BILLS DIGEST NO. 1, 2016–17                   2 September 2016

National Disability Insurance Scheme Savings Fund Special Account Bill 2016

Paula Pyburne
Law and Bills Digest Section 

Date introduced: 31 August 2016

House:  House of Representatives

Portfolio: Social Services

Commencement: On Royal Assent

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at September 2016.

History of the Bill

The National Disability Insurance Scheme Savings Fund Special Account Bill 2016 (the first Bill) was introduced into the House of Representatives on 16 March 2016.[1] The Bill was passed by that chamber but had not been debated in the Senate when the Parliament was dissolved for the election. The first Bill lapsed on the dissolution of the Parliament on 9 May 2016.

The National Disability Insurance Scheme Savings Fund Special Account Bill 2016 (this Bill), which was introduced into the House of Representatives on 31 August 2016, is in equivalent terms to the first Bill. A Bills Digest was prepared in respect of the first Bill.[2] The material in this Bills Digest has been sourced from that earlier one.

Purpose of the Bill

The purpose of this Bill is to establish the National Disability Insurance Scheme Savings Fund Special Account (the Special Account) which will be used to assist the Commonwealth to meet its funding obligations under the National Disability Insurance Scheme Act 2013[3] (NDIS Act).

Background

About the NDIS

In 2009, in response to a campaign for national disability insurance, the Productivity Commission was asked to ‘examine a range of options and approaches, including international examples, for the provision of long-term care and support for people with severe or profound disability’.[4]

The Productivity Commission report found:

The current disability support system is underfunded, unfair, fragmented, and inefficient, and gives people with a disability little choice and no certainty of access to appropriate supports. The stresses on the system are growing, with rising costs for all governments.[5]

In response to the Productivity Commission’s report and recommendations, the Council of Australian Governments (COAG) signed an Intergovernmental Agreement for the NDIS Launch on 7 December 2012.[6]

In 2013, the Commonwealth Government enacted the NDIS Act which:

•       established the framework for the NDIS and the National Disability Insurance Scheme Launch Transition Agency (the Agency) and its Board. This enabled the NDIS to be launched, and the Agency to operate the launch, in five sites across Australia from July 2013

•       sets out the objects and principles under which the NDIS is to operate, including ensuring that people with disability are supported to exercise choice and control over the care and support they receive, and giving effect in part to the United Nations Convention on the Rights of Persons with Disabilities[7]

•       sets out the process for a person becoming a participant in the scheme, how participants develop a personal, goal-based plan with the Agency, and how reasonable and necessary supports will be assured to participants and

•       provides that the Agency will be responsible for the provision of support to people with disability, their families and carers. This could include providing funding to individuals and organisations to help people with disability participate more fully in economic and social life.[8]

The states and territories subsequently signed bilateral agreements with the Commonwealth detailing the operational and funding arrangements for the NDIS in each trial site. These agreements included matters such as the planned intake of participants and the balance of cash and in-kind contributions to the scheme.[9]

Current position

The gradual roll out of the NDIS at specific sites in all states and territories has been ongoing since July 2013.[10] In November 2015 Bruce Bonyhady, Chairman of the Agency, reported that the NDIS ‘is in eight sites and has more than 19,500 participants, with another site due to commence shortly in North Queensland, in Townsville, Palm Island and Charters Towers’.[11]

More recently, Mr Bonyhady reported:

… the NDIS is on time and on budget and client satisfaction is above 90 per cent …

On 1 July the NDIS will move from a trial to a fully fledged program in all States and Territories (except WA). This is after having been assessed and reassessed by each Government and their Treasuries.[12]

Future projections

Agreements for the full scheme roll out of the NDIS have been reached with New South Wales, Victoria, Queensland, South Australia, Tasmania, the Australian Capital Territory and the Northern Territory. On 28 April 2016, the Commonwealth Government announced the trial site in Western Australia would be extended by 12 months to 30 June 2017 to ensure people with disability continue to receive supports while a full scheme approach is finalised.[13]

Accordingly, the scheme will be available to all eligible residents in the Australian Capital Territory by July 2016, in New South Wales and South Australia by July 2018, and in Tasmania, Victoria, Queensland and the Northern Territory by July 2019.[14] When it is fully operational in 2019 the Scheme will serve around 460,000 participants across Australia.[15]

The full scheme Heads of Agreement for each state and territory outline the parameters for transition to full scheme arrangements within specific timelines.[16]

Paying for the NDIS

When the NDIS Act was enacted it did ‘not include any provisions establishing a funding mechanism for the NDIS’.[17]

The Parliamentary Library’s Budget Review 2012–13 stated:

The NDIS will be a major and highly complex reform to the way in which disability care and support are funded. It is likely to have far-reaching effects throughout the disability services sector. The NDIS will also represent a significant new area of Commonwealth responsibility and expenditure. The estimated annual cost (nearly $14 billion) is around the same amount spent on the Disability Support Pension, more than the current annual cost of the Pharmaceutical Benefits Scheme ($10 billion), and not substantially less than the current annual cost of Medicare ($18 billion) …

… The question of how the NDIS will be funded (will there be an agreed formula entrenched in legislation?) is crucial in determining whether the longstanding problem of funding shortfalls will be adequately addressed. In the absence of an adequate and secure funding base, the NDIS would, in the long run, provide little advance on current arrangements.[18]

National Commission of Audit report

The National Commission of Audit report of 2014 stated:

The NDIS represents a major new area of Commonwealth spending responsibility, which is yet to be fully implemented. It is a worthy scheme with widespread community support. There are, however, significant financial risks associated with the introduction of the scheme. The Commonwealth is bearing the majority of the risk of any cost overruns. In negotiations with States the Commonwealth agreed to meet all extra costs during its launch and transition and at least 75 per cent of cost overruns of the mature scheme. The Commission considers that the NDIS should continue to be supported but it should be implemented in a way which is fiscally responsible and minimises risks of higher than expected spending. This can be achieved by exercising budget control to ensure the long-term sustainability of the NDIS.[19]

What the Productivity Commission recommended

The Productivity Commission recommended that the NDIS would:

… lock in tax revenue to meet its annual liabilities, without a yearly battle through the budget process to secure sufficient funding in competition with other government spending initiatives …. In effect, the NDIS will be funded by a mandatory annual insurance premium.[20]

The Productivity Commission proposed, amongst other things, that the Australian Government specify in legislation a special account—the ‘national disability insurance fund’. It was proposed:

… the legislative provision would require the Australian Government to earmark funds according to the prescribed formula. The elements of this approach that ensure a stable revenue stream are its legislated basis and that the amount earmarked for the fund would not be an absolute amount of dollars, but act effectively as a rate applied to a growing income base. Without the latter, the amount of revenue would fall relative to the costs of the NDIS, and making up the shortfall would require new legislation—leaving too much scope for future governments to renege on a stable source of revenue. As much as possible, the formula should be as simple as possible and transparent.[21]

What is a special account?

Under section 81 of the Constitution[22] all moneys raised or received by the Commonwealth form part of the Consolidated Revenue Fund (CRF). Furthermore, section 83 of the Constitution provides that no money may be drawn from the Treasury of the Commonwealth without a legal appropriation authority.[23] The CRF in section 81 of the Constitution is synonymous with the Treasury in section 83.[24]

Under section 80 of the Public Governance, Performance and Accountability Act 2013[25] if an Act establishes a special account and identifies the purposes of the special account, then the CRF is appropriated for expenditure for those purposes, up to the balance for the time being of the special account.

A special account which has been established under an enactment, such as is proposed by the Special Account Bill, can only be varied, revoked or abolished with the amendment or repeal of the provision which establishes the Special Account in the enabling legislation.[26]

While Special Accounts can record amounts solely from Commonwealth appropriations, they can also record amounts from other sources as allowed by the terms of the Special Account’s establishing legislation. These funds can include indirect taxes or other imposts (for example, an industry levy), contributions by other governments, or discretionary contributions by members of the community. Amounts standing to the credit of Special Accounts may only be debited strictly in accordance with the Account’s purpose.[27]

Committee consideration

Selection of Bills Committee

At its meeting of 17 March 2016 the Selection of Bills Committee decided to defer consideration of the first Bill to its next meeting.[28] At its meeting of 1 September 2016 the Selection of Bills Committee deferred consideration of the current Bill.

However, during the second reading debate on the first Bill, Member for Bendigo, Lisa Chesters, indicated that Labor would be seeking to have the first Bill referred to a Senate Committee for inquiry and report, stating:

We want this legislation to be tested and the people with a disability, their carers and their organisations to be able to ask questions. This enquiry needs to be established to allow proper scrutiny of this Bill. It will allow people with a disability and their advocates to provide feedback. This is complex policy, and everybody acknowledges that. So we need to allow people the chance to properly scrutinise this Bill and provide their own comments … That is why it is important that we establish a Senate enquiry to look at this legislation.[29]

Senate Standing Committee for the Scrutiny of Bills

The Standing Committee for the Scrutiny of Bills had no comments about the first Bill.[30] At the time of writing this Bills Digest the Committee had made no comment about this Bill.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[31]

Parliamentary Joint Committee on Human Rights

At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not commented on this Bill. The Committee considered that the first Bill did not raise human rights concerns.[32]

Policy position of non-government parties/independents

At the time of writing this Bills Digest, Labor had commented specifically on the funding of the NDIS and whether there was a budgetary short fall rather than on the establishment of a special account per se.[33]

Position of major interest groups

At the time of writing this Bills Digest, stakeholder groups had not commented on either the first Bill or this Bill.

Financial implications

According to the Explanatory Memorandum for this Bill it:

… will have nil or negligible financial impact over the forward estimates. The special account would not increase the Commonwealth’s gross debt and would not have a negative impact on the Budget bottom line as the special account sits within the Consolidated Revenue Fund and there are no associated Public Debt Interest or management costs.[34]

According to the Minister for Social Services, Christian Porter:

At full-scheme rollout, the bill for the NDIS will be $22 billion a year … The Commonwealth government will be committed to $11.3 billion worth of funding to the NDIS. Of that, $1.1 billion comes from existing Commonwealth funding, $3.3 billion from the Medicare levy and $1.9 billion from existing specialist disability services. That leaves a gap of $5 billion. We have created an account into which we will place identified savings to the tune of $5 billion over the next period of three years, to 2019.[35]

Special appropriations

Speaking about the first Bill, Minister for Social Services, Christian Porter, said that it would collect underspends and savings that will help meet the Commonwealth’s contribution to the NDIS from 2019–20. Once the fund is set up the government will ‘set aside specific, identified and protected savings… The fund will have an opening balance of $162.4 million, which was set aside in the 2015–16 Mid-Year Economic and Fiscal Outlook’.[36]

Key issues and provisions

Clause 5 establishes the National Disability Insurance Scheme Savings Fund Special Account as a Special Account for the purposes of the Public Governance, Performance and Accountability Act.

The Minister for Social Services has said that there is:

… $5 billion worth of funding shortfalls from 2019-20 onwards. This Special Account is the mechanism for securing that funding shortfall …

The Special Account will allow the government, over future budgets, to identify savings from existing programs and set aside those savings to assist in meeting the Commonwealth’s future financial commitments to the NDIS.[37]

Accordingly, clause 6 provides that the purposes of the Special Account are:

•       to assist the Commonwealth to meet its funding obligations in relation to the NDIS Act

•       to make payments to the National Disability Insurance Scheme Launch Transition Agency for the purposes of the Agency

•       to reduce the balance of the Special Account (and, therefore, the available appropriation for the account) without making a real or notional payment.

The Explanatory Memorandum to the Special Account Bill provides that the credits to the Special Account may result from:

•        underspends and net savings from the NDIS and other portfolio savings, as determined by the Minister for Social Services

•        discretionary decisions by the Prime Minister or the Cabinet and

•        decisions by the Prime Minister or the Cabinet about identified savings from other Commonwealth portfolios.[38]

The effect of clauses 5 and 6 together is that the CRF is appropriated for expenditure only for those purposes outlined above, up to the balance for the time being of the Special Account.

As stated above, the Commonwealth is setting up the Special Account to meet an expected future funding shortfall. This is required because the Intergovernmental Agreement on the National Disability Insurance Scheme Launch states as follows:

Governments agree that managing unexpected costs is a critical issue. The Commonwealth agrees that it will fund any costs associated with high population numbers, higher per person care and support costs, 100 per cent of the Agency’s cash flow risk and any other risk sharing arrangements identified in Schedules A-E during the launch and transition to a full scheme …[39]

Clause 7 of the Special Account Bill sets out the manner in which funds may be credited to the Special Account. It empowers the Minister to determine in writing that a specified amount is to be credited to the Special Account on a particular day or that a specified amount is to be credited in specified instalments on specified days. That determination is not a legislative instrument and so would not be a disallowable instrument under the Legislation Act 2003, and would not be required to be tabled in both Houses of the Parliament.[40] Clause 8 of the Special Account Bill allows the Minister to delegate any or all of his, or her, powers under clause 7 to the Secretary of the Department or an SES employee, or acting SES employee, in the Department.

Under clause 9 the Minister must cause a review of the operation of the National Disability Insurance Scheme Savings Fund Special Account Act 2016 to be undertaken in the financial year ending on 30 June 2027. However there is no stated requirement that the report of the review be tabled in both Houses of the Parliament or that it be published.

Concluding comments

When the NDIS is fully operational in 2019 it will cost $22 billion a year, of which the Commonwealth government will pay $11.3 billion. As stated above, the Commonwealth agreed in the Intergovernmental Agreement on the National Disability Insurance Scheme Launch, that it will fund any costs associated with high population numbers, higher per person care and support costs, 100 per cent of the Agency’s cash flow risk and any other risk sharing arrangements during the launch and transition to a full scheme. This is an enormous and imprecisely quantified financial commitment.

It would appear then that the creation of a special account is a prudent measure to ensure that funds are put aside to meet that commitment.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

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[1].              Parliament of Australia, ‘National Disability Insurance Scheme Savings Fund Special Account Bill 2016 homepage’, Australian Parliament website.

[2].              P Pyburne, National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016, Bills digest, 112, 2015–16, Parliamentary Library, Canberra, 2016.

[3].              National Disability Insurance Scheme Act 2013.

[4].              Productivity Commission (PC), Disability care and support, Inquiry report, 54, 2 vols., PC, Canberra, 31 July 2011, p. v.

[5].              Ibid., vol. 1., p. 2.

[6].              National Disability Insurance Scheme (NDIS), ‘Intergovernmental agreements’, NDIS website.

[7].              Convention on the Rights of Persons with Disabilities, done in New York on 13 December 2006, opened for signature 30 March 2007, [2008] ATS 12 (entered into force for Australia 16 August 2008).

[8].              Revised Explanatory Memorandum, National Disability Insurance Scheme Bill 2013, p. i.

[9].              NDIS, ‘Intergovernmental agreements’, NDIS website.

[10].              NDIS, ‘Our sites’, NDIS website.

[11].              B Bonyhady (NDIA Chairman), The what? why? who? and market opportunities of the NDIS, Brisbane, speech to the Committee for Economic Development of Australia, 5 November 2015.

[12].              B Bonyhady (NDIA Chairman), Statement from NDIA Chairman, Bruce Bonyhady in response to the story in the Australian on 16 April, media release, NDIS website, 16 April 2016.

[13].              NDIS, ‘NDIS in Western Australia’, NDIS website.

[14].              NDIS, ‘Intergovernmental agreements’, NDIS website.

[15].              B Bonyhady, The what? why? who? and market opportunities of the NDIS, op. cit.

[16].              NDIS, ‘Intergovernmental agreements’, NDIS website.

[17].              L Buckmaster and J Tomaras, National Disability Insurance Scheme Bill 2012, Bills digest, 72, 2012–13, Parliamentary Library, Canberra, 11 February 2013, p. 18.

[18].              L Buckmaster, National Disability Insurance Scheme: Budget review 2012–13, Research paper series, 9, 2011–12, Parliamentary Library, Canberra, 2012, pp. 131-134.

[19].              National Commission of Audit, Towards responsible government, Commonwealth of Australia, 2014, p. 91.

[20].              PC, Disability care and support, op. cit., vol. 2., p. 573.

[21].              Ibid., vol. 2., pp. 659–660.

[22].              Constitution.

[23].              Northern Suburbs General Cemetery Reserve Trust v Commonwealth (1993) 176 CLR 555, [1993] HCA 12.

[24].              Department of Finance and Administration, Guidelines for the management of special accounts, Financial Management Guidance no. 7, October 2003, p. 5.

[25].              Public Governance, Performance and Accountability Act 2013.

[26].              Department of Finance and Administration, Guidelines for the management of special accounts, op. cit., p. 17.

[27].              History of the development of special accounts is in C Lawson, ‘”Special Accounts” under the Constitution: amounts appropriated for designated purposes’, University of New South Wales Law Journal, 29(2), 2006, pp. 114–146.

[28].              Senate Standing Committee for Selection of Bills, Report, 4, 2016, 17 March 2016.

[29].              L Chesters, ‘Second reading speech: National Disability Insurance Scheme Savings Fund Special Account Bill 2016’, House of Representatives, Debates, 3 May 2016, p. 4181.

[30].              Senate Standing Committee for the Scrutiny of Bills, Alert Digest, 5, 2016, The Senate, 3 May 2016, p. 9.

[31].              The Statement of Compatibility with Human Rights can be found at the end of the Explanatory Memorandum to the National Disability Insurance Scheme Savings Fund Special Account Bill 2016.

[32].              Parliamentary Joint Committee on Human Rights, Thirty-seventh Report of the 44th Parliament, 2 May 2016, p. 1.

[33].              J Macklin (Shadow Minister for Disability Reform and Shadow Minister for Families and Payments) and T Burke (Shadow Minister for Finance), Pickpocket Porter steals NDIS money, joint media release, 9 April 2016; J Macklin (Shadow Minister for Disability Reform and Shadow Minister for Families and Payments) and T Burke (Shadow Minister for Finance), Government must explain what it’s done with NDIS funds, joint media release, 18 April 2016.

[34].              Explanatory Memorandum, National Disability Insurance Scheme Savings Fund Special Account Bill 2016, p. 1.

[35].              C Porter, ‘Questions without notice: National Disability Insurance Scheme’, [Questioner: E Jones], House of Representatives, Debates, 17 March 2016, p. 3530.

[36].              M Cormann (Minister for Finance) and C Porter (Minister for Social Services), New NDIS account to lock in funding, media release, 16 March 2016.

[37].              C Porter, ‘Second reading speech: National Disability Insurance Scheme Savings Fund Special Account Bill 2016’, House of Representatives, Debates, 16 March 2016, p. 3247; K Vickery, ‘NDIS faces "funding challenges"’, Daily Telegraph, 29 January 2016, p. 22.

[38].              Explanatory Memorandum, National Disability Insurance Scheme Savings Fund Special Account Bill 2016, p. 1.

[39].              Council of Australian Governments (COAG), ‘Intergovernmental Agreement on the National Disability Insurance Scheme Launch’, COAG website, 7 December 2012, paragraph 28.

[40].              Legislation Act, section 3AA.