Introductory Info
Date introduced: 18 February 2021
House: House of Representatives
Portfolio: Finance
Commencement: The Bills commence on Royal Assent.
Purpose of
the Bill
The purpose of the Appropriation
Bill (No. 3) 2020–2021 (the No. 3 Bill) is to propose additional annual appropriations
from the Consolidated Revenue Fund (CRF) of $2,505,148,000 ($2.5 billion) for
the ordinary annual services of the Government for the 2020–21 financial year.
These are in addition to the amounts of $76,364,376,000 ($76.4 billion)
appropriated by the Supply
Act (No. 1) 2020–2021 (the No. 1 Supply Act)and $36,809,121,000
($36.8 billion) by the Appropriation Act (No. 1)
2020–2021 (the No. 1 Appropriation Act).
Of the additional appropriations proposed in the No. 3
Bill:
- $761,601,000
($0.8 billion) is for the departmental activities of government entities and
- $1,743,547,000
($1.7 billion) is for activities that government entities administer on behalf
of the Commonwealth Government.
The purpose of the Appropriation
Bill (No. 4) 2020–2021 (the No. 4 Bill) is to propose additional annual appropriations
from the CRF of $141,300,000 ($0.14 billion) for non-operating activities.
These are in addition to the amounts of $6,665,982,000 ($6.7 billion)
appropriated by the Supply Act (No. 2)
2020–2021 (the No. 2 Supply
Act) and $14,854,576,000 ($14.9 billion) by the Appropriation Act (No.
2) 2020–2021 (the No. 2 Appropriation Act). Schedule 1 of the
No. 3 Bill and No. 4 Bill provide the following summaries of the proposed
amounts to be appropriated by Portfolio.
Table 1: summary of the proposed amounts to be appropriated
by Portfolio
| Portfolio |
No. 3 Bill
$’000 |
No. 4 Bill
$’000 |
| Agriculture, Water and the Environment |
24,857 |
4,220 |
| Attorney General’s |
32,078 |
- |
| Defence |
261,184 |
11 |
| Education, Skills and Employment |
237,493 |
158 |
| Finance |
46,183 |
- |
| Foreign Affairs and Trade |
338,710 |
11,128 |
| Health |
720,593 |
2,338 |
| Home Affairs |
94,075 |
61,669 |
| Industry, Science, Energy and Resources |
145,378 |
6,050 |
| Infrastructure, Transport, Regional Development and
Communications |
411,682 |
34,092 |
| Prime Minister and Cabinet |
37,409 |
14 |
| Social Services |
146,920 |
21,620 |
| Treasury |
8,586 |
- |
| Total additional appropriations |
2,505,148 |
141,300 |
Source: Appropriation
Bill (No. 3) 2020–2021 and Appropriation
Bill (No. 4) 2020–2021, Schedule 1.
Structure of the Bills
Part 1 of both Bills deals with preliminary matters,
including when the Acts commence, and how to interpret the Acts.
Part 2 of both Bills outlines the quantum and types of
appropriation from the CRF.
Part 3 of both Bills amend the Advance to the Finance
Minister (AFM) for 2020–2021.
Part 4 of each Bill deals with technical matters including
crediting amounts to special accounts, the formal appropriation of moneys from
the CRF, and the subsequent automatic repeal of the Acts.
Schedule 1 of both Bills contain the details of the
additional amounts and types of appropriation to be made to each entity. The
No. 3 Bill identifies the outcomes against which additional appropriations are
proposed.
Background
About
appropriations
An appropriation is the legal release of monies from the
CRF.[1]
The CRF is established by section 81 of the Constitution,
which provides:
All revenues or moneys raised or received by the Executive
Government of the Commonwealth shall form one Consolidated Revenue Fund, to be
appropriated for the purposes of the Commonwealth …[2]
Section 83 of the Constitution provides that no
money may be withdrawn from the CRF ‘except under appropriation made by law’.
The effect of these two sections is that all moneys received by the
Commonwealth must be paid into the CRF and must not be spent before there is an
appropriation authorising specific expenditure.
There are broadly speaking two types of appropriations,
annual appropriations and special appropriations.
- Annual
appropriations are those that provide annual funding to Commonwealth
entities, such as Departments, to undertake ongoing government activities.
These appropriations are given authority through the Appropriation Acts which
relate to the specific Budget year. These appropriations are limited to the
amount set out in the Appropriation Act.[3]
- Special
appropriations are appropriations that are not annual appropriations. They
provide authority to spend money for specific purposes (e.g. to finance
particular projects or provide social security payments). The authority to
appropriate, and the criteria that must be met to appropriate those monies are
not set out in the annual appropriation Acts, but rather Acts that authorise
Government to expend money from the CRF for specified purposes, for example the
Social Security
(Administration Act) 1999.[4]
Annual appropriations account for around 25 per cent of
Australian Government expenditures with the remaining 75 per cent funded
through Special Appropriations.[5]
It is important to note that annual and special
appropriations, do not create a source of power for the Commonwealth to spend
money; they merely release that money from the CRF. The Commonwealth’s power to
spend money must be found in other parts of the Constitution.[6]
Annual appropriations
The No. 3 and No. 4 Bills seek to make additional annual
appropriations from the CRF and are part of the annual appropriation process.
The annual appropriation amounts for the year are part of
the annual Budget process with the first Appropriation Bills for a Budget year
generally being introduced on Budget night (usually in May of the preceding
financial year).[7]
The Budget Speech is the second reading speech for the No. 1 Appropriation
Bill.[8]
Details of the proposed expenditure for which annual appropriations are made
are detailed in Portfolio Budget Statements which are released with the Budget.[9]
However, the Government will generally require additional
monies throughout the year as it makes further expenditure decisions. As such,
it will introduce additional annual appropriation bills throughout the year.[10]
The No. 3 and No. 4 Bills are such Bills. Details of the additional expenditure
to be funded through these appropriation Bills are disclosed in Portfolio
Additional Estimates Statements.[11]
Powers of the House of Representative to appropriate
Section 53 of the Constitution provides that laws
appropriating money may not originate in the Senate.[12]
Further, under section 56 of the Constitution, all proposed laws for the
appropriation of money may only be passed following a recommendation by the
Governor-General. By convention the Governor-General acts only upon the advice
of the Executive, so in practice section 56 prevents non-government
members of the House of Representatives introducing Bills that would propose to
appropriate money from the CRF.[13]
Powers of the Senate to amend
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.[14]
The Senate may amend proposed laws appropriating revenue
for purposes other than for the ordinary annual services of the Government, as
long as it does not ‘increase any proposed charge or burden on the people’.[15]
Conceivably, the Senate could amend an appropriation Bill for the other
services of Government to, for example, redirect the proposed appropriation to
another purpose, or reduce the proposed appropriation to nil. The Senate may
also request that, if new measures are included in a Bill for the ‘ordinary
annual services of Government’, the Bill be returned to the House with a
message requesting those new measures be omitted from the Bill.
The ‘ordinary annual services of government’ versus the
‘other’ services of government
Section 54 of the Constitution requires that there
be a separate law appropriating funds for the ‘ordinary annual services of
government’, and that other matters must not be dealt with in the same Bill.
However, what constitutes the ‘ordinary annual services of the Government’ and
‘other’ services of the Government is not defined in the Constitution.
A working distinction between ordinary and other annual
services was agreed in a ‘Compact’ between the Senate and the Government in
1965.[16]
Several amendments have been made to the Compact since 1965, and in 2010 the
Senate Standing Committee on Appropriations and Staffing recommended the Senate
restate the Compact in a consolidated form.[17]
On 22 June 2010, the Senate resolved as follows:
(1) To reaffirm its constitutional right to amend proposed laws appropriating revenue or moneys for expenditure on all matters not involving the ordinary annual services of the Government.
(2) That appropriations for expenditure on:
(a) the construction of public works and buildings;
(b) the acquisition of sites and buildings;
(c) items of plant and equipment which are clearly definable as capital expenditure (but not including the acquisition of computers or the fitting out of buildings);
(d) grants to the states under section 96 of the Constitution;
(e) new policies not previously authorised by special legislation;
(f) items regarded as equity injections and loans; and
(g) existing asset replacement (which is to be regarded as depreciation),
are not appropriations for the ordinary annual services of
the Government and that proposed laws for the appropriation of revenue or
moneys for expenditure on the said matters shall be presented to the Senate in
a separate appropriation bill subject to amendment by the Senate.
(3) That, in respect of payments to international organisations:
(a) the initial payment in effect represents a new policy decision and therefore should be in Appropriation Bill (No. 2); and
(b) subsequent payments represent a continuing government activity of supporting the international organisation and therefore represent an ordinary annual service and should be in Appropriation Bill (No. 1).
(4) That all appropriation items for continuing activities for which appropriations have been made in the past be regarded as part of ordinary annual services.[18]
Adherence to the Compact has not always been strict, and
the High Court has held that any disagreements between the Houses are not
justiciable.[19]
Any disputes are to be determined between the Houses themselves.
Departmental and administered expenses
Australian Accounting Standard 1050 Administered Items
requires that government agencies distinguish between revenues and expenses
that they administer for the Government, and those over which they have some
control.[20]
Generally, administered expenses are the costs of programs that agencies run
for the Government, while departmental expenses are the costs incurred in
running agencies.
Appropriation Bills, therefore, distinguish between
‘administered’ expenses and ‘departmental’ expenses. An administered
appropriation may be used only for the program or outcome that it is
appropriated for, while a departmental appropriation may be moved between
different departmental activities.[21]
Outcomes and programs
While the level of detail necessary for an Appropriation
Act to be valid is generally low,[22]
in the Pharmaceutical Benefits case the High Court held:
… there cannot be appropriations in blank, appropriations for
no designated purpose, merely authorising expenditure ...[23]
The Appropriation Bills must, therefore, also describe—in
general terms—what the moneys are to be utilised for. The Bills use four
methods for describing the purposes of the proposed appropriations.
Appropriations for ‘outcomes’ of non-corporate Commonwealth
entities
For non-corporate Commonwealth entities, the purposes of
operating appropriations (both departmental and administered) are specified
with reference to the ‘outcomes’ of those entities. In 2019, the Department of
Finance explained ‘outcome statements’ in the following terms:
Outcome statements articulate Government objectives and serve
three main purposes within the financial framework:
- to
explain the purposes for which annual appropriations are approved by the
Parliament for use by entities
- to provide a basis for budgeting and reporting against
the use of appropriated funds
- to
measure and assess entity and program non-financial performance in contributing
to Government policy objectives.[24]
Appropriations for corporate Commonwealth entities
As corporate Commonwealth entities are legally distinct
from the Commonwealth itself, money cannot be appropriated directly to those
entities.[25]
Instead, amounts are appropriated to relevant Departments for on-payment to
corporate Commonwealth entities within Departments’ portfolios.
Non-operating appropriations
Non-operating appropriations are amounts designated for
the capital needs of entities. Typically, these amounts are equity injections
into entities, or monies for the purchase or development of the assets of
entities. Under the Compact, they can only ever be proposed in a Bill dealing
with the ‘other’ annual services of Government.
Appropriations for payments to the states
Under section 96 of the Constitution, the
Commonwealth may make payments to the states with or without conditions, and
amounts intended for payments to the states are identified separately. Again,
because of the Compact, amounts to the states can only ever be proposed in a
Bill dealing with the ‘other’ annual services of Government. Amounts to the
Australian Capital Territory and the Northern Territory are also included with
the amounts for the states.
Advance
to the Finance Minister
The Advance to the Finance Minister, as outlined in Part 3
of each Bill, is an appropriation of moneys without any particular outcome or
specific purpose specified. According to the Appropriation Acts, the Finance
Minister may use the amount appropriated as an advance to modify the schedule
to the Appropriation Act, but only where:
...the Finance Minister is satisfied that there is an urgent
need for expenditure, in the current year, that is not provided for, or is
insufficiently provided for, [...]:
(a) because of an erroneous omission or understatement; or
(b) because
the expenditure was unforeseen until after the last day on which it was
practicable to provide for it in the Bill for this Act before that Bill was
introduced into the House of Representatives.[26]
In order to access an advance, the Finance Minister must
issue a determination under the relevant Appropriation Act. A determination is
a legislative instrument, but disallowance and sunsetting under section 42 and
Part 4 of Chapter 3 of the Legislation Act
2003 respectively do not apply.[27]
The AFM for the 2020–21 Budget year was limited by the No.
1 and No. 2 Supply Acts and later the No. 1 and No. 2 Appropriation Acts. Under
the Supply Acts the AFM was set at $16 billion for the ordinary annual services
of Government,[28]
and $24 billion in relation to the other annual services of the Government.[29]
These advances were subsequently reset by the Appropriation Acts to
$4.0 billion for the ordinary annual services of the Government[30]
and $6.0 billion in relation to the other annual services of the Government.[31]
The No. 3 and No. 4 Bills propose to ‘reset’ the AFM to
$4.0 billion for the ordinary annual services of the Government[32]
and $6.0 billion in relation to the other annual services of the Government,[33]
the same level as the Appropriation Acts but disregarding any previous determinations
made in 2020–2021.
To date in 2020–2021, the Finance Minister has made six
determinations, totalling $1.9 billion under the AFM in 2020–2021, this is
outlined in Table 2 below. This includes around $1.3 billion under the No. 1
Supply Act and $0.6 billion under the No. 2 Supply Act.
Table 2: summary of advances to the Finance Minister in
2020–2021
| Determination |
Entity |
Act |
Amount |
| Advance to the
Finance Minister Determination (No. 1 of 2020–2021) |
Department of Infrastructure,
Transport, Regional Development and Communications |
Supply Act (No. 2)
2020–2021 |
$250,000,000 |
| Advance to the
Finance Minister Determination (No. 2 of 2020–2021) |
Australian Trade and
Investment Commission |
Supply Act (No. 1)
2020–2021 |
$230,080,000 |
| Advance to the
Finance Minister Determination (No. 3 of 2020–2021) |
Department of Health |
Supply Act (No. 1)
2020–2021 |
$808,754,000 |
| Advance to the
Finance Minister Determination (No. 4 of 2020–2021) |
Department of Health |
Supply Act (No. 2)
2020–2021 |
$384,060,000 |
| Advance to the
Finance Minister Determination (No. 5 of 2020–2021) |
Department of Infrastructure,
Transport, Regional Development and Communications |
Supply Act (No. 1)
2020–2021 |
$71,734,000 |
| Advance to the
Finance Minister Determination (No. 6 of 2020–2021) |
Department of Social Services |
Supply Act (No. 1)
2020–2021 |
$159,713,242 |
Senate Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for
the Scrutiny of Bills (the Scrutiny Committee) considered both Bills together
in its scrutiny committee report of 24 February 2021.[34]
The Scrutiny Committee has general concerns that the AFM
allows the Finance Minister to allocate additional funds to entities by
delegated legislation, which is not disallowable, thereby limiting the ability
of Parliament to scrutinise these appropriations.[35]
It also notes that the AFM in 2020–2021 is significantly higher than in
previous years, ostensibly to deal with unexpected additional expenditures due
to the COVID-19 pandemic.[36]
However, the AFM provisions are not limited to the purpose of funding COVID-19
related expenditures.[37]
The Scrutiny Committee also raised a specific concern with
the intention to disregard any potential determinations which may be made under
the AFM established by the No. 1 and No. 2 Appropriation Bills by re-setting
the AFM in the No. 3 and No. 4 Bills.[38]
The Scrutiny Committee has sought to draw this to the attention of senators
noting this could, in effect, make additional funds available for expenditure
via a non-disallowable legislative instrument.[39]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011, the Government has assessed the Bills’
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 Bills are compatible.[40]
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights (PJCHR)
considered the Bills in its Scrutiny Report of 24 February 2021. The
PJHCR made no comment on the Bills.[41]
Key provisions
No. 3 Bill
Clauses 6–9 of the No. 3 Bill outline the quantum
and types of appropriation from the CRF.
Clause 10 of the No. 3 Bill restores the Advance to
the Finance Minister to $4.0 billion for 2020–2021, for the
ordinary annual services of Government, regardless of any determinations made
by the Finance Minister under subsection 10(2) of the No. 1 Appropriation
Act.
Clauses 11–13 of the No. 3 Bill provide for several
technical matters, including details relating to special accounts, formally
appropriating the amounts required from the CRF and the future repeal of the
Act on 1 July 2023.
Schedule 1 of the No. 3 Bill provides details about
the appropriations to both non-corporate entities and to corporate entities as
defined by the Public Governance, Performance and Accountability Act 2013
(PGPA Act). Table 3 sets out the appropriations under each of the No.
1 Supply Act, the No. 1 Appropriation Act and the proposed
appropriations under the No. 3 Bill for 2020–21.
Table 3: total appropriations for the ordinary annual
services of Government 2020–21
| Portfolio |
No. 1 Supply
Act 2020–21
$’000 |
No. 1 Appropriation Act 2020–21
$’000 |
No. 3 Bill 2020–21
$’000 |
| Agriculture, Water and the Environment |
1,242,100 |
1,151,889 |
24,857 |
| Attorney General’s |
1,047,123 |
770,946 |
32,078 |
| Defence |
21,990,934 |
9,439,756 |
261,184 |
| Education, Skills and Employment |
4,245,151 |
3,461,202 |
237,493 |
| Finance |
433,702 |
818,533 |
46,183 |
| Foreign Affairs and Trade |
3,859,128 |
3,587,557 |
338,710 |
| Health |
12,194,754 |
3,690,012 |
720,593 |
| Home Affairs |
4,104,656 |
3,181,812 |
94,075 |
| Industry, Science, Energy and Resources |
1,765,050 |
1,703,836 |
145,378 |
| Infrastructure, Transport, Regional Development and
Communications |
2,666,955 |
3,160,951 |
411,682 |
| Prime Minister and Cabinet |
1,223,083 |
998,426 |
37,409 |
| Social Services |
17,110,349 |
3,640,427 |
146,920 |
| Treasury |
4,481,391 |
1,203,774 |
8,586 |
| Total |
76,364,376 |
36,809,121 |
2,505,148 |
No. 4 Bill
Clauses 6–11 of the No. 4 Bill outline the quantum
and types of appropriation from the consolidated revenue fund.
Clause 12 of the No. 4 Bill restores the Advance to
the Finance Minister to $6.0 billion for 2020–2021 regardless of any
determinations made by the Finance Minister under subsection 12(2) of the No.
2 Appropriation Act.
Clauses 13–15 of the No. 4 Bill provide for several
technical matters including details relating to special accounts, formally
appropriating the amounts required from the CRF and the future repeal of the
Act on 1 July 2023.
The money in the No. 4 Bill is appropriated to
incorporated and non-incorporated Government entities according to Schedule 1
of that Bill as non-operating (or ‘capital’) appropriations. These
appropriations cannot be included in the No. 3 Bill as they do not relate to
the ‘ordinary annual services of Government’.
Table 4 sets out the appropriations under each of the No.
2 Supply Act, the No. 2 Appropriation Act and the proposed
appropriations under the No. 4 Bill for 2020–21.
Table
4: total appropriation for the other annual services of Government 2020–21
| Portfolio |
No. 2 Supply Act
2020–21
$’000 |
No. 2 Appropriation Act 2020–21
$’000 |
No. 4 Bill 2020–21
$’000 |
| Agriculture, Water and the Environment |
377,220 |
2,474,068 |
4,220 |
| Attorney General’s |
1,164 |
10,135 |
- |
| Defence |
3,433,328 |
8,495,030 |
11 |
| Education, Skills and Employment |
138,307 |
210,041 |
158 |
| Finance |
99,663 |
251,700 |
- |
| Foreign Affairs and Trade |
77,045 |
73,313 |
11,128 |
| Health |
102,243 |
627,605 |
2,338 |
| Home Affairs |
60,064 |
85,497 |
61,669 |
| Industry, Science, Energy and Resources |
318,182 |
682,994 |
6,050 |
| Infrastructure, Transport, Regional Development and
Communications |
1,908,427 |
1,427,598 |
34,092 |
| Prime Minister and Cabinet |
17,595 |
89,220 |
14 |
| Social Services |
8,112 |
190,009 |
21,620 |
| Treasury |
124,632 |
237,366 |
- |
| Total |
6,665,982 |
14,854,576 |
141,300 |