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Medicare Guarantee (Consequential Amendments) Bill 2017

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2016-2017

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Medicare Guarantee Bill 2017

Medicare Guarantee (Consequential Amendments) Bill 2017

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by authority of the

Treasurer, the Hon Scott Morrison MP)



Table of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1               Medicare Guarantee Fund.................................................. 5

 

 



 

The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

CRF

consolidated revenue fund

Health Special Account

Medicare Guarantee Fund (Health) Special Account

MBS

Medicare Benefits Schedule

PBS

Pharmaceutical Benefits Scheme

Treasury Special Account 

Medicare Guarantee Fund (Treasury) Special Account



Medicare Guarantee Fund

The Medicare Guarantee Bill 2017 establishes the Medicare Guarantee Fund to secure the ongoing funding of the Medicare Benefits Schedule (MBS) and the Pharmaceutical Benefits Schedule (PBS). The Medicare Guarantee Fund consists of the Medicare Guarantee Fund (Treasury) Special Account (the Treasury Special Account) and the Medicare Guarantee Fund (Health) Special Account (the Health Special Account).

To ensure funding is always available to meet these obligations the Treasurer must annually credit the Treasury Special Account with an amount equal to the estimated costs of the MBS and PBS for the next financial year with revenue raised from the Medicare levy (less amounts to fund the National Disability Insurance Scheme) as well as a portion of personal income tax receipts. This amount is then transferred to the Health Special Account for the sole purpose of funding the MBS and PBS. The Treasurer must also credit further amounts to the Treasury Special Account if needed at any time in the financial year to cover estimated MBS and PBS payments.

The Medicare Guarantee (Consequential Amendments) Bill 2017 makes amendments to other Commonwealth legislation to reflect the proposed operation of the Medicare Guarantee Bill 2017.

Date of effect The Medicare Guarantee Fund is established from the day after Royal Assent. Payments from the Fund commence after an amount is first required to be credited to the Health Special Account.

Proposal announced The measure was announced on 9 May 2017 in the 2017-18 Budget.

Financial impact :  Nil.

Human rights implications :  These Bills do not raise any human rights issues. See the Statements of Compatibility with Human Rights — paragraphs 1.66 to 1.75.

Compliance cost impact Nil.  



Chapter 1          

Medicare Guarantee Fund

Outline of chapter

1.1                   The Medicare Guarantee Bill 2017 establishes the Medicare Guarantee Fund to secure the ongoing funding of the Medicare Benefits Schedule (MBS) and the Pharmaceutical Benefits Schedule (PBS). The Medicare Guarantee Fund consists of the Medicare Guarantee Fund (Treasury) Special Account (the Treasury Special Account) and the Medicare Guarantee Fund (Health) Special Account (the Health Special Account).

1.2                   To ensure funding is always available to meet these obligations the Treasurer must annually credit the Treasury Special Account with an amount equal to the estimated costs of the MBS and PBS for the next financial year with revenue raised from the Medicare levy (less amounts to fund the National Disability Insurance Scheme) as well as a portion of personal income tax receipts. This amount is then transferred to the Health Special Account for the sole purpose of funding the MBS and PBS. The Treasurer must also credit further amounts to the Treasury Special Account if needed at any time in the financial year to cover estimated MBS and PBS payments.

1.3                   The Medicare Guarantee (Consequential Amendments) Bill 2017 makes amendments to other Commonwealth legislation to reflect the proposed operation of the Medicare Guarantee Bill 2017.

Context of amendments

Framework for special accounts and ordinary and special appropriations

1.4                   All Commonwealth expenditure is ultimately subject to the requirements of the Australian Constitution. Among other things, the Constitution requires that a consolidated revenue fund (CRF) be formed from all revenues or monies raised or received by the Executive Government of the Commonwealth.

1.5                   Sections 81 and 83 of the Constitution provide that there must be an appropriation, made by law, for the purposes of the Commonwealth, before money can be drawn down from the CRF. This safeguards Parliament’s control over government funding.

1.6                   The two main types of appropriations to authorise the spending of money from the CRF are annual and special appropriations. Annual appropriations, contained in annual Appropriation Acts passed by Parliament, provide annual funding for the ordinary services of government. Annual appropriations are typically split into two Bills, the first that appropriates money to fund the ordinary annual services of the government and the second that appropriates money to fund things outside the ordinary annual services, such as new activities and major capital works.

1.7                   A special (standing) appropriation is a provision in an Act of Parliament that provides authority to spend money for particular purposes. Once a Bill with a special appropriation clause has been passed by Parliament and receives Royal Assent, ongoing authority exists for the continued expenditure of these funds for the specified purposes.

1.8                   Division 3 of Part 2-5 of the Public Governance, Performance and Accountability Act 2013 deals with special accounts within the CRF. Broadly, a special account is an amount notionally set aside within the CRF for particular purposes.

1.9                   Section 80 of the Public Governance, Performance and Accountability Act 2013 sets out when funds held in a special account may be withdrawn from the CRF. Specifically it provides that:

•        if an Act establishes a special account and identifies the purposes of the special account, then the CRF is appropriated for expenditure for those purposes, up to the balance of the special account (i.e. a special appropriation supporting payments for the purposes of special accounts); and

•        the crediting of an amount to, or debiting of an amount from, a special account takes effect at the time an entry connected with the crediting or debiting is made in the accounts of the affected Commonwealth entity.

MBS benefits and PBS benefits

1.10               Prior to these amendments, Medicare benefits (often referred to as benefits under the MBS or MBS benefits) and PBS benefits were paid under the Health Insurance Act 1973 and National Health Act 1953 respectively.

1.11               Under these Acts payment obligations under those schemes were appropriated from the CRF.

1.12               Section 125 of the Health Insurance Act 1973 provided for a special appropriation covering amounts paid under the MBS, including special arrangements for optometrists supplying services to persons in isolated areas (see Part II and section 129A of the Health Insurance Act 1973 ).

1.13               Section 46AC of the Health Insurance Act 1973 provided a separate appropriation for payments related to the former Health and Hospitals Fund established under the now repealed part of the Nation-building Funds Act 2008 .

1.14               Similarly, section 137 of the National Health Act 1953 included a special appropriation under which payments made under the PBS were appropriated from the CRF.

1.15               However, this was subject to a qualification. Subsection 137(2) of the National Health Act 1953 provides that expenditure of a capital nature and expenditure on administrative expenses incurred by or on behalf of the Commonwealth for the purposes of this Act, with the exception of expenditure incurred under section 9A or paragraph 9C(2)(a) of that Act, were to be paid out of moneys from time to time appropriated by the Parliament under annual appropriation Bills. This ensures that there is regular Parliamentary scrutiny of capital and administrative expenses.

1.16               Capital expenditure is incurred under section 9A or paragraph 9C(2)(a) of the National Health Act 1953 and therefore is covered by the special appropriation despite being capital in nature if the expenditure related to arrangements made by the Commonwealth for:

•        the supply of medical or surgical aids, equipment or appliances to patients; or

•        the modification of buildings, vehicles or equipment to treat or rehabilitate patients. 

Summary of new law

1.17               The Medicare Guarantee Bill 2017 establishes the Medicare Guarantee Fund consisting of the Treasury Special Account and the Health Special Account (which are special accounts for the purposes of the Public Governance, Performance and Accountability Act 2013 ).

1.18               It provides that:

•        payments of Medicare benefits and payments under the PBS are debited to and paid from the Health Special Account;

•        the Treasurer must, by notifiable instrument, annually credit the Treasury Special Account with an amount equal to the estimated cost of paying Medicare benefits and PBS benefits over the next financial year;

•        amounts credited to the Treasury Special Account are transferred as soon as practical to the Health Special Account;

•        the Treasurer must ensure that at all times during a financial year that the Medicare Guarantee Fund has sufficient funds to meet its expected liabilities for that financial year, and must credit additional amounts to the Treasury Special Account if any shortfall is estimated to arise; and

•        excess amounts in the Medicare Guarantee Fund can be returned to the CRF.

1.19               The Medicare Guarantee (Consequential Amendments) Bill 2017 makes amendments to other Commonwealth legislation to reflect the operation of the Medicare Guarantee Bill 2017.

Detailed explanation of new law

Establishing the Medicare Guarantee Fund

1.20               The Medicare Guarantee Bill 2017 establishes the Medicare Guarantee Fund, consisting of two special accounts, the Treasury Special Account and the Health Special Account. [Definitions of ‘Medicare Guarantee Fund (Treasury) Special Account’ and ‘Medicare Guarantee Fund (Health) Special Account’ in clause 4, clause 5, subclauses 6(1) and (2) and 12(1) and (2) of the Medicare Guarantee Bill 2017]

1.21               A special account is a mechanism for the purposes of the Public Governance, Performance and Accountability Act 2013 that sets aside an amount within the Commonwealth’s CRF so that it can only be used for specific purposes.

1.22               The objective of the Government in establishing the Medicare Guarantee Fund is to secure the ongoing funding of the MBS and PBS.

1.23               Broadly, the Treasurer must credit an amount equal to the estimate of the annual MBS and PBS expenditure to the Treasury Special Account each financial year. The Treasurer must ensure that as soon as possible the credit is transferred to the Health Special Account to be available to be drawn on as required to meet its purpose of making Medicare benefit payments and PBS payments.

1.24               The establishment of the two special accounts as part of the Medicare Guarantee Fund (the Treasury Special Account and the Health Special Account) rather than a single special account is required to ensure that the new Medicare Guarantee arrangements do not affect existing expenditure reporting requirements for MBS and PBS payments undertaken by the Health portfolio.

Treasury Special Account

Purpose of the Treasury Special Account

1.25               The Medicare Guarantee Bill 2017 provides that the purpose of the Treasury Special Account is solely to ensure that funds are available for transfer to the Health Special Account to meet Medicare benefit and PBS payment obligations. This ensures that the Medicare Guarantee Fund safeguards Medicare benefit payments and PBS payments by providing that funds are always available to meet liabilities under the MBS and the PBS. [Clause 11 of the Medicare Guarantee Bill 2017]

Crediting the Treasury Special Account

Crediting provisions

1.26               To achieve this purpose, the Medicare Guarantee Bill 2017 allows the Treasurer to credit an amount to the Treasury Special Account for a specified budget year by making a determination. [Subclauses 7(1) and 7(4) of the Medicare Guarantee Bill 2017]

1.27               Once the determination is made, the specified amount must generally be credited to the Treasury Special Account in accordance with the timing specified in the determination. However, the amount cannot be credited before the later of the day the determination commences and 1 July 2017. [Subclauses 7(2) and (3) of the Medicare Guarantee Bill 2017]

1.28               The determination by the Treasurer is a notifiable instrument. The determination is not legislative in character - it specifies an amount according to fixed rules. However, making it a notifiable instrument ensures that there is appropriate scrutiny of the making of the determination by having a permanent public record of the decision on the Federal Register of Legislation. [Subclause 7(1) of the Medicare Guarantee Bill 2017]

Circumstances when the Treasurer must credit an amount

1.29               The Treasurer may make a determination to credit an amount at any time. However, there are two situations in which the Treasurer must credit an amount.

1.30               First, the Treasurer must credit an amount to the Treasury Special Account as soon as is practical after:

•        the release of the Commonwealth Budget for that financial year (the budget year); or

•        for the first year of the operation of the Medicare Guarantee Fund, as soon as possible after the Medicare Guarantee Bill 2017 commences.

[Definition of ‘budget year’ in clause 4 and clauses 8 and 9 of the Medicare Guarantee Bill 2017]

1.31               The Treasurer must annually credit the amount the Treasurer considers to be sufficient to cover the estimated total liabilities of the Health Special Account for that financial year (i.e. the total of all expected payments for the purposes of Part VII of the National Health Act 1953 and all amounts payable under Part II or under an arrangement in force under section 129A of the Health Insurance Act 1973 ). [Subclauses 8(2) and 9(2) and (3) of the Medicare Guarantee Bill 2017]

1.32               Transitional arrangements apply for the 2017-18 budget year as the Medicare Guarantee Fund may not have been established and an amount credited until after 1 July 2017. The amount credited for the 2017-18 budget year must be the estimate of expenditure for Medicare benefits and PBS payments from the day in the budget year in which the amount is credited until the end of the 2017-18 budget year. [Subclause 8(2) of the Medicare Guarantee Bill 2017]

1.33               This obligation ensures the full amount of funding expected to be required for Medicare benefit payments and PBS payments is, in effect, drawn from the proceeds of the Medicare levy (less the contribution for the National Disability Insurance Scheme) as well as a portion of personal income tax receipts and allocated to the Medicare Guarantee Fund to support those programs for the following financial year.

1.34               Secondly, the Treasurer must also credit an amount if at any time in a financial year the Treasurer considers that the amount held in the Medicare Guarantee Fund may not be sufficient to permit the payment of all amounts required for the remainder of that financial year for the purposes of payments under:

•        Part VII of the National Health Act 1953 ; and

•        Part II or under an arrangement in force under section 129A of the Health Insurance Act 1973 .

[Subclauses 10(1) and (2) of the Medicare Guarantee Bill 2017]

1.35               In this case, the amount that the Treasurer must credit is the amount of the estimated shortfall in funding for that financial year. [Subclause 10(3) of the Medicare Guarantee Bill 2017]

Adjustments to address over-estimates and under-estimates

1.36               While the Treasurer must ensure that the Medicare Guarantee Fund is credited with an amount equal to its estimated liabilities for each budget year, this estimate may either exceed actual expenditure or be less than actual expenditure.

1.37               The estimate of liabilities is also updated at each budget update, in line with forecasts of MBS and PBS expenditure over the forward estimates period.

1.38               The Treasurer may address any potential under-estimate in the amount credited or a later increase in estimated expenditure identified in a budget update by crediting additional amounts by determination. To the extent that the under-estimate or increase in estimated expenditure means that the Treasurer considers the amount held in the Medicare Guarantee Fund is insufficient to meet expected expenditure for that budget year, the Treasurer is required to credit an additional amount for that budget year to make up the shortfall. This ensures that the Medicare Guarantee Fund meets it objective of guaranteeing payment of MBS and PBS obligations. The additional amount must be credited for the financial year to which the shortfall relates. [Clause 10 of the Medicare Guarantee Bill 2017]

Health Special Account

Purpose of the Health Special Account

1.39               Consistent with the objective of the Medicare Guarantee Fund, the Medicare Guarantee Bill 2017 provides that the purpose of the Health Special Account is to meet the cost of Medicare benefit payments and PBS payments. [Clause 13 of the Medicare Guarantee Bill 2017]

1.40               A Medicare benefit payment is a payment under Part II or under an arrangement in force under section 129A of the Health Insurance Act 1973 . A PBS payment is a payment for the purposes of Part VII of the National Health Act 1953 . [The definitions of ‘Medicare benefit payment’ and ‘PBS payment’ in clause 4 of the Medicare Guarantee Bill 2017]

1.41               As a result, payments relating to Medicare benefits and pharmaceutical benefits under the PBS previously supported by special appropriations in the National Health Act 1953 and the Health Insurance Act 1973 are instead paid from the Health Special Account.

1.42               As these payments are made for the purposes of a special account the payments are supported by the special appropriation for payments for the purposes of special accounts up to the amount credited to the fund under section 80 of the Public Governance, Performance and Accountability Act 2013 .

1.43               The debiting and payment of these amounts is automatic - there is no need for Ministerial consideration of each payment and no delay to the provision of benefits.

1.44               The amendments do not affect the treatment of related payments that continue to be authorised by annual Parliamentary appropriations or existing special appropriations. This includes payments to which subsection 137(2) of the National Health Act 1953 applies (which continue to be dealt with through annual appropriations) and payments under other Parts of the National Health Act 1953 (which are not within the scope of PBS payments and so continue to be covered by the special appropriation).

Overestimates of liabilities

1.45               If the liabilities of the Health Special Account are overestimated and the Health Minister considers there will be a surplus in the fund at the end of a financial year, the Health Minister may direct, by notifiable instrument, that an amount should be debited from the Health Special Account and returned to the general CRF. The removal of funds from the Health Special Account to the general CRF is subject to disclosure by notifiable instrument to ensure that there is appropriate public scrutiny of such withdrawals. No amount can be debited retrospectively or before the Health Special Account has first been credited. [Subclauses 15(1) and (2) of the Medicare Guarantee Bill 2017]

1.46               For the purpose of this provision, the Health Minister is defined as the Minister that administers Part II of the Health Insurance Act 1973 . [Definition of ‘Health Minister’ in clause 4 of the Medicare Guarantee Bill 2017]

1.47               The amount that may be withdrawn using this power cannot exceed the amount of the estimated surplus. This provides an important safeguard to ensure that the amount in the Health Special Account cannot be reduced below the estimated amount required to meet payments each financial year. In addition, an amount credited during a financial year to meet estimated expenditure for the following financial year cannot be treated as a surplus amount for the financial year in which the credit is made. This safeguards the Health Special Account to ensure that it has sufficient funds to meet expected liabilities. [Subclause 15(3) of the Medicare Guarantee Bill 2017]

1.48               An amount credited to the Treasury Special Account that is then transferred to the Health Special Account is treated as being credited to the Health Special Account for the same budget year as the credit was made to the Treasury Special Account. This ensures that the transfer between special accounts does not result in a loss of connection with the relevant budget year when transferred to the Health Special Account. [Subclause 15(4) of the Medicare Guarantee Bill 2017]

Transfers from the Treasury Special Account to the Health Special Account

1.49               The Medicare Guarantee Bill 2017 does not provide for amounts to be directly credited from the CRF to the Health Special Account. Instead, funds to meet the liabilities of the Health Special Account are transferred to it from the Treasury Special Account. The Treasurer is required to debit the Treasury Special Account and make a corresponding credit to the Health Special Account as soon as practical after any amount is credited to the Treasury Special Account to ensure that the funds are made available on a timely basis to support MBS and PBS expenditure. [Subclause 14(1) of the Medicare Guarantee Bill 2017]

1.50               The Medicare Guarantee Bill 2017 specifies that directions relating to transfers are not legislative instruments. This clarification is included solely for the benefit of the reader. The document is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003 as it is purely administrative in character. [Subclause 14(2) of the Medicare Guarantee Bill 2017]

1.51               Unlike the initial crediting of amounts and subsequent withdrawals, the instrument transferring amounts between funds is not a notifiable instrument. This is because transfers within the Medicare Guarantee Fund are an administrative process that does not affect the total amount available in the Fund and accordingly a public record is not required.

Appropriation

1.52               If at any time, the balance of the Health Special Account was insufficient to meet a MBS or PBS payment then the CRF is appropriated for the purposes of making the payment. This ensures that in the unlikely event of an error or delay in crediting amounts to the Health Special Account, MBS and PBS liabilities will always be met. [Clause 18 of the Medicare Guarantee Bill 2017]

Administration of the Medicare Guarantee Fund

1.53               The administration of the Medicare Guarantee Fund is split between the Treasury and Health portfolios.

1.54               The Secretary of the Treasury Department is responsible for the administration of the Treasury Special Account. [Subclause 6(3) of the Medicare Guarantee Bill 2017]

1.55               The Secretary of the Health Department is responsible for the administration of the Health Special Account. [Subclause 12(3) of the Medicare Guarantee Bill 2017]

1.56               The Treasurer and Health Minister may delegate any of their functions under the Medicare Guarantee Bill 2017 to senior officials in their respective departments. Any exercise of functions delegated in this way must be consistent with the directions of the relevant Minister. [Clauses 16 and 17 of the Medicare Guarantee Bill 2017]

1.57               Amendments have been made to the operation of the secrecy provisions under the National Health Act 1953 and the Health Insurance Act 1973 to permit information covered by these provisions to be shared for the purposes of the performance of duties or the exercise of powers or functions under the provisions of the Medicare Guarantee Bill 2017. [Schedule 1 to the Medicare Guarantee (Consequential Amendments) Bill 2017, items 2 and 3, subsection 130(1) of the Health Insurance Act 1973 and subsection 135A(1) of the National Health Act 1953]

1.58               These amendments adapt the existing provisions to the revised legislative framework for payments as a result of establishing the Medicare Guarantee Fund - they do not involve any substantive change to the existing provisions. The amendments allow the continuation of the existing administration of MBS and PBS payments by Commonwealth agencies.

Minor and consequential amendments

1.59               The Medicare Guarantee Bill 2017 defines a number of terms that are used in its operative provisions. It also includes an outline to assist readers in understanding the Act. Consistent with other outlines in Commonwealth legislation, this outline is a simplified and non-operative explanation of the law. [Clauses 3 and 4 of the Medicare Guarantee Bill 2017]

1.60               The Medicare Guarantee (Consequential Amendments) Bill 2017 also makes a number of consequential amendments to the National Health Act 1953 and the Health Insurance Act 1973 to replace the current special appropriations under those Acts for Medicare benefit payments and PBS payments with the payment mechanism in the Health Special Account. [Schedule 1 to the Medicare Guarantee (Consequential Amendments) Bill 2017, items 1, 4 and 5, section 125 of the Health Insurance Act 1973 and subsection 137(1) of the National Health Act 1953]

Application and commencement provisions

Commencement

1.61               The Medicare Guarantee Bill 2017 commences on the day after it receives Royal Assent. [Clause 2 of the Medicare Guarantee Bill 2017]

1.62               The amendments made by the Medicare Guarantee Fund (Consequential Amendments) Bill 2017 commence on the day the first amount is credited to the Health Special Account. [Clause 2 of the Medicare Guarantee (Consequential Amendments) Bill 2017]

Application

1.63               While the Medicare Guarantee Fund comes into existence from the day after the Medicare Guarantee Bill 2017 receives Royal Assent, no amounts can be credited to the Treasury Special Account until 1 July 2017. Similarly, no amount can be transferred to or paid from the Health Special Account before this first amount is credited. [Subclause 7(3), paragraph 8(1)(b), clause 13, subclause 14(1) and clauses 15 and 18 of the Medicare Guarantee Bill 2017]

1.64               The consequential amendments to the National Health Act 1953 and the Health Insurance Act 1973 apply to payments made after the amendments commence. [Schedule 1 to the Medicare Guarantee (Consequential Amendments) Bill 2017, item 9]

1.65               This means that until the Treasury and Health Special Accounts have come into existence and the Medicare Guarantee Fund has received its first credit, Medicare benefit payments and PBS payments continue to be supported by the special appropriations under the Health Insurance Act 1973 and the National Health Act 1953 . This ensures continuity of funding for MBS and PBS payments both before and after the Health Special Account is established.



Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Medicare Guarantee Bill 2017

1.66               This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

1.67               The Bill establishes the Medicare Guarantee Fund, consisting of the Medicare Guarantee Fund (Treasury) Special Account (Treasury Special Account) and the Medicare Guarantee Fund (Health) Special Account (Health Special Account).

1.68               The Bill provides that:

•        from the later of 1 July 2017 and the date of commencement of a crediting determination made under the Bill, MBS and PBS payments are automatically debited to and paid from the Health Special Account; and

•        the Treasurer must, by notifiable instrument, annually credit the Treasury Special Account with an amount equal to its estimated liabilities for that financial year and transfer that amount to the Health Special Account.

1.69               The Bill also establishes mechanisms to address over and under estimates, including provisions to top-up the Health Special Account so a shortfall in the estimate of liabilities does not affect payments.

Human rights implications

1.70               This Bill does not engage any of the applicable rights or freedoms.

Conclusion

1.71               This Bill is compatible with human rights as it does not raise any human rights issues.

Medicare Guarantee (Consequential Amendments) Bill 2017

1.72               This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

1.73               The Bill makes consequential amendments to the Health Insurance Act 1973 and the National Health Act 1953 to reflect the establishment of the Medicare Guarantee Fund (Treasury) Special Account and the Medicare Guarantee Fund (Health) Special Account.

Human rights implications

1.74               This Bill does not engage any of the applicable rights or freedoms.

Conclusion

1.75               This Bill is compatible with human rights as it does not raise any human rights issues.