Fisheries Cost Recovery Standing Committee Meeting #25 - Chair’s Summary

Meeting details:

Date: Wednesday 5 September 2012

From: 10:30am to 5:00pm

Location:

Department of Primary Industries, Room 11, Mezzanine Level, 1 Spring Street, Melbourne, VIC.

Members attending:

Ian Cartwright (Ind. Chair)
Geoff Ellis (Industry)
Vince Collins (Industry)
Mark Edwards (DPI)
Terry Truscott (DPI)
Hugh Meggitt (Industry)
Vin Gannon (Industry)
Renee Vajtauer (SIV Observer)

Executive Support:

Chris Padovani

Ph: 03 9658 4779 (BH)

Guests/advisers:

Anthony Hurst, Executive Director, Fisheries Victoria
Gary Leonard (Industry)
Bill Allan (Industry)
Sean Buck (Industry)

Introduction

Fisheries Cost Recovery Standing Committee (FCRSC) Meeting #25 was the second to be held in 2012. The purpose of the meeting was to consider the implementation of a new prospective cost recovery system that would be implemented by 1 April 2013, as proposed by the Department at meeting #24. Following discussions between the Chair and the Office of the Minister for Agriculture and Food Security, the Minister directed that additional time should be allocated to the implementation of a new cost recovery system to allow for a more considered and staged development of the prospective regime. As a result, the Committee is now working to a revised timetable, which should achieve a new forward-looking/prospective cost recovery system, including the preparation of a Regulatory Impact Statement (RIS), to be phased in over a period commencing 1 April 2014. The Minister also provided direction that:

he does not require comments from the FCRSC on the matter of 2012/13 levies and the issue of rolling over by the Consumer Price Index, or the application of some other level of increase; This matter will be determined in consultation with SIV.; and
there should be a broadening of attendance at the Committee to reflect the major fisheries, broaden the level of expertise available; and increase the level of support for its outcomes. In the short term and to expedite progress, additional attendance would be achieved using the current provision in the Committee's Terms of Reference (TOR), which enables invitations to be extended to advisers. As such, the Committee, at least until the review of the TORs is complete, will remain an expertise-based committee, but with significant and valuable input from a wider range of industry attendees.

With the assistance of SIV, additional participation at the Committee was achieved. This is set to expand for the next meeting in accordance with the direction of the Minister. The meeting focused on:

developing a timetable that allows for the considered and staged development of this revised regime. In line with expectations from the Minister's office, I will report back to the Minister with a proposed timetable that will allow a staged implementation to commence by 1 April 2014; and
determining the principles of a robust cost recovery regime, confirming the services for which costs should be recovered from the commercial sector, and an appropriate attribution rate to recover those service costs.

Wild Catch Fisheries and Aquaculture Cost Recovery Review

A final draft of the Economics and Policy Research Branch cost recovery review was presented to the Committee in hard copy. This report was commissioned by the Department, with some input by the Committee to inform the development of an improved cost recovery system. In response to industry concerns that the outcomes of the Cost Recovery Review would be fully implemented by the Department as the new cost recovery regime, (in essence, a 'done deal'), the Department confirmed that the development of a new prospective cost recovery system would be achieved through the efforts of the FCRSC, and that it was open to all ideas and suggestions from the Committee. It was agreed that the Cost Recovery Review document and its recommendations would be used to inform, rather than drive the development of the new cost recovery system. Once final editing and proofing are complete, a final version of the Review document will be available on the Department website.

A timetable for cost recovery in Victoria to move to forward budgeting

The FCSRC discussed and agreed a timetable that aims to achieve the actions that need to be completed in order to meet the Minister's stated intention to implement a new cost recovery regime by 1 April 2014. This timetable will be provided to the Minister for Agriculture as requested. To achieve the April 2014 implementation date, the preparation of a RIS will need to be started by the 1^st March 2013. This will require considerable work to be undertaken by the Committee in the next six months, both in developing the detail of the system, and to ensure there is adequate consultation and input from stakeholders. While the RIS process does allow for a statutory consultation period with all stakeholders, the Committee is seeking to, consider industry issues, as far as possible during the development of the cost recovery regime. The timetable dictates the need for around five meetings of the Committee in the next six months.

The Committee noted that when it comes to considering a transition period to implement the new cost recovery regime, this may not be limited to a phase in of levies, but also a phase in of any new systems that DPI may need to adopt or any other matters that have yet to be considered.

Principles of cost recovery

TheCommittee discussed a number of cost recovery ideas and objectives and agreed on a revised set of cost recovery principles, which will also be provided to the Minister. These are high level principles and

a) Cost recovery systems should be designed to promote;

Economic efficiency; i.e. improve the allocation of resources in an economy by providing price signals for service provision that incorporate all of the relevant costs; and
Equity; i.e. those that benefit from a government service, or contribute to the need for a service, should pay for the associated costs. Where a number of groups benefit from a service, costs should be apportioned.

b) The cost recovery system should be administratively simple and minimise operating costs.

c) Operation of the system, including planning for the provision and delivery of services, should involve well designed, cost effective, consultation with those paying for the costs of services.

d) There should be transparency about the nature, extent, delivery and cost, of services for which there is cost recovery.

e) Operation of the system should promote opportunities for efficiency improvements.

f) Cross subsidisation between fishers and fisheries should be minimised.

g) Fee for service should be used where possible to directly recover the costs of transactions/service.

h) Between year volatility should be minimised in order to smooth costs to better enable businesses to plan.

i) Where resources are diverted to non-recoverable services (e.g. emergency services) or are materially under-delivered, a corresponding adjustment to future levies or services should be made.

j) The implementation of the system should include monitoring and periodic review.

k) The design, nature and extent of services should take into account the risks posed to the fishery and the value of production generated by the fishery.

It was noted that many of the issues of concern to industry, including 'special circumstances' provisions, the recoverability of Executive Salaries and supply of services will be discussed at subsequent meetings which will firm up a number of operational/ implementation issues.

Cost recoverable services provided to Victoria's wild-catch and aquaculture fisheries

The Committee discussed and made suggestions concerning the categories of services that DPI would provide to the commercial wild-catch and aquaculture industries, and the level of cost attribution applicable to industry for each of those categories. Three definitions of services to be provided to industry relating to the operational amanagement of fisheries require amendment and the Department was requested to provide these definitions at the next FCRSC meeting.

Industry strongly suggested that the idea of 'base-level' and 'above base-level' services be scrapped, and that the new cost recovery regime should contain 'services'. While accepting that more services cost more, and less services cost less, Industry members felt that the process to determine base-level and above base-level services would detract from the FCRSC's objective of implementing a prospective cost recovery regime by 1 April 2014.

Agreement on cost recoverable services at the generic level should be achieved at the next meeting, noting that fishery level fees and charges will be discussed in more detail at subsequent meetings, and will include significant input from stakeholders at the fishery level via the FCRSC membership.

The Department was asked by industry to clarify if an adjustment would be made to cost recovery levies for industry if the Court awards 'costs' to the Government following a successful prosecution.

Other Issues

Confidentiality and communication

After each meeting, as has occurred in the past, the Chair will produce a summary, which will be available on the department website not more than five working days after the meeting. Minutes of the meetings will be committee in confidence until they are cleared at the next meeting of the Committee, when they too will be placed on the Department website.

Committee members and advisers were encouraged to discuss the outcomes of each FCRSC meeting with stakeholders. Issues or details identified by exception as being of a particularly sensitive nature are to remain Committee in confidence until resolved or a decision taken. In essence, all matters discussed by the Committee can be aired with stakeholders where members/advisers consider it would be helpful, or are asked by the Committee to do so.

Developing the new prospective cost recovery system

Some concern was raised regarding the ability of the Department to provide the Committee with the necessary information to inform the development of the new system, particular given the fact it is facing budgetary cuts and structural change. The Committee noted the advice from the Executive Director Fisheries Victoria that DPI is committed to working with the FCRSC in the development of a new cost recovery regime, and confirmed that DPI considers this task a high priority and will allocate sufficient resources to achieve the Minister's implementation date of 1 April 2014.

The Committee noted that, given some of the residual concerns from the past performance of the fisheries cost recovery process, the task in hand would be challenging. It was agreed that while there was a need to learn from the past, there is a strong need to avoid re-iterating these matters, and instead focus on the development and implementation of a new cost recovery regime. The Committee also acknowledged the need to maintain momentum to get the job done in a timely manner.

Industry made it clear that they did not wish to see an 'off the shelf' cost recovery system imported from another jurisdiction and imposed in Victoria. The Committee agreed that any new system must be fit for purpose in a Victorian context and allow for the circumstances applicable to the State.

Abalone fishery

Regulations currently specify that the combined royalty and cost recovery payable annually in the abalone fishery is limited to 7.21% of GVP (Gross Value of Product). The figure was reached by agreement between industry and government. Industry noted their strong view that this cap on recovery for the abalone sector should be retained. DPI advised the Committee of their understanding that the 7.2% cap for abalone fisheries would remain.

Research

The FCRSC noted that environmental groups might advocate for research (and restrictions in fishing) to address environmental issues and standards at levels beyond those required under legislation. This could result in considerable costs being imposed on industry, which would be unacceptable. It was noted that well developed management plans, which should incorporate research and actions to address environmental concerns, should inform what research is to be done, thereby identifying research costs up front.

Transaction costs and fees

The Committee noted that DPI had conducted a review of its current fee structure (quota transfers, etc.), and has identified that the fees being charged to individuals do not cover the cost of the transaction. On the basis of current systems and staff complements, DPI is under-recovering for the cost of providing these services to individuals. However, these systems are currently being redesigned, and there is the potential for efficiency improvements. The Committee further noted the intention that transaction fees be reviewed in 2015, once the new systems are operating. In the meantime, fees will be maintained with an appropriate CPI index provided by Treasury.

Next Meeting: Friday 28 September 2012.

Ian Cartwright

Independent Chair

Fisheries Cost Recovery Standing Committee

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For further information on the above, or to raise any queries regarding the cost recovery process, please contact:

Chris Padovani

Project Officer Statutory Consultation

Department of Primary Industries

Tel: 03 9658 4779

Email: chris.padovani@dpi.vic.gov.au