Bills Digest no. 160 2009–10
Farm Household Support Amendment (Ancillary Benefits)
Bill 2010
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
Farm Household Support Amendment (Ancillary
Benefits) Bill 2010
Date introduced: 26 May 2010
House: Representatives
Portfolio: Agriculture, Fisheries and Forestry
Commencement: 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/.
The purpose of the Bill is to
ensure that recipients of income support under the Farm Family
Support component of a trial of new drought policy measures in
Western Australia can access the full range of so-called
‘ancillary benefits’ which are already available to
recipients of Exceptional Circumstances Relief Payment and other
welfare recipients under existing legislation.
The Government’s planned changes to drought assistance
arrangements have their origins in the ALP’s 2007 election
platform for primary industries which states:
... Labor believes that EC arrangements should
not be used to artificially support producers who are not viable
over the longer term, and that EC policy should not reduce the need
for responsible risk management by agriculture producers.
Labor believes it is important for governments
to increase the number of drought ready farming businesses so that
farms are more prepared for years with reduced rainfall in the
context of climate change.
A Rudd Labor Government will continue the
evolution of EC policy, and will work with the farm sector
including the National Farmers Federation to examine the links
between the objectives of drought support and natural resource
management policy more broadly.[1]
In April 2008 the Minister for Agriculture, Fisheries and
Forestry (the Minister) announced a review of drought policy
‘to help prepare farmers and local communities for climate
change’.[2]
A one year pilot of new drought policy measures to be conducted
in Western Australia (WA) was announced by the Government on 5 May
2010 with funding of $18 million provided for in the
2010–11 Budget.[3]
For nearly two decades Exceptional Circumstances (EC) assistance
has been the major policy measure for the provision of financial
support to households and businesses experiencing prolonged dry
seasonal conditions. Exceptional circumstances are those climatic
and other events of sufficient rarity and severity as to be
considered outside the scope of reasonable and responsible risk
management strategies. Relatively short periods of income decline
due to fluctuations in both seasonal and market conditions are not
included as farmers are expected to have strategies in place to
deal with these. This means, for example, that a drought as defined
in meteorological terms does not automatically qualify for EC.
Under EC assistance direct, short-term, financial assistance is
provided to farmers, and more recently agriculture dependent small
business operators, for the purposes of both welfare support to
households and business assistance. The EC Relief Payment (ECRP) is
the welfare component of EC and equivalent to the Newstart
Allowance. Additional benefits including access to a health care
card and concessional arrangements for Youth Allowance are also
available. EC Interest Rate Subsidies (ECIRS) is the business
support component of EC.
As part of the April 2008 announcement the Minister advised the
drought policy review would include:
- an economic assessment of current drought support measures by a
Productivity Commission (PC) report
- an expert panel to assess the social impacts of drought
- a detailed scientific examination of likely future climate
patterns and the current EC standard of a
one-in-20-to-25-year-event undertaken by the Bureau of Meteorology
(BoM) and CSIRO.
He also noted:
If droughts become longer and more frequent,
farmers may not qualify for drought support under the current
definition of an exceptional event, because it may not be something
that only occurs every 20-to-25-years.[4]
The announcement also stated the aim was to have an improved
drought policy in place by July 2009.[5]
The joint BoM/CSIRO scientific study examining the
appropriateness of the one in 20–25 year EC event trigger was
completed in July 2008 and concluded:
The current EC trigger, based on historical
records, has already resulted in many areas of Australia being
drought declared in more than five per cent of years, and the
frequency and severity are likely to increase. The principal
implication of the findings of this study is that the existing
trigger is not appropriate under a changing climate.[6]
The social impact report was finalised in September 2008 and
called for:
... a new national approach to living with
dryness, as we prefer to call it, rather than dealing with
drought. Governments should focus future policy on
facilitating the social wellbeing of farm families, rural
businesses and communities to improve their capacity to live with
dryness.[7]
The PC report was finalised in February 2009 and released in May
2009. Its key points include:
- Most farmers are sufficiently self-reliant to manage climate
variability …
- The National Drought Policy’s (NDP) EC declarations and
related drought assistance programs do not help farmers improve
their self-reliance, preparedness and climate change management
…
- Governments need to commit to a long term reform path that
recognises that the primary responsibility for managing risks,
including from climate variability and change, rests with
farmers.
With regard to EC assistance the PC recommended:
- Termination of ECIRS and state-based transactions subsidies as
it found them ineffective and perversely encouraging of poor
management practices
- Replacement of the ECRP due to its limited availability to
those in drought-declared areas which means hardship elsewhere or
for other reasons is ignored and
- Current EC declarations should lapse as soon as practicable and
the process not be extended to new areas as it is inequitable and
unnecessary. [8]
The PC also argued that the future policy framework should
include the following objectives:
- Assisting primary producers to adapt and adjust to the impacts
of climate variability and climate change
- Encouraging primary producers to adopt self-reliant approaches
to managing risks
- Assisting primary producers to manage greenhouse gas emissions
and other adverse impacts on the environment and
- Ensuring that farming families in hardship have temporary
access to an income support scheme that recognises the special
circumstances of farmers.[9]
The trial of new support measures in WA announced on
5 May 2010 will commence on 1 July 2010. The
Minister has advised the purpose of the trial is to:
test a range of new measures, including farm
planning, on-farm investment, farmer training, family income
support and community grants.
And that it is part of:
the Rudd Government’s plans to deliver an
improved drought support system which better supports farmers,
their families and regional communities.[10]
The trial region essentially covers the agricultural production
region in WA south from approximately Port Headland with the
notable exception of the higher rainfall areas in the south-west
corner. It encompasses 67 local government regions. A map of the
trial region is available on the Department of Agriculture,
Fisheries and Forestry (DAFF) website.[11]
While the Government has not formally responded to the Drought
Policy Review, and in particular the PC report, DAFF has
advised:
The pilot will be testing seven measures in
response to the national drought policy review, and the measures
are designed to move from a crisis management approach to risk
management.[12]
The Government has explicitly linked the new income support
arrangements in the trial including the hardship provision to the
PC’s recommendation. [13] However, its decision to leave open the
possibility of new areas in the rest of Australia being EC declared
is somewhat at variance with the PC’s approach.[14] That said, the
Government has clearly indicated the pilot is part of the process
of development of a new national drought policy.
It will be reviewed in 2011 and will provide
the basis for future consideration of a new national drought
policy, including measures, implementation and discussion with
state and territory governments.[15]
The seven measures being tested in the WA pilot are:
Farm Family Support – income support to
help farmers meet basic household expenses
Farm Social Support – stronger social
support networks to meet the mental health, counselling and other
social needs of farming families and communities
Building Farm Businesses – grants of up
to $60,000 to help farm businesses prepare for the impacts of
drought, reduced water availability and a changing climate, and
on-farm Landcare activities
Farm Planning – support for farmers to
undertake training to develop or update a strategic plan for their
farm business with a focus on preparing for future challenges
Stronger Rural Communities – grants to
local government for activities that make rural communities more
resilient during agricultural downturns
Farm Exit Support – grants of up to
$170,000 to support farmers who make the difficult decision to sell
the farm business
Beyond Farming – a new measure that puts
current farmers in touch with former farmers to work through the
opportunities outside of farming.[16]
The 2010–11 Budget provides $18 million for the trial over
five years including 2009–10, with $11 million of this to be
spent in 2010–11.[17] In terms of expenditure the significant elements of the
trial include:
- Building Farm Businesses (BFB) – this is the main
component of the trial with up to $8.4 million to be allocated in
combined grants of up to $60 000 comprising Farm Business
Adaptation Grants of up to $40 000 and Landcare Adaptation Grants
up to $20 000
- Farm Family Support (FFS) – $4.9 million is available for
income support for eligible farmers experiencing hardship
- Farm Planning (FP) – $3.6 million will fund farmers to
develop strategic business plans identifying priority activities to
improve the management and preparedness of the farm business to
respond to future challenges. Completion of a farm plan is a
prerequisite for accessing BFB. Individual farmers will receive up
to $7500 under FP and
- Farm Exit Support – $0.3 million is available for farmers
in significant financial difficulty who decide to sell their farm.
Eligible farmers will receive up to $170 000.
The planning component of the trial will be funded by the WA
Government which is contributing $5 million to the trial, bringing
total funding to $23 million.
The protracted process of changing drought policy was commented
on by the National Farmers Federation (NFF) in its response to the
announcement of the WA pilot.
For years we have been calling for a shift in
the policy focus from ‘drought relief’ to
‘drought management and preparedness’. [18]
Nevertheless the NFF described the trial as ‘a sensible,
practical and forward-looking approach that takes account of
climate risks and proactively manages them’ and noted that
the trial was based on a plan it had earlier provided to the
Government.[19]
When, due apparently to funding considerations, there was no
announcement of a new drought policy in the 2009-10 Budget as had
been widely anticipated, the NFF observed:
... [a drought] reform package without the
required funding support to make it work, would have been a
disaster. That was a real fear of farmers going into
tonight’s budget. It is better to wait to get drought policy
right than have a half-baked package.[20]
However, by February 2010 the NFF appeared to have run out of
patience with its declaration ‘drought relief has
stalled’. And while it praised the Government for having
accepted the NFF’s espoused principles for drought reform it
concluded that ‘... to date, despite ongoing negotiations
between the NFF and the Federal Agriculture Minister Tony Burke,
not much has happened.[21]
In responding to the announcement of the WA pilot the NSW
Farmers Association welcomed the planning, preparedness and social
support measures but expressed concern that a twelve month trial
won’t give enough time for measuring its effectiveness. It
also observed there was ‘still much detail to be clarified,
such as the income and assets test for the farm family
support’.[22]
The trial has been welcomed by WA’s major farming
organisations with the President of WA Farmers Federation (WAFF)
describing it as ‘an excellent initiative’ and noted
that EC ‘really hasn’t worked in Western
Australia’. The Vice President of the WA Pastoralists and
Graziers Association commended the Federal and WA Ministers
‘on a very imaginative approach to a very difficult
problem’ and expressed appreciation for the ‘whole
human approach’.[23]
The Opposition welcomed the announcement of the WA trial but
claims it does nothing to address serious droughts. It expressed
disappointment at the final result of ‘a two year work in
progress’ and described it as ‘a missed opportunity to
get drought policy right’.[24]
The estimated cost of providing the ancillary benefits covered
by this Bill to recipients of FFS in the WA pilot is $0.269
million.[25]
The Bill only makes an amendment to one Act, the Farm
Household Support Act 1992 (Cth), by inserting new
Part 9D. New section 52D then
‘deems’ certain provisions of other legislation to
apply in relation to payments made under the FFS Scheme in the same
way those provisions apply to payments made for exceptional
circumstances relief.
Concluding comments
The Bill provides for routine changes to the Farm Household
Support Act (Cth) to ensure equivalent ancillary benefits are
available to recipients of Farm Family Support (FFS) as are
presently available to beneficiaries of Exceptional Circumstances
Relief Payment. FFS is the welfare component of a package of new
drought support measures to be trialled in WA for one year from
1 July 2010. There is major interest in several elements of
the trial especially FFS which represents a quite different
approach to the provision of income support to farmers from the
current and longstanding EC measures.
The Explanatory Memorandum explains that the FFS scheme will be
delivered through an executive scheme arrangement under the
Financial Management and Accountability Act 1997, rather
than being fully legislated.[26] Guidelines providing operational details of the
FFS scheme are to be published.[27] A critical part of those guidelines will be the
definition of hardship adopted. There has been no indication as to
whether an existing definition of hardship used for the provision
of welfare payments in other circumstances will be adopted for the
trial or one customised for farming circumstances be developed.
The rationale given for use of an executive scheme is ‘the
complex nature of the income support legislation and the short term
nature of this program’.[28] A counter argument would be that the trial should
include all the relevant institutional arrangements including
legislation so that their effectiveness can also be assessed prior
to any similar arrangements be implemented nationally. In addition,
the Farm Household Support Act already demonstrates that
customisation of the complex income support legislation to
farmers’ circumstances is possible. That precedent plus the
Government’s reference to the trial being a short term
activity provides a reasonable basis for the expectation that any
national FFS style scheme will be fully legislated.
The Ombudsman’s report on executive schemes notes:
The main advantages of executive schemes are
the speed with which they can be set up and their flexibility when
circumstances change. However, that very flexibility poses risks to
the accountability of such schemes. Many of the checks and balances
on government power apply only to powers conferred by legislation.
Of particular concern are the restricted review and appeal rights
that are available to people who are affected by decisions made
under executive schemes.[29]
The report’s conclusions make suggestions for ‘best
practice’ in the establishment and running of such schemes to
overcome some of the problems that have arisen in the past. A
major suggestion is that a scheme’s eligibility criteria need
to be set out clearly and early and that they ensure legal
compliance.
Interestingly, one of the complaints used as a case study by the
Ombudsman in developing its eight best practice principles for
executive schemes is the Exceptional Circumstances Exit Grant for
drought affected farmers administered by the Department of
Agriculture, Fisheries and Forestry. The Ombudsman considers this
an “example of criteria which appear unsuitable and not fully
reflecting the policy behind a program”.[30]
In relation to the WA trial more broadly as well as its
components, the Government has also yet to be reveal the
methodology which will be used to evaluate the trial thereby
allowing a judgement to be made about whether it constitutes an
‘improved drought support system which better supports
farmers, their families and regional communities’.[31]
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2462.
Peter Hicks
1 June 2010
Bills Digest Service
Parliamentary Library
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