Bills Digest no. 72 2008–09
Appropriation Bill (No. 4) 2008-09
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
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced: 4
December 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 approximately $1
041 million for the non-ordinary (or ‘other’) annual
services of government.
Section 83 of the Constitution of Australia provides that no
monies may be withdrawn from the Consolidated Revenue Fund except
‘under an appropriation made by law’. Laws authorising
spending are either:
- special appropriations, or
- one of (usually) six annual appropriation acts.
Of the appropriation bills introduced to accompany the May
Budget, by far the most important, in dollar terms, is
Appropriation Bill (No. 1). This appropriates funds for the
‘ordinary’ annual services of the government while
Appropriation Bill (No. 2) appropriates funds for
‘other’ annual services. A third Appropriation
Bill—Appropriation (Parliamentary Departments) Bill No.
1—funds the parliamentary departments.
Section 54 of the Constitution requires that there be a separate
law appropriating funds for the ordinary annual services of the
government. That is why there are separate bills for ordinary
annual services and for other annual services. The distinction
between ordinary and other annual services was set out in a
‘Compact’ between the Senate and the Government in
1965.[1]
Additional estimates
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 No. 2 and
Appropriation (Parliamentary Departments) Bill No. 1
respectively.
When the Budget is brought down, the government releases
Portfolio Budget Statements. They contain, amongst other things,
explanations of the funding sought through the three Appropriation
Bills. The Portfolio Budget Statements are ‘relevant
documents’ for the purposes of section 15AB of the
Acts Interpretation Act 1901. This means that the
Portfolio Budget Statements can be used to help interpret an Act.
Portfolio
Additional Estimates Statements[2] are the counterparts of Portfolio Budget
Statements and contain explanations of the funding sought through
the additional estimates Appropriation Bills.
Departmental and administered expenses
Departmental outputs/expenses are the costs of running agencies,
for example, salaries, depreciation and other day-to-day operating
expenses. Administered expenses are the costs of programs that
agencies administer. While most administered expenses are funded
through special appropriations, some are funded through the
Appropriation Bills.
Departmental outputs and administered expenses contribute to
outcomes. They are the results or consequences for the community
that the government wishes to achieve. An example, in the
Attorney-General’s portfolio, is:
An equitable and accessible system of federal
civil justice.[3]
Payments for other services fall into four categories:
- payments to the states, territories and local government
(these are paid under section 96 of the
Constitution)
- new administered expenses
- ‘non-operating’ (sometimes called
‘capital’) costs:
- appropriations for ‘administered assets and
liabilities’ fund, for example, the purchase of new
administered assets and the reduction of administered
liabilities
- funding in the form of ‘equity injections’ is, for
example, for substantial investment in new assets
- ‘loans’ are provided when an investment is expected
to result in a return to the investment, for example, productivity
gains
- ‘previous years’ outputs’ appropriations
replenish funds used to provide departmental outputs in a previous
year. This can occur, for example, when the government has decided
to introduce a new program but the decision comes too late for the
program to be funded through the additional appropriation bills. In
such cases, the program is funded initially from existing
appropriations. This funding is later replenished in the form of a
previous years’ outputs appropriation, and
- payments to CAC Act bodies (these are payments made to
authorities and companies established under the
Commonwealth Authorities and Companies Act 1997 (CAC
Act). Examples of CAC Act bodies are the Australian War Memorial,
the Australian Film Commission, and the Australian Broadcasting
Corporation).
In previous years, payments to CAC Act bodies were made
‘directly’ to the bodies through Appropriation Act No.
2. Beginning in 2008-09, payments to CAC Act bodies are paid
‘indirectly’ through portfolio departments.
Appropriation Bill (No. 4) 2008-09 (the Bill) provides funds to the
relevant portfolio department for on-payment to a CAC Act body. For
example, under the Bill, funding for the Australian Broadcasting
Corporation, the Special Broadcasting Corporation, and the
Australian Communications and Media Authority are made
‘indirectly’ through the Department of Broadband,
Communications and the Digital Economy, the latter being the
relevant portfolio department. The Department of Finance and
Deregulation maintains a list of CAC Act bodies.[4]
The Bill contains processes for reducing amounts that have been
appropriated but which are subsequently found to be more than was
needed. Reductions can apply to:
- payments to the states, territories and local
governments
- administered assets and liabilities, and other departmental
items, and
- CAC Act body payments.
These processes are essentially the same as those available to
the reduction of departmental and administered expenses for
ordinary annual services.[5]
Beginning in 2008-09, the process for reducing appropriations
for payments to the states, territories and local governments is
different from the process in previous years. Under the new
process, the amount reduced is based on agencies’ financial
statements in their annual reports. In essence, the amount of the
reduction is the difference between the total of amounts
appropriated less the amount shown as having been spent in
agencies’ financial statements.
The Bill appropriates about $1 041 million.[6] This compares with about $12 691
million in Appropriation Act (No. 2) 2008-09.
For the most part, the Bill’s provisions are identical to
those in Appropriation Act (No. 2) 2008-09. The Bill
differs from Appropriation Act (No. 2) 2008-09 in that the
Bill omits provisions that are not relevant, for example, Part 4
which dealt with reducing payments to the states, territories and
local governments in previous Acts. This Bills Digest therefore
focuses on differences between the Bill’s provisions and
those in Appropriation Act (No. 2) 2008-09. The main
difference is in clause 15, which deals with the
Advance to the Finance Minister.
Clause 3 contains definitions. Most definitions
are identical to those in Appropriation Act (No. 2)
2008-09. The following are some of the definitions in
clause 3:
Clause 6 provides that the total of the items
in Schedule 2 is $1 041 383 000.
Clause 7 deals with payments to the states,
territories and local governments. Subclause 7(2)
specifies that if the Portfolio Statements indicate that certain
activities are intended to be for a particular outcome, then
expenditure on those activities is taken to be as contributing to
the outcome.
Clause 8 deals with ‘administered
items’. Subclause 8(1) provides that the
amount identified for an administered item in an outcome can be
used to contribute to that outcome. The wording of
subclause 8(2) is identical to that in
subclause 7(2).
Clause 9 deals with administered assets and
liabilities. Subclause 9(1) provides that the
amount identified for an agency’s administered assets and
liabilities may be applied to achieving any of the agency’s
outcomes, which are specified in paragraphs
9(1)(a) to 9(1)(f). Subclause
9(2) specifies that if the Portfolio Statements indicate
that certain activities were intended to be for a particular
outcome, then expenditure on those activities is taken to be as
contributing to the outcome.
Clause 10—Other departmental
items—provides that the amount specified in an other
departmental item for an Agency may be applied for the departmental
expenditure of the Agency.
Clause 11 deals with CAC Act body payments.
Subclause 11(1) provides that an amount,
appropriated for a CAC Act body payment item, may be paid to the
body for that body’s purposes. Subclause
11(2) provides that if an Act provides that a CAC Act body
must be paid amounts that are appropriated by the Parliament for
the purposes of the body, and Schedule 2 contains
a CAC Act body payment item for that body, then the body must be
paid the full amount specified in the item. According to the
Explanatory Memorandum:
The purpose of subclause 11(2) is to clarify
that subclause 11(1) is not intended to qualify any obligations in
other legislation regulating a CAC Act body, where that legislation
requires the Commonwealth to pay the full amount appropriated for
the purpose of the body.[8]
Back to top
Three clauses in Part 3 deal with reductions to
appropriations:
- clause 12 deals with reductions of (a)
payments to the states, territories and local governments and (b)
administered items
- clause 13 deals with reductions of (a)
administered assets and liabilities and (b) other departmental
items, and
- clause 14 deals with reductions to CAC Act
bodies payment items.
Subclause 12(1) stipulates that the amount by
which payments to the states, territories and local governments and
for administered items can be reduced is the difference between
what has been appropriated and what has been spent, the latter
being the amount shown in agencies’ financial statements.
However, paragraph 12(2)(a) gives
the Finance Minister power to determine that subclause
12(1) does not apply or that subclause
12(1) applies as if the amount in the annual report were
the amount that the Finance Minister determines
paragraph 12(2)(b). The
Explanatory Memorandum states:
The power in paragraph 12(2)(b) is to ensure
that the amount published for the item can be corrected if, for
example, the amount is erroneous or requires updating after an
agency’s annual report is published.[9]
Subclause 12(3) provides that a determination
made under subclause 12(2) is a legislative
instrument, that section 42 (relating to disallowance) of the
Legislative Instruments Act 2003[10] applies to the determination,
but that Part 6 (relating to sunsetting provisions) of the
Legislative Instruments Act 2003 does not apply to the
determination. In short, this means that the Finance
Minister’s determinations are disallowable by Parliament, but
once made, will not expire.
Subclause 13(1) enables the minister
responsible for an agency, or—where the Finance Minister is
responsible for the agency—the chief executive of the agency,
to seek a reduction in administered assets and liabilities, and
other departmental items, while subclause 13(2)
empowers the Finance Minister to make a determination that accords
with the request. However, the determination cannot reduce the
appropriation below zero (subclause 13(3)).
Requests are not legislative instruments (subclause
13(5)). While the Finance Minister’s determinations
are legislative instruments and are disallowable, the
determinations—like those in subclause
12(3)—are not subject to the sunsetting provisions
of the Legislative Instruments Act 2003 (subclause
13(6)).
The wording in clause 14—which deals with
reductions to CAC Act bodies payment items— is almost the
same as for clause 13. However, whereas a request
can come from the Chief Executive of an agency for which the
Finance Minister is responsible in the case of clause
13, a similar request must come from the Secretary of the
Department in the case of CAC Act bodies (paragraph
14(1)(b)). Subclause 14(5) confirms that a reduction can
be made for a CAC Act body even though it has been allocated funds
under subclause 11(2).
Clause 15–Advance to the Finance Minister
differs from the comparable sections in previous appropriation
acts. The Minister for Finance and Deregulation, the Hon. Lindsay
Tanner, in the second reading speech for Appropriation Bill (No. 3)
2008-09, gave the following explanation:
Based on current indications, we expect demand
for issues from the advance to be greater than the $295 million
provided in Appropriation Act (No. 1) and the $380 million provided
in Appropriation Act (No. 2). It is important that the government
can maintain its ability to issue amounts from the advance in the
event that there is an urgent need for expenditure. Accordingly,
clause 13 of Appropriation Bill (No. 3) provides that, irrespective
of the amounts issued from the advance, at the commencement of
Appropriation Act (No. 3), the amount available to be issued will
be restored to the original limit of $295 million. A similar clause
has been added to Appropriation Bill (No. 4) which will restore the
limit to $380 million.
In addition, a new clause is included in bills
(No. 3) and (No. 4) providing that where amounts included in those
bills have also been subject to an issue from the advance, for
example, where an amount is determined after the additional
estimates bills are finalised, then the appropriation in the bill
will be reduced by the amount of the advance. This change will
prevent appropriations for the same expenditure from both the
advance and the bill.[11]
Clause 15 relates to section 15 of
Appropriation Act (No. 2) 2008-09. Section 15 allows the
Finance Minister to spend up to $380
million if he or she is satisfied that there is an urgent need for
expenditure that is not provided for—or is insufficiently
provided for—because of an erroneous omission or
understatement or because the expenditure was unforeseen. Under
subsection 15(2), expenditure from the Advance to the Finance
Minister is treated as if it had been included in Schedule 2 of
Appropriation Act (No.2) 2008-09 (Schedule 2 enumerates
the services for which money is appropriated). In other words, the
effect of subsection 15(2) is to treat expenditure from the Advance
to the Finance Minister as if it had been included in—and
hence appropriated by—Appropriation Act (No. 2)
2008-09. Subsection 15(3) provides that the amount expended
from the Advance must not exceed $380 million.
Subclause 15(1) provides that if the Finance
Minister has determined—under subsection 15(2) of
Appropriation Act (No. 2) 2008-09—to increase an
amount in Schedule 2 of that Act because of expenditure from the
Advance, then that amount is to be disregarded for the
purposes of determining the maximum amount of the Advance. In other
words, for the purposes of determining the amount of the Advance,
prior expenditure from the Advance is to be disregarded, so that
the Advance is reinstated to a maximum of $380 million.
Subclause 15(2) is designed to prevent double
appropriations—once under the Bill and once from the Advance
to the Finance Minister—for the same activity/item.
Paragraph 15(2)(a) relates to expenditure under
the Bill while paragraph 15(2)(b) relates to the
Advance to the Finance Minister. Subclause
15(2) provides that if the Bill appropriates funds for a
particular expenditure (paragraph 15(2)(a)), and
the Finance Minister has already made a determination, before the
Bill commences, for expenditure for the same purpose from the
Advance to the Finance Minister (paragraph
15(2)(b)), then the amount that the Bill appropriates is
reduced by the amount already expended from the Advance to the
Finance Minister.
Clause 16—Crediting amounts to
Special Accounts provides that if a purpose of a special
account is a purpose that an item covers—irrespective of
whether that item expressly refers to the special
account—then amounts may be debited against the appropriation
for that item and credited to the special account.
Clause 17 deals with the conditions attached to
grants of financial assistance to the states, territories and local
governments.
Section 96 of the Constitution provides in part:
… the Parliament may grant financial
assistance to any State on such terms and conditions as the
Parliament thinks fit.
According to the Explanatory Memorandum, clause
17:
… delegates Parliament’s power
under section 96 of the Constitution to provide financial
assistance to the States to the responsible Minister listed in
Schedule 1 of the Bill.[12]
Subclause 17(1) provides that it applies
to payments to the states, territories and local government for the
outcomes listed in column 2 of Schedule 1.
Paragraph 17(2)(a) provides
that payments must accord with the conditions attached to the
payments—as established by the process set out in
subclause 17(3)—and also with any
determination as to the amounts and timing of payments
paragraph 17(2)(b). Subclause
17(3) provides that the way terms and conditions are
established is for the relevant Minister to make a determination in
writing before or after the Act commences. Subclause
17(4) provides that determinations mentioned in
paragraph 17(2)(a) and determinations made
under paragraph 17(2)(b) are not legislative
instruments. The Explanatory Memorandum explains that the reason
the determinations are not legislative instruments is:
… because the determinations are not
altering the appropriations approved by Parliament. Determinations
under subclause 17(2) will simply determine how appropriations
for State, ACT, NT and local government items will be paid. The
determinations are issued when required. However, payments can be
made without either determination.[13]
Schedule 1 lists the agencies responsible
for making payments to the states, territories, and local
governments, the outcomes for which payments are made, and the
names of the Ministers responsible for determining conditions and
for determining payments.
Schedule 2 lists the services for which money
is appropriated. The appropriations are broken down by agency, and
by the form that the payments take, for example, new administered
expenses.
Back to top
Concluding comments
As noted, most to the Bill’s provisions are identical to
those in Appropriation Act (No. 2) 2008-09. The treatment
of the Advance to the Finance Minister in clause
15 is, however, unusual and raises the question of why the
Bill adopts the approach it does to reinstating the amount of the
Advance to $380 million. Presumably, an alternative approach would
be to increase the amount of the Advance.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277
2464.
Richard Webb
28 January 2009
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted
by the Copyright Act 1968, no person may reproduce or transmit any
part of this work by any process without the prior written consent
of the Parliamentary Librarian. This requirement does not apply to
members of the Parliament of Australia acting in the course of
their official duties.
This work has been prepared to support the work of the Australian
Parliament using information available at the time of production.
The views expressed do not reflect an official position of the
Parliamentary Library, nor do they constitute professional legal
opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au. Any
concerns or complaints should be directed to the Parliamentary
Librarian. Parliamentary Library staff are available to discuss the
contents of publications with Senators and Members and their staff.
To access this service, clients may contact the author or the
Library’s Central Entry Point for referral.
Back to top