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Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests |
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Purpose
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This bill seeks to appropriate money out of the Consolidated Revenue Fund
for the ordinary annual services of the government
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Portfolio
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Finance
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Introduced
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House of Representatives on 25 July 2019
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1.6 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.
1.7 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.
1.8 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.[4]
1.9 The Senate Standing Committee on Appropriations and Staffing[5] has kept the issue of items possibly inappropriately classified as ordinary annual services of the government under active consideration for many years.[6] 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.[7]
1.10 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.
1.11 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.[8]
1.12 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.[9]
1.13 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'.[10]
1.14 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. 1) 2019-2020:
• Agriculture Stewardship Package ($34 million over four years);[11]
• Local School Community Fund ($30.2 million in 2019-20);[12]
• National Centre for Coasts, Environment and Climate ($25 million over four years).[13]
1.15 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;[14] 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.
1.16 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.
1.17 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.
1.18 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. 1) 2019-2020 which should only contain appropriations that are not amendable by the Senate).
1.19 Clause 10 seeks to enable the Finance Minister to provide additional funds to entities when he or she is satisfied that there is an urgent need for expenditure that is not provided for, or is insufficiently provided for, in Schedule 1. This additional appropriation is referred to as the Advance to the Finance Minister (AFM).
1.20 Subclause 10(2) enables the Finance Minister to make a determination that has the effect of allocating additional amounts, up to a total of $295 million as specified by subclause 10(3), to the appropriations outlined in Schedule 1 to the Act. Subclause 10(4) provides that a determination under subclause 10(2) is a legislative instrument, which must therefore be registered and tabled in Parliament. However, these determinations are not subject to parliamentary disallowance. The explanatory memorandum suggests that allowing these determinations to be disallowable 'would frustrate the purpose of the provision, which is to provide additional appropriation for urgent expenditure'.[16]
1.21 The committee notes that clause 10 (the AFM provision) allows the Finance Minister to allocate additional funds to entities up to a total of $295 million via non-disallowable delegated legislation and that it therefore delegates significant legislative power to the Executive. While this does not amount to a delegation of the power to create a new appropriation, 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'.[17] The AFM provision in this bill leaves the allocation of the purpose of certain appropriations in the hands of the Finance Minister, rather than the Parliament.
1.22 The committee has examined AFM provisions in previous appropriation bills and sought further information from the Finance Minister about their use.[18] The committee notes that AFM provisions have been used in previous years to allocate additional funds of varying amounts for a wide variety of purposes. Previous examples include $48.8 million for Mersey Community Hospital and Tasmanian Health Initiatives, $206.5 million for payments to local governments, and $6 million for grants to arts and culture bodies.[19] In 2018-19 the AMF provisions were used to allocate funding for:
• an expansion of the Drought Communities Program;[20]
• the re-opening of the Christmas Island Detention Centre following the passage of the Home Affairs Legislation Amendment (Miscellaneous Measures) Act 2019;[21] and
• a payment to South Australian Government to assist councils in South Australia to upgrade and maintain their local road network.[22]
The committee further notes that this issue also arises in relation to other appropriation bills.[23]
1.23 As AFM determinations are not subject to disallowance, the primary accountability mechanism in relation to AFMs (beyond the initial passage of the authorising provision in the regular appropriation bills) is an annual report tabled in Parliament on the use of the AFM. These reports are considered in the Senate,[24] and are published on the Department of Finance website.[25] The committee draws these reports to the attention of Senators.
1.24 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 Finance Minister to determine the purposes for which significant additional funds may be allocated in a legislative instrument not subject to disallowance.
[3] Various provisions. The committee draws senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(v).
[4] See Senate standing order 24(1)(a)(v).
[5] Now the Senate Standing Committee on Appropriations, Staffing and Security.
[6] 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.
[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] 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.
[10] 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.
[11] Budget Paper No. 2, 2019-20, p. 46.
[12] Budget Paper No. 2, 2019-20, p. 67.
[13] Budget Paper No. 2, 2019-20, p. 75.
[14] 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; Scrutiny Digest 2 of 2018, pp. 1-7.
[15] Clause 10. The committee draws senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv) and (v).
[16] Explanatory memorandum, p. 9.
[17] Combet v Commonwealth (2005) 224 CLR 494, 577 [160]; Wilkie v Commonwealth [2017] HCA
40 (28 September 2017) [91].
[18] See Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 12 of 2017, 18 October 2017, pp. 95–8; and Scrutiny Digest 2 of 2018, 14 February 2018, pp. 5-7.
[19] For further examples see Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 12 of 2017, 18 October 2017, pp. 97–8. For a comprehensive list of AFMs made between the 2006-07 and 2017-18 financial years, see Appendix 1 to Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 12 of 2017, 18 October 2017.
[20] Advance to the Finance Minister Determination (No. 1 of 2018-2019) [F2018L01816].
[21] Advance to the Finance Minister Determination (No. 2 of 2018-2019) [F2019L00577].
[22] Advance to the Finance Minister Determination (No. 3 of 2018-2019) [F2019L00852].
[23] For example, see clause 12 of Appropriation Bill (No. 2) 2019-2020 (the total amount that can be determined under this AFM provision is $380 million).
[24] Journals of the Senate, 3 April 2019, p. 4847. See also Rosemary Laing (ed), Odgers' Australian Senate Practice: As Revised by Harry Evans, Department of the Senate, 14th Edition, 2016, pp. 395-396.
[25] See https://www.finance.gov.au/publications/advance_to_the_finance_minister/.
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