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withdrawn from the Consolidated Revenue Fund except ‘under an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.
Back to top
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.
Back to top
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.
Back to top