Education Services for Overseas Students (TPS Levies) Amendment Bill 2017 - Commentary on Ministerial Responses [2017] AUSStaCSBSD 295 (6 September 2017)

• Education Services for Overseas Students (TPS Levies) Amendment Bill 2017
• Significant matters in delegated legislation16

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Education Services for Overseas Students (TPS Levies) Amendment Bill 2017

Purpose	This bill seeks to amend the Education Services for Overseas Students (TPS Levies) Act 2012 to enable the Minister to proactively manage the balance of the Overseas Students Tuition Fund
Portfolio	Education and Training
Introduced	House of Representatives on 10 August 2017
Bill status	Before House of Representatives
Scrutiny principles	Standing Order 24(1)(a)(iv) and (v)

2.22 The committee dealt with this bill in Scrutiny Digest No. 9 of 2017. The Minister responded to the committee's comments in a letter dated 31 August 2017. Set out below are extracts from the committee's initial scrutiny of the bill and the Minister's response followed by the committee's comments on the response. A copy of the letter is available on the committee's website.^[15]

Significant matters in delegated legislation^[16]

Initial scrutiny – extract

2.23 This bill seeks to enable the Minister for Education and Training to proactively manage the balance of the Overseas Students Tuition Fund (the Fund). The Tuition Protection Service (TPS) assists international students whose education providers are unable to fully deliver their course of study by ensuring that international students are able to complete their studies in another course or with another education provider, or receive a refund of their unspent tuition fees. The TPS is funded by an annual levy on all international education providers. The levy compromises administrative fee and base fee components. Amounts collected are credited into the Fund, which is a Special Account established under section 52A of the Education Services for Overseas Students Act 2000 (the ESOS Act).^[17] Under section 52C of the ESOS Act amounts in the Fund can only be expended for making payments to affected international students and paying the Commonwealth's costs associated with managing the Fund.

2.24 Currently the administrative and base fee components are set out in the primary legislation, however the bill would enable the Minister to set the administrative and base fee components of the TPS levy through a legislative instrument.^[18] The explanatory memorandum explains this by noting that recent growth in student enrolments has resulted in an increased collection of the TPS levy and 'since this growth has not been offset by a similar proportion of claims on the Fund, reserves have increased sharply'.^[19] The explanatory memorandum further notes that:

An appropriate reduction to the current administrative and base fees is needed to ensure the Fund remains within the target range of $30 million to $50 million recommended by the Australian Government Actuary and endorsed by the TPS Advisory Board. It is anticipated that this will be a one-off reduction to the Fund and the fee settings may not be updated every year.
Giving the Minister authority to proactively manage the Fund will maintain sufficient reserves to meet claims each year, commensurate with an increase in student enrolments. It also allows the Fund to remain viable in case any unforeseen events or major provider closures occur.^[20]

2.25 Thus, in order to provide this flexibility, the bill proposes that the legislative instrument could set the administrative and base fee components of the TPS levy.^[21] In making such a legislative instrument, the Minister must have regard to the sustainability of the Fund, and may also have regard to any other matter he or she considers appropriate.^[22] The bill also sets an upper limit which the Minister cannot exceed in determining the administrative and base fee components through a legislative instrument.^[23]

2.26 One of the most fundamental functions of the Parliament is to levy taxation.^[24] The committee's consistent scrutiny view is that it is for the Parliament, rather than makers of delegated legislation, to set a rate of tax. In this case, the detailed explanation in the explanatory memorandum, the fact that a maximum cap is set in the primary legislation and amounts collected by the levy are credited to a Special Account (which limits the use of the funds to purposes specified in primary legislation) largely addresses the committee's scrutiny concerns. However, any delegation to the executive of legislative power in relation to taxation still represents a significant delegation of the Parliament's legislative powers.

2.27 While the committee welcomes the important limitations on the proposed ministerial power to alter the rate of the TPS levy, from a scrutiny perspective, the committee considers that it may be appropriate for the bill to be amended to further increase parliamentary oversight by:

• requiring the positive approval of each House of the Parliament before a new determination under proposed subsection 7A comes into effect;^[25] or

• providing that the determinations do not come into effect until the relevant disallowance period has expired (while retaining the usual procedures in subsection 42(2) of the Legislation Act 2003 so that any determinations are taken to be disallowed if a disallowance motion remains unresolved at the end of the disallowance period).

2.28 The committee requests the Minister's response in relation to this matter.

Minister's response

2.29 The Minister advised:

I understand the Committee's view is that Parliament, rather than makers of delegated legislation, should set the levy and has suggested possible amendments to provide further parliamentary oversight.
The Bill amends the Education Services for Overseas Students (TPS Levies) Act 2012 (the Act). I consider the Bill in its current form already contains strong safeguards that ensure appropriate parliamentary oversight over the powers of the Minister, to make a legislative instrument to set the administrative and base fee components of the Tuition Protection Service (TPS) levy under the Act. As such, I do not propose to proceed with any amendments to the Bill.
The proposed new subsection 7A(3) of the Act (see item 5 of the Bill) sets maximum fee caps in the primary legislation which the Minister cannot exceed in determining the administrative and base fees through a legislative instrument. The maximum fee caps reflect the current legislated indexed amounts in the Act which were previously passed in Parliament. The imposition of a maximum fee cap limits the amount of administrative and base fees which can be collected each year, preventing any excessive financial impact on international education providers.
I have considered the Committee's suggestion to provide that the determination does not come into effect until after the relevant disallowance period has expired. However, I consider that existing disallowance processes give sufficient parliamentary oversight. Legislative instruments made under the proposed new section 7A of the Act are legislative instruments for the purposes of the Legislation Act 2003. These instruments will be subject to the usual disallowance procedures and parliamentary scrutiny under section 42 of the Legislation Act 2003.
As the Committee has noted, given the funds reside in a Special Account, they cannot be redirected toward any other program or portfolio, as legislation prescribes how the funds can be used.
The Australian Government's objective in amending the Act is to be able to act quickly and proactively in adjusting the levy settings when market conditions demand. Requiring positive approval from both Houses of Parliament to change the fee settings would impede the Government's ability to respond with agility.

Committee comment

2.30 The committee thanks the Minister for this response. The committee notes the Minister's advice that the bill in its current form already contains strong safeguards that ensure appropriate parliamentary oversight over the powers of the Minister to set the amount of the Tuition Protection Service (TPS) levy by legislative instrument. The committee also notes the Minister's advice that requiring positive approval from both Houses of Parliament to alter the level of the TPS levy would impede the government's ability to respond quickly when market conditions demand.

2.31 The committee takes this opportunity to reiterate that one of the most fundamental functions of the Parliament is to levy taxation. The committee's consistent scrutiny view is that it is for the Parliament, rather than makers of delegated legislation, to set a rate of tax. In its initial comments the committee welcomed the inclusion of a maximum cap in the primary legislation and the fact that amounts collected by the levy are credited to a Special Account (which limits the use of the funds to purposes specified in primary legislation). However, any delegation to the executive of legislative power in relation to taxation still represents a significant delegation of the Parliament's legislative powers.

2.32 The committee notes that requiring the positive approval of both Houses of Parliament may not unduly limit the government's ability to respond quickly to changing market conditions as any motions approving new determinations with broad support within the Parliament could be passed by both Houses within a few sitting days of an instrument being tabled. In fact, a positive approval procedure could provide certainty sooner than the usual disallowance procedures where there is a period of 15 sitting days within which an instrument may be disallowed.^[26]

2.33 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of allowing the Minister to alter the rate of a levy via delegated legislation.

2.34 The committee also draws this matter to the attention of the Senate Standing Committee on Regulations and Ordinances for information.

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[15] See correspondence relating to Scrutiny Digest No. 10 of 2017 available at: www.aph.gov.au/senate_scrutiny_digest.

[16] Schedule 1, item 5, proposed sections 6, 7 and 7A. The committee draws Senators' attention to these provisions pursuant to principles 1(a)(iv) and (v) of the committee's terms of reference.

[17] Explanatory memorandum, p. 2.

[18] Proposed subsections 7A(1)–(2).

[19] Explanatory memorandum, p. 2.

[20] Explanatory memorandum, p. 2.

[21] Proposed subsections 7A(1)–(2).

[22] Proposed subsections 7A(4)–(5).

[23] Proposed subsection 7A(3).

[24] This principle has been a foundational element of our system of governance for centuries: see, for example, article 4 of the Bill of Rights 1688: 'That levying money for or to the use of the Crown by pretence of prerogative without grant of Parliament for longer time or in other manner than the same is or shall be granted is illegal'.

[25] See, for example, section 10B of the Health Insurance Act 1973.

[26] See, for example, section 10B of the Health Insurance Act 1973. The committee notes that in the United Kingdom approximately ten per cent of statutory instruments are subject to an affirmative approval procedure where both Houses of the Parliament must expressly approve them: United Kingdom House of Commons Library, Statutory Instruments, Briefing Paper, 15 December 2016, p. 9