Bills Digest no. 86 2015–16
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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.
Daniel Weight
Economics Section
24 February 2016
Contents
Purpose
of the Bills
Structure of the Bills
Background
Appropriations
Senate Estimates
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Date introduced: 4
February 2016
House: House of
Representatives
Portfolio: Finance
Commencement: Both
Bills will commence on Royal Assent.
Links: The links to the Bills,
their Explanatory Memoranda and second reading speeches can be found on the Bills
home pages for the Appropriation
Bill (No. 3) 2015–2016 and the Appropriation
Bill (No. 4) 2015–2016 or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
The purpose of the Appropriation Bill (No. 3) 2015–2016 (the No. 3 Bill) is to appropriate an additional $1,308,670,000
($1.3 billion) from the Consolidated Revenue Fund (CRF) in the 2015–16
financial year for the ordinary annual services of the Government.
The purpose of the Appropriation Bill (No. 4) 2015–2016 (the
No. 4 Bill) is to appropriate an additional $905,053,000 ($0.9 billion) from
the CRF in the 2015–16 financial year for the other annual services of the
Government.
Part 1 of each Bill deals with preliminary matters,
including when the Acts commence, and how to interpret them.
Part 2 of each Bill outlines the quantum and types
of appropriation from the CRF.
Part 3 of each Bill replenishes the relevant
Advance to the Finance Minister (AFM).
Part 4 of each Bill deals with several technical
matters relating to special accounts, the formal appropriation of monies from
the CRF, and the automatic repeal of the Acts.
Schedule 1 of the No. 4 Bill nominates the Ministers
who are able to impose conditions on grants of financial assistance to the states
and territories.
Schedule 1 of the No. 3 Bill and Schedule 2 of
Bill No. 4 state the amounts of the appropriations to be made to each portfolio.
Under the Charter of Budget Honesty Act 1998, the
Government must release a Mid-Year Economic and Fiscal Outlook (MYEFO)
report ‘by the end of January in each year, or within six months after the last
budget, whichever is later’.[1]
The Government released the 2015–16 MYEFO on 15 December 2015.[2]
The 2015–16 MYEFO updated revenue and expenditure forecasts, and included the
announcement of new policy measures.[3]
The two Bills will add to or alter annual appropriations—as
required—to give effect to some of the measures announced in the 2015–16 MYEFO.
Not all measures will be implemented by these Bills, as some measures—in
particular those affecting taxation—may require other legislation to be passed
by the Parliament.[4]
An appropriation is the legal release of monies from the
CRF.[5]
Appropriation Acts, however, do not create a source of power for the
Commonwealth to spend money; they merely release that money from the CRF. The
Commonwealth’s power to spend money must be found in other parts of the Constitution.[6]
Under the terms of the Constitution, there are
certain unique requirements that a Bill proposing to appropriate monies from
the CRF must satisfy. An appropriation Bill must also comply with certain
presentational requirements.
Section 81 of the Constitution provides that:
All revenues or moneys raised or received by the Executive
Government of the Commonwealth shall form one Consolidated Revenue Fund [CRF],
to be appropriated for the purposes of the Commonwealth ...[7]
Section 83 of the Constitution provides that no
money may be withdrawn from the CRF ‘except under appropriation made by law’.[8]
The effect of these two sections is that all monies received by the
Commonwealth must be paid into the CRF, and must not be spent before there is
an appropriation authorising specific expenditure.
Section 53 of the Constitution prevents proposed
laws appropriating monies originating in the Senate.[9]
Further, under section 56 of the Constitution, all proposed laws for the
appropriation of money may only be introduced into the House of Representatives
following a recommendation by the Governor-General.[10]
As—by convention—the Governor-General only acts upon the advice of the
Executive, this provision of the Constitution prevents non‑government
members of the House of Representatives from introducing Bills that would
propose to appropriate money from the CRF.[11]
Section 54 of the Constitution requires that there
be a separate law appropriating funds for the ‘ordinary annual services of the Government’,
and that other matters must not be dealt with in the same Bill.[12]
However, what constitutes the ‘ordinary annual services of the Government’ and
the ‘other’ services of the Government is not defined in the Constitution.
A working distinction between ordinary and other annual
services was agreed in a ‘Compact’ between the Senate and the Government in
1965.[13]
Several amendments have been made to the Compact since 1965, and in 2010 the
Senate Standing Committee on Appropriations and Staffing recommended the Senate
restate the Compact in a consolidated form.[14] On 22
June 2010, the Senate resolved as follows:
(1) To
reaffirm its constitutional right to amend proposed laws appropriating revenue
or moneys for expenditure on all matters not involving the ordinary annual
services of the Government.
(2) That appropriations for expenditure on:
(a) the construction of
public works and buildings;
(b) the acquisition of
sites and buildings;
(c) items
of plant and equipment which are clearly definable as capital expenditure (but
not including the acquisition of computers or the fitting out of buildings);
(d) grants to the states
under section 96 of the Constitution;
(e) new policies not
previously authorised by special legislation;
(f) items regarded
as equity injections and loans; and
(g) existing asset
replacement (which is to be regarded as depreciation),
are not appropriations for the ordinary annual services of
the Government and that proposed laws for the appropriation of revenue or
moneys for expenditure on the said matters shall be presented to the Senate in
a separate appropriation bill subject to amendment by the Senate.
(3) That, in respect of payments to international
organisations:
(a) the
initial payment in effect represents a new policy decision and therefore should
be in Appropriation Bill (No. 2); and
(b) subsequent
payments represent a continuing government activity of supporting the international
organisation and therefore represent an ordinary annual service and should be
in Appropriation Bill (No. 1).
(4) That
all appropriation items for continuing activities for which appropriations have
been made in the past be regarded as part of ordinary annual services.[15]
Adherence to the Compact has not always been strict, and
the High Court has held that any disagreements between the Houses are not
justiciable.[16]
Any disputes, therefore, are to be determined between the Houses themselves.
Section 53 of the Constitution provides, among
other things, 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.
The Senate may amend proposed laws appropriating revenue
for purposes other than for the ordinary annual services of the Government, as
long as it does not ‘increase any proposed charge or burden on the people’.[17]
Conceivably, the Senate could amend an appropriation Bill for the other
services of Government so as to, for example, redirect the proposed
appropriation to another purpose, or reduce the proposed appropriation to nil.
Where a Bill for the ordinary annual services of the
Government includes amounts that the Senate considers should, because of the
Compact, be included in a Bill for the other annual services of the Government,
the Senate may elect to deal with that Bill as if it were a Bill for the other
annual services of government; considering it to be susceptible to amendment by
the Senate.[18]
Australian Accounting Standard 1050 Administered Items
requires that government agencies distinguish between revenues and expenses
that they administer for the Government, and those over which they have some
control.[19]
Generally, administered expenses are the costs of providing the programs that
agencies run for the Government, while departmental expenses are the costs
incurred in running agencies.
Appropriation Bills, therefore, distinguish between
‘administered’ expenses and ‘departmental’ expenses. Administered appropriation
may only be used for the program or outcome that it is appropriated for, while
departmental appropriation may be moved between different departmental
activities.[20]
While the level of detail necessary for an Appropriation
Act to be valid is generally low, in the Pharmaceutical Benefits case
the High Court held that:
... there cannot be appropriations in blank, appropriations for
no designated purpose, merely authorising expenditure...[21]
The Appropriation Bills must, therefore, also describe—in
general terms—the purpose for which monies are to be used. The Bills use four
methods for describing the purposes of the proposed appropriations.
For non-corporate Commonwealth entities, the purposes of
operating appropriations (both departmental and administered) are specified
with reference to the ‘outcomes’ of those entities. The Department of Finance
explains ‘outcomes’ as follows:
Government outcomes are the intended results, impacts or consequences
of actions by the Government on the Australian community.[22]
As corporate Commonwealth entities are legally distinct from
the Commonwealth itself,[23]
monies cannot be appropriated directly to those entities. Instead, amounts are
appropriated to relevant Departments for on‑payment to corporate
Commonwealth entities within Departments’ portfolios.
Non-operating appropriations are amounts designated for the
capital needs of entities. Typically, these amounts are equity injections into
entities, or monies for the purchase or development of the assets of entities.
Under the Compact, they can only ever be proposed in a Bill dealing with the
‘other’ annual services of Government.
Under section 96 of the Constitution, the
Commonwealth Parliament may make payments to the states with or without
conditions, and amounts intended for payment to the states are identified
separately in Appropriation Bills. Again, because of the Compact, amounts to
the states can only ever be proposed in a Bill dealing with the ‘other’ annual
services of Government. Amounts to the Australian Capital Territory and the
Northern Territory are also included with the amounts for the states.
The Advance to the Finance Minister (AFM) is the
appropriation of monies to the Finance Minister without any particular outcome
or purpose specified. The AFM is established in the first two Appropriation
Acts each year.[24]
The AFM is then replenished whenever supplementary Appropriation Acts are
passed.
The Finance Minister may allocate the moneys appropriated as
AFM to outcomes already provided for in that same Appropriation Act where:
the Finance Minister is satisfied that there is an urgent
need for expenditure, in the current year, that is not provided for, or is
insufficiently provided for, [...]:
(a) because of an erroneous omission or understatement; or
(b) because
the expenditure was unforeseen until after the last day on which it was
practicable to provide for it in the Bill for this Act before that Bill was
introduced into the House of Representatives.[25]
The amount of appropriation allocated to the AFM in 2015–2016
is $295 million for the ordinary annual services of government, and $380
million for the other annual services of government.[26]
The Finance Minister tables an annual report in Parliament on the use of the
AFM.[27]
The particulars of both Bills were referred to the Senate
legislative and general purposes standing committees under Senate standing
order 26 for examination and report. This process is generally known as the
Senate Estimates process, and on 10 November 2015 the Senate resolved to hold
the Additional Senate Estimates hearings between 8 and 12 February 2016.[28]
The No. 3 Bill seeks to appropriate $1,308,670,000 ($1.3
billion) from the CRF.[29]
The No. 4 Bill seeks to appropriate $905,053,000 ($0.9 billion) from the CRF.[30]
The total amount of money sought to be appropriated by the two Bills is $2,213,723,000
($2.2 billion).
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
two Bills’ compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. In
relation to the human rights implications of the Bills, the Government states:
...this Appropriation Bill performs an important constitutional
function, by authorising the withdrawal of money from the Consolidated Revenue
Fund for the broad purposes identified in the Bill.
However, as the High Court has emphasised, beyond this, the
Appropriation Acts do not create rights and nor do they, importantly, impose
any duties.
Given that the legal effect of Appropriation Bills is limited
in this way, the Appropriation Bill is not seen as engaging, or otherwise
affecting, the rights or freedoms relevant to the Human Rights
(Parliamentary Scrutiny) Act 2011.[31]
In relation to previous appropriation Bills, however, the
Parliamentary Joint Committee on Human Rights has stated as follows:
The committee notes that it does not anticipate it will
generally be necessary for it to make substantive comments on appropriation
bills... Nonetheless, the committee considers that there may be cases in which
the committee considers it appropriate to comment on such bills. These might
include specific appropriation bills or specific appropriations where there is
an evident and substantial link to the carrying out of policy or programs under
legislation that gives rise to human rights concerns and where the issues have
not been adequately addressed in its examination of the substantive legislation
or there has not been an opportunity for such examination.
The committee, however, notes that appropriation bills are
highly technical in nature and it is likely to be difficult for the committee
to identify particular human rights concerns in the time available. The
committee would therefore find it helpful if the statements of compatibility
accompanying these bills identified any proposed cuts in expenditure which may
amount to retrogression or limitations on human rights, in particular economic,
social and cultural rights.[32]
At the time of writing, the Bills had not been considered
by the Parliamentary Joint Committee on Human Rights.
Part 1 of each of the No. 3 and No. 4 Bills deal with
preliminary matters, including when the Acts commence (on Royal Assent), and
how to interpret the Acts. Clause 4 of each of the No. 3 and No. 4 Bills
provides that the accompanying Portfolio Budget Statements may be used as
extrinsic materials to interpret the Acts.
Part 2 of each of the No. 3 and No. 4 Bills outline
the quantum and types of appropriation from the CRF being proposed.
In the No. 3 Bill, money may be appropriated to
departments as departmental or administered appropriation for outcomes, or
payments for corporate Commonwealth entities within the meaning of the Public
Governance, Performance and Accountability Act 2013 (PGPA Act).
In the No. 4 Bill, money may be appropriated to
departments as either:
- appropriations
for grants to the states, territories and local governments (also see clause
14 below)[33]
- appropriations
for new departmental or administered programs[34]
- non-operating
(or ‘capital’) appropriations for new administered assets and liabilities[35]
or
- appropriations
for payments to departments for on-payment to corporate Commonwealth entities within
the meaning of the PGPA Act.
Part 3 of each of the No. 3 and No. 4 Bills
replenishes the AFM.
Part 4 of both Bills deal with certain technical
matters, including formally appropriating moneys from the CRF.[36]
Clause 14 of the No. 4 Bill deals with Parliament’s
power, under section 96 of the Constitution, to provide financial
assistance to the states. It delegates the power to determine the conditions attaching
to payments to the States, ACT, NT and local governments to the minister set
out in Schedule 1 of that Bill.
Schedule 1 in the No. 3 Bill and Schedule 2
in the No. 4 Bill provide detailed information about the services for which appropriations
are to be made to each portfolio and for each Commonwealth entity.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Charter of Budget Honesty
Act 1998, Schedule 1, Division 2 of Part 5, accessed 11 February 2016.
[2]. S
Morrison (Treasurer), Release
of 2015–16 Mid-year economic and fiscal outlook, media release, 15
December 2015, accessed 11 February 2016.
[3]. S
Morrison (Treasurer) and M Cormann (Minister for Finance), Mid-year
economic and fiscal outlook 2015–16, accessed 11 February 2016.
[4]. Constitution,
section 55, accessed 19 February 2016.
[5]. Department
of Finance (DoF), ‘Summary
of annual appropriations’ DoF website, accessed 13 February 2016.
[6]. Pape
v Commissioner of Taxation (2009) 238 CLR 1, [2009] HCA 23,
accessed 10 February 2016.
[7]. Constitution,
section 81.
[8]. Constitution,
section 83.
[9]. Constitution,
section 53.
[10]. Constitution,
section 56.
[11]. B
Wright and P Fowler, House
of Representatives practice, 6th edn, Department of the House of
Representatives, Canberra, 2012, p. 424, accessed 11 February 2016.
[12]. Constitution, section
54: ‘The proposed law which appropriates revenue or moneys for the ordinary
annual services of the Government shall deal only with such proposed
appropriation’.
[13]. J
Odgers, H Evans and R Laing, Odgers’
Australian Senate practice, 13th edn, Department of the Senate,
Canberra, 2012, p. 369, accessed 11 February 2016.
[14]. Senate
Standing Committee on Appropriations and Staffing, 50th
report: ordinary annual services of the government, The Senate, Canberra, June 2010, accessed 11 February 2016.
[15]. Australia,
Senate, Journals,
127, 2008–10, pp. 3642–43, accessed 11 February 2016.
[16]. Osborne
v Commonwealth (1911) 12 CLR 321, [1911]
HCA 19 per Griffith CJ at [336], accessed 11 February 2016.
[17]. Constitution,
section 53.
[18]. B
Wright and P Fowler, House
of Representatives practice, op. cit., p. 430.
[19]. Australian
Accounting Standards Board (AASB), ‘AASB
1050 Administered items’, AASB website, December 2013, accessed 11 February
2016.
[20]. Combet
v Commonwealth (2005) 224 CLR 494, [2005]
HCA 61, per Gummow, Hayne, Callinan and Heydon JJ at [123], accessed 19 February 2016.
[21]. Attorney-General
(Vic); Ex rel Dale v Commonwealth (‘Pharmaceutical Benefits case’) (1945) 71
CLR 237, [1945]
HCA 30, per Latham CJ at [253], accessed 11 February 2016.
[22]. Australian
Government, Guidance
for the preparation of the 2014–15 portfolio budget statements, March
2014, p. 21, accessed 11 February 2016.
[23]. Public Governance,
Performance and Accountability Act 2013, section 11, ‘Note,’ accessed
11 February 2016.
[24]. DoF,
‘Advance
to the Finance Minister’, DoF website, accessed 11 February 2016.
[25]. See,
for example, Appropriation
Act (No. 1) 2015–2016, section 10, accessed 24 February 2016.
[26]. Appropriation Act (No.
1) 2015–2016, subsection 10(3); Appropriation Act (No.
2) 2015–2016, subsection 12(3), both accessed
24 February 2016.
[27]. Department
of Finance, ‘Reports
on advances provided under the annual Appropriation Acts’,
Department of Finance website, accessed 13 February 2016.
[28]. Australia,
Senate, Journals,
124, 2013–15, p. 3335, accessed 15 February 2016.
[29]. Appropriation
Bill (No. 3) 2015–2016, clause 6.
[30]. Appropriation
Bill (No. 4) 2015–2016, clause 6.
[31]. Explanatory
Memorandum, Appropriation Bill (No. 3) 2015–2016, p. 3; Explanatory
Memorandum, Appropriation Bill (No. 4) 2015–2016, p. 4, accessed 15
February 2016.
[32]. Parliamentary
Joint Committee on Human Rights, Third
report of 2013, The Senate, Canberra, 2013, p. 66, accessed 11 February
2016.
[33]. Appropriation
Bill (No. 4) 2015–2016, clause 7.
[34]. Appropriation
Bill (No. 4) 2015–2016, clauses 8 and 10.
[35]. Appropriation
Bill (No. 4) 2015–2016, clause 9.
[36]. Appropriation
Bill (No. 4) 2015–2016, clause 15.
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