DISSENTING REPORT BY THE AUSTRALIAN DEMOCRATS

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DISSENTING REPORT BY THE AUSTRALIAN DEMOCRATS

Reference : Australia New Zealand Food Authority Amendment Bill 1996 (the Bill) and Australia New Zealand Food Authority Amendment Bill (No. 2) 1996 (the Bill No. 2)

1. Purpose

1.1 To set out our concerns about:

(a) the proposed levying of fees under this legislation;

(b) the proposed planning, managing and prioritising policy; and

(c) the importance of reviewing the Food Standards Code, developing a Uniform Food Hygiene Standard and facilitating an integrated national safe food system in addition to the development and variation of standards.

2. Object of the Bill and the Bill No. 2

2.1 The Bill - to amend the Australia New Zealand Food Authority Act 1991 (the Act) to enable the Australia New Zealand Food Authority (ANZFA) to charge applicants for the development and variation of the Food Standards Code. The charges are to be specified in the regulations.

2.2 The Bill No. 2 - to amend the Act to make policy and technical amendments in order to streamline and simplify ANZFA's functions.

3. Background

3.1 Treaty arrangements with New Zealand account for the present structure of ANZFA. ANZFA functions to process applications and prepare proposals that develop and vary food standards in consultation with the States and Territories and develop codes of practice for industry that relate to the standards.

3.2 The ANZFA has undergone funding cuts and offsets in line with the Coalitions policy. This proposed amendment is a part of the process of shifting the costs of carrying out the ANZFA functions to those who use their 'services'.

3.3 The ANZFA is presently reviewing the Food Standards Code, developing a Uniform Food Hygiene Standard and facilitating an integrated national safe food system. The amendments would arguably enable the ANZFA to charge for the development and variation of standards and apply its existing resources to the review, hygiene and facilitation projects.

3.4 The Codd Review (13 February 1997) investigated options for ANZFA user charges and cost recovery arrangements and recommended:

(a) a review of the whole regulatory model and structure of the food industry under COAG with new arrangements to be introduced by 1 January 2000 which could consider a uniform national registration and an associated fee structure and user pays licensed third party auditing of an enforcement and surveillance regime; and

(b) in the interim the Government should consider raising revenue from industry either by imposing a levy on large manufacturing companies or through negotiating a voluntary contribution from larger companies.

3.5 The proposed amendment in the Bill sets up a scheme whereby an applicant for the development or variation of a standard is required to pay according to a fee structure set out in regulations.

3.6 The proposed amendment in the Bill No 2 sets out a number of policy and technical amendments.

4. Major concerns about application fees

4.1 This Bill sets up a scheme whereby the major functions of the ANZFA to deal with applications and prepare proposals for the development or variation of standards (s 7) are to be paid for by those making application. These charges are arguably inappropriate for the following reasons:

(a) the amendments and focus of the Commonwealth, State and Territory governments is on reducing costs rather that seeking the best form of ensuring food safety followed by an analysis of the costings. A substantive report from a COAG Working Group is expected by the end of 1997 which will examine the disparate regulatory schemes around Australia. The Working Group is examining best practice and will seek to maximise uniformity. This report will also examine fees. The Working Group report and the completion of the food standards review may be implemented together by 1 January 2000. Seeking to implement a cost recovery mechanism before this Working Group report is arguably premature;

(b) the process of assessing applications for the development and variation of standards is one of the most important functions of ANZFA and is in the interests of public health and safety and consumer protection. This is a 'public good' and so arguably should not be paid for by industry alone, but rather by the taxpayer;

(c) an application for the development or variation of a standard does not confer a commercial benefit to the applicant (unless the applicant holds a proprietary right, but cannot sell unless it meets the standard), but rather a benefit to all the industry players who benefit from the standard ('free-rider'), and so it is arguably inequitable to charge the applicant alone;

(d) an application fee is expected to be of the order of $16,500 to $91,500 which may:

(i) discourage applications where there is no direct or minimal commercial benefit, but may be particularly advantageous to a small number of consumers (for example, an allergy free alternative);

(ii) exclude concerned consumer applicants who do not have sufficient resources to pay the required fees;

(iii) discourage concerned consumers applicants who are no going to derive a commercial gain;

(iv) discourage applications where there is no direct or minimal commercial benefit; and

(v) discourage smaller and/or innovative businesses as they will not have the resources;

(e) the option of an application fee for the development or variation of a standard was considered by the Codd Review as not a sensible or viable way for ANZFA to seek to raise revenue from industry other that at nominal levels where the costs of fee collection would absorb much of the overall revenue stream;

(f) an application fee may affect the total revenue of the ANZFA with a comparable effect on the treaty obligations with New Zealand. The treaty obligations need to be assessed before this application fee is imposed;

(g) the Codd Review suggested that ANZFA was not the right body to be designing or imposing a levy and that ANZFA's constructive relationship with industry, which is important for the review of the standards, could be damaged by such a levy (noting that the Codd Review recommended a levy or voluntary contribution from the industry rather than an application fee);

(h) ANZFA independence and activities should not be directed away from ensuring the fundamentals of public health and safety and consumer information and protection. The application fee may challenge this independence and activity by distorting the focus of ANZFA's dealing (for example, a particular company funding the standard in a particular field ahead of what might be the review of a standard in the 'national interest');

(i) the costs recoverable by ANZFA from applicants can only reflect the actual or attributable costs up to the publication of a draft standard or variation. The subsequent costs of public consultation and reporting cannot form a part of the charge. Therefore, the cost recovery proposed will not cover all the costs associated with an application;

(j) those seeking the development or variation of a standard may wait for the ANZFA to undertake the work of its own volition or seek to bring political pressure to achieve the changes without costs to the industry, consumer, etc.;

(k) an application may be lodged in New Zealand with effect in Australia because of the treaty arrangements, at no cost under the present scheme operating in New Zealand; and

(l) the application charge may need to be refunded on grounds of equity if ANZFA rejected the application which would not recognise the costs to ANZFA in reaching that decision.

4.2 The present structure of government involvement in food regulation is fragmentary with a range of different Commonwealth, State, Territory and local government regulations. Unification of this process may lead to cost savings and efficiencies. This contention is strongly supported by industry.

4.3 The amendment proposes to make the application fee a part of ANZFA's money rather than a part of the Consolidated Revenue Fund. The fee may then be offset against future appropriations by Parliament. This practice may avoid some of the accountability measures requiring different reporting and auditing requirements under the Audit Act 1901 compared to monies payable to the Consolidated Revenue Fund. It is submitted that government accountability and the efficient allocation of Commonwealth monies requires the management of monies paid to the Commonwealth to be allocated according to the practices of the government as a whole. This process is undermined if agencies such as ANZFA are able to manage and apply their money outside the policies of the Commonwealth.

4.4 The Codd Review considered various charging options including the charging of an application fee. The Codd Review concluded that an application fee was inappropriate because:

(i) the prospects of raising sufficient revenue were projected to be low; and

(ii) the objectives of public health and safety and consumer protection may be compromised by discouraging applications and the subsequent updating of standards.

4.5 The proposed cost recovery set out in the amendments is a unilateral action by Australia under its treaty arrangements with New Zealand. This treaty is arguably important for the improvement and harmonisation of food standards in Australia and New Zealand, and international trade generally. Introduction of this application fee may lead to New Zealand reconsidering its treaty commitment as under the treaty New Zealand commits funding on the basis of 'total agreed cost' shared with Australia on a 'pro rata to population basis'. Under this arrangement New Zealand contributes about A$1.3 million to ANZFA. It might be expected that this funding would be reduced according to the amount of the application fees. These arrangements may also call into question the work program agreed to under the treaty in good faith so soon after its attainment.

5. Other cost recover mechanisms

5.1 The Codd Review considered a range of user charges and cost recovery arrangements:

(a) the COAG Working Group is considering the structure of regulation of the food industry and they will be in a position to make suitable costing arrangements in line with the new model(s) which are expected to come into operation by 1 January 2000. This might include a national system of registration of food establishments, third party auditing on user pays basis, licensing fees for accreditation of auditors, etc.);

(b) entrepreneurial possibilities such as charging for new services and sponsorship of particular ANZFA activities (for example, the Australian Market Basket Survey, Food Composition Survey, etc.);

(d) a voluntary contribution from industry based on commitments given by the Government (for example, to rationalise the existing regulatory schemes, restructure the Board of ANZFA, etc.).

5.2 These alternative are not considered further in this report.

6. Plan manage and prioritise

6.1 The explanatory memorandum to the Bill states that the amending Bill will "enable it [ANZFA] to overcome three main deficiencies within the current legislation which prevent the Authority [ANZFA] having the capacity to plan, manage or prioritise its work load".

6.2 There being no control over the number of applications, an obligation to apply its resources on a first come first serve basis and an obligation to assess each application individually are given as examples of deficiencies in the current legislation.

6.3 This is an unusual argument and it is without basis. This is the main function of ANZFA as set out in section 7 of the Act. ANZFA is required to and it is its function to assess applications according to section 7 of the Act and in its planning and budgeting process it must estimate the number of applications and the amount of work it will have. This is a common practice in Commonwealth agencies which respond to requests. This is an issue of planning which will need to be addressed regardless of whether there is an application fee payable. Further, the application fee does not cover the entire cost to ANZFA of considering the application. This means that the present planning considerations will continue whether or not a fee is imposed.

6.4 The explanatory memorandum suggest ANZFA needs to provide resources for processing applications and because there is no control over the number of claims ANZFA would either compromise the quality of assessment or breach its statutory obligation to finalise the applications within 12 months (with a 6 month extension ANZFA may approve itself). This argument is baseless because it assumes ANZFA will be unable to meet the requirements of processing applications, which seems unlikely as they are currently statute bound to process applications with resources they already apply to that function from their appropriation. Further, this argument does not recognise that there may be resources applied to processing applications where no applications are made. These are not arguments directed at funding arrangements, but rather, at the planning of ANZFA's functions with its appropriation from Parliament (and its own monies).

6.5 Therefore, it is incorrect to claim that the present legislation is deficient. Rather, the objectives the Government aims to achieve are inconsistent with the Act in its present form. It is submitted the Government proposes the scheme to charge application fees because there are limited alternatives for the Government to make charges to offset the costs of ANZFA's administration which have not already been undertaken (for example, charging for services).

7. Alternative funding schemes

7.1 It is submitted that as a 'public good' the activities of ANZFA should be funded by the taxpayer through appropriations from Parliament. The proposal to seek funding from the users of ANZFA 'services' is arguably an arbitrary imposition of a charge.

7.2 There does not seem to be an equitable, accessible or efficient way to impose a charge that does not discriminate against a stakeholder at this time.

7.3 It is therefore submitted, that there is no present alternative scheme for charging for ANZFA to carry out its statutory functions, and that this is a cost that is appropriate to an appropriation by Parliament.

8. Policy and Technical Amendments

8.1 The Bill No. 2 sets out a number of policy and technical amendments. These amendments are directed to streamlining and simplifying the processes.

8.2 The following matters in the Bill No. 2 may require further consideration, including:

(a) the appropriateness of ANZFA raising revenue through the marketing of its expertise and the possible conflicts between these activities and ANZFA's functions;

(b) the exemption of ANZFA from some legal actions;

(d) the appropriateness and accountability of ANZFA in the management of its monies; and

(e) the meaning of the term 'work program' set out in the Regulations, but not in the Bills, and the composition and function of the 'committee' that determines the 'work program'.

8.3 Further consideration may need to be given to the importance for Australian consumers and industry to reviewing the Food Standards Code, developing a Uniform Food Hygiene Standard and facilitating an integrated national safe food system. These are important issues and their importance should not be overshadowed by an inappropriate scheme to charge fees for applications.

9. Recommendation

9.1 It is submitted that the Bill and the Bill No. 2 be reconsidered for the reasons set out above.

9.2 It is submitted that the Bill No. 2 should otherwise proceed. However, it is noted that there are a number of technical matters that may need to be addressed.

9.3 It is submitted that the Government should make a commitment to ensure the review the Food Standards Code, the development of a Uniform Food Hygiene Standard and the facilitation of an integrated national safe food system.

Senator Meg Lees	Senator Natasha Stott Despoja
Deputy Chair AD (South Australia)	AD (South Australia)

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