Bills Digest no. 138 2008–09
Nation-building Funds Amendment Bill 2009
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: 12 May
2009
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 prevent the transfer of $2.5
billion to the Education Investment Fund in order to redirect the
funds to proposed spending under the Clean Energy Initiative.
The
Nation-building Funds Act 2008 (Cth) (the
Nation-building Funds Act)[1] established several Funds, namely, the Building
Australia Fund, the Health and Hospitals Fund and the Education
Investment Fund (EIF). The EIF was established to:
- make payments in relation to the creation or development of
higher education infrastructure
- make payments in relation to the creation or development of
research infrastructure
- make payments in relation to the creation or development of
vocational education and training infrastructure
- make payments in relation to the creation or development of
eligible education infrastructure, and
- make transitional payments from the Higher Education Endowment
Fund (HEEF).[2]
The Howard Government established the HEEF:
For the first time ever, the Australian
Government will establish an endowment fund the Higher Education
Endowment Fund (HEEF) as a perpetual fund to generate earnings for
capital works and research facilities in our institutions of higher
learning. The initial investment of $5 billion out of this year s
Budget surplus will broadly double all the existing financial
investments and endowments currently held in the total university
sector. The capital will not be spent. It will be invested. And,
what is more, we will add further capital from future Budget
outcomes to this perpetual fund. Individuals who wish to contribute
to this visionary initiative will be able to make tax deductible
gifts to be managed along with the Government endowment. The
Endowment will be managed by the Guardians of the Future Fund. The
earnings generated by this investment will be dedicated to building
first class institutes of learning first class by world standards
and put our Institutes of Higher Learning on a secure footing for
ever.[3]
The
Higher Education Endowment Fund Act 2007 (Cth)[4] established the HEEF.
The Rudd Government announced the EIF[5] in the 2008 09 Budget.[6] The EIF would incorporate
the balance in the HEEF. Unlike the HEEF where only earnings were
available for spending, both the capital and the earnings of the
EIF are available for spending.
With respect to funding, the Government s ambition was to have
$11 billion in the EIF:
This reform will be underpinned by a new
Education Investment Fund (which absorbs and extends the Higher
Education Endowment Fund, HEEF). The Education Investment Fund will
provide financing for capital investment in higher education and
vocational education and training. Subject to final budget outcomes
in 2007-08 and 2008-09, the Government will make an initial
contribution to the fund of $5 billion, bringing its total to
around $11 billion.[7]
Of the $11 billion, $6.2 billion would come from transferring
the (then) balance in the HEEF.[8] The $5 billion or so would come from other
transfers. The Nation-building Funds Act provides for one such
transfer. Section 130 of this Act, which contains the simplified
outline of Part 3.2 of the Act which deals with the EIF, states in
part:
One or more initial amounts are to be credited
to the Education Investment Fund Special Account by 30 June
2009. The total of the initial amounts must equal $2.5 billion.
Further, subsection 133(2) of the National-building Funds Act
which deals with initial credits of amounts to the EIF states:
The responsible Ministers must ensure that, by
the end of 30 June 2009, the total of the amounts credited to
the Education Investment Fund Special Account under
subsection (1) equals $2.5 billion.
However, the Nation-building Funds Amendment Bill 2009 (the
Bill) seeks to prevent this transfer by repealing the crediting of
the $2.5 billion from the 2007-08 budget surplus .[9]
Rather, the $2.5 billion will be used to help fund the Clean
Energy Initiative announced in the 2009-10 Budget.[10]
According to the second reading speech, following the
repeal:
There will still be more than $6.5 billion in
the Education Investment Fund for education and research
infrastructure, of which $4.1 billion has been committed in the
2009-10 budget and in the nation-building package announced by the
Prime Minister on 12 December 2008. The balance of $2.4 billion
plus investment earnings, estimated to be around $630 million over
the forward estimates, will be available for future education and
research projects.[11]
At 31 March 2009, the amount in the EIF was $6.55
billion.[12] Of the
$4.1 billion, the 2009-10 Budget proposes spending of $2.985
billion over the four years 2009-10 to 2012-13.[13]
Budget Paper No. 1 2009-10 states:
The Government has committed to transfer the
realised 2007-08 surplus and the balance of the Telstra Sale
Special Account to the [Nation-building] Funds by 30 June
2009.[14]
The Bill reverses this undertaking at least as far as the EIF is
concerned. The funds are to be used to help fund the Clean Energy
Initiative.
Dr Glenn Withers of Universities Australia, the peak body
representing universities, criticised the decision to divert funds
from the EIF to the Clean Energy Initiative. He is reported as
saying that little of the money for the Clean Energy Initiative
would go towards universities, vocational education and training or
research institutes.[15]
The proposed amendment does not change the Budget deficit since
it only changes the composition of assets.
Clause 3 provides that each Act, which is
mentioned in Schedule 1 of the Bill, is amended or repealed in
accordance with that Schedule.
Schedule 1 amends the Nation-building Funds
Act 2008.
Item 1 deals with section 130 of the Act and
omits the wording in that section stating that one or more initial
amounts are to be credited to the EIF Special Account by
30 June 2009, and that the total of the initial amounts must
equal $2.5 billion.
Item 2 repeals section 133 dealing with initial
credits of amounts to the EIF (discussed above).
Concluding comments
The main consequence of the Bill is to reduce by $2.5 billion
funds that otherwise would have been spent on higher education, so
that those funds may be redirected towards the Australian
Government s Clean Energy Initiative.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277
2464.
Richard Webb
25 May 2009
Bills Digest Service
Parliamentary Library
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