Bills Digest no. 148 2009–10
Appropriation Bill (No. 2) 2010-2011
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
Appropriation Bill (No. 2)
2010-2011
Date introduced: 11 May 2010
House: House
of Representatives
Portfolio: Finance and Deregulation
Commencement: On Royal Assent
Links: The
links to the Bill, its Explanatory Memorandum and second
reading speech can be found on the Bills page, 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
$9.538 billion for the non-ordinary (‘other’) annual
services of government.
Constitutional
aspects
Section 83 of the Australian Constitution
provides that no monies may be withdrawn from the Consolidated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
- six (usually) annual appropriation Acts.
Appropriation Bill (No. 2) 2010–2011 (the Bill) is an
annual appropriation.
Annual
appropriation bills: ordinary and other annual services
Section 54 of the Australian Constitution
requires that there be a separate law appropriating funds for the
ordinary annual services of the government. That is why there are
separate appropriation 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
(the compact was updated to take account of the adoption of accrual
budgeting).
Appropriation Bill (No. 1) is introduced with the Budget and
appropriates funds for the ‘ordinary annual services of the
Government’. Appropriation Bill (No. 2)—which is also
introduced with the Budget—appropriates funds for
‘other’ annual services. A third Appropriation
Bill—Appropriation (Parliamentary Departments) Bill No.
1—funds the parliamentary departments.
Payments for other services funded under Appropriation Bill (No.
2) fall into three broad categories:
- payments to the states, territories and local governments
- new administered outcomes, and
- non-operating expenses.
Most payments to the states and territories are funded under a
special appropriation, namely, the
Federal Financial Relations Act 2009 (FFR Act).
Details of payments under the FFR Act can be found in the
Department of the Treasury Portfolio Budget Statements.
Payments for non-government schools fall into two categories.
On-going payments under the Schools Assistance Act 2008
are payments ‘through’ the states, that is, the
Commonwealth pays the states which pass the money on to schools.
Other payments for non‑government schools are made under
Appropriation Bill (No. 2).
The Commonwealth pays financial assistance grants to local
governments under the Local Government (Financial Assistance)
Act 1995. Since November 2009, payments to local governments
for the digital regions initiative have been centralised through
state and territory treasuries.[1] All other payments made directly to local
governments are paid under Appropriation Bill (No. 2).
As noted above, the distinction between ordinary and other
annual services was set out in a ‘compact’ between the
Senate and the government in 1965. New administered outcomes are
not ordinary annual services because Parliament has not approved
them.
Agency non-operating costs fall into three broad categories:
- equity injections and loans
- equity injections
are provided to agencies to enable them to invest in assets in
order to undertake departmental activities. Equity injections are
for ‘major’ investments, that is, those valued at more
than $10 million. Loans can be made when the investment is
expected to yield a return such as increased efficiency, and
- appropriations for administered assets and liabilities
- these fund the
acquisition of administered assets and reductions in administered
liabilities.
The third category of non-operating costs is payments to CAC Act
bodies (see the discussion below under ‘budget terms and
processes’). These payments are made to the responsible
portfolio department—for example, the Department of
Broadband, Communications and the Digital Economy—for payment
to CAC Act bodies, for example, the Australian Broadcasting
Corporation.
Budget terms and
processes
Departmental and
administered expenses
Departmental 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.
Outcomes and programs
Departmental 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:
A just and secure society through the
maintenance and improvement of Australia’s law and justice
framework and its national security and emergency management
system.[2]
Programs contribute to outcomes. For example, six programs
contribute to the above outcome including ‘national security
and criminal justice’ (program 1.6) and ‘justice
services’ (program 1.3).
Portfolio Budget Statements
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.
Reduction
processes
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, and
to administered items
- administered assets and liabilities, and other departmental
items, and
- CAC Act body payments.
Beginning in 2008-09, the process for reducing appropriations
for payments to the states, territories and local governments
changed. 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.
Advance to the Finance Minister
The advance to the Finance Minister (AFM) provides flexibility
by authorising the Finance Minister to expend money when the
Finance Minister is satisfied that there is an urgent need for
expenditure during the financial year but for which there is not a
sufficient appropriation. The Finance Minister can expend money
from the AFM only if the proposed expenditure meets certain
criteria.
Agencies subject to the Financial Management and
Accountability Act 1997 (FMA Act) are financially part of the
Commonwealth. Bodies subject to the Commonwealth Authorities
and Companies Act 1997 (CAC Act) are legally and financially
separate from the Commonwealth. Examples of CAC Act bodies are the
Australian War Memorial, Screen Australia, and the Australian
Broadcasting Corporation. FMA Act agencies are appropriated amounts
for the purposes of making payments to CAC Act bodies. For example,
the Department of Broadband, Communications and the Digital Economy
passes on funding to the Australian Broadcasting Corporation and
the Special Broadcasting Corporation. CAC Act bodies have to
request payment from the relevant portfolio department.
Drawing rights
Under the FMA Act, no money can be paid from the Consolidated
Revenue Fund (CRF) without a valid drawing right. Drawing rights
control payments from the CRF and the use of appropriations, and
allow the Finance Minister (or the Finance Minister’s
delegate) to set conditions and limits relating to those
activities. The FMA Act provides that an official or minister must
not make a payment of money from the CRF, or debit an
appropriation, unless authorised by a valid drawing right.
General drawing rights limits are a mechanism for limiting
spending under certain Acts. They do not appropriate money.
The Nation-building Funds Act 2008 established three
so-called nation-building funds—the Building Australia Fund,
the Education Investment Fund, and the Health and Hospitals
Fund—as well as special accounts for each of those funds. The
COAG Reform Fund Act 2008 established the COAG Reform Fund
as a special account. Its purpose is to make financial assistance
grants to the states and territories. An amount in the Building
Australia Fund, the Education Investment Fund and the Health and
Hospitals Fund may be transferred to the COAG Reform Fund special
account.
The Nation-building Funds Act 2008 and the Federal
Financial Relations Act 2009 (under which most payments to the
states and territories are made) contain mechanisms to limit the
amounts that can be paid annually under each of these two Acts. The
maximum amounts are called the ‘general drawing rights
limits’. The Bill contains the
general drawing rights limits for 2010‑11.
The Bill appropriates about $9.538 billion. This compares with
$10.629 billion in Appropriation Act (No. 2)
2009–10.
The Bill’s provisions are mostly the same as those in
Appropriation Act (No. 2) 2009–10. The following
therefore focuses on changes and new provisions.
Clause 3 contains definitions. The Bill
introduces four new definitions. All relate to the goods and
services tax (GST). The new definitions are of
acquisition; GST Act which is
defined as having the meaning of the A New Tax System (Goods
and Services Tax) Act 1999 as it applies because of the
Division 177 of that Act; GST qualifying amount;
and importation.
Part
2—Appropriation items
Clause 6 Summary of
appropriations provides that the total of the items in
Schedule 2 is $9 538 371 000.
Clause 7 deals with payments to the states,
territories and local government. Subclause 7(2)
provides 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 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).
As noted, administered assets and liabilities are one of the
three categories of non-operating costs. Clause 9
deals with administered assets and liabilities items.
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 Schedule 2 of the Bill or in Schedule
1 of Appropriation Act (No. 1) 2010–2011. The
wording of subclause 9(2) is identical to that in
subclause 8(2) and subclause
7(2).
Clause 10 deals with ‘other departmental
items’ and authorises appropriations for equity injections
and loans. Clause 10 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 items’. Subclause 11(1) provides
that an amount appropriated for a CAC Act body payment item may
only be applied for payment to the CAC Act body named.
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.
Part
3—Adjusting appropriation items
As noted above, processes exist for reducing appropriations. The
Explanatory Memorandum notes that:
Clauses 12, 13 and 14 have been amended since
the previous year’s Appropriation Bill, by introducing
additional mechanisms for initiating the reduction of unspent
items. This has the purpose of increasing the efficiency of the
reduction process particularly when surplus appropriations result
from government decisions.[3]
Clause 12 deals with reductions to payments to
the states, territories and local governments, and to administered
items. Subclause 12(1) provides that the amount by
which payments to the states, territories and local government 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.
Subclause 12(2) differs from the comparable
subclause in Appropriation Act (No. 2) 2009–10 by
changing paragraph 12(2)(a) and by the addition of
paragraph 12(2)(b).
Paragraph 12(2)(a) is essentially a rewording
whose intent has not changed. The Explanatory Memorandum
states:
Subparagraph 12(2)(a)(i) retains a power for
the Finance Minister to make a written determination specifying
that subclause 12(1) does not apply in relation to the item.
Subparagraph 12(2)(a)(ii) enables the Finance Minister to determine
that an amount published in the financial statements of an agency
is taken to be an amount specified in his or her
determination.[4]
With respect to 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. Additionally, the power in
paragraph 12(2)(b) is to provide the Finance Minister with the
capacity to make a written determination in those cases where an
agency has failed to specify a required amount in its annual
report. In those cases, the amount specified in the determination
as the required amount will be taken to be the required amount for
the purposes of subclause 12(1).[5]
Subclause 13(1) enables the minister
responsible for an agency, or the chief executive of the
agency—where the Finance Minister is responsible for the
agency—to seek a reduction in administered assets and
liabilities and other departmental items. Paragraph
13(1)(a) is new provision and adds a third category
of person, namely, the Prime Minister or a Minister acting on
behalf of the Prime Minister, who can request a reduction.
Subclause 13(5) is a new provision. It provides
that despite subsection 33(3) of the
Acts Interpretation Act 1901, a determination made
under subclause 13(2) must not be rescinded,
revoked, amended or varied. Subsection 33(3) of the Acts
Interpretation Act 1901 provides:
Where an Act confers a power to make, grant or
issue any instrument (including rules, regulations or
by‑laws) the power shall, unless the contrary intention
appears, be construed as including a power exercisable in the like
manner and subject to the like conditions (if any) to repeal,
rescind, revoke, amend, or vary any such instrument.
Subclause 13(5) thus overrides the power in
subsection 33(3) thereby ensuring that a determination that the
Finance Minister has made cannot be rescinded, revoked, amended or
varied. A determination under subclause 13(2) is a
disallowable instrument [subclause
13(7)].
Clause 14 deals with reductions to CAC Act
bodies payment items. The wording in clause 14 is
almost the same as in 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)(c)]. Paragraph 14(1)(a) is new and
is identical to paragraph 13(1)(a), that is,
paragraph 14(1)(a) and adds a third category of
person, namely, the Prime Minister or a Minister acting on behalf
of the Prime Minister to those who can request a reduction in a CAC
Act body payment. Likewise, subclause 14(5) is
identical to subclause 13(5), that is, a
determination cannot be rescinded, revoked, amended or varied.
Subclause 14(6) confirms that a reduction can
be made for a CAC Act body even though it has been allocated funds
under subsection 11(2).
As noted above, the advance to the Finance Minister authorises
the Finance Minister to expend money when the Finance Minister is
satisfied that there is not an adequate appropriation.
Clause 15 deals with the advance.
Subclause 15(1) sets out the criteria the Finance
Minister must be satisfied have been met before issuing an amount
to an agency. The criteria are that there is an urgent need for
expenditure that is not provided for, or is insufficiently provided
for in Schedule 2 because of an omission
or understatement, or because of unforeseen circumstances.
Subclause 15(3) allocates a maximum of $380 million to the
advance.
Clause 16 Determinations under previous Acts is
new. The Explanatory Memorandum states:
The purpose of clause 16 is to ensure that
any items, which have been reduced by instruments already made
under the listed appropriation Acts, cannot be restored by means of
a later determination.[6]
Clause 16 provides that
despite subsection 33(3) of the Acts Interpretation Act
1901, a determination made under any of the following
provisions must not be rescinded, revoked, amended or varied on or
after 1 July 2010. The following provisions referred to are the
earlier Appropriation Acts listed in paragraphs
16(a) to 16(y).
Clause 17 Reducing items in previous Acts is
also new.
The Explanatory Memorandum notes:
Clause 17 provides a process for reducing
certain classes of appropriation items in previous Acts, which is
substantially similar to the process for reducing administered
assets and liabilities items and other departmental items (clause
13) and CAC Act body payments (clause 14).[7]
Subclause 17(1) enables the Prime Minister or a
Minister acting on behalf of the Prime Minister to request the
Finance Minister to reduce:
- an administered assets and liabilities item or an other
departmental item in a previous Act [paragraph
17(1)(a)] or
- a CAC Act body payment item in a previous Act
[paragraph 17(1)(b)] or
- an administered capital item in a previous Act
[paragraph 17(1)(c)] or
- a departmental capital item in a previous Act
[paragraph 17(1)(d)].
Subclause 17(2) enables but does not require
the Finance Minister to make a written determination to reduce a
departmental item or a CAC Act body payment item in a previous Act.
Where the Finance Minister has made a determination, the effect of
the determination is negated if the determination reduces the item
below nil in the case of a departmental item
[paragraph 17(3)(b)] or CAC Act body item
[paragraph 17(3)(b)]. Subclause
17(5) provides that that a determination made by the
Finance Minister cannot be rescinded, revoked, amended or varied
despite subsection 33(3) the Acts Interpretation Act 1901.
Subclause 17(6) provides that a request made
under subclause 17(1) is not a legislative
instrument within the meaning of section 5 of the Legislative
Instruments Act 2003.
Subclause 17(7) provides that a determination
made under subclause 17(2) is a legislative
instrument and that despite subsection 44(2) of Legislative
Instruments Act 2003, section 42 of that Act—which
relates to disallowance—applies to the determination.
Subclause 17(7) also provides that Part 6 of
the Legislative Instruments Act 2003—which relates
to sunsetting—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 17(8) lists the earlier Acts to which
clause 17 applies.
As discussed, the Bill limits the amounts that can be paid
annually from the special accounts for three of the funds
established under the Nation‑building Funds Act
2008. Further, the Bill limits the amounts that can be
paid for general purpose financial assistance and national
partnership payments under the Federal Financial Relations Act
2009. Clause 18 General drawing rights limits
contains these provisions. The limits are:
- Building Australia Fund: $ 1 201 100 000 [subclause
18(1)]
- Education Investment Fund: $1 163 539 000 [subclause
18(2)]
- Health and Hospitals Fund: $ 952 633 000 [subclause
16(3)]
- general purpose financial assistance: $ 1 000 000 000
[subclause 16(4)]
- national partnership payments:
- general drawing
rights limit under the Federal Financial Relations Act
2009: $20 000 000 000 [subclause 18(5)]
Subclause 18(6)—which is
new—provides for an increase to the general drawing rights
limit for national partnership payments, previously specified in
subsection 16(5) of Appropriation Act (No. 2)
2009–2010. For the purposes of the 2009–2010
financial year, the general drawing rights limit is to be increased
by $2 000 000 000 from $23 000 000 000 to $25 000 000 000.
Clause 19 Adjustments for GST is new. The
Explanatory Memorandum states:
The effect of this clause will be to increase a
general drawing rights limit by the amount of any GST qualifying
amount in respect of an amount paid from a fund named in clause
18.
Some payments from the Building Australia Fund,
EIF, HHF and the COAG Reform Fund may include a GST qualifying
amount and the relevant general drawing rights limit is adjusted
accordingly. The appropriation itself is not affected by clause 19
because that is increased by the operation of section 30A of
the FMA Act. Essentially, clause 19 clarifies that the amounts
specified for the general drawing rights limits for 2010-11 are
exclusive of any GST qualifying amounts that may arise in respect
of acquisitions made in reliance on that limit.[8]
Part
5—Miscellaneous
Clause 21 Conditions etc. applying to
State, ACT, NT and local government items
Section 96 of the Australian Constitution
allows parliament to provide financial assistance to the states on
such terms and conditions as parliament thinks fit.
Clause 21 seeks to ensure that payments made
by the states, territories and local governments from financial
assistance provided by the Commonwealth must accord with the
conditions that the ministers, specified in Schedule
1, establish.
Clause 22 Appropriations of the Consolidated
Revenue Fund provides that the
Consolidated Revenue Fund is appropriated as necessary for the
purposes of the Bill including the operation of the Bill as
affected by the Financial Management and Accountability Act
1997.
Schedule 1 confers on the ministers named,
power to determine conditions under which any payments to and
through the states and territories and local government authorities
may be made, and the amounts and timing of those payments.
Appropriations are set out in Schedule 2 Services for
which money is appropriated. The summary from
Schedule 2 is shown below.
It is difficult to relate the items in Schedule
2 to the measures announced in the second reading speech
by the Minister for Finance and Deregulation, the Hon. Lindsay
Tanner, because the Bill will fund only some of the measures.
Further information can, however, be found in the Portfolio Budget
Statements for 2010–2011.[9]
Richard Webb
21 May 2010
Bills Digest Service
Parliamentary Library
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2464.
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