliamentary Departments) 2009-2010 (Cth). 784. Appropriation Act (Parliamentary Departments) 2010-2011 (Cth). 785. Appropriation Act (Parliamentary Departments) 2011-2012 (Cth). 786. Appropriation Act (Parliamentary Departments) 2012-2013 (Cth). 787. Appropriation Act (Parliamentary Departments) 2013-2014 (No 1) (Cth). 788. Appropriation Act (Parliamentary Departments) 2013-2014 (No 2) (Cth). 789. Appropriation Act (Parliamentary Departments) 2014-2015 (No 1) (Cth). 790. Appropriation Act (Parliamentary Departments) 2014-2015 (No 2) (Cth). 791. Appropriation Act (Parliamentary Departments) 2015-2016 (Cth). 792. Appropriation Act (Parliamentary Departments) 2016-2017 (Cth).

21

SECTION 2: WORKS CONSULTED Books

United Kingdom

793. Allan, TRS (1994), Law, Liberty, and Justice: The Legal Foundations of British Constitutionalism (Clarendon Press). 794. Allan, TRS (2003), Constitutional Justice: A Liberal Theory of the Rule of Law (OUP). 795. Allan, TRS (2013), The Sovereignty of Law: Freedom, Constitution, and Common Law (OUP). 796. Allison, JWF (2013), A.V. Dicey, Comparative Constitutionalism by AV Dicey (OUP) 797. Arrowsmith, Sue (2014), The Law of Public and Utilities Procurement: Regulation in the EU and UK (3rd ed, Sweet & Maxwell). 798. Barnett, Hilaire (2013), Constitutional & Administrative Law (10th ed, Routledge). 799. Bell, John and Bradley, Anthony (1991), Governmental Liability: a Comparative Study (National Committee of Comparative Law) 800. Bellamy, Richard (2007), Political Constitutionalism: A Republican Defence of the Constitutionality of Democracy (CUP) 801. Blackburn, R and Kennon, A (2003), Griffith and Ryle on Parliament: Functions, Practice and Procedures, 2nd edn (Sweet & Maxwell). 802. Bowyer, George (2007), Commentaries on the Constitutional Law of England (Stevens and Norton). 803. Brazier, Alex and Ram, Vidya (2006), The Fiscal Maze: Parliament, Government and Public Money (Hansard Society) 804. Brazier, Rodney (1999), Constitutional Practice: The Foundations of British Government (3rd ed, OUP). 805. Brown, AL (1989), The Governance of Late Medieval England, 1272–1461 (Hodder Arnold). 806. Cam, Helen (1962), Law-Finders and Law-Makers in Medieval England: Collected Studies in Legal and Constitutional History (Merlin Press). 807. Christodoulidis, E and Tierney, S, (2008), Public Law and Politics: the Scope and Limits of Constitutionalism (Edinburgh Centre for Law and Society). 808. Chubb, Basil (1952), The Control of Public Expenditure: Financial Committees of the House of Commons (Clarendon Press). 809. Clark, Peter, Smith, Alan and Tyacke, Nicholas (1979), The English Commonwealth, 1547–1640: Essays in Politics and Society Presented to Joel Hurstfield (Leicester University Press). 810. Cohen, Emmeline (1965), The Growth of the British Civil Service, 1780-1939 (George Allen and Unwin). 811. Coleman, Christopher and Starkey, David (1986), Revolution Reassessed: Revisions in the History of Tudor Government and Administration (OUP) 812. Cornish, William et al (2010), The Oxford History of the Laws of England: Volume XI: 1820–1914 English Legal System (OUP). 813. Cross, Claire, Loades, David and Scarisbrick, JJ (1998), Law and Government under the Tudors: Essays Presented to Sir Geoffrey Elton (CUP). 814. Daintith, Terence and Page, Alan (1999), The Executive in the Constitution: Structure, Autonomy and Internal Control (OUP). 815. Davies, Anne (2001), Accountability: a Public Law Analysis of Government by Contract (OUP). 816. Davies, Anne (2008), The Public Law of Government Contracts (Oxford University Press).

22 817. Dean, DM and Jones, NL (1990), The Parliaments of Elizabethan England (Wiley- Blackwell). 818. Dyzenhaus, David (1997), Legality and Legitimacy: Carl Schmitt, Hans Kelsen and Herman Weller in Weimar (OUP). 819. Elton, GR (1953), The Tudor Revolution in Government (CUP). 820. Elton, GR (1986), The Parliament of England, 1559–1581 (CUP). 821. Fisher, HAL (1911), The Collected Papers of Frederic William Maitland, Downing Professor of the Laws of England: Volumes 1 – 3 (CUP). 822. Foley, Michael (1989), The Silence of Constitutions: Gaps, ‘Abeyances’ and Political Temperament in the Maintenance of Government (Routledge). 823. Fox, David and Ernst, Wolfgand (2016), Money in the Western Legal Tradition (OUP). 824. Godfrey, Mark (2016), Law and Authority in British Legal History, 1200–1900 (CUP). 825. Green, Judith (1986), The Government of England under Henry I (CUP). 826. Harden, Ian (1992), The Contracting State (Open University Press). 827. Harris, GL King (1975), Parliament and Public Finance in Medieval England to 1369 (OUP). 828. Heclo, Hugh and Wildavsky, Aaron (1981), The Private Government of Public Money: Community and Policy inside British Politics (Macmillan). 829. Hexter, Jack (1992), Parliament and Liberty: From the Reign of Elizabeth to the English Civil War (Stanford University Press). 830. Hogg, DM (1938), Halsbury's Laws of England (2nd ed, Butterworths and Co). 831. Ilbert, Courtney (1901), Legislative Methods and Forms (Clarendon Press). 832. Ilersic, AR (1955), Government Finance and Fiscal Policy in Post-War Britain (Staples Press Limited). 833. Jackson, Paul and Leopold, Patricia (2001), O Hood, Phillips and Jackson Constitutional and Administrative Law (Sweet & Maxwell, 8th ed). 834. Jowell, Jeffrey, and Oliver, Dawn (1996-2011), The Changing Constitution (3rd–7th eds, OUP). 835. Jowell, Jeffrey, and Oliver, Dawn (2015), The Changing Constitution (8th ed, OUP). 836. Jupp, Peter (2006), The Governing of Britain, 1688–1848: the Executive, Parliament and the People (Routledge). 837. Keith, Berriedale (1933), The Constitutional Law of the British Dominions (Macmillan). 838. Keith, Berriedale (1938), The Dominions as Sovereign States: The Constitutions and Governments (Macmillan). 839. Le May, GHL (1979), The Victorian Constitution: Conventions, Usages and Contingencies (Palgrave Macmillan). 840. Loughlin, Martin (2000), Sword and Scales: An Examination of the Relationship between Law and Politics (Hart) 841. MacCormick, Neil and Birks, Peter (1986), The Legal Mind: Essays for Tony Honoré (Clarendon Press). 842. Mill, John Stuart (2008 re-issue), On Liberty and Other Essays (OUP). 843. Mitchell, JDB (1954), Contracts of Public Authorities (London School of Economics and Political Science). 844. Normanton, EL (1966), The Accountability and Audit of Governments: A Comparative Study (Manchester University Press) 845. Oliver, Dawn (1999), Common Values and the Public-Private Divide (CUP) 846. Oliver, Dawn, Prosser, Tony and Rawlings, Richard (2010), The Regulatory State: Constitutional Implications (OUP). 847. Pollard, David, Parpworth, Neil and Hughes, David (2007), Constitutional and Administrative Law (4th ed, OUP). 848. Prosser, Tony (1986), Nationalised Industries and Public Control (Wiley-Blackwell).

23 849. Raz, Joseph (1979), The Authority of Law (Clarendon Press). 850. Raz, Joseph (1994), Ethics in the Public Domain (Clarendon Press). 851. Robinson, Ann (1978), Parliament and Public Spending: the Expenditure Committee of the House of Commons, 1970–76 (Ashgate). 852. Roseveare, Henry (1991), The Financial Revolution: 1660-1760 (Routledge) 853. Runciman, David (1997), Pluralism and the Personality of the State (CUP). 854. Runciman, David and Ryan, Magnus (2003), Maitland: State, Trust and Corporation CUP). 855. Schofield, Roger (2004), Taxation under the Early Tudors, 1485–1547 (Blackwell Publishing). 856. Scholl, Hans (2010), E-Government (Routledge). 857. Skinner, Quentin (2002), Visions of Politics: Volume 1 Regarding Method (CUP). 858. Street, H (1953), Governmental Liability: A Comparative Study (CUP). 859. Sunkin, Maurice and Payne, Sebastian (1999), The Nature of the Crown: A Legal and Political Analysis (OUP). 860. Sutherland, Gillian (1972), Studies in Nineteenth-Century Government (Routledge). 861. Tiley, John (ed) (2010), Studies in the History of Tax Law - Volume 3 (Hart Publishing). 862. Tomkins, Adam (2006), Our Republican Constitution (Hart Publishing). 863. Turpin, Colin (1972), Government Contracts (Penguin). 864. Turpin, Colin (1989), Government Procurement and Contracts (Longman). 865. Walkland, SA (1979), The House of Commons in the Twentieth Century (Clarendon Press). 866. Warren, WL (1987), The Governance of Norman and Angevin England, 1086–1272 (Arnold). 867. Whittington et al (2010), The Oxford Handbook of Law and Politics (OUP). 868. Young, E Hilton (1915), The System of National Finance (Smith, Elder and Co).

Australia

869. Birch, AH (1955), Federalism, Finance and Social Legislation in Canada, Australian and the United States (OUP). 870. Bruce Harold Kobayashi and Larry E Ribstein (2007), Economics of Federalism (Edward Elgar). 871. Carney, Gerard (2006), The Constitutional Systems of the Australian States and Territories (CUP). 872. Crisp, LP (1978), Australian National Government (4th ed, Longman Cheshire). 873. Jenks, Edward (1895), The History of the Australasian Colonies (CUP). 874. Kincaid, John and Shah, Anwar (2007), The Practice of Fiscal Federalism: Comparative Perspectives (McGill-Queen's University Press). 875. La Nauze, JA (1972), The Making of the Australian Constitution (Melbourne University Press). 876. Lumb, RD (1965) The Constitutions of the States (2nd ed, University of Queensland Press). 877. Lumb, RD and Ryan, KW (1974), The Constitution of the Commonwealth of Australia Annotated (Butterworths). 878. Mathews, RL (ed) (1974), Intergovernmental Relations in Australia (Angus and Robertson). 879. Mathews, Russell, et al (1988), Taxation and Fiscal Federalism (Australian National University Press). 880. Mills, Stephen (1925), Taxation in Australia (Macmillan). 881. Quick and Garran (1901), The Annotated Constitution of the Australian Commonwealth (Angus and Robertson). 882. Ratchford, BU (1959), Public Expenditures in Australia (CUP).

24 883. Scotton, RB and Ferber, H (1980), Public Expenditures and Social Policy in Australia: Volume I The Whitlam Years, 1972–75 and Volume II The First Fraser Years, 1976– 78 (Longman Cheshire). 884. Selway, Bradley (1997), The Constitution of South Australia (Federation Press). 885. Selway, Bradley (1997), The Constitution of South Australia (Federation Press). 886. Silverster, Edward Kennedy (1853), New South Wales Constitution Bill: the Speeches in the Legislative Council of New South Wales (Thomas Daniel). 887. Spann, RN (1979), Government Administration in Australia (George Allan & Unwin). 888. Taylor, Greg (2006), The Constitution of Victoria (Federation Press). 889. Twomey, Anne (2006), The Chameleon Crown (Federation Press).

Other Commonwealth jurisdictions

890. Allan, JR, et al (eds) (2012), Open Federalism and the Spending Power (McGill- Queen's University Press). 891. Hogg, PW, Monahan, PJ and Wright, WK (2011), Liability of the Crown (4th ed, Carswell). 892. Kennedy, WPM (ed) (1930), Statutes, Treaties and Documents of the Canadian Constitution 1713–1929 (Clarendon Press). 893. Regimbald, Guy and Newman, Dwight (2013), The Law of the Canadian Constitution (1st ed, LexisNexis). 894. Stanley, George (1969), A Short History of the Canadian Constitution (Ryerson Press).

United States of America

895. Balding, Christopher (2012), Sovereign Wealth Funds (OUP). 896. Bassan, Fabio (2011), The Law of Sovereign Wealth Funds (Edward Elgar Publishing). 897. Burley, Justine (ed) (2004), Dworkin and his Critics (Blackwell). 898. Dyzenhaus, David, (ed) (1998), Law as Politics: Carl Schmitt’s Critique of Liberalism (Duke University Press). 899. Jenkins, Glenn, Kuo, Chun-Yan and Shukla, Gangadhar (2000), Tax Analysis and Revenue Forecasting (Harvard Institute for International Development). 900. McCormick, J (1997), Carl Schmitt’s Critique of Liberalism: Against Politics as Technology (University of Chicago Press). 901. Rosa, Harmut (2015), Social Acceleration: A New Theory of Modernity (Columbia University Press). 902. Siegel, Jacob (2012), Demography and Epidemiology of Human Health and Aging (Springer). 903. Sky, Theodore (2003), To Provide for the General Welfare: A History of the Federal Spending Power (Associated University Presses). 904. Story, J, (1873) Commentaries on the Constitution of the United States (4th ed). 905. Tullly, James (ed) (1988), Meaning & Content: Quentin Skinner and his Critics (Princeton University Press).

25 Other jurisdictions*

906. Dolls, Mathias, Fuest, Clemens and Peichl, Andreas (2010), ‘Social Protection as an Automatic Stabiliser’ (Institute for the Study of Labour, Policy Paper No 18). 907. Irwin (2015), ‘Defining the Government’s Debt and Deficit’ (IMF). 908. Moghadam, Reza, Ostry, Jonathan and Sheely, Robert (2011), ‘Assessing Reserve Adequacy’ (IMF). 909. Plamondon, Pierre et al (2002), Actuarial Practice in Social Security (ILO). 910. Wheeler, Graeme (2004), Sound Practice in Debt Management (World Bank). 911. Williams, Mike (2004), ‘Government Cash Management: Good and Bad Practice’ (World Bank).

Articles and discussion/working papers

United Kingdom

912. Pike and Savage (1998), ‘Forecasting the Public Finances in the Treasury’, 19 Fiscal Studies 49. 913. Allan, Trevor [1985], ‘Legislative Supremacy and the Rule of Law’, Cambridge Law Journal 111. 914. Arrowsmith, Sue (1990), ‘Government Contracts and Public Law’, 10 Legal Studies 231. 915. Arrowsmith, Sue (1995), ‘Public Procurement as an Instrument of Policy and the Impact of Market Liberalisation’, 111 Law Quarterly Review 235. 916. Aylmer, GE (1965), ‘Place Bills and the Separation of Powers’, 15 Transactions of the Royal Historical Society 46. 917. Brown, Jethro (1905), ‘The Personality of the Corporation and the State’, 21 Law Quarterly Review 365. 918. Chan, J and Chen, X (2002), ‘Models of Public Budgeting and Accounting Reform’, 2 OECD Journal of Budgeting Supplement 1. 919. Cohn, Margit (2005), ‘Medieval Chains, Invisible Inks: On Non-Statutory Powers of the Executive’, 25 Oxford Journal of Legal Studies 97. 920. Cohn, Margit [2009], ‘Judicial Review of Non-Statutory Executive Powers after Bancoult: a Unified Anxious Model’, Public Law 260. 921. Davies, Anne (2006), 'Ultra Vires Problems in Government Contracts', 122 Law Quarterly Review 98. 922. Fawcett, Paul (2010), ‘Metagovernance and the Treasury’s Evolving Role within the British Core Executive, 1997–2007’. 923. Feldman, David (1989), ’The Nature of Legal Scholarship’, 52 Modern Law Review 498. 924. Freedland, Mark [1994], ‘Government by Contract and Public Law’, Public Law 86. 925. Freedland, Mark [1996], ‘The Rule against Delegation and the Carltona Doctrine in an Agency Context’, Public Law 19. 926. Freedland, Mark [1998], ‘Public Law and Private Finance – Placing the Private Finance Initiative in a Public Frame’, Public Law 288.

* Including publications of the International Monetary Fund (IMF), World Bank, Bank of International Settlements and the International Labor Office (ILO).

26 927. Freedland, Mark [2005], ‘Privatising Carltona: Part II of the Deregulation and Contracting Out Act 1994’, Public Law 21. 928. Gee, Graham and Webber, Gregoire (2010), ‘What is a Political Constitution?’, 30 Oxford Journal of Legal Studies 273. 929. Goodhart, Charles and Lastra, Rosa (2018), ‘Populism and Central Bank Independence’, 29 Open Economics Review 49. 930. Griffith, JAG (1979), ‘The Political Constitution’, 42 Modern Law Review 1. 931. Griffiths, JAG, ‘The Common Law and the Political Constitution’ (2001) 117 Law Quarterly Review 42. 932. Haggen, (1925), ‘The Function of the Crown’, 41 Law Quarterly Review 182. 933. Harden, Ian [1996], ‘Value for Money in Administrative Law’, Public Law 661. 934. Harden, LJ (1993), ‘Money and the Constitution: Financial Control, Reporting and Audit’, 13 Legal Studies 16. 935. Harris, BV (1992), ‘The “Third Source” of Authority for Government Action’, 108 Law Quarterly Review 626. 936. Harris, BV (2007), ‘The “Third Source” of Authority for Government Action Revisited’, 123 Law Quarterly Review 225. 937. Harris, BV (2010), ‘Government “Third Source” Action and Common Law Constitutionalism’, 126 Law Quarterly Review 373. 938. Harris, BV [1989], ‘The Courts and the Cabinet: "Unfastening the Buckle"?’, Public Law 251. 939. Harrison Moore, William (1904), ‘The Crown as Corporation’, 20 Law Quarterly Review 351. 940. Harrison Moore, William (1925), ‘Suits Between States within the British Empire’, 7 Journal of Comparative Legislation and International Law 3rd series 155. 941. Heald, David and George Georgiou, George (2009), ‘Whole of Government Accounts Developments in the UK: Conceptual, Technical and Timetable Issues’, 29 Public Money & Management 219. 942. Himsworth, Chris (2001), ‘Review’, 5 Edinburgh Law Journal 113. 943. Holdsworth, William (1929), ‘A Case-book on Constitutional Law’, 45 Law Quarterly Review 166. 944. Howell (2010), ‘What the Crown May Do’, 15 Judicial Review 36. 945. Laski, Harold (1919), ‘The Responsibility of the State in England’, 32 Harvard Law Review 447. 946. Lester, Matthew, and Weait, Anthony [2005], ‘The Use of Ministerial Powers without Parliamentary Authority: the Ram doctrine’, Public Law 415. 947. Lounsbury, M (2008), ‘Institutional Rationality and Practice Variation: New Directions in the Institutional Analysis of Practice’, 33 Accounting, Organizations and Society 349. 948. Mansfield, G [1989], ‘The "New Approach" to Tax Avoidance: First Circular, then Linear, now Narrower’, British Taxation Review 5. 949. McBarnet, D and Whelan, C (1991), ‘The Elusive Spirit of the Law: Formalism and the Struggle for Legal Control’, 54 Modern Law Review 848. 950. McLean, Janet (2004), ‘The Crown in Contract and Administrative Law’, 24 Oxford Journal of Legal Studies 129. 951. McManus (2010), ‘The Crown’s Common Law Powers’, 15 Judicial Review 27. 952. O’Brien, PK (1988), ‘The Political Economy of British Taxation 1660–1815’, 41 Economic History Review 1. 953. O’Connell (1957), ‘The Crown in the British Commonwealth’, 6 International & Comparative Law Quarterly 103. 954. Pallot, J (1992), ‘Elements of a Theoretical Framework for Public Sector Accounts’, 5 Accounting, Auditing and Accountability Journal 38-59. 955. Prosser, Tony (1982), ‘Towards a Critical Public Law’, 9 Journal of Law and Society 1.

27 956. Rawlings, R (2005), ‘Review, Revenge, Retreat’, 68 Modern Law Review 378. 957. Reitan, EA (1970), ‘From Revenue to Civil List, 1688–1702: The Revolution Settlement and the “Mixed and Balanced” Constitution’, 13 Historical Journal 571. 958. Sainty, JC (1976), ‘The Evolution of the Parliamentary and Financial Secretaryships of the Treasury’, 91 English Historical Review 566. 959. Samuel, Geoffrey (2009), “Interdisciplinarity and the Authority Paradigm: Should Law be taken seriously by Scientists and Social Scientists”, 36 Journal of Law and Society 431. 960. Sugarman, David (1983), ‘Review’, 46 Modern Law Review 102. 961. Sumption, Jonathan (2011), ‘Judicial and Political Decision-Making: The Uncertain Boundary’, 16 Judicial Review 301. 962. Thain, Colin (2004), ‘Treasury Rules OK? The Further Evolution of a British Institution’, 6 British Journal of Politics and International Relations 121. 963. Tomkins, Adam (2008), ‘Review’, 71 Modern Law Review 1038. 964. Turpin, Colin [2000], ‘Review’, Cambridge Law Journal 396. 965. Wade, WH (1992), ‘The Crown – Old Platitudes and New Heresies’, 142 New Law Journal 1275. 966. Walters, Mark (2012), ‘Dicey on Writing the Law of the Constitution’, 32 Oxford Journal of Legal Studies 21. 967. Webber, Gregoire [2014], ‘Parliament and the Management of Conflict’, Public Law 100. 968. Wehner, Joachim (2006), ‘Assessing the Power of the Purse’, 54 Political Studies 767. 969. White, F, Harden, I and Donnelly, K [1994], ‘Audit, Accountability Officers and Accountability: the Pergau Dam Affair’, Public Law 526.

Australia

970. Allars, Margaret (1989), ‘Administrative Law, Government Contracts and the Level Playing Field’, 12 University of New South Wales Law Journal 114. 971. Appleby, Gabrielle (2009), ‘There Must be Limits: the Commonwealth Spending Power’, 37 Federal Law Review 93. 972. Attard, Bernard (2007), ‘New Estimates of Australian Public Borrowing and Capital Raised in London, 1849-1914’, 17 Australian Economic History Review 155. 973. Boxall, Peter (1998), ‘Outcomes and Outputs: The New Resource Management Framework’, 88 Canberra Bulletin of Public Administration 39. 974. Campbell, Enid (1968), ‘The Federal Spending Power Constitutional Limitations’, 8 University of Western Australia Law Review 443. 975. Campbell, Enid (1969), ‘Private Claims on Public Funds’, 3 University of Tasmania Law Review 138. 976. Campbell, Enid (1971), ‘Agreements about the Exercise of Statutory Powers’, 45 Australian Law Journal 338. 977. Campbell, Enid (1971), ‘Parliamentary Appropriations’, 4 Adelaide Law Review 145. 978. Campbell, Enid (1994), ‘Promises of Land from the Crown — Some Questions of Equity in Colonial Australia’, 13 University of Tasmania Law Review 1. 979. Cobbett, Pitt (1903-1904), ‘“The Crown” as Representing “the State”’, 1 Commonwealth Law Review 145. 980. Cuppaidge, WE (1954), ‘The Divisibility of the Crown’, 27 Australian Law Journal 594. 981. Dalton, RP (2006), ‘The Adverse Attributes of Specific Purpose Payments in Australia’, 10 Southern Cross University Law Review 43. 982. Dixon, Owen (1957), ‘The Common Law as an Ultimate Constitutional Foundation’, 31 Australian Law Journal 240.

28 983. Fenna, A (2008), ‘Commonwealth Fiscal Power and Australian Federalism’, 31 University of New South Wales Law Journal 509. 984. Gageler, Stephen (1987), ‘Foundations of Australian Federalism and the Role of Judicial Review’, 17 Federal Law Review 162. 985. Goldsworthy, Jeffrey (2009), ‘Justice Windeyer on the Engineers’ Case’, 37 Federal Law Review 363. 986. Gray, Anthony (2011), ‘Federal Spending Power in Three Federations: Australia, Canada and the United States’, 40 Common Law World Review 13. 987. Guthrie, James (1998), ‘Application of Accrual Accounting in the Australian Public Sector – Rhetoric or Reality’, 14 Financial Accountability & Management 1. 988. Harrison Moore, William (1903-1904), ‘The Enforcement of Administrative Law’, 1 Commonwealth Law Review 13. 989. Hogg, PW (1970), ‘The Doctrine of Executive Necessity in the Law of Contract’, 44 Australian Law Journal 154. 990. Kelly, J (2001), ‘Accrual-Based Budgeting in Australia: Getting behind the Myth to Learn Some Lessons’, 12 Financial Management Institute Journal 17. 991. Kober, R, Lee, J and Ng, J (2010), ‘Mind your Accruals: Perceived Usefulness of Financial Information in the Australian Public Sector under Different Accounting Systems’, 26 Financial Accountability & Management 267-298. 992. Laing, R (2007), ‘Accounting and Accountability’, 22(1) Australasian Parliamentary Review 19. 993. Lawson, Charles (2006), "Special Accounts" under the Constitution: Amounts Appropriated for Designated Purposes', 29 University of NSW Law Journal 114. 994. Lawson, Charles (2008), ‘Re-Invigorating the Accountability and Transparency of the Australian Government's Expenditure’, 32 Melbourne University Law Review 879. 995. Lawson, Charles (2009), 'Can the Executive Influence the "Independence" of the Auditor-General under the Auditor-General Act 1997’, 16 Australian Journal of Administrative Law, 90. 996. Lawson, Charles (2012), 'Should Parliament Determine the Accountability, Transparency and Responsibility Standards for the Australian Government?', 19 Australian Journal of Administrative Law. 997. Lawson, Charles, 'The Legal Structures of Responsible Government and Ministerial Responsibility' (2012) 35 Melbourne University Law Review 1005. 998. Leeming, Mark (1998), ‘The Liability of the Government under the Constitution’, 17 Australian Bar Review 215. 999. Leeming, Mark (2006), ‘The Liabilities of Commonwealth and State Governments’, 27 Australian Bar Review 217. 1000. Lindell, Geoffrey (2007), ‘The Combet Case and the Appropriation of Taxpayers’ Funds for Political Advertising — An Erosion of Fundamental Principles?’, 66 Australian Journal of Public Administration 307. 1001. McLeod, Andrew (2010), ‘The Executive and Financial Powers of the Commonwealth: Pape v Commissioner of Taxation’, 32 Sydney Law Review 123. 1002. Newberry, S (2001), ‘Public Sector Accounting: A Common Reporting Framework?’, 11 Australian Accounting Review 2. 1003. Postle, HT (1929), ‘Commonwealth and Crown’, 3 Australian Law Journal 109. 1004. Saunders, Cheryl (1978), ‘The Development of the Commonwealth Spending Power’, 11 Melbourne University Law Review 369. 1005. Saunders, Cheryl (1987-8), ‘Towards a Theory of s 96’, 16 Melbourne University Law Review 1 (Pt I) and 699 (PtII). 1006. Saunders, Cheryl (2000), ‘Federal Fiscal Reform and the GST’, 11 Public Law Review 99. 1007. Saunders, Cheryl (2009), ‘The Sources and Scope of Commonwealth Power to Spend’, 20 Public Law Review 256.

29 1008. Seddon, Nicholas (2000), ‘The Crown’, 28 Federal Law Review 245. 1009. Selway, Bradley (2005), ‘Of Kings and Officers — The Judicial Development of Public Law’, 33 Federal Law Review 187. 1010. Stone, Adrienne (2014), ‘Constitutional Orthodoxy in the United Kingdom and Australia’, 38 Melbourne University Law Review 836. 1011. Trewavas, K, Botica Redmayne, N and Laswad, F (2012), ‘The Impact of IFRS Adoption on Public Sector Financial Statements’, 60 Australian Accounting Review 86. 1012. Twomey, Anne (2009), ‘The Future of Australian Federalism — Following the Money’, 24 Australasian Parliamentary Review 11. 1013. Twomey, Anne (2010), ‘Pushing the Boundaries of Executive Power — Pape, the Prerogative and Nationhood Powers’, 34 Melbourne University Law Review 313. 1014. Twomey, Anne [2008], ‘Responsible Government and the Divisibility of the Crown’, Public Law 742. 1015. Uhr, John (2006), ‘Appropriations and the Legislative Process’, 17 Public Law Review 173. 1016. Waugh, John (1998), ‘Evading Parliamentary Control of Government Spending: Some Early Case Studies’, 9 Public Law Review 28. 1017. Weeks, Greg (2014), ‘The Public Law of Restitution’, 38 Melbourne University Law Review 198. 1018. Weisbrot, David and Chesterman, Michael (1987), ‘Legal Scholarship in Australia’, 50 Modern Law Review 709. 1019. Winterton, George (2003), ‘The Limits and Use of Executive Power by Government’, 31 Federal Law Review 421. 1020. Winterton, George (2004), ‘The Relationship between Commonwealth Legislative and Executive Power’, 25 Adelaide Law Review 21. 1021. Ziegert, Lotta (2006), ‘Does the Public Purse have Strings Attached? Combet & Anor v Commonwealth of Australia & Ors’, 28 Sydney Law Review 387.

Other Commonwealth jurisdictions

1022. Adam, Marc-Antoine (2008), ‘The Spending Power, Co-operative Federalism and Section 94’, 34 Queen’s Law Journal 175. 1023. Dyzenhaus, David (2013), ‘The End of the Road to Serfdom?’, 63 University of Toronto Law Review 310. 1024. Joseph, PA (1993), ‘The Crown as a Legal Concept’, New Zealand Law Journal 126. 1025. Lajoie, Andree (2008), ‘Current Exercises of the Federal Spending Power: what does the Constitution say about them?’, 34 Queen’s Law Journal 141. 1026. Mathieson, DL (1992), ‘Does the Crown have Human Powers’, 15 New Zealand Universities Law Review 117. 1027. McDonald, Roderick (1997), ‘Recommissioning Law Reform’, 35 Alberta Law Review 831. 1028. Petter, Andrew (1989) ‘Federalism and the Myth of the Federal Spending Power’, 68 Canadian Bar Review 448. 1029. Petter, Andrew (2008), ‘The Myth of the Federal Spending Power Revisited’, 34 Queen’s Law Journal 163. 1030. Walters, Mark (2001), ‘The Common Law Constitution in Canada: Return of Lex non Scripta as Fundamental Law’, 51 University of Toronto Law Journal 91.

United States of America

1031. Alfange (Jnr), Dean (1969), ‘Jeremy Bentham and the Codification of the Law’, Cornell Law Review 58.

30 1032. Bendor, Jonathan and Meirowitz, Adam (2004), ‘Spatial Models of Delegation’, 98 American Political Science Review 293. 1033. Dworkin, Ronald (1967), ‘The Model of Rules’, 35 University of Chicago Law Review 14. 1034. Gordon, David and Leeper, Eric (2002), ‘The Price Level, the Quantity Theory of Money and Fiscal Theory of the Price Level’, National Bureau of Economic Research Working Paper 9084. 1035. Grey, Thomas (1996), ‘Modern American Legal Thought’, 106 Yale Law Journal 493. 1036. Holmes, Oliver Wendall (Jnr) (1987), ‘The Path of the Law’, 10 Harvard Law Review 457. 1037. Kiguel, MA (1989), 'Budget Deficits, Stability, and the Monetary Dynamics of Hyperinflation', 21(2) Journal of Money, Credit and Banking 148. 1038. King, RG and Plosser, CI (1985), 'Money, Deficits, and Inflation' 22 Carnegie- Rochester Conference Series on Public Policy 147. 1039. Lin, H-Y and Chu, H-P (2013), 'Are Fiscal Deficits Inflationary?', 32 Journal of International Money and Finance 214. 1040. Pound, Roscoe (1911), ‘The Scope and Purpose of Sociological Jurisprudence’, 24 Harvard Law Review 591 . 1041. Priest, George (1981), ‘The New Scientism in Legal Scholarship: A Comment on Clark and Posner’, 90 Yale Law Journal 1284. 1042. Protopapadakis, AA and Siegel, JJ (1987), 'Are Money Growth and Inflation Related to Government Deficits? Evidence from Ten Industrialized Economies', 6(1) Journal of International Money and Finance 31. 1043. Sargent and Wallace (1981), ‘Unpleasant Monetarist Arithmetic’, 5 Federal Reserve Bank of Minneapolis Quarterly Review 1. 1044. Weisbach, D (1999), ‘Formalism in the Tax Law’, 66 University of Chicago Law Review 860. 1045. Willoughby, W (1918), ‘The Juristic Conception of the State’, 12 American Political Science Review 192.

Other jurisdictions

1046. Becker, Johannes and May, Elsayyad (2009), ‘The Evolution and Convergence of OECD Tax Systems’, 44(2) Intereconomics 105. 1047. Beirne, John and Fratzscher, Marcel (2013), ‘The Pricing of Sovereign Risk and Contagion During the European Sovereign Debt Crisis’, 34 Journal of International Money and Finance 60. 1048. Fischer, Stanley and Easterly, William (1990), ‘The Economics of the Government Budget Constraint’, 5(2) The World Bank Research Observer 127. 1049. Hutchinson, Terry [2005], ‘The Doctrinal Method: Incorporating Interdisciplinary Methods in Reforming the Law’, 3 Erasmus Law Review 130. 1050. Marti, Candid, (2013), ‘Performance Budgeting and Accrual Budgeting’, 37 Public Performance and Management Review 33. 1051. Phelps, ES (1973), 'Inflation in the Theory of Public Finance', 75(1) The Swedish Journal of Economics 67. 1052. Zumbansen, Peer (2009), ‘Law’s Knowledge and Law’s Effectiveness: Reflections from Legal Sociology and Legal Theory’, 10 German Law Journal 417.

31 General Legislation†

United Kingdom‡

1053. Act of 1714 (1 Geo I), c 12. 1054. Act of 1717 (3 Geo I) c 9. 1055. Act of 1760 (1 Geo III) c 1. 1056. Act of 1780 (20 Geo III) c 54. 1057. Act of 1782 (22 Geo III) c 82. 1058. Act of 1802 (42 Geo III) c 70. 1059. Act of 1806 (46 Geo III) c 141. 1060. Act of 1813 (53 Geo III) c 136. 1061. Act of 1819 (59 Geo III) c 114. 1062. Act of 1822 (3 Geo IV) c 95. 1063. Australian Constitutions Act 1850 (13 & 14 Vict) c 59. 1064. Australian Courts Act 1828 (9 Geo IV) c 83. 1065. Australian Waste Lands Act 1855 (18 & 19 Vict) c 56. 1066. Bank of England Act 1988 (UK) c 11. 1067. Bill of Rights 1688 (1 & 2 Wm & M) c 2. 1068. Canadian Revenue Control Act 1831 (1 & 2 Wm IV) c 23. 1069. Civil List Act 1837 (1 & 2 Vict) c 2. 1070. Consolidated Fund Act 1816 (56 Geo III) c 98. 1071. Contingencies Fund Act 1974 (UK) c 18 1072. Corporations Tax Act 2009 (UK) c 4. 1073. Corporations Tax Act 2010 (UK) c 4. 1074. Deodands Act 1846 (9 & 10 Vict), c 62. 1075. European Communities (Finance) Act 2008 (UK) c 1. 1076. Exchequer and Audit Departments Act 1957 (5 & 6 Eliz II) c 45. 1077. Government Annuities Act 1929 (19 & 20 Geo V) c 29. 1078. Government of Wales Act 2006 (UK) c 32. 1079. Government Trading Funds Act 1973 (UK) c 63. 1080. Humble Petition and Advice 1657. 1081. Income and Corporations Taxes Act 1988 (UK) c 1. 1082. Instrument of Government 1653. 1083. Loan Act 1901 (1 Edw VII) c 12 1084. Local Government (Contracts) Act 1997 (UK) c 65. 1085. Magna Charter 1215. 1086. National Debt Act 1870 (33 & 34 Vict) c 71. 1087. National Debt Act 1958 (7 & 8 Eliz II) c 6. 1088. National Debt Commissioners Act 1818 (58 Geo III) c 56. 1089. New South Wales Act 1823 (4 Geo IV) c 96. 1090. New South Wales Constitution Act 1842 (5 & 6 Vict) c 76. 1091. Office of Receipt of Exchequer Act 1834 (4 & 5 Will IV) c 15. 1092. Order-in-Council empowering the Governor of Queensland to make laws, and to provide for the Administration of Justice in the said Colony (1859) (UK).

† Non-parliamentary legislation (such as Orders in Council, Proclamations and Ordinances) is included under this title. ‡ Including all legislation prior to the establishment of the United Kingdom (1801) and the regnal year is not included in the citation of UK legislation from 1963.

32 1093. Parliament Acts 1911 and 1949 (1 & 2 Geo V), c 13 and (12, 13 & 14 Geo VI), c 103. 1094. Public Accounts and Charges Act 1891 (54 & 55 Vict) c 24. 1095. Public Finance and Accountability (Scotland) Act 2000 (Scot) asp 1. 1096. Quebec Act 1774 (14 Geo III) c 83. 1097. Quebec Revenue Act 1774 (14 Geo III) c 88. 1098. Social Security Act 1975 (UK) c 14. 1099. South Australia Act 1834 (4 & 5 Wm IV) c 95. 1100. Sovereign Grant Act 2011 (UK). 1101. Statute Concerning Tallage (De tallagio Non Concedendo) 1297. 1102. Supreme Court of Judicature (Consolidation) Act 1925 (15 & 16 Geo 5) c 49. 1103. Supreme Court of Judicature Act 1881 (44 & 45 Vict) c 68. 1104. Victoria Constitution Act 1855 (18 & 19 Vict) c 55. 1105. Waste Lands Act 1842 (5 & 6 Vict) c 36. 1106. Western Australia Constitution Act 1890 (53 & 54 Vict) c 26.

Australia

1107. Aged Care Act 1997 (Cth). 1108. Audit Act 1870 (NSW). 1109. Audit Act 1901 (Cth). 1110. Auditor-General Act 1997 (Cth) 1111. Australian Education Act 2013 (Cth). 1112. Civil List Act 1853 (SA). 1113. Claims against the Crown Act 1861 (NSW). 1114. Claims against the Crown Act 1875 (No 27) (NSW). 1115. Claims against the Crown Act 1875 (NSW). 1116. Claims against the Government Act 1853 (SA). 1117. Claims against the Government Act 1857 (NSW). 1118. Claims against the Government Act 1866 (Qld). 1119. Coastal Defence Appropriation Act 1908 (Cth). 1120. Crown Remedies and Liabilities Statute 1865 (Vic). 1121. Customs Act 1901 (Cth). 1122. Disability Care Australia Fund Act 2013 (Cth). 1123. Financial Agreement Validation Act 1929 (Cth). 1124. Financial Agreements (Commonwealth Liability) Act 1932 (Cth). 1125. Financial Agreements Enforcement Act 1932 (Cth). 1126. Financial Framework Legislation Amendment Act (No 3) 2012 (Cth). 1127. Future Fund Act 2006 (Cth). 1128. Nation-building Funds Act 2008 (Cth). 1129. National Debt Sinking Fund Act 1923 (Cth). 1130. National Health Act 1953 (Cth). 1131. Parliamentary Allowances Act 1953 (Cth). 1132. Public Accounts Committee Act 1951 (Cth). 1133. Public Works Loan Act 1884 (NSW). 1134. Remuneration Tribunal Act 1973 (Cth). 1135. South Australian Constitution 1856 (SA). 1136. Surplus Revenue Act 1908 (Cth). 1137. Tasmanian Constitution Act 1855 (Tas). 1138. Tax and Superannuation Laws Amendment (2014 Measures Act No 5) 2015 (Cth). 1139. War Precautions Act 1914-1916 (Cth).

Canada

33 1140. Audit Act 1878 (Can) c 7. 1141. Auditor General Act, SC 1976-77, c 34. 1142. Canada Revenue Agency Act, SC 1999, c 17. 1143. Currency Act RSC 1985 C-52. 1144. Financial Administration Act, RSC, 1985, c F-11. 1145. Loan Act 1888 (Can) c 2. 1146. Loan Act 1942 (Can) c 20. 1147. Public Debt – Loans Act 1872 (Can) c 6.

New Zealand

1148. Audit Act 1858 (NZ). 1149. Decimal Currency Act 1964 (NZ). 1150. Land-tax and Income-tax Act 1909 (NZ). 1151. Loans Fund Amalgamation Act 1879 (NSW). 1152. New Zealand Consolidated Stock Act 1877 (NZ). 1153. New Zealand Loans Act 1904 (NZ). 1154. Public Finance Act 1989 (NZ). 1155. Reserve Bank of New Zealand Act 1989 (NZ). 1156. War Purposes Loan Act 1917 (NZ).

Other Commonwealth jurisdictions

1157. Constitution of Belize 1981. 1158. Constitution of the Democratic Socialist Republic of Sri Lanka 1978 1159. Constitution of the Republic of Malawi 1994. 1160. The Jamaica (Constitution) Order in Council 1962.

United States of America

1161. 31 USC (“Money and Finance”).

Cases

United Kingdom

1162. Attorney-General v Andrews (1850) 2 Mac & G 225 [42 ER 87]. 1163. Attorney-General v Corporation of Lichfield [1848] EngR 668; (1848) 11 Beav 120. 1164. Attorney-General v Mayor, &c, of Newcastle-upon-Tyne and North-Eastern Railway Co (1889) 23 QBD 492 affd [1892] AC 568. 1165. Attorney-General v The Guardians of the Poor of Southampton [1849] EngR 644; (1849) 17 Sim 6 [60 ER 1028]. 1166. Attorney-General v The Mayor of Norwich [1837] EngR 776; (1837) 2 My & Cr 406. 1167. Ayr Harbour Trustees v Oswald (1883) 8 App Cas 623. 1168. Bank of England v Anderson (1837) 2 Keen 328 [48 ER 655]. 1169. Booth v Governor and Company of the Bank of England (1840) VII Clark & Finnelly 509 [7 ER 1163]. 1170. Brunton v Acting Commissioner of Stamp Duties for New South Wales [1913] AC 747. 1171. Churchward v The Queen (1865) LR 1 QB 173. 1172. Coltness Iron Co v Black (1881) 6 App Cas 315. 1173. Commercial Cable Co v Government of Newfoundland [1916] 2 AC 610.

34 1174. Ex parte Jolliffe (1845) 8 Beavan 168 [50 ER 66]. 1175. Ex parte Napier (1852) 18 QB 692 [118 ER 261]. 1176. Ex parte Ram (1837) 3 Mylne & Craig 25 [40 ER 833]. 1177. Ex parts Ricketts (1836) 4 Ad & El 999 [111 ER 1059]. 1178. Gibson v East India Company (1839) 5 Bing (NC) 262; 132 ER 1105]. 1179. Greenwood v F L Smidth & Co (1922) 1 AC 416. 1180. Hampden’s Case (1637) 3 ST 825. 1181. Heriot's Trust v Matson (No 8) (1920) JC 34. 1182. Holden & Co v. CPS (No 2) [1994] 1 AC 22. 1183. Holt v Markham [1923] 1 KB 504. 1184. Hunt v Peacock (1848) 6 Hare 361 [67 ER 1205]. 1185. In re de Bode (1838) 6 Dowl PC 776. 1186. Inland Revenue Commissioners v Sheffield and South Yorkshire Navigation Company [1916] 1 KB 882. 1187. M v The Home Office [1994] 1 AC 377. 1188. Mackay v. Attorney-General for British Columbia [1922] 1 AC 457. 1189. McCawley v King [1920] AC 691. 1190. Oriental Bank Corporation v Wright (1880) 5 App Cas 842. 1191. R (Corner House Research) v Director of the Serious Fraud Office (JUSTICE intervening) [2009] AC 756. 1192. R (Jackson) v Attorney-General [2006] 1 AC 262. 1193. R (on the application of) Boughton v Her Majesty’s Treasury (The Peace Tax Seven Case) [2005] EWHC 1914 (Admin) and [2006] EWCA Civ 504. 1194. Re Molony (1860) 1 Johnson and Hemming 249 [70 ER 740]. 1195. Rederiaktiebolaget Amphitrite v The King (“The Amphitrite”) (1921) 3 KB 500. 1196. Reference Re: the Employment and Social Insurance Act (Canada) [1937] AC 355 . 1197. Regina v Commissioners of Customs and Excise [1970] 1 WLR 450. 1198. Regina v Criminal Injuries Compensation Board, Ex parte Lain [1967] 2 QB 864. 1199. The Baron De Bode v The Queen (1851) 3 HL Cas 449 [10 ER 176]. 1200. The King v The Lords Commissioners of his Majesty's Treasury [1909] 2 KB 183. 1201. The Queen v The Commissioners for Special Purposes of the Income Tax (1888) 21 QBD 313. 1202. The Queen v The Secretary of State for War [1891] 2 QB 326. 1203. Thoburn v Sunderland City Council [2003] QB 151. 1204. Thomas v University of Bradford [1987] AC 795.

Canada

1205. Reference Re: the Employment and Social Insurance Act (Canada) [1936] SCR 427. 1206. Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources) [1989] 2 SCR 49. 1207. Covert v Minister of Finance of Nova Scotia [1980] 2 SCR 774. 1208. Eldridge v British Columbia (Attorney General) [1997] 3 SCR 624. 1209. Lovelace v Ontario [2000] 1 SCR 950. 1210. Massey-Ferguson Industries Ltd v Saskatchewan (minister of Agriculture) [1981] SCR 413. 1211. Pioneer Laundry & Dry Cleaners Ltd v The Minister of National Revenue [1939] SCR 1. 1212. Westbank First Nation v British Columbian Hydro and Power Authority [1999] 3 SCR 134. 1213. Winterhaven Stables Ltd v Canada (Attorney General) 53 DLR (4th) 413. 1214. YMHA Jewish Community Centre of Winnipeg Inc v Brown [1989] SCR 1532.

35 New Zealand

1215. Buckley & Young Ltd v Commissioner of Inland Revenue [1978] 2 NZLR 485.

United States of America

1216. Cincinnati Soap Co v United States, 301 US 308 (1937). 1217. Helvering v Davis, 301 US 619 (1937). 1218. North Carolina ex rel Morrow v Califano, 435 US 962 (1978). 1219. South Dakota v Dole, 483 US 203 (1987). 1220. Steward Machine Co v Davis, 301 US 548 (1937). 1221. Steward Machine Co v Davis, 301 US 548 (1937). 1222. United States v Butler, 297 US 1 (1936). 1223. United States v Gerlach Live Stock Co, 339 US 725 (1950). 1224. Williams v Cth and National Federation of Independent Business v Sibelius (USSC) 132 S. Ct. 2566 (2012).

General Government Publications, Historical Records and Proceedings of Parliaments

United Kingdom

1225. Cabinet Office, Categories of Public Bodies: a Guide for Departments (2012). 1226. Gershon, P, ‘Review of Civil Procurement in Central Government’ (1999). 1227. HMRC, HMRC Tax and NIC Receipts: Monthly and Annual Historical Record (22 May 2015). 1228. HM Treasury, 2007 Pre-Budge Report and Comprehensive Spending Review (2007, Cm 7227). 1229. HM Treasury, Better Accounting for the Taxpayer's Money: Resource Accounting and Budgeting in Government, (1994, Cm 2626). 1230. HM Treasury, Green Paper: “Better Accounting for the Taxpayer's Money: Resource Accounting and Budgeting in Government” (July 1994, 1993/94 Cm 2626). 1231. HM Treasury, Spending Review 2010 (2010, Cm 7942). 1232. HM Treasury, Spending Review and Autumn Statement (2015, Cm 9162). 1233. HM Treasury, White Paper: “Better Accounting for the Taxpayer's Money. The Government's Proposals: Resource Accounting and Budgeting in Government” (July 1995, 1994/95 Cm 2929). 1234. House of Commons Committee of Public Accounts, Fifteenth Report: “Resource Accounting and Budgeting in Government together with the Proceedings of the Committee relating to the Report and the Minutes of Evidence” (May 1995, 1994/95 HC 407). 1235. House of Commons Liaison Committee, Financial Scrutiny: Parliamentary Control over Government Budgets (3 July 2009). 1236. House of Commons Liaison Committee, Parliament and Government Finance: Recreating Financial Security (21 April 2008). 1237. House of Commons Library, The Government Resources and Accounts Bill (30 November 1999). 1238. House of Commons paper No. 56 of 2015-16. 1239. House of Commons Treasury Committee, Fifth Report: “Resource Accounting and Budgeting in Government: the Financial Reporting Advisory Board. Together with the Proceedings of the Committee and Minutes of Evidence” (27 March 1996, 1995/96 HC 309).

36 1240. House of Commons Treasury Committee, Fifth Special Report: “Resource Accounting and Budgeting in Government: the Financial Reporting Advisory Board: the Government's Response to the Fifth Report from the Committee in Session 1995- 96” (1995/96 HC 685). 1241. NAO, ‘The Asset Protection Scheme’ (HC567, 2010). 1242. National Audit Office, Report by the Comptroller and Auditor General: Resource Accounting and Budgeting in Government (25 January, 1994/95 HC 123). 1243. National Audit Office, Report by the Comptroller and Auditor General: “Resource Accounting and Budgeting in Government: the White Paper Proposals” (24 April 1996, 1995/96 HC 334). 1244. National Audit Office, Understanding Central Government’s Accounts (2014). 1245. Report of the Commissioners appointed to Examine, Take, and State the Public Accounts of the Kingdom (1785). 1246. Seely, A, National Insurance Contributions: An Introduction (2014, House of Commons Library, SN4517). 1247. HM Treasury, Supply Estimates: A Guidance Manual (July 2011). 1248. Debt Management Office, DMO: Annual Review 2013-14 (August 2014). 1249. HM Treasury, Alignment (Clear Line of Sight) Project (February 2010).

United States of America

1250. Government Accounting Standards Board, ‘Why Governmental Accounting and Financial Reporting is – and Should be – Different’, (2006).

International materials

1251. Articles of Agreement of the International Bank for Reconstruction and Development (as amended at 27 June 2012). 1252. Articles of Agreement of the International Monetary Fund (as amended at 28 April 2008).

Statistics datasets

1253. London Stock Exchange, Renminbi Securities Listed on the London Stock Exchange (11 December 2015).

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