Bills Digest no. 96 2006–07
Appropriation Bill (No. 4) 2006-07
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
Endnotes
Contact Officer & Copyright Details
Passage History
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 and other social security payments are made.
Annual appropriations
are usually contained in six Appropriation Acts. The first three are:
-
Appropriation Act (No. 1)
-
Appropriation Act (No. 2 ), and
-
Appropriation (Parliamentary Departments) Act (No.
1).
The Bills for the first three Acts are introduced at
the same time as the Budget. The Acts authorise the payment of specified
amounts for particular purposes.
Appropriation Act (No. 1) provides for the appropriation
of money from the Consolidated Revenue Fund for the ordinary annual
services of government.
Appropriation Act (No. 2) appropriates money for purposes
other than the ordinary services of government. The latter encompass
administered expenses—grants to the states, payments to the territories
and local government and new administered expenses—and so-called ‘non-operating’
costs. The latter—sometimes called ‘capital’ costs—comprise:
-
‘equity injections’, which are provided to
entities, for example, to enable investment in new capacity to produce
departmental outputs when normal cash flows are insufficient
-
‘loans’, which are provided to entities by
Government when an investment to produce future departmental outputs
is expected to result in a direct return such as an efficiency saving
(these are generally not formal loans established in contracts)
-
‘previous years’ outputs’ appropriations,
which provide funding to replenish appropriations used to deliver
departmental outputs 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 existing appropriations which are then replenished
by the previous years’ outputs appropriation, and
-
‘administered assets and liabilities’ appropriations,
which provide funding for acquiring new administered assets, enhancing
existing administered assets and discharging administered liabilities
relating to activities administered by entities on behalf of the Government.(1)
Funding requirements
usually change after the Budget is brought down. The government may
agree to additional funding if the amounts in the three Budget Appropriation
Acts are inadequate and so has to seek parliamentary approval for additional
spending. The process whereby additional funds are provided is called
‘additional estimates’ and begins around November of the Budget year.
The approved additional estimates are incorporated into Appropriation
Bills 3 and 4 and Appropriation (Parliamentary Departments) Bill
No. 2. These Bills are the counterparts of Appropriation
Bills No. 1 and 2 and Appropriation (Parliamentary Departments) Bill
No. 1, respectively. The Bill, which is the subject of this Digest,
appropriates money for purposes other than the ordinary services of
government.
Portfolio Additional Estimates Statements are the additional
estimates counterparts of Portfolio Budget Statements and contain explanations
of Appropriation Bills 3 and 4 and Appropriations (Parliamentary Departments)
Bill No. 2.
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.
[Emphasis added]
As this Bill is not concerned with the ordinary annual
services of the government, it may be amended by the Senate, so long
as the total amount appropriated by the Bill is not increased. The Senate
can, for example amend the Bills so as to reduce the total amount appropriated
or change the method, object and destination of the any of proposed
expenditure.
Expenses are classified as either departmental or administered.
Departmental expenses are the resources that agencies control and use
to produce outputs. In essence, departmental expenses are the cost of
running agencies. Examples of departmental expenses are salaries, other
employee entitlements, and the use of equipment. Departmental expenses
are appropriated as a single amount for each agency.
Administered expenses are spending that agencies manage
on the government’s behalf. Examples of administered expenses are subsidies,
grants and benefit payments, and the financial assistance grants the
Commonwealth makes to local governments.
The Advance to the Finance Minister (AFM) provides
flexibility in that it allows the spending of funds for unforseen contingencies.
The AFM is a provision authorised by the annual Appropriation Acts and
made available to the Finance Minister as a central contingency fund
to provide urgent funding to agencies throughout the financial year.
Examples of the AFM provision are found in section 12 of Appropriation
Act (No. 1) 2006-2007 and section 13 of Appropriation Act (No.
2) 2006-2007.
AFM 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.
A Special Account is a ledger account recording a right
to draw money from the Consolidated Revenue Fund (CRF) in accordance
with designated purposes. The Financial Management and Accountability
Act 1997 (FMA Act) provides the appropriation authority for expenditure
up to the balance of a Special Account. As to their purpose, the Department
of Finance and Administration has stated:
[Special Accounts] provide a useful method of delivering some government
programs, particularly ones funded by, say, indirect taxes or other
compulsory imposts, contributions by other governments or discretionary
contributions by members of the community. Special Accounts allow
money in the CRF to be set aside for particular spending purposes,
and moneys in a Special Account can only be spent for the purposes
nominated.
… Special Accounts may be used for proper trustee type moneys, where
the Commonwealth is holding money on behalf of other parties, so genuine
trustees’ moneys can fit into the Special Account definition. Also,
where we are holding moneys on behalf of the States and for other
similar uses, Special Accounts are an appropriate vehicle as well.
Special Accounts are established in two ways:
-
by a determination issued by the Finance Minister
under section 20 of the FMA Act or
-
by enabling Acts, under section 21 of the FMA Act.
Of the total of $637 million sought, $277 million is
for additional payments to the states, territories and local governments.
They include:
-
the largest amount—$223 million—for the Department
of Agriculture, Fisheries and Forestry to support primary producers
in regions that have been declared eligible for exceptional circumstances
assistance support, and
-
additional compensation payments totalling $35.4
million to New South Wales
and Victoria under the
Snowy Hydro Ltd corporatisation agreements. The payments compensate
for the lower dividends received by these states from Snowy Hydro
Ltd as a result of the company now paying company tax, ensuring that
the states are not penalised by the new structure.
The Mid-Year Economic and Fiscal Outlook 2006-07 (MYEFO),
which was released in December 2006 (at page 85) states:
The Government will provide an additional $867.9 million over four
years (including $1.7 million in 2005-06) to support primary producers
in regions that have been declared eligible for Exceptional Circumstances
assistance.
Farmers who have not experienced a break in drought over the past
18 months can have Exceptional Circumstances drought declarations
extended to the end of their next production cycle. Such extensions
are considered following the receipt of information and advice from
the National Rural Advisory Council and the Department of Agriculture,
Fisheries and Forestry Drought Taskforce.
Exceptional Circumstances assistance comprises interest rate subsidies
and income support to assist viable farm businesses and farm families
who have been adversely affected by exceptional climatic events, such
as drought. Eligible recipients are also provided with a health care
concession card and access to Youth Allowance.
Further information can be found in the press release of 16 October
2006 issued by the Prime Minister.
According to the minister’s second reading speech,
the additional payments relating to Snowy Hydro Ltd arise because the
sale of the company will not proceed.
Bill No. 4 proposes $359.6 million in funds for non-operating
expenses. The following contains details of some such expenses.
The Bill seeks capital funding of $22.5 million to
increase the capacity of the Australian Federal Police to respond to
peacekeeping and peace restoration assignments. The MYEFO states (page
92):
The Government will provide $493.2 million over five years (including
$148.6 million in 2010-11) to increase the capacity of the Australian
Federal Police to respond to peace-keeping, peace restoration and
capacity-building requirements overseas. This increased capacity will
allow the Australian Federal Police to respond more quickly and comprehensively
to international crisis situations and will help strengthen law enforcement
capabilities across the region.
This measure includes $30.4 million in capital funding for infrastructure
and equipment.
Further information can be found in the press release of 25 August
2006 issued by the Prime Minister.
The Department of Defence is seeking:
-
$49.7 million to acquire protective equipment to
enhance the security and effectiveness of deployments to Iraq
and Afghanistan
-
$18.6 million for the Australian Defence Force to
meet the cost of responding to the civil unrest in East
Timor, and
-
$14.2 million for the Australian Defence
Force for the first stage of the Enhanced Land Force initiative.
The MYEFO states (pages 101 and 102):
Australian Army-additional infantry battalion
The Government will provide
$4.1 billion over eleven years from 2006-07 (including $2.7 billion
over seven years from 2010-11) to increase the size of the Australian
Army by one light infantry battalion, implementing Stage 1 of the Enhanced
Land Force. This involves the acquisition of additional equipment including
Infantry Mobility Vehicles, and an increase in military and civilian
personnel and provides for Australian Defence Force support elements.
This measure includes $724.5 million in capital funding over five years
from 2007-08 (including $314.9 million over two years from 2010-11)
to develop facilities at Defence bases.
The additional personnel and operating costs for the new equipment
required have yet to be finalised, but are expected to be comparatively
minor. Provision for these costs, and for a second additional battalion
planned for the Enhanced Land Force, has been included in the Contingency
Reserve.
Further information can be found in the press releases of 24 August
2006 issued by the Prime Minister and of 7 December 2006 issued by
the Minister for Defence.
East Timor-funding to help restore peace and stability
The Government will provide $184.5 million over three
years (including $18.6 million in 2005-06 and $37.7 million in capital
funding) for the Australian Defence Force’s contribution to restoring
peace and stability in East Timor as part of Operation ASTUTE.
Further information can be found in the press release of 26 May 2006
issued by the Department of Defence.
The Office of Workplace Services is seeking capital
funds of $17.3 million to fund office fit-outs associated with its expanded
regional presence and to develop an information technology application
to manage claims and infringements. The MYEFO states (at page 117):
The Government will provide $20.5 million over four years to raise
public awareness of the services provided by the Office of Workplace
Services and the Office of the Employment Advocate. The education
and awareness campaign includes newspaper and radio advertising.
The aim of the campaign is to educate employees and employers to
direct workplace complaints to the Office of Workplace Services and
employers and employees to approach the Office of the Employment Advocate
for information and clarification on agreement making.
The Bill proposes providing the Department of Finance
and Administration with $60 million for the construction of the Christmas
Island Immigration Reception and Processing Centre. The MYEFO (at page
179) states:
The Government will provide additional funding of $60
million in 2006-07 for the construction of the Christmas Island Immigration
Reception and Processing Centre. This additional funding is required
due to an increase in project costs including in relation to the break-down
and lengthy time out of service of the Christmas Island port crane.
The Department of Human Services will be provided with
capital of $34.4 million to centralise project management and procurement
activities for the Health and Social Services Access Card. These additional
funds will be offset by savings in Centrelink and Medicare Australia.
The $34.4 million is additional to the $36.7 million sought for the
related purpose in Appropriation Bill (No. 3) 2006-07.
According to the minister’s second reading speech,
an additional $12 million is proposed for the Department of Immigration
and Citizenship to reimburse the department for workload increases flowing
from an increase in case volume and case complexity in several visa
categories. This is additional to the $13.7 million sought for the related
purpose in Appropriation Bill (No. 3) 2006-07.
According to the minister’s second reading speech,
the Department of Industry, Tourism and Resources will receive an additional
$28.8 million to cover an increased liability for compensation payments
accrued in 2005-06 to New South Wales
and Victoria under the
Snowy Hydro Ltd corporatisation agreements.
An additional $14 million will be provided to the Department
of the Treasury to meet obligations under the HIH Appropriation Act
2001.
The Australian Taxation Office will receive additional
capital of $11 million to help deliver the Simplified Superannuation
reforms. This is additional to the $47.5 million sought for the related
purpose in Appropriation Bill (No. 3) 2006-07.
The total amount sought is almost $637 million.
The provisions are mainly identical with those in Appropriation
Act (No. 4) 2005-06. However, clause 3 (‘definitions’) contains
a clarifying definition. Whereas previous Acts used the term ‘a State
payment item’, this has been made more explicit as ‘a State, ACT, NT
and local government item’. This revised wording is substituted in subclauses
7(1) and 7(2), 15(1), 15(2) and 15 (5). This
revised rewording was first introduced in the Appropriation Act (No.
2) 2006-07.
The main changes are to clause 15, which deals with
the conditions and terms applying to payments to the States, the ACT,
the NT and local government. Again this change was first introduced
in the Appropriation Act (No. 2) 2006-07.
For such payments to States, Territories and local government authorities,
the relevant portfolio Minister is able to determine conditions under
which payments can be made. Such determinations are not legislative
instruments and thus not disallowable by Parliament under the Legislative
Instruments Act 2003. Such payments must be made in accordance with
the conditions determined in accordance with the procedure contained
in subclause 15(3).
Clause 6 authorises expenditure of $636 945
000. The amounts allocated to each agency, and the breakdown between
departmental and administered items, are set out in Schedule 2.
Clause 7 empowers the Finance Minister to issue
money from the Consolidated Revenue Fund to entities so that the entities
can make payments to the states.
Clause 8 deals with administered items in the
basic appropriation. Subclause 8(1) limits the amount of money
the Finance Minister can issue from the Consolidate Revenue Fund to
the amount specified (in Schedule 2), and the amount that the Finance
Minister includes in a determination. The general procedure with respect
to the latter is as follows:
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 … the determinations for administered expenses
do not reduce the appropriation. Rather, they are a declaration by the
Finance Minister of the maximum amount that may be issued for the respective
items. The effect of the determination is that administered expense
appropriations that have not been expensed in a year cannot be spent
in later years.(2)
Clause 11 deals with reductions of appropriations.
The general process for reductions is as follows:
Amounts appropriated for departmental expenses and for
non-operating costs can be subject to a reduction process, first introduced
in the additional estimates appropriations acts for 2003-2004. Under
this process, on request in writing from a responsible minister, the
Finance Minister may issue a determination to reduce the entity’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 outputs and non-operating
costs may be issued from the CRF as required.(3)
Clause 12 deals with the power of the Finance
Minister to increase the amount allocated to a departmental item up
to a maximum of $20 million for the 2006-07 financial year. As noted,
departmental expenses are essentially the costs of running agencies
such as salaries and rent. Clause 12 provides flexibility in that when
situations arise where an agency finds that it does not have enough
funds for departmental expenses and the shortfall cannot be met through
the normal additional estimates processes, it may request additional
funds by means of a determination that the Finance Minister issues.
Subclause 12(3) provides that such a determination is a legislative
instrument, but is not disallowable. Clause 13 deals with the
Advance to the Finance Minister. Subclause 13(3) limits the combined
total the Finance Minister can issue under Appropriation Act (No.
2) 2006-07 and the Bill to $215 million. Subclause 13(5)
provides that such a determination is a legislative instrument, but
is not disallowable
Clause 14 provides that when an item of spending
or revenue falls within the purpose for which a Special Account has
been created, then that item may be respectively debited or credited
to the Special Account.
Endnotes
- Australian Government, Agency Resourcing 2006-07,
Budget Paper No. 4, p. 5.
- ibid., p. 6.
- ibid.
Richard Webb
22 February 2007
Economics Section
Parliamentary Library
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 Parliamentary Library, nor
do they constitute professional legal opinion.
Staff are available to discuss the paper's contents with
Senators and Members and their staff but not with members of the public.
ISSN 1328-8091
© Commonwealth of Australia 2007
Except to the extent of the uses permitted under the Copyright Act
1968, no part of this publication may be reproduced or transmitted
in any form or by any means, including information storage and retrieval
systems, without the prior written consent of the Parliamentary Library,
other than by members of the Australian Parliament in the course of their
official duties.
Published by the Parliamentary Library, 2007.
|
