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Wednesday, 19 March 2008
Page: 1343

Senator MURRAY (6:47 PM) —Appropriation Bill (No. 3) 2007-2008 and Appropriation Bill (No. 4) 2007-2008 are being dealt with cognately. The Appropriation Bill (No. 3) 2007-2008 appropriates additional money for the ordinary annual services of government. The bill provides for expenditure of $2.436 billion. Among other things, it provides $242.1 million for the Department of Education, Employment and Workplace Relations. For the Department of the Environment, Water, Heritage and the Arts, $50.8 million in additional funding is provided for the Great Barrier Reef Marine Park structural adjustment package, and an additional $31.8 million for rebates to households for installing solar hot water heaters, an additional $50.8 million for the National Solar Schools Plan and an additional $15.2 million for early action on the National Plan for Water Security. The National Water Commission gets $25 million to assist groundwater licence holders in New South Wales to adjust to reductions in water access entitlements.

The Department of Families, Housing, Community Services and Indigenous Affairs will be provided with $189.8 million to assist people with disabilities, their families and carers. There are appropriations for the Department of Immigration and Citizenship and the Department of Defence. The balance of the amount in Appropriation Bill (No. 3) relates to estimates variations, reclassifications and other minor measures.

The Appropriation Bill (No. 4) 2007-2008 provides for expenditure of $898.5 million for various projects and new expenditure. This compares with $636.9 million in the equivalent act for the year 2006-07. For instance, the Department of Defence will receive $26.8 million for payment to the Queensland government for the relocation of Amberley State School as a result of the expansion of RAAF Amberley, and $33 million will be provided under the Commonwealth, States and Territories Disability Agreement for grants to the states for people with disabilities and their carers. The biggest item in Appropriation Bill (No. 4) is for AusAID, which will be provided with $466.4 million for Australia’s contribution to the International Development Association, which is the concessional lending arm of the World Bank.

My principal reason for speaking in this debate is that I want to address the ongoing dispute over what should be in Appropriations Bill (No. 3), which is for the ordinary annual services of government, and Appropriations Bill (No. 4), which is for new expenditure. Section 83 of the Constitution states:

No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.

Section 53 says:

The Senate may not amend proposed laws imposing taxation, or proposed laws appropriating revenue or moneys for the ordinary annual services of the Government.

That is very wise, as the basic ongoing machinery of government must continue and remain funded and operative. But of course the Senate does want to have its say on bills that do not appropriate revenue or moneys for the ordinary annual services of government. Wanting, as always, to have their way, the executive has long mixed up new money into the ordinary annual services money in the appropriations bills. In particular, the Senate and senators have objected to completely new programs, and projects starting up, using money appropriated previously for the ordinary annual services of the government. This makes it difficult to distinguish between the ongoing activities and new programs and projects, or to separately identify the expenditure on each of those areas. This is a problem that is exaggerated when the outcome on which the appropriation hangs is so broad and generalised as to be virtually meaningless.

The Senate has never abandoned the sound, longstanding principle that all new policies would and should be classified as not part of the ordinary annual services of the government. There are two broad categories of appropriations: annual appropriations and special or standing appropriations. There has long been cross-party support for easy passage of appropriations for additional money for the ordinary annual ongoing services of government. But there has long been cross-party support for new expenditure to be open to rejection or amendment, and for much greater scrutiny.

Governments have long tried to mix up the two appropriation types to avoid rejection or amendment. The dispute between the two houses on such matters led eventually to the 1965 Senate compact. This compact has been amended in the past, but there is a dispute now as to its interpretation. Since the year 2005, the Senate Appropriations and Staffing Committee has been endeavouring to resolve this issue. The Senate Standing Committee on Finance and Public Administration has also explored this issue, not least in estimates. The history of the disputes is set out in the Appropriations and Staffing Committee annual report 2005-06, appendix 1, incorporating the committee’s 39th report, and the Appropriations and Staffing Committee annual report 2006-07, appendix 1. The committee and the then minister disagreed over the interpretation of what the committee agreed to in correspondence with the then minister in 1999, which the committee said had resulted in a significant departure from the compact of 1965.

In the report of the Finance and Public Administration Committee tabled this week on the 2007-08 additional estimates, the committee commented on a continuing lack of clarity in the portfolio additional estimates. This is some of what they had to say—and I am going to quote it in full:

1.32         A key component of the Estimates process is the examination of Portfolio Budget Statements (PBS) and Portfolio Additional Estimates Statements (PAES). The relationship between Appropriation Bills and PBS or PAES is an essential aspect of the committee’s examination of the expenditure and performance of departments and agencies.

1.33         The primary function of the PAES is to assist members of parliament in the scrutiny of changes to proposed expenditure. This is clearly outlined at the beginning of each PAES:

The purpose of the Portfolio Additional Estimates Statements (PAES), like that of the Portfolio Budget Statements, is to inform Senators and Members of Parliament of the proposed allocation of resources to government outcomes by agencies within the portfolio...The PAES include new measures, and summarise the changes by Appropriation Bill, and, where relevant, by Special Appropriation and Special Account.

The PAES facilitate understanding of the proposed appropriations in Appropriation Bills (Nos. 3 and 4) 2007-08. In this sense the PAES is declared by the Additional Estimates Bill to be a ‘relevant document’ to the interpretation of the Bills according to section 15AB of the Acts Interpretation Act 1901.

1.34         The relationship between the PAES, the PBS and relevant Budget Papers was discussed in detail in a previous report of the committee: Transparency and accountability of Commonwealth public funding and expenditure. In relation to the level of information provided in these budget documents, the committee made the following recommendation:

The committee recommends that expenditure should be reported at the levels of programs in the budget documents, including in the schedules to the Appropriation Acts.

1.35         As part of the Estimates process, the committee seeks to determine whether funding for newly established programs has been correctly allocated in Appropriation Bill No. 4 (bill no. 4), and not in Appropriation Bill No. 3 (bill no. 3) which is for the ordinary annual services of government as specified in the Compact of 1965. Disclosure of appropriations in the PAES is an important component of overall government transparency and disclosure to Parliament. For this reason, understanding the PAES is central to the Estimates process.

1.36         In scrutinising the most recent PAES of the three portfolios under the committee’s purview, insufficient information appears to have been provided, making it unclear to which appropriation bill funding for new programs had been allocated. There was little detail provided of appropriations in bill no. 4 across all portfolio areas. In many instances, such information was limited to equity injections. This may indicate that newly established programs (not considered to be ordinary annual services of government) had been inappropriately placed in bill no. 3.

1.37         Furthermore, the appropriation bills for each portfolio were highly aggregated, posing further difficulties for the committee in ascertaining whether funding had been correctly appropriated or not.

1.38         The committee has identified the following list of programs or projects that may have been inappropriately placed in bill no. 3. Because of the lack of information provided in PAES, the list below is somewhat uncertain and certainly incomplete.

Prime Minister and Cabinet

Council of Australian Governments (COAG) Reform Council ($3.57 million over four years to establish a Reform Council as part of new initiatives arising from the COAG);

Community Cabinets ($8.4 million over four years to conduct regular community cabinet meetings);

Homeland and Border Security—review ($114 000 over one year to conduct a review of homeland and border security arrangements in Australia);

Lobbyist Register—establishment ($1 million over four years to establish and maintain a register of lobbyists);

Office of National Security—establishment ($3.8 million over four years to provide coordinated and integrated whole-of-government advice on national security policy and strategic implementation oversight);

Office of Work and Family—establishment ($6.3 million over four years to provide policy coordination and advice on work and family matters);

Review of recognition for the battle of Long Tan ($161 000 over one year to meet the costs of the Independent Review Panel into Recognition for the Battle of Long Tan);

Social Inclusion Unit—establishment ($6.7 million over four years to establish the unit within the department); and

Design of the Emissions Trading Scheme ($6.3 million for the 2007-08 financial year).

That is a very long quote, but it is a very important quote. The committee has unanimously said that it is just fed up—to use my words, not theirs—with the continuing misallocation of appropriation items in the appropriation bills. This is a vital matter. The Senate does not ever want to get into a situation where it is faced with having to reject bills which cover the ordinary annual services of government. But, if governments continue to put new projects and new matters within appropriation bills, you might eventually get to a stage where the Senate majority would reject a bill—and you would have the potential for a constitutional crisis, as we had in 1975.

The treatment of budget bills is an extremely important matter constitutionally, from an accountability perspective, from a transparency perspective and from a propriety perspective. The Senate Standing Committee on Finance and Public Administration has viewed this matter as extremely serious over many years, as has the Senate Appropriations and Staffing Committee. What is concerning is that the unresolved issue with the previous government is continuing with the new government, who put out as their mantra that they intend to improve this situation. And yet here the report of the Senate finance and public administration committee into the additional estimates statements, which I have just quoted from, clearly indicates that these practices carry on unchanged. Put simply, this is unacceptable. It is unacceptable to the Senate from any perspective.

It is not just the Democrats who have a long history of arguing for full transparency with respect to expenditure proposals. Whenever any Senate committee has dealt with this matter they have taken a unanimous view, and that is that appropriations bills for the ordinary annual services of government need to be identifiably, transparently and absolutely distinct from appropriations bills for new projects and new expenditure. That is a cross-party opinion which has been maintained whoever the executive is. I expect that that view will continue.

This is not the sort of matter which brings people out on the streets, but it is the sort of matter which, if not resolved and attended to, can cause a great deal of trouble in due course, and it is very, very dangerous for any government to continue in this way without resolving the matter with the Senate. I would urge the new Minister for Finance and Deregulation to take personal responsibility for this matter, to personally get involved in this matter, to push aside those who may be advising him who are far too attached to past duplicities and to help the Senate resolve this matter with the executive.

I will briefly cover this issue as outlined in a report that has previously been published by the Senate Appropriations and Staffing Committee. In their annual report for 2005-06 there were some expositions of the case I have just been making with respect to the ordinary annual services of the government. What they say with respect to the compact of 1965—so that it is clear what it means—is:

The classification of appropriations was the subject of an agreement between the Senate and the Government in 1965, known as the Compact of 1965. It was then agreed that appropriations for the following matters would be regarded as not part of the ordinary annual services of the government:

(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;

(d)   grants to the States under Section 96 of the Constitution; and

(e)   new policies not authorised by special legislation, subsequent appropriations for such items to be included in the appropriation bill not subject to amendment by the Senate—

in other words, the one that deals with the ordinary annual services of government. The report goes on:

The agreement was subsequently confirmed by the Senate, including by a resolution of 1977 ...

…            …            …

The application of the Compact of 1965 was the subject of correspondence between the committee and the government, tabled in the Senate on 3 November 1988 and 4 April 1989. It was agreed that expenditure on computers, which, due to changes in technology, are no longer major items of capital equipment, and expenditure on the fitting out of buildings, should be regarded as part of the ordinary annual services subject to certain limits.

The point of quoting that, of course, is that the Senate attended to very practical details about equipment, accounting matters and precise elements with respect to appropriations. The paper provided by the committee then went on, in reference to the modifications of 1999:

In February 1999 the then Minister for Finance and Administration wrote to the President of the Senate suggesting that there should be some “modest changes”, consequent upon the impending introduction of accrual budgeting, to the Compact of 1965 between the Senate and the government on what constitutes the ordinary annual services of the government under section 53 of the Constitution.

The proposal submitted by the minister was:

(i)   all equity injections and loans, including for defence purposes, in Bill 2;

(ii)   new administered expenses that fall within an existing outcome included in Bill 1;

(iii)   asset replacement will be typically funded from depreciation provisions appropriated in Bill 1 as part of the price of outputs. [Bill 1 is the ordinary annual services and Bill 2 the other bill.]

It should be noted that only administered expenses (as distinct from departmental expenses) falling within “existing outcomes” would be ordinary annual services.

…            …            …

The minister’s proposal was referred to the committee by the President.

The committee, and the Senate by endorsing the committee’s report, agreed that:

   the classification of appropriation items according to whether they fall within the category of ordinary annual services of the government ... remain unchanged except that

   (i)       items regarded as equity injections and loans be regarded as not part of ordinary annual services

   (ii)     all appropriations items for continuing activities for which appropriations have been made in the past be regarded as part of ordinary annual services

   (iii)    all appropriations for existing asset replacement be regarded as provision for depreciation and part of ordinary annual services.


... this interpretation of the effect of the 1999 agreement was put before committee in May 2005 and endorsed by the members of the committee.

The question was again raised by ANAO ...

The point is that the Department of Finance and Deregulation and the minister disagree with the Senate’s interpretation, and the Senate’s will should prevail. Frankly, that is it. We are the representatives of the people, and our view as a house should prevail. It needs to be resolved.

I move the second reading amendment standing in my name:

At the end of the motion, add:

“, and the Senate, noting the comments in the report of the Finance and Public Administration Committee on the 2007-08 additional estimates in relation to the lack of clarity in the Portfolio Additional Estimates Statements, and programs or projects that may have been inappropriately included in the appropriation bill for the ordinary annual services of the government, calls upon the government:

(1)   to respond as soon as practicable to the March 2007 report of the Finance and Public Administration References Committee on Transparency and accountability in Commonwealth public funding and expenditure, particularly the recommendation of the committee that expenditure should be reported at the level of programs; and

(2)   to resolve the outstanding issue reported on by the Appropriations and Staffing committee in its annual reports for 2005-06 and 2006-07 in relation to the ordinary annual services of the government and appropriation bills”.