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Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests |
1.1 The committee seeks a response or further information from the relevant minister or sponsor of the bill with respect to the following bills.
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Purpose
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This bill provides for additional appropriations from the Consolidated
Revenue Fund for certain expenditure in addition to the appropriations
provided
for by the Appropriations Act
(No. 1) 2017-18
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Portfolio
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Finance
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Introduced
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House of Representatives on 8 February 2018
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1.2 This bill seeks to appropriate money from the Consolidated Revenue Fund. The appropriations in the bill are said to be for the ordinary annual services of the government. However, it appears to the committee, for the reasons set out below, that the initial expenditure in relation certain measures may have been inappropriately classified as ordinary annual services.
1.3 The inappropriate classification of items in appropriation bills as ordinary annual services when they in fact relate to new programs or projects undermines the Senate's constitutional right to amend proposed laws appropriating revenue or moneys for expenditure on all matters not involving the ordinary annual services of the government. This is relevant to the committee's role in reporting on whether the exercise of legislative power is subject to sufficient parliamentary scrutiny.[1]
1.4 By way of background, under section 53 of the Constitution the Senate cannot amend proposed laws appropriating revenue or moneys for the ordinary annual services of the government. Further, section 54 of the Constitution provides that any proposed law which appropriates revenue or moneys for the ordinary annual services of the government shall be limited to dealing only with such appropriation. The Senate Standing Committee on Appropriations and Staffing[2] has kept the issue of items possibly inappropriately classified as ordinary annual services of the government under active consideration for many years.[3]
1.5 The distinction between appropriations for the ordinary annual services of the government and other appropriations is reflected in the division of proposed appropriations into pairs of bills. Odd-numbered bills should only contain appropriations for the ordinary annual services of the government, while even-numbered bills—which are amenable by the Senate—contain all other appropriations. However, the Appropriations and Staffing Committee has noted that the division of items in appropriation bills since the adoption of accrual budgeting has been based on a mistaken assumption that any expenditure falling within an existing departmental outcome should be classified as ordinary annual services expenditure.[4] The Senate has not accepted this assumption.
1.6 As a result of continuing concerns relating to the misallocation of some items, on 22 June 2010 (in accordance with a recommendation made in the 50th Report of the Appropriations and Staffing Committee),[5] the Senate resolved:
1) To reaffirm its constitutional right to amend proposed laws appropriating revenue or moneys for expenditure on all matters not involving the ordinary annual services of the Government; [and]
2) That appropriations for expenditure on:
a) the construction of public works and buildings;
b) the acquisition of sites and buildings;
c) items of plant and equipment which are clearly definable as capital expenditure (but not including the acquisition of computers or the fitting out of buildings);
d) grants to the states under section 96 of the Constitution;
e) new policies not previously authorised by special legislation;
f) items regarded as equity injections and loans; and
g) existing asset replacement (which is to be regarded as depreciation),
are not appropriations for the ordinary annual services of the Government and that proposed laws for the appropriation of revenue or moneys for expenditure on the said matters shall be presented to the Senate in a separate appropriation bill subject to amendment by the Senate.
1.7 There were two other parts to the resolution: the Senate clarified its view on the correct characterisation of payments to international organisations, and resolved that all appropriation items for continuing activities, for which appropriations have been made in the past, be regarded as part of ordinary annual services.[6]
1.8 The committee concurs with the view expressed by the Appropriations and Staffing Committee that if 'ordinary annual services of the government' is to include items that fall within existing departmental outcomes then:
...completely new programs and projects may be started up using money appropriated for the ordinary annual services of the government, and the Senate [may be] unable to distinguish between normal ongoing activities of government and new programs and projects or to identify the expenditure on each of those areas.[7]
1.9 The Appropriations and Staffing Committee considered that the solution to any inappropriate classification of items is to ensure that new policies for which money has not been appropriated in previous years are separately identified in their first year in the bill that is not for the ordinary annual services of the government.[8]
1.10 Despite these comments and the Senate resolution of 22 June 2010, it appears that a reliance on existing broad 'departmental outcomes' to categorise appropriations, rather than on an individual assessment as to whether an appropriation relates to a new program or project, continues and appears to be reflected in the allocation of some items in the most recent appropriation bills.
1.11 For example, it appears that the initial expenditure in relation to the following items may have been inappropriately classified as 'ordinary annual services' and therefore improperly included in Appropriation Bill (No. 3) 2017-2018:
• Menzies Institute and Library ($7 million in 2017-18)[9]
• Australian Stockman's Hall of Fame—construction of new facilities and displays, amenity upgrades, and establishment of the Australian Rural Heritage Foundation ($15 million in 2017-18)[10]
• Qantas Founders Museum—construction of roofing facilities ($11.3 million in 2017-18)[11]
1.12 The committee has previously written to the Minister for Finance and considered this general matter in relation to inappropriate classification of items in other appropriation bills on a number of occasions.[12]
1.13 On each of these occasions, the committee noted the government's advice that it does not intend to reconsider its approach to the classification of items that constitute the ordinary annual services of the government; that is, the government will continue to prepare appropriation bills in a manner consistent with the view that only administered annual appropriations for new outcomes (rather than appropriations for expenditure on new policies not previously authorised by special legislation) should be included in even-numbered appropriation bills.
1.14 The committee again notes that the government's approach to the classification of items that constitute ordinary annual services of the government is not consistent with the Senate resolution of 22 June 2010 relating to the classification of ordinary annual services expenditure in appropriation bills.
1.15 The committee reiterates its agreement with the comments made on this matter by the Senate Standing Committee on Appropriations and Staffing, and in particular that the division of items in appropriation bills since the adoption of accrual budgeting has been based on a mistaken assumption that any expenditure falling within an existing outcome should be classified as ordinary annual services expenditure.
1.16 The committee draws the 2010 Senate resolution to the attention of Senators and notes that the inappropriate classification of items in appropriation bills undermines the Senate's constitutional right to amend proposed laws appropriating revenue or moneys for expenditure on all matters not involving the ordinary annual services of the government. Such inappropriate classification of items impacts on the Senate's ability to effectively scrutinise proposed appropriations as the Senate may be unable to distinguish between normal ongoing activities of government and new programs or projects.
1.17 The committee draws this matter to the attention of Senators as it appears that the initial expenditure in relation to certain items in the latest set of appropriation bills may have been inappropriately classified as ordinary annual services (and therefore improperly included in Appropriation Bill (No. 3) 2017-2018 which should only contain appropriations that are not amendable by the Senate).
1.18 The committee will continue to draw this important matter to the attention of senators where appropriate in the future.
Parliamentary scrutiny—appropriations determined by the Finance Minister[13]
1.19 Section 10 of Appropriation Act (No. 1) 2017-18 (Appropriation Act No. 1) enables the Finance Minister to allocate additional appropriations for items when satisfied that there is an urgent need for expenditure and the existing appropriations are inadequate. The allocated amount is referred to as the Advance to the Finance Minister (AFM). The additional amounts are allocated by a determination made by the Finance Minister (an AFM determination). AFM determinations are legislative instruments, but they are not subject to disallowance or parliamentary scrutiny by the Regulations and Ordinances Committee. Subsection 10(2) of Appropriation Act No. 1 provides that when the Finance Minister makes such a determination the Appropriation Act has effect as if it were amended to make provision for the additional expenditure. Subsection 10(3) caps the amounts that may be determined under the AFM provision in Appropriation Act No. 1 at $295 million. Identical provisions appear in Appropriation Act (No. 2) 2017-18 (Appropriation Act No. 2), although there is a separate ($380 million) cap in that Act.
1.20 The committee notes that the AFM provisions allow non-disallowable delegated legislation to, at least in effect, modify the operation of primary legislation, and therefore they delegate significant legislative power to the Executive. As the committee has previously noted, one of the core functions of the Parliament is to authorise and scrutinise proposed appropriations. High Court jurisprudence has emphasised the central role of the Parliament in this regard. In particular, while the High Court has held that an appropriation must always be for a purpose identified by the Parliament, '[i]t is for the Parliament to identify the degree of specificity with which the purpose of an appropriation is identified'.[14]
1.21 When the committee considered the AFM provisions in Appropriation Acts No. 1 and No. 2, the committee requested the Finance Minister's advice as to each instance in which the AFM provisions had been used over the previous ten financial years. In response, the Finance Minister confirmed that the AFM provisions had been used in 49 instances over the past twelve financial years. The committee published details of a selection of AFMs issued since 2006-07 in the body of its report, as well as the full list of AFMs in an appendix to the report.[15]
1.22 In concluding comments, the committee noted that, given determinations made under the AFM provisions are not subject to parliamentary disallowance, the primary accountability mechanism in relation to those determinations (beyond the initial passage of the authorising provision in the regular appropriations bills) is an annual report tabled in Parliament. These reports are referred to legislation committees considering estimates and are also considered in committee of the whole.[16] In addition, the reports are published on the Department of Finance website.[17] The committee drew this report, and the AFM provisions themselves, to the attention of Senators.
1.23 Subclause 10(1) of the present bill seeks to provide that any determinations made under the AFM provisions in Appropriation Act No. 1 are to be disregarded for the purposes of the $295 million cap in subsection 10(3) of that Act. The note to subclause 10(1) clarifies that this means that the Finance Minister would have access to the full $295 million for the purposes of making AFM determinations under section 10 of Appropriation Act No. 1, regardless of any amounts that have already been determined under that section.[18]
1.24 It appears to the committee that, for the 2017-18 financial year, the sole amount determined by the Finance Minister under the AFM provisions was $122 million to facilitate a voluntary postal plebiscite for all Australians on the electoral roll, conducted by the Australian Bureau of Statistics. This advance was made under section 10 of Appropriation Act No. 1.[19] Under clause 10 of the bill, this amount would be disregarded for the purposes of the $295 cap imposed by subsection 10(3) of Appropriation Act No. 1.
1.25 In light of the matters raised by the committee in relation to the Advance to the Finance Minister provisions in Appropriation Acts No. 1 and No. 2, the committee draws to the attention of senators the proposal to disregard previous expenditure of $122 million for the purposes of the cap on amounts that may be determined under the Advance to the Finance Minister provisions.
1.26 The committee will continue to draw this important matter to the attention of senators where appropriate in the future.
[1] See Senate standing order 24(1)(a)(v).
[2] Now the Senate Standing Committee on Appropriations, Staffing and Security.
[3] Senate Standing Committee on Appropriations and Staffing, 50th Report: Ordinary annual services of the government, 2010, p. 3; and recent annual reports of the committee.
[4] Senate Standing Committee on Appropriations and Staffing, 45th Report: Department of the Senate's Budget; Ordinary annual Services of the government; and Parliamentary computer network, 2008, p. 2.
[5] Senate Standing Committee on Appropriations and Staffing, 50th Report: Ordinary annual services of the government, 2010, p. 3.
[6] Journals of the Senate, 22 June 2010, pp 3642–3643.
[7] Senate Standing Committee on Appropriations and Staffing, 45th Report: Department of the Senate's Budget; Ordinary annual Services of the government; and Parliamentary computer network, 2008, p. 2.
[8] Senate Standing Committee on Appropriations and Staffing, 45th Report: Department of the Senate's Budget; Ordinary annual Services of the government; and Parliamentary computer network, 2008, p. 2.
[9] Mid-Year Economic and Fiscal Outlook 2017-18, p. 145.
[10] Mid-Year Economic and Fiscal Outlook 2017-18, p. 171.
[11] Mid-Year Economic and Fiscal Outlook 2017-18, p. 174.
[12] Senate Standing Committee for the Scrutiny of Bills, Tenth Report of 2014, pp. 402-406; Fourth Report of 2015, pp. 267-271; Alert Digest No. 6 of 2015, pp. 6-9; Fourth Report of 2016,
pp. 249-255; Alert Digest No. 7 of 2016, pp. 1-9; Scrutiny Digest 2 of 2017, pp. 1-5; Scrutiny Digest 6 of 2017, pp. 1-6; and Scrutiny Digest 12 of 2017, pp. 89-95.
[13] Clause 10. The committee draws Senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv) and 24(1)(a)(v).
[14] Combet v Commonwealth (2005) 224 CLR 494, 577 [160]; Wilkie v Commonwealth [2017] HCA 40 (28 September 2017) [91].
[15] Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 12 of 2017, pp. 95-98 and Appendix 1.
[16] Rosemary Laing (ed), Odgers' Australian Senate Practice: As Revised by Harry Evans (Department of the Senate, 14th ed, 2016), pp 395–396.
[17] See http://www.finance.gov.au/publications/advance_to_the_finance_minister/.
[18] Section 13 of Appropriation Bill No. 4 contains identical provisions, which apply to determinations made under the AFM provisions in Appropriation Act No. 2.
[19] Advance to the Finance Minister Determination (No. 1 of 2017-2018), https://www.legislation.gov.au/Details/F2017L01005.
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