Bills Digest No. 93 2003-04
Appropriation Bill (No. 3) 2003–04
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) 2003–04
Date Introduced: 11 February 2004
House: House
of Representatives
Portfolio: Department of Finance and Administration
Commencement: On the day when 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 six annual appropriation Bills. They authorise about 30 per
cent of annual Commonwealth spending.
Special (or standing) appropriations—the terms are often used interchangeably—authorise
about 70 per cent of spending. An example of special appropriations is
road spending. This is authorised under three Acts: the Australian
Land Transport Development Act 1988, the Roads to
Recovery Act 2000, and the Local Government (Financial Assistance)
Act 1995.
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.
These Bills are contained 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. 2) provides appropriations for:
Administered expenses include:
Administered items are expenses, revenues, assets or liabilities managed
by agencies on behalf of the Commonwealth. Agencies do not control administered
items. Administered expenses include grants, subsidies and benefits. In
many cases, administered expenses fund the delivery of third party outputs.
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.(1)
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
Bills No. 1 and 2 and Appropriations (Parliamentary Departments) Bill
No. 1 respectively.
Portfolio Additional Estimates Statements (PAES) are the additional estimates
counterparts of Portfolio Budget Statements (PBS) and contain explanations
of Appropriation Bills 3 and 4 and Appropriations (Parliamentary Departments)
Bill No. 2.
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. These reports are, however, virtually useless
in finding out the purposes for which funds were expended because the
reports contain so little information: the data are aggregated and the
outcomes are vague.
Special Accounts are a mechanism used to record in the Consolidated Revenue
Fund amounts that are earmarked for specified purposes, that is, they
are a way of classifying revenue and spending into different categories.
The Australian National Audit Office recently released a report that criticised
agency
management of Special Accounts.
According to the second reading speech, sums sought in the Bill include:
-
$235.8 million to the Department of Defence, Department of Foreign
Affairs and Trade, AusAID and the Australian Federal Police, in relation
to peace-keeping commitments and aid work in the Solomon Islands
-
$86.3 million towards drought assistance and interim support payments
-
$75 million in indexation adjustments for the Department of Defence
-
$75.1 million for rephasing from 2002-03 into 2003-04 of funds for
the Department of Health and Ageing
-
$65.5 million to the Australian Federal Police to cover the costs
of the Papua New Guinea deployment
-
$38.8 million for implementation of the MedicarePlus package
-
$19.3 million to meet Australia's contribution payments to various
international organisations
-
$19 million across 15 of the 17 portfolios in order to implement
the findings of the Budget Estimates and Framework Review
-
$21.4 million in assistance for victims of the Bali terrorist attacks
and their families and for meeting the cost of the investigations
-
$14.3 million in relation to changes in the Hearing Services model,
and
-
$12.8 million towards the government's response to the recommendations
of the inquiry into regional telecommunications.
The remaining amount—around $269.5 million—relates to estimates variations
and other measures.(2)
Proposed Part 2 deals with 'basic appropriations'. These
are the amounts allocated to agencies to enable them to perform ordinary
annual services. Clause 6 of proposed Part 2 specifies
a total of $944 938 000. The amounts, by agency, are contained
in proposed Schedule 1.
The Bill contains two new clauses, that is, similar clauses do not appear
in Appropriation Act (No. 3) 2002-03. In his second reading speech,
the Parliamentary Secretary to the Minister for Finance and Administration,
the Hon. Peter Slipper said:
Two new clauses have been added to the three additional estimates
bills. The new clauses will provide a mechanism for the finance minister,
on request from a portfolio minister, to lapse amounts of departmental
expense appropriations which are not required. Such amounts may be not
required because of an accounting reclassification, efficiency gains resulting
in reduced spending or changes in the structure of government.
The first clause provides the lapsing mechanism in respect
of the three bills. The second clause provides the same mechanism in respect
of the annual appropriation acts agreed to since the 1999 budget.
The first new clause—Clause 9 of proposed Part 2—provides that
a Minister—proposed subsection 9(1)—or a Chief Executive—proposed
subsection 9(2)—may request the Minister for Finance to make a written
determination which reduces a departmental item by the amount specified
in the determination. Following receipt of such a request, the Minister
for Finance can issue such a determination. Proposed subsection 9(5)
limits the amount of the reduction in two circumstances. First, paragraph
9(5)(a) limits the reduction to the amount in the determination. Second,
where payments have already been made from the Consolidated Revenue Fund,
paragraph 9(5)(b) limits the actual reduction to the difference between
the amount already paid and the reduction sought in the determination.
Proposed subsection 9(9) provides that a determination is a disallowable
instrument for the purpose of section 46A of the Acts Interpretation
Act 1901.
A similar mechanism is intended in Clause 10 of proposed Part
2. Clause 10 empowers the Minister for Finance, on receipt
of a written request from a Minister—proposed subsection 10(2)—or
a Chief Executive—proposed subsection 10(3)—to reduce, by a written
determination, amounts allocated by the Acts set out in subsection
10(1). All these Acts are Appropriation Acts of earlier years.
Proposed Part 3 deals with additions to basic appropriations.
Clause 13 authorises the Minister for Finance to spend no more than
$175 million from the AFM and to provide Parliament with details of the
amounts spent.
Compared with Appropriation Act (No. 3) 2002–03, the only significant
change in the Bill—other than the amounts appropriated—are Clauses 9 and
10 of proposed Part 2.
The effect of Clause 9 seems to be to make it possible to claw back the
amount appropriated under the Bill to the amount likely to be spent. Similarly,
Clause 10 seems to be intended to claw back unused departmental appropriations
from previous years. The purpose of these clauses is not clear but seems
to be a spending control mechanism aimed at preventing agencies from seeking
unduly large appropriations for departmental expenses and carrying forward
unspent amounts to future years that agencies are unlikely to spend.
-
Budget Paper No. 4 2003-04. pp. 4–5.
-
House Hansard, 11 February 2004, p. 24255.
Richard Webb
23 February 2004
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
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