Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Bill 2020 [2020] AUSStaCSBSD 68 (17 April 2020)

• Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Bill 2020
• Significant matters in delegated legislation 28

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Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Bill 2020

Purpose	This bill seeks to guarantee loans for small and medium enterprises, relating to the Coronavirus Economic Response. The bill seeks to appropriate up to $20 billion from the Consolidated Revenue Fund to meet any liabilities that the Commonwealth incurs under those guarantees
Portfolio	Treasury
Introduced	House of Representatives on 23 March 2020

Significant matters in delegated legislation ^[28]

1.58 Clause 5 provides that the minister may grant a guarantee to a financial institution in connection with loans made, or to be made, by the financial institution to SME entities; however, the minister must not grant a guarantee unless he or she is satisfied that granting the guarantee is likely to assist in dealing with the economic impacts of COVID-19. Clause 4 provides that 'SME entity' has the meaning given by the legislative rules and subclause 5(3) provides that the grant of a guarantee must be in accordance with any requirements prescribed by the legislative rules. Clause 6 provides that the total amount appropriated from the Consolidated Revenue Fund for the purposes of meeting any liabilities that the Commonwealth incurs under the guarantees granted under clause 5 must not exceed $20 billion.

1.59 The committee has consistently raised concerns about framework bills, which contain only the broad principles of a legislative scheme and rely heavily on delegated legislation to determine the scope and operation of the scheme. As the detail of the delegated legislation is generally not publicly available when Parliament is considering the bill, this considerably limits the ability of Parliament to have appropriate oversight over new legislative schemes. Consequently, the committee's view is that significant matters, such as details of the operation of a guarantee scheme that could result in the Commonwealth incurring liabilities of up to $20 billion, should be in the primary legislation unless a sound justification for the use of delegated legislation is provided.

1.60 The explanatory memorandum states that the legislative rules may include the following matters:

• the definition of 'SME entity';

• the eligibility criteria for a financial institution to receive a guarantee;

• the proportion of risk to be held by the Commonwealth and a financial institution subject to a guarantee;

• the types and terms of loans subject to a guarantee; and/or

• the maximum size of an individual loan subject to a guarantee. ^[29]

1.61 The committee notes that the explanatory memorandum contains no explanation for why these significant matters have been left to delegated legislation or why at least high-level guidance in relation to the operation of scheme could not have been included on the face of the bill.

1.62 From a scrutiny perspective, the committee considers that the matters that are to be provided for in the legislative rules (such as the definition of 'SME entity', the eligibility criteria for a financial institution to receive a guarantee, and the types and terms of loans subject to a guarantee) are central to the operation of the guarantee scheme and should therefore have been included in primary legislation.

1.63 The committee draws this matter to the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation and the Senate Select Committee on COVID-19.

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[28] Clause 5. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv) and (v).

[29] Explanatory memorandum, p. 160.