Appropriation Bill (No 3) 2018-19 [2019] AUSStaCSBSD 20 (28 March 2019)

• Chapter 1
• Commentary on Bills
• Appropriation Bill (No. 3) 2018-19
• Parliamentary scrutiny—ordinary annual services of the government1

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Chapter 1

Commentary on Bills

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.

Appropriation Bill (No. 3) 2018-19

Purpose	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) 2018-19
Portfolio	Finance
Introduced	House of Representatives on 14 February 2019

Parliamentary scrutiny—ordinary annual services of the government^[1]

1.2 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.

1.3 This bill seeks to appropriate money from the Consolidated Revenue Fund 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 to certain measures may have been inappropriately classified as ordinary annual services.

1.4 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.^[2]

1.5 The Senate Standing Committee on Appropriations and Staffing^[3] has kept the issue of items possibly inappropriately classified as ordinary annual services of the government under active consideration for many years.^[4] It 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.^[5]

1.6 As a result of continuing concerns relating to the misallocation of some items, on 22 June 2010 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 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.^[6]

1.8 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.^[7]

1.9 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 a particular appropriation relates to a new program or project, continues. The committee notes that in recent years the Senate has routinely agreed to annual appropriation bills containing such broadly categorised appropriations, despite the potential that expenditure within the broadly-framed departmental outcomes may have been inappropriately classified as 'ordinary annual services'.^[8]

1.10 Based on the Senate resolution of 22 June 2010, it appears that the initial expenditure in relation to the following measures may have been inappropriately classified as 'ordinary annual services' and therefore improperly included in Appropriation Bill (No.3 ) 2018-2019:

• Inspector-General of Live Animal Exports ($1.8 million over four years);^[9]

• Mutual Understanding, Support, Tolerance, Engagement and Respect Initiative—establishment ($60 million over three years.^[10]

1.11 The committee has previously written to the Minister for Finance in relation to inappropriate classification of items in other appropriation bills on a number of occasions;^[11] however, the government has consistently advised that it does not intend to reconsider its approach to the classification of items that constitute the ordinary annual services of the government.

1.12 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.

1.13 The committee notes that any 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.

1.14 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) 2018-2019 which should only contain appropriations that are not amendable by the Senate).

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[1] Various. The committee draws senators' attention to these provisions pursuant to Senate Standing Order 24(1)(a)(v).

[2] See Senate standing order 24(1)(a)(v).

[3] Now the Senate Standing Committee on Appropriations, Staffing and Security.

[4] Senate Standing Committee on Appropriations and Staffing, 50th Report: Ordinary annual services of the government, 2010, p. 3; and annual reports of the committee from 2010-11 to 2014-15.

[5] Senate Standing Committee on Appropriations and Staffing, 45^th Report: Department of the Senate's Budget; Ordinary annual Services of the government; and Parliamentary computer network, 2008, p. 2.

[6] Senate Standing Committee on Appropriations and Staffing, 45^th Report: Department of the Senate's Budget; Ordinary annual Services of the government; and Parliamentary computer network, 2008, p. 2.

[7] Senate Standing Committee on Appropriations and Staffing, 45^th Report: Department of the Senate's Budget; Ordinary annual Services of the government; and Parliamentary computer network, 2008, p. 2.

[8] See, for example, debate in the Senate in relation to amendments proposed by Senator Leyonhjelm to Appropriation Bill (No. 3) 2017-18, see Senate Hansard, 19 March 2018, pp. 1487-1490.

[9] Mid-Year Economic and Fiscal Outlook 2018-19, p. 152.

[10] Mid-Year Economic and Fiscal Outlook 2018-19, p. 221.

[11] 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; Scrutiny Digest 12 of 2017, pp. 89-95.