Bills Digest no. 109 2008–09
Appropriation Bill (No. 6) 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: 26 February 2009
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 $1 830.889 million for the non-ordinary (‘other’) annual services
of the government in support of the Nation Building and Jobs Plan.
On 3 February 2009, the Rudd
Government announced the National Building and Jobs Plan (the Plan).[1] The context was the deterioration in the Australian and world economies. The
Plan’s purpose is to provide additional fiscal stimulus to counter the
contraction in the economy. The Plan is the fourth fiscal stimulus package and
follows the Economic Security Strategy,[2] the Nation Building Package,[3] and the Council of Australian Governments (COAG) funding package.[4]
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be withdrawn from the Consolidated Revenue Fund except ‘under an appropriation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 80 per cent
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 twenty per cent 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.
Other annual services include:
- grants of financial assistance to the states, territories, and
local government
- new administered expenses (see below)
- ‘non‑operating’ costs, and
- payments to CAC Act bodies (see below).
Non‑operating costs comprise:
- equity injections, which are provided to agencies to allow them,
for example, to invest in non-financial assets such as buildings and railway
lines
- loans are provided to agencies when an investment is expected to yield
a return, for example, increased productivity
-
‘previous years’ outputs’ appropriations replenish money spent on
departmental expenses (see below) in a previous year
-
‘administered assets and liabilities’ appropriations fund
additions to administered assets and the discharge of administered liabilities.
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.[5] This means that the Portfolio Budget Statements can be used to help interpret
an Act. Portfolio Additional Estimates Statements are the counterparts of Portfolio Budget Statements and contain
explanations of the funding sought through the additional estimates
Appropriation Bills.[6]
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.
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.[7]
Reduction processes
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.
The Bill appropriates $1 830.889 million. The Bill is the
fifth to appropriate money for other annual services for financial year
2008–09. The other items of legislation to do so are:
The Nation Building and Jobs Plan is the main fiscal
stimulus package the government has introduced. The Appropriation (Nation
Building and Jobs) Act (No. 2) 2008-09 appropriated some funds for the Nation
Building and Jobs Plan. In his second reading speech for Appropriation Bill
(No. 5) 2008–09, the Minister for Competition Policy and Consumer Affairs, and
Assistant Treasurer, the Hon. Chris Bowen (the Minister), stated that
additional funding is needed to underpin the Nation Building and Jobs Plan. Whereas Appropriation
Bill (No. 5) 2008–09 provides additional
funding for ordinary annual services, Appropriation Bill (No. 6)
2008-09 (the Bill) appropriates funds for other annual services in support of the Nation Building and Jobs Plan. As
the Minister noted in the second reading speech for the Bill:
Appropriation Bill (No. 6) 2008-2009 provides additional funding for payments of a capital nature, such as
for the purchase of administered assets and for payments to the states,
territories and local government authorities.[9]
There are three components to the appropriations. The
largest—for the Department of Infrastructure, Transport, Regional Development
and Local Government—is an equity injection of $1 188.9 million into the Australian Rail Track
Corporation (pages 19 and 20 of the Bill refer). The Australian Rail Track
Corporation is a wholly-owned Commonwealth company, and is the main vehicle
through which the Commonwealth funds investment in rail. Investment in the
Hunter Valley coal lines is a major component of the proposed investment.
The second component—also for the Department of
Infrastructure, Transport, Regional Development and Local Government—is the bringing
forward of $711 million for spending on roads. Of this, the Bill provides for
$391.989 million in 2008–09 (pages 19 and 20 of the Bill refer). The $391.989
million will be paid to the states, territories and local government.
The third component is $250 million for the Department of
the Environment, Water, Heritage and the Arts (pages 17 and 18 of the Bill
refer). According to the second reading speech, the government proposes to
bring forward expenditure totalling $500 million over four years, beginning in
2008–09, to expedite the return of water to the Murray Darling Basin. The $500
million is in response to the agreement with Senator Xenophon to bring forward
expenditure to buy water to return to the Basin.[10]
For the most part, the Bill’s provisions are identical to
those in Appropriation Act (No. 2) 2008–09 and Appropriation (Nation
Building and Jobs) Act (No. 2) 2008-09.
Clause 3 contains definitions. The following are some of the
definitions in clause 3.
CAC Act body: this is a Commonwealth authority or company
within the meaning of the Commonwealth Authorities and Companies Act 1997.
CAC Act body payment item: this is the amount set out in Schedule
2 in relation to a CAC Act body.
Chief Executive is defined as having the same meaning as in
the Financial Management and Accountability Act 1997.
Item means any of the following:
- a State, ACT, NT and local government
item;
- an administered item;
- an administered assets and
liabilities item;
- an other departmental item;
- a CAC Act body payment item.
Other departmental item means an amount set out in
Schedule 2 in relation to an Agency:
- opposite the heading “Equity
Injections”; or
- opposite the heading “Loans”; or
- opposite the heading “Previous Years’
Outputs”.
Clause 3 contains several definitions of ‘Portfolio
Statements. They all refer to the Statements introduced as ‘relevant documents’
in support of various Acts.
Portfolio
Additional Estimates Statements means the Portfolio
Additional Estimates Statements that were tabled in the Senate or the House of
Representatives in relation to the Bill for the Appropriation Act
(No. 3) 2008‑2009 and the Bill for the Appropriation Act
(No. 4) 2008‑2009.
Portfolio
Budget Statements means the Portfolio Budget Statements that were tabled in
the Senate or the House of Representatives in relation to the Bill for the Appropriation
Act (No. 1) 2008‑2009 and the Bill for the Appropriation Act
(No. 2) 2008‑2009.
Portfolio
Supplementary Additional Estimates Statements means the Portfolio
Supplementary Additional Estimates Statements that were tabled in the Senate or
the House of Representatives in relation to the Bill for the Appropriation
(Nation Building and Jobs) Act (No. 1) 2008‑2009 and the Bill
for the Appropriation (Nation Building and Jobs) Act (No. 2) 2008‑2009.
Portfolio Supplementary
Additional Estimates Statements No. 2 means the Portfolio
Supplementary Additional Estimates Statements that were tabled in the Senate or
the House of Representatives in relation to the Bill for this Act and the Bill
for the Appropriation Act (No. 5) 2008‑2009.
Portfolio
Supplementary Estimates Statements means the Portfolio Supplementary
Estimates Statements that were tabled in the Senate or the House of
Representatives in relation to the Bill for the Appropriation (Economic
Security Strategy) Act (No. 1) 2008‑2009 and the Bill for the Appropriation
(Economic Security Strategy) Act (No. 2) 2008‑2009.
Clause 6 provides that the total of the items in Schedule 2 is $1 830 889 000.
Clause 7 deals with payments to the states, territories and local
governments. Subclause 7(2) specifies that if the Portfolio
Budget Statements, Portfolio Supplementary Estimates Statements, Portfolio
Additional Estimates Statements, Portfolio Supplementary Additional Estimates
Statements or Portfolio Supplementary Additional Estimates Statements
No. 2 indicate that certain activities are
intended to be for a particular outcome, then expenditure on those activities
is taken to be as contributing to the outcome.
Clause 8 deals with ‘administered items’. Subclause 8(1) provides that the amount identified for an administered item in an outcome can
be used to contribute to that outcome. The wording of subclause 8(2) is
identical to that in subclause 7(2).
Clause 9 deals with administered assets and liabilities. Subclause 9(1) provides that the amount identified for an agency’s
administered assets and liabilities may be applied to achieving any of the
agency’s outcomes, which are specified in paragraphs 9(1)(a) to 9(1)(j). Subclause 9(2) specifies that if the Portfolio Budget Statements,
Portfolio Supplementary Estimates Statements, Portfolio Additional Estimates
Statements, Portfolio Supplementary Additional Estimates Statements or
Portfolio Supplementary Additional Estimates Statements No. 2 indicate that certain activities were intended to be for a
particular outcome, then expenditure on those activities is taken to be as contributing
to the outcome.
Clause 10—Other departmental items—provides that the amount
specified in an other departmental item for an Agency may be applied for the
departmental expenditure of the Agency.
Clause 11 deals with CAC Act body payments. Subclause 11(1) provides that an amount, appropriated for a CAC Act body payment item, may be
paid to the body for that body’s purposes. Subclause 11(2) provides that
if an Act provides that a CAC Act body must be paid amounts that are
appropriated by the Parliament for the purposes of the body, and Schedule 2 contains a CAC Act body payment item for that body, then the body must be paid
the full amount specified in the item. According to the Explanatory Memorandum:
The purpose of subclause 11(2) is to clarify that subclause
11(1) is not intended to qualify any obligations in other legislation
regulating a CAC Act body, where that legislation requires the Commonwealth to
pay the full amount appropriated for the purpose of the body.[11]
Three clauses in Part 3 deal with reductions to appropriations:
- clause 12 deals with reductions of (a) payments to the
states, territories and local governments and (b) administered items
- clause 13 deals with reductions of (a) administered assets
and liabilities and (b) other departmental items, and
- clause 14 deals with reductions to CAC Act bodies payment
items.
Subclause 12(1) stipulates that the amount by which payments to the
states, territories and local governments and for administered items can be
reduced is the difference between what has been appropriated and what has been
spent, the latter being the amount shown in agencies’ financial statements.
However, paragraph 12(2)(a) gives the Finance Minister power to
determine that subclause 12(1) does not apply or that subclause 12(1) applies as if the amount in the annual report were the amount that the Finance
Minister determines paragraph 12(2)(b). The Explanatory
Memorandum states:
The power in paragraph 12(2)(b) is to ensure that the amount
published for the item can be corrected if, for example, the amount is
erroneous or requires updating after an agency’s annual report is published.[12]
Section 44(2) of the Legislative
Instruments Act 2003 lists legislative instruments that are not subject to
disallowance.[13] The list includes Item 38 ‘Instruments made under
Annual Appropriation Acts’. Subclause 12(3) of the Bill provides that a determination made under subclause 12(2) is a legislative instrument, that section 42 (relating
to disallowance) of the Legislative Instruments Act 2003 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.
Subclause 13(1) enables the minister responsible for
an agency, or—where the Finance Minister is responsible for the agency—the
chief executive of the agency, to seek a reduction in administered assets and
liabilities, and other departmental items, while subclause 13(2) empowers the Finance Minister to make a determination that accords with the
request. However, the determination cannot reduce the appropriation below zero
(subclause 13(3)). Requests are not legislative instruments (subclause
13(5)). While the Finance Minister’s determinations are legislative
instruments and are disallowable, the determinations—like those in subclause
12(3)—are not subject to the sunsetting provisions of the Legislative
Instruments Act 2003 (subclause 13(6)).
The wording in clause 14—which
deals with reductions to CAC Act bodies payment items— is almost the same as
for clause 13. However, whereas a request can come from the Chief
Executive of an agency for which the Finance Minister is responsible in the
case of clause 13, in the case of CAC Act bodies, a similar request must
come from the Secretary of the Department if the Finance minister is
responsible for the body (paragraph 14(1)(b)). Subclause 14(5) confirms
that a reduction can be made for a CAC Act body even though it has been
allocated funds under subclause 11(2).
Special accounts are essentially
ledgers in which all expenditure and revenue related to a particular purpose
are recorded. This simplifies identification of all financial activities
related to that purpose. Clause 15—Crediting amounts to
Special Accounts provides that if a purpose of a special account is a
purpose that an item covers—irrespective of whether that item expressly refers
to the special account—then amounts may be debited against the appropriation
for that item and credited to the special account.
Clause 16 deals with the conditions attached to
grants of financial assistance to the states, territories and local governments.
Section 96 of the Constitution provides in part:
… the Parliament may grant financial assistance to any State
on such terms and conditions as the Parliament thinks fit.
According to the Explanatory Memorandum, clause 16:
… deals with Parliament’s power under section 96 of the Australian Constitution to provide financial assistance to the States. Clause 16
delegates the power to the responsible Ministers listed in Schedule 1 of
the Bill, by providing the Ministers named in Schedule 1 with the power to
determine:
∙ conditions under which payments to the States, the
ACT and NT and local councils may be made: paragraph 16(2)(a); and
∙the amounts and timing of those payments: paragraph
16(2)(b).[14]
Subclause 16(1) provides that it applies to
payments to the states, territories and local government for the outcomes
listed in column 2 of Schedule 1. Paragraph 16(2)(a) provides that payments must accord with the conditions attached to the
payments—as established by the process set out in subclause 16(3)—and
also with any determination as to the amounts and timing of payments paragraph 16(2)(b). Subclause 16(3) provides that the way terms and conditions are established is for the relevant Minister to make a determination in writing before or
after the Act commences. Subclause 16(4) provides that determinations mentioned
in paragraph 16(2)(a) and determinations made under paragraph 16(2)(b) are not legislative instruments. The Explanatory Memorandum explains that the
reason is:
… because the determinations are not altering the
appropriations approved by Parliament. Determinations under subclause 16(2)
will simply determine how appropriations for State, ACT, NT and local
government items will be paid. The determinations are issued when required. However,
payments can be made without either determination.[15]
Clause 17 Appropriation of the Consolidated Revenue Fund provides that the Consolidated Revenue Fund is appropriated for the purposes of
this Act, including the operation of this Act as affected by the Financial
Management and Accountability Act 1997.
Schedule 1 lists the agency—in this case the Department of
Infrastructure, Transport, Regional Development and Local Government—which is responsible for making payments to the states,
territories, and local governments, the outcomes for which payments are made,
and the Minister responsible for determining conditions and for determining
payments.
Schedule 2 lists the services
for which money is appropriated. The appropriations are broken down by agency,
and by the form that the payments take.
As noted, Appropriation
Bill (No. 5) 2008-09 also appropriate funds in support of the Nation Building
and Jobs Plan [see the Bills Digest for Appropriation Bill (No. 5) 2008-09].
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2464.
Richard Webb
6 March 2009
Bills Digest Service
Parliamentary Library
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