Housing Australia Future Fund Bill 2023 Treasury Laws Amendment (Housing Measures No 1) Bill 2023 - Commentary on Ministerial Responses [2023] AUSStaCSBSD 68 (30 March 2023)

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Purpose	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.
Portfolio	Finance
Introduced	House of Representatives on 9 February 2023
Bill status	Before the Senate

Significant matters in delegated legislation
Exemption from disallowance^[7]

2.19 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.

2.20 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^[8] 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.

2.21 In Scrutiny Digest 2 of 2023 the committee requested 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.^[9]

2.22 The Minister for Finance (the minister) advised that there is an appropriate level of parliamentary authorisation and oversight over a subclause 11(2) determination because any appropriated amount would first be required to be approved by the Parliament. The minister advised that a subclause 11(2) determination would be an administrative tool intended to manage financial arrangements related to such appropriations.

2.23 The minister also advised that subjecting a determination to potential disallowance would undermine the ability of the Future Fund Board of Guardians to invest the additional credits in suitable investments. This is because exposing a determination to potential disallowance would require the Board to provide an acceptable level of investment returns prior to the completion of the disallowance period, as the additional credits would need to be readily available to be returned should the determination be disallowed. The minister considered that this would be the case whether disallowance is likely or not, as the Board would be obliged to act in a manner that ensured that the additional credits were available to be returned at any time before the disallowance period expired.

2.26 While the committee acknowledges that instruments made under subclause 11(2) will not directly appropriate money from the consolidated revenue fund, it is nonetheless true that these instruments will be legislative in nature. As such, the committee's position is that these instruments should be subject to an appropriate level of parliamentary scrutiny unless exceptional circumstances can be demonstrated. It is not sufficient to simply state that the instruments will deal with administrative matters without linking this to the appropriateness of exempting the instrument from disallowance. For instance, it may be relevant if an administrative decision is unlikely to affect an individual's rights, obligations or interests. In this case, however, the large sums of money involved mean that subclause 11(2) appear to be significant despite the fact that they deal with administrative arrangements.

2.27 The committee also notes the minister's explanation that exposing a subclause 11(2) determination to the disallowance process may undermine the ability of the Future Fund Board of Guardians to invest. The committee acknowledges this point. However, the committee is concerned that the minister's response has not outlined any evidence that appropriate modifications to the disallowance process were considered to address this issue. For example, it would have been possible to provide that a subclause 11(2) determination does not come into effect until after the disallowance period has ended. Given the significance of abrogating parliamentary oversight of legislation, the committee considers that alternative methods for ensuring certainty should be considered before exempting an instrument from disallowance and that evidence of this should be included in the explanatory materials for the bill.

2.28 The committee draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of providing the responsible Ministers with a power to make non-disallowable legislative instruments under subclause 11(2) of the bill.

Section 96 grants to the states^[11]

2.29 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,^[12] and must not be made before 1 July 2023.^[13] 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.^[14] However, there is nothing in the bill providing guidance as to what the terms and conditions may be, nor any requirement for the written agreement to be tabled in the Parliament.

2.30 In Scrutiny Digest 2 of 2023 the committee requested the minister's advice as to:

2.31 The minister advised that, where appropriate, HAFF funding programs will have guidelines published on the relevant departmental website to ensure that applicants are treated equitably, and that funding recipients are selected based on merit addressing the program's objectives.

2.32 The minister advised that grant programs under the HAFF will be developed in accordance with the Commonwealth Grant Rules and Guidelines 2017 (CGRG) and the requirements of the Public Governance, Performance and Accountability Act 2013.

2.33 The minister also advised that grant guidelines will be developed for all new grant opportunities and approved grants will be reported on the GrantConnect website no later than 21 days after the grant agreement takes effect. HAFF grant administration will be conducted in a manner consistent with the CGRG's principles of:

2.34 In relation to the approach taken to the terms and conditions attaching to any grants to the states, the minister advised that this is consistent with the CGRGs. The minister did not consider that an amendment was necessary to provide that these agreements be tabled, or that such an amendment would add to the effective administration of the HAFF. In this context, the minister noted that there are sufficient reporting obligations in the HAFF Bill and that, when combined with the existing requirements in existing Commonwealth legislation and frameworks, these ensure that detailed information on grants and arrangements is available to the general public.

2.35 Similarly, the minister considered the HAFF Bill includes sufficient high-level guidance on the terms and conditions for financial assistance to be granted. Where appropriate, terms and conditions will be included in grant guidelines and funding agreements with recipients, rather than placing it within the primary legislation.

2.36 The minister also advised that any disbursements from the HAFF to states and territories will be subject to the Federation Funding Agreements (FFA) Framework. The Intergovernmental Agreement on Federal Financial Relations (IGA FFR), under the FFA Framework, outlines the objectives, principles and institutional arrangements governing financial relations between the Commonwealth and state and territory governments.

2.37 The minister advised that a clause 18 written agreement will form a new Schedule under the Federation Funding Agreement (FFA) - Affordable Housing, Community Services and Other, which sets out the standard terms and conditions for funding agreements with the states and territories in these sectors. FFA schedules can be tailored to: establish milestones for initiatives; their relationship to program activities; expected completion dates; relevant reporting dates; and expected payments to be made. The parties agree to meet the milestones and/or performance benchmarks set out in the Schedule.

2.38 Finally, the minister advised that to ensure transparency, all funding agreements with state governments are published on the Federal Financial Relations website and detailed in Budget Paper 3: Federal Financial Relations, and equivalent documents in the Mid-Year Economic and Fiscal Outlook and the Final Budget Outcome.

2.40 The committee notes the minister's advice in relation to the reporting requirements that apply to grants to the states under clause 18 and the guidelines that will direct the administration of such grants. The committee welcomes these measures.

2.41 The committee also welcomes the minister's advice that the terms and conditions attaching to clause 18 grants will be based on the standard terms and conditions within the Federation Funding Agreement.

2.42 However, while welcoming this advice, the committee remains concerned that written agreements with the states will not be required to be tabled in the Parliament. The committee also remains concerned that there are no explicit requirements within the bill setting out what the terms and conditions of a grant may be.

2.43 The minister has advised that they do not consider that additional tabling requirements would assist with the administration of the HAFF. While acknowledging this advice, the committee notes that its scrutiny concerns relate specifically to the appropriateness of delegating to the executive Parliament's constitutional power to provide grants to the states, in circumstances in which there is little information as to the terms and conditions of those grants within the primary legislation. While relevant, it is not sufficient to note that the administrative arrangements for the HAFF are appropriate.

2.44 The committee further notes that the process of tabling documents in the Parliament provides opportunities for debate that are otherwise not available if the documents are merely available online and is therefore an important element of parliamentary scrutiny and oversight. Appropriate parliamentary scrutiny over grants agreements contributes to the maintenance of the Parliament's role under section 96 of the Constitution.

2.45 The committee draws this matter to the attention of senators and leaves to the Senate as a whole the appropriateness of conferring a broad power to make grants to the states in circumstances where there is no guidance in the bill as to the terms and conditions on which grants may be made, and no requirement to table written agreements with the states containing those terms and conditions in the Parliament.

Exemption from disallowance^[17]

1.17 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).^[18] 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.

2.46 In Scrutiny Digest 2 of 2023 the committee requested 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.^[19]

2.47 The minister advised that, similar to the other long-term Commonwealth investment funds (including the Future Fund, the Medical Research Future Fund, the Future Drought Fund, and the Disaster Ready Fund), it is expected that the investment mandate will set a long-term target rate of return. In these cases, it is envisaged that investment mandates would only be reissued if there was a significant change in government policy or a structural change in the investment landscape.

2.48 The minister noted that, in setting the investment mandates for the different investment funds, responsible Ministers would need to ensure that:

2.49 The minister also noted that exempting investment mandates from disallowance is consistent with the long-standing and established operational arrangements for other funds currently managed by the Board. The minister additionally noted that such directions are part of a class of instruments that are routinely exempt under item 2 of the table at section 9 of the Legislation (Exemption and other Matters) Regulation 2015.

2.50 The minister advised that the bill provides for appropriate parliamentary and public scrutiny over investment mandates because investment mandates are a legislative instrument, because they are subject to mandatory consultation requirements with the Board and because any submission subsequently received from the Board must be tabled in both Houses of the Parliament. Finally, the minister advised that the process for setting non-disallowable investment mandates provides the Board with an appropriate level of operational certainty in managing their investments over the long term, while also allowing the government to issue updated directions to the Board when appropriate.

2.52 While the committee acknowledges that ministerial directions are routinely exempt from disallowance under the Legislation (Exemption and other Matters) Regulation 2015, the committee does not consider that this is a sufficient justification for exempting an instrument from disallowance. Rather, each exemption must be individually justified based on the specific circumstances of the case at hand. To this end, the committee notes that the Senate Standing Committee for the Scrutiny of Delegated Legislation has expressed particular concern about broad classes of exemptions from disallowance based exclusively on the form of the relevant instrument,^[21] emphasising that 'any exclusion from parliamentary oversight...requires that the grounds for exclusion be justified in individual cases, not merely stated'.^[22]

2.53 Neither is it a sufficient justification to state that appropriate parliamentary scrutiny is provided because investment mandates are legislative instruments. Scrutiny concerns stem from exactly this point, given that exempting an instrument from disallowance has the effect of removing parliamentary oversight over its constitutionally enshrined legislative function. That is, the default scrutiny position is that the Parliament should have oversight over all instruments of a legislative character, unless exceptional circumstances can be demonstrated.

2.54 Further, while consultation requirements and tabling requirements are welcome, such arrangements are not enough, of themselves, to justify removing parliamentary oversight over a Commonwealth law.

2.55 Finally, the committee reiterates that it has not considered a desire for certainty to be a sufficient justification for exempting an instrument from disallowance. The minister's response has not adequately explained why this general principle would not apply in this case. It also remains unclear why there would be a need for urgency,^[23] given that it appears there is sufficient time to draft the first mandate.

2.56 The committee draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of providing the Ministers with a power to make non-disallowable Investment Mandates under subclause 41 of the bill.

Tabling of documents in Parliament^[24]

2.57 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.

2.58 In Scrutiny Digest 2 of 2023 the committee requested 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.^[25]

2.59 The minister advised that any submissions received from the Future Fund Board of Guardians (the Board) under paragraph 44(1)(b) would be considered by the government at the time of settling the investment mandate direction. The minister considered that it is therefore appropriate to table the Board's submission at the same time as the investment mandate direction itself, noting that this would also allow members and senators to review the direction and any submission of the Board together. On this basis, the minister did not consider that the bill would be improved by requiring the Board's submission to be tabled within a set timeframe.

2.61 In light of the information provided by the minister, the committee makes no further comment on this matter.

[7] Clause 11 of the Housing Australia Future Fund Bill 2023 (HAFF Bill). The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(iv) and (v).

[10] The minister responded to the committee's comments in a letter dated 20 March 2023. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 4 of 2023 available at: www.aph.gov.au/senate_scrutiny_digest .

[11] 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).

[16] The minister responded to the committee's comments in a letter dated 20 March 2023. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 4 of 2023 available at: www.aph.gov.au/senate_scrutiny_digest .

[17] Clause 41. The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(v).

[20] The minister responded to the committee's comments in a letter dated 20 March 2023. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 4 of 2023 available at: www.aph.gov.au/senate_scrutiny_digest .

[24] Subclause 44(2). The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(v).

[26] The minister responded to the committee's comments in a letter dated 20 March 2023. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 4 of 2023 available at: www.aph.gov.au/senate_scrutiny_digest .

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests