Fisheries Cost Recovery Standing Committee Meeting #21

10.30am Wednesday 20 October 2010

Venue: DPI 1 Spring St, Melbourne Vic 3001.

Chairman's Summary

Attendees:

Ian Cartwright – Independent Chair
Geoff Ellis (Industry member)
Vince Collins (Industry member)
Hugh Meggitt (Industry member)
Ross McGowan (SIV) – Permanent Observer
Terry Truscott (DPI member)
Renee Vajtauer (SIV) - Observer
Mark Edwards (DPI) - Observer

Robert Krix - Executive Support
Chris Padovani – Administrative Support

Invitees:

Bill Fisher, Principal Economist, Economics and Policy Research Branch, DPI

The meeting was the second Fisheries Cost Recovery Standing Committee (FCRSC) in 2010. Key issues discussed included:

Progress towards forward budgeting and the FACS review
Cost recovery comparative FACS data summary for 2008/09 and 2009/10
Marine Parks programme services
FRDC Levies
FCRSC appointments

Progress towards forward budgeting and the FACS review

The Committee has previously endorsed a DPI/FV proposal to conduct a Cost Recovery Review which is being done by DPI's Economics and Policy Research Branch (E&PRB) under the direction of, and in collaboration with Fisheries Victoria, with regular consultation with the FCRSC. The project is designed to consider all means of improving the cost-effectiveness and efficiency of the current fee and levy setting approach for cost recovery from industry. The review will place particular emphasis on moving towards implementing an up-front (prospective process) approach to setting levies for planned management services to be delivered during the forthcoming year(s), rather than the current process for recovering costs after the fishery management services (FMS) have been delivered (a retrospective process). The project includes a review of the Fisheries Activity Costing System (FACS).

An update on progress of the review was provided by Bill Fisher, Principal Economist, DPI's Economics and Policy Research Branch. Industry has assisted in the development of, and embraced the principles of cost recovery, and, through the FCRSC, has strived to ensure accountability for the FMS provided. The Committee noted the importance of ensuring that, to the fullest extent possible, the principles being used in the cost recovery review should be consistent with the existing and agreed cost recovery principles identified in the FCRSC Terms of Reference. It was agreed that this is the case.

The forward budgeting model that is intended to replace the current cost recovery system, is still in the early planning stages and requires a number of issues to be worked through. These issues include the need to develop processes for dealing with "overs/unders" for year-to-year adjustments and a way of ensuring that industry would not be charged twice for the provision of FMS for any licensing period during implementation.

The Committee again noted that the current agreement with government on royalty and cost recovery in the abalone fishery limited the total amount payable/recoverable from the abalone sector in the form of royalty/costs to 7.21% of GVP of the fishery.

DPI will continue to consult with FCRSC and will be scheduling a meeting of FCRSC to seek further feedback on concepts and proposals prior to the completion of the Draft Report. A consultation process with industry will also be undertaken prior to implementing any recommendations arising from the completed review which is expected to be completed during March 2011.

The concept of linking the desired cost recovery outcomes to the broader DPI/FV corporate planning and budgetary processes, was endorsed, but it was recognised that this would take some time to implement

Cost recovery comparative FACS data summary for 2008/09 and 2009/10

The comparative FACS data for the provision of Fisheries Management and Compliance Services for 2008/09 and 2009/10 was reviewed. Two major concerns were expressed:

the apparent anomalies in the cost data presented, particularly the level of estimated 'Recovered Costs for some fisheries, to point at which the Committee agreed that the data was unreliable; and
the on-going issue of a disparity between actual costs and recovered costs for some fisheries

The decrease of total expenditure by Fisheries Victoria (as indicated by FACS) on the provision of FMS from the 2008/09 to 2009/10 years was noted, and will be investigated further.

DPI will be providing i) an explanation as to why the FACS data indicates a reduction in the provision of FMS of about 18% against actual total expenditure for 2008/09 and 2009/10 and ii) data on recoverable FMS costs as a percentage of total combined budget expenditure for the provision of Management and Compliance services for these financial periods.

The FCRSC subsequently supported a roll-over of Management and Compliance Services levies from 2010 to 2011, including an inflation adjustment of 2.25% (the State Government's 2009/10 inflation adjustment).

Marine Parks programme services

Following implementation of marine parks, the Victorian Government made a commitment of $14.1 million over 4 years and $3.4 million on-going to boost fisheries enforcement. Under the Marine Parks & Sanctuaries Compensation Initiative funding.

In response to questions from the FCRSC, DPI clarified the position in relation to the potential for the cost burden of this funding to be transferred to industry and cost recovered. It was noted that:

the (then) $3.4 million of FMS (compliance) provided through the Marine Parks and Sanctuaries compensation initiative will continue to be exempt from cost recovery, subject to the Government continuing to provide this initiative funding; and
actual expenditure through this initiative will be about $6.1 million for 2010/11.

FRDC levies

The total amount of funds raised through the FRDC levy is equal to approximately 0.25% of the averaged (over three years) combined fisheries GVP (Gross Value of Production).

In 2008, all fees and levies (including the FRDC Levy) were rolled over with an increase in line with inflation (i.e. the levy was not calculated using the 0.25% of GVP formula). In 2009, the fees and levies were again rolled over with an inflation factor due to the levy being expressed in Fee Units

The Committee recommended an approach for the 2011/12 licensing year whereby current levy values would be adjusted downwards to equate to 0.25% of GVP in fisheries where there was an effective overcharge, and remain as is for fisheries where less than 0.25% of GVP will be collected, subject to this approach not resulting in an excessive reduction in total funds collected for FRDC.

FCRSC appointments

The current term of appointment of FCRSC members expired on 30 September 2010. The Chair of the Committee has been re-appointed and nominations for other members have been provided to the Minister. The other members of the Committee will not be officially re-appointed until after the State election. The nominal aquaculture representative indicated that it would be preferred that they not be nominated by SIV, but that is acceptable temporarily, as there is currently no representative body in Victoria for aquaculture producers.