Bills Digest no. 57 2007–08
Appropriation Bill (No. 3) 2007-08
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Appropriation
Bill
(No. 3) 2007-08
Date introduced:
13 February 2008
House: House
of Representatives
Portfolio:
Finance and Deregulation
Commencement:
On Royal Assent
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
To appropriate additional money for the ordinary annual services of the
government.
Section 83 of the Constitution states:
No money shall be drawn from the Treasury of the Commonwealth
except under appropriation made by law.
There are two broad categories of appropriations:
- annual appropriations, and
- special (or standing) appropriations.
There are usually six annual appropriation Bills. They authorise about
25 per cent of annual Commonwealth spending.
Special (or standing) appropriations—the terms are often used interchangeably—authorise
about 75 per cent of spending. An example of a special appropriation is
the Social Security (Administration) Act 1999 under which age pensions
and other social security payments are made.
Annual appropriations are usually contained in six Appropriation Acts
although there can be more. The first three are:
- Appropriation Act (No. 1)
- Appropriation Act (No. 2 ), and
- Appropriation (Parliamentary Departments) Act (No. 1).
The Bills for the first three Acts are introduced at the same time as
the Budget. The Acts authorise the payment of specified amounts for particular
purposes. Appropriation Act (No. 1) provides for the appropriation of
money from the Consolidated Revenue Fund for the ordinary annual services
of government. Appropriation Act (No. 2) provides for the appropriation
of money from the Consolidated Revenue Fund for purposes other than the
ordinary services of government.
The Senate’s powers and ‘money’
bills
Section 53 of the Constitution states:
Proposed laws appropriating revenue or moneys, or imposing
taxation, shall not originate in the Senate. But a proposed law shall
not be taken to appropriate revenue or moneys, or to impose taxation,
by reason only of its containing provisions for the imposition or appropriation
of fines or other pecuniary penalties, or for the demand or payment
or appropriation of fees for licences, or fees for services under the
proposed law.
The Senate may not amend proposed laws imposing taxation,
or proposed laws appropriating revenue or moneys for the ordinary
annual services of the Government.
The Senate may not amend any proposed law so as to increase
any proposed charge or burden on the people.
The Senate may at any stage return to the House of Representatives
any proposed law which the Senate may not amend, requesting, by message,
the omission or amendment of any items or provisions therein. And the
House of Representatives may, if it thinks fit, make any of such omissions
or amendments, with or without modifications.
Except as provided in this section, the Senate shall
have equal power with the House of Representatives in respect of all
proposed laws.
As this Bill is concerned with the ordinary annual services of the government,
it may not be amended by the Senate.
Funding requirements usually change after the Budget is brought down.
The government may agree to additional funding if the amounts in the three
Budget Appropriation Acts are inadequate and so has to seek parliamentary
approval for additional spending. The process whereby additional funds
are provided is called ‘additional estimates’
and usually begins around November of the Budget year. The approved additional
estimates are incorporated into Appropriation Bills 3 and 4 and Appropriation
(Parliamentary Departments) Bill No. 2. These Bills are the counterparts
of Appropriation Bills No. 1 and 2 and Appropriation (Parliamentary Departments)
Bill No. 1 respectively.
Portfolio Additional Estimates Statements are the additional estimates
counterparts of Portfolio Budget Statements and contain explanations of
Appropriation Bills 3 and 4 and Appropriations (Parliamentary Departments)
Bill No. 2.
Expenses are classified as either departmental or administered. Departmental
expenses are the resources that agencies control and use to produce outputs.
In essence, departmental expenses are the cost of running agencies. Examples
of departmental expenses are salaries, other employee entitlements, and
the use of equipment. Departmental expenses are appropriated as a single
amount for each agency.
Administered expenses are spending that agencies manage on the government’s
behalf. Examples of administered expenses are subsidies, grants and benefit
payments, and the financial assistance grants the Commonwealth makes to
local governments.
The Advance to the Finance Minister (AFM) provides flexibility in that
it allows the spending of funds for unforseen contingencies. The AFM is
a provision authorised by the annual Appropriation Acts and made available
to the Finance Minister as a central contingency fund to provide urgent
funding to agencies throughout the financial year. Examples of the AFM
provision are in section 11 of Appropriation Act (No. 1) 2007-2008
and section 12 of Appropriation Act (No.3) 2006-2007.
AFM funding is available only if it meets two tests:
- the need for funding must be urgent, and
- the need was unforeseen or arose because of erroneous omission or
understatement.
The Bill proposes additional funding for a number of agencies, some of
which flows from election policies. It is not clear whether some of the
policies can be considered to constitute new programs. Traditionally,
new programs are funded under Appropriation Bills No. 2 and 4. After funding
for the programs has been approved, the programs are considered to be
ordinary annual services and so are funded through Appropriation Bills
No. 1 and 3.
The following lists, by agency, some of the measures the Bill covers.
In the second
reading speech, the Minister for Finance and Deregulation identified
additional funding for:
- $402 million for depreciation expense
- this is offset by a reduction in capital spending, so the net
effect on the Budget is neutral
- $38.8 million for Stage 2 of the Enhanced Land Force Initiative,
and
- $70.6 million for additional costs incurred for Operation Astute
in East Timor in 2006-07.
Programs the Minister identified are:
- $100 million for the National Secondary
Schools Computer Fund
- this will provide for grants of up to $1 million for schools
to assist them to provide for new or upgraded information and communications
technology for secondary school students in years 9 to 12
- $33.3 million for the Skilling
Australia for the Future program
- the government estimates that this program will cost $1.3 billion
over four years
- $92.6 million to meet additional costs associated with the previous
government’s Skills for the Future program and to extend that program
until the Skilling Australia for the Future program begins in
April 2008
- $16.2 million to establish the Television
Technical Operators
College and the WesTrac National
Skills Training Centre of Excellence
- $22.7 million for assistance to schools in declared Exceptional Circumstances
areas to increase equitable access to high-quality education opportunities
- $45.7 million in 2007-08 to establish the Workplace Authority, and
- $15 million to establish the Office of the Workplace Ombudsman.
Additional funding for the Department of the Environment, Water, Heritage
and the Arts includes:
- $50.8 million for the Great Barrier Reef Marine Park Structural Adjustment
Package
- $31.8 million to provide rebates to households
for installing solar hot water heaters
- $50.8 million for the National Solar Schools
Plan to encourage improved energy and water efficiency in schools,
and
- $15.2 million to take early action on the National Plan for
Water Security, to accelerate investment in water savings infrastructure
and the purchase of water allocations
- this brings forward spending from 2011-12
- $25 million for the National Water Commission to assist groundwater
licence holders in New South Wales
to adjust to reductions in water access entitlements.
The Department of Families, Housing, Community Services and Indigenous
Affairs will receive an additional $189.8 million to assist people with
disabilities, their families and carers
- this includes annual tax-free payments of $1,000 for each child under
the age of 16 with a disability for whom the carer is receiving Child
Carer Allowance, and $9 million to increase the support available
to people in disability business services.
Additional funding earmarked for the Department of Health and Ageing
includes:
- $14 million to provide incentives to support the take-up of Medicare
Easyclaim by patients attending participating general practices
and specialist practices
- $33.1 million to provide up-front capital grants and recurrent funding
for the establishment of 31 GP Super Clinics,
and to provide incentive payments to GPs
and allied health providers to relocate to these clinics
- $11.7 million to establish a specialist training school at Greenslopes
Private Hospital at the University of Queensland, and
- $31.6 million for hospitals and community health under the Better
Outcomes for Hospitals and Community Health program
- this includes funds for specific commitments announced during
the election such as $10 million for the Flinders Medical Centre clinical teaching
facilities upgrade.
The Bill provides for the Department of Immigration and Citizenship (DIAC)
to receive the following additional amounts:
- $18 million to upgrade the Border Control System
- $81.6 million through the DIAC funding model for increases in the
volume of DIAC’s transactions, including visa applications (mainly student
and skilled migrant) during 2007-08.
The Bill provides for $2.5 million to establish Infrastructure
Australia.
The Bill provides $15.2 million for the introduction of the Enterprise Connect
program, which will replace the Howard Government’s Australian Industry
Productivity Centres.
It is not clear whether some of the policies can be considered to constitute
new programs. Traditionally, new programs are funded under Appropriation
Bills No. 2 and 4. After funding for the programs has been approved, the
programs are considered to be ordinary annual services and so are funded
through Appropriation Bills No. 1 and 3.
The Bill provides for expenditure of more than $2.436 billion. This compares
with $1.119 billion for the equivalent 2006-07 Act.
The provisions in the Bill are virtually identical with those of Appropriation
Act (No. 3) 2006-07 and Appropriation Act (No. 1) 2007-08.
Clause 6 authorises expenditure of $2 436 108 000. The amounts
allocated to each agency, and the breakdown between departmental and administered
items, are set out in Schedule 1.
Subclause 7(1) empowers the Finance Minister to issue money from
the Consolidated Revenue Fund for departmental items for an entity but
restricts the total to that specified in Schedule 1.
Clause 8 deals with administered items in the basic appropriation.
Subclause 8(1) limits the amount of money the Finance Minister
can issue from the Consolidated Revenue Fund to the amount specified (in
Schedule 1), and the amount that the Finance Minister includes
in a determination. The general procedure with respect to the latter is
as follows:
Appropriations for administered expenses are subject
to a determination by the Finance Minister on the amounts to be issued.
The effect of that determination is to prevent any amount of the appropriation
that has not been expensed in the year from being issued from the Consolidated
Revenue Fund. By convention the Finance Minister issues determinations
in relation to administered expenses appropriations following the completion
of each financial year … the determinations for administered expenses
do not reduce the appropriation. Rather, they set the maximum amount
that may be issued from each administered expense appropriation. The
effect of the determination is that administered expense appropriations
that have not been expensed in a year cannot be spent in later years. [1]
Clause 9 deals with reductions of appropriations. The general
process for reductions is:
Amounts appropriated for departmental outputs and for
non-operating costs can be subject to a reduction process, first introduced
in the additional estimates appropriations acts for 2003-2004. Under
this process, on request in writing from a responsible minister, the
Finance Minister may issue a determination to reduce the entity’s departmental
expense or non-operating costs appropriation. Requests for amounts to
be lapsed may arise, for example, because the appropriation is no longer
required. [2]
Section
11 of Appropriation Act (No. 3) 2006-07
titled ‘Departmental items-adjustments’ empowered the Finance Minister
to increase the amount allocated to a departmental item up to a maximum
of $20 million. As noted, departmental expenses are essentially the costs
of running agencies such as salaries and rent. Section 11 provided flexibility
in that when situations arise where an agency finds that it does not have
enough funds for departmental expenses and the shortfall cannot be met
through the normal additional estimates processes, it may request additional
funds by means of a determination that the Finance Minister issues.
It is not clear why a comparable clause has been dropped from this Bill.
A possibility is that it is a way of enforcing financial discipline on
agencies in the context of the government seeking to cut expenditure for
fiscal policy purposes. By eliminating access to this option, agencies
will be forced to operate within the budgets available through the annual
appropriations and additional estimates processes.
Clause 11 deals with the AFM (see page 4 of the Digest). Subclause
11(3) limits the combined total the Finance Minister can issue under
Appropriation Act (No. 1) 2006-07 and the Bill to $175 million.
Subclause 11(5) provides that such an AFM determination by the Finance
Minister is a legislative instrument, but is not disallowable.
A clause comparable to Clause 12 has not appeared in previous
Appropriations Bills. This clause derives from the intervention in indigenous
affairs in the Northern Territory.
A special account named the ‘Northern Territory Flexible Funding Pool
Special Account’ has been created [a special account is a device to simplify
accounting whereby all financial transactions—whether money flowing in
(credit) or out (debit)—that are related to a particular activity are
recorded]. The Minister, in the second
reading speech, provided the following explanation of this Clause
12:
We have inserted a new provision in Appropriation Bill
(No.3)—section 12—to facilitate the achievement of whole-of-government
outcomes relating to Indigenous employment initiatives. The new provision
will provide relevant agencies with the necessary appropriation in order
to spend amounts received from the Northern Territory Flexible Funding
Pool Special Account. Participating agencies will be identified in an
annual determination by the finance minister. The Flexible Funding Pool
model was adopted to permit the reallocation of funds between participating
agencies, where required, to more effectively meet employment objectives
relating to the Northern Territory Emergency Response.
Subclause 12(1) provides that clause 12 applies when three
conditions apply:
- an amount is paid to an agency from the Northern Territory Flexible
Funding Pool Special Account
- the item is an administered item, and
- the item is specified in a written determination the Finance Minister
makes.
Subclause 12(3) provides that the agency must use the money only
for the purpose set out in the determination.
Subclause 12(5) provides that the determination is a legislative
instrument but is not disallowable.
Richard Webb
18 February 2008
Bills Digest Service
Parliamentary Library
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