|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests |
|
Purpose
|
This bill seeks to establish the National Finance and Investment
Corporation
|
|
Portfolio
|
Treasury
|
|
Introduced
|
House of Representatives on 15 February 2018
|
|
Bill status
|
Before the Senate
|
2.119 The committee dealt with this bill in Scrutiny Digest No. 3 of 2018. The Treasurer responded to the committee's comments in a letter dated 26 April 2018. 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.[65]
2.120 The bill seeks to establish the National Housing Finance and Investment Corporation (NHFIC). The functions of the NHFIC would include making loans, investments and grants to improve, directly or indirectly, housing outcomes; determining terms and conditions for such loans, investments and grants; and providing business advisory services and other capacity-building assistance to community housing providers.[67] Subclause 8(2) provides that the NHFIC's functions would include granting financial assistance to states and territories in relation to these matters and determining terms and conditions for such grants of financial assistance.[68]
2.121 The explanatory memorandum states that the bill enables the NHFIC to perform its functions for purposes related to specific constitutional powers, and further states that the NHFIC is likely to perform its functions in relation to the corporations power, the external affairs power, a Territory and/or 'granting financial assistance to which section 96 of the Constitution applies'.[69]
2.122 The committee notes that section 96 of the Constitution confers on the Parliament the power to make grants to the states and to determine terms and conditions attaching to them.[70] Where the Parliament delegates this power , the committee considers that it is appropriate that the exercise of this power be subject to at least some level of parliamentary scrutiny, particularly noting the terms of section 96 of the Constitution and the role of senators in representing the people of their state or territory.
2.123 The committee notes that the bill contains no guidance on its face as to the terms and conditions that will attach to financial assistance granted to the states by the NHFIC. The bill does, however, seek to allow the minister to direct, by legislative instrument, the board of the NHFIC in relation to the performance of its functions and provides that these directions may, among other matters, set out decision-making criteria and limits for the granting of financial assistance to states and territories.[71] Such ministerial directions will be known as the 'investment mandate', and by reason of regulations made for the purposes of paragraph 44(2)(b) of the Legislation Act 2003 will not be subject to disallowance.[72]
2.124 The committee further notes that, although the bill provides that the investment mandate may set out decision-making criteria and limits for the granting of financial assistance to the states and territories, the exposure draft of the NHFIC investment mandate direction does not appear to contain any such guidance.[73]
2.125 The committee is concerned that the level of parliamentary scrutiny afforded to grants made by the NHFIC to the states and territories will be very limited, given that the bill does not contain on its face any guidance as to the terms and conditions attaching to such grants, the draft investment mandate for the NHFIC contains no such guidance, and the legislative instruments making up the investment mandate will not be subject to disallowance.
2.126 Noting that section 96 of the Constitution confers on the Parliament the power to make grants to the states and to determine terms and conditions attaching to them, the committee suggests it may be appropriate for the bill to be amended to:
• include some high-level guidance as to the terms and conditions under which financial assistance may be granted by the NHFIC to the states and territories; and
• subject the legislative instruments making up the NHFIC investment mandate to disallowance (despite regulations made for the purposes of paragraph 44(2)(b) of the Legislation Act 2003).
2.127 The committee seeks the Treasurer's advice in relation to the above. The committee also seeks the Treasurer's advice as to why the exposure draft of the NHFIC investment mandate does not include any directions about the
decision-making criteria for granting financial assistance to states and territories, including guidance as to the terms and conditions under which financial assistance may be granted to the states and territories.
Treasurer's response
2.128 The Treasurer advised:
The Committee notes that section 96 of the Constitution confers on the Parliament the power to make grants of financial assistance to the States and to determine the terms and conditions attaching to such grants and suggested that it may be appropriate for the Bill to: include some
high-level guidance as to the terms and conditions under which financial assistance may be granted by the NHFIC to the States and Territories; and subject the NHFIC investment mandate to disallowance.
References to grants to States and Territories
The object of the NHFIC is to improve housing outcomes for Australians, and it will achieve this through the administration of three programs: the Affordable Housing Bond Aggregator, the National Housing Infrastructure Facility (NHIF) and capacity building activities. The Affordable Housing Bond Aggregator and capacity building activities are only available to registered community housing providers. In terms of the $1 billion allocation for the NHIF, there is a limited amount of grant funding available ($175 million), and most finance will be in the form of loans.
The Bill provides that the NHFIC's functions include granting financial assistance to the States and Territories to improve housing outcomes and determining terms and conditions for such grants of financial assistance. This is included to provide flexibility in the way payments are made to eligible project proponents and to reflect the constitutional powers which support the NHFIC's functions.
Guidance on terms and conditions
The approach taken with regard to the NHFIC is consistent with other Commonwealth bodies tasked with providing financial assistance to the States. Parliament can and does delegate its power under section 96 of the Constitution to determine terms and conditions attaching to grants of financial assistance. A recent example is the Northern Australia Infrastructure Facility Act 2016, in which Parliament delegated this power to the Facility, which operates commercially and is governed by an independent Board. Another example is the annual even-numbered Appropriation Acts, which appropriate amounts to be paid to the States under section 96 of the Constitution and enable the Minister to determine the terms and conditions that apply to such payments.
The Board of the NHFIC will be independent and appointed based on relevant skills and experience. The Board will be equipped to decide whether to provide a loan or grant, or make an equity investment, to support the construction of housing-enabling infrastructure (such as new sewerage infrastructure). It will apply commercial discipline and its expertise to decide which projects to fund in light of the objectives of the NHFIC to improve housing outcomes for Australians, and consistent with the terms of the investment mandate.
The investment mandate will provide guidance to the NHFIC on its operations, including the types of projects that are eligible for NHIF finance, the types of loan concessions that the NHFIC can provide and criteria for making NHIF financing decisions. Providing the details in the investment mandate rather than in the Bill provides flexibility to allow the NHFIC to respond to evolving market conditions. The draft investment mandate specifies a number of factors that the Board must take into account when making a NHIF financing decision, including the likely impact of the project on the supply and ongoing availability of affordable housing.
While specific terms and conditions for grants of financial assistance to the States and Territories are not included in the Bill or the draft investment mandate, eligibility and decision making criteria which apply generally are provided in the latter. That is, the guidance to be provided in the investment mandate will apply to all finance provided by the NHIF, irrespective of the project proponents.
Disallowance of the NHFIC investment mandate
Like other legislative instruments, the investment mandate is required to be tabled in Parliament and registered on the Federal Register of Legislative Instruments. This enables the public and Parliament to hold the Government accountable for the directions it issues to the Board.
However, I do not consider that subjecting the investment mandate to parliamentary disallowance is appropriate. The investment mandate should provide certainty to both the Board and the market about the way in which the NHFIC is to exercise its functions and powers. This certainty would be delayed if the mandate is disallowable. In addition, in the event that an objection is raised and the mandate ceases to operate, the Board would be placed in a very difficult situation leading to significant uncertainty and impracticality.
I also draw the Committee's attention to the fact the Government has undertaken extensive public consultation at every stage of the development of the NHFIC Bill and investment mandate.
Finally, I note that this approach is consistent with legislation such as the Northern Australia Infrastructure Facility Act 2016, the Clean Energy Finance Corporation Act 2012 and the Future Fund Act 2005.
Committee comment
2.129 The committee thanks the Treasurer for this response. The committee notes the Treasurer's advice that allowing the NHFIC to grant financial assistance to the states and territories, and determine the terms and conditions attaching to such grants, will provide flexibility in the way payments are made to eligible project proponents.
2.130 The committee also notes the Treasurer's advice that providing guidance to the NHFIC on its operations—including on the types of projects that are eligible for finance, the types of loan concessions that may be provided, and the criteria for making financing decisions—in the investment mandate, rather than in the bill, will allow flexibility to respond to evolving market conditions. The committee further notes the advice that although the draft investment mandate does not include specific terms and conditions for grants of financial assistance to the states and territories, it does include general eligibility and decision-making criteria that apply to all finance provided by the NHCIF.
2.131 The committee also notes the Treasurer's advice that he considers it would not be appropriate to subject the legislative instruments making up the investment mandate to disallowance as this would create uncertainty for the board and the market with respect to the functions and powers of the NHFIC and that, in the event that these instruments were disallowed, the board would be placed in 'a very difficult situation leading to significant uncertainty and impracticality.'
2.132 The committee reiterates that the power to make grants to the states and to determine the terms and conditions attaching to such grants is conferred on the Parliament by section 96 of the Constitution. Where the Parliament delegates this power to the executive, the committee considers that it is appropriate that the exercise of this power be subject to at least some level of parliamentary scrutiny, particularly noting the terms of section 96 of the Constitution and the role of senators in representing the people of their state or territory.
2.133 The committee acknowledges the Treasurer's advice that the general eligibility and decision-making criteria that are set out in the draft investment mandate will also apply to grants of financial assistance to the states and territories and that, to this extent, the draft investment mandate does contain guidance on the terms and conditions of such grants. However, the committee remains concerned that this guidance is not set out in the bill itself, nor is it contained in a legislative instrument subject to disallowance.
2.134 The committee remains of the view that, from a scrutiny perspective, it would be more appropriate to include in the bill, instead of in the investment mandate, the general eligibility and decision-making criteria, as well as at least high-level guidance about the strategies and policies to be followed for the effective performance of the NHFIC's functions. Alternatively, if this guidance is to be included in a legislative instrument, the committee considers it would be appropriate that this instrument be subject to disallowance. The committee acknowledges the advice that subjecting such instruments to the usual disallowance processes could cause 'significant uncertainty and impracticality' in the event that the investment mandate came into effect and was subsequently disallowed.[74] However, the committee notes that there are other methods to ensure parliamentary scrutiny over such instruments. For example, it would be possible to provide that the instruments making up the investment mandate do not come into effect until the relevant disallowance period has expired.[75]
2.135 The committee draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of delegating to the NHFIC the Parliament's power under section 96 of the Constitution to make grants to the states where guidance as to the terms and conditions attaching to such grants, and the strategies and policies to be followed for the effective performance of the NHFIC's functions, is to be left to non-disallowable legislative instruments.
2.136 Clause 55 provides for the delegation and subdelegation of the powers and functions of the Chief Executive Officer (CEO) of the NHFIC. Subclause 55(1) seeks to allow the CEO to delegate any of his or her powers or functions under the bill to a 'senior member' of staff of the NHFIC, and subclause 55(2) seeks to allow the CEO to subdelegate to a senior member of staff of the NHFIC powers or functions originally delegated by the board.
2.137 The committee notes that neither the bill nor the explanatory memorandum provide any definition of a 'senior member of the staff' of the NHFIC.[77] Although the explanatory memorandum states that allowing the delegation of powers or functions to senior staff is 'a normal administrative arrangement',[78] it does not provide any guidance as to the level at which an NHFIC staff member would be considered to be a senior member of staff, nor any guidance as to the qualifications or attributes they will be required to possess.
2.138 The committee is concerned that, although the bill restricts the delegation and subdelegation of powers and functions by the CEO to 'senior members' of staff, the range of staff that could be included under this term remains unclear. It is therefore difficult to assess the appropriateness of allowing the delegation and subdelegation of powers and functions to this category of staff members.
2.139 The committee requests the Treasurer's advice as to the intended meaning of 'senior member' of the NHFIC staff under the bill. The committee also requests the Treasurer's advice as to whether the bill or explanatory memorandum could be amended to provide some guidance as to the staff levels that will be considered to be 'senior members' of staff and the skills and attributes they will be required to possess.
Treasurer's response
2.140 The Treasurer advised:
The Bill provides for the delegation of functions by the NHFIC and by the Board to the CEO, and for the delegation and sub-delegation by the CEO to a senior member of the NHFIC staff.
The Committee requested advice as to the intended meaning of 'senior member' of the NHFIC staff, and whether the Bill or explanatory memorandum could be amended to provide some guidance as to the staff levels and skills of staff considered to be senior members of staff.
It is not unusual for Commonwealth entities to be permitted to delegate statutory powers and functions to individual members of staff. Indeed, it is generally considered necessary to include a delegation power in relation to an entity and its CEO. Some precedents include the Export Finance and Insurance Corporation and the Regional Investment Corporation.
The NHFIC will need to have in place appropriate governance and supervisory arrangements for all staff. Subject to this expectation, I consider that it is appropriate for the NHFIC, as an independent corporate Commonwealth entity, to determine its staffing arrangements and structure. What constitutes a 'senior member' of the NHFIC's staff according to the ordinary meaning of the term will need to be determined in the context of the staffing arrangements and structure the NHFIC adopts.
It will be the NHFIC's responsibility to ensure that only those senior staff with appropriate qualifications and experience and relevant training are delegated functions. I am confident that the NHFIC will appropriately balance its risks in relation to delegations and do not consider that the Bill or explanatory memorandum require amendment to deal explicitly with this matter.
Committee comment
2.141 The committee thanks the Treasurer for this response. The committee notes the Treasurer's advice that the NHFIC will need to have in place appropriate governance and supervisory arrangements for all staff and that what constitutes a 'senior member' of staff according to the ordinary meaning of the term will need to be determined in the context of the staffing arrangements the NHFIC adopts. Finally, the committee notes the Treasurer's advice that it will be the NHFIC's responsibility to ensure that only those senior staff with 'appropriate qualifications and experience, and relevant training are delegated functions', and that he does not consider that the bill requires amendment to deal with this matter.
2.142 However, the committee reiterates its concern that the range of employees that could be considered to be 'senior members' of staff remains unclear. The committee also notes that, despite the Treasurer's advice that it will be the NHFIC's responsibility to ensure that functions and powers are only delegated to senior staff with appropriate qualifications, experience and training, there is nothing on the face of the bill that would limit delegations in this way.
2.143 The committee considers it may be appropriate to amend the bill to require that the CEO be satisfied that persons performing delegated functions and exercising delegated powers have the expertise appropriate to the function or power delegated.
2.144 The committee otherwise draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of allowing the delegation of administrative powers to a broad range of persons as provided for in clause 55 of the bill.
[65] See correspondence relating to Scrutiny Digest No. 5 of 2018 available at: www.aph.gov.au/senate_scrutiny_digest
[66] Subclause 8(2). The committee draws senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv) and (v).
[67] Paragraphs 8(1)(a) and (b).
[68] Subclause 8(2).
[69] Explanatory memorandum, p. 19.
[70] Section 96 of the Constitution provides that: '...the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit'.
[71] See clause 12 and paragraph 13(b)(ii).
[72] See note to subclause 12(1).
[73] Exposure draft of the National Housing Finance and Investment Corporation Investment Mandate Direction 2018, available at https://treasury.gov.au/consultation/c2018-t263622/.
[74] In contrast, subsection 11(4) of the Regional Investment Corporation Act 2018 provides that the operating mandate for the Regional Investment Corporation, which is similar to the investment mandate for the NHFIC, is subject to parliamentary disallowance.
[75] For an example of this approach, see section 79 of the Public Governance, Performance and Accountability Act 2013.
[76] Clause 55. The committee draws senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(ii).
[77] Clause 45 provides that the NHFIC may employ such persons as it considers necessary and subclause 45(3) provides that the NHFIC may make arrangements for the services of officers or employees of the Commonwealth or a State or Territory or any other organisation or body to be made available to the NHFIC.
[78] Explanatory memorandum, p. 40.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/other/AUSStaCSBSD/2018/140.html