Appropriation Bill (No. 5) 2017-2018 [and] Appropriation Bill (No. 6) 2017-2018

Bills Digest No. 130, 2017–18

PDF version [262KB]

Dinty Mather
Economics Section
25 June 2018

Contents

The Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Background
Committee consideration
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Funding amounts in the No. 5 and No. 6 (2017–2018) Bills

 

Date introduced:  8 May 2018
House:  House of Representatives
Portfolio:  Finance
Commencement: Royal Assent

Links: The links to the Appropriation Bill (No. 5) 2017–2018 and the Appropriation Bill (No. 6) 2017–2018, their Explanatory Memoranda and second reading speeches can be found on the Bill’s home pages, 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 Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at June 2018.

The Bills Digest at a glance

Appropriation Bill (No. 5) 2017–2018 and Appropriation Bill (No. 6) 2017–2018 are additional Appropriation Bills tabled late in the financial year to allow the Government to fund new programs announced in the Budget, but which commence before the start of the next financial year, and make other technical adjustments in anticipation of the 2018–19 Budget.

This Bills Digest contains background material including the constitutional and other requirements for Appropriation Bills, and a summary of the information available on the purpose of the appropriations.

Purpose of the Bill

The Appropriation Bill (No. 5) 2017–2018 (the No. 5 Bill) seeks to appropriate $1,689,023,000 of additional revenue out of the consolidated revenue fund (CRF) for the ordinary annual services of the Government.[1]

The Appropriation Bill (No. 6) 2017–2018 (the No. 6 Bill) seeks to appropriate $6,208,830,000 of additional revenue out of the CRF for the other services of the Government that are not the ordinary annual services of the Government.[2]

Structure of the Bill

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).[3]

Part 4 of each Bill deals with several technical matters, including details relating to special accounts and formally appropriates the amounts required from the CRF.

Schedule 1 of each Bill provides the amounts of the appropriations to be made to the departments and other Commonwealth bodies listed.

Background

Appropriations

An appropriation is the legal release of moneys from the CRF. The Appropriation Acts are the authoritative source for details of annual appropriations provided to agencies. The Acts take precedence over budget papers, portfolio budget statements and other associated materials.

There are certain unique constitutional requirements that a Bill proposing to appropriate moneys must satisfy. An appropriation Bill must also comply with certain presentational requirements.

Constitutional requirements

Section 81 of the Constitution provides:

All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth ...[4]

Section 83 of the Constitution provides that no money may be withdrawn from the CRF ‘except under appropriation made by law’.[5]

The effect of these two sections is that all moneys received by the Commonwealth must be paid into the CRF, and must not be spent before there is an appropriation authorising specific expenditure.

Appropriation Acts 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 either in an authority in the Constitution (other than the appropriation provision) or under a valid law of the Commonwealth.[6]

Proposed laws appropriating moneys may not originate in the Senate.[7] Further, under section 56 of the Constitution, all proposed laws for the appropriation of money may only be introduced following a recommendation by the Governor-General.[8] By convention the Governor–General acts only upon the advice of the Executive, so section 56 prevents non–government members of the House of Representatives introducing Bills that would propose to appropriate money from the CRF.[9]

The ‘ordinary annual services of government’ versus the ‘other’ services of government

Section 54 of the Constitution requires that there be a separate law appropriating funds for the ‘ordinary annual services of government’, and that other matters must not be dealt with in the same Bill.[10] However, what constitutes the ‘ordinary annual services of the Government’ and ‘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.[11] 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.[12] 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:
    1. the construction of public works and buildings;
    2. the acquisition of sites and buildings;
    3. 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);
    4. grants to the states under section 96 of the Constitution;
    5. new policies not previously authorised by special legislation;
    6. items regarded as equity injections and loans; and
    7. 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.

  1. That, in respect of payments to international organisations:
    1. the initial payment in effect represents a new policy decision and therefore should be in Appropriation Bill (No. 2); and
    2. 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).
  2. That all appropriation items for continuing activities for which appropriations have been made in the past be regarded as part of ordinary annual services.[13]

Adherence to the Compact has not always been strict, and the High Court has held that any disagreements between the Houses are not justiciable.[14] Any disputes are to be determined between the Houses themselves.

The Senate’s powers

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’.[15] 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. The Senate may also request that, if new measures are included in a Bill for the ‘ordinary annual services of government’, the Bill be returned to the House with a message requesting those new measures be omitted from the Bill.

Appropriations through the year

Budget

Each year, 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 require additional funding if the amounts in the three budget Appropriation Acts are inadequate. If so, the Government has to seek parliamentary approval for the additional expenditure. The process whereby additional funds are provided is called ‘additional estimates’ and usually begins around November of the budget year. The approved additional funding is 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.

Supplementary Additional Estimates

In some years, the Government may decide to introduce further Appropriation Bills following the additional estimates process. When this occurs, it is often done at the same time that the next year’s budget Bills are tabled. Additional Appropriation Bills tabled late in the year allow the Government to fund new programs announced in the Budget, but which commence before the start of the next financial year, and make other technical adjustments in anticipation of the next year’s budget.

Presentational requirements

Departmental and administered expenses

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.[16] Generally, administered expenses are the costs of programs that agencies run for the Government, while departmental expenses are the costs incurred in running agencies.[17]

Appropriation Bills, therefore, distinguish between ‘administered’ expenses and ‘departmental’ expenses. An administered appropriation may be used only for the program or outcome that it is appropriated for, while a departmental appropriation may be moved between different departmental activities.[18]

Purposes

While the level of detail necessary for an Appropriation Act to be valid is generally low,[19] in the Pharmaceutical Benefits case the High Court held:

... there cannot be appropriations in blank, appropriations for no designated purpose, merely authorising expenditure ...[20]

The Appropriation Bills must therefore describe—in general terms—what the moneys are to be utilised for. The Bills use four methods for describing the purposes of the proposed appropriations.

Appropriations for ‘outcomes’ of non-corporate Commonwealth entities

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 ‘outcome statements’ in the following terms:

... outcome statements articulate Government objectives and form an integral part of the appropriations framework. They:

  1. explain the purpose for which annual appropriations are approved by the Parliament for use by entities;
  2. provide a basis for budgeting and reporting against the use of appropriated funds; and
  3. measure and assess entity and program non-financial performance in contributing to Government objectives.

An outcome statement should provide an immediate impression of what success looks like.[21]

Outcome statements, therefore, tend to be aspirational in nature.

Appropriations for corporate Commonwealth entities

As corporate Commonwealth entities are legally distinct from the Commonwealth itself,[22] 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

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.

Appropriations for payments to the states

Under section 96 of the Constitution, the Commonwealth may make payments to the states with or without conditions, and amounts intended for payments to the states are identified separately. 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.

Advance to the Finance Minister

The Advance to the Finance Minister (AFM) is the appropriation of moneys to the Finance Minister without any particular outcome or purpose specified. The AFM is established in the first two Appropriation Acts each year,[23] and is subsequently 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, in the existing Appropriation Act:

  • because of an erroneous omission or understatement or
  • because the expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Bill for the Act before it was introduced into the House of Representatives.[24]

The amount of appropriation allocated to the AFM each year has typically been limited to $295 million for the ordinary annual services of government, and $380 million for the other annual services of government. The Finance Minister tables an annual report in Parliament on the use of the AFM.[25]

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment on the Bills.[26]

Financial implications

The No. 5 Bill seeks to appropriate $1,689,023,000 from the CRF.[27] The No. 6 Bill seeks to appropriate $6,208,830,000 from the CRF.[28] The total amount of money the two Bills seek to appropriate is $7,897,853,000.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s 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 Explanatory Memorandum of each Bill notes:

... the Bill performs an important constitutional function, by authorising the withdrawal of money from the CRF for the broad purposes identified in the Bill.

However, as the High Court has emphasised, beyond this, 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 Bill is not seen as engaging, or otherwise affecting, the rights or freedoms relevant to the Human Rights (Parliamentary Scrutiny) Act 2011.

Detailed information on the relevant appropriations, however, is contained in the portfolio statements.[29]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights has repeatedly stated that it considers that Appropriation Bills may engage human rights; particularly given the capacity for Appropriation Bills to give effect to a reduction in funding for programs that might be aimed at the realisation of human rights.[30]

In its assessment of the Bills, the Committee referred to its comments in relation to prior Appropriation Bills before stating as follows:

The committee notes that, as with previous appropriations bills, the statements of compatibility for the current bills provide no assessment of their compatibility with human rights on the basis that they do not engage or otherwise create or impact on human rights. However, while the committee acknowledges that appropriations bills present particular challenges in terms of human rights assessments, the appropriation of funds may engage and potentially limit or promote a range of human rights that fall under the committee's mandate.

Given the difficulty of conducting measure-level assessments of appropriations bills, the committee recommends that consideration be given to developing alternative templates for assessing their human rights compatibility, drawing upon existing domestic and international precedents. Relevant factors in such an approach could include consideration of:

  • whether the bills are compatible with Australia's obligations of progressive realisation with respect to economic, social and cultural rights;
  • whether any reductions in the allocation of funding are compatible with Australia's obligations not to unjustifiably take retrogressive or backward steps in the realisation of economic, social and cultural rights; and
  • whether the allocations are compatible with the rights of vulnerable groups (such as children; women; Aboriginal and Torres Strait Islander Peoples; persons with disabilities; and ethnic minorities).[31]

The Committee recommended that departmental officials meet with it ‘to develop workable approaches to statements of compatibility for appropriations bills’ and sought the advice of the Minister on the proposed course of action.[32]

Key issues and provisions

Key provisions

Part 1 of each of the No. 5 and No. 6 Bills deals with preliminary matters, including when the Acts commence, and how to interpret the Acts. Clause 4 of each of the No. 5 and No. 6 Bills provides that the accompanying Portfolio Statements may be used as extrinsic materials to interpret the Acts.[33]

Part 2 of each of the No. 5 and No. 6 Bills outlines the quantum and types of appropriation from the consolidated revenue fund.[34]

In the No. 5 Bill, the money is 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. The details of appropriations are outlined in Schedule 1 of that Bill.

In the No. 6 Bill, the money is appropriated to departments as appropriations for:

  • grants to the states, territories and local governments
  • new programs
  • non-operating (or ‘capital’) appropriations
  • payments to departments for on-payment to corporate Commonwealth entities under the Public Governance, Performance and Accountability Act.

Part 3 of each of the No. 5 and No. 6 Bills replenishes the AFM. The replenishment of the AFM established under the Appropriation Act (No. 1) 2017–2018 and the Appropriation Act (No. 2) 2017–2018 means that the Finance Minister, after the passage of the two Bills, will have the same amount of discretionary appropriation available as at the start of the financial year.

Part 4 of each of the No. 5 and No. 6 Bills ensures that if an appropriation is made for purposes that are covered by a Special Account, then the Special Account is replenished by the same amount as the appropriation (clause 11 in the No. 5 Bill and clause 13 in the No. 6 Bill).[35] Part 4 also contains the provisions formally appropriating moneys from the CRF, subject to the effect of certain provisions of the Public Governance, Performance and Accountability Act (clause 12 in the No. 5 Bill and clause 14 in the No. 6 Bill).

Schedule 1 in each of the No. 5 and No. 6 Bills specifies the amounts to be appropriated for individual departments, and payments for Commonwealth entities.

Funding amounts in the No. 5 and No. 6 (2017–2018) Bills

The Portfolio Supplementary Additional Estimates Statements (PSAESs) usually provide some information on the additional appropriations included in Appropriation Bills No. 5 and No. 6. The level of detail provided varies between portfolios. The following list summarises some of the key information available from the PSAESs, the Appropriation Bills and the second reading speeches.

The appropriation amounts do not directly reflect the funding attached to particular measures—rather, the appropriation to a particular agency or department reflects the net appropriation requirement in 2017–18 after the interaction of a number of policy changes and other factors.

Agriculture and Water Resources Portfolio

  • $1.985 million for additional departmental funding and $0.050 million for additional administered funding in the No. 5 Bill.[36]

Attorney-General’s Portfolio

  • $0.241 million for the High Court to implement security measures as part of the 2018–19 Budget in the No. 6 Bill to enable these capital projects to commence as soon as possible.[37]

Defence Portfolio

  • $947.846 million for departmental funding in the No. 5 Bill to better align Defence Integrated Investment Program funding with Defence capability project operational requirements.[38]

Education and Training Portfolio

  • $167.282 million as administered funding in the No. 5 Bill to implement the Research and Investment Plan as informed by the national Research Infrastructure Roadmap.[39]

Environment and Energy Portfolio

  • $434.557 million to continue to deliver the Reef 2050 Long Term Sustainability Plan.[40]

Health Portfolio

  • $44.478 million in the No. 5 Bill of which $12.281 million is for departmental expenses and $32.197 million for administered expenses.[41]
  • $0.496 million in the No. 6 Bill as non-operating expenses.[42]

Home Affairs Portfolio

  • $31.950 million in the No. 5 Bill for departmental expenses and $94.263 million in the No. 6 Bill for non-operating expenses primarily for the Home Affairs ICT systems upgrade.[43]

Jobs and Innovation Portfolio

  • $60.226 million in the No. 5 Bill of which $0.109 million is for departmental expenses and $60.117 million for administered expenses.[44] This additional funding is for the measure ‘doubling our investment in Australia’s supercomputing infrastructure’, a component of funding for the measure ‘Hydrogen Energy Supply Chain project - pilot’, and transfer of funds to the Regional Jobs and Investment Package within the Infrastructure, Regional Development and Cities portfolio.[45]

Prime Minister and Cabinet

  • $0.270 million in the No. 5 Bill for additional departmental expenses.[46]

Social Services Portfolio

  • $0.379 million in the No. 5 Bill for additional departmental expenses and $0.280 million in the No. 6 Bill for non-operating expenses.[47]

 


[1].      Clause 6 of the Appropriation Bill (No. 5) 2017–2018.

[2].      Clause 6 of the Appropriation Bill (No. 6) 2017–2018.

[3].      The AFM is, broadly speaking, the appropriation of moneys to the Finance Minister without any particular outcome or purpose specified, to enable the Finance Minister to allocate moneys where there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, in the existing Appropriation Act, subject to certain conditions. The framework for the AFM is discussed in more detail below.

[4].      Commonwealth of Australia Constitution Act (The Constitution), section 81.

[5].      The Constitution, section 83.

[6].      Pape v Commissioner of Taxation (2009) 238 CLR 1, [2009] HCA 23.

[7].      The Constitution, section 53.

[8].      The Constitution, section 56.

[9].      BC Wright, ed, House of Representatives practice, sixth edn, Department of the House of Representatives, Canberra, 2012, p. 420.

[10].    The Constitution, section 53.

[11].    R Laing, ed, Odgers’ Australian Senate practice, 14th edn, The Senate, Canberra, 2016, p. 386.

[12].    Senate Standing Committee on Appropriations, Staffing and Security, 50th report: ordinary annual services of the government, The Senate, Canberra, June 2010, p. 3.

[13].    Laing, ed, Odgers’ Australian Senate practice, op. cit., p. 387.

[14].    Osborne v Commonwealth (1911) 12 CLR 321 at 336, [1911] HCA 19.

[15].    The Constitution, section 53.

[16].    Australian Accounting Standards Board (AASB), Administered items, AASB 1050, December 2007.

[17].    The Department of Finance describes administered appropriation items as ‘normally related to activities governed by eligibility rules and conditions established by the Government or parliament such as grants, subsidies and benefit payments’, Department of Finance, ‘Guide to appropriations’.

[18].    Combet v Commonwealth (2005) 224 CLR 494, [2005] HCA 61 at para. 123.

[19].    Ibid.

[20].    Attorney-General (Vic); Ex rel Dale v Commonwealth (“Pharmaceutical Benefits case”) (1945) 71 CLR 237 at para. 253, [1945] HCA 30.

[21].    Department of Finance, Guide to preparing the 2018–19 portfolio budget statements, Department of Finance, p. 33.

[22].    Public Governance, Performance and Accountability Act 2013 (Cth), section 11, ‘Note’.

[23].    Department of Finance, ‘Advance to the Finance Minister’, Department of Finance website, last updated 12 July 2017.

[24].    See clause 10 of the Appropriation Bill (No. 5) 2017–2018 and section 10 of the Appropriation Act (No. 1) 2017–2018; clause 12 of the Appropriation Bill (No. 6) 2017–2018 and section 12 of the Appropriation Act (No. 2) 2017–2018.

[25].    Department of Finance, ‘Advance to the Finance Minister’, op. cit.

[26].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, 2018, The Senate, 20 June 2018, p. 54.

[27].    Appropriation Bill (No. 5) 2017–2018, clause 6.

[28].    Appropriation Bill (No. 6) 2017–2018, clause 6.

[29].    Explanatory Memorandum, Appropriation Bill (No. 5) 2017–2018, p. 4; Explanatory Memorandum, Appropriation Bill (No. 6) 2017–2018, p. 4.

[30].    Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 5, 19 June 2018, pp. 49–50.

[31].    Ibid., pp. 51–2.

[32].    Ibid., p. 52.

[33].    The portfolio statements are relevant documents for the purposes of section 15AB of the Acts Interpretation Act 1901 (Cth).

[34].    In particular clause 6 of each Bill.

[35].    For a discussion of special accounts see Department of Finance, ‘Special appropriations: special accounts’, Department of Finance website.

[36].    Australian Government, Portfolio supplementary additional estimates statements, 2017–18: Agriculture and Water Resources Portfolio, 2018, p. 5.

[37].    Australian Government, Portfolio supplementary additional estimates statements, 2017–18: Attorney-General’s Portfolio, 2018, p. 3.

[38].    D Coleman, ‘Second reading speech: Appropriation Bill (No. 5) 2017–2018’, House of Representatives, Debates, 8 May 2018, p. 3354.

[39].    Ibid.

[40].    Ibid.

[41].    Appropriation Bill (No. 5) 2017–2018, ‘Summary of appropriations’, p. 11.

[42].    Appropriation Bill (No. 6) 2017–2018, ‘Summary of appropriations’, p. 11.

[43].    Australian Government, Portfolio supplementary additional estimates statements 2017–18: Home Affairs Portfolio, 2018, p. 2; D Coleman, ‘Second reading speech: Appropriation Bill (No. 6) 2017–2018’, House of Representatives, Debates, 8 May 2018, p. 3354.

[44].    Appropriation Bill (No. 5) 2017–2018, ‘Summary of appropriations’, p. 11.

[45].    Australian Government, Portfolio supplementary additional estimates statements, 2017–18: Industry, Innovation and Science Portfolio, 2018, p. 1.

[46].    Appropriation Bill (No. 5) 2017–2018, ‘Summary of appropriations’, p. 11.

[47].    Ibid., p. 11; Appropriation Bill (No. 6) 2017–2018, ‘Summary of appropriations’, p. 11.

 

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