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Medical Research Future Fund Bill 2015 [and] Medical Research Future Fund (Consequential Amendments) Bill 2015



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ISSN 1328-8091

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BILLS DIGEST NO. 3, 2015-16 10 AUGUST 2015

Medical Research Future Fund Bill 2015 [and] Medical Research Future Fund (Consequential Amendments) Bill 2015 Jaan Murphy Law and Bills Digest Section

Dr David Brett Science, Technology, Environment and Resources Section

Contents

Purpose of the Bills .............................................................. 6

Structure of the Bills ............................................................ 6

Background ......................................................................... 6

Committee consideration .................................................... 7

Parliamentary Joint Committee on Human Rights .................. 7

Senate Community Affairs Legislation Committee .................. 7

Senate Standing Committee for the Scrutiny of Bills .............. 7

Senate Standing Committee for the Selection of Bills ............. 7

Policy position of non-government parties/independents ..... 7

Australian Labor Party ............................................................. 7

Palmer United Party ................................................................ 8

Australian Greens .................................................................... 8

Senator Leyonhjelm ................................................................. 8

Other independents ................................................................ 8

Position of major interest groups ......................................... 8

Financial implications .......................................................... 9

Statement of Compatibility with Human Rights .................... 9

Key issues and provisions of the Bill ..................................... 9

Date introduced: 27 May 2015

House: House of Representatives

Portfolio: Finance

Commencement: The operative provisions of the Medical Research Future Fund Bill 2015 will commence on the later of the day after it receives the Royal Assent or the day after the Medical Research Future Fund (Consequential Amendments) Bill 2015 receives the Royal Assent. The schedules of the Medical Research Future Fund (Consequential Amendments) Bill 2015 commence on the days listed in the table at item 2 of that Bill.

Links: The links to the Bills, their Explanatory Memoranda and second reading speeches can be found on the Bills’ home pages for the Medical Research Future Fund Bill 2015 and the Medical Research Future Fund (Consequential Amendments) Bill 2015 or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

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Part 1 - preliminary matters ................................................. 10

Objects of the Bill ................................................................ 10

Constitutional basis of the Bill ............................................. 10

Key definitions ..................................................................... 11

Advisory board .................................................................. 11

Business entity .................................................................. 12

Medical research ............................................................... 12

Medical innovation............................................................ 13

Medical research institute ................................................ 14

Corporate Commonwealth entity ..................................... 14

Crown immunity from prosecution for offences................. 15

Extraterritorial application .................................................. 15

Part 2 - The Fund ................................................................... 15

Division 1 — Introduction.................................................... 15

Division 2 — Establishment of the Fund and Special Account ............................................................................... 16

Establishment of the Fund and Special Account ............... 16

Initial seed capital and investments .................................. 16

Division 3 — Credits to the MRFF Special Account ............. 16

Division 4 — Debits from the MRFF .................................... 17

Decisions about grant funding .......................................... 17

Figure 1: MRFF governance and disbursement arrangements ...................................................................... 19

Table 1: peer review of funding decisions ........................... 20

The need to support indirect research costs .................... 20

General purposes of the MRFF Special Account ............... 21

Specific purpose of the MRFF Special Account: State/Territory grants through the COAG Reform Fund................................................................................... 21

Specific purpose of the MRFF Special Account: grants to corporate entities and universities ............................... 22

Specific purpose of the MRFF Special Account: payments to corporate Commonwealth entities .............. 22

Obligation on FFB to ensure sufficient money .................. 23

Division 5 — Inter-fund transfers ........................................ 23

Part 2A - Australian Medical Research Advisory Board ........ 23

Division 1 — simplified outline ............................................ 23

Division 2 — Establishment of the Advisory Board ............. 23

Division 3 - the Strategy ...................................................... 24

Factors to be considered in developing the Strategy........ 24

How the Fund and NHMRC would coordinate efforts ...... 24

Limitations on the content of the Strategy ....................... 25

Contents of the Strategy are fixed for five years and cannot be amended .......................................................... 25

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Division 3 - the Priorities .................................................... 26

Factors to be considered in developing the Priorities ...... 26

Limitations on the content of the Priorities ...................... 26

Contents of the Priorities are fixed for two years ............. 26

Issues arising from the five-year and two-year fixed periods that the Strategy and Priorities remain in force .................................................................................. 27

Ensuring the Strategy and Priorities are developed using evidence and are not politicised ................................ 27

Division 4 - the Advisory Board ........................................... 28

Membership of the Advisory Board .................................. 28

Appointment of members ................................................. 28

The expertise of Advisory Board members and nomination ........................................................................ 28

The need for consumer representation on the Advisory Board .................................................................. 29

Remuneration ................................................................... 29

Conflict of Interests ........................................................... 30

Table 2: disclosure of conflict of interest and voting .......... 30

Termination of Advisory Board members ......................... 31

Part 3 - Maximum annual distributions ................................ 32

Part 4 - Investments of the Fund .......................................... 33

Where does the Fund get the funds to invest? ................... 33

What can the Fund invest in? .............................................. 33

How does the Fund purchase investments? ....................... 33

Objects of the Investment Portfolio .................................... 34

The Investment Mandate, governance of the Fund and Ministerial oversight............................................................ 34

The need for the Investment Mandate to focus on or prohibit certain types of investments ............................... 36

Part 5 - Reporting obligations ............................................... 36

Part 6 - Miscellaneous .......................................................... 37

Delegation ........................................................................... 37

Delegation by the Health Minister .................................... 37

Delegation by the Finance Minister .................................. 37

Delegation by the Treasurer ............................................. 37

Embedded review................................................................ 38

Rule-making power ............................................................. 38

Other provisions ................................................................ 38

Key issues and provisions of the Consequential Bill ............. 39

Structure of the Consequential Bill ....................................... 39

Schedule 1 ............................................................................. 39

Amendments to the COAG Reform Fund Act 2008 ............. 39

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Amendments to the DisabilityCare Australian Fund Act 2013 ..................................................................................... 39

Amendments to the Future Fund Act 2006 ......................... 40

Investment managers........................................................ 40

Reporting obligations ........................................................ 40

Inter-fund transfers ........................................................... 40

Amendments to the Nation-building Funds Act 2008 ......... 41

Schedule 2 — Abolition of the HHF ....................................... 41

Schedule 3 ............................................................................. 41

Concluding comments ....................................................... 41

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List of abbreviations

Abbreviation Definition

Advisory Board Australian Medical Research Advisory Board

Bill Medical Research Future Fund Bill 2015

CEO Chief Executive Officer

Consequential Bill Medical Research Future Fund (Consequential Amendments) Bill 2015

FFB Future Fund Board

Fund Medical Research Future Fund

Health Account Medical Research Future Fund Health Special Account

HHF Health and Hospitals Fund

Inquiry Senate Community Affairs Legislation Committee inquiry into the Bill

MAD maximum annual distribution

MREA Medical Research Endowment Account

MRFF Special Account Medical Research Future Fund Special Account

NHMRC National Health and Medical Research Council

NHMRC Act National Health and Medical Research Council Act 1992

Priorities Australian Medical Research and Innovation Priorities

Strategy Australian Medical Research and Innovation Strategy

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Purpose of the Bills The purpose of the Medical Research Future Fund Bill 2015 (the Bill) is to establish a perpetual fund that is capable of generating ‘income over the long term’ to provide the ‘large-scale funding’ that is required for ‘medical research and medical innovation to support a healthy and productive nation’.1

The purpose of the Medical Research Future Fund (Consequential Amendments) Bill 2015 (the Consequential Bill) is to make consequential amendments to other legislation to give effect to the Medical Research Future Fund and the abolition of the Health and Hospitals Fund (HHF).

Structure of the Bills The Bill is divided into six parts:

• Part 1 contains various preliminary provisions including definitions, extraterritorial operation and the constitutional basis for the Bill

• Part 2 establishes the Medical Research Future Fund (the Fund), defines its purpose and sets out how payments can be made to different types of entities

• Part 3 deals with the maximum annual distribution (MAD) that can be made each year

• Part 4 deals with how the Fund is to be invested, as well as various governance mechanisms

• Part 5 deals with reporting obligations

• Part 6 contains miscellaneous provisions, including a rule-making power.

The Consequential Bill has three schedules. Schedule 1 contains the main amendments to a number of Acts. Schedule 2 contains amendments relating to the abolition of the HHF. Schedule 3 contains amendments contingent on commencement of parts of the Acts and Instruments (Framework Reform) Act 2015.2

Background As part of the 2014-15 Budget, the Australian Government announced the establishment of the $20 billion Fund, initially targeted to commence from 1 January 2015.3 At the time, it was proposed that:

From 2015-16, the net earnings from the Fund will serve as a permanent revenue stream, primarily to the National Health and Medical Research Council (NHMRC). The Fund will distribute around $1 billion a year into medical research from 2022-23… This investment, to be managed by the Future Fund Board of Guardians, will help to ensure Australia can continue to advance world leading medical research projects, attract and retain first class researchers and deliver improved health and medical outcomes for all Australians.

4 [emphasis added]

The policy basis for creating the Fund is, in part, that by financially supporting medical research and medical innovation over the long-term, the health and wellbeing of all Australians can be improved.5 Even after Government amendments in the House of Representatives, the mechanisms in the Bill for delivering on that policy objective differ slightly from the original model proposed as part of the 2014-15 Budget. Nonetheless, they are consistent with the overall policy objectives: funding medical research and innovation (including in health disciplines) over the long-term to improve the health and well-being of Australians.

1. Medical Research Future Fund Bill 2015, preamble. 2. Acts and Instruments (Framework Reform) Act 2015, accessed 7 August 2015. 3. Australian Government, ‘Medical Research Future Fund’, Budget overview, 2014-15, accessed 11 June 2015; Australian Government, ‘Medical Research Future Fund’, Overview: Health, 2014-15, accessed 11 June 2015.

4. Australian Government, ‘Medical Research Future Fund’, Budget Overview, 2014-15, op. cit. 5. Explanatory Memorandum, Medical Research Future Fund Bill 2015, p. 4, accessed 15 June 2015.

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Committee consideration Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights considered the Bills and stated that they ‘do not require additional comment as they either do not engage human rights or engage rights (but do not promote or limit rights)’.6

Senate Community Affairs Legislation Committee The Bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and report by 10 August 2015. Details of the inquiry are at the inquiry webpage.7

Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills had no comment on either the Bill or the Consequential Bill.8

Senate Standing Committee for the Selection of Bills In its sixth report of 2015, the Senate Standing Committee for the Selection of Bills (the Selection Committee) ‘considered … but was unable to reach agreement’ on the Bill and Consequential Bill.9 Subsequently however, the Senate passed an amendment to the motion to adopt the sixth report of the Selection Committee, the effect of which was to refer the Bill and Consequential Bill to the Senate Community Affairs Legislation Committee for inquiry and report by 10 August 2015.10

Policy position of non-government parties/independents Australian Labor Party The Labor Party indicated it would not support the Bill in its original form,11 and also indicated it does not support the proposed transfer of $1 billion from the HHF to the Fund.12 The Labor Party has also expressed a number of concerns about the Bill related to governance of the Fund and oversight of distributions, as well as the Bill’s current definition of ‘medical research’.13

The Shadow Minister for Health, Ms Catherine King, moved a number of proposed amendments to the Bill.14 Briefly, those amendments seek to ensure that decisions to provide funds, grants or payments are made by the Chief Executive Officer (CEO) of the National Health and Medical Research Council (NHMRC) instead of the Finance or Health Minister. However, following the amendment of the Bill by the Government (the details of which are discussed later in this Digest), the Labor Party noted that:

We will not oppose these amendments, although we see them as second-class. We think the amendments that we moved and failed to pass in the House, which would see these funds go through the Medical Research Endowment Account and therefore be distributed according to normal NHMRC processes, are by [far] and away the better

6. Parliamentary Joint Committee on Human Rights (PJCHR), Twenty-third Report of the 44th Parliament , 18 June 2015, pp. 1-2, accessed 7 August 2015. See also: PJCHR, Index of bills considered by the committee in 2015, 25 June 2015, p. 16, accessed 7 August 2015. 7. Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and the Medical Research Future Fund (Consequential Amendments) Bill 2015, The Senate, Canberra, 2015, accessed 8 August 2015. 8. Senate Standing Committee for the Scrutiny of Bills, Alert Digest No. 6 of 2015, The Senate, Canberra, 17 June 2015, pp. 34-35, accessed

18 June 2015. 9. Senate Selection of Bills Committee, Report No. 6 of 2015, The Senate, Canberra, 16 June 2015, p. 4, accessed 18 June 2015. 10. Senate Selection of Bills Committee, Report No. 6 of 2015, op. cit., p. 7. See also: D Bushby, ‘Selection of Bills Committee Report’, Senate,

Debates, 16 June 2015, p. 3544 (moving that Report No. 6 of 2015 be adopted); C Moore, ‘Selection of Bills Committee Report’, Senate, Debates, 16 June 2015, p. 3546 (moving the amendment that the Bills be referred to the Community Affairs Committee), Division at 15.50 (33 Ayes, 27 Noes), amendment passed’, all accessed 7 August 2015. 11. C King, ‘Consideration in detail: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 4 June 2015, p. 5886, accessed 16 June 2015, ‘We want to support medical research. We want to support a Bill, but we cannot support this Bill in its current form. It must be amended.’ 12. C King, ‘Second reading speech: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 4 June 2015, p. 5855, accessed 16 June 2015. 13. C King (Shadow Minister for Health), Abbott must ensure MRFF cannot be used as a $20 billion Coalition Fund, media release, 4 June 2015, accessed 15 June 2015. 14. The amendments moved by the Opposition can be accessed via the Medical Research Future Fund Bill 2015 homepage here. See also: C King, ‘Consideration in detail: Medical Research Future Fund Bill 2015’, op. cit., p. 5886.

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alternative, but we recognise that we did not have the numbers in the House to get those through … We will not oppose the amendments in this House but, as the Minister knows, a Senate inquiry has just commenced. I am advised that we will have some public hearings over the course of July where these issues will be able to be fleshed out a little bit more, and they will then be subject to further debate in the Senate.

15

This would appear to indicate that the Labor party will not necessarily support the amended Bill in the Senate.

Palmer United Party Palmer United Party (PUP) Senator Zhenya Wang has indicated strong support for the Fund, stating that:

The MRFF [Medical Research Future Fund] is an imperative for Australia and that is why I and many of my Senate colleagues support it, and so should all Australians. I call on the government to consult widely and come up with the formula to fund it. 16

As such, it would appear likely that the PUP will support the Bill.

Australian Greens The party has previously opposed linking funding for the Fund to the previously proposed GP co-payment, but has indicated that it is generally supportive of increasing funding for medical research.17 Initial funding of the Fund is linked to both savings measures in the Health portfolio and the transfer of the uncommitted balance of the HHF.18 As such, the likely position of the Greens on the amended Bill is not clear.

Senator Leyonhjelm Media reports indicate that Liberal Democrat Senator David Leyonhjelm is opposed to the establishment of the Fund.19 As such, it would appear likely that Senator Leyonhjelm will oppose the Bill.

Other independents At the time of writing, the position of other independent Members and Senators and non-government parties was not clear.

Position of major interest groups A range of interest groups including universities, private industry, consumer groups and industry bodies lodged more than 50 submissions to the Senate Community Affairs Legislation Committee inquiry into the Bill (the Inquiry).20 Whilst the submissions were overwhelmingly supportive of the establishment of the Fund, a number of common issues were identified, including:

• the expertise of Advisory Board members and how they are appointed

• the need for consumer representation on the Advisory Board

• how the Fund and NHMRC would coordinate efforts

• ensuring the Strategy and Priorities are developed using evidence and are not politicised

• the need to support indirect research costs

• the definitions of ‘medical research’ and ‘medical innovation’

• how funding decisions are made and the role of peer-review and independent expert advice

• the need for the Investment Mandate to focus on or prohibit certain types of investments

15. M Butler (Shadow Minister for Environment, Climate Change and Water), ‘Consideration in detail: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 4 June 2015, p. 7030, accessed 21 July 2015. 16. Z Wang, ‘Money must be found for the medical research future fund’, The Australian, 2 March 2015, p. 10, accessed 15 June 2015. 17. A Bandt (Greens Deputy Leader), Abbott and Cormann need 'Plan B' on Medical Research Fund, media release, [22 August 2014], accessed

16 June 2015. 18. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 4. 19. R Lewis and J Kelly, ‘”Goodies” and “baddies” in crossbench sights’, The Australian, 14 May 2015, p. 6, accessed 16 June 2015. 20. Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund

(Consequential Amendments) Bill 2015, Submissions, accessed 25 July 2015.

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• reporting obligations and

• the need for the Advisory Board.

These issues are examined below under the heading ‘Key issues and provisions of the Bill’.

Financial implications In the second reading speech for the Bill, the Treasurer advised that on it establishment on 1 August 2015:

The fund will then receive an initial contribution of $1 billion from the uncommitted balance of the Health and Hospitals Fund. In addition, the estimated value of savings from the Health portfolio will be contributed until the fund breaches a target capital level of $20 billion. 21

The Financial Impact Statement in the Explanatory Memorandum to the Bill notes that:

• the initial credit of funds from the HHF into the Fund will not have a direct impact on underlying cash and fiscal balances

• interest earnings of the Fund will have a positive impact on the underlying cash and fiscal balances

• costs incurred by the Future Fund Board (FFB) will have a negative impact on the underlying cash and fiscal balances and

• payments from the Fund will have a negative impact on the underlying cash and fiscal balances.22

However, the Financial Impact Statement does not provide any figures regarding the financial implication of the Bill over the long term arising from the impacts noted above. The way in which the establishment of the fund was accounted for in the budget has attracted some criticism, with one commentator stating:

Of course, since the government is in deficit, it doesn't actually have any money to put into its medical research future fund account. So to its normal borrowing to cover the deficit it will have to add borrowing to finance the money it puts into the research fund. This extra will add to the size of its gross public debt, but not to its net debt, since the latter is the gross debt (everything the government owes other people) minus all the money in the various parts of the future fund, which has been used to buy shares and bonds, and so represents all the money other people owe the government. However, when the government spends the interest on the medical fund on medical research, this spending will be recorded above the line and so will add to the deficit.

23

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.24

Key issues and provisions of the Bill In the House of Representatives, the Government moved a number of amendments to the Bill and Consequential Bill.25 The amendments appear to be a response to criticisms regarding the governance of the Fund and oversight of distributions, with the Minister stating:

These amendments clarify and enhance the decision-making and accountability mechanisms to be used in the disbursement of funds from the MRFF. They reflect the policy approach already announced, but for public assurance the government is very willing to insert arrangements into the legislation that were originally intended to be implemented administratively. By shifting this detail into the legislation, the government can disabuse concerns

21. J Hockey, ‘Second reading speech: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 27 May 2015, p. 4701, accessed 8 August 2015. 22. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 6. 23. R Gittins, ‘Medical research future fund: How the trick is done’, Sydney Morning Herald, (online edition), 15 December 2014, accessed

16 June 2015. 24. The Statements of Compatibility with Human Rights can be found at page 6 of the Explanatory Memorandum to the Bill and page 5 of the Explanatory Memorandum to the Consequential Bill. 25. See: Medical Research Future Fund Bill 2015, Government amendments [sheet HK145] and Medical Research Future Fund (Consequential

Amendments) Bill 2015, Government amendments [sheet ZA395], accessed 8 August 2015.

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raised by the opposition that disbursements from the fund may lack sufficient governance or expert leadership. The amendments ensure robust decision making and strong accountability mechanisms. 26

As a result, the analysis and discussion below refers to the Bill as amended by the House of Representatives. Briefly the amendments:

• create the Australian Medical Research Advisory Board (Advisory Board)

• impose requirements to have:

- an Australian Medical Research and Innovation Strategy (Strategy) and - Australian Medical Research and Innovation Priorities (Priorities) both of which must be developed by the Advisory Board and • specify that decision-making mechanisms for the disbursement of funds from the Fund must take account of

the Strategy and the Priorities.

Part 1 - preliminary matters

Objects of the Bill The Bill is somewhat unusual in that it contains both an objects clause (clause 3) and a preamble. The preamble provides that:

The Parliament of Australia recognises that the health and wellbeing of all Australians is essential to the future of Australia. Discoveries in medical research and important medical innovations in the future will contribute to improving the health and wellbeing of all Australians.

In order for medical research and medical innovation to support a healthy and productive nation, long-term and large-scale funding is required. The Parliament believes that the establishment of a perpetual fund capable of generating income over the long term is the most appropriate mechanism for ensuring that this funding is available on an ongoing basis. The Commonwealth has a role in meeting this funding need as it is able to marshal and deploy resources not available through other means.

Funding a system for medical research and medical innovation requires a national approach. The establishment of the Medical Research Future Fund and its administration will ensure that a coherent and consistent approach is adopted in the funding of medical research and medical innovation to ensure that such research and innovation benefits all Australians.

Clause 3 provides that the object of the Bill is to:

… improve the health and wellbeing of Australians by establishing the Medical Research Future Fund to provide grants of financial assistance to support medical research and medical innovation.

The contents of the preamble and clause 3 are both broadly consistent with the policy objective contained in the Bill’s Explanatory Memorandum and that proposed as part of the 2014-15 Budget.

Constitutional basis of the Bill Clause 9 of the Bill provides a number of ‘alternative’ constitutional bases for the validity of the Bill.27 The inclusion of such a clause would appear to be a reaction to the High Court decisions in Pape, Williams (No. 1) and Williams (No. 2).28 In simple terms, the High Court has held that even if the Commonwealth has a valid constitutional basis for spending money, specific legislative authorisation beyond an appropriation Act is usually required before it can do so.

26. S Ley, ’Consideration in detail: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 22 June 2015, p. 7029, accessed 13 July 2015. 27. The inclusion of the type of provision is becoming increasingly common. See, for example: section 333 of the Navigation Act 2012; section 4 of the National Land Transport Act 2014 and section 206 of the National Disability Insurance Scheme Act 2013, all accessed 8 August 2015. 28. Pape v Commissioner of Taxation [2009] HCA 23; (2009) 238 CLR 1; Williams v Commonwealth of Australia [2012] HCA 23; (2012) 248 CLR 156

and Williams v Commonwealth of Australia [2014] HCA 23; (2014) 252 CLR 416.

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Until the High Court’s 2009 decision in Pape, the prevailing view was that the Commonwealth had the power to appropriate monies to a purpose or matter irrespective of whether or not the Commonwealth had any legislative power in relation to that purpose or matter. This purported ‘spending power’ was inferred from sections 81 and 83 of the Constitution, which deal with appropriations.

However, in Pape the High Court ruled that sections 81 and 83 of the Constitution do not of themselves provide the Executive Branch of the Commonwealth Government with a substantive spending power. Instead, the Commonwealth has to show some legal basis, beyond the mere passing of an Appropriation Act, for expenditure to be lawful. Put simply, spending can only usually be authorised by legislation that falls within a subject matter head of power under section 51 of the Constitution or by the ‘nationhood power’.

In Williams (No. 1) the High Court again held that the Executive Branch of Commonwealth Government cannot (generally) spend money unless it is supported by constitutionally valid, legislatively provided power. Hayne J noted pointedly that the proposition that just ‘because certain expenditure could be authorised by statute, it can be undertaken by the Executive’ was false.29 Put simply, even if the Constitution provides a head of power that could support legislation that could then authorise certain expenditure (in this case, on medical research) that doesn’t mean the Government can spend money prior to such legislation being passed. The Commonwealth Parliament passed what it perceived as remedial legislation to counteract the Williams (No. 1) decision.30 The validity of that legislation was the focus of Williams (No. 2).

In Williams (No. 2) the High Court held that the remedial legislation was also not authorised under the incidental power (section 51(xxxix) of the Constitution) because it would allow any appropriations made under sections 81 and 83 of the Constitution to be spent as the Executive branch of the Commonwealth Government saw fit, against the authority of Pape. Put simply, once again the High Court held that all expenditures must be authorised by legislation supported by a relevant constitutional power — it is not simply enough to pass an Appropriation Act.

Clause 9 appears to be a reaction to these High Court decisions and outlines fourteen constitutional heads of power that authorise ‘making grants of financial assistance to support medical research and medical innovation’31 including:

• the grants power (section 96 of the Constitution)

• the health and social services power (section 51(xxiiiA) of the Constitution)

• the territories power (section 122 of the Constitution)

• the corporations power (section 51(xx) of the Constitution) and

• the race power (section 51(xxvi) of the Constitution).32

Whilst the inclusion of clause 9 does not guarantee that aspects of the Bill will not be susceptible to some form of constitutional challenge in the future, it aims to ensure that other provisions in the Bill remain valid in the event of such a challenge being successful.

Key definitions Clause 5 contains key definitions that underpin the operation of the Bill, some of which are examined below.

Advisory board The definition of Advisory Board means the Australian Medical Research Advisory Board proposed by clause 32B.

Australian Medical Research and Innovation Priorities

Australian Medical Research and Innovation Priorities (Priorities) is defined to mean the priorities determined by the Advisory Board in accordance with clause 32E.

29. Williams v Commonwealth of Australia [2012] HCA 23; (2012) 248 CLR 156, as per Hayne J at [194]. 30. Financial Framework Legislation Amendment Act (No. 3) 2012, accessed 8 August 2015. 31. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 8. 32. Constitution, accessed 8 August 2015.

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Australian Medical Research and Innovation Strategy

Australian Medical Research and Innovation Strategy (Strategy) is defined to mean the strategy determined by the Advisory Board in accordance with clause 32D.

Business entity The definition of business entity is broad and encompasses most types of entities used to undertake business activities (for example, companies and trusts), other than cooperatives.

Medical research A number of submissions either supported or were critical of the definition of medical research proposed by the Bill.33 Medical research is only defined as including ‘research into health’. Compared to the definition contained in the National Health and Medical Research Council Act 1992 (NHMRC Act, discussed below), this is a vague definition that could be taken to allow the funding of research into human/animal/plant health, or possibly into broader health determinants such as agricultural research (for example, that relates to nutrition) or socioeconomic or sociocultural factors that influence health. In contrast, section 4 the NHMRC Act defines medical research as including (but not limited to):

… the laboratory-based or clinical study, or group or community-based study of the causes, treatment and prevention of human diseases and also includes dental research. 34

The lack of a precise definition of medical research has raised some concerns, with the Shadow Minister for Health noting that:

Departmental officials at Senate estimates yesterday … were unable to give the Senate estimates committee even a definition of 'medical research' that would be funded under the scheme. Instead, we were told a yet to be appointed ministerial advisory committee that is not in the legislation will advise the government on what research could be funded under the program … [d]esigning mobile phone apps is one of the uses the fund could possibly be put to.

35

The Shadow Minister then moved that the ‘House notes that the Bill … does not define medical research and innovation in the way in which the government has itself described it’.36

These concerns were echoed by some interest groups. For example, the University of Melbourne expressed the view that the current definition of ‘medical research’ contained in the Bill could:

… inadvertently exclude those non-medically related disciplines such as physics, engineering, information technology and mathematics (and also allied health disciplines) that are part of the contemporary approach to medical research. 37

As a result, it recommended that ‘the Bill adopts a broad, inclusive definition of ‘medical research’ to reflect the multidisciplinary nature of modern medical research’, and proposed that the following definition would best facilitate coverage of contemporary best practice in medical research:

33. The University of Melbourne, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, no date, pp. 2, 4; Innovative Research Universities (IRU), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 13 July 2015, p. 2; The Australian Health Economics Society (AHES), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 13 July 2015, p. 2; Notre Dame, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., pp. 1-2; MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3; GO8, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., pp. 2-5, all accessed 25 July 2015.

34. National Health and Medical Research Council Act 1992 section 4, accessed 16 June 2015. 35. C King, ‘Second reading speech: Medical Research Future Fund Bill 2015’ , House of Representatives, Debates, 4 June 2015, p. 5850, accessed 16 June 2015. 36. Ibid., p. 5055. 37. The University of Melbourne, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future

Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 4.

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Medical research can draw on many disciplines and is broadly defined as the investigation into the causes, prevention and treatment of disease that includes, but may not be limited to, an understanding of fundamental biological processes, applications of basic research or translational research that generate new knowledge in the fields of biomedicine, clinical medicine, trauma, public health or allied health sciences.

38

The Australian Health Economics Society (AHES) also expressed concern, arguing that ‘an inappropriately narrow medical interpretation of research priorities could become entrenched’ unless a clear statement of the research scope intended to be covered is incorporated into the Bill.39 Likewise, the Group of Eight (Go8)40 argued that the Bill’s definition of ‘medical research ‘provides no specific guidance about the range of research disciplines and approaches that the Fund can support’ and therefore ‘is likely to hinder Australia’s capacity to produce truly outstanding advances in health and wellbeing.’41

In contrast, a number of other submissions argued that the definition of ‘medical research’ provides a sufficient level of flexibility and should be retained.42

Medical innovation A number of submissions either supported or were critical of the definition of medical innovation proposed by the Bill.43 Medical innovation is broadly defined as:

… the application and commercialisation of medical research, and the translation of medical research into new or improved medical treatments, for the purpose of improving the health and wellbeing of individuals. 44

Given that the definition links to the vague definition of medical research discussed above, it has potentially broad application. Whilst this may provide the Fund with significant flexibility with regards to the provision of funding, awarding of grants and investment decisions, it also introduces a degree of ambiguity as to precisely what activities are covered, at least in comparison to the existing framework under the NHMRC Act.

Further, this definition would appear to allow the Fund to support commercialisation activities that are currently ineligible for funding through the NHMRC, such as phase 4 clinical trials, which in most cases are not deemed to be research. Phase 4 clinical trials are studies:

… designed to monitor the effectiveness of the approved intervention in the general population and to collect information about any adverse effects associated with widespread use over longer periods of time. They may also be used to investigate the potential use of the intervention in a different condition, or in combination with other therapies.

45

38. Ibid.

39. AHES, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2. 40. The Go8 is a network of Australia’s leading research-intensive universities. 41. GO8, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and

Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3. 42. IRU, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; Notre Dame, Submission to the Senate Community Affairs

Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3. 43. Innovative Research Universities (IRU), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 13 July 2015, p. 2; The Australian Health Economics Society (AHES), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 13 July 2015, p. 2; Notre Dame, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., pp. 1-2; MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3, all accessed 25 July 2015. 44. Clause 5. 45. National Health and Medical Research Council, ‘Australian clinical trials: phases of clinical trials’, Australian Clinical Trials website, n.d., accessed 7 August 2015.

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Traditionally, because phase 4 clinical trials occur after an intervention, treatment or drug has already been approved for certain uses and is being marketed, it has not been considered medical research of the type that would attract funding through the NHMRC.

It is unclear how broadly the funding of commercialisation of medical research is intended to be applied; this could include marketing, for example, as that is (arguably) an aspect of commercialising new or improved medical treatments.

As with the definition of ‘medical research’, a number of interest groups expressed concern about the definition of ‘medical innovation’, with some arguing that it requires amendment to improve clarity and ensure it can be flexibly applied to a wide range of activities. For example, the University of Notre Dame Australia argued that the definition is too narrow as it only focuses on ‘medical treatments’ and that:

There are many examples of valuable research that do not relate to medical treatment including in the areas of prevention, health risk management and early detection of diseases and other health problems. In researching better care for chronic disease multidisciplinary care should be a focus rather than ‘medical treatments’ alone. And beyond treatment and cure the important roles of palliative care research and pain management need to be recognized in the health and medical research agenda. The delivery of quality, accessible and efficient health services is another national priority requiring a range of research disciplines including health services, health economics, health policy research that changes clinical practice and informs health policy.

46

Accordingly, it suggested that the Bill be amended to include alternative definition such as:

Medical innovation means the application, commercialisation and translation of medical research and invention to create new or better ways to improve the health and wellbeing of individuals and communities. 47

Likewise the MRFFAG also recommended that the definition of ‘medical innovation’ be amended to ‘include reference to diagnosis and prevention’ and proposed an alternative definition very similar to the one proposed by the University of Notre Dame Australia.48 However, other submissions argued that the definition of ‘medical innovation’ provides a sufficient level of flexibility and should be retained.49

Medical research institute A medical research institute is defined as an institute (however described) that:

• has a primary purpose of conducting medical research and

• is an entity that is registered under the Australian Charities and Not-for-profits Commission Act 2012 as the type of entity mentioned in column 1 of item 1 of the table in subsection 25-5(5) of that Act.50

Corporate Commonwealth entity A corporate Commonwealth entity is defined as having the same meaning as in the Public Governance, Performance and Accountability Act 2013.51 That Act provides for two types of Commonwealth entities-those that are body corporates (such as the Commonwealth Scientific and Industrial Research Organisation (CSIRO)) and those that are not (such as all the Commonwealth departments, including the Department of Health). A corporate Commonwealth entity ‘has a separate legal personality and can act on its own behalf in exercising

46. Notre Dame, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2. 47. Ibid.

48. MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3: ‘medical innovation means the application, commercialisation and translation of medical research into new or better ways to improve the health and wellbeing of individuals and the community’. 49. For example, IRU, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015

and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2. 50. Australian Charities and Not-for-profits Commission Act 2012, column 1, item 1 of the table in subsection 25-5(5), accessed 8 August 2015. 51. Public Governance, Performance and Accountability Act 2013, section 8 (definitions of corporate Commonwealth entity, Commonwealth

entity and listed entity), subsection 10(1) and paragraph 11(a), accessed 8 August 2015.

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certain legal rights such as entering contracts and owning property’ in contrast, non-corporate Commonwealth entities ‘have no separate legal existence from the Commonwealth’.52.

Crown immunity from prosecution for offences Subclause 6(1) provides that the Act will bind the Crown in each of its capacities. However, subclause 6(2) then provides that the Act will ‘not make the Crown liable to be prosecuted for an offence’, which in effect, provides a limited form of Crown immunity.

Crown immunity is defined as ‘the presumption that a statute does not bind the Crown unless by express mention or necessary implication’ (in this instance, subclause 6(1) does so explicitly).53 Importantly, the ‘Crown’ has been interpreted as ‘often signifying the entire administrative edifice of the executive government’54 and hence arguably extends to public servants acting in their official capacities. One of the immunities enjoyed by the Crown includes immunity from prosecution of a criminal offence (at common law or under statute) which is what is specifically granted by subclause 6(2).55

Whilst providing immunity from prosecution is not unheard of, the Explanatory Memorandum and the second reading speech do not provide any explanation as to why this immunity is required in this instance.56

Extraterritorial application Clauses 7 and 8 provide that the operation of the Bill will extend to every external territory of the Commonwealth, and also to acts, omissions, matters and things outside Australia. The Explanatory Memorandum to the Bill explains that it is necessary for the legislation to apply outside Australia because grant recipients ‘may collaborate with international partners’.57

Part 2 - The Fund Part 2 of the Bill is divided into five Divisions:

• Division 1 provides a simplified outline of Part 2

• Division 2 provides for the establishment of the Fund and the Medical Research Future Fund Special Account (MRFF Special Account)

• Division 3 deals with credits of amounts to the MRFF Special Account

• Division 4 has six subdivisions dealing with the limits on total annual debits from the MRFF Special Account, the purpose of the MRFF Special Account, making grants and payments and certain obligations of the FFB

• Division 5 deals with transfers from the Fund to the Future Fund.

Key issues and provisions in each Division are examined below.

Division 1 — Introduction Clause 10 contains a simplified outline of Part 2 of the Bill. It notes that:

• the Fund consists of the MRFF Special Account and the investments of the Fund (Investment Portfolio)58

• initially, the Fund’s investments are a portion of the investments of the HHF which was established under the Nation-building Funds Act 2008 59

• debits are made from the MRFF Special Account by the Finance Minister after being required to do so by the Health Minister60

52. Explanatory Memorandum, Public Governance, Performance and Accountability Bill 2013, p. 18, accessed 8 August 2015. 53. R Finkelstein and D Hamer, eds, LexisNexis concise Australian legal dictionary, 5th edn, LexisNexis Butterworths, Chatswood, 2011, p. 160. 54. Ibid.

55. Senate Standing Committee on Legal and Constitutional Affairs, The doctrine of the Shield of the Crown, Commonwealth of Australia, Canberra, December 1992, p. 8, accessed 16 June 2015. 56. See for example: National Broadband Network Companies Act 2011, section 6, accessed 29 July 2015. 57. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 8. 58. See also clauses 11 and 14. 59. Nation-building Funds Act 2008, Chapter 4 generally. See also clauses 12 and 13 of the Bill. For information on the HHF see: Department of

Health, ‘Health and Hospitals Fund (HHF)’, accessed 8 August 2015.

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• the Health Minister takes the Priorities (determined by the Advisory Board) into account in making decisions about the financial assistance provided from the MRFF Special Account61

• the MRFF Special Account can be debited for three main purposes:62

- channelling grants to the COAG Reform Fund to make grants of financial assistance to States and Territories63 - channelling grants to the Medical Research Future Fund Health Special Account (Health Account) to make grants of financial assistance to certain bodies64 - making grants of financial assistance directly to corporate Commonwealth entities65 and • the MRFF Special Account can also be debited in relation to costs and other obligations incurred by the FFB in

managing the Fund.66

Division 2 — Establishment of the Fund and Special Account

Establishment of the Fund and Special Account Clause 11 establishes the Fund, and provides that it consists of the MRFF Special Account and the Investment Portfolio. Clause 14 establishes the MRFF Special Account, which will be a special account for the purposes of the Public Governance, Performance and Accountability Act 2013. In turn, an Appropriation Act can contain a provision to the effect that if any of the purposes of the MRFF Special Account is a purpose covered by an item in an Appropriation Act (even if it doesn’t expressly refer to the MRFF Special Account) then those amounts may be debited against the appropriation for that item, and credited to that special account without further legislative authorisation.67

Initial seed capital and investments Clauses 12 and 13 give effect to the policy basis for providing the Fund’s initial seed capital and investments announced in the 2014-15 Budget.68 Clause 12 provides that the day after the section commences, the Finance Minister must determine the amount to be transferred from the HHF to the Fund, and give the determination to the FFB.69 The determination will be a non-disallowable legislative instrument.70

In turn, clause 13 provides that within 28 days of receiving the determination the FFB must identify financial assets (to the value of the amount determined by the Finance Minister) to be transferred from the HHF to the Fund. Further, paragraph 13(1)(b) provides that the FFB must also ensure that the balance of the HHF not transferred to the Fund will stand to the credit of the HHF Special Account.71

Division 3 — Credits to the MRFF Special Account Clause 15 allows the responsible Ministers72 (or their delegates) to determine an amount that is to be credited to the MRFF Special Account.73 Any such determination will be a non-disallowable legislative instrument, with the Government noting that:

60. See also clause 15A. 61. See also subclause 15A(2). 62. See clause 17. 63. See clause 20 and paragraph 17(a). For background information on the COAG Reform Fund and the COAG Reform Fund Act 2008 see: R

Webb, COAG Reform Fund Bill 2008, Bills digest, 54, 2008-09, Parliamentary Library, Canberra, 2008. 64. See clause 25 and paragraph 17(b). 65. See clause 29 and paragraph 17(c). 66. See paragraphs 18(d)-(g) and clause 19. 67. Clause 14, note. 68. Australian Government, ‘Medical Research Future Fund’, Budget Overview, 2014-15, op. cit. 69. The HHF is established by section 214 of the Nation-building Funds Act 2008. 70. Subclause 12(2). 71. The Explanatory Memorandum to the Bill notes that ‘These cash amounts will be used to meet commitments related to previously approved

Health and Hospitals Fund projects under an appropriation to be established by the Medical Research Future Fund (Consequential Amendments) Bill 2015’: Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 9. 72. Defined in clause 5 as the Treasurer and the Finance Minister. 73. Subclause 15(1); clauses 60 and 61.

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Such determinations would usually be regarded as administrative, rather than legislative, in character. It is not appropriate that they be disallowable as they are a one-off instrument made when funds are about to be credited. The same approach was taken for equivalent provisions in the Future Fund Act 2006. 74

In effect, clause 15 allows amounts other than those included in the initial transfer of assets from the HFF to be credited to the MRFF Special Account. Subclause 15(2) provides that when making the written determination, the responsible Ministers must ‘have regard to the object of this Act’, which is set out in clause 3. These are discussed below under the heading ‘Objects of the Investment Portfolio’.

Division 4 — Debits from the MRFF This division is divided into six subdivisions. Subdivision A deals with the rules that apply to debits from the MRFF Special Account, including the limit on total annual debits. The majority of the other subdivisions deal with the powers and process involved in making grants to the states, territories and various corporate entities (such as universities, companies and Commonwealth owned corporations). It is this aspect of the Bill (as drafted) that has attracted controversy, as the proposed mechanisms for determining successful grant applicants and then awarding grants differs from the existing framework that governs the awarding of Commonwealth grants for medical research created by the NHMRC Act. These differences remain, and are discussed below.

Decisions about grant funding A large number of submissions expressed concern over the how individual funding decisions were to be made, the decision making process and the role of the Advisory Board and the Minister. These submissions expressed a strong preference that funding decisions be made either on the basis of independent expert advice and/or through a peer review process, instead of being determined by the Minister and subject to Cabinet approval procedure.75

Originally, the Bill contained no information on how decisions on grant funding are to be made. In contrast, the NHMRC Act provides that a function of the CEO of the NMHRC is to provide advice to the Minister on a range of issues related to medical research, including making recommendations in relation to expenditure on medical research (including recommendations in relation to making of grants for medical research).76

Currently, subsection 51(2) of the NHMRC Act provides that grants for medical research must be provided ‘subject to such conditions as the Minister, acting on the advice of the CEO, determines’ (emphasis added). In other words, the current framework for awarding medical research grants requires the Minister to ‘act on’ the advice provided by an independent statutory authority (the CEO of the NHMRC). The Explanatory Memorandum indicates that the government intends:

… to rely on the expertise of the NHMRC to aid the distribution of funds from the Medical Research Future Fund for the purpose of making grants of financial assistance to support medical research and medical innovation. 77

Originally the Bill lacked similar provisions, and appeared to provide that grants from the MRFF Special Account could be made at a Minister’s discretion and without a legal requirement for the Minister to at least consider

74. Subclause 15(3); Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 10. 75. ASMR, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3; Orygen, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential

Amendments) Bill 2015, op. cit., p. 3; The Australian Academy of Technological Sciences and Engineering (ATSE), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, July 2015, p. 2; Victorian Government, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 5; GO8, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; IRU, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3; The University of Melbourne, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., pp. 2-3, all accessed 25 July 2015. 76. National Health and Medical Research Council Act 1992, paragraphs 7(1)(a)(iv), (b) and (c), subsection 51(2). 77. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 14.

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independent, expert advice from a statutory office holder or to consult with the NHMRC. The Opposition raised concerns about those differences, stating:

There is no peer review and no independent oversight in the legislation at all, which will allow the government to fund its own pet health and medical research projects… the reason that Labor has such significant concerns is that this Bill… does not provide the governance assurances that would satisfy Labor that the fund credits will be disbursed in the most prudent manner. Frankly, the way that the government has established it leaves no assurance that funds will not simply be channelled to fund the coalition's own election commitments and pet projects, so long as they meet very broad purposes as stated in the Bill.

78

In an apparent response to these criticisms, the Government made a number of amendments to the Bill, which the Minister stated:

… increase transparency in the decision-making process [to] include the requirements for an expert Australian medical research advisory board, setting out the advisory board's role, governance and reporting arrangements; an Australian medical research and innovation strategy; Australian medical research and innovation priorities; and decision-making mechanisms for the disbursement of funds from the MRFF to be reliant upon the strategy and the priorities.

79 [emphasis added].

Clause 15A was a Government amendment agreed to in the House of Representatives. 80 It provides that the Health Minister ‘must take into account’ the Priorities when determining whether to require the Finance Minister to debit a specified amount from the MRFF Special Account. As explained by the Minister:

The proposed amendments also clarify the finance minister's role. The finance minister is not the decision maker… Debits from the MRFF special account will only be made by the finance minister after being required to do so by the health minister. The role of the finance minister merely credits amounts between accounts as a bursar of funds, acting on instruction of the health minister.

81

Importantly, as noted in the Bill’s Supplementary Explanatory Memorandum:

• the Health Minister will bring forward proposals for Cabinet’s consideration that are consistent with the Strategy and Priorities (these are discussed below under the headings ‘Division 3 - the Strategy’ and ‘Division 3 - the Priorities’)

• the Priorities must be used by the Government when ‘in making decisions regarding programme-level funding from the MRFF’82

• the application of the Priorities to inform decision-making by the Cabinet and Health Minister is ‘expected to ensure that any expenditure from the MRFF will have a strong business case’83 and

• programme-level funding decisions are then made by Cabinet through the Budget process.84

As a result, whilst the Minister still retains a level of discretion over how grants and payments are to be awarded and to what specific programs, the requirement imposed on the Health Minister by subclause 15A(2) to ‘take into account’ the Priorities set by the proposed Advisory Board ensures that the Minister is provided independent expert advice regarding potential funding decisions. 85 The Supplementary Explanatory

78. C King, ‘Second reading speech: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 4 June 2015, p. 5850-5851, accessed 16 June 2015; See also C King, Abbott must ensure MRFF cannot be used as a $20 billion Coalition Fund, media release, 4 June 2015, accessed 15 June 2015; D Harrison, ‘Labor says Medical Research Future Fund could be diverted for “pet projects"’, The Canberra Times, (online edition), 5 June 2015, accessed 19 June 2015.

79. S Ley, ‘Consideration in detail: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 22 June 2015, p. 7029, accessed 13 July 2015. 80 S Ley, ‘Consideration in detail: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, op. cit., p. 7029. 81. S Ley, ‘Consideration in detail: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, op. cit., p. 7029; see also

Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, p. 2, accessed 13 July 2015. 82. Supplementary Explanatory Memorandum, op. cit., p. 3. Any such debit must be made in in accordance with Part 2, Division 4, subdivision C, D or E of the Bill. 83. Ibid.

84. Ibid., pp. 3-4. 85. Ibid., pp. 2-4.

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Memorandum succinctly summarises the grant funding decision making process, and the role of the proposed Advisory Board in relation to the Health Minister and Government generally in the diagram below:86

Source: as per footnote 86

However, a large number of submissions to the Senate Community Affairs Legislation Committee Inquiry into the Bill have expressed dissatisfaction or concern about the proposed method for making individual funding decisions, including the role of the Minister and recommended an alternative approach.87 The table below summarises those submissions.

86. Ibid., p. 6. 87. ASMR, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., pp. 3-4; Orygen, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential

Amendments) Bill 2015, op. cit., p. 3; ATSE, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, July 2015, p. 2; Victorian Government, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 5; GO8, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; The University of

Figure 1: MRFF governance and disbursement arrangements

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Table 1: peer review of funding decisions

Interest group Recommendation

Australian Society for Medical Research

• Once the research priorities are established, research funds should be allocated following rigorous peer-review of grants applications.

• to avoid duplication, reduce bureaucracy, cut red tape and maximise the ‘add on value’ of the MRFF, the Advisory Board for the MRFF should sit under the umbrella of the NHMRC Research Committee and

• the existing NHMRC grant application processes should be utilised to ensure the best quality health and medical research is funded, and a smooth and transparent funding mechanism for the MRFF funds.

Orygen - The National Centre of Excellence in

Youth Mental Health

• The NHMRC’s capacity to provide appropriately peer-reviewed assessment of research proposals will be a key asset that should be used in the disbursement of a substantial proportion of funding allocated from the MRFF.

• Expert review should form a part of decision-making for all disbursement channels.

Australian Academy of Technological Sciences and Engineering

• Funding allocations need to be competitive, assessed by expert review and merit based.

Victorian Government • The Bill should be amended to ensure that funding is directed to medical research solely on the basis of independent and peer reviewed advice.

Medical Research Future Fund Action Group • Public, competitive calls for applications should be the norm with independent expert assessment of proposals for financial assistance.

• Clauses 20, 25 and 29 should be amended to require the Minister to obtain and consider appropriate and relevant independent expert advice in relation to a direction that amounts are to be debited from the MRFF Special Account or the MRFF Health Special Account.

Group of Eight • Independent expert review represents international best practice in the allocation of scarce funding, and should be included in the selection and allocation of project funding from the MRFF.

• The Senate should amend the Bill to include the need for independent expert review or advice as part of the process of distributing funds from the MRFF Special Account.

The University of Melbourne

• The Bill should be amended to acknowledge the centrality of independent, expert review of research applications as best practice in the transparent, efficient allocation of competitive research funding and require that it be adopted for allocating grants through the MRFF.

Source: as per footnote 87.

The need to support indirect research costs A number of submissions highlighted the desirability for grants made from the MRFF Special Account to be able to fund indirect research costs. 88 For example, Universities Australia (UA) noted that the ‘inadequate level of

Melbourne, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., pp. 2-3, all accessed 25 July 2015. 88. Victorian Government, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 16 July 2015, p. 2; Universities Australia (UA), Submission to

the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 10 July 2015, p. 2 (both accessed 25 July 2015); UTAS, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; UWS, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical

Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 1.

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support for the indirect costs of research has long been identified as a serious concern for the Australian research system’.89 The Victorian Government stated that in its view, Commonwealth-funded research should fund the full costs of such research ‘including indirect costs’ through a ‘consistent health and medical research grants’ program open to ‘all administering institutions, including universities, hospitals and medical research institutes’. 90

In addition to not placing independent expert advice and peer-review of funding applications at the centre of the funding decision-making process, the Bill differs from the existing framework in other important aspects.

General purposes of the MRFF Special Account Subdivision B of Division 4 of Part 2 deals with the purposes of the MRFF Special Account. Clause 17 outlines the three main purposes of the MRFF Special Account as per the simplified outline of Part 2 provided in clause 10 (discussed above). Clause 18 defines the purposes of the MRFF Special Account that are related exclusively to the Investment Portfolio. For example, these purposes include:

• paying the costs of, or incidental to, the acquisition of financial assets or derivatives under clauses 37 and 47 respectively91

• paying a premium in respect of a contract of insurance entered into by the FFB exclusively in connection with the Fund92 and

• paying expenses of an investment of the Fund.93

As such, it sets out the additional purposes (expenses that are exclusively related to the Investment Portfolio) for which the MRFF Special Account may be debited.94 In addition, clause 19 lists a number of purposes that, whilst not exclusively related to the Fund, are nonetheless a ‘purpose’ of the MRFF Special Account. In effect, clause 19 facilitates payment of various expenses that may be incurred by the FFB in respect of its broader functions under the Bill, and related legislation from the MRFF Special Account. 95

Specific purpose of the MRFF Special Account: State/Territory grants through the COAG Reform Fund Subdivision C deals with providing funding to states and territories for ‘the purposes of’ medical research and medical innovation. Clause 20 provides that the Finance Minister must, if required by the Health Minister to do so under clause 15A, direct that a specified amount be debited from the MRFF Special Account and credited to the COAG Reform Fund for the purpose of providing a specific grant to a state or territory for medical research and medical innovation. A copy of any such written direction must be given to the Treasurer and Health Minister.96

Clause 22 states that the terms and conditions of such grants must be set out in a written agreement between the Commonwealth and state or territory, and must be complied with. Clause 21 then provides that the Treasurer must ensure that the COAG Reform Fund is debited for the purposes of making the grant.

The Opposition unsuccessfully moved amendments to clauses 20 and 22 which would have replaced the references to the Finance Minister and ‘a Minister’ in those clauses with references to the CEO of the NHMRC.97 The effect of the amendments would be to remove the power and discretion to determine what grants will be provided to state and territories (and under what terms) from the Ministers, and instead provide that power solely to the CEO of an independent statutory authority (the NHMRC).

89. UA, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2. 90. Victorian Government, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2 91. Paragraphs 18(a) and (c). 92. Paragraph 18(f). 93. Paragraph 18(b). 94. See also: clause 14 and the discussion under the heading ‘Establishment of the Fund and Special Account’. 95. The related legislation includes the Future Fund Act 2006, Nation-building Funds Act 2008 and DisabilityCare Australia Fund Act 2013. 96. Subclause 20(5). 97. Medical Research Future Fund Bill 2015, [Opposition proposed amendments], items 9 to 11. See also clause 30A at item 21 of the

Opposition’s proposed amendments, which provides that the CEO of the NHMRC has the function of giving directions and entering into agreements in accordance with Part 2, Division 4 of the Bill (instead of a Minister).

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Specific purpose of the MRFF Special Account: grants to corporate entities and universities Subdivision D deals with providing grants to a range of entities through the MRFF Health Special Account. In contrast to the grants provided to states and territories under subclause 20(2), grants under this subdivision do not need to be ‘for the purposes of’ medical research and innovation but instead can be for the broader purpose of ‘supporting’ medical research and medical innovation by:

• medical research institutes

• universities

• corporate Commonwealth entities and

• corporations.98

Clause 23 establishes the MRFF Health Special Account (Health Account), which will be a special account for the purposes of the Public Governance, Performance and Accountability Act 2013. In turn, an Appropriation Act can contain a provision to the effect that if any of the purposes of the Health Account is a purpose covered by an item in the Appropriation Act (even if it doesn’t expressly refer to the Health Account) then those amounts may be debited against the appropriation for that item, and credited to that special account without further legislative authorisation.99

Clause 24 specifies that the purpose of the Health Account is to ‘make grants for the purposes of supporting medical research and medical innovation’ and that these grants can be made to the entities listed above. As noted earlier, the use of the word ‘supporting’ widens the range of activities that could potentially be funded

under such grants, and may possibly extend to activities that only tangentially ‘support’ medical research and medical innovation, such as marketing.

Clause 25 provides that the Finance Minister must, if required to do so by the Health Minister under clause 15A, direct that a specified amount be debited from the MRFF Special Account and credited to the Health Account for the purpose of providing a grant to an entity of the kind referred to in clause 24. A copy of any such written direction must be given to the Treasurer and Health Minister.100

Clause 26 then provides that the Health Minister must ensure that the Health Account is debited for the purposes of making the grant. The Government notes that this:

… reflects the Government’s intention that the MRFF Health Special Account operates as a vehicle through which payments from the Medical Research Future Fund will be distributed to recipients in respect of medical research and medical innovation initiatives. 101

Following such a debit, the Health Minister must publish on the internet information about the grant to which the debit relates, providing a measure of transparency (dependent of course on the level of detail of such publications).102

Clause 27 states that the terms and conditions of such grants must be set out in a written agreement between the Commonwealth and the entity receiving the grant, which must be complied with.

Specific purpose of the MRFF Special Account: payments to corporate Commonwealth entities Subdivision E deals with providing funding to corporate Commonwealth entities for ‘the purposes of supporting’ medical research and medical innovation. Clause 29 provides that the Finance Minister must, if required by the Health Minister to do so under clause 15A, direct that a specified amount be debited from the MRFF Special Account for the purpose of providing a grant to a corporate Commonwealth entity for the ‘purposes of supporting’ medical research and medical innovation. A copy of any such written direction must be given to the

98. Clause 24. 99. Clause 23, note. 100. Subclause 25(5).

101. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 13. 102. Note 1 to subclause 26(1); clause 58.

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Treasurer and Health Minister.103 As noted earlier, the use of the word ‘supporting’ widens the range of activities that could potentially be funded under such grants.

Clause 30 states that the terms and conditions of such grants must be set out in a written agreement between the Commonwealth and the corporate Commonwealth entity, and those must be complied with.

The Opposition unsuccessfully moved amendments to clauses 29 and 30 which would have replaced the references to the Finance Minister and ‘a Minister’ in those clauses with references to the CEO of the NHMRC.104 The effect of the amendments would be to remove the power and discretion to determine what grants will be provided to corporate Commonwealth entities (and under what terms) from the Ministers, and instead provide that power solely to the CEO of an independent statutory authority (the NHMRC).

Obligation on FFB to ensure sufficient money Subdivision F deals with the obligation of the FFB to ensure that there is sufficient money in the Special Account to cover authorised debits.

Division 5 — Inter-fund transfers Division 5 deals with inter-fund transfers between the Fund and the Future Fund. Clause 32 allows the Finance Minister to direct that any amount debited from the Future Fund Special Account for the purposes of the Bill is to be debited from the MRFF Special Account and credited to the Future Fund Special Account. The Explanatory Memorandum notes that the purpose of clause 32 is to allow ‘reimbursement to the Future Fund Special Account of expenses incurred in relation to the Medical Research Future Fund that have been debited from the Future Fund Special Account’.105

Part 2A - Australian Medical Research Advisory Board Part 2A was inserted into the Bill by the Government’s amendments and is comprised of four divisions.106 The purpose of Part 2A is to establish the Advisory Board, the Strategy and the Priorities and provide arrangements for the appointment of Advisory Board members and related issues.

Division 1 — simplified outline Clause 32A contains a simplified outline of Part 2A that outlines the role of the Advisory Board, Strategy and Priorities. The Advisory Board:

• consists of the CEO of the NHMRC and other persons appointed by the Health Minister

• determines the Strategy every five years and

• determines the Priorities every two years, which the Health Minister must take into account when making ‘decisions in relation to financial assistance’ granted from the MRFF Special Account.107

Division 2 — Establishment of the Advisory Board Clause 32B establishes the Advisory Board. Clause 32C provides that the functions of the Advisory Board are:

• to determine the Strategy and Priorities in accordance with Division 3 of Part 2A of the Bill and

• advise the Health Minister about other matters referred to the Advisory Board by the Health Minister.

Subclause 32B(2) provides that the Health Minister may give the Advisory Board written directions regarding the way in which it is to carry out its functions, and the procedures to be followed at any meetings. Subclause 32B(3) provides that such a direction is not a legislative instrument.108

103. Subclause 29(4). 104. Medical Research Future Fund Bill 2015, proposed amendments (non-government), items 18 to 20. See also clause 30A proposed by item 21, which provides that the CEO of the NHMRC has the function of giving directions and entering into agreements in accordance with Part 2, Division 4 of the Bill (instead of a Minister).

105. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 15. 106. Medical Research Future Fund Bill 2015, Government amendments [sheet HK145]. 107. Clause 32A. 108. As noted in the Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 9: ‘These Ministerial directions

are administrative rather than legislative in nature and are therefore not a legislative instrument for the purposes of the Legislative Instruments Act’.

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Division 3 - the Strategy Clause 32D deals with the Strategy. Subclause 32D(1) provides that the Advisory Board must determine a strategy, the purpose of which is to ensure ‘that a coherent and consistent approach is adopted in providing financial assistance under this Act for medical research and medical innovation’.

Factors to be considered in developing the Strategy Subclause 32D(3) provides that when determining the Strategy, the Advisory Board must take into account the national strategy for medical research and public health prepared by the NHMRC (NHMRC Strategy) and any other relevant matters.109 Whilst it is not referred to in the Bill (as amended) itself, the Government has indicated that when determining the Strategy, the Advisory Board should ‘also refer to the government's science and research priorities’, suggesting that this is an example of another ‘relevant matter’ that must be taken into account.110

The NHMRC Strategy forms part of the NMHRC’s corporate plan.111 Relevantly, the corporate plan must set out an assessment by the CEO of the NMHRC of the ‘major national health issues that are likely to arise’ during the period covered, and also the NHMRC Strategy.112 As part of preparing the corporate plan (and therefore the NHMRC Strategy), the CEO of the NMHRC must ‘consult with the Minister and the Council on the matters proposed for inclusion in the plan'.113

How the Fund and NHMRC would coordinate efforts The Medical Research Endowment Account (MREA) is administered by the NHMRC.114 The MREA is a special account established under the NHMRC Act.115 Payments are made from the MREA to government departments, universities, institutions or people engaged in medical research and for assistance in training people in medical research.116The above arrangement in the Bill appears to be aimed at ensuring that the Strategy does not result in replicating the priorities and programs funded by the MREA through the NHMRC. Instead, it aims to ensure that the Strategy, Priorities and funding provided through the Fund and that provided through the MREA complement each other, with the Government stating:

The Australian medical research and innovation strategy will ensure that a coherent and consistent approach is adopted in the funding of medical research and medical innovation from the MRFF over a five-year period.

The strategy determined by the advisory board must take into account the national strategy prepared by the NHMRC, and it should also refer to the government's science and research priorities. The priorities will inform the proposals for disbursement that I will take to cabinet each year for decision through the budget process… The MRFF represents a major injection of new funds into the medical research sector, adding to the research funding allocated by the NHMRC through the Medical Research Endowment Account. The MRFF and MREA will operate alongside each other and in clear sight of each other. My biennial reports to the parliament will disclose how the spending profile for the MRFF adds to other categories of Commonwealth funding on medical research and innovation, to demonstrate that the new fund builds upon existing funding.

117

109. The NHMRC Strategy is prepared in accordance with paragraph 16(2)(c) of the National Health and Medical Research Council Act 1992. 110. S Ley, ‘Consideration in detail: Medical Research Future Fund Bill 2015’, House of Representatives, Debates, 22 June 2015, p. 7029, accessed 13 July 2015.

111. National Health and Medical Research Council Act 1992, section 16. 112. Ibid., paragraphs 16(2)(a) and (c). 113. Ibid., subsection 16(1). 114. National Health and Medical Research Council Act 1992, Part 7 (generally); National Health Medical Research Council (NHMRC), ‘Funding’,

NHMRC website, accessed 10 August 2015. 115. National Health and Medical Research Council Act 1992, Part 7. 116. The Research Committee established by the National Health and Medical Research Council Act 1992 advises and makes recommendations to the NHMR Council on the application and monitoring of the MREA: subsection 35(2). 117. S Ley, ‘Consideration in detail: Medical Research Future Fund Bill 2015’ , House of Representatives, Debates, op. cit., p. 7029. See also:

Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 2: ‘The MRFF will complement the Medical Research Endowment Account operated by the National Health and Medical Research Council (NHMRC), and leverage the existing capabilities of the NHMRC, including peer review, grants management, and the provision of expert advice.’

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The importance of ensuring that the Fund and NMHRC coordinate efforts and that the funding provided by the Fund complements, rather than duplicates, that provided through the MREA was highlighted in a number of submissions. The University of Tasmania (UTAS) noted:

The interaction between the NHMRC and the MRFF might require greater consideration of how to generate the strategic research coordination to influence the cultural, institutional and financial drivers of medical and health research and their translation into clinical practice. In the UK this approach occurs through the Office for Strategic Coordination of Health Research that sits above their Medical Research Council and National Institute for Health Research. This model might be considered in coordinating the MRFF.

118

In summary, subclause 32D(3) provides for indirect Ministerial input into the development of the Strategy, via the requirement to take into account the NMHRC Strategy. However, this approach is not unusual (as demonstrated by subsection 16(1) of the NMHRC Act) and the Bill contains additional safeguards aimed at ensuring the Strategy is developed at a reasonable arm’s length from the Government of the day. It would also appear to at least partially address the concerns raised about possible duplication of efforts and funding through the MREA and the Fund by ensuring that in developing the Strategy and Priorities, the Advisory Board must take into account the NHMRC Strategy.

Limitations on the content of the Strategy Subclause 32D(5) provides that the Strategy must not ‘require financial assistance to be provided to a particular person, or for a particular project’. The Government states that this limitation will ensure that:

The Strategy will not identify particular projects to receive funding; in part this requirement ensures that the members of the Board who are also members of the medical research community are not exposed to potential conflicts of interest. 119

In other words, subclause 32D(5) ensures that it would be difficult for members of the Advisory Board to use the Strategy to benefit a particular institute or entity they work for or are affiliated with. However, it would appear that there may be circumstances in which the Strategy may have the effect of ensuring that financial assistance is provided to a particular person or for a particular project. For example if the NMHRC Strategy identifies a particular emerging public health issue that was only being researched by one team or organisation, then it is conceivable that the Strategy may suggest funding it, thus effectively requiring (or at least strongly recommending) that financial assistance be provided to a particular entity or project (as there is only one relevant entity or project in existence).

Contents of the Strategy are fixed for five years and cannot be amended Subclause 32D(4) provides that the Strategy, once developed, remains in force for five years. Further, subclause 32D(8) provides that the Strategy cannot be repealed, rescinded, revoked or amended. In other words, once developed, it remains in force and unalterable for five years.120

In contrast, section 19 of the NMHRC Act provides that the NMHRC corporate plan (and therefore the NMHRC Strategy) can be varied, with approval of the Minister. The Government argues that preventing the Strategy from being altered is justified on the basis that this approach will ‘support a consistent and planned approach to medical research funding’.121

Subclause 32D(6) provides that whilst the Strategy is a legislative instrument, it is not subject to disallowance. The Government argues that ‘this approach enables the public and the Parliament to hold the Advisory Board and the Government accountable without impeding the Advisory Board’s ability to perform its functions’.122 Note that subclause 32D(7) also provides that the Strategy must be published on the Internet.

118. UTAS, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 1. 119. Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 3. 120. Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 9: ‘the Strategy and Priorities cannot be

repealed, rescinded, revoked, amended, or varied in any way under the Acts Interpretation Act. It is intended that the Strategy and Priorities remain unchanged for periods of five and two years respectively to support a consistent and planned approach to medical research funding.’ 121. Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 9. 122. Ibid.

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Division 3 - the Priorities Clause 32E deals with the Priorities, which must be taken into account by the Health Minister when making funding decisions.123 The provision sets out the relationship of the Priorities with the Strategy and how they are to be developed by the Advisory Board.

Factors to be considered in developing the Priorities Subclause 32E(1) provides that the Advisory Board must determine the Priorities for providing financial assistance for medical research and medical innovation. Subclause 32E(2) then provides that the Priorities must be consistent with the Strategy. In addition to being consistent with the Strategy, subclause 32E(3) provides that, in determining the Priorities, the Advisory Board must take into account:

• the burden of disease on the Australian community

• how to deliver practical benefits from medical research and medical innovation to as many Australians as possible

• how to ensure that the financial assistance provided delivers the greatest value for all Australians

• how to ensure that the financial assistance provided complements and enhances other financial assistance provided for medical research and medical innovation and

• any other relevant matter.

Whilst it is not referred to in the Bill (as amended) itself, the Government has indicated that when determining the Strategy, the Advisory Board should ‘also refer to the government's science and research priorities’.124 As the Priorities must be consistent with the Strategy, this suggests that the science and research priorities of the government of the day (which are different to the Priorities in the Bill) are an example of a ‘relevant matter’ that may be taken into account by the Advisory Board when developing the Priorities.125

Limitations on the content of the Priorities In contrast to the limitation placed on the Strategy, clause 32E does not contain a specific prohibition on the Priorities requiring financial assistance to be provided to a particular person, or for a particular project. It is not clear why this approach has been taken, and no explanation is given in the Supplementary Explanatory Memorandum. This would appear to allow situations where the Advisory Board sets Priorities that may result in financial assistance being provided to projects in which members of the Advisory Board are involved (as some may be members of the medical research community), and hence a conflict of interest arises. This issue is partially resolved by clause 32K, as discussed below.

Contents of the Priorities are fixed for two years Subclause 32E(5) provides that the Priorities, once developed, remain in force for two years. Further, subclause 32E(8) provides that the Priorities cannot be repealed, rescinded, revoked or amended. In other words, once developed, they remain in force and unalterable for two years.126

The Government argues that preventing the Priorities from being altered is justified on the basis that this approach will ‘support a consistent and planned approach to medical research funding’.127

Subclause 32E(6) provides that whilst the Priorities are a legislative instrument, they are not subject to disallowance. The Government argues that ‘this approach enables the public and the Parliament to hold the Advisory Board and the Government accountable without impeding the Advisory Board’s ability to perform its

functions’.128 Note that subclause 32E(7) provides that the Strategy must be published on the Internet.

123. Subclause 15A(2). 124. S Ley, ‘Consideration in detail: Medical Research Future Fund Bill 2015’’, House of Representatives, Debates, 22 June 2015, p. 7029, accessed 13 July 2015; see also Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 3.

125. Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 3. 126. Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 9: ‘the Strategy and Priorities cannot be repealed, rescinded, revoked, amended, or varied in any way under the Acts Interpretation Act. It is intended that the Strategy and Priorities remain unchanged for periods of five and two years respectively to support a consistent and planned approach to medical research funding.’

127. Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 9. 128. Ibid.

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Issues arising from the five-year and two-year fixed periods that the Strategy and Priorities remain in force A number of submissions to the Senate inquiry noted an inconsistency arising from the five-year and two-year fixed periods that the Strategy and Priorities must remain in force. For example, the MRFFAG noted:

Given the five and two year timeframes, the Action Group queries how the Priorities can remain consistent at all times with the Strategy when there isn’t always the opportunity to renew the Priorities in the same year the Strategy is renewed. 129

Likewise, Professor Alan Pettigrew (the Inaugural CEO of the NHMRC), making a submission in a private capacity, also noted that ‘it is possible that the variation of priorities every two years would not enhance stability in Australia’s approach to health and medical research’ and therefore recommended that consideration be given to reviewing the Priorities every five years, at the same time as the review of Strategy is undertaken.130

These are legitimate concerns, given that subclause 32E(2) provides that the Priorities must be consistent with the Strategy. Put simply, if a new Strategy is released whilst existing Priorities are in force and those Priorities are inconsistent with the Strategy, subclause 32E(8) will prevent them from being amended to be consistent with the Strategy, thus creating a situation where the Priorities and Strategy are not aligned and cannot be brought into alignment for a period of time.

Ensuring the Strategy and Priorities are developed using evidence and are not politicised A number of submissions made reference to how the Strategy and Priorities are to be developed.131 UTAS expressed concern at the arrangements proposed by the Bill:

The proposed Bill should deliver a rigorous and transparent mechanism for identifying national health and medical research priorities as well as a strategy for their delivery (and reporting) through a competitive funding process. Once identified the process for attracting and evaluating research proposals would require a more explicit commitment to a national and international peer-review system of quality control.

The Bill indicates the powerful role of an Advisory Board in managing the MRFF and providing advice to government (through the Minister to the Cabinet) about its use, but the membership, constituency and powers of this Board are insufficiently clear. Additional effort is needed to ensure that priority setting is evidence-based and driven by demonstrated need rather than short-term political expediency.

Australian medical research is highly regarded internationally and has received many accolades both to individuals and as a system. We have also seen significant translation of publicly-funded basic research into commercially successful products (e.g. Cochlear, ResMed, Gardasil, CSL). Each of these areas of success has depended ultimately on the nature of the decision-making for funding, which for the past 60 years has been peer-review driven. We support continuation of such a system into the MRFF.

132

In addition, other submissions suggested that the process of developing the Strategy and Priorities, as well as being open and transparent, include a process of consultation and input from consumers.133

129. MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 4. 130. Professor Alan Pettigrew, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, no date, p. 2, accessed 25 July 2015. 131. Ibid; Orygen, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and

Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3; ACTA, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3. 132. UTAS, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2. 133. ACTA, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3; ASMR, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, July 2015, op. cit., p. 3.

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Division 4 - the Advisory Board

Membership of the Advisory Board Clause 32F provides that the Advisory Board consists of the CEO of the NMHRC and up to seven ‘other’ members. The Minister must appoint one of the members of the Advisory Board (other than the CEO of the NMHRC) to be the Chair.134

Appointment of members Clause 32G deals with the appointment of members to the Advisory Board. A person is not eligible for appointment to the Advisory Board unless the Health Minister is satisfied that their appointment ensures that the Advisory Board collectively possesses ‘an appropriate balance of experience and knowledge’ in the following fields:

• medical research

• policy relating to health systems

• management of health services

• medical innovation

• financing and investment and

• commercialisation of research and innovation.135

Members are appointed by the Health Minister by written instrument, and serve on a part-time basis for a period of time specified in the written instrument (not exceeding five years).136 They can, however, be reappointed after their term expires.137

The expertise of Advisory Board members and nomination A number of submissions expressed the view that it was necessary for the Advisory Board to include a wider range of expertise than that proposed in the Bill including: clinical trials, nursing, midwifery, allied health, related scientific disciplines (such as chemistry), hospital-based experts, clinical research (including health services research).138

In addition, the University of Western Sydney expressed a desire for greater clarity around how Advisory Board Members are selected, noting that the process for nominating members of the Advisory Board, and the length and nature of their term, is not clear.139 Likewise the Australian Society for Medical Research (ASMR) stated:

… more information is required pertaining to the appointment of board members and the relevant selection criteria. Such processes are already in place via NHMRC and should be utilised. 140

134. Subclause 32G(3). 135. Subclause 32G(2). Whilst the text of the Bill only refers to ‘commercialisation’, the Supplementary Explanatory Memorandum notes on page 10 that ‘Members of the Advisory Board must… possess an appropriate balance of experience and knowledge in…. commercialisation of research and innovation.’ 136. Subclauses 32G(1) and (4). 137. Note to subclause 32G(4) (referring to section 33AA of the Acts Interpretation Act 1901). 138. Australian Clinical Trials Alliance (ACTA), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical

Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 14 July 2015, p. 3; The Council of Academic Public Health Institutions (CAPHIA), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 10 July 2015, p. 2; Group of Eight Australia (GO8), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 10 July 2015, p. 2; University of Western Sydney (UWS), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, no date, pp. 1 and 3, Australian Academy of Science (AAoS), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, July 2015, p. 2 (all accessed 25 July 2015). 139. UWS, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and

Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3. 140. The Australian Society for Medical Research (ASMR), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, July 2015, p. 3, accessed 25 July 2015.

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The need for consumer representation on the Advisory Board A number of submissions recommend that the Advisory Board should include one or more consumer, patient advocacy, carer, or community representative members.141 For example, the University of Notre Dame Australia recommended that ‘a community/consumer perspective and voice on the Advisory Board is desirable’ and that the Board ‘should be able to access relevant independent expert advice if required to support their considerations’.142 Similarly Cancer Voices Australia recommended that:

There is a lot of evidence that better decisions are made when consumers are involved and the obvious benefit is community involvement in allocating community and donor funds. Most large research funders in Australia have recognised this and include consumers in their panels of people who allocate research eg the various Cancer Councils, Cancer Institute NSW, National Breast Cancer Foundation etc. It is also accepted that two, rather than one, consumer voices should be the standard, best practice approach. We were disappointed such an approach was dropped by the Government with the new appointments to the Pharmaceutical Benefits Scheme Committee.

We strongly request that the Bill be amended to include two consumer representatives on the Advisory Board, including one representing Australians with cancer due to the size of its burden in terms of people affected and costs. 143

Remuneration Clause 32H deals with the remuneration and allowances of the members of the Advisory Board. As clause 32F provides that the Advisory Board consists of the CEO of the NMHRC and ‘up to seven other members’ (emphasis added) it can be inferred that a reference to a member of the Advisory Board includes (unless specified otherwise) the CEO of the NMHRC.144

Subclause 32H(1) provides that ‘a member’ of the Advisory Board (thus including the CEO of the NMHRC) is to be paid remuneration determined by the Remuneration Tribunal, or, if no such determination has been made, as determined by the Health Minister.145 In relation to allowances however, subclause 32H(2) provides that a member of the Advisory Board is to be paid ‘allowances that are prescribed’ under subclause 32H(4), which allows the Health Minister to determine such allowances by legislative instrument. This is somewhat unusual as allowances for members of such bodies are usually determined by the Remuneration Tribunal.146

141. UWS, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3; AAoS, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2; Cancer Voices Australia (CVA), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 7 July 2015, p. 2; Rare Voices Australia (RVO), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 14 July 2015, p. 2; Orygen - The National Centre for Excellence in Youth Mental Health (Orygen), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, no date, pp. 2-3; The University of Notre Dame Australia (Notre Dame), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, 10 July 2015, pp. 2-3; The Medical Research Future Fund Action Group (MRFFAG), Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, no date, p. 4, all accessed 25 July 2015. 142. Notre Dame, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and

Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3. 143. CVA, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2. 144. The use of the phrase ‘other members’ implies that the CEO of the NHMRC is also a ‘member’ of the Advisory Board. In contrast, if the clause

had read ‘the Advisory Board is comprised of the CEO and up to seven members’, it could have been inferred that the CEO was not a ‘member’ even though they were part of the Advisory Board. 145. See also subclauses 32H(2), (3) and (4). 146. See: National Health and Medical Research Council Act 1992, section 43 and Remuneration Tribunal Act 1973, subsections 3(1) (definitions of

allowance and public office, 3(2) (definition of remuneration includes reference to annual allowances), 3(4) (definition of ‘public office’ refers to ‘an appointment made under a law of the Commonwealth’), 7(3) (the Remuneration Tribunal determines the remuneration (and therefore annual allowances) to be paid to holders of public office).

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Conflict of Interests Clause 32K deals with the disclosure on interests by Advisory Board members. It applies to a member who has a ‘material personal interest’ in a matter being considered (or about to be considered) by the Advisory Board.147 As is standard with similar legislative provisions:

• a member must, as soon as possible, disclose the nature of the material personal interest at a meeting of the Advisory Board and also to the Health Minister148

• the disclosure must be recorded in the minutes of the relevant meeting149 and

• where a member, without reasonable excuse, fails to disclose a material personal interest, the Health Minister must terminate their appointment.150

However, unlike analogous provisions in legislation dealing with the disclosure and management of material personal interests by members of boards or committees, clause 32K does not prohibit a member of the Advisory Board who has disclosed a material personal interest from being present when the matter is considered or from taking part in any decision made in relation to the matter. (Such matters could be addressed in the directions that may be given to the Board by the Health Minister under subclause 32B(2).) In contrast, this issue is directly addressed in other legislation, as demonstrated by the table below.

Table 2: disclosure of conflict of interest and voting

Act, Regulation or Bill Relevant

provision

Duty imposed in relation to voting

The Bill Clause 32K No restrictions on voting on a matter

pertaining to a disclosed material personal interest.

Public Governance, Performance and Accountability Rule 2014 (made under the Public Governance, Performance and Accountability Act 2013 (PGPA Act 2013))

Rule 15 and Section 29 of the PGPA Act 2013

An official who has a material personal interest in a matter that relates to the affairs of the entity must not (subject to certain exceptions):

• be present while the matter is being considered at the meeting or

• vote on the matter.

Future Fund Act 2006 Section 71 A Board member who has a material

personal interest in a matter that is being considered at a Board meeting must not (subject to certain exceptions):

• be present while the matter is being considered at the meeting or

• vote on the matter.

NMHRC Act Subsection

42A(5)

A member who has disclosed an interest in a matter under consideration must not (unless the CEO or Chair otherwise determines):

• be present when the Council or

147. Subclause 32K(1). 148. Subclause 32K(2), compare to: National Health and Medical Research Council Act 1992, subsections 42A(1), (3) and Public Governance, Performance and Accountability Act 2013, sections 29 and 31.

149. Subclause 32K(3), compare to: Fair Work (Registered Organisations) Bill 2014 [No. 2], proposed section 293C (in particular proposed subsection 293C(6)). 150. Subclause 32K(4), compare to: National Health and Medical Research Council Act 1992, paragraph 44B(3)(b) and Public Governance, Performance and Accountability Act 2013, section 30.

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Act, Regulation or Bill Relevant

provision

Duty imposed in relation to voting

committee considers the matter or

• take part in any decision of the Council or committee in relation to the matter.

Corporations Act 2001 Section 195 A director of a public company who has a

material personal interest in a matter that is being considered at a directors' meeting must not (subject to certain exceptions):

• be present while the matter is being considered at the meeting or

• vote on the matter.

Fair Work (Registered Organisations) Amendment Bill 2014 [No. 2] Proposed section 293F

An officer of an organisation who has a material personal interest in a matter that relates to the affairs of the organisation:

• must not be present during any deliberation by the organisation on the matter and

• must not take part in any decision of the organisation with respect to the matter.

No rationale appears to have been provided for why the legislation does not specify that members of the Advisory Board are not allowed to vote on matters in which they have a material personal interest, or why the approach adopted by clause 32K differs from the ‘standard’ approach observed in other Commonwealth legislation, such as the PGPA Act 2013, Corporations Act 2001, Future Fund Act 2006, NMHRC Act and that proposed by the Fair Work (Registered Organisations) Bill 2014 [No. 2]. (Although, as set out above, this could be dealt with in directions on the procedures to be followed in Advisory Board meetings, given by the Health Minister under subclause 32B(2), it would be clearer and ensure greater transparency if the requirements were included in the legislation itself.)

Termination of Advisory Board members Clause 32N provides that the Health Minister may terminate the appointment of a member of the Advisory Board (other than the CEO of the NHMRC). Unlike analogous provisions in legislation dealing with the termination of board members, clause 32N does not restrict termination to a pre-defined set of circumstances such as bankruptcy, misbehaviour or mental or physical incapacity, as demonstrated by the table below.

Act Relevant

provision

Grounds for termination

The Bill Clause 32N None specified. On the face of the Bill, the Health Minister has an unfettered power to terminate the appointment of any member for any reason, at any time. (Subject to standard administrative law considerations.)

Future Fund Act 2006

Section 44 A Board member can only be terminated for:

• misbehaviour

• physical or mental incapacity

• becoming bankrupt or

• certain other circumstances.

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Act Relevant

provision

Grounds for termination

NMHRC Act Section 44B A Board member can only be terminated for:

• misbehaviour

• physical or mental incapacity

• becoming bankrupt or

• certain other circumstances.

No rationale appears to have been provided for why the Health Minister requires such a wide power to terminate the appointment of Advisory Board members, nor why the approach adopted by clause 32N differs from the approach observed in the Future Fund Act 2006 and NMHRC Act.

Part 3 - Maximum annual distributions Part 3 of the Bill deals with the maximum annual distribution (MAD) that can be debited from the MRFF Special Account each financial year.151 Subclause 34(1) provides that the FFB must determine the MAD for each financial year by the day specified by the Finance Minister.152 The determination produced by the FFB must also include the methods used for working out the MAD and the considerations taken into account when working out that amount, thus providing a degree of transparency if the Finance Minister chooses to publish the determination on the Internet (see below).153 When determining the MAD, subclause 34(4) provides that the FFB must take into account a number of factors including:

• preserving the long-term nominal value of financial assets initially transferred from the HHF to the Fund154

• preserving the long-term nominal value of the total amount of other amounts credited to the Fund155

• moderating (to the extent possible) year-on-year variability of the MAD156

• maintenance of the FFB’s ability to comply with the Fund Investment Mandate (Investment Mandate) issued under clause 39157

• any costs, expenses, obligations or liabilities likely to be incurred by the FFB for the purposes of clauses 18 and 19 (expenses related to the Investment Portfolio)158 and

• any additional matters specified by the Finance Minister.159

The Explanatory Memorandum notes that ‘the principle of preserving the nominal value of capital invested in the Medical Research Future Fund by the Government is to be applied over a long-term time horizon’.160 The Bill also provides that the Finance Minister has the discretion to publish the FFB’s determination on the Internet, and clarifies that the determination is not a legislative instrument (and hence is not subject to disallowance).161

151. Clause 33. 152. See subclauses 34(2) and (3): the Minister must give the FFB at least 90 days to prepare the MAD determination. 153. Paragraph 34(8)(b). 154. Subparagraph 34(4)(a)(i). 155. Subparagraph 34(4)(a)(ii). 156. Paragraph 34(4)(b). 157. Paragraph34(4)(c). 158. Paragraph 34(4)(d). 159. Paragraph 34(4)(e) and subclauses 34(5) and (6). However, those matters must not be inconsistent with the matters to be considered under

subclause 34(4), the Investment Mandate or any other provision of the Bill and must be provided at least 90 days before the FFB is required to determine the MAD for the next financial year: subclauses 34(6) and (7). 160. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 16. 161. Subclauses 34(9) and (10).

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Part 4 - Investments of the Fund Part 4 of the Bill contains the bulk of the provisions that deal with the proposed governance structure of the Fund’s Investment Portfolio, what it can invest in (and for what purposes), the role of the FFB and the degree of oversight and direction that can be provided by the responsible Ministers.

Where does the Fund get the funds to invest? Subclause 37(1) provides that the FFB uses amounts standing to the credit of the MRFF Special Account to fund its investments. Clause 38 then provides that income, return of capital, and the proceeds of realised investments must be credited to the MRFF Special Account. In short, income and returns from the Fund’s investments provide the funding for making investments.

What can the Fund invest in? Investments made from the MRFF Special Account are made by the FFB on behalf of the Fund.162 Those investments must be made in the name of the FFB, but are taken to be investments of the Fund.163 Subclause 37(1) provides that the FFB can invest amounts standing to the credit of the MRFF Special Account in any financial assets - a term defined expansively in section 6 of the Future Fund Act 2006 - which in turn can be expanded by regulations issued under that Act.164 As result, the Fund can, for example, invest in:

• cash and deposits (both Australian currency and foreign currency)

• investments, loans and placements (include bonds, debentures, various forms of loans and redeemable preference shares) and

• equity (shares in listed companies, preference shares and other claims on other entities entitling the holder to a share of the income of the entity and a right to a share of the residual assets of the entity should it be wound up).165

Clause 47 also provides that the FFB, for certain purposes (such as protecting the value of an investment) can invest in derivatives.166 Clause 49 also allows the FFB to enter into securities lending arrangements for a purpose connected with the Fund.

How does the Fund purchase investments? Clause 50 allows the FFB to engage one or more investment managers for purposes in connection with the Fund. The Explanatory Memorandum notes that ‘an investment manager is defined broadly to include custodians, transition managers and other investment managers.’167 However, it also notes that the Future Fund Management Agency (Agency) is excluded from the definition of an Investment Manger as ‘it is generally expected that investment activities, such as acquiring derivatives or investing money, will be outsourced.’168 Subclause 50(2) then provides that the FFB only:

• invest amounts under subclause 37(1) (discussed above)

• acquire derivatives under subclause 47(1)

• enter into securities lending arrangements under subclause 49(1) or

• realise financial assets that are investments of the Fund

through an investment manager engaged by the FFB or in a manner approved by the responsible Ministers.

162. Subclause 37(1). 163. Subclauses 37(2) and (3). 164. See: clause 5, which provides that the definition of a ‘financial asset’ is that contained in the Future Fund Act 2006 (see section 6 and the definitions of GFS Australia and GFS System in section 5 of that Act). 165. Australian Bureau of Statistics (ABS), Australian GFS Framework, Australian System of Government Finance Statistics: Concepts, Sources and

Methods, cat. no. 5514.0.55.001, ABS, Canberra, 2005, accessed 7 August 2015. 166. See for example paragraph 47(1)(a). 167. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 24. 168. Ibid.

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The Bill also provides that the FFB must ensure that any investment managers it engages operate consistently with the Bill, and provide reports regularly to it and the Agency.169 This approach to making investments is consistent with that adopted in the Future Fund Act 2006.

Objects of the Investment Portfolio As noted in the preamble to the Bill, the purpose of establishing the Fund is to generate ‘income over the long term’ as that is ‘the most appropriate mechanism’ for ensuring that funding is available for medical research and innovation.170 This view is reinforced by clause 40, which states that in performing its Investment Portfolio function, the FFB has an obligation to seek to:

• maximise the return earned on the Investment Portfolio over the long term (consistent with international best practice for institutional investment) and

• enhance the Commonwealth’s ability to provide grants of financial assistance to support medical research and medical innovation.

As a result, in simple terms, the object of the Investment Portfolio is to generate income and returns which are then credited to the MRFF Special Account to provide the funding for:

• further investments in additional or other financial assets

• the provision of grants and payments for medical research and medical innovation under Part 2, Division 4, subdivisions B, C, D and E (discussed above) and

• enhancing the ability of FFB to discharge costs, expenses, obligations and liabilities and make payments for the additional purposes set out in clauses 18 and 19 (discussed above).171

However, when performing its Investment Portfolio function and pursuing those objectives, the FFB remains subject to the Bill as a whole and the Investment Mandate (discussed below) which prevails over the obligation imposed by clause 40, to the extent of any inconsistency.172

The Investment Mandate, governance of the Fund and Ministerial oversight The Bill creates a two-tiered governance structure. The Government, through the responsible Ministers, provides broad ‘strategic guidance’ to the FFB on how it expects the Fund to be invested. In turn, the FFB is responsible for developing policies to guide its investment decisions, which are then carried out by Investment Managers engaged for that purpose. Importantly however, the responsible Ministers are not able to direct the FFB to invest in a particular financial asset, business entity or activity.173 Whilst this approach is consistent with that adopted under the Future Fund Act 2006, it differs from the grant approval process (discussed above) where the relevant Minister can choose to direct funds through a grant or payment to specific entities of their choosing. 174

Clause 39 deals with the Investment Mandate, in similar terms to section 18 of the Future Fund Act 2006. In effect, the Investment Mandate ‘provides the Government, as owner of the Medical Research Future Fund, with a mechanism for articulating its expectations for how the Medical Research Future Fund will be invested and managed by the Future Fund Board’.175 The Government notes that the framework established by clause 39 that enables it ‘to give strategic guidance’ to the FFB whilst preserving the FFB’s ‘role in managing’ the Investment Portfolio ‘at arm’s length from the Government’ is ‘consistent with the arrangements in place for the Future Fund’.176

169. Subclauses 50(3) and (4). 170. See also: Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 18, which notes that subclause 36(1) ‘is intended to reinforce that amounts are invested by the Future Fund Board for the main object of enhancing the Commonwealth’s ability to provide grants for medical research and innovation.’

171. Ibid., p. 18. 172. Subclause 39(5). 173. Subclause 41(1). 174. Future Fund Act 2006, section 18A. See also the discussion under the heading Part 2, ‘Division 4’. 175. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 19.

176. Ibid.

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The Investment Mandate is a written direction to the FFB produced by the responsible Ministers about the performance of its Fund investment functions.177 Subclause 39(1) ensures that the responsible Ministers (the Minister for Finance and the Treasurer) must produce at least one Investment Mandate. In producing the Investment Mandate, the responsible Ministers ‘must have regard to’:

• maximise the return earned on the Fund over the long term, consistent with international best practice for institutional investment

• enhance the Commonwealth’s ability to provide grants of financial assistance to support medical research and medical innovation and

• any other matters the responsible Ministers consider relevant.178

However, clause 42 provides that the Ministers must give the FFB a draft of the Investment Mandate, invite the FFB to make submissions on it (within a timeframe set by the responsible Ministers) and consider submissions made within that time limit. The submissions must be tabled in each House of Parliament, along with the final Investment Mandate. Whilst the Investment Mandate is a legislative instrument, it is not subject to disallowance or sunsetting.179 Overall, clause 42 provides a degree of transparency as the requirement to table the FFB’s submissions along with the Investment Mandate will highlight any disagreements between the approach recommended by the FFB and that desired by the Government. However, the Bill does not provide for any formal parliamentary input into the process of developing the Investment Mandate, reflecting the position under the Future Fund Act 2006.180 Whilst subclause 43(1) provides that the FFB must take ‘all reasonable steps’ to comply with the Investment Mandate, subclause 43(5) provides that a failure to do so will not affect the validity of any transaction.

Subclause 39(4) provides that the Investment Mandate can set out the policies to be pursued by the FFB in relation to matters of risk and return and the allocation of financial assets, and any policy relating to the allocation of financial assets ‘must not be inconsistent with a policy relating to matters of risk and return’. Subclause 39(5) provides that the Investment Mandate prevails over the obligations imposed by clause 40 (to the extent of any inconsistency) and must not otherwise be inconsistent with the Bill.

Clause 41 places limitations on the contents of the Investment Mandate.181 Under subclause 41(1), the responsible Ministers must not give a direction within the Investment Mandate which would, directly or indirectly, require the FFB to invest in a particular financial asset, acquire a particular derivative, or allocate finances to a particular business entity, activity or business.182

As such, subclause 41(1) will prevent the Investment Portfolio being used as a political ‘slush fund’. A further transparency measure is included in clause 46. Briefly, clause 46 imposes an obligation on the FFB to produce and comply with written policies that are consistent with the Investment Mandate in relation to:

• the investment strategy for the Investment Portfolio

• the benchmarks that are used to assess the performance of the Investment Portfolio

• the risk management strategies of the Investment Portfolio and

• matters relating to international best practice for institutional investment or specified in the rules.183

177. Subclause 39(1). 178. Subclause 39(2). 179. See subclause 39(7), notes 1 and 2. 180. Clause 42 and subclause 39(7). In contrast, section 19 of the Future Fund Act 2006 requires that the Minister must give a draft copy of the

Investment Mandate to the FFB, invite their feedback and consider its response. 181. This clause is expressed in nearly identical terms to section 18A of the Future Fund Act 2006, which was inserted by the Higher Education Endowment Fund (Consequential Amendments) Act 2007. In the second reading speech to that Act’s Bill, ‘responsible governance’ and preventing ‘the responsible ministers from issuing a ministerial direction that has the effect of requiring the board to use the assets of the

fund to support a particular business entity, a particular activity or a particular business’ were cited as the reasons for making that amendment: J Bishop, ‘Second reading speech: Higher Education Endowment Fund (Consequential Amendments) Bill 2007’, House of Representatives, Debates, 16 August 2007, pp. 3-4, accessed 19 June 2015. 182. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 23. 183. Subclauses 46(1), (2), and (7). However, it is worth noting that subclause 46(8) provides failing to comply with a policy does not affect the

validity of any transaction.

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Subclauses 46(3) and (4) provide that such policies must be published in the internet, thus giving a degree of transparency around how the FFB ‘performs its investment function’ in relation to the Investment Portfolio ‘including risk management, performance assessment and benchmarks’.184

The need for the Investment Mandate to focus on or prohibit certain types of investments A number of submissions suggested that the Bill be amended to focus the investment activities undertaken by the Future Fund Board (FFB) in relation to the Investment Portfolio to either encourage investment in certain types of industries, or prohibit investment in industries that have negative health impacts.185 For example, Orygen — The National Centre of Excellence in Youth Mental Health, recommended that:

… in describing the investment strategy used to generate returns to the MRFF:

 there could be scope to invest in commercialising/translation companies

 there could be a restriction on investing in organisations producing products that are damaging to health (e.g. alcohol) 186

The Medical Research Future Fund Action Group (MRFFAG) also suggested that clause 36 of the Bill be amended to provide another ancillary object of supporting ‘medical innovation’.187 The MRFFAG argued that such an amendment ‘together with clause 39(2)(c) would then allow the responsible Ministers to provide the Future Fund Board with a direction in the Investment Mandate regarding investment in medical innovation.’188

Part 5 - Reporting obligations Part 5 deals with reporting obligations and other transparency measures that are consistent with those found in the Future Fund Act 2006.189 Clause 55 allows the Finance Minister to require the FFB to prepare a report or document about the performance of the FFB’s functions within a specified timeframe, and discretion as to whether to publish such reports or documents.

Clause 56 imposes an obligation on the FFB to keep the responsible Ministers informed about its operations, and to provide reports, documents or information in relation to those operations as appropriate. Clause 57 then allows the Finance Minister to give a Minister any such reports, documents or information (as well as other information or documents obtained by the Finance Minister under the Bill). Clause 57A requires the Health Minister to prepare a report on the financial assistance provided from the MRFF Special Account against the Priorities every two years. The report must be tabled in both Houses of Parliament and include:

• a description of how the financial assistance provided was consistent with the Priorities and

• information about any other financial assistance provided by the Commonwealth for medical research and medical innovation.190

The Victorian Government recommended that the Bill be amended to provide that the Health Minister must report to parliament on the financial assistance provided from the MRFF Special Account on an annual, instead of biennial basis.191

184. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 23. 185. Orygen, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3; MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential

Amendments) Bill 2015, op. cit., p. 6. 186. Orygen, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 3. 187. MRFFAG, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill 2015 and

Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 6. 188. Ibid. 189. Future Fund Act 2006, sections 54 and 55. 190. Subclause 57A(2). 191. Victorian Government, Submission to the Senate Community Affairs Legislation Committee, Inquiry into the Medical Research Future Fund Bill

2015 and Medical Research Future Fund (Consequential Amendments) Bill 2015, op. cit., p. 2;

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Whilst the Government has stated that a report prepared under clause 57A must ‘include a description of how the financial assistance provided was consistent with the Strategy and Priorities’, the text of the Bill itself does not require that the report outline the consistency of financial assistance provided with the Strategy, only the Priorities.192 As such, from a strictly legal perspective a report prepared under clause 57A need not include a description of how financial assistance provided was consistent with the Strategy.

Clause 58 provides that the Health Minister must publish information on the internet about grants provided from the Health Account to entities of the kind referred to in subclause 26(1) — that is, medical research institutes, universities, corporate Commonwealth entities and corporations.

Part 6 - Miscellaneous

Delegation Clauses 60, 61 and 61A allow the Finance Minister, Health Minister and Treasurer to delegate certain powers under the Bill to high ranking officials. For example, this includes the Health Minister’s powers to issue directions to facilitate the making of grants or payments to states, territories, corporate Commonwealth entities and specific entities of certain types (such as medical research institutes). 193 Certain aspects of these powers can be delegated to persons who must then comply with any Ministerial directions.194 In effect, the Bill as amended by the Government allows the relevant Minister to not only make a direction to issue a grant or make a payment to a specific state, territory, entity or organisation, but to also delegate that power.

Delegation by the Health Minister Clause 61A provides that Health Minister may, by writing, delegate any or all of his or her powers under:

• clause 15A: requiring the Finance Minister to debit the MRFF Special Account

• clause 26: debiting the Health Account for the purposes of making the grant to an entity of the type listed (a medical research institute, university, corporation or corporate Commonwealth entity) and

• clause 27: drafting the terms and conditions of such grants and entering into the agreement on behalf of the Commonwealth.195

Clause 61A allows the Health Minister to delegate any or all of these powers to the Secretary of the Department of Health, the CEO of the NHMRC or to Senior Executive officers in either organisation, with subclause 61A(2) indicating that anyone to whom these powers are delegated must comply with Ministerial directions.

Delegation by the Finance Minister Clause 60 provides that Finance Minister may, by writing, delegate any or all of his or her powers under:

• clause 15: determining an amount that is to be credited to the MRFF Special Account

• clause 20: directing that a specified amount be debited from the MRFF Special Account and credited to the COAG Reform Fund for the purpose of providing a specific grant to a state or territory for medical research and medical innovation

• clause 25: directing that a specified amount be debited from the MRFF Special Account and credited to the Health Account for the purpose of providing a grant to an entity of the kind referred to in clause 24 and

• clause 29: directing that a specified amount be debited from the MRFF Special Account for the purpose of providing a grant to a corporate Commonwealth entity for the ‘purposes of supporting’ medical research and medical innovation.

Delegation by the Treasurer Clause 61 provides that Treasurer may, by writing, delegate any or all of his or her powers under:

• clause 15: determining an amount that is to be credited to the MRFF Special Account and

192. Supplementary Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 10. 193. See clauses 15A and 61A. 194. See clauses 60, 61 and 61A. 195. Clauses 61A, 15A, 26 and 27. See also: clauses 24 and 25.

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• subclause 21(1): debiting the COAG Reform Fund for the purpose of providing a specific grant to a state or territory for medical research and medical innovation.

Embedded review Clause 62 provides that the Bill will be subject to a legislatively embedded review (LER). Specifically, the Minister must cause a review of the operation of the Bill to be undertaken either:

• before 30 June 2023 or

• at another date that the responsible Ministers consider appropriate.

It does not provide any details about who is to conduct the review, what is to be examined, if the report of such a review is to be tabled in Parliament and so forth. As a result, the timing and scope of any such review is effectively at the discretion of the responsible Ministers. This is not surprising, given that the Productivity Commission noted in 2011 that ‘there do not appear to be any rules or guidelines about when an embedded review should be included in Australian Government legislation, nor about the scope of any such review’.196 It also noted that:

The scope of statutory reviews can vary substantially. The terms of reference for the review may be set out in legislation or open to the agency required to commission the review … [t]he need for an embedded statutory review is identified during the development of the regulation. As far as the Commission is aware, this is done on an ad hoc basis by the departments drafting the legislation ...

197

As a result, whilst the LER provision provided by clause 62 is lacking in substantive details, it cannot be said to be a departure from the usual form of such provisions - as none exists. However, the power provided to the Minister to postpone the date by which the review is to be conducted (potentially indefinitely) provided by paragraph 62(b) appears to be highly unusual.198

Rule-making power Clause 63 allows the Finance Minister, via a legislative instrument, to make rules required, permitted, necessary or convenient for carrying out and giving effect to the Bill.

Other provisions Subclause 45(1) prohibits the FFB from borrowing money except in the circumstances provided for in subclauses 45(2) and (3) (for example, short term borrowing associated with the settlement of transactions).199 The Explanatory Memorandum notes that ‘the overall aim of this section is to ensure that the Future Fund Board is able to operate efficiently without exposing the budget to undue risk’.200

Clause 51 deals with the tax treatment of franking credits arising from investments in the Investment Portfolio. Its operation is adequately described on page 25 of the Explanatory Memorandum.

Clause 52 provides that the FFB must realise an asset that ceases to be a financial asset or any asset acquired by it (as an investment of the Fund) that is not a financial asset. The Explanatory Memorandum notes that this could occur in circumstances where the FFB:

196. Productivity Commission (PC), Identifying and evaluating regulation reforms, Research report, Melbourne, December 2011, accessed 4 May 2015, p. 37. 197. Ibid., p. 72. 198. Whilst section 55 of the DisabilityCare Australia Fund Act 2013 provides a similar power, this can be contrasted to the review provisions in the

following Acts, none of which provide a similar power: Fuel Quality Standards Act 2000, section 72; Gene Technology Act 2000, section 194; Product Stewardship (Oil) Act 2000, section 36; Australian Crime Commission Act 2002, section 61A; Legislative Instruments Act 2003, sections 59 and 60; National Transport Commission Act 2003, section 51; SPAM Act 2003, section 46; Water Act 2007, section 253; Dental Benefits Act 2008, section 68; Personal Property Securities Act 2009, section 343; Australian Information Commissioner Act 2010, section 33; Healthcare Identifies Act 2010, section 35; Product Stewardship Act 2011, section 109; Defence Trade Controls Act 2012, section 74 and the Illegal Logging Prohibition Act 2012, section 84, all accessed 10 August 2015. 199. Explanatory Memorandum, Medical Research Future Fund Bill 2015, op. cit., p. 22. 200. Ibid.

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… holds an asset which was mistakenly acquired by the Board, or given to the Board, or which ceases to be a financial asset due to a revision of the Australian Bureau of Statistics Government Finance Statistics Manual… 201

Clause 53 provides that a function of the FFB includes investing amounts in accordance with the Bill.

Key issues and provisions of the Consequential Bill The Medical Research Future Fund (Consequential Amendments) Bill 2015 (Consequential Bill) makes consequential amendments to the COAG Reform Fund Act 2008, Future Fund Act 2006, Nation-building Funds Act 2008, DisabilityCare Australia Fund Act 2013 and the Health Insurance Act 1973 for the purpose of:

• enabling grants to the states and territories through the COAG Reform Fund

• extending the FFB’s duties to manage the Fund and

• allowing amounts to be transferred between the Fund and the Future Fund to allow for proper apportioning of common expenses incurred by the FFB in managing the Fund, Future Fund, Nation-building Funds and the DisabilityCare Australia Fund (DCAF).202

In addition, the Consequential Bill abolishes the HHF and creates a special appropriation that will allow the Department of Health to meet ongoing financial commitments related to HHF projects already entered into before the HHF is closed.203

Structure of the Consequential Bill The Consequential Bill has three schedules. Schedule 1 contains the main amendments that support the establishment of the Fund. Schedule 2 contains the amendments related to the abolition of the HHF. Schedule 3 contains amendments that are contingent on the commencement of certain parts of the Acts and Instruments (Framework Reform) Act 2015.

Schedule 1

Amendments to the COAG Reform Fund Act 2008 Items 1 to 3 make consequential amendments that:

• recognise that grants from the Fund to the States and Territories are channelled through the COAG Reform Fund204

• allow an amount that originates from the Fund to be transferred to the COAG Reform Fund205 and

• provide that grants provided to states and territories through the COAG Reform Fund are subject to the provisions of the Bill.206

Further information on these amendments can be found on page 6 of the Consequential Bill’s Explanatory Memorandum.

Amendments to the DisabilityCare Australian Fund Act 2013 Items 4 to 6 make consequential amendments that provide that certain expenses incurred by the FFB (such as establishing and operating bank accounts, insurance premiums and expenses incurred by the FFB in relation to managing the DCAF) can be met from the DCAF Special Account provided:

• they relate to the DCAF and

• only to the extent that such expenses do not relate to any other fund (including the Fund).

201. Ibid., p. 25. 202. Explanatory Memorandum, Medical Research Future Fund (Consequential Amendments) Bill 2015, p. 4. 203. Ibid. 204. Medical Research Future Fund (Consequential Amendments) Bill 2015, item 2; Explanatory Memorandum, Medical Research Future Fund

(Consequential Amendments) Bill 2015, p. 6. 205. Medical Research Future Fund (Consequential Amendments) Bill 2015, item 1; Explanatory Memorandum, Medical Research Future Fund (Consequential Amendments) Bill 2015, p. 6. 206. Medical Research Future Fund (Consequential Amendments) Bill 2015, item 3; Explanatory Memorandum, Medical Research Future Fund

(Consequential Amendments) Bill 2015, p. 6.

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Further information on these amendments can be found on page 7 of the Consequential Bill’s Explanatory Memorandum.

Amendments to the Future Fund Act 2006 Items 7, 13 and 14 confirm that the FFB has additional functions under the Bill related to the Fund.

Investment managers Items 11, 12 and 20 will allow investment managers engaged with the management of the Fund to also be engaged for the purposes of managing a range of other funds and for the FFB to delegate its power to engage such investment managers (in relation to the Fund) to the Chair of the FFB or Senior Executive employees of the Agency.

Further information on these amendments can be found on pages 7 and 8 of the Consequential Bill’s Explanatory Memorandum.

Reporting obligations Items 15 and 18-19 deal with reporting obligations. Item 15 clarifies that the FFB’s reporting obligation in relation to the Future Fund are separate from the reporting obligations under the Bill. Items 18 and 19 require that the annual report prepared by the Chair of the FFB must include a report on:

• the performance of the Investment Portfolio207

• the amounts debited from the MRFF Special Account for purposes allowed under the Bill208 and

• must include benchmarks in relation to the performance of the debits from the MRFF Special Account.209

Further information on these amendments can be found on pages 7 and 8 of the Consequential Bill’s Explanatory Memorandum.

Inter-fund transfers Items 21 to 22 amend section 84 of the Future Fund Act 2006 to provide that where money is received by the FFB and no provisions in the relevant legislation cited require it to be credited to a specific fund’s special account (including the MRFF Special Account), that amount must be credited to the Future Fund Special Account. Item 23 then provides that the Minister can direct that such amounts that are credited to the Future Fund Special Account are subsequently transferred to the MRFF Special Account. (Equivalent provisions already exist for the other funds managed by the FFB.) Under subsection 84(6), which is amended by item 25, such a written direction ‘does not have the status of a legislative instrument’ (and hence is therefore not disallowable by either House of Parliament). The Explanatory Memorandum notes that this approach is:

… consistent with the status of other written directions that can be made by the nominated Minister under subsections 84(2), 84(3), 84(4) and 84(4A) [of the Future Fund Act 2006] in relation to the transfer of amounts to other Special Accounts as provided under those subsections. 210

Item 31 adds a new clause to the end of Schedule 2A (which deals with inter-fund transfers) allowing the relevant Minister to provide a written direction requiring the reversal of a debit from the MRFF Special Account to meet bank account, insurance premium or other costs relating to the Fund. Such a reversal:

• is to be effected by debiting the Future Fund Special Account and crediting the MRFF Special Account and

• cannot exceed the amount originally debited from the MRFF Special Account.

Proposed subclause 6(3) then provides that such a written direction is not a legislative instrument.

Further information on these amendments can be found on page 8 of the Consequential Bill’s Explanatory Memorandum.

207. Proposed paragraph 81(1E)(a). 208. Proposed paragraphs 81(1E)(b)-(e). 209. Proposed subsection 81(2D). 210. Explanatory Memorandum, Medical Research Future Fund (Consequential Amendments) Bill 2015, p. 8.

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Amendments to the Nation-building Funds Act 2008 Sections 20, 138 and 219 of the Nation-building Funds Act 2008 set out the additional purposes of, respectively, the:

• Building Australia Fund (BAF)

• Education Investment Fund (EIF) and

• HHF.

The provisions specify that expenses incurred by the FFB (such as establishing and operating bank accounts, insurance premiums etc.) can be met from the BAF, EIF or HHF Special Account (as appropriate) provided they relate to the BAF, EIF or HHF and only to the extent that such expenses do not relate to any other fund. Items 32 to 40 make consequential amendments to these provisions to include references to the MRRF.

Further information on these amendments can be found on page 9 of the Consequential Bill’s Explanatory Memorandum.

Schedule 2 — Abolition of the HHF Item 38 repeals Chapter 4 of the Nation-building Funds Act 2008, thus abolishing the HHF. Item 39 is a transitional provision that ensures that agreements relating to payments from the HHF in force under section 261 of the Nation-building Funds Act 2008 immediately before the repeal of that section are taken to have been made under proposed section 46AB of the Health Insurance Act 1973 (which will be inserted by item 20 of Schedule 2 to the Consequential Bill). This will ensure that the agreements can continue to operate until such time as they expire.

Items 1 to 4 make consequential amendments to the COAG Reform Fund Act 2008 reflecting the cessation of the HHF. Items 5 to 7 make consequential amendments to the DisabilityCare Australia Fund Act 2013 reflecting the cessation of the HHF. Items 8 to 19 make consequential amendments to the Future Fund Act 2006 reflecting the cessation of the HHF. Item 20 inserts a proposed Part IVAA and proposed sections 46AA, 46AB, 46AC and 46AD into the Health Insurance Act 1973 in relation to payments relating to the HHF, which will allow outstanding commitments of the HHF to be met. Items 24 to 37 make consequential amendments to the Nation-building Fund Act 2008 reflecting the cessation of the HHF. Further information on these amendments can be found on page 12 of the Consequential Bill’s Explanatory Memorandum.

Further information on these amendments can be found on pages 10 to 12 of the Consequential Bill’s Explanatory Memorandum.

Schedule 3 Item 1 amends Schedule 3 of the Bill to change the references to the Legislative Instruments Act 2003 to the Legislation Act 2003, reflecting the commencement of the Acts and Instruments (Framework Reform) Act 2015.

Concluding comments It would appear likely that the Bill will be the subject of considerable debate in the Senate. In particular, the definitions of ‘medical research’ and ‘medical innovation’, as well as the desirability of funding decisions being made by the Health Minister and through Cabinet processes instead of being made by independent experts via peer review are likely to be issues of considerable interest and potential diversity of views.

The process of nominating Advisory Board Members, the mixture of expertise, consumer representation and how the Strategy and Priorities are to be developed would also appear to be issues of concern. Further, the desirability of allowing Advisory Board members to vote on matters in which they have a material personal interest may also attract some debate.

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