BILLS DIGEST NO. 46, 2011–12, 12 September 2011

Parliamentary Service Amendment (Parliamentary Budget Officer) Bill 2011

Anne Holmes and Richard Webb
Economics Section

Date introduced:  24 August 2011

House:  House of Representatives

Portfolio:  Treasury

Commencement:  Sections 1–3 on Royal Assent; Schedules 1–3 on a day to be fixed by Proclamation but not later than six months after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The Parliamentary Service Amendment (Parliamentary Budget Officer) Bill 2011 (the Bill) amends the Parliamentary Service Act 1999 (Parliamentary Service Act) to establish:

•       a new department of the Parliament—the Department of the Parliamentary Budget Office—to provide to all Members of the House of Representatives and Senators, independent information and analysis of budget-related matters, including costings of policies, and

•       the office of Parliamentary Budget Officer who, as Secretary of the Department of the Parliamentary Budget Office, will be responsible for providing those services.

In addition, the Bill amends the Charter of Budget Honesty Act 1998 (CBH Act) to, among other things, extend the provision of policy costings during a caretaker period to the leader of a minority party.

Background

There is a growing international trend for legislatures to establish independent, non-partisan bodies to assist legislators to understand better, and to be better placed to assess, budgets. This includes analysis of the robustness of the assumptions underlying the economic outlook, the government’s fiscal strategy, risks to the Budget, and the costs and benefits of individual budget measures. Probably the best known such body is the Congressional Budget Office in the United States, but other countries including the United Kingdom, Canada, and the Netherlands have established similar bodies. While the precise nature and functions of each of these bodies differ, a key feature that they share is independence from the executive branch of government. 

Basis of policy commitment

Paragraph 16.1 of the Agreement for a Better Parliament: Parliamentary Reform, which was negotiated between the Australian Labor Party (ALP), the Coalition and Independents after the 2010 election, includes this provision:

16.1 Parliamentary Budget Office

A Parliamentary Budget Office be established, based in the Parliamentary Library, to provide independent costings, fiscal analysis and research to all members of parliament, especially non-government members.

The structure, resourcing and protocols for such an Office be the subject of a decision by a special committee of the Parliament which is truly representative of the Parliament.[1]

The agreement between the ALP and the Australian Greens contained a similar provision.[2]

The Joint Select Committee on the Parliamentary Budget Office (Joint Select Committee) was established under a resolution of appointment passed by the House of Representatives on 18 November 2010 and by the Senate on 22 November 2010. The Joint Select Committee’s terms of reference required it to inquire into and report on:

(a) the appropriate mandate for the Parliament Budget Office (PBO);

(b) the nature of information needed to assist the Parliament in its consideration of matters related to the budget;

(c) the role and adequacy of current institutions and processes in providing this information, and the areas in which additional support is required;

(d) the scope for a PBO to fulfil its mandate in a cost-effective manner; and

(e) bearing in mind these considerations, the most appropriate structure, resourcing and protocols for a PBO, including but not limited to:

(i) the PBO’s functions and lines of accountability and oversight;

(ii) the routine work expected of the PBO and the minimum reporting requirements;

(iii) the protocols for members of parliament requesting non-routine work of the PBO, including the types of work and the rules for prioritising and carrying out these requests;

(iv) the protocols around access to and disclosure of the PBO’s work and any confidentiality requirements;

(v) the protocols around the PBO’s relationships with other institutions and processes, including government departments and agencies; and

(vi) an appropriate level of staffing, appropriate qualifications for staff, and resources to allow the PBO to fulfil its mandate; and

(f)  in conducting its inquiry, the Committee may choose to consider the operation and effectiveness of similar offices in other parliamentary democracies and their relevance to Australian circumstances.[3]

In March 2011, the Joint Select Committee issued its report which included 28 recommendations.[4]

The 2011-12 Budget provided for funding of the Parliamentary Budget Office.

On 1 August 2011, the Government tabled its response to the report. The Government agreed to 23 of the recommendations and to five in-principle.[5] Of the five recommendations agreed in-principle:

•       Recommendation 10, that the position of Parliamentary Budget Officer be established through dedicated legislation, would in effect be fully implemented by this Bill: the position of Parliamentary Budget Officer and the establishment of the PBO are both dealt with

•       Recommendation 14 is that the Parliamentary Budget Officer have access to the processes of the Freedom of Information Act 1982 (FOI Act) without charge in the event that information is not provided by a Government department in accordance with an established memorandum of understanding. The Government proposes that memoranda of understanding between the PBO and Government departments will deal with interactions with the FOI Act, and its application will be considered if the need arises

•       the Government has agreed with Recommendation 19 that the Parliamentary Budget Officer be empowered to make public statements, in particular where they consider that their work has been misrepresented in the public domain, but has not specifically included a provision in the Bill; there is provision for publishing work except where a request is confidential, and in such a case there is provision for a public statement about the request if it is in the public interest

•       similarly, it has budgeted for four years along the lines proposed in Recommendation 26 for an annual budget of $6 million

•       While it agrees in principle with Recommendation 28 about the location of the Parliamentary Budget Office, it regards this as an operational matter for the Parliamentary Budget Officer.

Committee consideration

At its meeting of 25 August 2011, the Senate Selection of Bills Committee decided to defer consideration of the Bill until its next meeting.[6]

Policy position of non-government parties/independents

The Coalition parties’ platform for the 2010 election included a pledge to establish a PBO.[7] Indeed, a Private Member’s Bill to establish a PBO was introduced in the 42nd Parliament by then Liberal Senator Guy Barnett.[8]

The Agreement for a Better Parliament: Parliamentary Reform was negotiated between the ALP, the Coalition and the independent members of Parliament. Non-government parties, the Australian Greens and independents were represented on the Joint Select Committee and joined in its recommendations. That being the case, there is a good deal of agreement on the establishment of a PBO, although differences are apparent with regard to aspects of its operations.

On 22 August 2011, the member for North Sydney, Joe Hockey MP, introduced a Private Member’s Bill, Parliamentary Budget Office Bill 2011 (the Private Member’s Bill).[9] The two Bills are similar in many respects.

One key difference is that the Private Member’s Bill proposes that the PBO have its own quite wide powers to obtain information from agencies, similar to those of the Auditor-General. As discussed above, the Government Bill provides for memoranda of understanding with government agencies, as was recommended by the Joint Select Committee. The Joint Select Committee also proposed that the Parliamentary Budget Officer be able to use the processes of the FOI Act without cost.  The Government, in its response to the Joint Select Committee, notes that interactions with the FOI Act can be addressed in the memoranda of understanding. The proposal in the Private Member’s Bill could have the advantages that access to information would be guaranteed, and information might be acquired more quickly. Timing is important for costings during caretaker period.

Another difference is that the Private Member’s Bill in effect would eliminate the policy costing function established under the CBH Act. On the one hand, continuation of costing arrangements under the Charter of Budget Honesty is duplication of a function; on the other hand, it means that extra resources will be available during election periods, when they are most needed. The Bill rules out any shopping for the most favourable answer by not allowing a costing to be done both by the PBO and under the CBH.

The Private Member’s Bill would establish the PBO as a statutory agency staffed under the Public Service Act (but reporting to the Parliament) rather than as a Department of the Parliament. This arrangement would be like that for the Australian National Audit Office.

The Private Member’s Bill appears to envisage a broader role in economic commentary for the PBO. This would make it more like the US Congressional Budget Office. However, the provisions in the Government Bill for the PBO to set its own work program, to prepare (on request) submissions to Parliamentary inquiries, and to conduct research on and analysis of the budget and fiscal policy settings – in addition to its costing functions – may give sufficiently wide and ambitious scope.

Concerns have been raised that the requirement to use official forecasts and estimates will reduce the power of the PBO as an alternative voice. The requirement has the advantage that analysis from the PBO will be directly comparable with analysis from the Departments of Treasury and Finance.  The PBO is able, and possibly even expected, to analyse, and presumably if necessary take issue with, the Treasury and Finance forecasts and estimates. There appears to be nothing in the Bill to prevent the PBO from generating or obtaining other forecasts and estimates and using them as well, though obviously there would be resource constraints.

It is likely that members of the Australian Greens and independent members will welcome the Bill, as it gives them access to new resources and to the policy costing resources provided under the CBH Act.

Financial implications/special appropriation

The Bill is a special appropriation and provides $6 million for the financial year beginning 1 July 2011. However, in the 2011-12 Budget, the Government pledged funding of $24.9 million over four years.[10] According to the Explanatory Memorandum to the Bill, in future years, funding will be through the annual Parliamentary departments Appropriation Acts.[11]

Key provisions

Schedule 1—Amendment of the Parliamentary Service Act 1999

Section 7 of the Parliamentary Service Act contains the relevant definitions for the Act.  Items 1–14 insert additional definitions into section 7.

Item 1 inserts the term authorised member of a Parliamentary party into section 7 of the Parliamentary Service Act so that the Leader of a Parliamentary party (see item 10 below) may authorise a member of that party to request policy costings during a caretaker period under proposed section 64J.

Item 6 defines independent member and relates to caretaker periods.[12] To be an independent member as defined by the Bill, that person must not be a member of a Parliamentary party, must have indicated that he or she will be a candidate in a general election or in a Senate election held on the same day as the general election, and must not have been endorsed by a political party before the caretaker period. 

Item 10 defines Parliamentary party as a political party with at least one member of Parliament and, during a caretaker period for a general election, the party must have at least one person who was a member of Parliament immediately before the caretaker period began.

The amendments in the Bill operate to divide existing Part 7 of the Parliamentary Service Act into three separate Divisions.  Item 15 inserts the new heading for Division 1—Departments other than the Parliamentary Budget Office.  Proposed section 53A is an interpretative provision which makes clear that a reference in Division 1 of the Parliamentary Service Act does not include a reference to the Parliamentary Budget Office.

Item 16 inserts the new heading for Division 2—Parliamentary Budget Office. Proposed Division 2 comprises two subdivisions:

•       Subdivision A which deals with the establishment and functions of the PBO in proposed sections 64A–64V, and

•       Subdivision B which deals with the appointment and conditions of appointment of the Parliamentary Budget Officer in proposed sections 64X–64XF.

Parliamentary Budget Office—establishment, functions, et cetera.

Proposed subsection 64A(1) establishes the Department of the Parliamentary Budget Office.

Proposed section 64B contains the purpose of the PBO which is to inform the Parliament by providing independent and non‑partisan analysis of the budget cycle, fiscal policy and the financial implications of proposals.

Proposed section 64C establishes the office of the Parliamentary Budget Officer.

Proposed section 64E sets out the Parliamentary Budget Officer’s functions. They include the preparation of:

•       policy costings in two distinct periods:

–      outside caretaker periods, policy costings are available to all Senators and Members of the House of Representatives (proposed paragraph 64E(1)(a))

–      during caretaker periods, election policy costings for publicly-released policies are available to authorised members of Parliamentary parties or independent members (proposed paragraph 64E(1)(b))

•       responses to budget-related requests from all Senators and Members of the House of Representatives (proposed paragraph 64E(1)(c))

•       submissions to Parliamentary committees on request from those committees (proposed paragraph 64E(1)(d)), and

•       work on its own initiative on budget and fiscal policy (proposed paragraph 64E(1)(e)).

Proposed subsection 64E(2) precludes the Parliamentary Budget Officer from preparing economic forecasts and budget estimates (other than for the PBO) while proposed subsection 64E(3) requires the Parliamentary Budget Officer to use the most recent official forecasts, parameters and fiscal estimates. Requirements for the official forecasts and budget estimates are contained in Parts 5, 6 and 7 in the CBH Act. They comprise the annual Government reporting (being the Budget Economic and Fiscal Outlook Report, the Mid-year Economic and Fiscal Outlook Report and the Final Budget Outcome Report), the Intergenerational Report and the Pre-election Economic and Fiscal Outlook Reports.

Proposed section 64F deals with arrangements for the PBO to obtain information from Commonwealth bodies. Proposed subsection 64F(1) allows the Parliamentary Budget Officer to make an arrangement with the head of a Commonwealth body to obtain information relevant to the Parliamentary Budget Officer’s work. Such arrangements may provide for confidentiality of the information disclosed (proposed subsection 64F(2) but the arrangement itself must be made publicly available (proposed subsection 64F(3)).

Proposed section 64H deals with requests for costing of policies, or proposed policies, outside caretaker periods. A key feature is that proposed subsection 64H(2) empowers all senators and members of the House of Representatives to request policy costings. Proposed subsection 64H(3) provides that requests must be in writing (proposed paragraph 64H(3)(a)) and may include a direction to treat the requests, the policy costings or any other information relating to the requests, as confidential (proposed paragraph 64H(3)(d)).

Proposed section 64J deals with requests for policy costings during caretaker periods. Proposed subsection 64J(2) empowers an authorised member of a Parliamentary party to request the costing of a policy that the Parliamentary party has announced publicly, while proposed subsection 64J(5) similarly allows an independent member to request a costing of a policy that the independent member has announced publicly. Section 29 of the CBH Act also deals with requests for costings of election commitments.  Proposed subsections 64J(3)–64J(4) and proposed section 64K are included to avoid the PBO duplicating requests made under CBH Act, and vice versa.

Proposed section 64L deals with requests for policy costings made before polling day and which the Parliamentary Budget Officer costs during caretaker period. In such cases, the Parliamentary Budget Officer must cost the policy and publicly release the costings as soon as practicable after the request has been made and before polling day. However, if the Parliamentary Budget Officer cannot complete the costings before polling day, the Parliamentary Budget Officer must release a statement to that effect. In that case the request is taken to have been withdrawn on that day and the Parliamentary Budget Officer is not authorised to proceed with the costings.

Caretaker periods are defined to extend to the point when either it is clear that the Government has been re-elected or the new Government has been sworn in, which can be well beyond polling day.[13] Proposed section 64LA covers situations where requests are made on or after polling day. Proposed subsection 64LA(2) provides that the Parliamentary Budget Officer must cost the policy as soon as possible. Should that not be possible before the end of the caretaker period, the Parliamentary Budget Officer must publicly release a statement to that effect (proposed paragraph 64LA(3)(a)).

Proposed section 64M deals with budget-related requests under proposed paragraph 64E(1)(c), other than policy costings. It provides that such a request may include a direction that it be treated confidentially. 

Proposed sections 64N to 64T contain governance provisions:

•       proposed section 64N requires the Parliamentary Budget Officer to report on the PBO’s activities to the Presiding Officers, and assist the Presiding Officers to discharge their accountability obligations to the Parliament

•       proposed section 64P prevents the Presiding Officers from directing the Parliamentary Budget Officer how to conduct policy costings outside caretaker periods

•       proposed section 64Q requires the Parliamentary Budget Officer to prepare annual work plans in consultation with the Joint Committee of Public Accounts and Audit (Joint Committee)

•       proposed section 64R empowers the Joint Committee to request the Parliamentary Budget Officer to provide estimates of its expenditure for a financial year before the budget for that year

•       proposed section 64S gives the Joint Committee a broad remit over the PBO. This includes consideration of the PBO’s operations and resources and reporting to both Houses of Parliament the outcomes of these considerations, and reporting to both Houses of Parliament on any other matter relating to the functions and powers of the Parliamentary Budget Officer, and

•       proposed section 64T empowers the Joint Committee to ask the Parliamentary Budget Officer to initiate an independent review of the PBO after a general election.  Any review must be completed within nine months after the end of the caretaker period for an election, and must be tabled in each House of the Parliament.

Proposed subparagraph 64U(a) provides that the Parliamentary Budget Officer must make publicly available requests for policy costings made during caretaker periods and the responses to those requests. Similarly, the Parliamentary Budget Officer must make publicly available committee requests (proposed paragraph 64U(d)), and any other work that the PBO has undertaken (proposed paragraph 64U(e)). Requests for costings made outside caretaker periods and other budget-related requests (proposed paragraph 64U(c)) are to be made publicly available subject to confidentiality requirements (proposed paragraph 64V(2)).

Parliamentary Budget Officer—appointment, conditions, et cetera.

Under proposed section 64X the Presiding Officers appoint the Parliamentary Budget Officer to a term of four years but no more than eight years.[14] Proposed subsection 64XA(1) provides that the Presiding Officers must not appoint the Parliamentary Budget Officer without the approval of the Joint Committee of Public Accounts and Audit.[15]  The remuneration of the Parliamentary Budget Officer is to be determined by the Remuneration Tribunal (proposed section 64XB).

Proposed section 64XE sets out the process for the removal of the Parliamentary Budget Officer from office.  It requires each House of the Parliament, in the same session of the Parliament, to present an address to the Presiding Officers praying for the removal of the Parliamentary Budget Officer on the ground of misbehaviour or physical or mental incapacity.

Item 18 of Schedule 1 to the Bill inserts the new heading for Division 3. The effect of item 18 is to require the Parliamentary Budget Officer to prepare an annual report.

Schedule 2—Amendment of the Charter of Budget Honesty Act 1988

Schedule 2 makes three main changes to the CBH Act as follows:

•       it redefines the term caretaker period

•       it gives the Leader of a minority party access to costings, and

•       it redefines the terms of the public release of policy costings.

Item 4 substitutes a new definition of caretaker period for a general election into subsection 3(1) of Schedule 1 to the CBH Act.[16] This starts when the House of Representatives expires or is dissolved, and ends when the government has been re‑elected or, if there is a new government, when the new government has been sworn in.

Item 6 also inserts into subsection 3(1) of Schedule 1 to the CBH Act the term Leader of a minority party meaning the leader of a recognised non‑government party with at least five members—but not including the Leader of the Opposition in the House of Representatives or in the Senate.

Items 22–33 amend existing Part 8—Costing of election commitments in the CBH Act.  In particular, item 22 adds proposed paragraph 29(1)(c) which allows the Leader of a minority party to request the preparation of costings of policies that the party has announced publicly.

Item 23 is designed to ensure that the costing of a policy is not prepared both by the PBO and under the CBH Act.

Items 24–26 extend to the Leader of a minority party the right to obtain costings under the Charter of Budget Honesty.

Item 32 repeals clause 31—which deals with the public release of policy costings—and substitutes new proposed sections 31 and 31A. The former deals with the public release of costing requests made before polling day during caretaker periods, and the latter with requests made on or after polling day. Proposed subsection 31(2) requires either or both of the Secretaries of the Department of the Treasury and the Department of Finance to release publicly the request and a costing of the policy as soon as possible and before polling day. However proposed subsection 31(3) provides that if the Secretaries cannot complete a costing before polling day, they must release a statement to that effect and not proceed with the costing. Similarly, proposed section 31A requires the public release of costings requested after polling day, but provides that if the Secretaries cannot complete a costing before the end of the caretaker period, they must release a statement to that effect and not proceed with the costing.

Schedule 3—Amendment of other Acts

Subsection7(1) of the FOI Act provides that the bodies specified in Division 1 of Part I of Schedule 2, and a person holding and performing the duties of an office specified in that Division, are to be deemed not to be prescribed authorities for the purposes of this Act.  Item 3 of Schedule 3 to the Bill amends the FOI Act including definitions of Parliamentary Budget Office and Parliamentary Budget Officer. Item 3 inserts both of those terms into Division 1 of Part I of Schedule 2 of the FOI Act to exempt the PBO and Parliamentary Budget Officer from the operation of the Act.

Item 5 appears to be intended to implement proposed section 64XB by amending the Remuneration Tribunal Act 1973 to ensure that that Act encompasses the position of the Parliamentary Budget Officer[17]. However, the amendment as drafted does not appear to achieve the stated aim.

Concluding comments

There is broad support for the establishment of a PBO. It would allow for resources for non‑government parties and members of Parliament to test policy options outside of caretaker periods, and it would establish an independent, non-partisan source of budget commentary.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2464.

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ISSN 1328-8091

[1].               Agreement for a better Parliament: parliamentary reform, September 2010, viewed 2 September 2011, http://parlinfo/parlInfo/download/library/jrnart/640272/upload_binary/640272.pdf;fileType=application/pdf#search=%22agreement%20for%20a%20better%20%20parliamentary%20reform%22

[2].               The Australian Greens & The Australian Labor Party (‘The Parties’) – agreement, September 2010, viewed 9 September 2011, http://greens.org.au/greens_labor_deal

[3].               Joint Select Committee on the Parliamentary Budget Office, Inquiry into the proposed Parliamentary Budget Office, Canberra, March 2011, p. xi, viewed 2 September 2011, http://www.aph.gov.au/house/committee/jscpbo/report/fullreport.pdf

[4].               Ibid., pp. xv to xx.

[5].               Australian Government, Government response to the Joint Select Committee on the Parliamentary Budget Office, Inquiry into the proposed Parliamentary Budget Office, Canberra, July 2011, viewed 2 September 2011, http://www.aph.gov.au/house/committee/jscpbo/report/govtresp.pdf

[6].               Selection of Bills Committee, Report No. 11 of 2011, Department of the Senate, Canberra, 25 August 2011, paragraph 4, viewed 7 September 2011, http://www.aph.gov.au/Senate/committee/selectionbills_ctte/reports/2011/rep1111.pdf 

[7].               J Hockey, ‘First reading speech: Parliamentary Budget Bill 2011’, House of Representatives, Debates, 22 August 2011, p. 40, viewed 2 September 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fc98fcd9b-9e94-4cb9-b317-af35f8e25267%2F0086%22

[8]               Parliamentary Budget Office Bill 2010 homepage http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fs760%22

[9].               The text of the Parliamentary Budget Office Bill 2011 and the accompanying Explanatory Memorandum can be viewed on the Bill homepage: http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr4619%22

[10].               Australian Government, Budget measures: budget paper no. 2: 2011-12, Commonwealth of Australia, Canberra, 2011, p. 283, viewed 1 September 2011, http://cache.treasury.gov.au/budget/2011-12/content/download/bp2.pdf

[11].               Explanatory Memorandum, Parliamentary Service Amendment (Parliamentary Budget Officer) Bill 2011, p. 6.

[12].               The term caretaker period for a general election has the same meaning as in Schedule 1 of the Charter of Budget Honesty Act 1998, as amended by item 4 of Schedule 2 to the Bill.

[13].               See item 4 of Schedule 2 to the Bill.

[14].               Section 7 of the Parliamentary Service Act defines the Presiding Officers as the President of the Senate, or the Speaker of the House of Representatives, or the President of the Senate and the Speaker of the House of Representatives acting jointly.

[15].               Item 7 of Schedule 1 to the Bill inserts the definition of Joint Committee of Public Accounts and Audit as provided for by the Public Accounts and Audit Committee Act 1951.

[16].               See also item 3 of Schedule 1 to the Bill.

[17].              Explanatory Memorandum, Parliamentary Service Amendment (Parliamentary Budget Officer) Bill 2011, p. 20.