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
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ISSN 1328-8091
© Commonwealth of Australia 2007
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