Future Drought Fund Bill 2018 [2018] AUSStaCSBSD 267 (5 December 2018)

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Purpose	This bill seeks to establish the Future Drought Fund to fund initiatives relating to future drought resilience, preparedness and response, and provides an initial credit of $3.9 billion
Portfolio	Finance
Introduced	House of Representatives on 28 November 2018

Broad discretionary powers^[25]

1.33 Clause 21 of the bill seeks to allow the Agriculture Minister (the minister), on behalf of the Commonwealth, to make arrangements with, and grants of financial assistance to, a person or body for a number of specified purposes related to drought resilience.^[26] The minister would be able to begin providing grants and making arrangements on or after 1 July 2020.

1.34 The committee's view is that, where it is proposed to allow the expenditure of a potentially substantial amount of Commonwealth money,^[27] the expenditure should be subject to at least some level of parliamentary scrutiny. In this regard, the committee is concerned that the bill contains no guidance on its face as to the terms and conditions that would attach to the financial assistance granted in accordance with clause 21, beyond requiring that any such terms and conditions are to be set out in a written agreement between the Commonwealth and the relevant grant recipient.^[28] The explanatory memorandum provides no explanation as to why it is considered necessary and appropriate to confer on the minister a broad power to provide financial assistance with regard to drought resilience, without specifying any terms and conditions to which the provision of assistance would be subject.

1.35 The committee also notes that clause 26 (which seeks to set constitutional limits on the provision of financial assistance) would provide that the minister may grant financial assistance to a state or territory. The explanatory memorandum indicates that assistance to the states may be used to incentivise resource management activities and to restore native vegetation for soil and water regeneration.^[29] In this respect, the committee notes that section 96 of the Constitution confers on the Parliament the power to make grants to the states and to determine the terms and conditions attaching to them.^[30] Where the Parliament delegates this power, the committee considers that it is appropriate that the exercise of the power be subject to at least some level of parliamentary scrutiny. However, as noted above, the bill does not appear to contain any guidance as to the terms and conditions on which financial assistance may be granted including to the states and territories.

1.36 The committee acknowledges that the bill seeks to allow the minister, by legislative instrument, to determine a plan (Drought Relief Funding Plan) for ensuring that a coherent and consistent approach is adopted in relation to the making of grants and arrangements, and that minister must comply with this plan when making a grant of financial assistance. However, as outlined below at [1.44] to [1.57], this plan would not be subject to disallowance.

1.37 In light of the discussion above, the committee is concerned that the level of parliamentary scrutiny afforded to grants of financial assistance made in accordance with clause 22 would 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, and that the Drought Relief Funding Plan would not be subject to disallowance.

1.38 The committee requests the minister's advice as to why it is considered necessary and appropriate to confer on the Agriculture Minister a broad power to make grants of financial assistance, in the absence of any guidance on the face of the bill as to how this power is to be exercised.

1.39 The committee also requests the minister's advice as to the appropriateness of amending the bill to include (at least high-level) guidance as to the terms and conditions on which financial assistance may be granted.

Merits review^[31]

1.40 As outlined above, clause 21 seeks to allow the minister to make an arrangement with, or make a grant of financial assistance to, a person or body for certain prescribed purposes relating to drought resilience. In relation to the persons and bodies to whom grants may be made, the explanatory memorandum states that:

1.41 It appears to the committee that the provision of grants and the making of arrangements pursuant to clause 21 may involve discretionary decisions on the part of the minister. Moreover, such decisions may have the potential to affect the interests of the persons and entities to which grants may be provided and arrangements made. Consequently, it appears that decisions made under clause 21 may be suitable for independent merits review. However, the committee notes that neither the bill nor the explanatory memorandum indicates whether merits review would be available.

1.42 Additionally, it is unclear to the committee exactly how grants would be made, and arrangements entered into, under clause 21 of the bill (once enacted). The committee notes that neither the bill nor the explanatory memorandum set out any particular processes (for example, an application process) to be followed by persons seeking to obtain a grant or enter into an arrangement. Information regarding how grants are to be awarded and how arrangements are to be entered into would assist the committee in determining whether relevant decisions would be suitable for independent merits review.

Significant matters in non-disallowable legislative instruments^[33]

1.44 Clause 31 of the bill would require the minister to determine a Drought Resilience Funding Plan (DRFP) for ensuring that a 'coherent and consistent approach' is adopted in relation to the making of grants and entering into agreements in relation to the provision of financial assistance. When making a grant or entering into an agreement, the minister would be required to comply with the DRFP that is in force.^[34] The Regional Investment Corporation Board (RIC) would also be required to comply with the DRFP in force when giving advice to the minister about grants and agreements.^[35] Subclause 31(7) provides that a DRFP would be a legislative instrument, but would not be disallowable.

1.45 Clause 41 would permit the responsible ministers (that is, the Treasurer and the Finance Minister) to give the Future Fund Board (FFB) written directions about the performance of its investment functions relating to the Future Drought Fund. Directions given by the responsible ministers make up the Fund's 'investment mandate'. Because the directions making up the investment mandate are given by a minister to a Commonwealth entity, they will not be subject to disallowance or sunsetting. This is because the directions will be covered by an exemption under the Legislation (Exemptions and Other Matters) Regulation 2015.^[36]

1.46 The committee's consistent view is that significant matters relating to a legislative scheme, such as how grants and agreements under the relevant scheme are to be administered, should be included in primary legislation (or at least in legislative instruments subject to parliamentary disallowance and sunsetting) unless a sound justification for using non-disallowable delegated legislation is provided.

1.47 In this instance, the explanatory memorandum provides no information as to why it is considered necessary and appropriate to leave significant elements of the drought resilience funding scheme proposed by the bill to delegated legislation (that is, to the DRFP and the directions comprising the investment mandate). In relation to why the DRFP would not be disallowable, the explanatory memorandum states that:

1.48 The committee does not consider the fact that the DRFP would be 'operational in nature', on its own, to be sufficient justification for not subjecting the DRFP to disallowance.

1.49 In relation to why the directions comprising the investment mandate would not be subject to disallowance or sunsetting, the explanatory memorandum states:

1.50 While noting this explanation, the committee does not consider operational certainty alone to be sufficient justification for leaving significant elements of the drought resilience funding scheme in the bill to non-disallowable instruments. Further, while the committee appreciates the importance of ensuring certainty and coherence for the FFB in relation to the performance of its functions, the committee considers that there may be other methods available to deliver certainty to the FRB while maintaining an appropriate level of parliamentary oversight. For example, the committee considers that it would be possible to provide that instruments making up the investment mandate are generally disallowable, with an exception provided for emergency circumstances.

1.52 In relation to directions making up the Future Drought Fund's investment mandate, the committee also requests the minister's advice as to the appropriateness of amending the bill to provide that the directions are subject to disallowance but only come into force once the disallowance period has expired, unless the minister certifies that there is an urgent need to make changes and it is in the national interest that a specified direction not be subject to disallowance.

Broad delegation of administrative powers^[39]

1.53 Proposed paragraph 63(1)(c) provides that the minister may, in writing, delegate any or all of the their powers under Division 2 of Part 3 to a person who is an official of a Commonwealth entity, and who is not covered by proposed paragraphs 63(1)(a) or (b). Noting that proposed paragraphs 63(1)(a) and (b) would permit the minister to delegate powers to the secretary and to SES employees within the department, it appears that the power of delegation in proposed paragraph 63(1)(c) would extend to any APS employee.

1.54 The committee has consistently drawn attention to legislation that allows the delegation of administrative powers to a relatively large class of persons, with little or no specificity as to their qualifications or attributes. Generally, the committee prefers to see a limit set either on the scope of the powers that might be delegated, or on the categories of persons to whom delegations are permitted. The committee's preference is that delegates be confined to the holders of nominated offices or to members of the Senior Executive Service. Where broad delegations are provided for, the committee considers that an explanation as to why such delegations are necessary and appropriate should be included in the explanatory memorandum. In this instance, the explanatory memorandum states that:

1.55 While noting this explanation, the committee does not consider administrative flexibility (that is, ensuring that grants can be administered by particular Commonwealth officials) to be sufficient justification for enabling the delegation of the minister's powers to any official of a Commonwealth entity. The committee also notes that the bill does not appear to set any limits on the level to which powers may be delegated, or require that delegates possess expertise appropriate to the delegated powers.

1.56 The committee requests the minister's more detailed advice as to why it is considered necessary and appropriate to permit the Agriculture Minister to delegate their powers to any official of a Commonwealth entity.

1.57 The committee also requests the minister's advice as to the appropriateness of amending the bill to; at a minimum, require that persons exercising delegated powers possess the expertise appropriate to the relevant delegation.

No requirement to table or publish review report^[41]

1.58 Clause 65 of the bill seeks to require the responsible ministers to cause a review of the operation of the Act to be undertaken before the tenth anniversary of its commencement. The explanatory memorandum states that the review:

1.59 However, the bill would not require any documents associated with the review (for example, terms of reference or a final report) to be tabled in Parliament. The bill also does not appear to require that documents associated with the review be made available online.

1.60 Tabling documents in Parliament is important to parliamentary scrutiny, as it alerts parliamentarians to the existence of the documents and provides opportunities for debate that are not available where documents are not made public or are only published online. Making documents associated with review processes available online promotes transparency and accountability. Consequently, where a bill does not require documents associated with a significant legislative review to be tabled or made available online, the committee would expect an appropriate justification to be included in the explanatory memorandum.

1.61 In this instance, the explanatory memorandum does not provide any explanation as to why documents associated with the review would not be tabled in Parliament or made available online. It only explains the purpose of the review, as set out at [1.58] above.

1.62 Noting that there may be impacts on parliamentary scrutiny where documents associated with a significant review are not available to the Parliament, the committee requests the minister's advice as to why it is not proposed to require documents associated with the operational review of the Act to be tabled in Parliament and made available online.

[25] Clause 21 and clause 22. The committee draws senators’ attention to these provisions pursuant to Senate Standing Orders 24(1)(a)(iv) and (v).

[26] The purposes for which grants may be made, and arrangements may be entered into, are specified in proposed paragraphs 21(1)(c) to (h).

[27] In this respect, the explanatory memorandum states that $3.9 billion in uncommitted funds would be transferred from the Building Australia Fund (which is to be dissolved following the enactment of the bill) to the Future Drought Fund on its establishment. The explanatory statement further states that the Future Drought Fund is expected to grow to $5 billion over the next 10 years.

[30] 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'.

[31] Clause 21. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(i).

[33] Clause 31 and clause 41. The committee draws senators' attention to these provisions pursuant to Senate Standing Orders 24(1)(a)(iv) and (v).

[35] Clause 29. Clause 28 requires the Agriculture Minister to request advice from the RIC, and to consider this advice, before making a grant or entering into an arrangement.

[39] Proposed paragraph 63(1)(c). The committee draws senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(ii).

[41] Clause 65. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(v).

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests