You can't cap assemblies common fund - Supreme Court to govt
It is unconstitutional for the government to cap funds allocated to the District Assemblies Common Fund (DACF), the Supreme Court has declared.
A seven-member panel of the court, in a unanimous decision, held that the allocation of funds to the DACF was a constitutional provision which did not provide for its capping.
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According to the court, presided over by the Chief Justice, Justice Sophia Akuffo, the inclusion of the funds allocated to the DACF as part of the statutory funds which were capped in adherence to the Earmarked Funds Capping and Realignment Act, 2017 (Act 947) violated Article 252 Clause 2 of the 1992 Constitution.
The court further held that Section 126 of the Local Governance Act, 2016 (Act 916), which also limited the proportion of revenue due for allocation to the DACF, also violated Article 252(2) of the 1992 Constitution.
Per the court’s decision, sections of Act 947 and Act 916 which gave the government the legal backing to cap the funds allocated to the DACF were unconstitutional and, therefore, null and void.
“To the extent that sections 1(2), 2(b),3(1)(b), 3(5)(a), 7(a) and 8 of the Earmarked Funds Capping and Realignment Act, 2017 (Act 947) and Section 126 of the Local Governance Act, 2016 (Act 916) purport to limit the proportion of revenue due for allocation to the District Assemblies Common Fund, as established by Article 252(2) of the Constitution, the same are in contravention of the Constitution and are hereby declared to be null and void,” it held.
Article 252(2) of the 1992 Constitution stipulates that Parliament shall “make allocation of not less than five per cent of the revenues of Ghana to the district assemblies for development and the amount shall be paid into the District Assemblies Common Fund in quarterly instalments”.
The unanimous decision of the court was delivered by Justice Akuffo on June 12, 2019.
Other members of the panel were Justices Sophia Adinyera, Jones Dotse, Paul Baffoe-Bonnie, Sule Gbadegbe, Gabriel Pwamang and Agnes Dordzie.
Plaintiffs and defendant
The legal challenge which gave rise to the Supreme Court’s judgment was initiated by two National Democratic Congress (NDC) Members of Parliament (MP), Mr Benjamin Komla Kpodo, the MP for Ho Central, and Mr Richard Quashigah, the MP for Keta.
The Attorney-General (A-G) was the defendant in the case.
Counsel for the plaintiffs was Dr Dominic A. Ayine, a former Deputy A-G, while Mr Godfred Yeboah Dame, a Deputy A-G, represented the state.
Act 947 is not entirely void
The apex court, however, held that taking out the DACF from the Earmarked Funds Capping and Realignment Act, 2017(Act 947) did not mean the whole of Act 947 was null and void.
“We must emphasise, however, that this finding does not make the rest of the act void. We have taken due note of the desire of the government to free itself from the constraints imposed on it by the statutory earmarking of revenue which leaves very little revenue for the general development of the nation.
“The government may realign statutory earmarked funds, but, certainly, it may not do so to the constitutional funds without amending the relevant provisions of the Constitution in accordance with the dictates of the Constitution,” it held.
It further ruled that the decision did not also mean that other levies imposed by Parliament for specific funds formed part of the revenues from which not less than five per cent must be allocated to the DACF.
“For the avoidance of doubt, our decision must not be interpreted to mean that levies imposed by Parliament to specifically provide money for specific-purpose funds, such as the National Health Insurance Levy under Act 650, the Energy Sector Levy (ESLA) under Act 899 or the Petroleum Products Levy under Act 536, are to be treated as forming part of total revenues of Ghana for purposes of Article 252(2).
“Such levies could not have been in the contemplation of the framers of the Constitution, since they are not regular and recurring sources of revenue to government,” the court held.
Capping of funds
Parliament passed the Earmarked Funds Capping and Realignment Act, 2017(Act 947) on March 28, 2017.
The act provides that the earmarked funds for each financial year should be equivalent to 25 per cent of revenue.
Earmarked funds include the DACF and the Ghana Education Trust Fund (GETFund).
Making a case before the bill was passed into law in 2017, the Minister of Finance, Mr Ken Ofori-Atta, told Parliament that the capping arrangement had become necessary to remove the rigidities in public expenditure.
He said the government was left with virtually nothing after taking out interest payments, compensation of employees and earmarked funds from revenues.
That, he said, had resulted in the unsustainable cycle of borrowing by the government to fund any other important expenditure to meet the aspirations of the people.
Legal challenge
On December 27, 2017, Mr Kpodo and Mr Quashigah filed a legal challenge against Act 947, Act 916 and other laws such as the Petroleum Revenue Management Act, 2011 (Act 815) which they argued allowed the government not to allocate the required percentage of the total revenue of the country to the DACF, as stipulated by Article 252 (2) of the Constitution.
According to the plaintiffs, such a move was inconsistent and in contravention of Article 252(2) of the Constitution and was thus unconstitutional and void.
It was their argument that the Minister of Finance relied on Act 947, Act 916 and Act 815 to cap the allocation to the DACF by excluding non-tax revenue and oil revenue.
They contended that from the choice of words used, the framers of the Constitution intended that five per cent of all revenues accruing to the government was required to be allocated to the DACF.
Not all revenues
In its judgment, the Supreme Court held that revenues from which the five per cent must be allocated to the DACF included tax revenues and non-tax revenues paid to the central government, as well as petroleum revenues which were allotted to support the annual budget.
It was, however, its decision that certain revenues which came into the purse of the central government were not part of the total revenues and, therefore, portions must not be allocated to the DACF.
The exempted revenues include “foreign loans and grants, petroleum receipt paid into the Heritage and the Stabilisation funds, retained internally generated funds and levies imposed by Parliament for specific purposes under an Act of Parliament”.
