Ross Cadell (NSW, National Party) Share this | Hansard source

On behalf of Senator Dean Smith, I present Scrutiny digest 7 of 2024 of the Standing Committee for the Scrutiny of Bills, together with ministerial correspondence received by the committee, and I seek leave to incorporate a tabling statement in Hansard.

Leave granted.

The statement read as follows—

As Chair of the Senate Standing Committee for the Scrutiny of Bills, I rise to speak to the tabling of the committee's Scrutiny Digest 7 of 2024.

The Digest reports on the committee's consideration of 24 bills which were introduced into the Parliament during recent sitting weeks, amendments made to six bills, as well as two bills which respectively establish and amend standing appropriations.

In the Digest, the committee has identified potential scrutiny concerns in relation to 16 newly introduced bills. The Digest also contains the committee's comments on recent ministerial responses in relation to nine bills.

The Digest reports on the committee's comments in relation to Appropriation Bills (Nos 5 and 6) 2023-2024 and Appropriation Bills (Nos 1 and 2) 2024-2025.

For a number of years, the committee has raised ongoing concerns in relation to parliamentary scrutiny and oversight over government expenditure in the Appropriation Bills. As the committee is the primary way in which parliamentary concerns with Appropriation Bills are routinely raised, the committee proposes to make contributions in the second reading debate of such bills to draw these concerns to the attention of senators.

The first such concern relates to the potentially inappropriate classification of measures as ordinary annual services. Under section 53 of the Constitution, both Houses of the Parliament have equal legislative power except in relation to limited circumstances. One of these limitations is that the Senate cannot amend proposed laws appropriating revenue or moneys for the ordinary annual services of the government.

Reflecting the importance of the role of the Senate in the legislative process, to protect the rights of the Senate, section 54 of the Constitution provides that any proposed law which appropriates revenue or moneys for the ordinary annual services of the government shall be limited to dealing only with such appropriation.

Appropriation Bill No. 1 seeks to appropriate money from the Consolidated Revenue Fund for the ordinary annual services of government. However, it appears to the committee that the initial expenditure in relation to certain measures may have been inappropriately classified.

As the meaning of 'ordinary annual services' is not a question that will be considered by the judiciary, the meaning of the phrase is a matter to be settled by the Houses of the Parliament. The Senate passed a resolution on 22 June 2010 reaffirming its constitutional right to amend Appropriation bills not for the ordinary annual services of the government.

Based on this resolution, it appears that at least part of the initial expenditure in relation to the particular measures may have been inappropriately classified as 'ordinary annual services' and therefore improperly included in Appropriation Bill No. 1. Details of these measures are contained in Scrutiny Digest 7 of 2024.

The inappropriate classification of items in appropriation bills as ordinary annual services, when they in fact relate to new programs or projects, undermines the Senate's constitutional right to amend proposed laws appropriating revenue or moneys for expenditure on all matters not involving the ordinary annual services of the Government.

The second concern relates to the Advance to the Finance Minister. Clause 10 of Appropriation Bill No. 1 enables the Finance Minister to allocate additional funds to entities when satisfied that there is an urgent need for expenditure and the existing appropriations are inadequate. The additional amounts are allocated by a non-disallowable determination made by the Finance Minister referred to an AFM determination. The amount available under the AFM provisions in both Appropriation Bills Nos 1. And 2. together add up to $1 billion.

The committee considers that, in allowing the Finance Minister to allocate additional funds to entities via non-disallowable delegated legislation, the AFM provisions delegate significant legislative power to the Executive. The committee notes that one of the core functions of the Parliament is to authorise and scrutinise proposed appropriations. High Court jurisprudence has emphasised the central role of the Parliament in this regard. In particular, while the High Court has held that an appropriation must always be for a purpose identified by the Parliament, '[i]t is for the Parliament to identify the degree of specificity with which the purpose of an appropriation is identified'. The AFM provisions leave the allocation of the purpose of certain appropriations in the hands of the Finance Minister, rather than the Parliament.

The committee has sought further information from the Finance Minister as to how the combined cap of $1 billion to the additional amounts that may be allocated by the Finance Minister in Appropriation Bills Nos. 1 and 2 was determined.

In relation to the broad discretion provided to ministers to determine terms and conditions for grants to the states, section 96 of the Constitution states that 'the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit'. Clause 16 of Appropriation Bill No. 2 seeks to delegate this power to the relevant minister and, in particular, provides the minister with the power to determine the terms and conditions under which payments to the states and territories may be made, as well as the amount and timing of the payments.

Notably, these determinations are not legislative instruments. As the Constitution empowers the Parliament, rather than the Executive, to grant financial assistance to the states on such terms as the Parliament thinks fit, the committee considers that it would be appropriate that the exercise of this power be subject to effective parliamentary scrutiny. This is particularly so noting the terms of section 96 and the role of senators in representing the people of their state or territory.

The committee notes, and welcomes, that as a result of the committee's engagement on this matter, important progress has been made to improve the provision of information regarding section 96 grants to the states since the 2017-18 Budget. These measures aid in improving the ability of the Parliament to scrutinise the Executive's use of the delegated power to make grants to the states and to determine terms and conditions attaching to them under section 96 of the Constitution.

Nevertheless, the committee draws the attention of senators to the appropriateness of delegating the Parliament's power to determine the terms and conditions of payments of financial assistance to the states to ministers.

Further, the committee draws the Senate's attention to the high debit limits set out in clause 13 of Appropriation Bill No. 2. This provision specifies debit limits to both the general purpose financial assistance and national partnership payments that the Finance minister can make by non-disallowable determination under the Federal Financial Relations Act 2009. The committee has repeatedly raised concern at debit limits that are significantly higher than expected expenditure, in some instances by billions of dollars.

The committee considers that setting such high limits, alongside the power of the minister to authorise the funding of further grants by non-disallowable determination, means that significant new expenditures can be made without oversight by the Parliament and therefore greatly reduces transparency over expenditure of public money.

The committee draws the attention of senators to the appropriateness of setting debit limits for grant programs well above the expected level of expenditure.

Finally, the committee draws the Senate's attention to measures marked as 'not for publication' in associated Budget papers. The non-publication of the financial details associated with budget measures is an issue of concern to the committee due to its impact on the ability of the Parliament to scrutinise such measures.

The committee considers that parliamentary scrutiny would be enhanced if the default position is to publish the full amount of funding allocated to each Budget measure.

However, where it is considered to be appropriate not to do so, the committee considers that adequate explanation should be included within the Portfolio Budget Statements, noting that the onus is on those claiming confidentiality in relation to the provision of information to the Parliament to argue the case for it. This would enable the Parliament to scrutinise the reasons for non-disclosure of the financial details of the measure and would focus the minds of the Executive on the appropriateness of non-disclosure in each case.

The committee welcomes the Minster for Finance's advice earlier in 2024 that she has asked her department to consider, where possible, enhancing the guidance on information which may be provided as part of measure descriptions in budget papers and portfolio budget statements in relation to measures that have been marked as not for publication.

In the meantime, the committee reiterates its significant scrutiny concerns that the Parliament is being asked to authorise appropriations without clear information about the amounts that are to be appropriated under each individual budget measure.

Moving on to other matters in the Digest, the committee welcomes undertakings by the Minister for Health and Aged Care in relation to the Therapeutic Goods and Other Legislation Amendment (Vaping Reforms) Bill 2024. In response to scrutiny concerns raised by the committee relating to the breadth of the secretary's discretionary power, the minister has undertaken to amend the bill to require the secretary to have regard to specific criteria determined by the minister in a legislative instrument when granting or refusing an application to manufacture, supply or possess vaping goods. The minister has also undertaken to amend the bill to provide for internal and external merits review of decisions made by the secretary to issue enforceable directions under the Therapeutic Goods Act 1989. The committee welcomes these undertakings which appropriately constrain administrative discretionary power and provide for independent merits review over decisions which can impact rights, liberties and obligations.

In relation to the scrutiny concerns identified in this Digest, I would like to draw the Senate's attention to the committee's comments on numerous bills which provide for instrument-making powers not subject to sufficient parliamentary oversight. This includes instruments exempt from disallowance, instruments exempt from sunsetting and non-legislative instruments.

Disallowance is the primary means by which the Parliament exercises control over the legislative power that it has delegated to the executive. Exempting an instrument from disallowance interferes with democratic oversight of Commonwealth law and with the constitutional role of Parliament as the source of the executive's law-making power. In June 2021, the Senate acknowledged these implications and resolved that delegated legislation should be subject to disallowance unless exceptional circumstances can be shown which would justify an exemption.

Relatedly, sunsetting plays a key role in ensuring legislative instruments are regularly reviewed to determine whether they are still fit for purpose and only in force as long as required. Once they have sunset, instruments can be remade and tabled in the Parliament, which promotes parliamentary oversight and scrutiny.

In each of these cases, the committee expects a strong justification as to the exceptional circumstances that permit an exception to the usual disallowance and sunsetting processes, and an explanation as to why an instrument is considered administrative rather than legislative in character.

The committee does not consider the fact that an instrument falls within one of the classes of exemption in the Legislation Act 2003 or the Legislation (Exemptions and Other Matters) Regulation 2015 is, of itself, a sufficient justification for excluding parliamentary disallowance or sunsetting. Similarly, the committee does not consider that a desire for efficiency, commercial certainty, flexibility, consistency with past practice or the fact an instrument forms part of an intergovernmental scheme as suitable justifications for exempting instruments from these processes.

Numerous bills in this Digest seek to introduce instrument-making powers exempt from disallowance or sunsetting. These include:

Federal Financial Relations Act 2009

National Disability Insurance Scheme Act 2013

In each of these examples, the committee has sought from the relevant minister a stronger justification for the exemption from the usual disallowance or sunsetting processes, or further explanation as to the administrative nature of the instrument, given the effect these provisions have on reducing parliamentary oversight and scrutiny over the measures they seek to introduce.

I encourage all parliamentarians to carefully consider the committee's analysis contained in the Digest. With these comments, I commend the committee's Scrutiny Digest 7 of 2024 to the Senate.