EXPLANATORY STATEMENT
Issued by the authority of the Minister for Finance and Deregulation
The instrument to which this explanatory statement relates | Advance to the Finance Minister Determination (No. 1 of 2012-2013) |
Date instrument was made | 8 March 2013 |
The legislative authority under which the instrument is made
| The Advance to the Finance Minister (AFM) is provided under subsection 13(2) of Appropriation Act (No. 1) 2012-2013 (the Act). This section provides that amounts can be issued from the Advance to the Finance Minister, up to a limit of $295 million. The Finance Minister, must, however, be satisfied there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, in Schedule 1 of that Act, and provided the need arises for one of the reasons specified in paragraphs 13(1)(a) and (b). The Finance Minister is satisfied, based on information provided by the Department of Education, Employment and Workplace Relations (DEEWR) that the additional expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Bill for the Act before the Bill was introduced into the House of Representatives: paragraph 13(1)(b). A determination made under subsection 13(2) of Appropriation Act (No. 1) 2012-2013 is a legislative instrument, but neither section 42 (disallowance) nor Part 6 (sunsetting) of the Legislative Instruments Act 2003 applies to the determination. |
Purpose and effect of the instrument
| The instrument determines that the administered item for Outcome 4 for DEEWR in Appropriation Act (No. 1) 2012‑2013 be increased by $24,117,394.97. The administered item for Outcome 4 can be applied for the purpose of contributing to achieving the Outcome, namely: Safer, fairer and more productive workplaces for employers and employees by promoting and supporting the adoption of fair and flexible workplace arrangements and safe working arrangements. The additional amount is specifically provided to enable DEEWR to cover payments under the General Employee Entitlements and Redundancy Scheme (GEERS). GEERS is a demand‑driven scheme that provides a safety net to assist employees who have lost their employment as a result of the liquidation or bankruptcy of their employer and who are owed certain employee entitlements. The effect of the determination is that Schedule 1 of Appropriation Act (No. 1) 2012‑2013 will have effect as if it were amended as specified in the determination. The amount provided under this AFM will reduce the equivalent appropriation amount when Appropriation Bill (No. 3) 2012-2013 commences, through the operation of subsection 13(2) of Appropriation Act (No. 3) 2012-2013, where that Act provides an amount for the same particular expenditure. |
Human Rights Impact Statement | This Determination does not engage any of the applicable rights or freedoms outlined in the Human Rights (Parliamentary Scrutiny) Act 2011. This Determination is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 as it does not raise any human rights issues. |
Background | The section providing for the AFM is contained in the annual Appropriation Acts. It enables the Finance Minister to facilitate urgent and unforeseen expenditure that was not within the contemplation of Parliament when the Appropriation Act was passed, and was therefore not provided for in Schedule 1 of the Appropriation Act. The background to the instrument is provided in the application made by DEEWR for funding from the AFM, reproduced below. |
APPLICATION FOR ADVANCE TO THE FINANCE MINISTER 2012-2013
Agency: Department of Education, Employment and Workplace Relations
Appropriation: Appropriation Act (No. 1) 2012-2013
Description: General Employee Entitlements and Redundancy Scheme (GEERS)
Administered Annual Appropriation
Outcome: Outcome 4: Safer, fairer and more productive workplaces for employers and employees by promoting and supporting the adoption of fair and flexible workplace arrangements and safer working arrangements
Source of Available Appropriations | 2012-2013
| 2011-2012 | All other years |
$ | $ | $ | |
Appropriation Act (No. 1) | 213,637,000.00 |
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TOTAL APPROPRIATIONS AVAILABLE | 213,637,000.00 |
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TOTAL AMOUNT SPENT | 203,012,985.79 |
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TOTAL UNSPENT APPROPRIATIONS | 10,624,014.21 |
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Appropriation Required: $34,741,409.18
Appropriations Available: $10,624,014.21
Amount required from AFM: $24,117,394.97
AFM Category:
This request is unforeseen and is in accordance with Appropriation Act (No. 1) 2012-2013, Part 3, section 13 (1)(b).
Explanation of requirements from AFM:
GEERS is a safety net scheme to assist employees who have lost their employment due to the liquidation or bankruptcy of their employer and who are owed certain employee entitlements.
GEERS is a demand-driven scheme, and predicting future expenditure is difficult. GEERS was replaced by the Fair Entitlements Guarantee (FEG) scheme when the Fair Entitlements Guarantee Act 2012 commenced operation on 5 December 2012. The Act provides an unlimited special appropriation for the FEG scheme. Claims for FEG assistance can only be made where the employer went bankrupt or into liquidation on or after 5 December 2012. Claims where the employer went bankrupt or into liquidation prior to 5 December 2012 are still assessed under GEERS. This application only considers expected claims under GEERS.
GEERS anticipated payments for 1 March 2013 to 5 April 2013 are expected to affect approximately over 2800 employees and 880 businesses. Based on current trends and the recent insolvency of large employers the current GEERS appropriation of $202.975 million will be exhausted by mid-March 2013. GEERS is expected to need up to an additional $24.117 million to meet its commitments to 5 April 2013.
Expenditure under GEERS cannot be definitively predicted because it is affected by a wide range of variables, including:
- the number of companies placed into liquidation;
- the number of claimants for GEERS assistance;
- the industrial instruments that determine the terms and conditions of the claimants' employment; and
- eligible entitlements outstanding at the time of the insolvency.
As part of the 2012-13 MYEFO and Additional Estimates processes, GEERS estimates have been increased by $45.424 million for 2012-2013. The increase is included in Appropriation Bill (No. 3) 2012-2013; however, the passage of the Bill is not likely to occur until late March-early April 2013. At the current rate of expenditure, the existing appropriation for GEERS will be exhausted by mid-March. An Advance from the Finance Minister is required to provide funding for the program pending the passage of Appropriation Bill (No. 3) 2012-2013. Any amount provided and used under an Advance from the Finance Minister will reduce the equivalent appropriation amount when Appropriation Bill (No. 3) 2012-2013 commences.
Urgent:
Due to a number of large employers entering insolvency since Appropriation Act (No. 1) 2012-2013 received Royal Assent, an appropriation of $202.975 million for 2012-2013 is expected to be insufficient to meet the sustained increased demand for GEERS assistance for the remainder of this financial year.
In the event that the program has insufficient funds to make payments under GEERS in 2012-13, this would result in the untenable position of eligible GEERS claimants having their assistance delayed at a time of personal and financial hardship, following their redundancy from an insolvent employer. Such an outcome would also result in reduced public confidence in the Government’s administration of GEERS.
There are insufficient funds within the outcome that can be used to cover expenditure for the GEERS program. It is anticipated that all uncommitted funds within Outcome 4 will be exhausted by the second week of March. There are only a small number of programs within Outcome 4, all with small levels of appropriations that can only assist with this pressure for a short period of time. It should be noted that GEERS is the single largest program within Outcome 4. It is therefore critical that funds of $24.117 million be provided to the program within the next two weeks.
Unforeseen:
As stated above, the GEERS program is a demand driven program available to employees in any industry where the employer enters liquidation or bankruptcy. Given the volatility of the overall economy and the range of industries and employers that might enter insolvency, it is difficult to predict the likely expenditure for the program in any given year with any certainty.
Forecast to 30 June 2013:
Based on current trends and the recent insolvency of several large businesses, current projection of the actual expenditure that will be required under GEERS in 2012-13 is expected to be consistent with the amount published in PAES of $248.399 million for the year.
Signed By Chief Finance Officer
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NAME: (block capitals please) | CRAIG STOREN |
SIGNATURE: |
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DATE: | 1 March 2013 |