Bills Digest no. 57 2007–08
Appropriation Bill
(No. 3) 2007-08
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
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Appropriation
Bill
(No. 3) 2007-08
Date
introduced: 13
February 2008
House: House of Representatives
Portfolio: Finance and Deregulation
Commencement:
On Royal
Assent
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading
speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To appropriate additional money for the ordinary annual services
of the government.
Section 83 of the Constitution
states:
No money shall be drawn from the Treasury of the
Commonwealth except under appropriation made by law.
There are two broad categories of appropriations:
- annual appropriations, and
- special (or standing) appropriations.
There are usually six annual appropriation Bills. They authorise
about 25 per cent of annual Commonwealth spending.
Special (or standing) appropriations the terms are often used
interchangeably authorise about 75 per cent of spending. An example
of a special appropriation is the Social Security
(Administration) Act 1999 under which age pensions and other
social security payments are made.
Annual appropriations are usually contained in six Appropriation
Acts although there can be more. The first three are:
- Appropriation Act (No. 1)
- Appropriation Act (No. 2 ), and
- Appropriation (Parliamentary Departments) Act (No.
1).
The Bills for the first three Acts are introduced at the same
time as the Budget. The Acts authorise the payment of specified
amounts for particular purposes. Appropriation Act (No. 1) provides
for the appropriation of money from the Consolidated Revenue Fund
for the ordinary annual services of government. Appropriation Act
(No. 2) provides for the appropriation of money from the
Consolidated Revenue Fund for purposes other than the ordinary
services of government.
The Senate s powers
and money bills
Section 53 of the Constitution states:
Proposed laws appropriating revenue or moneys, or
imposing taxation, shall not originate in the Senate. But a
proposed law shall not be taken to appropriate revenue or moneys,
or to impose taxation, by reason only of its containing provisions
for the imposition or appropriation of fines or other pecuniary
penalties, or for the demand or payment or appropriation of fees
for licences, or fees for services under the proposed law.
The Senate may not amend proposed laws imposing
taxation, or proposed laws appropriating revenue or moneys for the
ordinary annual services of the Government.
The Senate may not amend any proposed law so as to
increase any proposed charge or burden on the people.
The Senate may at any stage return to the House of
Representatives any proposed law which the Senate may not amend,
requesting, by message, the omission or amendment of any items or
provisions therein. And the House of Representatives may, if it
thinks fit, make any of such omissions or amendments, with or
without modifications.
Except as provided in this section, the Senate
shall have equal power with the House of Representatives in respect
of all proposed laws.
As this Bill is concerned with the ordinary annual services of
the government, it may not be amended by the Senate.
Funding requirements usually change after the Budget is brought
down. The government may agree to additional funding if the amounts
in the three Budget Appropriation Acts are inadequate and so has to
seek parliamentary approval for additional spending. The process
whereby additional funds are provided is called additional
estimates and usually begins around
November of the Budget year. The approved additional estimates are
incorporated into Appropriation Bills 3 and 4 and Appropriation
(Parliamentary Departments) Bill No. 2. These Bills are the
counterparts of Appropriation Bills No. 1 and 2 and Appropriation
(Parliamentary Departments) Bill No. 1 respectively.
Portfolio Additional Estimates Statements are the additional
estimates counterparts of Portfolio Budget Statements and contain
explanations of Appropriation Bills 3 and 4 and Appropriations
(Parliamentary Departments) Bill No. 2.
Expenses are classified as either departmental or administered.
Departmental expenses are the resources that agencies control and
use to produce outputs. In essence, departmental expenses are the
cost of running agencies. Examples of departmental expenses are
salaries, other employee entitlements, and the use of equipment.
Departmental expenses are appropriated as a single amount for each
agency.
Administered expenses are spending that agencies manage on the
government s behalf. Examples of administered expenses are
subsidies, grants and benefit payments, and the financial
assistance grants the Commonwealth makes to local governments.
The Advance to the Finance Minister (AFM) provides flexibility
in that it allows the spending of funds for unforseen
contingencies. The AFM is a provision authorised by the annual
Appropriation Acts and made available to the Finance Minister as a
central contingency fund to provide urgent funding to agencies
throughout the financial year. Examples of the AFM provision are in
section 11 of Appropriation Act (No. 1) 2007-2008 and
section 12 of Appropriation Act (No.3) 2006-2007.
AFM funding is available only if it meets two tests:
- the need for funding must be urgent, and
- the need was unforeseen or arose because of erroneous omission
or understatement.
The Bill proposes additional funding for a number of agencies,
some of which flows from election policies. It is not clear whether
some of the policies can be considered to constitute new programs.
Traditionally, new programs are funded under Appropriation Bills
No. 2 and 4. After funding for the programs has been approved, the
programs are considered to be ordinary annual services and so are
funded through Appropriation Bills No. 1 and 3.
The following lists, by agency, some of the measures the Bill
covers.
In the
second reading speech, the Minister for Finance and
Deregulation identified additional funding for:
- $402 million for depreciation expense
- this is offset by a reduction in capital spending, so the net
effect on the Budget is neutral
- $38.8 million for Stage 2 of the Enhanced Land Force
Initiative, and
- $70.6 million for additional costs incurred for Operation
Astute in East Timor in 2006-07.
Programs the Minister identified are:
- $100 million for the National
Secondary Schools Computer Fund
- this will provide for grants of up to $1 million for schools to
assist them to provide for new or upgraded information and
communications technology for secondary school students in years 9
to 12
- $33.3 million for the
Skilling Australia for the Future program
- the government estimates that this program will cost $1.3
billion over four years
- $92.6 million to meet additional costs associated with the
previous government s Skills for the Future program and to extend
that program until the Skilling Australia for the Future
program begins in April 2008
- $16.2 million to establish the Television Technical Operators
College and the WesTrac National Skills Training Centre of
Excellence
- $22.7 million for assistance to schools in declared Exceptional
Circumstances areas to increase equitable access to high-quality
education opportunities
- $45.7 million in 2007-08 to establish the Workplace Authority, and
- $15 million to establish the Office of the Workplace
Ombudsman.
Additional funding for the Department of the Environment, Water,
Heritage and the Arts includes:
- $50.8 million for the Great Barrier Reef Marine Park Structural
Adjustment Package
- $31.8 million to provide rebates
to households for installing solar hot water heaters
- $50.8 million for the National Solar
Schools Plan to encourage improved energy and water efficiency
in schools, and
- $15.2 million to take early action on the National
Plan for Water Security, to accelerate investment in water
savings infrastructure and the purchase of water allocations
- this brings forward spending from 2011-12
- $25 million for the National
Water Commission to assist groundwater licence holders in New
South Wales to adjust to reductions in water access
entitlements.
The Department of Families, Housing, Community Services and
Indigenous Affairs will receive an additional $189.8 million to
assist people with disabilities, their families and carers
- this includes annual tax-free payments of $1,000 for each child
under the age of 16 with a disability for whom the carer is
receiving
Child Carer Allowance, and $9 million to increase the support
available to people in disability business services.
Additional funding earmarked for the Department of Health and
Ageing includes:
- $14 million to provide incentives to support the take-up of
Medicare Easyclaim by patients attending participating general
practices and specialist practices
- $33.1 million to provide up-front capital grants and recurrent
funding for the establishment of 31 GP
Super Clinics, and to provide incentive payments to GPs and
allied health providers to relocate to these clinics
- $11.7 million to establish a specialist training school at
Greenslopes Private
Hospital at the University of Queensland, and
- $31.6 million for hospitals and community health under the
Better Outcomes for Hospitals and Community Health program
- this includes funds for specific commitments announced during
the election such as $10 million for the Flinders Medical Centre
clinical teaching facilities upgrade.
The Bill provides for the Department of Immigration and
Citizenship (DIAC) to receive the following additional amounts:
- $18 million to upgrade the Border
Control System
- $81.6 million through the DIAC funding model for increases in
the volume of DIAC s transactions, including visa applications
(mainly student and skilled migrant) during 2007-08.
The Bill provides for $2.5 million to establish Infrastructure
Australia.
The Bill provides $15.2 million for the introduction of the
Enterprise
Connect program, which will replace the Howard Government
s Australian Industry Productivity Centres.
It is not clear whether some of the policies can be considered
to constitute new programs. Traditionally, new programs are funded
under Appropriation Bills No. 2 and 4. After funding for the
programs has been approved, the programs are considered to be
ordinary annual services and so are funded through Appropriation
Bills No. 1 and 3.
The Bill provides for expenditure of more than $2.436 billion.
This compares with $1.119 billion for the equivalent 2006-07
Act.
The provisions in the Bill are virtually identical with those of
Appropriation Act (No. 3) 2006-07 and Appropriation
Act (No. 1) 2007-08.
Clause 6 authorises expenditure of $2 436 108
000. The amounts allocated to each agency, and the breakdown
between departmental and administered items, are set out in
Schedule 1.
Subclause 7(1) empowers the Finance Minister to
issue money from the Consolidated Revenue Fund for departmental
items for an entity but restricts the total to that specified in
Schedule 1.
Clause 8 deals with administered items in the
basic appropriation. Subclause 8(1) limits the
amount of money the Finance Minister can issue from the
Consolidated Revenue Fund to the amount specified (in
Schedule 1), and the amount that the Finance
Minister includes in a determination. The general procedure with
respect to the latter is as follows:
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
amount of the appropriation that has not been expensed in the year
from being issued from the Consolidated Revenue Fund. By convention
the Finance Minister issues determinations in relation to
administered expenses appropriations following the completion of
each financial year the determinations for administered expenses do
not reduce the appropriation. Rather, they set the maximum amount
that may be issued from each administered expense appropriation.
The effect of the determination is that administered expense
appropriations that have not been expensed in a year cannot be
spent in later years. [1]
Clause 9 deals with reductions of
appropriations. The general process for reductions is:
Amounts appropriated for departmental outputs and
for non-operating costs can be subject to a reduction process,
first introduced in the additional estimates appropriations acts
for 2003-2004. Under this process, on request in writing from a
responsible minister, the Finance Minister may issue a
determination to reduce the entity s departmental expense or
non-operating costs appropriation. Requests for amounts to be
lapsed may arise, for example, because the appropriation is no
longer required. [2]
Section 11 of Appropriation Act (No. 3)
2006-07 titled Departmental items-adjustments
empowered the Finance Minister to increase the amount allocated to
a departmental item up to a maximum of $20 million. As noted,
departmental expenses are essentially the costs of running agencies
such as salaries and rent. Section 11 provided flexibility in that
when situations arise where an agency finds that it does not have
enough funds for departmental expenses and the shortfall cannot be
met through the normal additional estimates processes, it may
request additional funds by means of a determination that the
Finance Minister issues.
It is not clear why a comparable clause has been dropped from
this Bill. A possibility is that it is a way of enforcing financial
discipline on agencies in the context of the government seeking to
cut expenditure for fiscal policy purposes. By eliminating access
to this option, agencies will be forced to operate within the
budgets available through the annual appropriations and additional
estimates processes.
Clause 11 deals with the AFM (see page 4 of the
Digest). Subclause 11(3) limits the combined total
the Finance Minister can issue under Appropriation Act (No. 1)
2006-07 and the Bill to $175 million. Subclause
11(5) provides that such an AFM determination by the
Finance Minister is a legislative instrument, but is not
disallowable.
A clause comparable to Clause 12 has not
appeared in previous Appropriations Bills. This clause derives from
the intervention in indigenous affairs in the Northern Territory. A
special account named the Northern Territory Flexible Funding Pool
Special Account has been created [a special account is a device to
simplify accounting whereby all financial transactions whether
money flowing in (credit) or out (debit) that are related to a
particular activity are recorded]. The Minister, in the
second reading speech, provided the following explanation of
this Clause 12:
We have inserted a new provision in Appropriation
Bill (No.3) section 12 to facilitate the achievement of
whole-of-government outcomes relating to Indigenous employment
initiatives. The new provision will provide relevant agencies with
the necessary appropriation in order to spend amounts received from
the Northern Territory Flexible Funding Pool Special Account.
Participating agencies will be identified in an annual
determination by the finance minister. The Flexible Funding Pool
model was adopted to permit the reallocation of funds between
participating agencies, where required, to more effectively meet
employment objectives relating to the Northern Territory Emergency
Response.
Subclause 12(1) provides that clause
12 applies when three conditions apply:
- an amount is paid to an agency from the Northern Territory
Flexible Funding Pool Special Account
- the item is an administered item, and
- the item is specified in a written determination the Finance
Minister makes.
Subclause 12(3) provides that the agency must
use the money only for the purpose set out in the
determination.
Subclause 12(5) provides that the determination
is a legislative instrument but is not disallowable.
Richard Webb
18 February 2008
Bills Digest Service
Parliamentary Library
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