Bills Digest no. 58 2007–08
Appropriation Bill (No. 4) 2007-08
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
Contact officer & copyright details
Passage history
Appropriation
Bill
(No. 4) 2007-08
Date
introduced: 13
February 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/.
Purpose
To appropriate additional money for purposes other than the
ordinary annual services of the government.
Section 83 of the Constitution states:
No money shall be drawn from the Treasury of the
Commonwealth except under appropriation made by law.
There are two broad categories of appropriations:
- annual appropriations, and
- special (or standing) 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
of a special appropriation 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 although there can be more. 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) provides for the appropriation of
money from the Consolidated Revenue Fund for purposes other than
the ordinary services of government. The latter encompass
administered expenses (see below) which include grants to the
states, payments to the territories and local government, 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 (see below)
- 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 (see below). 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]
The Senate s powers and money bills
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.
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 Bill so as to reduce the total amount
appropriated or change the method, object and destination of any of
the proposed expenditure.
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 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.
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.
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 in
section 11 of Appropriation Act (No. 4) 2006-2007 and
section 12 of Appropriation Act (No.2) 2007-2008.
AFM funding is available only if it meets two tests:
- the need for funding must be urgent, and
- the need was unforeseen or arose because of erroneous omission
or understatement.
The Bill proposes additional funding, some of which flows from
election policies. The following lists, by agency, some of the
measures the Bill covers as announced in the Minister s
second reading speech.
The Department of Defence will receive $26.8 million for payment
to the Queensland government for the relocation of Amberley State
School as a result of the expansion of RAAF Amberley. This
appropriation is provided through the reclassification of an
existing Defence appropriation.
An additional $33.0 million will be provided under the
Commonwealth State and Territories Disability Agreement for grants
to the states for people with disabilities and their carers.
AusAID will be provided with $466.4 million for Australia s
contribution to the International Development Association, which is
the concessional lending arm of the World Bank. The amount reflects
additional funding announced in the 2007-08 Mid-year Economic and
Fiscal Outlook of $211
million. It also reflects a change in the accounting treatment
for $255 million, which was previously appropriated with funding
for loans in Appropriation Act (No. 1) 2007-08. The
original funding provided in this Act under the previous accounting
treatment will be returned to the budget.
Funding for this Department includes:
- $40.3 million for investment in hospitals and community health
under the Better Outcomes for Hospitals and Community Health
program
- this program includes funds for specific commitments announced
during the election, such as $15 million for the Launceston
Integrated Cancer Care Centre, and
- $18 million for a contribution to Grafton Hospital.
An equity injection of $121.4 million is proposed for the
Department of Immigration and Citizenship to, among other things,
reimburse the Department for meeting workload increases flowing
from an increase in case volume in 2006-07, and to provide capital
funding for IT system development and upgrades for the border
control system as well as additional capital funding for the
Systems for People IT program.
The appropriation of $20 million brings forward funding under
the AusLink
program to allow the early initiation of (unidentified) projects by
the Department of Infrastructure, Transport, Regional Development
and Local Government.
An additional $17.6 million will be provided to the Department
of Innovation, Industry, Science and Research for the
Innovation Investment Fund. This amount represents the profit
on the fund s investment, and continues the policy that profits
generated should be returned to the fund to create a
self-sustaining program of investments.
The Bill provides for expenditure of $898.489 million. This
compares with $636.945 million in the equivalent 2006-07 Act.
Clause 6 authorises expenditure of $898 489
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, territories and local
government.
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
amount 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 set the maximum amount
that may be issued from each administered expense appropriation.
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 outputs 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.[3]
Section 12 of Appropriation Act (No.4)
2006-07 titled Other departmental
items-adjustments and borrowings empowered the Finance Minister to
increase the amount allocated to a departmental item to a maximum
of $20 million. As noted, departmental expenses are essentially the
costs of running agencies such as salaries and rent. Section 12
provided 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.
It is not clear why a comparable clause has been dropped from
the Bill. A possibility is that it is a way of enforcing financial
discipline on agencies in the context of the government seeking to
cut expenditure for fiscal policy purposes. By eliminating access
to this option, agencies will be forced to operate within the
budgets available through the annual appropriations and additional
estimates processes.
Clause 12 deals with the AFM (see page 4 of the
Digest). Subclause 12(3) limits the combined total
the Finance Minister can issue under Appropriation Act
(No.2) 2007-08 and the Bill to $215 million.
Subclause 12(5) provides that an AFM determination
issued by the Finance Minister under clause 12 is
a legislative instrument, but is not disallowable.
Clause 13 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.
Richard Webb
18 February 2008
Bills Digest Service
Parliamentary Library
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