Bills Digest No. 115 2004–05
Appropriation Bill
(No. 3) 2004–05
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
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Appropriation Bill
(No. 3) 2004–05
Date Introduced: 10 February 2005
House: House
of Representatives
Portfolio: Finance and Administration
Commencement: On
the day it receives the Royal Assent
To appropriate additional sums for the ordinary annual
services of the Government.
Section 83 of the Constitution
states:
No money shall be drawn from the Treasury of the Commonwealth
except under appropriation made by law.
There are two broad categories of appropriations:
There are usually six annual appropriation Bills. They authorise about
25 per cent of annual Commonwealth spending.
Special (or standing) appropriations—the terms are often used interchangeably—authorise
about 75 per cent of spending. An example is the Social Security (Administration)
Act 1999 under which age pensions, Austudy payments and other social
security payments are made.
Three annual appropriations Bills are introduced when the Budget is brought
down. They are:
-
Appropriation Bill (No. 1)
-
Appropriation Bill (No. 2 ), and
-
Appropriation (Parliamentary Departments) Bill (No. 1).
These Bills are reproduced in Budget Paper No. 4.
The Bills authorise the payment of specified amounts for particular purposes.
Appropriation Bill (No.1) provides for the appropriation of money from
the Consolidated Revenue Fund for the ‘ordinary annual services’ of government.
Appropriation Bill (No. 2) provides for the appropriation of money from
the Consolidated Revenue Fund for purposes other than the ordinary services
of government. The division of items between the two Bills accords with
the 1965 ‘compact’ between the House of Representatives and the Senate.
Appropriation Bill (No. 1) appropriates amounts according to whether
they are departmental or administered expenses. Departmental expenses
are those that agencies control.(1) Examples are salaries,
other cash expenses, and non-cash expenses such as accruing employee entitlements
and depreciation. Administered expenses are those that agencies administer
on behalf of the government. [While some administered expenses are paid
under Appropriation Bill (No. 1), the bulk are paid under special appropriations].
Appropriation Bill (No. 2) provides appropriations for:
Administered expenses include:
-
grants to the States and Territories (sometimes called section 96
grants), and
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new administered outcomes.
Non-operating costs—sometimes called ‘capital costs’—include:
-
‘equity injections’ which are provided to agencies to enable investment
in new capacity when normal cash flows are insufficient
-
‘loans’ which are provided to agencies and used when an investment
is expected to result in a direct return such as an efficiency saving
-
previous years outputs appropriations: these provide funding for
outputs that were delivered in a previous year. This can occur, for
example, when a decision is made to implement a new activity after
the date for inclusion in the additional appropriation Bills. Such
activities are funded initially from cash balances, which are then
replenished by the previous years outputs appropriation, and
-
‘administered assets and liabilities’ appropriations: they provide
funding for acquiring new assets, extending existing assets, and discharging
administered liabilities relating to activities administered by agencies
in their fiduciary capacity on behalf of the Government.(2)
The Parliamentary Departments have a separate Appropriation Bill because
Parliament is constitutionally separate and independent of the Executive.
Funding requirements often change after the Budget is brought down. Governments
make new policy commitments which have to be funded. Agencies reassess
their requirements and, if necessary, submit requests for additional funding.
The Government may agree to additional funding if the amounts in the Appropriation
Acts are inadequate. The process whereby additional funds are provided
is called additional
estimates, and begins around November.
The approved additional estimates are incorporated into Appropriation
Bill (No. 3), Appropriation Bill (No. 4), and Appropriations (Parliamentary
Departments) Bill (No. 2). These Bills are the counterparts of Appropriation
Bill (No. 1), Appropriation Bill (No. 2), and Appropriations (Parliamentary
Departments) Bill (No. 1) respectively.
Portfolio Additional Estimates Statements are the additional estimates
counterparts of Portfolio Budget Statements, and contain explanations
of Appropriation Bill (No. 3), Appropriation Bill (No. 4), and Appropriation
(Parliamentary Departments) Bill (No. 2).
New policy proposals should not be included in Appropriation Bill (No.
3) because they do not fall with the classification of ordinary annual
services. New policy measures are funded either through Appropriation
Bill (No. 4) or special appropriations.(if any)
The Advance
to the Finance Minister (AFM) provides flexibility to the system of
appropriating funds. The AFM is a contingency fund from which the Minister
for Finance can spend for emergency or unforeseen circumstances. Authority
for payments derives from the annual Appropriation Acts. According to
Department of Finance and Administration guidelines, funding is available
only if agencies meet two tests:
-
the need for funding must be urgent, and
-
the need was unforeseen or arose because of erroneous omission or
understatement.
The Appropriation Acts also require the Finance Minister to account to
Parliament for spending from the AFM, which the Minister does by tabling
monthly and annual statements. Whereas in the past, these reports were
virtually useless in finding out the purposes for which funds were expended,
their content has improved dramatically and they now contain plain English
explanations.
The Bill refers to Special Accounts. In essence, they are ledgers in
the Consolidated Revenue Fund that are used to record all spending and
revenue relevant to a particular activity. Special accounts are thus a
means of simplifying the recording and keeping track of amounts of money
associated with that activity.
According to the second reading speech, sums sought in the Bill fall
into three categories:
-
funding of election commitments
-
major items of expenditure, and
-
estimates variations and other measures.
They include:
-
$18.5 million to the Department of Health and Ageing to further address
mental health issues, including depression and dementia
-
$10.1 million to establish the National Water Commission and provide
program funding under the Australian Water Fund
-
$10 million contribution to the Department of Communications, Information
Technology and the Arts towards upgrading the Penrith stadium
-
$6.9 million to the Attorney-General’s Department for additional
funding for the National Community Crime Prevention program, in addition
to the extra $5 million announced before the election, and
-
$6.5 million to the Department of Veterans’ Affairs as additional
funding to commemorate significant anniversaries in 2005, including
the 90th anniversary of the Gallipoli landings and the 60th anniversary
of the end of World War II.
They include:
- $365.1 million to the Department of Employment and Workplace Relations
in additional funding for Job Network, reflecting the continuation of
record levels of performance and employment outcomes under Employment
Services Contract 3
- a net $103.8 million to the Department of Defence, which includes
$149.4 million to fund accelerated depreciation for the earlier withdrawal
of F111 fighter bomber planes and two guided missile frigates
-
$85.1 million in indexation adjustments
-
$123.5 million to establish Tourism Australia
-
$78.7 million to the Department of Family and Community Services
to fund Centrelink costs for the recent budget measure, More Help
for Families
-
$60 million to the Australian Taxation Office to provide transitional
grants to state funded organisations which will become ineligible
for an exemption from fringe benefits tax as public benevolent organisations
-
$42.1 million to the Department of Environment and Heritage to enhance
and supplement the Great Barrier Reef structural adjustment package,
and
-
$24.3 million to the Department of Health and Ageing for the childhood
obesity package.
These amount to around $690.7 million.
As noted, some of funding sought is for commitments made during the 2004
election.
Section 53 of the Constitution states:
Proposed laws appropriating revenue or moneys, or imposing
taxation, shall not originate in the Senate. But a proposed law shall
not be taken to appropriate revenue or moneys, or to impose taxation,
by reason only of its containing provisions for the imposition or appropriation
of fines or other pecuniary penalties, or for the demand or payment
or appropriation of fees for licences, or fees for services under the
proposed law.
The Senate may not amend proposed laws imposing taxation,
or proposed laws appropriating revenue or moneys for the ordinary annual
services of the Government.
The Senate may not amend any proposed law so as to increase
any proposed charge or burden on the people.
The Senate may at any stage return to the House of Representatives
any proposed law which the Senate may not amend, requesting, by message,
the omission or amendment of any items or provisions therein. And the
House of Representatives may, if it thinks fit, make any of such omissions
or amendments, with or without modifications.
Except as provided in this section, the Senate shall
have equal power with the House of Representatives in respect of all
proposed laws.
In short, the Senate cannot amend any laws for appropriating monies for
the ordinary annual services of the government. The Senate can, however,
amend any appropriations for other purposes.
The clauses in the Bill are largely identical to the provisions of Appropriation
Act (No. 3) 2003–04. The following focuses on the provisions in the
Bill that are not in this Act.
Part 2 deals with basic appropriations. They are the amounts allocated
to agencies so they can provide ordinary annual services. Clause 6
of Part 2 specifies a total of $1 540 million. The amounts for each
agency are contained in Schedule 1.
Clause 8 deals with basic appropriations for administered items.
Subclause 8(1) provides that, for an administered item, the Finance
Minister may issue amounts that do not exceed, in total, the lesser of:
Budget Paper No. 4 contains the following explanation of these paragraphs:
Appropriations for administered expenses are subject
to a determination by the Finance Minister on the amounts to be issued.
The effect of that determination is to prevent any part of the appropriation
that has not been expensed in the year from being issued from the Consolidated
Revenue Fund. By convention the Finance Minister issues determinations
in relation to administered expenses appropriations following the completion
of each financial year.(3)
Subclause 8(3) is a provision that has not appeared in earlier
years’ Appropriation Bills. It provides that a determination under paragraph
8(1)(b) is not a legislative instrument for the purposes of the Legislative
Instruments Act 2003. This means that the Minister’s
determination is not required to be tabled in each House of Parliament,
and is not subject to disallowance.
The provisions in Clause 9 are identical to the comparable
provisions in Appropriation Act (No. 3) 2003–04 except for the
addition of subclause 9(9) and subclause 9(10). Subclause
9(9) relates to subclauses 9(1) and 9(2). These two
subclauses deal with the lapsing of departmental expenses:
The annual appropriations acts are not expressed in terms
of a particular financial year and so do not automatically lapse. Amounts
appropriated for departmental expenses and for non-operating costs can
be subject to a lapsing process first introduced in the additional estimates
appropriations bills for 2003-2004. Under this process, on request in
writing from a responsible minister for an agency, the Finance Minister
may issue a determination to reduce the agency’s departmental expense
or non-operating costs appropriation. Requests for amounts to be lapsed
may arise, for example, because the appropriation is no longer required.
Until the Finance Minister issues a determination under this process,
moneys appropriated for departmental expenses and non-operating costs
may be issued from the Consolidate Revenue Fund in the budget or later
years.(4)
Subclause 9(9) provides that a determination under subclause 9(1) or
subclause 9(2) is a legislative instrument for the purposes of the Legislative
Instruments Act 2003 and that, despite subsection
44(2) of this Act, section 42 of this Act applies to the determination.
However, Part 6 of that Act does not apply to the determination.
Comment. Part 6 of the Legislative Instruments Act deals
with the sunsetting of legislative instruments, subsection 44(2) with
legislative instruments that are not subject to disallowance, and section
42 with the disallowance of legislation instruments. Thus subclause 9(9)
provides that the sunset provisions do not apply but that the disallowance
provisions do.
Subclause 9(10) provides that a written request under subclause 9(1)
or subclause 9(2) is not a legislative instrument for the purposes of
the Legislative Instruments Act.
The provisions in Clause 10 are identical to the comparable
provisions in Appropriation Act (No. 3) 2003–04 except for the addition
of subclauses 10(3) and 10(4). These subclauses deal with
section 31 of the Financial Management and Accountability Act 1997
(FMA Act) and ‘net appropriations’. Section 31 of the FMA Act allows a
departmental item to be increased by an amount (up to the amount of eligible
receipts) where the Finance Minister and the Minister responsible for
an agency have entered into a ‘net appropriation agreement’ with the agency.
(A proforma
agreement can be found on the Department of Finance and Administration
website). Such an agreement provides that, if the agency receives any
amounts covered by the agreement, the agency’s appropriation will be increased
in the annual Appropriation Acts. Specific provisions in the annual Appropriation
Acts give effect to the agreement. Thus, the agreement has effect only
while the specific provisions are in the annual Appropriation Acts. The
main effect of subclauses (3) and (4) is to apply net appropriation agreements
to administered items and specifically to the agencies set out in paragraphs
10(4) (a) to (d) inclusive.
The provisions in Clause 11 are identical to the comparable
provisions in Appropriation Act (No. 3) 2003–04 except for the addition
of subclause 11(3). Subclauses 11(1) and (2)
allow the Finance Minister to increase the amount specified in a departmental
item but limit the increase to no more than $20 million. Subclause 11(3)
provides that the Finance Minister’s determination is a legislative instrument
for the purposes of the Legislative Instruments Act but that neither section
42 of that Act nor Part 6 of that Act applies.
Clause 12 deals with
the advance to the Finance Minister. The provisions in Clause 12
are identical to the comparable provisions in Appropriation
Act (No. 3) 2003–04 except for the addition of subclause 12(4)
and subclause 12(5). Subclause 12(3) limits the amount of
the advance for the financial year ended 30 June 2005 to $175 million.
Subclause 12(4) provides that if an amount set out in Schedule 1 of the
Bill is recovered, then the total the Minister can advance remains at
$175 million. Subclause 12(2) provides that, where the Finance
Minister has advanced an amount, Schedule 1 is taken to be amended to
take account of the advance. Subclause 12(5) provides that a determination
issued under subclause 12(2) is a legislative instrument for the purposes
of the Legislative Instruments Act 2003 but that neither
section 42 of that Act nor Part 6 of that Act applies.
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‘Agency Resourcing 2004-05. Budget Paper No. 4’, p. 4.
-
For a more comprehensive discussion, see ‘Agency Resourcing 2004-05.
Budget Paper No. 4’, pp. 4–5.
-
‘Agency Resourcing 2004-05. Budget Paper No. 4’, p. 5.
-
‘Agency Resourcing 2004-05. Budget Paper No. 4’, p. 5.
Richard Webb
16 February 2005
Bills Digest Service
Information and Research Services
This paper 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 Information and Research Service,
nor do they constitute professional legal opinion.
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ISSN 1328-8091
© Commonwealth of Australia 2005
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