Australian Dairy Industry

Transcription

1 Australian Dairy Industry Represented by Australian Dairy Industry Council Inc. and Dairy Australia Response to Australian Government Review of Cost Recovery Guidelines 2005 Contacts August 2012 DA: Kira Goodall Manager Regulatory Affairs, Dairy Australia I kgoodall@dairyaustralia.com.au Level 5 IBM Centre 60 City Road, Southbank Victoria 3006 ADIC: Natalie Collard Chief Executive Officer, Australian Dairy Farmers I ncollard@australiandairyfarmers.com.au

2 The Australian Dairy Industry The dairy industry is one of Australia s major rural industries. Based on farm gate value of production, it is ranked third behind the beef and wheat industries. There are approximately 6,900 farmers producing close to 9.5 billion litres of milk annually, for a farm gate value of just under $4 billion. The dairy industry welcomes the chance to present this submission in response to the Australian Government Review of Cost Recovery Guidelines This is a joint submission from the Australian Dairy Industry Council (ADIC) and Dairy Australia. The ADIC is the national peak policy body for the Australian dairy industry and represents all sectors of the industry on issues of national and international importance. Its constituent organisations the Australian Dairy Farmers Limited (ADF) and the Australian Dairy Products Federation (ADPF) represent the interests of dairy farmers, manufacturers, processors and traders across Australia. Dairy Australia is the dairy industry-owned service company, limited by guarantee, whose members are farmers and industry bodies, including the ADF and the ADPF. Key points The Australian dairy industry supports in-principle the content and intent of the current Cost Recovery Guidelines Cost-recovered agencies should also be required to be transparent and accountable about cost containment efforts alongside cost recovery to ensure maximum efficiency and reduce regulatory and cost burden on industry and the community. The Department of Finance and Deregulation should examine industry concerns about implementation of the Cost Recovery Guidelines 2005 by Government agencies as part of the review. The Department of Finance and Deregulation should undertake communication and training of all Government Departments following the review to ensure that the intent and detail of the CR Guidelines is properly understood and implemented. Introduction Costs are recovered from the dairy industry for Australian government activities in a wide range of areas and through a number of different agencies. Examples include: paid applications to Food Standards Australia New Zealand, dairy quota administration and export certification through the Department of Agriculture Fisheries and Forestry, and agvet chemical regulation (via costs passed on by chemical companies) through the Australian Pesticides and Veterinary Medicines Authority. State governments also recover costs from industry, for example for the activities of state-based food safety regulators. The Australian dairy industry supports a review of the Australian Government s Cost Recovery Guidelines 2005 ( CR Guidelines ) to ensure that: - they reflect and absorb changes to legislation, policy and processes occurring since 2005; and - there is increased transparency in cost recovery activities including processes and calculations involved in setting and amending fees and charges, monitoring, reviewing and reporting. Australian Dairy Industry response to the Australian Government Review of Cost Recovery Guidelines

3 The dairy industry supports the intent and content of the CR Guidelines in principle but has serious concerns about: 1. Lack of incentives to ensure best practice in cost management in cost-recovered agencies; and 2. Implementation and compliance by Government agencies in practice. Best practice in cost management While the Australian dairy industry supports the current CR Guidelines, they should include a discussion to context cost recovery within an overall cost management program. A cost management program is the effective, overarching control of an organisation s finances, of which cost recovery is one component. When properly implemented, cost management should translate into reduced costs of production for products and services, as well as increased value being delivered to the user. These are the expectations of the users who pay for government services. Industry should be able to monitor the performance and efficiency improvements of cost-recovered agencies over time. Industry confidence in cost recovery arrangements will be increased where cost tracking, analysis and cost containment is reported, where resource and asset utilisation is transparent and where distribution of benefits is clearly articulated. This enables users/beneficiaries to understand how costs are accrued and calculated and how an agency is likely to approach cost management in future reviews. While industry and individual companies are the immediate users/beneficiaries of these services, cost-recovered agencies are monopoly providers and users should not bear the costs of agency inefficiencies. Where Government is not containing costs, for example, industry should be exempt from charge. As periodic reviews appear to inevitably result in increases to levies and charges, cost containment must be exercised and reported on alongside cost recovery. The CR Guidelines would be improved by addressing cost recovery in the context of overall cost management and should require agencies to report accordingly. Such reporting should be a requirement in both in the Cost Recovery Impact Statement (CRIS) process and annual portfolio budget submissions, creating the right incentive for achieving ongoing best practice in Government fee-for-service delivery. Implementation of Cost Recovery Guidelines in practice Agency accountability for compliance with the CR Guidelines could be improved and warrants consideration in this review. A number of recent examples highlight dairy industry concerns about transparency and accountability in cost recovery programs. For example: The dairy industry has supported user pays/cost recovery principles, provided there is clear transparency of the costs. With export certification, when DAFF moved to cost recovery programs, there was a clear delineation between dairy program costs and costs associated with what was then termed DAFF (AQIS) Community Service Obligations (CSO). The CSO components covered areas where AQIS, as the competent authority for export certification, provided input to importing countries policy development to ensure no technical barriers to trade were put up. As well, AQIS dealt with technical barriers to trade under CSOs as the rationale was that AQIS was clearing the pathway to exports that in turn benefited the national economy (and the community). Over the ensuing years, while the policy area of work increased, the extent to which the CSO funding was applied decreased and costs were added to the industry funded program without any opportunity to discuss this. There now is no CSO (or equivalent) component within DAFF for export certification. In another instance, AQIS moved to streamline the oversight of export certificates allowing State Food Authorities who were undertaking audits on behalf of AQIS, to also oversight the provision Australian Dairy Industry response to the Australian Government Review of Cost Recovery Guidelines

4 of export certificates. AQIS claimed that they were substantially reducing the dairy program costs. However, the State Authorities had to provide a system for export certificates that was substantially more expensive than a centralized system through AQIS, and a system where the full costs had to be recovered from industry. In the guise of cost savings, AQIS simply shifted their costs to industry via state authorities and industry lost transparency and gained increased costs in the process. Food Standards Australia New Zealand is proposing a fee increase well in excess of the Consumer Price Index. The CR Guidelines require a rigorous analysis commensurate with a CRIS when proposing a fee increase of this level (see page 52 of the CR Guidelines), but this has not been undertaken. The extent of the current proposed fee increase and the timeframe for introduction materially affects the dairy and other food industries, but have been deemed machinery in nature as advised by the Office of Best Practice Regulation. The first principles policy review of Australian Pesticides and Veterinary Medicines Authority (APVMA) cost recovery practices recently announced should be undertaken in conjunction with the Better Regulation of Agriculture and Veterinary Chemicals reforms, which seek, among other objectives, to improve the efficiency and function of the APVMA. Cost management is an integral feature of overall effective agency functioning. The first principles review of cost recovery must include scrutiny of the APVMA s approach to overall cost management. In particular, the APVMA should be accountable for cost containment alongside cost recovery. The Australian dairy industry would be happy to meet with the Department of Finance and Deregulation to further discuss these examples of where implementation of the CR Guidelines has fallen short of industry expectations and whether there is scope for addressing this important issue in the review. The Australian dairy industry would like to see the Department of Finance and Deregulation include communication and training of all Government Departments following the review to ensure that the intent and detail of the CR Guidelines is properly understood and implemented. Costs associated with policy and parliamentary work Government should not seek to recover twice from an activity. Any component of an agency s work program that the Government has agreed should be publicly funded should be clarified and transparent to service users and clearly outside cost-recovery arrangements. In other words, products and services for which fees and charges are extracted from users should be additional to those that have already been funded from Consolidated Revenue to which industry participants have contributed through general taxation. Cost-recovered agencies should not seek to recover costs from industry for policy and parliamentary work that is the core business of the overarching Government Department funded by general taxation. Cost recovery will be at its most transparent and efficient if structural arrangements reflect this key principle (key principle 5 in the CR Guidelines). In practice, however the Australian dairy industry acknowledges that important knowledge, expertise and data often resides primarily within a costrecovered agency. For example the provision of information to support international market access is a core government function. In the area of agvet chemicals this information is held by the APVMA, which is a fully cost recovered agency. However this should not be a reason for cost-shifting of core onto industry. Clear consideration and delineation of the roles of cost-recovered agencies against their Government Departments needs to form part of the periodic cost-recovery reviews. Ideally structural reform should be implemented where appropriate, however at the very least funding arrangements for particular agency functions should be itemised and published. Australian Dairy Industry response to the Australian Government Review of Cost Recovery Guidelines

5 Specific questions posed in the review In addition to the previous issues, the dairy industry provides the following response to the specific questions raised on the review web page: The best method/s to consult with non-government users on specific cost recovery activities (e.g. this currently occurs through a CRIS) As outlined in section 3, the dairy industry strongly argues for rigorous analysis commensurate with a CRIS for any proposed cost recovery reforms that result in an increase to fees and charges that exceed the Consumer Price Index (and are therefore material ). In addition, the dairy industry argues that stakeholder consultation should occur for all CRIS processes, rather than just where appropriate (Figure 7 of the CR Guidelines). What information non-government users need in relation to specific cost recovery activities As outlined in section 2, industry s confidence in cost recovery programs for Governmentoperated services will be improved where transparent account of whole-of-agency costs are published, allowing for performance to be measured by service users and external stakeholders. Examples provided in section 3 highlight the need for greater transparency from Government. How to report on specific cost recovery activities The dairy industry has addressed this in section 2. Any other views non-government users may have in relation cost recovery activities The dairy industry has provided a response in sections 3 and 4. Conclusion The Australian dairy industry would like to continue to be involved in discussions as the review progresses, particularly in relation to a) ensuring agencies exercise cost containment alongside cost recovery and b) implementation and compliance issues. Australian Dairy Industry response to the Australian Government Review of Cost Recovery Guidelines