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Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests |
1.1 The committee comments on the following bills and, in some instances, seeks a response or further information from the relevant minister.
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Purpose
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The Housing Australia Future Fund Bill 2023 seeks to establish the Housing
Australia Future Fund to create a funding source to support and increase social
and affordable housing,
as well as other acute housing needs.
The Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 seeks to
amend the National Housing Finance and Investment Corporation Act 2018 to
improve the affordability and accessibility of housing for
Australians.
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Portfolio
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Finance
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Introduced
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House of Representatives on 9 February 2023
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1.2 Clause 10 of the Housing Australia Future Fund Bill 2023 (HAFF Bill) provides for the establishment of a Housing Australia Future Fund Special Account (the Special Account). Clause 13 of the HAFF Bill sets out a list of purposes for which money may be credited from the Special Account, including paying for the acquisition of financial assets, paying the expenses of an investment of the Housing Australia Future Fund, paying for the acquisition of derivatives, and paying or discharging the costs, expenses and other obligations incurred by the Future Fund Board.
1.3 Under subclause 11(1) of the HAFF Bill, $10 billion will be credited into the Special Account upon commencement of the bill. However, subclause 11(2) provides that the responsible Ministers[2] may determine additional specified amounts to be credited into the Special Account. Subclause 11(3) states that these determinations are legislative instruments but are not subject to the usual parliamentary disallowance process.
1.4 Disallowance is the primary means by which the Parliament exercises control over the legislative power that it has delegated to the executive. Exempting an instrument from disallowance therefore has significant implications for parliamentary scrutiny. In June 2021, the Senate acknowledged these implications and resolved that delegated legislation should be subject to disallowance unless exceptional circumstances can be shown which would justify an exemption. In addition, the Senate resolved that any claim that circumstances justify such an exemption will be subject to rigorous scrutiny, with the expectation that the claim will only be justified in rare cases.[3]
1.5 The Senate's resolution is consistent with concerns about the inappropriate exemption of delegated legislation from disallowance expressed by this committee in its recent review of the Biosecurity Act 2015,[4] and by the Senate Standing Committee for the Scrutiny of Delegated Legislation in its inquiry into the exemption of delegated legislation from parliamentary oversight.[5]
1.6 In light of these comments and the resolution of the Senate, the committee expects the explanatory materials for a bill exempting delegated legislation from disallowance to set out the exceptional circumstances which justify the exemption and how they apply to the provision in question. The committee's already significant scrutiny concerns in relation to an unjustified exemption from disallowance are heightened when the instrument in question would allow the crediting of a potentially significant amount of public money, as in this case. In this instance the explanatory memorandum states:
A determination under subclause 11(2) is expected to be made only in limited circumstances following the initial credit provided for by subclause 11(1). Amounts credited under subclause 11(2) are expected to be provided from other Appropriation Acts. In this respect, the determination would be a tool for the Government to manage its financial arrangements. Disallowance could also undermine commercial certainty, given that once an amount is credited to the HAFF Special Account, the Future Fund Board would be able to invest the amount in any financial assets under clause 39 of the HAFF Bill.
Providing for a determination under subclause 11(2) to be a legislative instrument that is not disallowable would be consistent with arrangements for other investment funds managed by the Future Fund Board (see Item 3 of Schedule 1 of the Future Fund Act, section 15 of the MRFF Act, section 14 of the FDF Act, and section 13 of the DRF Act).[6]
1.7 While the committee acknowledges that it may be necessary to delegate legislative power in order to build capacity in relation to government programs which necessitate significant involvement from the states, the committee does not consider that this explanation has provided sufficient detail to justify exempting instruments made under subclause 11(2) from disallowance.
1.8 The committee reiterates its general concerns in relation to exempting instruments from disallowance due to a desire to provide certainty. While the committee acknowledges that the possibility of disallowance presents some degree of uncertainty, the committee notes that this level of uncertainty is in many ways inherent to lawmaking within Australia's system of representative government and applies equally to primary legislation which is subject at any time to amendment or repeal by the Parliament. A balance must be struck between protecting against uncertainty and allowing parliamentary scrutiny over executive made law. As a general principle, the committee does not consider that the difficulties associated with the small degree of uncertainty inherent in the disallowance process outweigh the significance of abrogating or limiting parliamentary oversight of executive made law by exempting an instrument from disallowance. The committee notes that the explanatory memorandum has not explained why this general principle would not apply in this case.
1.9 The committee further notes the explanation that the determination is intended to be an administrative rather than legislative decision, and that it would only be exercised in limited circumstances. However, the committee does not consider that the explanatory memorandum has included enough information to demonstrate why this is the case or why only exercising a power in limited circumstances justifies exempting an instrument from disallowance. For example, the committee considers that it would have been more appropriate to outline why the usual appropriations process is not adequate given the very large sums involved, why a disallowance process would undermine the fund’s capacity to make good investments in the public interest, and why a disallowance process might place the fund at a disadvantage. The committee also considers that it would have been more appropriate to provide evidence that appropriate modifications to the disallowance process were considered prior to an exemption being set out within the bill.
1.10 In light of the above, the committee requests the minister's further detailed advice in relation to the exceptional circumstances that are said to justify exempting an instrument made under subclause 11(2) from the usual parliamentary disallowance process.
1.11 Subclause 18(3) of the HAFF Bill provides that a designated Minister may make a grant of financial assistance to a state or territory in relation to acute housing needs, social housing or affordable housing. A grant of financial assistance may not amount to a loan,[8] and must not be made before 1 July 2023.[9] The terms and conditions on which financial assistance may be granted must be set out in a written agreement between the Commonwealth and the state or territory.[10] Certain information relating to grants must be published online, including the amount of each grant, the total amount included in all clause 18 grants, and the total amount that is due, but has not yet been paid, under all clause 18 grants.[11]
1.12 Similarly, item 5 of Schedule 2 to the Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 (Treasury Laws Housing Bill) amends an existing power within the National Housing Finance and Investment Corporation Act 2018 (NHFIC Act) which allows the Commonwealth to provide grants of financial assistance to the states and territories.[12] As in the case of the HAFF Bill, the terms and conditions on which those grants may be made will be set out in a written agreement.[13] The amended form of this provision, as introduced by the Treasury Laws Housing Bill, would allow the Commonwealth to make grants to the states for the purposes of improving, directly or indirectly, housing outcomes. The committee commented on the original version of this provision in Scrutiny Digest 3 of 2018.[14] However, it does not appear that any of the committee's scrutiny concerns have been addressed in relation to the new form of the power.
1.13 The committee notes that section 96 of the Constitution confers on the Parliament the power to make grants of financial assistance to the states and to determine the terms and conditions attached to them. Where the Parliament delegates this power to the executive, the committee considers it appropriate for the exercise of the power to be subject to at least some level of parliamentary scrutiny, particularly noting the terms of section 96 and the role of senators in representing the people of their state or territory. More generally, the committee's view is that, where it is proposed to allow the expenditure of a potentially significant amount of public money, the expenditure should be subject to appropriate parliamentary scrutiny and oversight.
1.14 In this regard, the committee is concerned that the HAFF Bill contains very little guidance on its face as to how the broad power to make grants is to be exercised, nor any information as to the terms and condition of the grants, other than that they must be set out in a written agreement. It is also not clear to the committee from the explanation provided within the bill's explanatory materials how the criteria for the award of the grants will be developed, whether standard criteria will apply, whether the processes for developing criteria are set out in non-legislative documents, such as the Commonwealth Grants Rules and Guidelines 2017, and why criteria cannot be fully set out on the face of the bill.
1.15 The committee is also concerned that there is no requirement to table in the Senate written agreements between the Commonwealth and the states and territories. Such a requirement would ensure that senators are at least made aware of, and have an opportunity to debate, any agreements made under subclause 18(3) of the HAFF Bill. In this context, the committee notes that the process of tabling documents in Parliament alerts parliamentarians to their existence and provides opportunities for debate that are not available where documents are made available through other means, for example, by being published online.
1.16 Where a bill provides for a broad discretionary power to make an arrangement for granting financial assistance, including to the states and territories, the committee expects the explanatory memorandum to justify why a broad discretionary power is necessary; to address what limits or terms and conditions will apply to the making of the grants; and to explain how an appropriate level of parliamentary scrutiny will be maintained. In this instance, the explanatory memorandum provides no explanation, merely re-stating the effect of the provision.
1.17 The committee therefore requests the minister's advice as to:
• how the criteria for the award of grants of financial assistance will be developed, noting that there is limited guidance on the face of the Housing Australia Future Fund Bill 2023 (HAFF Bill) as to how the power to make grants is to be exercised;
• whether the HAFF Bill can be amended to include at least high-level guidance as to the terms and conditions on which financial assistance may be granted; and
• whether the HAFF Bill can be amended to include a requirement that written agreements with the states and territories for grants of financial assistance made under subclause 18(3) are:
• tabled in the Parliament within 15 sitting days after being made; and
• published on the internet within 30 days after being made.
1.18 Subclause 41(1) of the HAFF Bill provides that the responsible Ministers may give the Future Fund Board written directions about the performance of its Housing Australia Future Fund investment functions. These directions are to be collectively known as the Housing Australia Future Fund Investment Mandate (the Investment Mandate).[16] An Investment Mandate direction could cover a broad range of significant matters, including the policies to be pursued in relation to matters of risk and return and the allocation of financial assets.[17] If the Future Fund Board fails to comply with the Investment Mandate they must report on that fact to the minister.[18] The minister may subsequently ask for a written explanation. These directions are legislative instruments, but a note under clause 41 clarifies that the directions are not subject to disallowance or sunsetting due to the operation of the Legislation (Exemptions and Other Matters) Regulation 2015.
1.19 A similar power is set out at section 12 of the NHFIC Act. Instruments made under section 12 of the NHFIC Act are also exempt from disallowance. Item 8 of Schedule 2 to the Treasury Laws Housing Bill would amend the NHFIC Act to more clearly set out the circumstances in which an entity may apply for a loan, grant, guarantee or for capacity building in circumstances where an Investment Mandate under the NHFIC Act provides that Housing Australia must consider such an application.
1.20 As noted above, the committee's expectation is that any exemption from disallowance will be extensively justified within the explanatory materials to the bill. Such a justification should include a discussion of the exceptional circumstances that are said to justify the exemption. In this instance, the explanatory memorandum to the HAFF Bill states:
The Government considers it is appropriate that a direction under subclause 41(1) of the HAFF Bill is not subject to disallowance. These directions are operational in character. The HAFF Bill would provide adequate scrutiny of directions comprising the HAFF Investment Mandate through mandated consultation with the Future Fund Board (clause 44). Exemption from disallowance together with consultation would give the Future Fund Board necessary certainty when investing through the HAFF. While it would be possible to provide that a direction under subclause 41(1) does not come into effect until disallowance periods have expired, this approach would significantly impede the ability of Government to make urgent changes to the HAFF Investment Mandate in the national interest.[19]
1.21 As noted above, the committee has generally not considered that a desire for certainty is a sufficient justification for exempting an instrument from disallowance. In this case, the committee does not consider that the explanatory memorandum has adequately explained why the need for certainty is of such an exceptional nature as to justify removing democratic oversight over a law of the Commonwealth. In addition, it is not clear why there would be a need for urgency given that it appears there is sufficient time to draft the first mandate.
1.22 In light of the above, the committee requests the minister's further detailed advice in relation to the exceptional circumstances that are said to justify exempting an Investment Mandate from the usual parliamentary disallowance process.
1.23 Before giving the Future Fund Board an Investment Mandate direction under subclause 41(1), paragraph 44(1)(a) provides that the minister must send a draft direction to the Future Fund Board. The Future Fund Board may then make a submission on the draft direction which the minister is required to consider.[21]
1.24 Subclause 44(2) provides that any submission made by the Future Fund Board on a draft direction must be tabled in each House of the Parliament along with the direction. The committee notes that no timeframe is specified setting out when the minister must table the submission after they receive it.
1.25 The committee therefore requests the minister's advice as to whether the bill could be amended to provide that a submission made by the Future Fund Board in accordance with paragraph 44(1)(b) must be tabled in both Houses of the Parliament within an explicitly stated timeline, for example, within 15 sitting days of the minister receiving a submission.
[1] Clause 11 of the Housing Australia Future Fund Bill 2023. The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(iv) and (v).
[2] Defined under clause 5 as the Treasurer and the Finance Minister.
[3] Senate resolution 53B. See Journals of the Senate, No. 101, 16 June 2021, pp. 3581–3582.
[4] See Chapter 4 of Senate Standing Committee for the Scrutiny of Bills, Review of exemption from disallowance provisions in the Biosecurity Act 2015: Scrutiny Digest 7 of 2021 (12 May 2021) pp. 33–44; and Scrutiny Digest 1 of 2022 (4 February 2022) pp. 76-86.
[5] Senate Standing Committee for the Scrutiny of Delegated Legislation, Inquiry into the exemption of delegated legislation from parliamentary oversight: Interim report (December 2020); and Inquiry into the exemption of delegated legislation from parliamentary oversight: Final report (March 2021).
[6] Explanatory memorandum, p. 13.
[7] Subclause 18(3) of the HAFF Bill; Schedule 2, item 5, proposed subsection 8(2). The committee draws senators’ attention to these provisions pursuant to Senate standing order 24(1)(a)(v).
[8] Subclause 18(6).
[9] Subclause 18(8).
[10] Subclause 19(2).
[11] Clause 24.
[12] Schedule 2, item 5, proposed subsection 8(1A)(b).
[13] Schedule 2, item 8, proposed subsection 10(5).
[14] Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 3 of 2018 (21 March 2018), pp. 28-30.
[15] Clause 41. The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(v).
[16] Subclause 41(3).
[17] Subclause 41(4).
[18] Clause 45.
[19] Explanatory memorandum, p. 30.
[20] Subclause 44(2). The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(v).
[21] Paragraphs 44(1)(b) and (c).
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