Bills Digest no. 71 2008–09
Appropriation Bill (No. 3) 2008-09
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
Date introduced: 4 December 2008
House: House of Representatives
Portfolio: Finance and Deregulation
Commencement: On Royal Assent
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, 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/.
To appropriate about $2 053 million for
the ordinary annual services of government.
Section 83 of the Constitution provides that no monies may
be withdrawn from the Consolidated Revenue Fund except ‘under an appropriation
made by law’. Laws authorising spending are either:
- special appropriations, or
- one of (usually) six annual appropriation acts.
Special appropriations—which account for about three
quarters of spending—are spending authorised by acts for particular purposes.
Examples are age pensions, carer payments, and the seniors concession allowance
paid under the Social Security (Administration) Act 1999, and Family Tax
Benefits A and B paid under A New Tax System (Family Assistance)
(Administration) Act 1999. The remaining quarter of spending is funded by
annual appropriations.
Section 54 of the Constitution requires that there be a
separate law appropriating funds for the ordinary annual services of the government.
That is why there are separate bills for ordinary annual services and for other
annual services. The distinction between ordinary and other annual services was
set out in a ‘Compact’ between the Senate and the Government in 1965 (the
Compact was updated to take account of the adoption of accrual budgeting). Appropriation
Bill (No. 1) is introduced with the Budget and appropriates funds for the
‘ordinary annual services of the Government’. Appropriation Bill (No. 2)—which
is also introduced with the Budget—appropriates funds for other annual
services. A third Appropriation Bill—Appropriation
(Parliamentary Departments) Bill No. 1—funds the parliamentary
departments.
Additional estimates
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 usually begins around November of the Budget
year. The approved additional estimates are incorporated into Appropriation Bills
No. 3 and No. 4 and Appropriation (Parliamentary Departments) Bill No. 2. These
Bills are the counterparts of Appropriation Bills No. 1 and No. 2 and
Appropriation (Parliamentary Departments) Bill No. 1 respectively.
When the Budget is brought down,
the government releases Portfolio Budget Statements. They contain, amongst
other things, explanations of the funding sought through the three
Appropriation Bills. The Portfolio Budget Statements are ‘relevant documents’
for the purposes of section 15AB of the Acts
Interpretation Act 1901. This means that the
Portfolio Budget Statements can be used to help interpret an Act. Portfolio
Additional Estimates Statements[1] are the counterparts of Portfolio Budget Statements and
contain explanations of the funding sought through the additional estimates Appropriation
Bills.
Departmental and administered expenses
Departmental expenses (outputs) are costs incurred in running
agencies, for example, salaries, depreciation and other day-to-day operating
expenses. Administered expenses (items) are the costs of providing the programs
that agencies administer. While most administered expenses are funded through
special appropriations, some are funded through the Appropriation Bills. The
Bass Strait Passenger Vehicle Equalisation Scheme is an example of an administered
expense funded as an ordinary annual service.
Departmental outputs and administered expenses contribute to
outcomes. Outcomes are the results or consequences for the community that the
government wishes to achieve. An example, in the Attorney-General’s portfolio,
is:
An equitable and accessible system of federal civil justice.[2]
The Senate’s powers in
relation to ordinary annual services
Section 53 of the Constitution provides that the Senate may
not amend proposed laws appropriating revenue or moneys for the ordinary annual
services of the government. The Senate may, however, return to the House of
Representatives any such proposed laws requesting, by message, the omission or
amendment of any items or provisions therein.
It is sometimes the case that an appropriation for a
departmental expense exceeds what is needed. However, departmental items do not
automatically lapse if they are not spent. In these circumstances, a ‘reduction
process’ to extinguish the unspent amount is available. Under this process, on
request in writing from a minister, the Finance Minister may issue a
determination to reduce the agency’s departmental expenses appropriation. In
short, the excess of the amount allocated over the amount expended can be
extinguished.
Appropriations for administered expenses are also subject to
an annual process to extinguish amounts that are not required. The amount
identified as spending on administered expenses in agencies’ financial
statements—as published in their annual reports—is the basis for this process. In
short, the amount of the reduction is the difference between the amount
appropriated and the amount spent as shown in the agency’s financial
statements.
Financial
implications
Appropriation Bill (No. 3) 2008-09 (the Bill) appropriates about
$2.053 billion compared with about $60.875 billion in Appropriation Act (No. 1)
2008-09. As usual, additional expenditure on defence is the biggest category
($846.4 million).[3] However, agencies involved in the regulation of financial markets—Treasury, the
Australian Prudential Regulation Authority (APRA) and the Australian Securities
and Investment Commission (ASIC)—will also receive additional funding. ASIC
will receive an additional $11.2 million, APRA $8.3 million and Treasury $0.7
million.[4]
In his second reading speech, the Minister for Finance and
Deregulation the Hon. Lindsay Tanner (the Minister) mentioned some of the items
for which funding is being sought. This Bills Digest therefore does not examine
these. However, the Appendix at the end contains links to the Portfolio Additional
Estimates Statements in which information on the purposes for funding is sought
can be found.
The Minister’s second reading speech also referred to
reclassifications of appropriations:
The appropriations that I have outlined so far are proposed
to meet additional funding requirements that have arisen since the last budget.
There is a further category of requirement for additional appropriation, referred
to as a ‘reclassification of appropriation’, that is also proposed in
Appropriation Bill (No. 3). These amounts need to be re-appropriated to align the
purpose of the proposed spending with the correct appropriation type. The
additional appropriations are fully offset by savings against the original
appropriations and thus do not lead to additional expenditure.[5]
Details of these reclassifications can not be found in the
Bill because they are aggregated with other amounts. Details can, however, be
found in the Portfolio Additional Estimates Statements. For example, with
respect to the Bureau of Meteorology, the Minister referred to the reclassification
of $20 million from payments to the states, territories and local government to
administered expenses. This can be found on pages 44 and 46 of the Portfolio
Additional Estimates Statements for the Environment, Water, Heritage and the
Arts portfolio.
Most of the provisions in the Bill are identical to those in Appropriation
Act (No. 1) 2008-09.[6] Further, provisions in Appropriation Act (No. 1) 2008-09 which are redundant—for
example, those relating to section 31 agreements which have been overtaken by
other legislation—have been dropped from the Bill. This Bills Digest therefore
focuses on differences between the Bill’s provisions and those in Appropriation
Act (No. 1) 2008-09. The main difference is in clause 13, which
deals with the Advance to the Finance Minister (see below).
Clause 3 contains definitions. It defines ‘Portfolio Statements’
to mean (a) the Portfolio Budget Statements, and (b) the Portfolio Supplementary
Estimates Statements and (c) the Portfolio Additional Estimates Statements.
The reference to Portfolio
Supplementary Estimates Statements[7] is to the Statements released in support of the Appropriation (Economics Security Strategy) Bill No. 1 2008-09 and the Appropriation (Economics Security Strategy) Bill No. 2 2008-09 which the government introduced to provide fiscal stimulus to the economy.
Clause 4 provides that the Portfolio Statements are
relevant documents for the purposes of section 15AB of the Acts
Interpretation Act 1901.[8]
Clause 6 Summary of appropriations states the
total of the items specified in Schedule 1 is $2 052 939 000. Schedule
1 lists all the agencies that are to be funded, the amount of funding, and
whether the item is departmental or administered.
Clause 8 deals with ‘administered items’. Clause 8 is identical to section 8 in Appropriation Act (No. 1) 2008-09 except
that subclause 8(2) refers to ‘Portfolio Statements’ whereas section 8
in Appropriation Act (No. 1) 2008-09 refers to ‘Portfolio Budget
Statements’. Subclause 8(1) confirms that if an amount is specified as
an administered item for an outcome, then money can be expended to achieve that
outcome. Subclause 8(2) provides that where the Portfolio Statements
indicate that an activity is for an outcome, the amount in the administered
item is taken to contribute towards the achievement of that outcome.
A CAC Act body is a Commonwealth authority or company within
the meaning of the Commonwealth
Authorities and Companies Act 1997 (the CAC Act) [9]. Clause 9 deals with a ‘CAC Act body payment item’. This is the total
amount set out in Schedule 1 of the Bill in relation to a CAC Act body.
For example, for the Broadband, Communications and the Digital Economy Portfolio, Schedule 1 shows an administered expense for the Special Broadcasting
Service Corporation of $331 000.[10]
As noted, a process exists whereby appropriations for
departmental expenses that are not needed can be abolished. Clause
10—Reducing departmental items contains this process. Subclause 10(1) specifies who can request reductions in departmental expenses. Paragraph
10(1)(a) empowers the Minister for an agency to ask the Finance Minister to
reduce a departmental item for that agency, while paragraph 10(1)(b) enables the Chief Executive of an agency, for which the Finance Minister is
responsible, to ask the Finance Minister to reduce a departmental item for that
agency. Subclause 10(2) specifies that the Finance Minister may make a
determination reducing a departmental item by the amount in the request. Subclause
10(3) provides that the determination will have no effect to the
extent that it would reduce the departmental item below nil.
Clause 11—Reducing administered items contains the
process for extinguishing appropriations for administered items that are not
needed. Subclause 11(1) provides that if the amount shown in the
financial statements of an agency’s annual report shows that the expensed
amount of an administered item is less than the amount appropriated for that
item, then the amount of the reduction is the difference between the
appropriated amount and the amount in the annual report. Subclause 11(2) enables the Finance Minister to determine that an amount, published in the
financial statements of an agency, is taken to be the amount specified in his
or her determination, while paragraph 11(2)(b) ensures that the amount
published in the annual report can be corrected. Subclause 11(3) provides that the Finance Minister’s determination, made under subclause
11(2), is a legislative instrument, that section 42 (relating to
disallowance) of the Legislative
Instruments Act 2003[11] applies to the determination, but that Part 6 (relating to sunsetting
provisions) of the Legislative Instruments Act 2003 does not apply to
the determination. In short, this means that the Finance Minister’s
determinations are disallowable by Parliament, but once made, will not expire.
Clause 12 contains the process for reducing CAC
Act body payments. This is almost identical to that for departmental items (clause
10). One difference is that whereas paragraph 10(1)(b) enables the
Chief Executive of an agency, for which the Finance Minister is responsible, to
ask the Finance Minister to reduce a departmental item for that agency, paragraph
12(1)(b) enables the Secretary of the Department for which the Finance
Minister is responsible to request a reduction for a CAC Act body. The reason for
this difference is that payments to CAC Act bodies are channelled through the
relevant portfolio departments. Subclause 12(2) empowers the Finance
Minister to make a determination reducing a CAC Act body payment by the amount
requested. Subclause 12(5) provides that proposed subsection 9(2) does not limit the reduction of a CAC Act body payment under this section.
Clause 13–Advance to the Finance Minister (AFM) differs
from the comparable sections in previous Appropriation Acts. The Minister, in
the second reading speech, gave the following explanation for the change:
Based on current indications, we expect demand for issues
from the advance to be greater than the $295 million provided in Appropriation
Act (No. 1) and the $380 million provided in Appropriation Act (No. 2). It is
important that the government can maintain its ability to issue amounts from
the advance in the event that there is an urgent need for expenditure.
Accordingly, clause 13 of Appropriation Bill (No. 3) provides that, irrespective
of the amounts issued from the advance, at the commencement of Appropriation
Act (No. 3), the amount available to be issued will be restored to the original
limit of $295 million. A similar clause has been added to Appropriation Bill
(No. 4) which will restore the limit to $380 million.
In addition, a new clause is included in bills (No. 3) and
(No. 4) providing that where amounts included in those bills have also been
subject to an issue from the advance, for example, where an amount is
determined after the additional estimates bills are finalised, then the
appropriation in the bill will be reduced by the amount of the advance. This
change will prevent appropriations for the same expenditure from both the advance
and the bill.[12]
The Explanatory Memorandum contains the following
explanation of clause 13:
Clause 13 of the Bill provides that, irrespective of the
amounts issued from the AFM before the commencement of the Bill, the amount
available under section 14 of Act No. 1 will be restored to the
original amount of $295 million. The provision has been added to the Bill
to ensure that there will be sufficient scope to provide amounts from the AFM
for the remainder of the financial year.[13]
Clause 13 relates to section 14 of the Appropriation
Act (No. 1) 2008-09. Section 14 allows the Finance
Minister to spend up to $295 million if the Finance Minister is satisfied
that there is an urgent need for expenditure that is not provided for—or is
insufficiently provided for—because of an erroneous omission or understatement
or because the expenditure was unforeseen. Under subsection 14(2), expenditure
from the Advance to the Finance Minister is treated as if it had been included
in Schedule 1 of Appropriation Act (No. 1) 2008-09 where Schedule 1
contains all the amounts appropriated. In other words, the effect of subsection
14(2) is to treat expenditure from the Advance to the Finance Minister as if it
had been included in—and hence appropriated by—Appropriation Act (No. 1)
2008-09. Subsection 14(3) provides that the amount expended from the
Advance must not exceed $295 million.
Subclause 13(1) provides that if the Finance Minister
has determined—under subsection 14(2) of Appropriation Act (No. 1)
2008-09—to increase an amount in Schedule 1 of that Act because of expenditure
from the Advance, then that amount is to be disregarded for the purposes
of determining the maximum amount of the Advance. In other words, for the
purposes of determining the amount of the Advance, prior expenditure from the
Advance is to be disregarded, so that the Advance is reinstated to a maximum of
$295 million.
Subclause 13(2) is designed to prevent double appropriations—once
under the Bill and once from the Advance to the Finance Minister—for the same activity/item. Paragraph 13(2)(a) relates to expenditure under the Bill while paragraph
13(2)(b) relates to the Advance to the Finance Minister. Subclause
13(2) provides that if the Bill appropriates funds for a particular expenditure
[paragraph 13(2)(a)] and the Finance Minister has already made a
determination, before the Bill commences, for expenditure for the same purpose
from the Advance to the Finance Minister [paragraph 13(2)(b)], then the
amount that the Bill appropriates is reduced by the amount already expended
from the Advance to the Finance Minister.
Concluding
comments
As noted, most to the Bill’s provisions are identical to
those in Appropriation Act (No. 1) 2008-09. The treatment of the Advance
to the Finance Minister in clause 13 is, however, unusual and raises the
question of why the Bill adopts the approach it does to reinstating the amount
of the Advance to $295 million. Presumably, an alternative approach would be to
increase the amount of the Advance. The Minister’s second reading
speech does not elucidate on the reasons the Minister expects issues from the Advance
to be greater than $295 million provided in Appropriation Act (No. 1)
2008-09 and $380 million in Appropriation Act (No. 2) 2008-09. As it
was, Appropriation Act (No. 1) 2008-09 increased the Advance by $120 million to
$295 million.
Main link: http://www.budget.gov.au/2008-09/content/paes/html/index.htm
Agriculture, Fisheries
and Forestry: http://www.daffa.gov.au/about/budget/budget_2008-2009/portfolio_additional_estimates_statements_2008-09
Attorney-General’s: http://www.ag.gov.au/www/agd/agd.nsf/Page/Publications_Budgets_Budget2008_AdditionalEstimateStatements_PortfolioAdditionalEstimatesStatements2008-2009
Broadband, Communications
and the Digital Economy: http://www.dbcde.gov.au/department/governance_and_administration/budget
Defence: http://www.defence.gov.au/budget/08-09/paes/
Defence portfolio:
Department of Veterans’ Affairs: http://www.dva.gov.au/media/publicat/budget/08/pbs/2008-09_DVA_13_Portfolio_Additional_Estimates_Statements.pdf
Department of Education, Employment
and Workplace Relations: http://www.deewr.gov.au/NR/rdonlyres/6BB861A8-449B-41D8-B8BA-CA7F2245FE32/0/200809PAES20081201.pdf
Environment, Water, Heritage
and the Arts: http://www.environment.gov.au/about/publications/budget/2008/paes/pubs/dewha-2008-09-paes.pdf
Families, Housing,
Community Services and Indigenous Affairs: http://www.fahcsia.gov.au/internet/facsinternet.nsf/aboutfacs/budget/budget2008-08_paes_0809.htm
Finance and Deregulation: http://www.finance.gov.au/publications/portfolio-budget-statements/08-09/portfolio-additional-estimates-statements.html
Foreign Affairs and
Trade: http://www.dfat.gov.au/dept/budget/index.html
Human Services: http://www.humanservices.gov.au/dhs/publications/budget/0809-financial-year.html
Immigration and
Citizenship: http://www.immi.gov.au/about/reports/budget/budget08/index.htm
Infrastructure,
Transport, Regional Development and Local Government: http://www.infrastructure.gov.au/department/statements/2008_2009/paes/index.aspx
Innovation, Industry,
Science and Research: http://www.innovation.gov.au/General/Corporate/Pages/PortfolioAdditionalEstimatesStatements200809.aspx
Prime Minister and
Cabinet: http://www.dpmc.gov.au/accountability/budget/2008-09/index.cfm#aes
Prime Minister and
Cabinet portfolio: Department of Climate Change: http://www.climatechange.gov.au/budget/0809/paes0809.html
Resources, Energy and
Tourism: http://www.ret.gov.au/Department/Documents/2008-09%20PAES-FINAL-011208.pdf
Treasury: http://www.budget.gov.au/2008-09/content/paes/html/index_tsy.htm
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2464
Richard Webb
28 January 2009
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted by the
Copyright Act 1968, no person may reproduce or transmit any part of this
work by any process without the prior written consent of the Parliamentary
Librarian. This requirement does not apply to members of the Parliament
of Australia acting in the course of their official duties.
This work 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.
Feedback is welcome and may be provided to: web.library@aph.gov.au.
Any concerns or complaints should be directed to the Parliamentary Librarian.
Parliamentary Library staff are available to discuss the contents of publications
with Senators and Members and their staff. To access this service, clients
may contact the author or the Library’s Central Entry Point for
referral.
|
