Bills Digest no. 72 2008–09
Appropriation Bill (No. 4) 2008-09
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
Concluding comments
Contact officer & copyright details
Passage history
Date introduced: 4 December 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 approximately $1 041
million for the non-ordinary (or ‘other’) annual services of government.
Section 83 of the Constitution of Australia provides that no
monies may be withdrawn from the Consolidated Revenue Fund except ‘under an
appropriation made by law’. Laws authorising spending are either:
- special appropriations, or
- one of (usually) six annual appropriation acts.
Of the appropriation bills introduced to accompany the May
Budget, by far the most important, in dollar terms, is Appropriation Bill (No.
1). This appropriates funds for the ‘ordinary’ annual services of the
government while Appropriation Bill (No. 2) appropriates funds for ‘other’
annual services. A third Appropriation Bill—Appropriation
(Parliamentary Departments) Bill No. 1—funds the parliamentary
departments.
Section 54 of the Constitution requires that there be a
separate law appropriating funds for the ordinary annual services of the
government. That is why there are separate bills for ordinary annual services
and for other annual services. The distinction between ordinary and other
annual services was set out in a ‘Compact’ between the Senate and the
Government in 1965.[1]
Additional estimates
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 No. 2 and
Appropriation (Parliamentary Departments) Bill No. 1 respectively.
When the Budget is brought down,
the government releases Portfolio Budget Statements. They contain, amongst
other things, explanations of the funding sought through the three
Appropriation Bills. The Portfolio Budget Statements are ‘relevant documents’
for the purposes of section 15AB of the Acts
Interpretation Act 1901. This means that the
Portfolio Budget Statements can be used to help interpret an Act. Portfolio
Additional Estimates Statements[2] are the counterparts of Portfolio Budget Statements and
contain explanations of the funding sought through the additional estimates
Appropriation Bills.
Departmental and
administered expenses
Departmental outputs/expenses are the costs of running
agencies, for example, salaries, depreciation and other day-to-day operating
expenses. Administered expenses are the costs of programs that agencies
administer. While most administered expenses are funded through special
appropriations, some are funded through the Appropriation Bills.
Departmental outputs and administered expenses contribute to
outcomes. They are the results or consequences for the community that the
government wishes to achieve. An example, in the Attorney-General’s portfolio,
is:
An equitable and accessible system of federal civil justice.[3]
Payments for other services fall into four categories:
- payments to the states, territories and local government
(these are paid
under section 96 of the Constitution)
- new administered expenses
- ‘non-operating’ (sometimes called ‘capital’) costs:
- appropriations for ‘administered assets and liabilities’ fund,
for example, the purchase of new administered assets and the reduction of
administered liabilities
- funding in the form of ‘equity injections’ is, for example, for
substantial investment in new assets
- ‘loans’ are provided when an investment is expected to result in
a return to the investment, for example, productivity gains
- ‘previous years’ outputs’ appropriations replenish
funds used to provide departmental outputs in a previous year. This can occur,
for example, when the government has decided to introduce a new program but the
decision comes too late for the program to be funded through the additional
appropriation bills. In such cases, the program is funded initially from
existing appropriations. This funding is later replenished in the form of a
previous years’ outputs appropriation, and
- payments to CAC Act bodies (these are payments made to authorities
and companies established under the Commonwealth
Authorities and Companies Act 1997 (CAC Act). Examples of
CAC Act bodies are the Australian War Memorial, the Australian Film Commission,
and the Australian Broadcasting Corporation).
In previous years, payments to CAC Act bodies were made
‘directly’ to the bodies through Appropriation Act No. 2. Beginning in 2008-09,
payments to CAC Act bodies are paid ‘indirectly’ through portfolio departments.
Appropriation Bill (No. 4) 2008-09 (the Bill) provides funds to the relevant
portfolio department for on-payment to a CAC Act body. For example, under the
Bill, funding for the Australian Broadcasting Corporation, the Special
Broadcasting Corporation, and the Australian Communications and Media Authority
are made ‘indirectly’ through the Department of Broadband, Communications and
the Digital Economy, the latter being the relevant portfolio department. The
Department of Finance and Deregulation maintains a list of CAC Act bodies.[4]
The Bill contains processes for reducing amounts that have
been appropriated but which are subsequently found to be more than was needed.
Reductions can apply to:
- payments to the states, territories and local governments
- administered assets and liabilities, and other departmental
items, and
- CAC Act body payments.
These processes are essentially
the same as those available to the reduction of departmental and administered
expenses for ordinary annual services.[5]
Beginning in 2008-09, the process
for reducing appropriations for payments to the states, territories and local
governments is different from the process in previous years. Under the new
process, the amount reduced is based on agencies’ financial statements in their
annual reports. In essence, the amount of the reduction is the difference
between the total of amounts appropriated less the amount shown as having been
spent in agencies’ financial statements.
The Bill appropriates about $1 041 million.[6] This compares with about $12 691 million in Appropriation Act (No. 2) 2008-09.
For the most part, the Bill’s
provisions are identical to those in Appropriation Act (No. 2) 2008-09. The
Bill differs from Appropriation Act (No. 2) 2008-09 in that the Bill
omits provisions that are not relevant, for example, Part 4 which dealt with
reducing payments to the states, territories and local governments in previous
Acts. This Bills Digest therefore focuses on differences between the
Bill’s provisions and those in Appropriation Act (No. 2) 2008-09. The
main difference is in clause 15, which deals with the Advance to the Finance
Minister.
Clause 3 contains definitions. Most definitions are identical to
those in Appropriation Act (No. 2) 2008-09. The following are some of
the definitions in clause 3:
Clause 6 provides that the total of the items in Schedule 2 is $1 041 383 000.
Clause 7 deals with payments to the states, territories and local
governments. Subclause 7(2) specifies that if the Portfolio Statements
indicate that certain activities are intended to be for a particular outcome,
then expenditure on those activities is taken to be as contributing to the
outcome.
Clause 8 deals with ‘administered items’. Subclause 8(1) provides that the amount identified for an administered item in an outcome can
be used to contribute to that outcome. The wording of subclause 8(2) is
identical to that in subclause 7(2).
Clause 9 deals with administered assets and liabilities. Subclause
9(1) provides that the amount identified for an agency’s administered
assets and liabilities may be applied to achieving any of the agency’s
outcomes, which are specified in paragraphs 9(1)(a) to 9(1)(f). Subclause
9(2) specifies that if the Portfolio Statements indicate that certain
activities were intended to be for a particular outcome, then expenditure on
those activities is taken to be as contributing to the outcome.
Clause 10—Other departmental items—provides that the amount
specified in an other departmental item for an Agency may be applied for the
departmental expenditure of the Agency.
Clause 11 deals with CAC Act body payments. Subclause 11(1) provides that an amount, appropriated for a CAC Act body payment item, may be paid
to the body for that body’s purposes. Subclause 11(2) provides that if
an Act provides that a CAC Act body must be paid amounts that are appropriated
by the Parliament for the purposes of the body, and Schedule 2 contains
a CAC Act body payment item for that body, then the body must be paid the full
amount specified in the item. According to the Explanatory Memorandum:
The purpose of subclause 11(2) is to clarify that subclause
11(1) is not intended to qualify any obligations in other legislation
regulating a CAC Act body, where that legislation requires the Commonwealth to
pay the full amount appropriated for the purpose of the body.[8]
Three clauses in Part 3 deal with reductions to appropriations:
- clause 12 deals with reductions of (a) payments to the
states, territories and local governments and (b) administered items
- clause 13 deals with reductions of (a) administered assets
and liabilities and (b) other departmental items, and
- clause 14 deals with reductions to CAC Act bodies payment
items.
Subclause 12(1) stipulates that the amount by which payments to the
states, territories and local governments and for administered items can be
reduced is the difference between what has been appropriated and what has been
spent, the latter being the amount shown in agencies’ financial statements.
However, paragraph 12(2)(a) gives the Finance Minister power to
determine that subclause 12(1) does not apply or that subclause 12(1) applies as if the amount in the annual report were the amount that the Finance
Minister determines paragraph 12(2)(b). The Explanatory
Memorandum states:
The power in paragraph 12(2)(b) is to ensure that the amount
published for the item can be corrected if, for example, the amount is
erroneous or requires updating after an agency’s annual report is published.[9]
Subclause 12(3) provides
that a determination made under subclause 12(2) is a legislative
instrument, that section 42 (relating to disallowance) of the Legislative
Instruments Act 2003[10] applies to the determination, but that Part 6 (relating to sunsetting
provisions) of the Legislative Instruments Act 2003 does not apply to
the determination. In short, this means that the Finance Minister’s
determinations are disallowable by Parliament, but once made, will not expire.
Subclause 13(1) enables the minister responsible for an agency, or—where
the Finance Minister is responsible for the agency—the chief executive of the
agency, to seek a reduction in administered assets and liabilities, and other
departmental items, while subclause 13(2) empowers the Finance Minister
to make a determination that accords with the request. However, the
determination cannot reduce the appropriation below zero (subclause 13(3)).
Requests are not legislative instruments (subclause 13(5)). While the
Finance Minister’s determinations are legislative instruments and are disallowable,
the determinations—like those in subclause 12(3)—are not subject to the
sunsetting provisions of the Legislative Instruments Act 2003 (subclause
13(6)).
The wording in clause 14—which
deals with reductions to CAC Act bodies payment items— is almost the same as
for clause 13. However, whereas a request can come from the Chief
Executive of an agency for which the Finance Minister is responsible in the
case of clause 13, a similar request must come from the Secretary of the
Department in the case of CAC Act bodies (paragraph 14(1)(b)). Subclause
14(5) confirms that a reduction can be made for a CAC Act body even though
it has been allocated funds under subclause 11(2).
Clause 15–Advance to the Finance Minister differs
from the comparable sections in previous appropriation acts. The Minister for
Finance and Deregulation, the Hon. Lindsay Tanner, in the second reading speech
for Appropriation Bill (No. 3) 2008-09, gave the following explanation:
Based on current indications, we expect demand for issues
from the advance to be greater than the $295 million provided in Appropriation
Act (No. 1) and the $380 million provided in Appropriation Act (No. 2). It is
important that the government can maintain its ability to issue amounts from
the advance in the event that there is an urgent need for expenditure. Accordingly,
clause 13 of Appropriation Bill (No. 3) provides that, irrespective of the
amounts issued from the advance, at the commencement of Appropriation Act (No.
3), the amount available to be issued will be restored to the original limit of
$295 million. A similar clause has been added to Appropriation Bill (No. 4)
which will restore the limit to $380 million.
In addition, a new clause is included in bills (No. 3) and
(No. 4) providing that where amounts included in those bills have also been
subject to an issue from the advance, for example, where an amount is
determined after the additional estimates bills are finalised, then the
appropriation in the bill will be reduced by the amount of the advance. This
change will prevent appropriations for the same expenditure from both the advance
and the bill.[11]
Clause 15 relates to section 15 of Appropriation
Act (No. 2) 2008-09. Section 15 allows the Finance
Minister to spend up to $380 million if he or she is satisfied that there
is an urgent need for expenditure that is not provided for—or is insufficiently
provided for—because of an erroneous omission or understatement or because the
expenditure was unforeseen. Under subsection 15(2), expenditure from the
Advance to the Finance Minister is treated as if it had been included in
Schedule 2 of Appropriation Act (No.2) 2008-09 (Schedule 2 enumerates
the services for which money is appropriated). In other words, the effect of
subsection 15(2) is to treat expenditure from the Advance to the Finance
Minister as if it had been included in—and hence appropriated by—Appropriation
Act (No. 2) 2008-09. Subsection 15(3) provides that the amount expended
from the Advance must not exceed $380 million.
Subclause 15(1) provides that if the Finance Minister
has determined—under subsection 15(2) of Appropriation Act (No. 2)
2008-09—to increase an amount in Schedule 2 of that Act because of
expenditure from the Advance, then that amount is to be disregarded for
the purposes of determining the maximum amount of the Advance. In other words,
for the purposes of determining the amount of the Advance, prior expenditure
from the Advance is to be disregarded, so that the Advance is reinstated to a
maximum of $380 million.
Subclause 15(2) is designed to prevent double appropriations—once
under the Bill and once from the Advance to the Finance Minister—for the same
activity/item. Paragraph 15(2)(a) relates to expenditure under the Bill
while paragraph 15(2)(b) relates to the Advance to the Finance
Minister. Subclause 15(2) provides that if the Bill appropriates funds
for a particular expenditure (paragraph 15(2)(a)), and the Finance
Minister has already made a determination, before the Bill commences, for
expenditure for the same purpose from the Advance to the Finance Minister (paragraph
15(2)(b)), then the amount that the Bill appropriates is reduced by the
amount already expended from the Advance to the Finance Minister.
Clause 16—Crediting amounts to Special Accounts provides
that if a purpose of a special account is a purpose that an item
covers—irrespective of whether that item expressly refers to the special
account—then amounts may be debited against the appropriation for that item and
credited to the special account.
Clause 17 deals with the conditions attached to
grants of financial assistance to the states, territories and local governments.
Section 96 of the Constitution provides in part:
… the Parliament may grant financial assistance to any State
on such terms and conditions as the Parliament thinks fit.
According to the Explanatory Memorandum, clause 17:
… delegates Parliament’s power under section 96 of the
Constitution to provide financial assistance to the States to the responsible
Minister listed in Schedule 1 of the Bill.[12]
Subclause 17(1) provides that it applies to
payments to the states, territories and local government for the outcomes
listed in column 2 of Schedule 1. Paragraph 17(2)(a) provides that payments must accord with the conditions attached to the payments—as
established by the process set out in subclause 17(3)—and also with any
determination as to the amounts and timing of payments paragraph 17(2)(b). Subclause 17(3) provides that the way terms and conditions are
established is for the relevant Minister to make a determination in writing
before or after the Act commences. Subclause 17(4) provides that
determinations mentioned in paragraph 17(2)(a) and determinations
made under paragraph 17(2)(b) are not legislative instruments. The
Explanatory Memorandum explains that the reason the determinations are not
legislative instruments is:
… because the determinations are not altering the
appropriations approved by Parliament. Determinations under subclause 17(2)
will simply determine how appropriations for State, ACT, NT and local government
items will be paid. The determinations are issued when required. However,
payments can be made without either determination.[13]
Schedule 1 lists the agencies responsible for making payments to the
states, territories, and local governments, the outcomes for which payments are
made, and the names of the Ministers responsible for determining conditions and
for determining payments.
Schedule 2 lists the services for which money is appropriated. The appropriations
are broken down by agency, and by the form that the payments take, for example,
new administered expenses.
Concluding
comments
As noted, most to the Bill’s provisions are identical to
those in Appropriation Act (No. 2) 2008-09. The treatment of the Advance
to the Finance Minister in clause 15 is, however, unusual and raises the
question of why the Bill adopts the approach it does to reinstating the amount
of the Advance to $380 million. Presumably, an alternative approach would be to
increase the amount of the Advance.
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2464.
Richard Webb
28 January 2009
Bills Digest Service
Parliamentary Library
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