§ 367. “The Control of the Payment of Bounties.”

The Bill of 1891 provided (chap. IV., secs. 4, 7, 9) that “the payment of bounties” should pass to the Commonwealth; that until the imposition of uniform duties the bounties payable in each State should be “paid by the officers of the Commonwealth;” and that the amount so paid on behalf of any State should be deducted from its share of the surplus. In the Adelaide draft of 1897 these provisions were all omitted, and nothing but “the control of the payment of bounties” passed to the Commonwealth.

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What passes to the Executive Government of the Commonwealth by these words is not a liability, but a right of control. “Control” means regulation, government, direction; it is a matter of authority, not of obligation. To interpret the somewhat vague words of this provision, it is necessary to refer to the other sections of the Constitution dealing with bounties.

Sec. 51—iii. empowers the Federal Parliament to make laws with respect to “bounties on the production or export of goods, but so that such bounties shall be uniform throughout the Commonwealth.”

Sec. 90 provides that on the imposition of uniform duties, the power of the Commonwealth to grant bounties shall become exclusive; that thereupon all laws of the States offering bounties shall cease to have effect; but that “any grant of or agreement for any such bounty” shall be good if made before 30th June, 1898. It follows from that section, read together with sec. 107, that until the imposition of uniform duties the States may make laws offering bounties; but that when the uniform tariff begins the laws so made must cease to have effect and the bounties so offered (unless granted or contracted for before the date named) must cease also.

Sec. 90 declares that nothing in the Constitution prohibits a State from granting any bounty for mining for metals, or from granting, with the consent of both Houses of the Federal Parliament, any bounty whatever.

The Constitution therefore refers to two kinds of bounties—Federal bounties and State bounties. With regard to Federal bounties, the words of this section raise no difficulty; whenever such bounties have been authorized by the Parliament the Federal Executive will control their payment as it controls every other part of the federal administration.

With regard to State bounties, it is hard to see what control the Federal Executive can exercise over payments, beyond seeing that the requirements of the Constitution are complied with. State bounties may come under four heads: (1) Before the uniform tariff each State may, as before, grant what bounties it pleases. (2) After the uniform tariff, there may be (a) State bounties to the extent of grants made, or binding agreements entered into, before 30th June, 1898; (b) State bounties on mining for metals; (c) any State bounties granted with the consent of both Houses of the Federal Parliament. As to grants and agreements made before 30th June, 1898, see Notes, § 383, infra. With respect to State bounties on mining for metals, or given with the consent of the Federal Parliament, the powers reserved to the States leave little room for federal control. Such bounties are arrangements between a State and its producers; they are granted by the State, and payable by the State, and involve no obligation on the part of the Commonwealth.

87. During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides368, of the net revenue369 of the Commonwealth from duties of customs and of excise not more than one-fourth shall be applied annually by the Commonwealth towards its expenditure370.

The balance shall, in accordance with this Constitution, be paid to the several States371, or applied towards the payment of interest372 on debts of the several States taken over by the Commonwealth.

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HISTORICAL NOTE.—The Commonwealth Bill of 1891 contained no guarantee to the States, though the desire for some guarantee was prominent throughout the financial debate. It was specially emphasized by Sir John Bray in his proposal to make the Commonwealth liable for the public debts of the States. (Conv. Deb., Syd., 1891, pp. 836–49.)

In the Finance Committee appointed at the Adelaide Session of the Convention of 1897–8 to frame financial resolutions for submission to the Constitutional Committee the guarantee question was raised at once, and various forms of guarantee were suggested. Almost the first of them was the following, moved by Mr. Holder:— “That, until a uniform tariff has come into force, each State . … shall receive from the federal authority, in monthly instalments, a return of 70 per cent of the customs and excise duties contributed by the State.” (Minutes of Committee, p. 5.) Mr. Holder's proposal, which was almost identical with this section, was negatived, and the guarantees resolved on by the Committee, and agreed to by the Convention, were a limitation of federal expenditure, and a provision for the return of a minimum aggregate surplus (see p. 170, supra). (Conv. Deb., Adel., pp. 889, 1053–67.)

At the Sydney session, 1897, in the general financial debate (p. 176, supra) the question of guarantees was prominent, but no definite proposition was made.

At the Melbourne session (Debates, pp. 2378–9, 2422–31, 2456–7), on the discussion of the Finance Committee's report, which recommended the omission of the Adelaide guarantees, Mr. Holder again (pp. 890–3) suggested a return of a fixed proportion of the revenue, stating that he had put it before both Finance Committees, and now wished to put it before the Convention. He read a clause which he had drafted to carry out his views, and discussed the objections which had been raised. The proposal was referred to by Mr. Solomon (pp. 1056–7), by Mr. Reid (p. 1070), by Sir John Downer (p. 1074), and by Mr. Lyne (p. 1082). The Adelaide guarantees were excised; but various substitutes were unsuccessfully proposed. First came Mr. Henry's “financial assistance” clause (see Historical Note to sec. 96). Then, on the discussion of the West Australian clause (guaranteeing to Western Australia a subsidy which would equalize the “proportionate net loss” of that colony with the “average proportionate net losses” of the other colonies), Sir John Forrest moved an amendment to make the clause apply to all the States—which he afterwards withdrew in favour of a clause of Sir George Turner's, guaranteeing to each State a return equal to its so-called “net loss,” calculated on the customs and excise revenue collected in the State under the federal tariff and the amount which would have been collected on the same trade under the superseded provincial tariff. This also was withdrawn, but Mr. Isaacs afterwards brought it up again in a modified form, and it was finally negatived. (Conv. Deb., Melb., pp. 1122–90, 1244–9.) At last, on the second recommittal, Sir Edward Braddon brought forward and carried the first draft of the “Braddon clause,” which, after being twice recommitted, was ultimately agreed to (p. 198, supra). (Conv. Deb., Melb., pp. 2378–9, 2422–31, 2456–7.) After the fourth Report it was verbally amended.

After the failure of the Convention Bill to secure the statutory majority in New South Wales, both Houses of the New South Wales Parliament asked for the omission of the clause (see p. 216, supra). This would have been agreed to by the Premiers' Conference, 1899, if another form of guarantee could have been suggested which would have been equally satisfactory; but all alternative suggestions were thought by Mr. Reid to be more objectionable than the clause itself. By way of compromise, the words “During a period of ten years, and thereafter until the Parliament otherwise provides” were inserted.

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