Fisheries Cost Recovery Standing Committee Meeting #26 - Chair’s Summary

Meeting details:

Date: Friday 28 September 2012

From: 8:30am to 4:30pm

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)
• Vin Gannon (Industry)
• Renee Vajtauer (SIV Observer)

Executive Support:

Chris Padovani

Ph: 03 9658 4779 (BH)

Guests/advisers:

• Harry Peeters (Industry)
• Gary Leonard (Industry)
• Bill Allan (Industry)
• Sean Buck (Industry)

Introduction

Fisheries Cost Recovery Standing Committee (FCRSC) Meeting #26 was the second to be held in 2012. The purpose of the meeting was to continue the development and implementation of a new prospective cost recovery system commenced at the previous meeting for implementation by 1 April 2014. The meeting noted that since the previous meeting, the Minister for Agriculture and Food Security had been advised of the proposed timetable for implementation and the agreed cost recovery principles that will underpin the design of the new cost recovery regime.

Two other points were clarified from the previous meeting:

• If the Court awards 'costs' to the Government following a successful prosecution, no adjustment would be made to cost recovery levies for industry due to the Victorian Government's policy not to hypothecate any funds collected under the Confiscation Act back to enforcement agencies due to the perverse incentives that could be created, which could undermine the justice system. Industry maintained a view that as a result of paying annual levies for the provision of fisheries regulatory services such as surveillance, intelligence, etc. it would not be unreasonable for there to be a return to industry from confiscations (rather that fines) as an off-set for the levies paid by industry for those services.
• The Victorian Government policy regarding the automatic indexing of levies, fees and fines each year for inflation, so that the value of those levies, fees and fines is maintained, will continue to be applied under the new cost recovery regime. Without indexation via the use of fee units, there would be a significant amount of administrative work and cost in undertaking Regulatory Impact Statements on a regular basis.

The Chair reiterated the importance of transparency, and indicated that observers, in addition to the now expanded participation at the FCRSC table through the inclusion of additional advisers, were welcome.

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

At FCRSC meeting #25, the Committee asked DPI to amend the table of services to include better definitions for some fisheries management services and insert an additional column containing the Committee's comments. These changes were provided to Committee members to review prior to the meeting.

Three services were been more clearly defined as requested ('operational management of marine fisheries', 'operational management of freshwater fisheries' and 'operational management of aquaculture fisheries'). After discussion and further refinement, these were generally accepted by the Committee and will be reviewed at the next meting.

The Committee agreed that more explanation was needed regarding cost recovery and emergency management, including what are deemed cost recoverable and non-cost recoverable 'emergencies'. Some examples could include disease outbreak, severe depletion of the fishery caused by over-fishing, introduction of an exotic species, the spread of sea urchins, fire and an oil spill. The additional explanation should consider: in what circumstances could the Minister's ability to waive levies be exercised and for how long. The Committee agreed that the document should also specify the process required for a fishery to obtain an exemption(s) from the requirement to pay cost recovery levies in very unusual circumstances (e.g. via the FCRSC to the Minister for Agriculture and Food Security). The Committee noted that existing public policy may influence the Victorian Government's position on these matters, which may mean that they are outside the jurisdiction of the FCRSC. The Department will provide advice on the relationship between cost recovery and emergency management prior to the next meeting, where the matter will be further discussed.

Proposed operation of a prospective cost recovery system

The Committee considered a Department paper outlining the proposed approach to operating prospective cost recovery (Guidelines for the operation of cost recovery). This which will act as the basis on which a prospective cost recovery system will operate. A number of key issues were raised by the Committee:

• Efficiency improvements. Cost recovery principle five sets out that "operation of the system should promote opportunities for efficiency improvements". It was acknowledged that benchmarking was an appropriate approach to assess the efficiency of service provision. Where such a process clearly established the service was inefficient, consideration could be given to lowering the cost of those services. External provision of some types of services could occur where standards and specifications are developed. Monitoring, where necessary, should be implemented to ensure integrity of provision. The costs of some of these processes (development of standards and specifications, monitoring, contract management) would themselves be recoverable.
• Consultation. The Committee agreed that consultation regarding the level of services and schedules should be undertaken with persons fully representative of those paying levies at a fishery level. The Committee noted one option was to consider the ability of SIV to assist in the future consultation process with industry via a number of committees such as the ones it currently administers (Abalone, Bay and Inlets). Appropriate governance and other factors would need to be considered if this task was assigned to SIV. Other options include using fishery management plan bodies or more direct consultation with levy payers. The Committee will confirm the mechanism for consultation regarding the level of services and schedules at a future meeting.
• Cost recovery cycle. The Committee agreed that a long term cycle (four or five years) would be appropriate to smooth out fluctuations and lumps in costs across fisheries and reduce transaction costs to a more manageable level. The Committee also agreed that a trial period to bed in the new prospective cost recovery system would be appropriate. Industry members had reservations about committing to the length of the trial period at this stage. As such, the Committee agreed that the implementation of the prospective system should be reviewed after one year.
• Transparency. The Committee noted the need for transparency about the delivery of cost recovered services, but also the need for practicality and simplicity. It was acknowledged that it would be the deliverables and milestones that would be important within any year, rather than hours or dollars which would be costly to track. Industry was of the strong view that regular feedback and reporting at the fishery level would be necessary. DPI agreed to develop a proposal based on reporting at the level of deliverables every four months.
• Fishery Management Plans. The Committee noted that wherever possible, there should be alignment between Fishery Management Plans and the cost recovery cycle. Fishery management plans should contain the objectives, strategies and services for fisheries; there are therefore close links to cost recovery.
• Executive Management Costs. The Committee agreed that the Guidelines should contain a section that specifies that costs associated with the Executive Director, the Business Management Team, Directors and their assistants are not subject to cost recovery.
• Cross subsidisation. The Committee noted cost recovery principle number six "Cross subsidisation between fishers and fisheries should be minimised" and agreed that any new fishery should fund costs associated with the management of that fishery in line with the cost recovery principles.
• Costs of Compliance. It was acknowledged that reporting on compliance activities/services particularly in the abalone sector, had been an ongoing matter of concern for industry under the current cost recovery regime. DPI advised the Committee that there was the need for a careful balance between the degree of accountability and not compromising the integrity of compliance and potentially damaging any investigation/operation. The Committee discussed the process for compliance reporting in other cost recovery jurisdictions and agreed it would be useful to consider their approaches, including that in NSW. This matter will be dealt with in some detail in subsequent meetings of the Committee.(NB See also below under Section 7 of the summary - Marine Parks.
• Education services. DPI will clarify whether the education services currently provided to the aquaculture sector (educational pamphlets, fact sheets, newsletters, videos, etc.) were at the request of industry.
• Licensing vs. cost recovery years. DPI will assess whether the licensing year can be moved to be in line with the financial year and provide an answer to the question "could levies be paid by industry on 1 July with the licensing year continuing to commence at 1 April?"

DPI will amend the Guidelines as requested and provide to the Committee members for review prior to the next FCRSC meeting

Fishery templates for Cost recoverable Fisheries Regulatory

The Committee considered a template for the cost recovery of services for the Abalone Eastern Zone Fishery in which the cost recoverable services (Function, Description, and Deliverables / Milestones) are proposed to be described for each fishery. The template will ultimately include the total and recoverable costs for each fishery. The Committee noted the five working example draft templates (including costs, FTE's and milestones) for the Abalone Eastern Zone, Western Port and Port Phillip Bay, Bait (General), Rock Lobster Eastern Zone and Aquaculture Bivalve Shellfish fisheries. The Committee noted that these example templates contained a rough first estimate of staff effort and costs, and were provided for discussion. Final FTE's and costs will clearly be contingent on the final nature and extent of services and deliverables. Accordingly, the Committee agreed that these FTE's and costs are confidential to committee members/advisors at this time, but that the services and draft milestones may be discussed more broadly with other industry groups/persons as appropriate.

Industry attendance at FCRSC

At FCRSC Meeting #25, the Committee noted that further industry attendees for rock lobster (Western Zone), aquaculture (marine waters), and the abalone (Western Zone) and abalone (Central Zone) will be invited to FCRSC meetings as advisors to assist in the development and implementation of a new cost recovery regime. These advisors would be reimbursed for reasonable travel expenses incurred as a result of attending FCRSC meetings. Accommodation expenses for those attendees residing outside of Melbourne, where the timing of meetings makes travel on the day impractical, will also be incurred by DPI.

Seafood Industry Victoria has made repeated attempts to involve attendees from the Rock Lobster Western Zone and Aquaculture (marine) sectors in the development of a new cost recovery regime. Unfortunately, no person has been willing to become involved in the process.

The Committee further noted the resignation of Mr Hugh Meggitt (aquaculture representative) due to increased work commitments and impending retirement. The Committee agreed that Mr Meggitt had been a valued member of the FCRSC and was disapointed to learn of his resignation.

Principles of cost recovery

Following earlier discussion and amendment, the Committee agreed and approved the following eleven cost recovery principles:

1. 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.
2. The cost recovery system should be administratively simple and minimise operating costs;
3. 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;
4. there should be transparency about the nature, extent, delivery and cost, of services for which there is cost recovery;
5. Operation of the system should promote opportunities for efficiency improvements;
6. Cross subsidisation between fishers and fisheries should be minimised;
7. Fee for service should be used where possible to directly recover the costs of transactions/services;
8. Between year volatility should be minimised in order to smooth costs to better enable businesses to plan;
9. 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;
10. The implementation of the system should include monitoring and periodic review; and
11. The design, nature and extent of services should take into account the risks posed by the fishery and the value of production generated by the fishery.

Other issues

• Research. Industry sought clarification from DPI on the matter of ownership of information for research conducted by DPI, or an agreed service provider, where industry had paid levies for that service. DPI's initial response was that the outcomes of research conducted would be publicly available if they were to be used in statutory decision making; however DPI agreed to clarify the ownership of that information and provide advice back to the Committee. DPI did specify that it would protect the rights of any individual licence holder/representative group that provides commercially sensitive information to DPI.
• Abalone cost recovery/royalty. 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 with government. Industry reiterated their strong view that this cap on recovery for the abalone sector should be retained. DPI advised the Committee of their understanding that the 7.21% cap for abalone fisheries would remain.
• Abalone management plan. The Committee reaffirmed its agreement that efficient service delivery is a key component of a revised cost recovery regime. Industry used the example of the Abalone Fishery Management Plan as being a product/service that has not been delivered by DPI in a timely and efficient manner.
• Fee-for Service. 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 these transactions. 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 annual CPI index adjustment provided by Treasury.
• Marine Parks Funding. On 16 November 2002, National Parks (Marine National Parks and Marine Sanctuaries) Act 2002 came into effect. The Committee again noted that the (then) $3.4 million of fisheries management services provided through the Marine Parks and Sanctuaries initiative will continue to be exempt from cost recovery, subject to the Government continuing to provide this initiative funding. The Committee noted that actual expenditure through this initiative was about $6.3 million for 2010/11. Industry suggested that the purpose of this funding was to significantly reduce the level of illegal take in the abalone fisheries. As such, industry maintain that this funding should off-set the level of funding provided by the abalone sector via cost recovery for compliance within the three abalone fisheries and there should be reporting on the expenditure of those funds. DPI maintains that the Government made a commitment to boost fisheries enforcement including for abalone. The Chair requested that DPI and the abalone representatives on the FCRSC resolve this matter (compliance reporting and cost recovery) as a priority, preferably out of session before the next FCRSC meeting, as it continues to be a distraction in trying to develop a prospective cost recovery system.

Next Meetings:

FCRSC meeting #27 – Friday 2 November 2012.
FCRSC meeting #28 – Thursday 22 November 2012.
FCRSC meeting #29 – Friday 14 December 2012.

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