Bills Digest no. 58 2007–08
Appropriation Bill (No. 4) 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. 4) 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/.
Purpose
To appropriate additional money for purposes other than 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 latter encompass administered expenses (see below)—which
include grants to the states, payments to the territories and local government,
new administered expenses—and so-called ‘non-operating’ costs. The latter—sometimes
called ‘capital’ costs—comprise:
- ‘equity injections’, which are provided to entities, for example,
to enable investment in new capacity to produce departmental outputs
(see below)
- ‘loans’, which are provided to entities by Government when
an investment to produce future departmental outputs is expected to
result in a direct return such as an efficiency saving (these are generally
not formal loans established in contracts)
- ‘previous years’ outputs’ appropriations, which provide funding
to replenish appropriations used to deliver departmental outputs in
a previous year. This can occur, for example, when a decision is made
to implement a new activity after the date for inclusion in the additional
appropriation bills (see below). Such activities are funded initially
from existing appropriations which are then replenished by the previous
years’ outputs appropriation, and
- ‘administered assets and liabilities’ appropriations, which
provide funding for acquiring new administered assets, enhancing existing
administered assets and discharging administered liabilities relating
to activities administered by entities on behalf of the government.[1]
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 not concerned with the ordinary annual services of the
government, it may be amended by the Senate, so long as the total amount
appropriated by the Bill is not increased. The Senate can, for example,
amend the Bill so as to reduce the total amount appropriated or change
the method, object and destination of any of the proposed expenditure.
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. 4) 2006-2007
and section 12 of Appropriation Act (No.2) 2007-2008.
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, some of which flows from election
policies. The following lists, by agency, some of the measures the Bill
covers as announced in the Minister’s second
reading speech.
The Department of Defence will receive $26.8 million for payment to the
Queensland government for the relocation of Amberley State School as a
result of the expansion of RAAF Amberley. This appropriation is provided
through the reclassification of an existing Defence appropriation.
An additional $33.0 million will be provided under the Commonwealth State
and Territories Disability Agreement for grants to the states for people
with disabilities and their carers.
AusAID will be provided with $466.4 million for Australia’s contribution
to the International Development Association, which is the concessional
lending arm of the World Bank. The amount reflects additional funding
announced in the 2007-08 Mid-year Economic and Fiscal Outlook of $211 million.
It also reflects a change in the accounting treatment for $255 million,
which was previously appropriated with funding for loans in Appropriation
Act (No. 1) 2007-08. The original funding provided in this Act under
the previous accounting treatment will be returned to the budget.
Funding for this Department includes:
- $40.3 million for investment in hospitals and community health under
the Better Outcomes for Hospitals and Community Health program
- this program includes funds for specific commitments announced
during the election, such as $15 million for the Launceston Integrated
Cancer Care Centre, and
- $18 million for a contribution to Grafton Hospital.
An equity injection of $121.4 million is proposed for the Department
of Immigration and Citizenship to, among other things, reimburse the Department
for meeting workload increases flowing from an increase in case volume
in 2006-07, and to provide capital funding for IT system development and
upgrades for the border control system as well as additional capital funding
for the Systems for People IT program.
The appropriation of $20 million brings forward funding under the AusLink
program to allow the early initiation of (unidentified) projects by the
Department of Infrastructure, Transport, Regional Development and Local
Government.
An additional $17.6 million will be provided to the Department of Innovation,
Industry, Science and Research for the Innovation
Investment Fund. This amount represents the profit on the fund’s investment,
and continues the policy that profits generated should be returned to
the fund to create a self-sustaining program of investments.
The Bill provides for expenditure of $898.489 million. This compares
with $636.945 million in the equivalent 2006-07 Act.
Clause 6 authorises expenditure of $898 489 000. The amounts allocated
to each agency, and the breakdown between departmental and administered
items, are set out in Schedule 2.
Clause 7 empowers the Finance Minister to issue money from the
Consolidated Revenue Fund to entities so that the entities can make payments
to the states, territories and local government.
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 Consolidate Revenue Fund to the amount specified (in
Schedule 2), 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.[2]
Clause 11 deals with reductions of appropriations. The general
process for reductions is as follows:
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.[3]
Section
12 of Appropriation Act (No.4) 2006-07 titled
‘Other departmental items-adjustments and borrowings’ empowered the Finance
Minister to increase the amount allocated to a departmental item to a
maximum of $20 million. As noted, departmental expenses are essentially
the costs of running agencies such as salaries and rent. Section 12 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 the 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 12 deals with the AFM (see page 4 of the Digest). Subclause
12(3) limits the combined total the Finance Minister can issue under
Appropriation Act (No.2) 2007-08 and the Bill to
$215 million. Subclause 12(5) provides that an AFM determination
issued by the Finance Minister under clause 12 is a legislative
instrument, but is not disallowable.
Clause 13 provides that when an item of spending or revenue falls
within the purpose for which a Special Account has been created, then
that item may be respectively debited or credited to the Special Account.
Richard Webb
18 February 2008
Bills Digest Service
Parliamentary Library
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