Bills Digest No. 2, 2017–18
PDF version [508KB]
Daniel McKay
Law and Bills Digest Section
1
August 2017
Contents
Purpose of the Bill
Structure of the Bill
Background
Primary Industries Research and
Development Act 1989
Marketing Function
Committee consideration
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Expenditure for marketing activities
Reporting requirements
Definition of marketing activities
Date introduced: 29
March 2017
House: House of
Representatives
Portfolio: Agriculture
and Water Resources
Commencement: The
day after Royal Assent.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at August 2017.
Purpose of
the Bill
The purpose of the Primary Industries Research and
Development Amendment Bill 2017 (the Bill) is to amend the Primary
Industries Research and Development Act 1989 (the Act) to allow Research
and Development Corporations (RDCs) regulated by the Act to undertake marketing
functions with funds raised by voluntary contributions such as gifts, grants or
bequests. In doing so, it removes a current restriction which limits the
funding of marketing activities to money raised by a statutory marketing levy.
Structure
of the Bill
The Bill comprises one schedule with nine items: eight which
amend the Act and one which clarifies the application of the amending
provisions on and after commencement.
Background
Primary
Industries Research and Development Act 1989
The Primary Industries
Research and Development Act 1989 (known until 2013 as the Primary
Industries and Energy Research and Development Act 1989) authorises and
regulates four rural research and development corporations (RDCs): Fisheries,[1]
Cotton,[2]
Grains[3]
and Rural Industries.[4]
These statutory RDCs are considered government agencies and must comply with
government regulation and policy in areas such as finance and administration.[5]
The Act stipulates the allowable functions of RDCs, reporting requirements such
as the production of an annual report, and puts restrictions on the use of
funds.
There are eleven
other RDCs: the Australian Grape and Wine Authority, which has its own
constitutive Act[6];
and ten industry-owned RDCs governed by the Corporations Act
2001, their own enabling legislation which allows them to raise and
disburse levies and other industry contributions, and subject to government oversight
through Statutory Funding Agreements (SFAs).[7]
Once all RDCs were subject to the Act, but these ten have since become
independent not-for-profit companies owned by industry members. The rationale
behind the privatisation of the RDCs was to give industry members more say in the
running of the organisations, and to extend the range of functions the
organisations could undertake.[8]
All RDCs, both statutory and industry-owned, are members of the Council
of Rural Research and Development Corporations which meets twice yearly.[9]
Marketing function
Statutory RDCs have only been permitted to undertake
marketing activities since 2013. The Rural Research and
Development Legislation Amendment Act 2013 enlarged the scope of
activities that statutory RDCs could undertake, including marketing. While all RDCs
(other than Sugar Research Australia) are now permitted to undertake marketing
activities, it is important to note that this is not obligatory.
The 2013 reforms were intended to match the competencies
of statutory RDCs with industry-owned RDCs and allow them to promote the benefits
of their respective products.[10]
The reforms implemented a 2011 Productivity Commission recommendation that statutory
RDCs be permitted to additionally perform marketing functions.[11]
However, in adding the marketing function, the ability to raise funds was
limited to a special marketing levy additional to the research and development
levy. Section
33A of the Act also explicitly rules out the use of research and development
funds for marketing purposes.
In his second reading speech for the current Bill, Luke
Hartsuyker has justified the reform on the grounds of efficiency and cost,
noting ‘the process to impose a statutory levy is often time consuming and its
collection can be expensive’.[12]
This aligns with the Government’s stated intention in the 2015 Agricultural
Competitiveness White Paper to improve the efficiency of the research and
development system.[13]
The inefficiency of a marketing levy was perhaps foreshadowed by the findings
in the Productivity Commission’s 2011 report which identified the costs of
establishing marketing levies. The report stated:
As many participants noted, introducing or changing a levy
can be very expensive. The process typically requires significant advertising
and mail out campaigns articulating the various arguments for the levy or
change in its rate, as well as extensive consultation with the relevant
industry constituencies. Engaging an electoral commission or other provider to
conduct the ballot can also be costly — the most recent review of the wool levy
(WoolPoll 2009) cost $680 000, while direct costs associated with the vote to
retain a temporary increase in the beef marketing levy exceeded $340 000. As
well as being expensive, preparing a levy proposal is time consuming. On
average, it takes industries around twelve months to put together a proposal
for a new or changed levy that complies with the Levy Principles. (References
removed.)[14]
A 2015 Senate Committee inquiry into the imposition of and
disbursement of marketing and R&D levies raised similar concerns about the
costs and inefficiencies relating to levies.[15]
While the recommendations do not relate to this Bill, it shows that industry
has had concerns surrounding the levy system for some time.
This Bill may help avoid these inefficiencies by allowing
RDCs to collect funds for marketing purposes directly from members.
Nevertheless, the marketing levy remains an option available to these corporations
if it is considered the better mechanism in the particular circumstances.
Committee
consideration
Senate
Standing Committee for the Scrutiny of Bills
The Scrutiny of Bills Committee had no comment on the
Bill.[16]
Policy
position of non-government parties/independents
No policy position has been publically stated by a
non-government party or any of the independents. The 2013 legislation which
gave RDCs the ability to undertake marketing activities was introduced by the
Labor Government before the 2013 election, and passed afterwards without
controversy.[17]
Position of
major interest groups
The reform is supported by the Fisheries Research and
Development Corporation (FRDC). The FRDC is an important stakeholder
campaigning for the change. Luke Hartsuyker in the second reading speech cited
the difficulties encountered by the FRDC and its industry bodies in meeting the
‘costs of establishing and collecting a statutory levy’.[18]
In its March 2017 ‘Stakeholder Briefing’ the FRDC stated that it:
... continues to work with the Department of Agriculture and
Water Resources to amend the Primary Industry Research and Development Act to
allow for voluntary collection of marketing funds. Discussions with the
Department indicate that the requisite legislation for the amendment has been
drafted and it is hoped it will be introduced into parliament in the Autumn
2017 sitting.[19]
Recent statements by any of the other three statutory RDCs
on this matter have not been identified.
Financial
implications
The Explanatory Memorandum states that the Bill will have
no financial implications for the Commonwealth.[20]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[21]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights considers
that the Bill does not raise any human rights concerns.[22]
Key issues
and provisions
Expenditure
for marketing activities
Item 2 of the Bill inserts proposed paragraph 11(eb)
into section 11 of the Act, which lists the functions of RDCs. Reflecting the
new source of funding for marketing activities being established by this Bill,
the proposed paragraph makes the use of such voluntary contributions for
marketing activities a listed function of RDCs. Items 3 and 4 insert
references to proposed paragraph 11(eb) into sections 13 and 14 of the
Act dealing with agreements for carrying out research and development
activities and marketing activities. Item 9 provides that the amendments
made by items 3 and 4 will apply to agreements entered into on and after the
day the Act commences.
Because of the high level of Government funding that RDCs
receive, restrictions have been placed on their expenditure. This is to ensure
that funding derived from statutory levies for research and development and
matched funds from the Government are spent on core functions. Subsection 33(1)
of the Act provides a list of the purposes for which an RDC’s money can be
spent. Item 7 inserts proposed subsection 33(1A) which specifies
that such restrictions do not apply to funds received through voluntary
contributions for marketing activities as provided for in the Bill.
Section 33A of the Act stipulates that only money received
by RDCs as the marketing component of a statutory levy, and not money received
as the research component of the levy or any matching Government payments can
be spent on marketing activities. Item 8 inserts a note at the end of
this section stating that some voluntary contributions received by an RDC must
be used for marketing activities. This reiterates the distinction made
elsewhere in the Act between funds received for research and development
purposes, and those raised or received for marketing.
The changes outlined in this amending Bill do not alter
the ability of statutory RDCs to undertake marketing activities. Rather, the
purpose and effect of this Bill is to give RDCs the additional ability to raise
funds for marketing activities through voluntary contributions such as a gift,
grant or bequest.
Reporting
requirements
Item 5 inserts a requirement for RDCs to detail in
their annual report all information about any marketing activities they have
undertaken in a given reporting period. This substituted provision remains
consistent with its original purpose to make RDCs accountable for all their
functions, including marketing. Item 6 adds a clarifying note to the end
of section 28, which sets out requirements for annual reports. The note makes
clear that marketing activities must be accounted for in the annual report
regardless of whether they are funded by levy or voluntary contribution. Item
9 provides that this amendment will apply to annual reports prepared on and
after the day the Act commences.
Definition
of marketing activities
Item 1 expands the definition of ‘marketing
activities’ in subsection 4(1) by adding the words ‘or an activity incidental
to such marketing, advertising or promotion’. This widens the scope of the
definition by explicitly including the gamut of activities required for
effective marketing, such as consulting and planning. This change will likely
have no material effect other than to remove possible ambiguity about what
activities may be funded by the new mechanism introduced by the Bill. The
change also makes the text more similar to that used in the definition of R&D
activity and should improve the application and understanding of the
Act because of the consistency it introduces.[23]
[1]. Fisheries Research and Development
Corporation (FRDC) website.
[2]. Cotton Research and Development Corporation
website.
[3]. Grains Research and Development Corporation website.
[4]. Rural Industries Research and Development
Corporation website.
[5].
Australian Government, ‘About:
governance and accountability’, Rural Research and Development Corporations
(Rural RDCs) website.
[6]. Australian Grape
and Wine Authority Act 2013 (Cth).
[7]. Australian
Government, ‘About’,
Rural Research and Development Corporations (Rural RDCs) website.
[8]. Senate
Standing Committee on Rural and Regional Affairs and Transport, Industry
structures and systems governing the imposition of and disbursement of
marketing and research and development (R&D) levies in the agricultural
sector, The Senate, Canberra, June 2015.
[9]. Australian
Government, ‘Council
of Rural RDCs: meeting communique’, Rural RDCs website, 6 March 2017.
[10]. M
Cash, ‘Second
reading speech: Rural Research and Development Legislation Amendment Bill 2013,
Primary Industries (Excise) Levies Amendment Bill 2013, Primary Industries
(Customs) Charges Amendment Bill 2013’, Senate, Debates, 5 December
2013, p. 1006.
[11]. Productivity
Commission (PC), Rural
research and development corporations, Inquiry report, 52, PC,
Canberra, 10 February 2011, recommendation 9.3.
[12]. L
Hartsuyker, ‘Second reading speech:
Primary Industries Research and Development Amendment Bill 2017’, House of
Representatives, Debates, 29 March 2017, p. 3564.
[13]. Department
of Agriculture, Agricultural
competitiveness white paper: stronger farmers, stronger economy, White paper,
January 2015, pp. 19, 95.
[14]. PC,
Rural
research and development corporations, op. cit., p. 261.
[15]. Senate
Standing Committee on Rural and Regional Affairs and Transport, Industry
structures and systems governing the imposition of and disbursement of
marketing and research and development (R&D) levies in the agricultural
sector, op. cit.
[16]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 5, 2017, The Senate, Canberra, 10 May 2017, p. 50.
[17]. The
Rural
Research and Development Legislation Amendment Bill 2013 was first
introduced in the 43rd Parliament, and lapsed when the Parliament was prorogued
in 2013. The Bill was reintroduced by the Abbott Government in November 2013
with only minor changes. For more information, see: R Dossor, Rural
Research and Development Legislation Amendment Bill 2013 [and] Primary
Industries (Customs) Charges Amendment Bill 2013 [and] Primary Industries
(Excise) Levies Amendment Bill 2013, Bills digest, 13, 2013–14,
Parliamentary Library, Canberra, 2013.
[18]. L
Hartsuyker, ‘Second
reading speech: Primary Industries Research and Development Amendment Bill 2017’,
op. cit.
[19]. FRDC,
FRDC
stakeholders briefing notes, FRDC, Canberra, March 2017.
[20]. Explanatory
Memorandum, Primary Industries Research and Development Amendment Bill
2017, p. 3.
[21]. The
Statement of Compatibility with Human Rights can be found at page 4 of the
Explanatory Memorandum to the Bill.
[22]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 4, 2017, Canberra, 9 May 2017, p. 74.
[23]. L
Hartsuyker, ‘Second
reading speech: Primary Industries Research and Development Amendment Bill 2017’,
op. cit., p. 3564.
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