Appropriation Bill (No 2) 2019-2020 [2019] AUSStaCSBSD 62 (31 July 2019)

• Appropriation Bill (No. 2) 2019-2020
• Parliamentary scrutiny—section 96 grants to the states 26
• Parliamentary scrutiny—debit limits36

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Appropriation Bill (No. 2) 2019-2020

Purpose	This bill seeks to appropriate money out of the Consolidated Revenue Fund for certain expenditure
Portfolio	Finance
Introduced	House of Representatives on 25 July 2019

Parliamentary scrutiny—section 96 grants to the states ^[26]

1.25 Clause 16 of the bill deals with Parliament's power under section 96 of the Constitution to provide financial assistance to the states. Section 96 states that 'the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit'.

1.26 Clause 16 seeks to delegate this power to the relevant minister and, in particular, provides the minister with the power to determine:

• conditions under which payments to the states, the Australian Capital Territory and the Northern Territory or a local government authority may be made;^[27] and

• the amounts and timing of those payments.^[28]

1.27 Subclause 16(4) provides that determinations made under subclause 16(2) are not legislative instruments. The explanatory memorandum states that this is:

because these determinations are not altering the appropriations approved by Parliament. Determinations under subclause 16(2) are administrative in nature and will simply determine how appropriations for State, ACT, NT and local government items will be paid.^[29]

1.28 The committee has commented in relation to the delegation of power in these standard provisions in previous even-numbered appropriation bills.^[30]

1.29 The committee takes this opportunity to reiterate that the power to make grants to the states and to determine terms and conditions attaching to them is conferred on the Parliament by section 96 of the Constitution. While the Parliament has largely delegated this power to the executive, the committee considers that it is appropriate that the exercise of this power be subject to effective parliamentary scrutiny, particularly noting the terms of section 96 and the role of senators in representing the people of their state or territory.

1.30 The committee notes that important progress has been made to improve the provision of information regarding section 96 grants to the states since the 2017-18 budget, following suggestions originally made by the committee in Alert Digest 7 of 2016.^[31] These improvements include the addition of an Appendix E to Budget Paper No. 3,^[32] which provides details of the appropriation mechanism for all payments to the states and the terms and conditions applying to them, and a new mandatory requirement for the inclusion of further information in portfolio budget statements where departments and agencies are seeking appropriations for payments to the states, territories and local governments.^[33]

1.31 The committee also notes that Appendix E to Budget Paper No. 3 for the 2018-19 budget incorporates certain additional changes on which the committee sought the minister's advice in Scrutiny Digest 6 of 2017,^[34] and that the mandatory requirement for the inclusion of additional information in portfolio budget statements appears to have been met by those agencies seeking appropriations for payments to the states, territories and local government in this bill.^[35] The committee considers that these measures improve the ability of the Parliament to scrutinise the executive's use of the delegated power to make grants to the states and to determine terms and conditions attaching to them under section 96 of the Constitution.

1.32 The committee again thanks the minister for responding constructively to its proposals regarding the provision of additional information about the making of grants to the states under section 96 of the Constitution, and looks forward to these measures continuing for future appropriation bills.

1.33 The committee otherwise leaves to the Senate as a whole the appropriateness of the delegation of legislative power in clause 16, which allows the minister to determine conditions under which payments to the states, territories and local government may be made and the amounts and timing of those payments.

Parliamentary scrutiny—debit limits^[36]

1.34 Clause 13 of the bill specifies debit limits for certain grant programs. A debit limit must be set each financial year otherwise grants under these programs cannot be made. The total amount of grants cannot exceed the relevant debit limit set each year.

1.35 The explanatory memorandum notes that Parliament may approve annual debit limits for general purpose financial assistance or national partnership payments to the states.^[37]

1.36 The explanatory memorandum explains the purpose of setting these debit limits:

Specifying a debit limit in clause 13 is an effective mechanism to manage expenditure of public money as the official or Minister making a payment of public money cannot do so without this authority. The purpose of doing so is to provide Parliament with a transparent mechanism by which it may review the rate at which amounts are committed for expenditure.^[38]

1.37 This bill, along with Supply Act (No. 2) 2019-2020, proposes the following debit limits for 2019-20:

• General purpose financial assistance to the states—$5 billion;^[39] and

• National partnership payments to the states—$25 billion.^[40]

1.38 In relation to the $25 billion debit limit for national partnership payments, the committee notes that the budget papers state that it is expected that national partnership payments will be $11.5 billion in 2019-20.^[41] Therefore the debit limit proposed in this bill would allow an additional $13.5 billion in national partnership payments to be made without the need to seek further parliamentary approval. It is not clear what the expected level of expenditure is in relation to general purpose financial assistance.

1.39 The committee sought the minister's advice in relation to similar provisions in Appropriation Bill (No. 2) 2017-2018 and was informed that setting debit limits at a high level is necessary to ensure that the Commonwealth has appropriate provision to manage variations in expenditure required prior to the passage of further annual appropriation bills, including increases to existing undertakings to the states, and provision for any large-scale natural disasters or other major unexpected events.^[42] While the committee acknowledges this rationale, it considers that setting a debit limit at over twice the anticipated expenditure may undermine the stated intention of the debit limit regime—that is, to provide Parliament with a 'transparent mechanism by which it may review the rate at which amounts are committed for expenditure'.^[43]

1.40 The committee draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of setting debit limits for these grant programs well above the expected level of expenditure, noting that this practice appears to undermine the effectiveness of the debit limit regime as a mechanism for ensuring meaningful parliamentary oversight of these grant programs.

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[26] Clause 16 and Schedules 1 and 2. The committee draws senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv) and (v).

[27] Paragraph 16(2)(a).

[28] Paragraph 16(2)(b).

[29] Explanatory memorandum, p. 12.

[30] See Senate Standing Committee for the Scrutiny of Bills, Seventh Report of 2015, pp. 511-516; Ninth Report of 2015, pp. 611-614; Fifth Report of 2016, pp. 352-357; Eighth Report of 2016, pp. 457-460; Scrutiny Digest 3 of 2017, pp. 51-54; Scrutiny Digest 6 of 2017, pp. 7-10; Scrutiny Digest 12 of 2017, pp. 99-104; Scrutiny Digest 2 of 2018, pp. 8-11; Scrutiny Digest 6 of 2018, pp. 9-12.

[31] See Senate Standing Committee for the Scrutiny of Bills, Alert Digest 7 of 2016, pp. 7-10; and Eighth Report of 2016, pp. 457-460.

[32] Appendix E of Budget Paper No. 3, https://budget.gov.au/2019-20/content/bp3/download/bp3_appendix_e_online.pdf

[33] See Department of Finance, Guide to Preparing the 2018-19 Portfolio Budget Statements, pp. 24-25, https://www.finance.gov.au/sites/default/files/guidance-portfolio-budget-statements-19-20.pdf.

[34] Senate Standing Committee for the Scrutiny of Bill, Scrutiny Digest 6 of 2017, 14 June 2017, pp. 7-10.

[35] The committee discussed the partial compliance with the requirement to provide additional information in portfolio budget statements for the 2017-18 budget in its Scrutiny Digest 6

of 2017, 14 June 2017, pp. 7-10, and Scrutiny Digest 12 of 2017, 18 October 2017, pp. 99-104.

[36] Clause 13. The committee draws senators' attention to this provision pursuant to Senate Standing Order 24(1)(a)(v).

[37] See sections 9 and 16 of the Federal Financial Relations Act 2009.

[38] Explanatory memorandum, p. 10.

[39] Subclause 13(1).

[40] Subclause 13(2).

[41] Federal Financial Relations: Budget Paper No. 3 2019-20, p. 3.

[42] See Scrutiny Digest 12 of 2017, 18 October 2017, pp. 104-107.

[43] Explanatory memorandum, p. 10.