EXPLANATORY STATEMENT

Federal Financial Relations Act 2009

Federal Financial Relations (National Specific Purpose Payments) Determination 2016-17

The Intergovernmental Agreement on Federal Financial Relations (the IGA) provides a robust foundation for collaboration on policy development and service delivery, and facilitates the implementation of economic and social reforms in areas of national importance.

In agreeing the framework for federal financial relations, the Commonwealth committed to the provision of financial support for the States and Territories’ service delivery efforts through:

•                 general purpose financial assistance, including the ongoing provision of GST payments, to be used by the States for any purpose;

•                 National Specific Purpose Payments (National SPPs) to be spent in key service delivery sectors;

•                 National Health Reform funding;

•                 Students First funding; and

•                 National Partnership payments to support the delivery of specified outputs or projects, to facilitate reforms, or to reward those jurisdictions that deliver on nationally significant reforms.

The federal financial framework commenced on 1 January 2009.  The payment provisions of the IGA are implemented through the Federal Financial Relations Act 2009 (the Act).

National SPPs

Under the IGA, the Commonwealth provides National SPPs to the States and Territories as a financial contribution to support State and Territory service delivery in the areas of skills and workforce development, disability and housing. 

The Federal Financial Relations (National Specific Purpose Payments) Determination 2016-17 (the Determination) specifies the amounts for the disability services, skills and workforce development, and housing National SPPs for 2016-17.

Part 3 of the Act provides for the Minister, by legislative instrument, to determine the total amounts payable in respect of each National SPP, the manner in which these total amounts are indexed, and the manner in which these amounts are divided between the States and Territories. The Determination has been made in accordance with these provisions.

The Act also requires the Minister have regard to the IGA when making a determination for National SPPs.  The indexation methodology used to calculate each National SPP in the Determination is in accordance with the relevant growth factor for each National SPP as outlined in ‘Schedule D — Payment Arrangements’ to the IGA.

Advance payments in respect of the National SPPs are provided throughout the financial year based on estimates of each jurisdiction’s anticipated entitlement.  Any adjustment between the advances paid to a jurisdiction and the jurisdiction’s determined entitlement is made in the first practicable payment in the subsequent financial year.

Part 3 of the Act and ‘Schedule D — Payment Arrangements’ to the IGA provide that the States and Territories are required to spend each National SPP in the service sector relevant to the payment.  However, the States and Territories have full budget flexibility to allocate funds within that sector as they see fit to achieve any mutually agreed objectives for that sector.

The Minister’s determination in respect of National SPPs is a legislative instrument and will be registered on the Federal Register of Legislation.

Consultation

The IGA was subject to extensive consultation with the States and was signed by all jurisdictions in December 2008.  The IGA is publicly available on the website for the Council for Federal Financial Relations.  Consultation with the States and Territories on National SPPs also occurs regularly, principally through meetings between Heads of Treasuries.

Commencement

The Determination commenced on the day it was made.

Statement of Compatibility with Human Rights

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

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

Overview of the Legislative Instrument

In accordance with the Intergovernmental Agreement on Federal Financial Relations and the Federal Financial Relations Act 2009, the Commonwealth provides National Specific Purpose Payments (NSPPs) to the States and Territories as a financial contribution to support State and Territory service delivery in the areas of disability, skills and workforce development, and housing.  The Federal Financial Relations Act 2009 requires the Treasurer to make an annual determination of the total payment amount for each NSPP by applying an indexation factor to the total payment amount from the previous financial year. The relevant indexation factors are calculated according to formulas set out in Schedule D to the Intergovernmental Agreement on Federal Financial Relations.

This Legislative Instrument determines the total amounts payable in respect of the disability, skills and workforce development, and housing NSPPs for 2016‑17, the manner in which these total amounts are indexed, and the manner in which these amounts are divided between the States and Territories.

In total, the NSPPs have increased by $90.7 million since 2015-16. The increase for each NSPPs since 2015-16 is included in the table below.

Table 1: Increase in the National SPPs

Human rights implications

Funding for all NSPPs has increased since the previous financial year. However, a change in any of the parameters underlying the agreed indexation formulas can result in a reduced total payment. Other policies and programs may also have an effect on NSPPs. For example, the NSPP for disability services is likely to decrease in future financial years as States and Territories transition to the National Disability Insurance Scheme, even though the total resources that the Commonwealth devotes to disability services will be increasing.

This Legislative Instrument, and the payments to the States and Territories that the instrument supports, assist in the realisation of a number of human rights:

•               The NSPP for skills and workforce development promotes the right to education (art 13, International Covenant on Economic Social and Cultural Rights (ICESCR); art 28, Convention of the Rights of the Child (CRC) and art 24, Convention on the Rights of Persons with Disabilities (CRPD)), and the realisation of the right to work through vocational training (art 6, ICESCR and art 27, CRPD).

•               The NSPP for affordable housing promotes the right to an adequate standard of living, specifically in relation to housing (art 11, ICESCR; art 27, CRC and art 28, CRPD).

•               The NSPP for disability services promotes the right of children with disabilities to education, training and health care (art 23, CRC and art 7, CRPD); rights concerning the ability of persons with disabilities to live independently and be included in the community (art 19, CRPD); rights concerning the personal mobility of persons with disabilities (art 20, CRPD); rights concerning the habilitation and rehabilitation of persons with disabilities (art 26, CRPD); and the right to take part in cultural life (art 30, CRPD).

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.