Chapter 13 - Financial legislation

When requests are required: (b) ordinary annual services

Section 53 of the Constitution provides that the Senate may not amend a bill which would appropriate money for the ordinary annual services of the government.

A bill would appropriate money if it contains a provision expressly stating that money is appropriated for the purposes of the bill. It is therefore readily determined whether a bill is an appropriation bill. The question which arises for interpretation is: what kind of appropriation is an appropriation for the ordinary annual services of the government?

This expression is used only in sections 53 and 54, and not in section 55. It is therefore not justiciable and its interpretation is a matter for the two Houses in their dealings with each other.

The framers of the Constitution had a fairly clear conception of the meaning of the phrase “the ordinary annual services of the government”, and it was expounded by a number of speakers at the Constitutional Conventions. The expression referred to the annual appropriations which were necessary for the continuing expenses of government, as distinct from major projects not part of the continuing and settled operations of government. The expression had been taken from the so-called Compact of 1857 between the government and the Legislative Council of South Australia, and the operation of that agreement was familiar to the framers of the Constitution. The interpretation of the provision was also explored in a number of debates in the Senate. (For a comprehensive history of the exposition of the phrase see ASP, 6th ed., 1991, pp 569-80.)

The interpretation of the expression was substantially settled in 1965 by what amounted to an agreement between the Senate and the government, and by agreed applications of the terms of that agreement since that time.

This agreement, which is generally referred to as the Compact of 1965, arose from an attempt by the government to place in the non-amendable annual appropriation bills provision for some matters which were traditionally regarded as not forming part of the ordinary annual services. After debate in the Senate and the consideration of the matter by an informal committee of senators, a statement was made on behalf of the government indicating that appropriations for the following matters would not be regarded as part of the ordinary annual services of the government and would therefore be included in the amendable bill:

(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;

(d) grants to the States under section 96 of the Constitution; and

(e) new policies not authorised by special legislation, subsequent appropriations for such items to be included in the appropriation bill not subject to amendment by the Senate.

This list reflected the principles set out in the report of the informal committee of senators. (A detailed account of the establishment of the Compact of 1965 is in ASP, 6th ed., 1991, pp 580-3.)

In 1974 two estimates committees drew attention to appropriations for new policies included in the non-amendable appropriation bill, and the Standing Committee on Constitutional and Legal Affairs was given a reference to consider the inclusion of new policies not authorised by legislation in the non-amendable bill. The committee’s report indicated that appropriations for new policies not authorised by legislation should not be included in the non-amendable bill, and recommended that the Senate reaffirm the principles of the Compact of 1965 (report of the committee, PP 130/1976). The Senate therefore passed the following resolution:

That the Senate resolves:

(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;

(d) grants to the States under section 96 of the Constitution; and

(e) new policies not previously authorised by special legislation,

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. (17 February 1977 J.572)

The ordinary annual services are therefore defined by what they do not include rather than what they include.

The application of the Compact of 1965 was the subject of correspondence between the Standing Committee on Appropriations and Staffing and the government, tabled in the Senate on 3 November 1988 and 4 April 1989. It was agreed that expenditure on computers, which, due to changes in technology, are no longer major items of capital equipment, and expenditure on the fitting out of buildings, should be regarded as part of the ordinary annual services subject to certain limits.

In 1999 the Senate adopted a recommendation in the 30th report of the Appropriations and Staffing Committee that some adjustments be made in the classification of appropriation items for the purpose of determining whether they fall within the category of ordinary annual services in the context of accrual budgeting (22/4/1999, J.777). The adjustments provided that:

(i) items regarded as equity injections and loans be regarded as not part of ordinary annual services

(ii) all appropriation items for continuing activities for which appropriations have been made in the past be regarded as part of ordinary annual services

(iii) all appropriations for existing asset replacement be regarded as provision for depreciation and part of ordinary annual services.

In 2004 the Senate determined a matter relating to the classification of payments to international organisations, on the recommendation of the Appropriations and Staffing Committee (41st report of the committee, PP 360/2004; 8/12/2004, J.273).

In March 2005 two appropriation bills were presented to replenish money spent by departments and agencies on relief for the victims of the 2004 tsunami. One of the bills purported to be for the ordinary annual services, but as the expenditure could not possibly be ordinary annual services expenditure, both bills were treated as amendable bills (15/3/2005, J.499-500). The Northern Territory Emergency Response package of bills repeated this anomaly (17/8/2007, J.4254), as did bills to cover expenditure on an equine influenza outbreak (14/2/2008, J.152). See also statement by the Chair of Committees in relation to the Appropriation (Regional Telecommunications Services) Bill 2005-2006, SD, 14/9/2005, p. 37.

These instances indicated that the Department of Finance and Administration appeared to be taking a position that ordinary annual services include anything it regarded as falling within vaguely-expressed outcomes of departments, including new policy proposals, a position quite contrary to the compact of 1965 and subsequent Senate determinations (see Report No. 25 of 2005-06 of the Auditor-General, pp 40-41; Appropriations and Staffing Committee, Annual Report 2005-06, PP 157/2006; Annual Report 2006-07, PP 138/2007; report of Finance and Public Administration Committee on annual reports, PP 206/2007; report on additional estimates 2007-08, PP 230/2008; Appropriations and Staffing Committee, 45th Report, PP 148/2008: this report called for a return to the position formerly agreed between the Senate and the government).

An amendment passed on 20 March 2008 to the motion for the second reading of the 2007-08 additional appropriation bills drew attention to the reports of the Senate committees on this issue, and called upon the government to resolve it (J.322). At the time of writing it remained unresolved. (See Supplement)

During the debate leading up to the Compact of 1965, it was pointed out that appropriations for the two Houses of the Parliament should not be regarded as ordinary annual services of the government, or, indeed, services of the government, and it was recommended that they be contained in a separate bill. This recommendation was not put into effect until 1982, when a separate parliamentary appropriations bill was introduced as a result of the recommendations of the Senate Select Committee on Parliament’s Appropriations and Staffing (see under Parliamentary appropriations, below).

For amendments of an annual appropriation bill not for the ordinary annual services, see 30/11/1995, J.4320-1; 24/6/2004, J.3697-8.

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