Bills Digest no. 132 2005–06
Appropriation Bill (No. 1) 2006–2007
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
Main Provisions
Endnotes
Contact Officer & Copyright Details
Passage History
Appropriation
Bill (No. 1) 2006–2007
Date introduced: 9 May 2006
House: House of Representatives
Portfolio: Finance and Administration
Commencement: On Royal Assent.
To appropriate approximately $53.335 billion
for the ordinary annual services of the Government.
Section 83 of the Constitution provides that no monies may be withdrawn
from the Consolidated Revenue Fund (CRF) except ‘under an appropriation
made by law’. Laws authorising spending are either:
- special appropriations, or
- six (usually) annual Appropriation Acts.
Special appropriations—which account of about 75 per cent of spending—are
spending authorised by Acts for particular purposes. Examples are age
pensions, disability support pensions and the Newstart Allowance paid
under the Social Security (Administration) Act 1999, and the Family
Tax Benefits A and B paid under A New Tax System (Family Assistance)
(Administration) Act 1999.
The Appropriation Bill (No. 1) 2006-2007 (the Bill) appropriates funds
for the ‘ordinary annual services of the Government’. By comparison Appropriation
Bill (No. 2) 2006-2007 appropriates funds for other annual services. 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 (the
Compact has been updated to take account of the adoption of accrual budgeting).
The amounts allocated to each Commonwealth portfolio and the breakdown
between departmental outputs and administered expenses, are set out in
Schedule 1.
Departmental outputs are expenses that portfolio departments and agencies
control. They are essentially the cost of running agencies – for example
are salaries and other day-to-day operating expenses. The bulk of appropriations
in the Bill are for departmental expenses. Administered expenses are those
that agencies administer on the Government’s behalf. While most administered
expenses are funded through special appropriations, some are funded through
the Bill. The ‘regional partnerships’ program and the Bass Strait Passenger
Vehicle Equalisation Scheme are examples of administered expenses funded
through the Bill.(1)
Departmental outputs and administered expenses contribute to outcomes.
They are the results or consequences for the community that the Government
wishes to achieve. For example, the Bill appropriates funds for the Federal
Magistrates Service under Outcome 1 which is:(2)
To provide the Australian community with a simple and
accessible forum for the resolution of less complex disputes within
the jurisdiction of the Federal Magistrates Service.
Section 53 of the Constitution provides that the Senate may not amend
proposed laws appropriating revenue or moneys for the ordinary annual
services of the Government. The Senate may, however, return to the House
of Representatives any such proposed laws requesting, by message, the
omission or amendment of any items or provisions therein.
In May 2005, the Commonwealth announced its intention to introduce a
workplace relations reform package. In response, the Australian Council
of Trade Unions instituted a national campaign opposing the proposed reforms.
The Government also commenced a national advertising campaign to promote
the proposed reforms. The advertisements were funded from appropriations
to the Employment and Workplace Relations Portfolio under the Appropriation
Act (No. 1) 2005-2006.
The crucial question argued before the High Court was whether the purpose
for which the Commonwealth decides to appropriate money must be described
in the appropriation Acts with some degree of specificity and, if so,
what degree of specificity would be required under the Australian Constitution.
In Combet, all members of the High Court agreed that the Constitution
requires some degree of specificity. The majority in this matter, comprised
of Gummow, Hayne, Callinan and Heydon JJ, endorsed the view that so-called
blank appropriations, that are appropriations without any specificity,
are invalid.(4) Further, the majority, with Gleeson
CJ agreeing, held that the degree of specificity is to
be set by Parliament.
However, the majority did not provide a conclusive answer as to where
the specificity threshold may lie. Rather, arguably even sidestepping
the issue, their Honours held that departmental items specified in appropriation
bills are not connected to outputs which could have provided some specificity.
As a result, their Honours did not hesitate to find that the expenditure
for the advertising campaign was covered by the appropriation Act. On
this point, Gleeson CJ provided some
form of guidance, arguing that outputs are valid expressions of Parliament’s
choice, unless they are expressed in such broad terms that they are devoid
of meaning.(5) His Honour found that the breadth of the output
stated for the departmental item was sufficient to support the expenditure
by the government.
The decision by the majority was heavily criticised by the dissenting
Justices Kirby and McHugh. McHugh argued that the approach taken by the
majority would appear to authorise agencies ‘to spend money on whatever
outputs it pleases’.(6) Justice Kirby
made a similar point, especially noting that appropriations cannot be
denuded of meaning without violating constitutional commands.(7)
The total amount appropriated from consolidated revenue under the Bill
is approximately $53.335 billion (as compared to the Appropriation
Act (No. 1) 2005-2006, where the amount was approximately $47.371
billion).(8) As usual, by far the largest single portfolio
appropriation is Defence with some $17.541 billion. Whilst aggregate appropriations
for the various portfolios and agencies within each portfolio are contained
in Schedule 1 of the Bill, more detailed information for all portfolios
can found in their respective Portfolio Budget Statements at http://www.budget.gov.au/2006-07/pbs/html/index.htm
The main provisions of the Bill are in practice identical to Appropriation
Act (No. 1) 2005-06, with only a few minor deletions to take account
of redundant provisions.
New section 4 provides that Portfolio Budget Statements are to
be considered as relevant extrinsic interpretational material under section
15AB of the Acts Interpretation Act 1903. This provision was contained
in the Appropriation Act (No.1) 2005-2006, a fact noted by the
High Court in the Combet case discussed above. However, the contents
of the relevant Portfolio Budget Statement does not appear to have been
an influential factor in the majority decision in that case.
New section 6 provides that
the basic appropriation is $53,334,579. The amounts allocated to each
agency, and the breakdown between departmental outputs and administered
expenses, are set out in Schedule 1. The actual appropriation is
done under new section 15.
New Section 7 empowers the Finance Minister to issue money from
the Consolidated Revenue Fund for departmental items (department outputs)
for an agency but restricts the total to that specified in Schedule
1.
New Section 8 deals with administered items in the
basic appropriation. Subclause 8(1) limits the amount of money
the Finance Minister can issue for administered items from the Consolidate
Revenue Fund to the lesser of the amount specified in Schedule
1, and the amount that the Finance Minister includes in a determination.
The general procedure with respect to such a determination is as follows:(9)
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 part of the appropriation
that has not been expensed in the year from being issued from the CRF.
By convention the Finance Minister issues determinations in relation
to administered expenses appropriations following the completion of
each financial year. Unlike the reduction determinations for departmental
outputs or non-operating costs discussed above, the determinations for
administered expenses do not reduce the appropriation. Rather, they
are a declaration by the Finance Minister of the maximum amount that
may be issued for the respective items. The effect of the determination
is that administered expense appropriations that have not been expensed
in a year cannot be spent in later years.
New Section 9 deals with ‘reduction
of appropriations upon request’. Departmental appropriations do not lapse
at the end of the financial year. They therefore remain legally valid
until spent, that is, the unspent balances of all departmental appropriations
remain available across all financial years. However, amounts appropriated
for departmental expenses can be subject to a reduction process. Under
this process, the Finance Minister may issue a determination—following
a written request from the relevant Minister—to reduce an agency’s departmental
expenses appropriation. As in the 2005-06 Act, for previous years such
determinations are legislative instruments, and disallowable by either
House of Parliament in the usual way under the Legislative Instruments
Act 2003.
New Section 11 allows the Finance
Minister to increase, by determination, spending on departmental items.
The maximum allowed is $20 million. Such determinations are legislative
instruments, but are not disallowable under the Legislative Instruments
Act 2003: new subsection 11(3).
New section 12 effectively allows
the Finance Minister to increase the total amount appropriated in Schedule
1 by up to $175 million in urgent cases were the need for additional
amount was unforeseen or not provided for due to an ‘erroneous omission
or understatement’. A determination by the Finance Minister increasing
the appropriation is a legislative instrument, but not disallowable under
the Legislative Instruments Act 2003: new subsection 12(4).
Endnotes
- Department of Transport and Regional Services 2006-2007
Portfolio Budget Statement.
See: http://www.dotars.gov.au/dept/budget/0607/c3.aspx
- See: page 32 of the Appropriation Bill (No.1) 2006-2007.
- Combet v Commonwealth [2005] HCA 61.
- ibid., paragraph 160 per Gummow, Hayne, Callinan and Heydon JJ
- ibid., paragraph 27 per Gleeson J.
- ibid., paragraph 90 per McHugh J
- ibid., paragraph 258, per Kirby J.
- Although with later adjustments, the ‘actual available’ 2005-2006
appropriation appears to have been 48.165 billion. See p. 13 of the
Bill.
- 2006-2007 Budget Paper No. 4
Angus Martyn
19 May 2006
Bills Digest Service
Information and Research Services
This paper has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Information and Research Service,
nor do they constitute professional legal opinion.
IRS staff are available to discuss the paper's contents
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ISSN 1328-8091
© Commonwealth of Australia 2006
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Published by the Parliamentary Library, 2006.
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