General policy statement

Appropriation is the statutory mechanism by which Parliament authorises the Government to incur expenses and capital expenditure. Other than permanent appropriations provided for in other legislation, appropriations are provided by Appropriation (Estimates) and Appropriation (Supplementary Estimates) Bills.

This Bill seeks parliamentary authorisation of the individual appropriations contained in The Estimates of Appropriations for the Government of New Zealand for the year ending 30 June 2015 (B.5) (the Estimates) presented to the House of Representatives as part of the 2014 Budget documentation.

This Bill has been prepared taking into account amendments to the Public Finance Act 1989 made by the Public Finance Amendment Act 2013 (the 2013 amendment Act), including amendments to be made on 1 July 2014 that apply prospectively to matters relating to the 2014/15 financial year: see clause 2 of Schedule 1 of the Public Finance Act 1989. This Bill therefore differs from previous Appropriation (Estimates) Bills as follows:

• the appropriations made by this Bill include multi-category appropriations (see new sections 7A and 7B of the Public Finance Act 1989, which will be inserted into the principal Act on 1 July 2014 by section 59 of the 2013 amendment Act). Multi-category appropriations may include output expenses, other expenses, and non-departmental capital expenditure:

• in previous years, appropriations for a single financial year were separated into 2 categories—clause 6 and Schedule 1 made appropriations for expenses and appropriations for capital expenditure, and clause 7 and Schedule 2 made appropriations for both expenses and capital expenditure (for intelligence and security departments). With the addition of multi-category appropriations, which can also include both expenses and capital expenditure, the Bill has been restructured so that all appropriations applying to a single financial year are made by a single clause and set out in a single schedule (see clause 6 and Schedule 1):

• this Bill assists parliamentary control of the amount of net assets that a department or an Office of Parliament may hold by authorising capital injections, rather than by confirming net assets of departments and Offices of Parliament (see new section 12A of the Public Finance Act 1989, which will be inserted into the principal Act on 1 July 2014 by section 62 of the 2013 amendment Act, and sections 23 and 26E of the Public Finance Act 1989, which will be repealed and replaced, respectively, on 1 July 2014 by sections 71 and 77 of the 2013 amendment Act):

• the Bill does not list non-departmental appropriations on which a Minister is required to report under section 32A of the Public Finance Act 1989, because that section will be repealed on 1 July 2014 by section 79 of the 2013 amendment Act. However, Ministers will continue to be required to provide end-of-year performance information on non-departmental appropriations under new sections 15C and 19B of the Public Finance Act 1989, which will be inserted into the principal Act on 1 July 2014 by sections 64 and 69 of the 2013 amendment Act.

In this Bill, the individual appropriations in summarised form are set out in Schedules 1 and 2. The provisions of the Bill ensure that the scope of each appropriation as set out in the Estimates forms part of the legal appropriation.

In accordance with the Public Finance Act 1989, separate appropriations are required for—

• each category of output expenses; and

• each category of benefits or related expenses; and

• each category of borrowing expenses; and

• each category of other expenses; and

• each category of capital expenditure; and

• the expenses and capital expenditure to be incurred by each intelligence and security department; and

• each multi-category appropriation.

Approval to spend public money is not required in Appropriation Acts because section 6 of the Public Finance Act 1989 provides ongoing authority for public money to be spent for the purposes of meeting expenses or capital expenditure incurred in accordance with an appropriation, the payment of goods and services tax in relation to those expenses or that capital expenditure, the repayment of debt, and the settlement of liabilities.

This Bill also seeks parliamentary authorisation for the Crown to make capital injections to departments and an Office of Parliament during the 2014/15 financial year. New section 12A of the Public Finance Act 1989 (which comes into force on 1 July 2014 and applies in respect of the 2014/15 financial year) provides that the Crown must not make a capital injection to a department (other than an intelligence and security department) or an Office of Parliament unless the capital injection is authorised under an Appropriation Act. By requiring capital injections to be authorised, Parliament retains control over the level of net assets that departments and Offices of Parliament may hold.

A capital injection—

• authorises the Crown to inject additional cash or other assets into a department (other than an intelligence and security department) or an Office of Parliament to increase the amount of net assets on its balance sheet; but

• does not form part of a Vote; and

• is not an appropriation.

In contrast, capital expenditure by a department or an Office of Parliament—

• does form part of a Vote; and

• for an intelligence and security department, requires an annual appropriation; but

• for other departments and for Offices of Parliament, does not require an annual appropriation because there is a permanent legislative authority for departments (other than intelligence and security departments) and Offices of Parliament to incur capital expenditure (see sections 24(1) and 26E of the Public Finance Act 1989, as in force on and from 1 July 2014); and

• does not increase the amount of net assets on the balance sheet of the department or Office of Parliament.

Departmental disclosure statement

A departmental disclosure statement is not required for this Bill.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 is the commencement clause. The Bill comes into force on the day after the date on which it receives the Royal assent.

Clause 3 provides that the Bill (except clause 7 and Schedule 2) relates to the 2014/15 financial year.

Clause 4 is an overview clause.

Clause 5 is an interpretation provision.

Clauses 6 and 7 are the principal appropriation clauses of the Bill.

Clause 6 authorises, for the 2014/15 financial year, the appropriations set out in Schedule 1. Each appropriation is of a type specified in new section 7A(1) of the Public Finance Act 1989, which will be inserted into the principal Act on 1 July 2014 by section 59 of the 2013 amendment Act.

Clause 7 authorises the multi-year appropriations set out in Schedule 2. Section 10 of the Public Finance Act 1989 provides that an Appropriation Act may authorise expenses or capital expenditure to be incurred for more than 1 financial year as long as the authority (which lapses at the end of the period specified in the Appropriation Act) does not apply for more than 5 financial years.

Section 9 of the Public Finance Act 1989 concerns the scope of appropriations. Clauses 6 and 7 (when read together with the definition of “scope shown in the Estimates” in clause 5(1)) each describe where the scope of each appropriation authorised under those clauses is set out, making the scope of each appropriation (as set out in the Estimates) part of the legal appropriation.

Clause 8 and Schedule 3 specify the appropriations to which output expenses may be charged under section 21 of the Public Finance Act 1989. This means that, provided the other requirements in section 21 of the Public Finance Act 1989 are met, output expenses may be incurred up to the amount of third-party revenue expected to be earned by the relevant class of outputs during the 2014/15 financial year.

Clause 9 authorises the capital injections set out in Schedule 4.

Clause 10 and Schedule 5 repeal spent Appropriation Acts.