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Appropriation Bill (No. 1) 2016-2017 [and] Appropriation Bill (No. 2) 2016-2017 [and] Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017



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BILLS DIGEST NO. 27, 2016-17 19 OCTOBER 2016

Appropriation Bill (No. 1) 2016-2017 [and] Appropriation Bill (No. 2) 2016-2017 [and] Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017 Daniel Weight Economics Section

Contents Purpose of the Bill ............................................................... 2

Structure of the Bill ............................................................. 2

Background ......................................................................... 2

Appropriations generally ..................................................... 3

Constitutional requirements ................................................... 4

The ‘ordinary annual services of the Government’ and ‘other’ annual services of the Government .......................... 4

The Senate’s powers ............................................................. 5

Presentational requirements................................................... 5

Departmental and administered expenses ........................... 5

Outcomes and programs ....................................................... 6

Appropriations for the Parliament and the Judiciary ............. 6

Advances to the Finance Minister and the Presiding Officers ............................................................................... 7

Debit limits ......................................................................... 8

Table 1: Debit limit reconciliation ......................................... 9

Committee consideration .................................................... 9

Senate Standing Committee for the Scrutiny of Bills .............. 9

Appropriation Bill (No. 1) 2016-2017 ................................... 9

Appropriation Bill (No. 2) 2016-2017 ................................. 10

Senate Estimates ................................................................... 11

Financial implications ........................................................ 11

Table 2: Annual appropriation available, or proposed to be made available, for 2016-17, by portfolio ..................... 11

Date introduced: 31 August 2016

House: House of Representatives

Portfolio: Finance

Commencement: Each Bill will commence on Royal Assent.

Links: The links to the Appropriation Bill (No. 1) 2016- 2017, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page.

The links to the Appropriation Bill (No. 2) 2016-2017, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page.

The links to the Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page.

All three Bills can be accessed through the Australian Parliament website.

If the Bills pass the Parliament and receive Royal Assent, they will become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

October 2016.

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Appropriation Bill (No. 1) 2016-2017 [and] Appropriation Bill (No. 2) 2016-2017 [and] Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017 2

Table 3: Annual appropriation available, or proposed to be made available, for 2016-17, by parliamentary department ......................................................................... 13

Statement of Compatibility with Human Rights .................. 13

Purpose of the Bill The purpose of the Appropriation Bill (No. 1) 2016-2017 (the ‘No. 1 Bill’) is to appropriate $49,425,332,000 ($49.4 billion) from the Consolidated Revenue Fund (CRF) in the 2016-17 financial year for the ordinary annual services of the Government.

The purpose of the Appropriation Bill (No. 2) 2016-2017 (the ‘No. 2 Bill’) is to appropriate $8,702,002,000 ($8.7 billion) from the CRF in the 2016-17 financial year for the other annual services of the Government.

The purpose of the Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017 (the ‘Parliamentary Departments Bill’) is to appropriate $147,224,000 ($147.2 million) for the Parliamentary departments.

These amounts are in addition to amounts appropriated in May 2016 under:

• the Supply Act (No 1) 2016-20171

• the Supply Act (No. 2) 2016-20172 and

• the Supply (Parliamentary Departments) Act (No. 1) 2016-2017.3

Structure of the Bill Part 1 of each Bill deals with preliminary matters, including when the Acts commence, and how to interpret the Acts.

Part 2 of each Bill outlines the quantum and types of appropriation from the CRF.

Part 3 of each Bill provides for either an Advance to the Finance Minister (AFM) or an Advance to the Presiding Officers of the Parliamentary departments, whichever is appropriate.

Part 4 of both the No. 1 Bill and the Parliamentary Departments Bill and Part 5 of the No. 2 Bill deal with technical matters including crediting amounts to special accounts, the formal appropriation of moneys from the CRF, and the automatic repeal of the subsequent Acts.

Part 4 of the No. 2 Bill sets the maximum amounts that can be drawn each year from the CRF for four types of grant to the states and territories that the Commonwealth may make. These limits are known as ‘debit limits’.

Schedule 1 of the No. 2 Bill nominates the Ministers who are able to impose conditions on grants of financial assistance to the states and territories proposed in that Bill.

Schedule 1 of the No. 1 Bill and the Parliamentary Departments Bill and Schedule 2 of Bill No. 2 contain the details of the amounts and types of appropriation to be made to each entity.

Background On 21 March 2016, the Prime Minister announced his intention to request that the Governor-General dissolve both Houses of the Parliament on or before 11 May 2016 for the purposes of holding a double-dissolution election if the Senate failed to pass certain legislation. 4 In announcing his intention, the Prime Minister advised:

Because such a double dissolution must be done on or before the 11th of May, the Government will be bringing the Budget forward to Tuesday 3rd of May so that Mr Shorten [the Leader of the Opposition] will be able to deliver his reply on the Thursday in the usual way.

1. Supply Act (No 1) 2016-2017.

2. Supply Act (No. 2) 2016-2017. 3. Supply (Parliamentary Departments) Act 2016-2017. 4. M Turnbull (Prime Minister), Transcript of press conference: Parliament House: Canberra, media release, 21 March 2016.

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Even with the revised scheduling of Budget day, however, there was little likelihood that the Parliament would have had time to consider and pass the annual Appropriation Bills prior to the likely dissolution of the Parliament.

On Thursday 28 April 2016, therefore, the Finance Minister, Senator Cormann, announced that the Government would introduce Supply Bills in the next meeting of the Parliament.5 Senator Cormann said:

These Bills will ensure continuity of the normal business of government in the context of a double-dissolution election. 6

On 2 May 2016, the Government introduced three Supply Bills that proposed to appropriate around five-twelfths (5/12) of the amounts anticipated to be required in 2016-17 for the existing activities of the Government only. The three Supply Bills were as follows:

• the Supply Bill (No 1) 2016-20177

• the Supply Bill (No. 2) 2016-20178 and

• the Supply (Parliamentary Departments) Bill (No. 1) 2016-2017.9

In effect, the Supply Bills (when enacted) provided for five months of appropriation—or enough for the functions of Government to continue until about the end of November 2016—excluding any money for new policy measures. The three Supply Acts commenced on 1 July 2016.10 The amounts appropriated were equivalent to five-twelfths (5/12) of the Government's proposed annual budget.

On 3 May 2016, the revised Budget Day, the Treasurer introduced three Appropriation Bills into the House of Representatives.11 However, those Bills lapsed when the 44th Parliament was dissolved on 9 May 2016.

On the second sitting day of the 45th Parliament, the Government introduced into the House the three Bills the subject of this Bills Digest. The Government advises that the only differences between the Appropriation Bills presented to the 44th Parliament and those the subject of this Bills Digest arise because of:

• the Merger of the CrimTrac Agency with the Australian Crime Commission, which resulted in the CrimTrac Agency’s outcome statement being transferred to the ACC as Outcome 2, along with the proposed appropriation

• a change in governance structure of Old Parliament House (OPH), which involved OPH becoming a corporate entity from 1 July 2016 and

• machinery of government changes related to the establishment of the Department of Environment and Energy.12

The Bills propose to appropriate seven-twelfths (7/12) of the total amount anticipated to be required in 2016-17 for the existing activities of the Government, as well as amounts for all new activities of the Government that are to be provided for by annual Appropriation Bills.

Appropriations generally An appropriation is the legal release of moneys from the CRF.13 Appropriation Acts, however, do not create a source of power for the Commonwealth to spend money; they merely release that money from the CRF. The Commonwealth’s power to spend money must be found in other parts of the Constitution.14

5. Australian Associated Press (AAP), ‘Supply bills to keep government running’, 9NEWS.com.au, 28 April 2016. 6. Ibid.

7. Parliament of Australia, ‘Supply Bill (No 1) 2016-2017 homepage’, Australian Parliament website. 8. Parliament of Australia, ‘Supply Bill (No. 2) 2016-2017 homepage’, Australian Parliament website. 9. Parliament of Australia, ‘Supply (Parliamentary Departments) Bill (No. 1) 2016-17 homepage’, Australian Parliament website. 10. Australia, Senate, Journals, 152, 2013-16, 3 May 2016, p. 4196; Supply Act (No. 1) 2016-2017; Supply Act (No. 2) 2016-2017; Supply

(Parliamentary Departments) Act 2016-2017. 11. Parliament of Australia, ‘Appropriation Bill (No. 1) 2016-2017 homepage’, Australian Parliament website; ‘ Appropriation Bill (No. 2) 2016- 2017 homepage’, Australian Parliament website; ‘Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017 homepage’, Australian

Parliament website. 12. Explanatory Memorandum, Appropriation Bill (No. 1) 2016-2017, pp. 11-12.

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Under the terms of the Constitution, a Bill proposing to appropriate moneys from the CRF must satisfy certain unique requirements. An appropriation Bill must also comply with certain presentational requirements.

Constitutional requirements Section 81 of the Constitution provides:

All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund [CRF], to be appropriated for the purposes of the Commonwealth … 15

Section 83 of the Constitution provides that no money may be withdrawn from the CRF ‘except under appropriation made by law’.16 The effect of these two sections is that all moneys received by the Commonwealth must be paid into the CRF, and must not be spent before there is an appropriation authorising specific expenditure.

Section 53 of the Constitution prevents proposed laws appropriating moneys originating in the Senate.17 Further, under section 56 of the Constitution, all proposed laws for the appropriation of moneys may only be introduced into the House of Representatives following a recommendation by the Governor-General.18 As the Governor-General only acts upon the advice of the Executive, this provision of the Constitution prevents non-government members of the House of Representatives from introducing Bills that would propose to appropriate money from the CRF.19

The ‘ordinary annual services of the Government’ and ‘other’ annual services of the Government Section 54 of the Constitution requires that there be a separate law appropriating funds for the ‘ordinary annual services of the Government’, and that other matters must not be dealt with in the same Bill.20 However, neither the ‘ordinary annual services of the Government’ or ‘other’ annual services of the Government are defined in the Constitution.

A working distinction between ordinary and other annual services was agreed in a Compact between the Senate and the Government in 1965.21 Several amendments have been made to the Compact since 1965 and, in 2010, the Senate Standing Committee on Appropriations and Staffing recommended that the Senate restate the Compact in a consolidated form.22 On 22 June 2010, the Senate resolved as follows:

(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.

(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;

13. Department of Finance (Finance), ‘Summary of annual appropriations’, Finance website, last updated 15 June 2015. 14. Pape v Commissioner of Taxation (2009) 238 CLR 1, [2009] HCA 23. 15. Constitution, section 81. 16. Constitution, section 83. 17. Constitution, section 53. 18. Constitution, section 56. 19. B Wright and P Fowler, House of Representatives practice, 6th edn, Department of the House of Representatives, Canberra, 2012, p. 424. 20. Constitution, section 54: ‘The proposed law which appropriates revenue or moneys for the ordinary annual services of the Government shall

deal only with such proposed appropriation’. 21. J Odgers, H Evans and R Laing, Odgers’ Australian Senate practice, 13th edn, Department of the Senate, Canberra, 2012, p. 369. 22. Senate Standing Committee on Appropriations and Staffing, Ordinary annual services of the government, Report, 50, The Senate, Canberra,

June 2010.

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(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.

(3) That, in respect of payments to international organisations:

(a) the initial payment in effect represents a new policy decision and therefore should be in Appropriation Bill (No. 2); and

(b) subsequent payments represent a continuing government activity of supporting the international organisation and therefore represent an ordinary annual service and should be in Appropriation Bill (No. 1).

(4) That all appropriation items for continuing activities for which appropriations have been made in the past be regarded as part of ordinary annual services. 23

Adherence to the Compact has not always been strict, and the High Court has held that any disagreements between the Houses are not justiciable.24 Any disputes, therefore, are to be determined between the Houses themselves.

The Senate’s powers Section 53 of the Constitution provides, among other things, that the Senate may not amend proposed laws appropriating revenue or moneys for the ordinary annual services of the Government. The Senate may, however, return such proposed laws to the House of Representatives and request, by message, the omission or amendment of any items or provisions.

The Senate may amend proposed laws appropriating revenue or moneys for purposes other than for the ordinary annual services of the Government, as long as it does not ‘increase any proposed charge or burden on the people’.25 Conceivably, the Senate could amend an Appropriation Bill for the other annual services of Government in order to, for example, redirect the proposed appropriation to another purpose, or reduce the proposed appropriation to nil.

Where a Bill for the ordinary annual services of the Government includes amounts that the Senate considers should, because of the Compact, be included in a Bill for the other annual services of the Government, the Senate may elect to deal with that Bill as if it were a Bill for the other annual services of government. In other words, the Senate may treat such a Bill as being susceptible to amendment.26

Presentational requirements

Departmental and administered expenses Australian Accounting Standard 1050 Administered Items requires that government agencies distinguish between revenues and expenses that they administer for the Government, and those over which they have some control.27 Generally, administered expenses are the costs of providing the programs that agencies run for the Government, while departmental expenses are the costs incurred in running agencies.

Appropriation Bills, therefore, distinguish between ‘administered’ expenses and ‘departmental’ expenses. Administered appropriation may only be used for the program or outcome that it is appropriated for, while departmental appropriation may be moved between different departmental activities.28

23. Australia, Senate, Journals, 127, 2008-10, 22 June 2010, pp. 3642-43. 24. Osborne v Commonwealth (1911) 12 CLR 321, [1911] HCA 19 per Griffith CJ at [336]. 25. Constitution, section 53. 26. Wright and Fowler, House of Representatives practice, op. cit., p. 430. 27. Australian Accounting Standards Board (AASB), Australian Accounting Standard 1050 Administered items, AASB website, December 2013. 28. Combet v Commonwealth (2005) 224 CLR 494, [2005] HCA 61, per Gummow, Hayne, Callinan and Heydon JJ at [123].

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Outcomes and programs While the level of detail necessary for an Appropriation Act to be valid is generally low, in the Pharmaceutical Benefits case the High Court held:

… there cannot be appropriations in blank, appropriations for no designated purpose, merely authorising expenditure … 29

The Appropriation Bills must therefore describe—in general terms—the purpose for which moneys are to be used. The Bills use four methods for describing the purposes of the proposed appropriations.

Appropriations for ‘outcomes’ of non-corporate Commonwealth entities For non-corporate Commonwealth entities, the purposes of operating appropriations (both departmental and administered) are specified with reference to the ‘outcomes’ of those entities. In 2014, the Department of Finance explained ‘outcomes’ as in the following terms:

Government outcomes are the intended results, impacts or consequences of actions by the Government on the Australian community. 30

The equivalent advice for the 2016-17 year stated:

An outcome statement should provide an immediate impression of what success looks like. 31

Outcome statements, therefore, tend to be aspirational in nature.

Appropriations for corporate Commonwealth entities As corporate Commonwealth entities are legally distinct from the Commonwealth itself, moneys cannot be appropriated directly to those entities.32 Instead, amounts are appropriated to relevant departments for on-payment to corporate Commonwealth entities within departments’ portfolios.

Non-operating appropriations Non-operating appropriations are amounts designated for the capital needs of entities. Typically, these amounts are equity injections into entities, or moneys for the purchase or development of the assets of entities. Under the Compact, they can only ever be proposed in a Bill dealing with the ‘other’ annual services of Government.

Appropriations for payments to the states Under section 96 of the Constitution, the Commonwealth Parliament may make payments to the states with or without conditions. Amounts intended for payment to the states are identified separately in appropriation Bills. Again, because of the Compact, amounts to the states can only ever be proposed in a Bill dealing with the ‘other’ annual services of Government. Amounts to the Australian Capital Territory and the Northern Territory are also included with the amounts for the states.

Appropriations for the Parliament and the Judiciary In 1981, the Senate Select Committee on Parliament’s Appropriations and Staffing considered the appropriations for the Parliament. That Committee noted the unique constitutional position of the Parliament vis-à-vis the Executive. That Committee noted section 53 of the Constitution’s reference to the ‘ordinary annual services of the Government’ before observing:

the Parliament may be ordinary; it may be annual; it may even be regarded as a service; but it is not a service of the Government. It is therefore inconsistent with the concept of the separation of powers and the supremacy of

29. Attorney-General (Vic); Ex rel Dale v Commonwealth (‘Pharmaceutical Benefits case’) (1945) 71 CLR 237, [1945] HCA 30, per Latham CJ at [253]. 30. Department of Finance, Guidance for the preparation of the 2014-15 portfolio budget statements, March 2014, p. 21. 31. Department of Finance, Guide to preparing the 2016-17 portfolio budget statements, March 2016, p. 31. 32. Public Governance, Performance and Accountability Act 2013, section 11, ‘Note’.

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Parliament to treat the provisions made for the Parliament as being an ordinary annual service of the Government. 33 (emphasis added).

That Committee recommended:

… all items of expenditure administered by the Executive departments on behalf of the Parliament be brought together in [a] Parliamentary Appropriation Bill …

Since 1982, the appropriations for the Parliamentary departments have been provided for via a distinct Appropriation Bill.

Quarantining appropriations in this way only applies to the Parliamentary departments (of which there are currently four).34 It does not extend to other aspects of the finances of the Parliament, such as providing for the remuneration and allowances of parliamentarians.

Despite the fact that, under the Constitution, the Judiciary is also distinct from the Executive, there is no equivalent practice whereby the Judiciary is provided for via a distinct Appropriation Bill.

Advances to the Finance Minister and the Presiding Officers The advance to the Finance Minister and the advance to the responsible Presiding Officers is an appropriation of moneys without any particular outcome or purpose specified. The advances are established in the first Appropriation Acts each year. The advances are then replenished whenever supplementary Appropriation Acts are passed.

The Finance Minister may use the amount appropriated as an advance to modify the schedule to the Appropriation Act, but only where:

the Finance Minister is satisfied that there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, […]:

(a) because of an erroneous omission or understatement; or

(b) because the expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Bill for this Act before that Bill was introduced into the House of Representatives. 35

The Explanatory Memorandum asserts that an advance may also be used to add a new item or outcome to the schedule.36

An equivalent legislative scheme is proposed for the Presiding Officers.37

The amount of appropriation proposed to be allocated to the advance to the Finance Minister in 2016-17 is $295 million in relation to the ordinary annual services of the Government; and $380 million in relation to the other annual services of the Government.38

For the Presiding Officers of the Parliament, the amounts of appropriation proposed to be allocated to the advance in 2016-17 are:

• $300,000 each in relation to the:

- Department of the Senate39

- Department of the House of Representatives40 and

33. Australia, Parliament, Parliament’s appropriations and staffing: report of the Senate Select Committee, Parl. Paper 151, Canberra, 1981, p. 18. 34. Namely: Department of the Senate, Department of the House of Representatives; Department of Parliamentary Services, and the Parliamentary Budget Office. 35. Appropriation Bill (No. 1) 2016-2017, clause 10; Appropriation Bill (No. 2) 2016-2017, clause 12. 36. Explanatory Memorandum, Appropriation Bill (No. 1) 2016-2017, p. 9; Explanatory Memorandum, Appropriation Bill (No. 2) 2016-2017, p.

10.

37. Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, clause 11. 38. Appropriation Bill (No. 1) 2016-2017, subclause 10(3); Appropriation Bill (No. 2) 2016-2017, subclause 12(3). 39. Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, subclause 11(3). 40. Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, subclause 11(4).

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- Parliamentary Budget Office41 and

• $1,000,000 in relation to the Department of Parliamentary Services.42

In order to access an advance, the Finance Minister or Presiding Officers, as the case may be, must issue a determination under the relevant Appropriation Act. A determination is a legislative instrument, but disallowance and sunsetting under section 42 and Part 4 of Chapter 3 of the Legislation Act 200343 respectively do not apply.44

Debit limits In addition to appropriating moneys for the other annual services of the Government, Part 4 of the No. 2 Bill also sets a maximum amount—known as a ‘debit limit’—that may be provided to the states and territories under four specific grant programs.

The legal appropriation for the four grant programs are provided by the special appropriation in section 80 of the Public Governance, Performance and Accountability Act 2013, which provides a standing appropriation for debits from special accounts. However, the design of the legislative schemes associated with each of the four grant programs requires that the maximum annual amount that may be debited under each program each year is to be set in an annual appropriation Bill. The four grant programs are as follows:

• grants from the Building Australia Fund provided for by Part 2.2 of the Nation-building Funds Act 200845

• grants from the Education Investment Fund provided for by Part 3.2 of the Nation-building Funds Act46

• grants of general purpose financial assistance (other than the revenue from the Goods and Services Tax) provided under section 9 of the Federal Financial Relations Act 200947 and

• grants made as National Partnership Payments via section 16 of the Federal Financial Relations Act.

Because the Compact prevents the No. 1 Bill from dealing with grants to the states and territories, the debit limits are set in the No. 2 Bill.

The Supply Act (No. 2) 2016-2017 provided debit limits that were about five-twelfths (5/12) of the total amount budgeted to be debited from the four funds in 2016-17. Subsection 13(5) of the Supply Act (No. 2) 2016-2017 provides that, if another appropriation Bill proposed another amount as a debit limit for the current year, that other amount is to be added to the amount provided in the Supply Act (No. 2) 2016-2017 to arrive at a total debit limit for 2016-17.

Table 1 shows the cumulative debit limits proposed to be made available in 2016-17; the proposed payments under each of the four grant programs in 2016-17; and the amount the debit limit exceeds (or falls short of) the budgeted payments under each of the four grant programs in 2016-17.

41. Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, subclause 11(6). 42. Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, subclause 11(5). 43. Legislation Act 2003. 44. Appropriation Bill (No. 1) 2016-2017, subclause 10(5); Appropriation Bill (No. 2) 2016-2017, subclause 12(5); Appropriation (Parliamentary

Departments) Bill (No. 1) 2016-2017, subclause 11(8). 45. Nation-building Funds Act 2008, section 109. 46. Ibid., section 199. 47. Federal Financial Relations Act 2009.

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Table 1: Debit limit reconciliation

Fund Debit limit

set in Supply Act (No 2) 2016-2017

Debit limit proposed in No. 2 Bill

Cumulative debit limit for 2016-17

Proposed expenditure in 2016-17

Excess or deficiency

$’m $’m $’m $’m $’m

Building Australia Fund 192.3 269.3 461.6 126.3

48 335.3

Education Investment Fund 17.5 5.1 22.6 26.7

49 -4.1

General purpose financial assistance 2,083.3 2,916.7 5,000.0 604.5

50 4,395.5

National Partnership Payments 10,416.7 14,583.3 25,000.0 12,513.0

51 12,487.0

Source: Department of Finance (Finance), Portfolio budget statements 2016-17: budget related paper no. 1.8, Finance, Canberra, May 2016, p. 31; Department of the Treasury (Treasury), Portfolio budget statements 2016-17: budget related paper no. 1.16, Treasury, Canberra, May 2016, p. 22.

Table 1 shows that, aside from the Education Investment Fund,52 the debit limits proposed for each of the grant programs is generally far in excess of that required to meet the proposed expenditure under each of those grant programs. For example, the debit limit proposed for National Partnership Payments is $12.5 billion above the proposed National Partnership Payment grants in 2016-17; or twice the amount required.

If the debit limits were set to the amounts proposed in the No. 2 Bill, the Executive would be free to make grants to the states and the territories up to the value of the excess, without any further approval by the Parliament.

Committee consideration Senate Standing Committee for the Scrutiny of Bills In its Alert Digest No. 7 of 2016, the Senate Standing Committee for the Scrutiny of Bills made comments in relation to the No. 1 Bill and the No. 2 Bill.53

Appropriation Bill (No. 1) 2016-2017 In relation to the No. 1 Bill, the Committee noted that initial expenditure for some items of expenditure announced in the 2016-17 Budget were inappropriately being treated as part of the ordinary annual services of Government because of their inclusion in the No. 1 Bill. The Committee identified three measures as potentially being erroneously included in the No. 1 Bill. These measures were:

• Australian International Education — enabling growth and innovation54

• Investment Approach to Welfare — Try, Test and Learn Fund55 and

• National Carp Control Plan.56

48. Australian Government, Portfolio budget statements 2016-17: budget related paper no. 1.8: Finance Portfolio, May 2016, p. 31. 49. Ibid.

50. Australian Government, Portfolio budget statements 2016-17: budget related paper no. 1.16: Treasury Portfolio, May 2016, p. 22. 51. Ibid., p. 23. 52. The debit limit for which appears to be insufficient to provide for the proposed expenditure by $4.1 million. 53. Senate Standing Committee for the Scrutiny of Bills, Alert digest, 7, 2016, The Senate, 12 October 2016. 54. Australian Government, Budget measures: budget paper no. 2: 2016-17, p. 76. 55. Ibid., p. 142.

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In relation to this matter, the Committee said:

The committee again notes that this approach is not consistent with the Senate resolution of 22 June 2010 relating to the classification of ordinary annual services expenditure in appropriation bills.

The committee reiterates its agreement with the comments made on this matter by the Senate Standing Committee on Appropriations and Staffing, and in particular 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 outcome should be classified as ordinary annual services expenditure.

The committee draws the 2010 Senate resolution to the attention of Senators and notes that the 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.

The committee draws this matter to the attention of Senators as it appears that the initial expenditure in relation to some 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) 2016-2017 which should only contain appropriations that are not amendable by the Senate).

The committee will continue to draw this important matter to the attention of Senators where appropriate in the future. 57

Appropriation Bill (No. 2) 2016-2017 In relation to the No. 2 Bill, the Committee raised a specific concern with the clause 16 of the Bill, which would allow the Executive to determine the terms and conditions that attach to the grants of financial assistance to the states and territories proposed to be provided by that Bill. The Committee noted that under section 96 of the Constitution, the Parliament, not the Executive, was vested with the power to make grants to the states, but that typically the Parliament has delegated that power to the Executive via legislation.

The Committee went on to raise a broader question about the various legislative provisions under which the power to make grants to the states and territories had been delegated by the Parliament to the Executive. The Committee concluded by making the following request of the Minister:

committee seeks the Minister’s advice as to:

 whether future Budget documentation (such as Budget Paper No. 3 ‘Federal Financial Relations’) could include general information about:

o the statutory provisions across the Commonwealth statute book which delegate to the Executive the power to determine terms and conditions attaching to grants to the States; and

o the general nature of terms and conditions attached to these payments (including payments made from standing and other appropriations); and

 whether the Department of Finance is able to issue guidance advising departments and agencies to include the following information in their portfolio budget statements where they are seeking appropriations for payments to the States, Territories and local government in future appropriation bills:

56. Ibid., p. 129. 57. Senate Standing Committee for the Scrutiny of Bills, Alert digest, 7, 2016, op. cit., p. 4.

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o the particular purposes to which the money for payments to the States, Territories and local government will be directed (including a breakdown of proposed grants by State/Territory);

o the specific statutory or other provisions (for example in the Federal Financial Relations Act 2009, the COAG Reform Fund Act 2008, Local Government (Financial Assistance) Act 1995 or special legislation or agreements) which detail how the terms and conditions to be attached to the particular payments will be determined; and

o the nature of the terms and conditions attached to these payments. 58

Senate Estimates The particulars of the three Bills were referred to the Senate legislative and general purposes standing committees under Senate standing order 26 for examination and report.59 This process is generally known as Senate Estimates. On 31 August 2016 the Senate resolved to hold the 2016-17 supplementary Budget estimates hearings between 17 and 20 October 2016.60

Financial implications The No. 1 Bill proposes to appropriate $49,425,332,000 ($49.4 billion) from the CRF.61

The No. 2 Bill proposes to appropriate $8,702,002,000 ($8.7 billion) from the CRF.62

The Parliamentary Departments Bill proposes to appropriate $147,224,000 ($147.2 million) from the CRF.63

The total amount of money proposed to be appropriated by the three Bills is $58,274,558,000 ($58.3 billion).

Table 2 shows the total amount of appropriation that has been provided to each portfolio by the Supply Act (No. 1) 2016-2017 and the Supply Act (No 2) 2016-2017 and the amount of appropriation proposed to be provided in the No. 1 Bill and the No. 2 Bill.

Table 2: Annual appropriation available, or proposed to be made available, for 2016-17, by portfolio

Supply Act

(No. 1) 2016-2017

Supply Act (No. 2) 2016-2017

Appropriati on Bill (No. 1) 2016-2017 (October 2016 version)

Appropriati on Bill (No. 2) 2016-2017 (October 2016 version)

Total

$'000 $'000 $'000 $'000 $'000

Portfolio

Agriculture and Water Resources 397,322 186,054 560,766 310,625 1,454,767

Attorney-General’s 1,228,932 30,481 1,762,709 106,946 3,129,068

Communications and the Arts 982,683 3,482,054 1,405,327 4,875,110 10,745,174

Defence 12,432,242 970,373 18,047,727 1,377,403 32,827,745

Education and 985,903 19,801 1,333,716 29,590 2,369,010

58. Ibid., pp. 7-8. 59. The Senate. Standing orders and other orders of the Senate, Standing order 26, The Senate, Canberra, August 2015. 60. Australia, Senate, Journals, 2, 2016, 31 August 2016, pp. 76-77. 61. Appropriation Bill (No. 1) 2016-2017, clause 6. 62. Appropriation Bill (No. 2) 2016-2017, clause 6. 63. Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, clause 6.

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Supply Act

(No. 1) 2016-2017

Supply Act (No. 2) 2016-2017

Appropriati on Bill (No. 1) 2016-2017 (October 2016 version)

Appropriati on Bill (No. 2) 2016-2017 (October 2016 version)

Total

$'000 $'000 $'000 $'000 $'000

Training

Employment 988,654 - 1,235,196 6,703 2,230,553

Environment and Energy

602,742 67,766 901,853 96,293 1,668,654

Finance 466,489 23,666 422,269 47,814 960,238

Foreign Affairs and Trade

2,696,110 464,829 3,775,608 655,325 7,591,872

Health 4,361,881 74,656 6,193,565 104,969 10,735,071

Immigration and Border Protection

1,836,515 93,944 2,766,432 227,309 4,924,200

Industry, Innovation and Science

877,968 33,716 1,244,880 42,630 2,199,194

Infrastructure and Regional Development

589,301 380,449 883,556 543,736 2,397,042

Prime Minister and Cabinet

835,024 22,004 1,183,762 30,955 2,071,745

Social Services 3,729,804 85,607 5,065,326 123,918 9,004,655

Treasury 2,020,880 64,758 2,642,640 122,676 4,850,954

Total 35,032,450 6,000,158 49,425,332 8,702,002 99,159,942

Source: Supply Act (No. 1) 2016-2017; Supply Act (No 2) 2016-2017; Appropriation Bill (No. 1) 2016-2017; Appropriation Bill (No. 2) 2016- 2017.

Table 3 shows the total amount of appropriation that has been provided to each Parliamentary department by the Supply (Parliamentary Departments) (No. 1) Act 2016-2017 and the amount of appropriation proposed to be provided in the Parliamentary Departments Bill 2016-2017.

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Table 3: Annual appropriation available, or proposed to be made available, for 2016-17, by parliamentary department Supply

(Parliamentary Departments) (No. 1) Act 2016-2017

Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017

Total

$'000 $'000 $'000

Parliamentary department

Department of the Senate 8,436 15,322 23,758

Department of the House of Representatives 9,058 16,065 25,123

Department of Parliamentary Services 76,374 111,799 188,173

Parliamentary Budget Office 2,884 4,038 6,922

Total 96,752 147,224 243,976

Source: Supply (Parliamentary Departments) (No. 1) Act 2016-2017; Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017.

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth),64 the Government has assessed the three Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. In relation to the human rights implications of the Bills, the Government states:

1 The Bill seeks to appropriate money for the ordinary annual services of the Government [or services that are not considered to be ordinary annual services; or expenditure by the Parliamentary departments, as relevant].

2 Accordingly, the Bill performs an important constitutional function, by authorising the withdrawal of money from the CRF for the broad purposes identified in the Bill.

3 However, as the High Court has emphasised, beyond this, Appropriation Acts do not create rights and nor do they, importantly, impose any duties.

4 Given that the legal effect of Appropriation Bills is limited in this way, the Bill is not seen as engaging, or otherwise affecting, the rights or freedoms relevant to the Human Rights (Parliamentary Scrutiny) Act 2011.

5 Detailed information on the relevant appropriations, however, is contained in the portfolio statements. 65

In relation to previous appropriation Bills, however, the Parliamentary Joint Committee on Human Rights has stated as follows:

The committee notes that it does not anticipate it will generally be necessary for it to make substantive comments on appropriation bills… Nonetheless, the committee considers that there may be cases in which the committee considers it appropriate to comment on such bills. These might include specific appropriation bills or specific appropriations where there is an evident and substantial link to the carrying out of policy or programs under legislation that gives rise to human rights concerns and where the issues have not been adequately addressed in its examination of the substantive legislation or there has not been an opportunity for such examination.

The committee, however, notes that appropriation bills are highly technical in nature and it is likely to be difficult for the committee to identify particular human rights concerns in the time available. The committee would therefore find it helpful if the statements of compatibility accompanying these bills identified any proposed cuts in

64. Human Rights (Parliamentary Scrutiny) Act 2011. 65. Explanatory Memorandum, Appropriation Bill (No. 1) 2016-2017, p. 4; Explanatory Memorandum, Appropriation Bill (No. 2) 2016-2017, p. 4; Explanatory Memorandum, Appropriation (Parliamentary Departments) Bill (No. 1) 2016-2017, p. 4.

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expenditure which may amount to retrogression or limitations on human rights, in particular economic, social and cultural rights. 66

In subsequent reports of the Parliamentary Joint Committee on Human Rights, the Committee has further considered the potential human rights implications of Appropriation Bills.67 In response to these concerns, the Finance Minister, Senator Cormann, has advised the Committee, inter alia:

The policy development process does … by its nature require an assessment of all factors that might relate to the relevant policies, including environmental, legal, economic, social and moral factors. The Attorney-General's Department has developed an assessment tool and educational materials for use by policy officers to strengthen the capacity to develop policies, programs and legislation consistent with human rights.

68

Despite the Minister’s assurances, the Committee maintained a concern that some appropriation Bills in some instances may impact adversely on human rights.69

At the time of writing, the Bills that are the subject of this Bills Digest had not been considered by the Parliamentary Joint Committee on Human Rights.

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66. Parliamentary Joint Committee on Human Rights (PJCHR), Examination of legislation in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011, Report, 3, 2013, Commonwealth of Australia, Canberra, 13 March 2013, p. 66. 67. See: PJCHR, Twenty-third report of the 44th Parliament, 18 June 2015; PJCHR, Thirty-fourth report of the 44th Parliament, 23 February 2016. 68. PJCHR, Twenty-third report of the 44th Parliament, op. cit., p. 17. 69. Ibid.