Chapter 2
Issues
2.1
Issues identified with the proposed cost recovery amendments are
explored in paragraphs 2.2–2.60. Submitters' views on the changes to reporting
requirements and RDC meeting requirements are considered in paragraphs 2.61–2.77.
Concerns with the cost recovery proposal
2.2
The committee received evidence from representatives of industry and the
RDC sector, and state governments. All were concerned with the proposal to require
RDCs to repay the cost of Australia's membership of international commodities
organisations and fisheries organisations. A number of reasons were given for
this concern:
-
First, it was argued that the proposed amendments would undermine
the existing R&D partnership model between industry and the government
[paragraphs 2.4—2.9].
-
Second, submitters challenged the premise that the amendments
would introduce a 'user pays' method of cost recovery [paragraphs 2.10—2.20].
-
Third, it was debated whether membership of international
commodities organisations and fisheries organisations benefits Australian industry
[paragraphs 2.21—2.38].
-
Fourth, submitters questioned whether the use of research and
development funding to cover membership fees is in keeping with RDC funding
agreements and statutory requirements [paragraphs 2.39—2.40].
2.3
Submitters also commented on the apparently disproportionate impact it
is anticipated the proposed amendments would have on the Fisheries RDC [paragraphs 2.41—2.47].
Lastly, strong concerns were raised with the consultation process for the draft
bill [paragraphs 2.48—2.50].
The R&D partnership model
2.4
It was put to the committee that the proposed amendments 'strike at the
heart of the rural RDC model'.[1]
The committee heard that the current RDC funding model is a 'partnership
between industry and government'.[2]
The view that RDC funding is a mutual, collaborative arrangement between
government and industry was shared by representatives of the RDC sector[3]
and industry.[4]
It was evident that the current partnership model has general support, with
industry advising that the co-operative approach to research and development
funding is 'world class'.[5]
2.5
However, the proposed amendments, it was argued, represent a fundamental
shift in Australia's RDC funding arrangements. Speaking on behalf of
Australia's 15 RDCs, the Council of Rural Research and Development Corporations
contended that the proposed measures 'will change the nature of the
co-investment model'. The council explained:
The capped matching model for government industry
co-investment is at the heart of the primary industries RD&E investment
arrangements. Any changes to this model will change the intent and weaken the
model.[6]
2.6
Similarly, Grain Growers Ltd noted that the measures are 'not consistent
with the key principles that support the relationship between the Australian grains
industry...and the government'.[7]
The National Farmers' Federation (the NFF) submitted that the proposed
amendments would instigate a 'slow dismantling' of the RDC partnership model,[8]
while Australia Pork Limited advised that the amendments would alter 'an agreed
formula'.[9]
Sugar Research Australia Ltd viewed the amendments as 'jeopardising the
government industry partnership model'.[10]
2.7
As these statements indicate, the proposed amendments were seen as arbitrary,
unilateral government action rather than a funding decision taken in concert
with industry.[11]
These concerns are captured in the following advice from the Council of Rural Research
and Development Corporations:
It looks like a minor change, but if we actually see what is
happening, for a long time industry and government have been in partnership
through the RDCs on basically equal footing. What is now happening is the
government has said, 'Sorry, we're a bit short of cash, so we're going to use
some of those funds because this appears to be an industry benefit.' In a
sense, that is appropriate for government to do. Fundamentally, at the base
here is a partnership between industry and government where one party is deciding
to move unilaterally without consulting the others.[12]
2.8
Submitters' concerns were not limited to the text of the proposed
amendments. It was recognised that, if passed, the amendments may have
potentially far-reaching impact. The Winemakers Federation of Australia, the
Wine Grape Growers Association, and the Australian Horticultural Exporters
Association all submitted that the proposed amendments would create a
'loophole' for future unilateral government cost-shifting to industry.[13]
According to the Council of Rural Research and Development Corporations, the
NFF and Australian Pork Limited, this loophole would create a precedent for
future government action. The amendments, if passed, would create an uncertain
future for industry and the RDC sector.[14]
As the Council of Rural Research and Development Corporations submitted:
Ultimately, it sets a precedent where government can come
through and reallocate funding that has had a longstanding, sustainable
arrangement with industry for the delivery of R&D...At the moment, through
the arrangement, it is restricted to the fisheries, grains, cotton, sugar, and
grape and wine. There is nothing other than 'well, it hasn't happened before'
to say what other international organisations are out there that we may be a member
of, that we may be looking for the government at some point to say, 'That one
has industry benefit; maybe we can get some funding from somewhere to pay for
it.' We do not have that detail.[15]
2.9
Fundamentally, there was concern that the proposed amendments would undermine
trust in the RDC partnership model.[16]
In this vein, the Australian Horticultural Exporters Association sought
assurances that the proposed amendments would not pave the way for future
unilateral cost shifting.[17]
However, in response to these concerns, the Department confirmed that the
proposed amendments would set a precedent for future transfers of costs from
government to industry.[18]
A 'user-pays' cost recovery policy
2.10
Submitters also challenged the assumption underlying the bill that the
proposed amendments would introduce a 'user pays' cost recovery system. As
stated in the bill's explanatory memorandum:
From 2014–5, the government will recover the cost of the
memberships from the matching funding it contributes to the relevant RDCs that
coordinate research for the industry which benefits the most from the
membership.[19]
2.11
This 'user pays' policy was questioned on two grounds.
Membership benefits may be
unrelated to research and development
2.12
First, submitters disputed the assumption underlying the bill that it is
solely through the research and development sector that industry derives
benefit from Australia's membership in the regional and international
organisations. It was argued that any potential membership benefits may be
unrelated to R&D.
2.13
The Australian Grape and Wine Authority provided information about the
objectives and purpose of the International Organisation of Vine and Wine (the
OIV). The Authority explained that the OIV contributes to the international
coordination of practices and standards. Notably, the committee was informed
that membership benefits 'are broadly market access and industry
development...rather than solely R&D related.'[20]
Therefore, the Authority questioned the rationale for requiring research and
development corporations to pay 100 percent of the membership fees. The
Australian Grape and Wine Authority submitted:
The accounting treatment for this particular membership fee
would be an apportionment between R&D and non-R&D for Commonwealth
matching purposes. But it would be incorrect to offset the full amount from
Commonwealth matching where a proportion of the fee was for non-R&D
purposes.[21]
2.14
Grain Growers Ltd also noted the potential for membership benefits to be
unrelated to research and development. Speaking in relation to the
International Grains Council, Grain Growers Limited submitted that the
'proposed amendments do not consider the range of stakeholders that might
benefit'. It was suggested that potential beneficiaries may include other
commodities, grain traders and exporters, and, indeed, the public.[22]
2.15
The NFF made similar observations. The Federation submitted that
membership of international commodities organisations may provide trade
benefits that are separate to research and development considerations. Australia's
participation was characterised as 'soft diplomacy'.[23]
Accordingly, the NFF argued that it would be appropriate for the membership
costs to be recovered from the Department of Foreign Affairs and Trade.[24]
The relevance of trade is evident in the Department's description of the
purpose of the International Grains Council:
The International Grains Council (IGC) and member countries
oversees the implementation of the Grains Trade Convention, an important
multilateral treaty to facilitate trade in wheat, coarse grains (corn, barley,
sorghum and other grains), rice and oilseeds. Its aims are to strengthen
international cooperation in the trade of grains; to promote expansion,
openness and fairness in the grains sector, to contribute to grain market
stability, to enhance world food security, and ultimately to secure a freer
flow of trade in grains, including the elimination of trade barriers and unfair
and discriminatory practices. It seeks to do this through information-sharing,
analysis and consultation on grain market and policy development. In addition
to accessing data, membership to the IGC facilitates the analysis and
interpretation of trading patterns.[25]
2.16
Other submitters also noted the link between the international
commodities organisations and the fisheries organisations and the Department of
Foreign Affairs and Trade. The Western Australian Fisheries Industry Council
submitted that 'regional fishery organisations are by nature about diplomacy
and not about Australian fisheries and aquaculture'.[26]
The Council of Rural Research and Development Corporations also noted the link
between the organisations and international relations, noting that Australia's
membership in international commodities organisations is, in part, a
'diplomatic mission'.[27]
Transparency, control and decision
making
2.17
RDC and industry representatives also noted that under the proposed
amendments RDCs would incur membership costs for regional and international
organisations but not obtain membership privileges.[28]
As multiple submitters highlighted, it is the Australian government who is a
member of the international commodities organisations and the regional
fisheries organisations.[29]
Consequently, the bill would require RDCs to meet the expense of Australia's
ongoing membership to these organisations without extending to the RDCs the capacity
to influence membership outcomes. The Department confirmed that membership, and
the direct benefits and rights that membership entails, would remain with the
Australian government.[30]
2.18
It was clear that there is a strong view amongst industry and the RDC
sector that the obligation to pay should come with the opportunity for greater
influence. Industry and RDC representatives collectively recommended the bill
be amended to provide RDCs and industry greater involvement with the
international commodities organisations and the regional fisheries
organisations. For example, on behalf of the RDC sector, the Council of Rural
Research and Development Corporations recommended the bill be amended to ensure
full consultation with the affected industries and relevant RDCs prior to the
government making decisions regarding membership of other international bodies.[31]
2.19
Similar recommendations were also submitted by industry. For example,
Grain Growers Limited recommended the following procedural changes for the
Australian Government's participation in the International Grains Council (the
IGC):
The Department of Agriculture IGC representative should
report back to industry representative bodies on the following aspects:
-
Rationale for the Australian
Government commitment to the International Grains Council;
-
Update on activities and progress
of the International Grains Council on trade and market access issues; specifically,
an update on activities and progress of the Grains Trade Convention forum and
any decision to develop and sponsor grain-related projects in member countries,
should be reported to industry at the conclusion of each of the two yearly
meetings
-
Reporting on any benefit derived
from the participation in the International Grains Council with particular
detail around benefit to the production sector, provided at the conclusion of
each of the two yearly meetings.[32]
2.20
These recommendations are consistent with the recommendations put
forward by the NFF. Overall, the NFF did not support the proposal for RDCs to
fund the Australian Government's membership in intergovernmental commodity and
fisheries organisations. However, were the bill to pass, the NFF recommended
measures to increase RDCs' and industry's participation in international and
fisheries fora. Specifically, the NFF recommended:
-
the bill be amended to require the Australian Government to
closely consult with relevant industry commodity organisations and RDCs and
reflect domestic industry views as part of engagement with the international
intergovernmental commodity organisations; and
-
the bill be amended to require the Australian Government to
regularly report to relevant industry commodity organisations and RDCs on
outcomes from engagement with international intergovernmental commodity
organisations.[33]
The value of membership: Is there a
benefit?
2.21
Submitters debated the value of Australia's membership in regional
fisheries organisations and international commodities organisations. While it
was recognised that membership promotes market access, the overall merit to the
research and development sector was questioned.
Market access and global
competitiveness
2.22
Generally, it was recognised that membership of the organisations can facilitate
market access. The Department submitted that membership helps solidify
Australia's presence in international markets:
Many of these bodies undertake market analysis and market
statistics and also do research and development in their own right in some
cases. OIV, for example, do technical wine standards, which are incorporated
into the European Union legislation. So, for us to have access to the European
market, for example, if they change one of the wine standards, it is in our
interests to make sure we are there at the standard-setting stage.[34]
2.23
In summary, the Department advised that global competitiveness requires
a global presence. In response to questioning, the Department provided the
following example in relation to Australia's membership of the International
Grains Council:
Australia has used its position in the IGC to promote our
industry, in particular the export quality standards and systems that
demonstrate Australia's capacity to be a reliable supplier of high-quality grain
to world markets. Australia has hosted a meeting of the IGC in Australia to
provide our trading partner governments with a first-hand experience of our
production and export systems. At other times, Australia has provided expert
industry speakers to IGC conferences to again promote our industry.[35]
2.24
The Department further advised that in some cases membership is
necessary for Australian industry to continue to operate in international
markets. For example, the committee was informed that membership of regional
fisheries organisations is a precondition of access to fisheries in
international waters. If Australia were not a member of the regional fisheries
organisations, industry would not have access to the fisheries.[36]
2.25
Australian Pork Limited approved Australia's involvement with
international commodities organisations:
The upside [of discontinuing membership] would be that we
would save roughly $10,000 a year, which is very little. The downside would be
a small amount of isolation from what is going on internationally, not being
able to have those connections to people around the world in understanding the
next trends affecting our industry, including managing activist groups,
including looking at health and nutrition of the product and how it fits into
21st-century human diet, including issues around feed grain sustainability. For
all these big global issues we need to be at the table.[37]
2.26
The Council of Rural Research and Development Corporation was satisfied that
Australia benefits from membership in the international commodities
organisations and the fisheries organisations. As the council stated,
'engagement in these forums is important. We are not trying to debate that
point'.[38]
2.27
The positive link between membership in international commodity
organisations and the international export of Australian products and produce
was even acknowledged by submitters who were, in general, sceptical of the
overall value of membership. For example, Sugar Research Australia acknowledged
there are benefits 'in terms of access to market and economic research'.[39]
Membership benefits for the
research and development sector
2.28
However, while the relevance to international trade was acknowledged,
some submitters questioned whether membership directly benefits the R and D
sector independent of any benefits to industry.
2.29
The Grains Research and Development Corporation submitted that it was
not in a position to comment on the supposed value of membership, as it had
insufficient information about Australia's involvement with the International
Grains Council. The corporation's comments highlighted the current gap between the
international commodities organisations and Australia's research and
development corporations.
2.30
Representatives of the sugar industry and the sugar RDC sector were
highly sceptical of the value of Australia's membership in the International
Sugar Organisation. Sugar Research Australia advised that 'to date, there has
been nothing that has truly benefited the Australian sugar industry out of
[the] membership'.[40]
Sugar Research Australia also reported that, as the RDC is not a member of the
international commodities organisation, it was not in a position to quantify
any membership benefits.[41]
The Australian Sugar Alliance noted that the industry has unsuccessfully
lobbied the Australian Government to discontinue its membership, and has not
voted in support of the proposition that industry levies should be used to fund
Australia's membership of the International Sugar Organisation.[42]
2.31
The Western Australian Fisheries Industry Council challenged the market
access rationale for membership as given by the Department. The council
reported that while a member of six regional fisheries organisations, Australia
only accesses fisheries in two regions.[43]
Long-term value for money?
2.32
While not challenging the importance of continuing membership in the
organisations, the Council Rural Research and Development Corporation
questioned whether the proposed amendments might have unintended consequences. The
council advised that current analysis demonstrates there is a $12 productivity
gain for every dollar invested in research and development.[44]
The NFF cited similar figures,[45]
while research undertaken by the Productivity Commission that suggests rates of
return of approximately 24 per cent were also noted.[46]
2.33
It was implied that the diversion of funds from research and development
to membership fees could have a value impact beyond the headline membership
cost. There was a view across state government, industry and RDC submissions
that directing funding away from research and development undermines industry
productivity. The Hon Dr John McVeigh MP, Queensland Minister for Agriculture,
Fisheries and Forestry, highlighted concerns that reduced funding 'has the
potential to stifle not only in innovation, but also the ability to meet
growing market needs'.[47]
2.34
The Australian Horticultural Exporters Association expressed this
concern in the following terms:
The future of the agriculture industry depends upon Research
and Development. Without sufficient research, innovation is stifled, disenabling
industry to maintain competitiveness; develop varieties and overcome market
issues that are necessary to meet global needs.[48]
2.35
The Western Australian Fisheries Industry Council provided an example of
the economic benefits obtained through research and development programs. It
was put to the committee that the proposed cost recovery amendments would have
measurable consequences for industry productivity and products:
The long-term consequences of the de-escalation of focus on
and funding for R D and E cannot be overstated. For 2013–14 the FRDC had to
terminate the industry tactical research fund that has allowed industry to
invest in R D and E that makes meaningful changes to their profits and
productivity.
A good example of R D and E investment has been the science
that resulted in the WA crab industry developing an innovative crab cake
product...To date about 1,000,000 crab cakes have been produced – increasing the
profitability of the fishery.
WAFIC predicts a decrease in R D and E will inevitably limit
the reach of supporting marketing initiatives that fall out of such programs.
At some point, whether sooner or later, this will impact both domestic and
overseas markets for fishing and marine related products.[49]
2.36
It was further suggested that a decrease in Commonwealth R&D
funding, by way of requiring membership repayments, could result in diminished
funding from the private sector. The Western Australian Fisheries Industry
Council speculated that the bill could be seen by the private sector as the
government reducing its commitment to R&D. Consequently, the council
submitted that it would be likely that industry would correspondingly reduce
its voluntary contributions to R&D activities.[50]
A similar prediction was made by the New South Wales Department of Primary
Industries.[51]
Ongoing evaluation of membership
benefits
2.37
There was consensus among industry representatives and RDC
representatives that government should work with RDCs and industry
representatives to determine whether there is merit in continuing membership of
the relevant international commodities organisations and the regional fisheries
organisations. In relation to the International Grains Council, Grain Growers
Ltd submitted:
I think whether this particular membership is or is not
beneficial should be decided as part of the R D and E or industry processes of
working out what happens to scarce funds that are contributed to industry
functions.[52]
2.38
It was further submitted that legislation should allow for 'critique,
review and consideration' of membership benefits.[53]
The NFF recommended the bill be amended to 'require the Australian Government
to consult with relevant industry commodity organisations and RDCs as to their
support for membership to international inter-governmental commodity
organisations.'[54]
As a related measure, the NFF also submitted that the bill be amended to
introduce a time limit of five years on the membership repayment requirements.[55]
Can research and development funds
be used for membership fees?
2.39
In chapter 1, the Committee notes that consequential amendments would be
needed to existing RDC funding agreements to ensure the agreements do not refer
to requirements and provisions under the RDC enabling legislation that would be
repealed were the bill passed. Submitters to this inquiry identified further
potential inconsistency between the RDC enabling legislation, as would be
amended if the bill were passed, and existing funding agreements. Successive
RDCs advised that their enabling legislation contains clear and precise rules governing
how RDCs allocate their funding. The rules are reiterated in the funding
agreements between the RDCs and the Commonwealth and the RDCs' annual
operations plans.[56]
As the Council of Rural Research and Development Corporations explained, RDCs
questioned whether the rules allow for funding to be used to pay for membership
dues:
The PIRD and other Acts are also explicit in intention
regarding the funding and administration of defined research and development
for primary industries, as opposed to a generalised notion of delivering
industry benefits...[U]nless this is explicitly for the purposes of primary
industries research and development, by definition it must fall outside the
Act. If the purpose of participation is not related to research and development
the government should identify a more appropriate funding source. If
involvement does align with the Act, the amendments are unwarranted.[57]
2.40
The committee was advised that under the existing rules, funding
proposals go through a rigorous screening process. It was noted that the
proposed measures would isolate the membership fees from this process.[58]
A disproportionate impact on the
Fisheries RDC?
2.41
Of the four RDCs that would be responsible for covering the cost of
Australia's membership of international commodities organisations and regional
fisheries organisations, the Fisheries RDC would bear the greatest expense. The
Department advised that the Fisheries RDC would be responsible for membership
fees, across six fisheries organisations, totalling $965,000. This figure can
be compared with the projected costs to the other three RDCs that would be responsible
for membership fees outlined in the following table.
Figure 2: Comparison of projected membership fees[59]
RDC
|
Organisations
|
Anticipated membership fees
|
Approximate 2014-15 budget
|
Australian Grape and Wine Authority
|
International Organisation of Vine and Wine
|
$110,000
|
$34 million
|
Cotton Research and Development Corporation
|
International Cotton Advisory Committee
|
$95,000
|
$20.4 million
|
Fisheries Research and Development Corporation
|
The Commission for the Conservation of Southern Bluefin Tuna, the
Indian Ocean Tuna Commission, the Western and Central Pacific Fisheries
Commission, the South Pacific Regional Fisheries Management Organisation, the
Southern Indian Ocean Fisheries Agreement and the Network of Aquaculture
Centres in Asia Pacific.
|
$965,000
|
$27.4 million
|
Grains Research and Development Corporation
|
International Grains Council
|
$150,000
|
$187 million
|
Sugar Research Australia
|
International Sugar Organisation
|
$160,000
|
$32 million
|
2.42
Evidence before the committee demonstrates that the cost to the
Fisheries RDC will be approximately nine times higher than the individual projected
costs to the Australian Grape and Wine Authority, the Cotton Research and Development
Corporation, and the Grains Research and Development Corporation. On notice,
the Department advised that, based on 2013-14 figures, the proposed amendments
would result in an estimated 3.6 per cent reduction of the FRDC's income.[60]
2.43
The Council Rural Research and Development Corporation submitted that this
cost disparity would result in the Fisheries RDC 'bearing the brunt' of the
proposed changes to the RDC funding arrangements.'[61]
The Western Australian Fisheries Industry Council (WAFIC) particularly noted
its concerns with the proposed cost-recovery amendments, arguing that the
reduced FRDC funding would have 'serious flow on effects to RD&E activities
within the commercial fishing sector'.[62]
2.44
The committee received evidence from the FRDC of its view of the
anticipated impact on FRDC expenditure. The FRDC predicted a total loss of more
than $2.5 million in fishing and agriculture R&D for the 2014–15 financial year.
This anticipated loss took account of reduced government contributions and
predicted reductions in private sector funding. The FRDC further advised that the
leverage that the FRDC could offer industry R&D investments would in future
be reduced by eight per cent. This would translate into the tactical research
fund being suspended for the 2014–15 financial year, and reductions to the
Annual Competitive Round, and the tactical research sub-programmes and industry
partnership agreements.[63]
2.45
This anticipated reduction in services and expenditure can be compared
with the likely financial consequences of the proposed amendments for the
Australian Grape and Wine Authority, the Cotton Research and Development
Corporation, and the Grains Research and Development Corporation. The likely
consequences would be less pronounced. The Australian Grape and Wine Authority
advised that the anticipated $115,000 membership fee is 'a big amount of
money'. However, the Authority does not anticipate significant impacts for its
current projects. Rather, the committee was advised that the Authority would
reduce spending across all areas of current expenditure:
In our case, I think we would probably salami slice. Rather
than have an impact on a larger project, it would be a matter of trimming back
here and there.[64]
2.46
Sugar Research Australia (SRA) advised that the anticipated repayment
cost of $160,000 per annum is 'not insignificant in the context of SRA's total
RD&E investment budget'.[65]
However, SRA did not further elaborate.
2.47
The Grains Research and Development Corporation noted that the
amendments would result in a 'small but significant' reduction in the Australian
Government's contribution to grains R, D and E.[66]
However, even in response to direct questioning,[67]
the corporation did not provide details of the likely effect of the small but
significant reduction for the corporation's R, D and E activities. The
committee did not receive evidence directly from the Cotton Research and Development
Corporation.
Concerns with the consultation
process for the draft bill
2.48
There was unanimous disapproval among industry and RDC representatives
for the consultation process on the draft bill. In response to the committee's questioning,
the Department advised that on the afternoon of 16 September 2014 select organisations
were notified that an exposure draft bill would be released 'very shortly'. The
RDCs subsequently received the exposure draft on Wednesday 17 September,[68]
and were required to provide comments by midday Thursday 18 September.[69]
It was initially proposed that the RDCs would have until the close of business 18 September,
however this timeframe was truncated to comply with the Office of Parliamentary
Counsel's drafting requirements.[70]
The RDCs were advised not to forward the draft bill to third parties. RDCs were
only authorised to provide the draft bill to their staff, board and legal
advisers.[71]
Notably, this requirement prevented RDCs from consulting their members. The
consultation process also excluded industry representatives.[72]
2.49
Submitters identified several flaws with the consultation process.
First, the timeframe of the day and a half was considered insufficient to
properly review the proposal or collate feedback to provide the Department.[73]
Second, submitters questioned the Department's instructions to not consult
members. As Ms Alicia Garden, Chief Executive Officer, Grain Growers
Ltd argued, this limited the feedback that RDCs could provide and runs counter
to the purpose and practices of Australia's research and development network:
We are a representative organisation and if we cannot consult
our membership we cannot represent the appropriate view.[74]
2.50
Third, submitters questioned the purpose of the minimal consultation
process. The NFF, which was not included in the consultation on the draft bill,
criticised the limited range of organisations who received the exposure draft
for comment. Overall, the NFF submitted that the consultation process was
grossly insufficient and could not accurately be labelled as a 'consultation':
We have been largely disappointed in the approach by the
department. Any discussion about consultation is absolute poppycock—it is
absolute rubbish to suggest that they have consulted through this process.[75]
2.51
Submitters also noted that the consultation process did not result in
substantive policy or legislative change. The Council of Rural Research and Development
Corporations advised that input was fairly minor and 'in terms of the broader
decision-making...we did not have an influence'.[76]
As Australian Pork Limited commented, the consultation was not a particularly
robust or perfect process.[77]
Committee view
2.52
The committee acknowledges the concern within the R&D sector that
the proposed cost recovery measures signal a departure from the established R&D
partnership model. Research and development funding has operated on the basis
of a long-standing, established model. Any changes to that model, no matter how
minor, have the potential to be seen as a precursor to broader funding changes.
2.53
However, the measures need to be viewed in context. The research and
development sector is being asked to contribute a proportion of Australia's
costs of its participation in international and regional organisations from
which Australian industries derive a direct benefit. While cognisant of the
sector's concerns, the committee sees that there is a direct correlation
between the objects of the international commodities organisations and regional
development organisations and Australia's network of primary industry research
and development corporations. Both exist to promote best practice in primary industries.
Both operate to promote sustainable, optimal use of resources. There was
consensus among submitters to the inquiry that membership promotes Australian
products to the international community and facilitates market access. Marketing
and market access is an express objective of the research and development
framework established under the Primary Industries Research and Development
Act 1989 and related research and development legislation.
2.54
However, it is also clear that these linkages are underdeveloped. It is
of concern to the committee that there is minimal industry involvement, and
even less R&D sector involvement, with international commodity
organisations and the regional fisheries organisations.
2.55
In this regard, the committee was alarmed at evidence that the R&D
and primary industry sectors are largely unfamiliar with the benefits derived
from membership. The committee recommends Government, through the Department of
Agriculture, consult with industry and the research and development sector
prior to attending organisational meetings and provide the research and
development and primary industry sectors a detailed synopsis of meeting
discussions and outcomes. The committee also urges the Government to explore
whether it would be appropriate for industry and research and development
sector attendance at meetings.
2.56
The bill would require RDCs to collectively incur costs of approximately
$7 million over four years. While the RDCs would incur these costs, the
committee is conscious that the costs would be offset by the Government's
2014-15 budget commitment to increase research and development funding by $100
million over four years. The committee acknowledges concerns that the cost
recovery measures would put pressure on R&D programs and service delivery.
However, with one exception, the evidence before the committee does not bear
this out. The amendments would likely have a measurable impact on the Fisheries
RDC. The committee therefore recommends the Government track this issue with
the Fisheries RDC. The committee will also monitor the impact of the cost
recovery requirements on the Fisheries RDC and other affected RDCs, and may
seek separate, additional briefings from the Department.
2.57
Throughout the inquiry, RDC representatives questioned whether payment
of membership fees is within the scope of the RDC enabling legislation and
funding agreements. While the proposed amendments would introduce a new use for
research and development funding, the committee is satisfied that there are
linkages between Australia's membership in international commodities
organisations and regional fisheries organisations and the research and
development sector. However, the committee brings these concerns to the Government's
attention, and recommends the Government consider whether amendments are
required to existing funding agreements to clarify that the funding may in part
be used to cover the membership dues.
2.58
The committee expresses its strong concern with the consultation process
for the draft bill. It is clear to the committee that there is a perception among
industry and the RDC sector that the Government is pulling away from its
commitment to research and development. In part, the committee attributes this misapprehension
to the inadequate consultation process for this bill. It would have been
appropriate for officers of the Department to have been available to the RDC
sector and relevant industry representatives to properly hear their concerns.
One and a half days on an exposure draft bill does not provide sufficient time
for meaningful review and feedback. The committee hopes that this inquiry
process will help allay some of the sector's concerns.
Recommendation 1
2.59
The committee recommends the Senate pass Schedule 1 of the bill in its
current form.
Recommendation 2
2.60
The committee recommends the Department of Agriculture liaise with RDCs
prior to attending meetings of the relevant international commodities organisation
and regional fisheries organisations and report back to the RDCs on meeting
outcomes and the benefits derived from ongoing membership.
Recommendation 3
2.61
The committee recommends the Government monitor the impact of the cost
recovery requirement on the capacity of the Fisheries RDC to continue to support
research and development within the fisheries industry.
Proposed 'red tape' reductions
2.62
Schedule 2 of the bill would introduce what the Department described as
'measures to reduce red tape'.[78]
If passed, the bill would remove the requirement for the Minister to organise
an annual coordination meeting of Australia's five statutory RDCs. The bill
would also remove existing requirements for RDCs to table corporate documents
in Parliament.
Proposal to repeal requirements for
annual coordination meetings
2.63
The Department advised that the RDC landscape has significantly changed
since the requirement for an annual statutory RDC meeting was first introduced.
With only five of the 15 RDCs currently operating as statutory RDCs, the
requirement fails to fulfil the coordination purpose for which was introduced:
Currently the requirement for a coordination meeting only
applies to the statutory RDCs—which is five of the 15 bodies—so it is a little
bit pointless to have that coordination meeting.[79]
2.64
The Council of Rural Research and Development Corporations advised that
the council now manages the coordination function:
We would suggest that the council provides a better forum now
anyway than just the five chairs of the statutory authorities getting together.
We have all of the chairs come together. We also provide a structure under
which the chief executives can meet, the business managers can meet, the
R&D managers can meet. So there are a whole lot of structures that sit
underneath that that go across all 15. But there is also one on one. There is a
whole lot of engagement between all of them.[80]
2.65
Evidence before the committee indicates there is general support for this
approach. No RDC raised concerns with the proposal. One industry
representative, the NFF, sought clarification on what other coordination
mechanisms exist. However, overall, the NFF supported the removal of the
requirement for the annual coordination meeting:
The NFF supports the removal of the requirement on the Minister
of Agriculture to organise an annual coordination meeting with the chairs of
the statutory RDCs. The NFF recognises that only a small proportion of RDCs are
statutory bodies and there will be a reduction in regulatory burden from this
amendment.[81]
Proposal to repeal requirements to
table RDC corporate documents in Parliament
2.66
Part 1, Schedule 2 of the bill would remove existing requirements for
the Australian Livestock Export Corporation Ltd, Dairy Australia Ltd, Forest
and Wood Products Australia Ltd, and Sugar Australia Ltd to table various
corporate documents in Parliament. These documents would include annual
reports, funding agreements, variations to funding agreements, and compliance
reports. The Department explained that the requirement to provide these
documents to Parliament is considered an unnecessary regulatory burden.[82]
The Department also advised that '[t]he Australian Bureau of Agriculture and
Resource Economics and Sciences has estimated that the cost of publishing the
annual reports for tabling to be $5700.'[83]
However, the committee was not provided a breakdown of this estimated cost or a
clear indication of whether this figure is per RDC or an average of all
agencies within the agriculture portfolio.
2.67
Answers to questions on notice elaborate on the rationale for the
proposed amendments. The amendments, it was argued, will promote consistency
without compromising transparency:
The proposal to remove tabling requirements for some
documents for some RDCs reflects the fact that the most of the industry-owned
RDCs are not required to table these documents and there are no concerns
regarding availability or transparency with those documents. The amendments in
the Bill will improve consistency in requirements across the industry-owned RDCs.[84]
2.68
As noted, consistency was promoted as a key reason for the removal of
the tabling requirements. Currently the requirements for tabling corporate
documents vary greatly across the 15 RDCs. The Department advised that this mishmash
approach to corporate governance is the combined result of a myriad of
individual decisions rather than deliberate choice:
Each of the industry-owned corporations has its own act which
governs it. There has been no consistent approach with regard to this. In some
there is a requirement to table and in some there is not.[85]
2.69
Evidence provided by the Department confirms that RDCs would still be
required to make corporate documents publicly available. However, the evidence does
not contain further details about what precisely would be required.[86]
The committee has noted, in chapter 1 of this report, that current funding
agreements between the Commonwealth and the RDCs impose requirements on RDCs to
provide copies of these documents to the Minister.
2.70
The Grains Research and Development Corporation noted that corporate documents
are currently publicly available to the shareholders and stakeholders. The RDC
advised that this would continue regardless of the proposed legislative
amendments. Sugar Research Australia explained its current practice of
publishing annual reports on its website and sending annual reports to members
who request a hardcopy. Sugar Research Australia advised it costs the
organisation approximately $6000 to print 500 copies of its annual report.[87]
Notably, both RDCs advised they would agree to continue to table annual reports
in Parliament.[88]
Committee view
2.71
The committee endorses the proposal to remove the requirement for the Minister
to organise an annual coordination meeting between the five statutory RDCs. The
object of coordination within the RDC sector is far better achieved by the
coordination services provided by the Council of Rural Research and Development
Corporations.
2.72
However, the committee does not support the proposal to discontinue
existing requirements for RDCs to table corporate documents in Parliament.
Corporate documents provide the opportunity to examine the operation of
agencies that benefit from Commonwealth funding. Annual reports, funding
agreements, compliance reports and variations to funding agreements are key
accountability documents and are fundamental to Parliamentary oversight of the
government's allocation of Commonwealth resources. Tabling the documents in
Parliament acknowledges the Parliament's responsibility, and authority, to
scrutinise government action and the actions that third parties take on
government's behalf.
2.73
The committee is required under standing order 25 to report on the
annual reports of departments and agencies within its portfolio area. A review
of the committee's reports on annual reports over the past five years indicates
that the committee has routinely monitored the annual reports of the four RDCs
that, if the bill were passed, would no longer be required to present documents
to Parliament. If passed, the bill would substantially undermine the committee's
oversight role in relation to the RDC sector.
2.74
The committee does not share the view that the proposed Part 1, Schedule
2 amendments are necessary to promote regulatory consistency. Consistency would
be achieved by imposing tabling requirements on the remaining 11 RDCs rather
than removing the requirements from the four RDCs that are the subject of this
bill. Consistency is required. However, what is required is consistency that
promotes, rather than undermines, accountability.
2.75
Contrary to the arguments put forward, the evidence before the committee
does not establish that there is substantial regulatory burden, or financial
cost, associated with the tabling of corporate documents in Parliament. The
amendments would result in only minor financial savings for the RDCs. If
passed, the proposed amendments would substantially compromise fiscal
accountability for minimal fiscal gain.
2.76
Part 1 of Schedule 2 of the bill should be amended to require all 15 RDCs
to table corporate documents in Parliament.
Recommendation 4
2.77
The committee recommends the Senate pass Part 2 (Item 9), Schedule 2 of
the bill, which would remove the requirement for an annual coordination meeting
of statutory RDCs.
Recommendation 5
2.78
The committee recommends the Government amend Part 1, Schedule 2 of the
bill to require all RDCs to table corporate documents in Parliament.
Senator the Hon Bill
Heffernan
Chair
Navigation: Previous Page | Contents | Next Page