Senator Penny Wright asks questions about increasing efficiency dividends for the High Court of Australia
Legal and Constitutional Affairs Legislation Committee Attorney-General's portfolio February 24, 2014
Senator WRIGHT: I have some similar questions on these points. I just want to be clear so that I am sure that I am asking my questions on the basis of accurate information. I understand that to date you were subject to an efficiency dividend of 1.5 per cent but that you were exempted from the efficiency dividend increase to four per cent in 2012. Is that right?
Mr A Phelan: Yes, we have been subject over the years to most-if not all-of the efficiency dividends except that one.
Senator WRIGHT: Except the increase. Is that right?
Mr A Phelan: Yes, the one-off one. Going back to 1987-that is all I have here-there are two that we have been exempt from. One was when the High Court was exempt from the single-year 2.5 per cent impost in 2012-13, and the current government exempted the High Court from a further increase of 0.25 per cent that was additional to the efficiency dividend announced just prior to the election. So, of all the efficiency dividends that the court has been exempted from, they are the only two.
Senator WRIGHT: I understand that effective from 1 July this year the dividend will be increased to 2.25 per cent from the previous 1.5 per cent. Is that right?
Mr A Phelan: Yes.
Senator WRIGHT: I am going to ask some of the questions that you have already been asked, but I would like a bit more detail, if possible, about the work the court might have performed in preparation for achieving this increased dividend and, in particular, the areas of the court's operations that it anticipates will need to be reformed in order to meet this increased efficiency dividend. What sorts of things has the court looked at? You have indicated that there are some fixed costs over which you really have no control, so what are the areas which potentially have some give?
Mr A Phelan: There will be pain when I say there is some give. Anything to do with the building and building maintenance can manifest later as deferred liabilities. So we are loath to do that, but we will if we have to. There is a capacity within the court to carry a deficit within its existing cash holdings for a little while. The first year is not a significant issue for the court. You are only talking there, I think, in the range of $163,000 from 1 July. But certainly by 2015-16, when we are talking $366,000 and, for 2016-17, $577,000, and when we have costs that are rising and intersecting with a revenue base which is starting to go down, it gets tougher. But we do not believe that there will be any impact on core services. They would be immunised. We are not looking at reducing, for example, circuits for cost reasons. Although we only circuit when there is work, I should qualify that.
We are looking at electricity, even though I have said there are statutory charges. There are still some variable issues we can look at-and water. We are rebuilding the whole of the building management system, which is something I perhaps should have mentioned to Senator Singh, but we have not started that yet. There is the whole computerised system of controlling air conditioning and so on. We will be replacing the whole of the air conditioning system over the next couple of years. It is many millions of dollars.
That may well help to bring us closer to where we have to be. We do believe that we have got the cash to carry a deficit for a little bit of time. It is not liquidity issue; it is a book deficit issue for us that we need to manage.
Senator WRIGHT: So have you carried a deficit up to now?
Mr A Phelan: No. Well, I have not looked at our books. We are certainly accumulating deficits for one simple reason. That is that we are not cash funded for depreciation; so in an accounting sense, when we are charged expenditure for depreciation, we go quite a few millions of dollars into the red. It is a complete book entry, which is meaningless in a liquidity sense. So we have carried those sorts of deficits for some time as book deficits. But we have still got a very healthy balance sheet, if I can put it that way.
Senator WRIGHT: But this deficit that you indicated-the first one, as of 1 July for the next financial year-of $163,000 will not just be a book deficit. That will actually be running deficit.
Mr A Phelan: If we cannot reduce expenditure to meet that efficiency dividend, then yes. There will be a deficit.
Senator WRIGHT: Does the court consider itself analogous to other federal government agencies who are subject to increased efficiency dividends or is that the court's view that, as the third branch of the executive government, such an efficiency dividend is not appropriate to apply to them?
Senator Brandis: Is that not a policy question?
CHAIR: You can answer it as a policy question. I will not argue on whether it is or it is not, but go ahead.
Senator Brandis: I do think, Senator Wright, that the court may or may not have an opinion on the matter, but whether it does or not is really not an appropriate question. The policy of the government, and in fact this is a policy we inherited from the previous Labor government, is to impose the efficiency dividend on the courts. There is a broader constitutional issue here about the way in which courts established under chapter 3 of the Constitution ought to be treated for administrative and financial purposes, but I really do not know that it is appropriate to ask this officer his views on that matter.
CHAIR: No, she is asking you now.
Senator WRIGHT: Then I am happy to hear your view. I understand that the Chief Justice expressed that view in a letter that was made available under freedom of information when he wrote to the Prime Minister.
Senator Brandis: The fact is that under the arrangements established by central agencies, and particularly by the Department of Finance, the courts are treated equivalently to other agencies for certain budgetary purposes. That is the way it is. We would open a very big can of worms if we were to revisit that treatment. I do not propose to do that.
Senator WRIGHT: Does it not raise the issue that essentially they are not just agencies to do the bidding of government-
Senator Brandis: Of course they are not.
Senator WRIGHT: but indeed there is a separation of powers issue whereby they are third arm of the executive government.
Senator Brandis: They are a third arm of government, not a third arm of the executive government.
Senator WRIGHT: That is not executive government-
Senator Brandis: You are absolutely right. I, in particular as the Attorney-General, respect the position that the courts are as independent from the executive as the parliament is. There are three arms of government established by our Constitution and the courts are a separate arm of government. There is no doubt about that. But what we are discussing now is the way in which courts, which are funded from monies raised from taxpayers, are treated for certain accounting and budgetary purposes by the Department of Finance. That is all I am saying.
Senator WRIGHT: I suppose I am just saying that it is conceivable, isn't it, that if those sorts of budgetary decisions were made to such an extent that they incapacitated a court from being able to carry its functions properly then effectively it is derogating from its ability to carry that third arm of government role.
Senator Brandis: Not really. Nobody is suggesting that the courts are incapable of carrying out their function.
Senator WRIGHT: Mr Phelan, I understand that Chief Justice French wrote to the Prime Minister to say that cutting the High Court's funding would affect the High Court's ability to do its work, and again that was a document that was released under freedom of information. What response has the court received from the Prime Minister or other government sources regarding that issue?
Senator Brandis: I can table the Prime Minister's response to the Chief Justice, a letter of 17 November, which is self-explanatory.
Senator WRIGHT: Thank you.