Fisheries Cost Recovery Standing Committee Meeting #31

Approved Minutes - 3 April 2013

Meeting details:

Date: Wednesday 3 April 2013
From: 10:00am to 4:30pm
Location: Department of Primary Industries, Room 16.3, 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)
Mob: 0427 353 23

Advisors/Presenters:

• Sean Buck (Industry)
• Gary Leonard (Industry)
• Wayne Haggar (Industry observer)
• Grant Leeworthy (Industry)
• Peter Phillips (RIS service provider)
• Bill Allan (Industry)
• Anthony Hurst (DPI)
• Megan Higson (DPI observer)

1) Welcome and Introductions

2) Apologies:

• Edward Meggitt (Industry)
• Harry Peeters (Industry)
• Anthony Ciconte (Industry)
• Sue Alcock (Industry)

3) Confirmation of previous Minutes

BACKGROUND: Draft Minutes of FCRSC meeting #30 of 8 February 2013 were circulated to members on 5 March 2013 for comment by 18 March 2013.

No comments were made by FCRSC members or advisors. Consequently, the Chair authorised DPI to publish the Draft Minutes of FCRSC meeting #30 of 8 February 2013 to ensure that FCRSC deliberations were transparent to all of industry.

DPI published the Draft Minutes on the DPI website on 21 March 2013.

OUTCOME:

1. The FCRSC recalled a discussion regarding a provision for a waiver in circumstances of hardship.
2. DPI advised the FCRSC that the discussion was recorded in the Minutes under 6(b) 13??The FCRSC reviewed the amended draft ?Guidelines for the operation of cost recovery? document. Industry suggested there should be a provision for a waiver in circumstances of hardship. DPI noted the view that the Fisheries Act 1995 only allows waivers where services are not provided?.
3. The Committee confirmed the Minutes of FCRSC meeting #30, noting that a further discussion of the non-provision of services would be addressed under agenda item 5(c).

4) Items for discussion/noting

4(a) Regulatory Impact Process

BACKGROUND: The purpose of the Regulatory Impact Statement (RIS) process is to ensure that regulation is only implemented or amended when there is a justified need; only the most efficient forms of regulation are adopted; and there is an adequate level of public consultation in the development of regulatory measures.

A RIS is required for a statutory rule or legislative instrument (e.g. Regulations) that imposes a significant economic or social burden on a sector of the public. FV considered that the proposed amendments to the Fisheries (Fees, Royalties and Levies) Regulations 2008 put in place the prospective cost recovery system requires the preparation of a RIS.

The RIS is assessed by the Victorian Competition & Efficiency Commission (VCEC). The VCEC provides independent advice about the adequacy of the analysis in the RIS (rather than the merits of the proposal) against the requirements of the Subordinate Legislation Act 1994 and the Victorian Guide to Regulation.

DPI have engaged external providers (Regulatory Impact Solutions) to work together to prepare a RIS for the proposed changes to the Fisheries (Fees, Royalties and Levies) Regulations 2008.

DPI provided the FCRSC with the Draft RIS for review on 22/3/13. The providers were invited to attend FCRSC #31 to further describe the RIS process and content of the RIS. VCEC must approve the RIS before it is put out for public comment.

RECOMMENDATION: For discussion.

OUTCOME:

1. The Chair reminded the FCRSC that the purpose of this meeting was to focus on the draft RIS.
2. Industry queried when the final date for amendments to the nature and extent of services was, and by extension, the proposed levies for inclusion in the RIS. The Chair stressed to industry the importance of understanding where we are in the timeline, and that DPI had to finalise the RIS to enable VCEC to review. Therefore, any further comments on the proposed levies would need to be submitted by Wednesday 10 April 2013. If there is a substantial error with any of the levy information, there is still opportunity for DPI to correct that error.
3. The FCRSC noted that industry members/advisors can, and should, continue to interact with DPI on the nature and extent of services after the 10th, including during the RIS process, with a view to continued improvement and associated cost savings that could be implemented. Any adjustments in the level of services to be provided as a result of this dialogue, and by extension the levies, will not be reflected in the RIS. However, those adjustments, if any are required, would be considered at the end of the RIS process when all stakeholder comments are collated and final amendments are made to the regulations. This is in line with the Minister?s advice to the FCRSC at meeting 29 of 14 December 2012 where he confirmed that the RIS consultation will be an 'open' process and that there will be opportunity for broad consultation on a range of issues within each sector, with a view to revision of draft regulations as necessary.The FCRSC noted that DPI can provide information to industry during the RIS consultation process to inform any submissions.
4. DPI advised the FCRSC that there would be on-going discussion with industry members & advisors regarding the nature and extent of services in a number of fisheries, including the FCRSC, post the RIS during 2013/14 and the first two trial years, with a view to continued improvement and associated cost savings that could be implemented in the following year(s).
5. The Chair noted that industry members/advisors had been working positively with DPI regarding the nature and extent of services to be provided, which has led to a number of adjustments to schedules for fisheries, and is the way that the process should operate.
6. The Subordinate Legislation Act states that a RIS is required for Regulations that impose a significant economic or social burden on a sector of the public, e.g. an increase in cost on industry of more than $500,000 is considered a significant economic burden.
7. Mr Peter Phillips, of Regulatory Impact Solutions provided a presentation to the FCRSC on the contents of the draft RIS, the process to date and answered a number of questions raised by industry. The FCRSC noted that Regulatory Impact Solutions have extensive experience in preparing RIS?s, having prepared 40% of the RIS?s over the last four years, including 75% of Victoria?s fee/levy RIS?s in the last three years.
8. The FCRSC noted that there are strict requirements on what must be included in a RIS and how it must be presented, including an independent assessment of adequacy of the RIS by the Victorian Competition and Efficiency Commission (VCEC)
9. The FCRSC further noted that where Regulations impose fees, charges, levies, etc., the RIS must demonstrate compliance with the Victorian Government?s Cost Recovery Guidelines. Mr Phillips advised the FCRSC that VCEC?s assessment of the draft RIS was mainly complimentary, but that it had some real concerns that the proposed concessions did not reflect full cost recovery.
10. The FCRSC noted that the proposed concessions represented a reduction of approximately 20% of total recoverable costs. DPI advises that the proposed concessions are required to mitigate economic impacts on industry, with a particular focus on the impact of increased levies on smaller businesses.
11. Industry asked about the Minister?s ability to waive levies under the Fisheries Act 1995. DPI advised the FCRSC that regulations are required to operationalize the head of power in the Act, and that DPI has advice that the Fisheries Act 1995 only allows waivers where services are not provided. The FCRSC noted that a further discussion of the non-provision of services would be addressed under agenda item 5(c). The FCRSC discussed the issue of cross-subsidisation, i.e. should the tax-payer under-write costs, via concessions, for the provision of fishery regulatory services to a commercial fishery? One point of view from VCEC, as relayed by Mr Phillips, was that society should not cross-subsidise costs incurred in managing commercial fisheries, instead allocating available funding to areas where the whole community will benefit.
12. Industry put forward an alternative point of view, that as industry are a part of the community and contribute to the economy via the payment of taxes, employment, the provision of fresh seafood, etc., Government support for the commercial fishing industry creates a multiplier effect, and could be viewed as a good return on investment.
13. The Committee recalled the rationale for each proposed concession and noted the need to develop the rationale to support discussion with VCEC. DPI sought assistance from industry members/advisors to better develop the rationale for the proposed concessions. Specifically, any economic documentation such as profit and loss statements from a range of small, medium and large businesses across a range of fisheries would assist the RIS providers in their task of obtaining VCEC support for the proposed concessions. This information would be kept confidential. It was noted that anecdotal evidence will not suffice.
14. The FCRSC noted Mr Phillips advice that, whilst most States and the Northern Territory recover some costs of managing fisheries, South Australia is the only other state with full cost recovery. For 2010/11, South Australia?s regulatory costs amounted to 6.6% of that State?s fisheries GVP. In contrast, the proposed amendments to the levies in the draft RIS are based on a total cost that is around 5.1% of GVP. This suggests Victoria?s proposed levies are not unreasonably high, especially given that South Australian fisheries tend to be larger and of higher value than those in Victoria. This suggests that the costs and services relative to GVP in South Australia should be lower than in Victoria.
15. The FCRSC again noted that the RIS is expected to be released for 60 days public comment in July & August 2013.
16. The draft RIS identified a risk that due to the increase in the total levy amount to be collected, there may some commercial operators who choose not to renew their licenses (pay their levies), instead choosing to fish unlicensed (illegally). Industry confirmed that this is a real risk given the level of increases in some fisheries.
17. Industry sought Mr Phillips advice on how DPI can gain efficiencies in the provision of fisheries regulatory services. Mr Phillips advised the FCRSC that the Sustainable Government Initiative was an example of how the Victorian Government was looking to improve the efficiency of the Victorian Public Service. Mr Phillips also cited the Victorian Auditor General?s Office recent audit report Effectiveness of Compliance Activities: Departments of Primary Industries and Sustainability and Environment (October 2012) which assessed whether DPI and DSE are effectively providing compliance services. The audit found that Fisheries Victoria has a robust and transparent process for identifying its high compliance risks, has effective oversight across all of its regulatory activities, has suitable and appropriate staff and staff functions, and has improved its performance management framework to better reflect its effectiveness.
18. An additional method to determine efficiency is benchmarking, for example, the comparison to South Australia?s cost recovery system as outlined above.
19. DPI reminded the FCRSC that staff time and other costs of each cost recoverable activity per fishery has been documented in the schedules. This will allow stakeholders to understand the resources required to deliver the services. DPI has established milestones for each service, and will report back to the FCRSC on a quarterly basis once the prospective cost recovery system has been implemented.
20. The FCRSC also noted the Minister?s expectations from FCRSC #29 that the Department and industry work together to find smarter ways of providing the services that are needed. The challenge is to find ways of doing things better (more cost effectively) and considering ways to better involve industry in directly delivering services with the right checks and balances.
21. Mr Phillips offered assistance to any industry member/advisor who may require any additional information on the RIS process both before and during the public consultation process. He suggested this be coordinated through the FCRSC members & advisors representing the different fisheries.

ACTION ITEM:

1. Industry members/advisors to provide feedback to DPI to help strengthen the rationale for each of the proposed concessions by Wednesday 10 April 2013.
2. Industry members/advisors to provide any further comments on the draft RIS to DPI for consideration by Regulatory Impact Solutions by Wednesday 10 April 2013.
3. DPI to provide the FCRSC with the Victorian Government?s Cost Recovery Guidelines.
4. DPI to provide the FCRSC with an electronic copy of Mr Phillips presentation on the RIS.

4(b) Consultation regarding the level of services

BACKGROUND: At FCRSC meeting #26, the Committee agreed to confirm the mechanism for consultation regarding the level of services and schedules at a future meeting.

At FCRSC #28, DPI tabled a discussion paper regarding the mechanism for consultation with industry on the nature and extent of services to be provided by Fisheries Victoria, including the criteria for assessing consultation options:

1. The degree to which all affected stakeholders have the opportunity to comment on and discuss proposed services and costs (inclusiveness).
2. The degree to which the stakeholders consulted are representative of all the persons responsible for paying cost recovery levies.
3. The degree to which the consultation process is cost effective.
4. The degree to which there is alignment with relevant stakeholder engagement principles.

The FCRSC noted the cost incurred by DPI to conduct FCRSC meeting #28 was approximately $5,000 (venue hire, catering, accommodation, sitting fees, reimbursement of travel expenses, etc.). This estimation does not include the DPI staff cost incurred to attend the meeting (seven DPI representatives attended the meeting).

The FCRSC agreed that holding a large number of regional forums around the State will not work (too time consuming and costly), nor can the FCRSC adequately represent all 42 fisheries.

The Committee noted that Seafood Industry Victoria (SIV) was a permanent observer at FCRSC meetings, and that industry could raise cost recovery matters to be discussed at FCRSC meetings via SIV, although the Committee acknowledged that SIV does not represent aquaculture licence holders. DPI maintained that the FCRSC could be open to criticism for not having measures in place to ensure FCRSC industry members/advisors adequately represented all of the wild-catch and aquaculture licence holders.

Industry suggested that DPI could use existing organisations and meetings such as Total Allowable Commercial Catch (TACC) meetings in quota managed fisheries, or zonal forums, to consult with those particular fisheries, and that SIV would be able to consult with the remaining wild-catch fisheries via other means.

DPI expressed some concern as to whether the options considered by the FCRSC were adequately representative, and that the use of DPI?s website to publish the proposed service schedules, advertise the consultation period and seek written advice from affected entitlement holders could be a cost effective method of augmenting the consultation mechanisms considered.

The FCRSC noted that once the development and implementation of the cost recovery system had been achieved, the Committee would revert back to a more strategic role.
At FCRSC #30, the FCRSC agreed to reconsider and finalise an approach to further consultation at the next FCRSC meeting.

RECOMMENDATION: That the FCRSC finalise the approach to further consultation at the fishery level.

OUTCOME:

1. Following the FCRSC?s previous advice regarding consultation on the nature and extent of services at the fishery level, DPI tabled a discussion paper outlining two options (Option A ? Fishery Specific Forums and Option B ? Multi-fishery Forums) for consideration of the FCRSC.
2. Both options represent a compromise from a more principled approach. The FCRSC noted that in the medium to long term, the review and operation of Management Plans for a fishery is the preferred mechanism for discussing the nature and extent of cost recoverable services with industry.
3. In the short term, it is proposed to use the Management Plan process where applicable and aligned to the four-yearly cost recoverable cycle along with option A or B.
4. Both options would be complemented with the use of DPI?s website to publish proposed fishery-specific schedules, advertise the consultation period, and seek written feedback from affected entitlement holders.
5. The FCRSC agreed that holding a large number of regional forums around the State (Option B ? Multi-fishery forums) will not work (High risk that forums could be dominated by a few entitlement holders meaning inadequate coverage of each fishery, time consuming and costly).
6. Industry provided their support for Option A ? Fishery Specific Forums where DPI could use existing organisations and meetings such as Total Allowable Commercial Catch (TACC) meetings in quota managed fisheries, or zonal forums to consult with particular fisheries, and that SIV would be able to consult with the remaining wild-catch fisheries via other means, subject to the exact process and timeline being determined.
7. The existing forums that would be used are:
   1. Abalone (Central, Eastern, Western zones) TACC/Management forums;
   2. Rock Lobster (Eastern and Western zones) TACC/Management forums;
   3. Giant Crab fisheries TACC/Management forums;
   4. Victorian Bay & Inlet Fishery Association or appropriate SIV subcommittee;
   5. Victorian Commercial Eel Fishermen?s Association; and
   6. DPI?s aquaculture forum.

8. A new forum would need to be created, in partnership with SIV, for the Victorian Inshore Trawl, Ocean Access and bait fisheries.
9. SIV expressed some reservations about any additional costs that it may incur to co-ordinate this consultation process. DPI advised that it would work with SIV to reduce the costs. For example, DPI could host the forums at its offices, and provide executive support whilst SIV invited industry attendees and convened the forum.
10. DPI advised the FCRSC that ToR?s, Minutes, recommendations, etc. would be required for each fishery specific forum to clearly define their role, and help to ensure the process is meaningful.
11. Industry suggested that the proposed timeframe for using existing forums may need to be adjusted to ensure sufficient time for consultation prior to the start of the licensing year, for example, the abalone TACC forums are held in Jan/Feb, which is too close to the start of the licensing year ? 1 April to have a meaningful discussion on the nature and extent of services to be provided.
12. Industry suggested DPI develop an annual timetable for consultation regarding the level of services. DPI agreed to develop this timetable, which would be publicly available via the DPI website.
13. The Committee recognised that it would be the services/milestones that would be important within any year and that reporting on services/milestones at the fishery level would support transparency and accountability. DPI advised the Committee that once the prospective cost recovery system was implemented, it would provide the FCRSC with fishery-level reports on a quarterly basis.
14. The Committee noted that industry members of the FCRSC would be able to provide these fishery-level reports to their respective industry bodies, and that the reports would also be publicly available via the DPI website.
15. The FCRSC agreed that as the fishery specific forums would be conducted annually, an annual report on services/milestones at the fishery level would be tabled. The Committee again noted that Seafood Industry Victoria (SIV) was a permanent observer at FCRSC meetings, and that industry could raise cost recovery matters to be discussed at FCRSC meetings via SIV, although the Committee acknowledged that SIV does not represent aquaculture licence holders. The aquaculture industry could raise cost recovery matters to be discussed at FCRSC meetings via the recently established aquaculture forum.
16. Industry expressed concern that no Minutes were taken from the technology workshop recently convened by the Education & Enforcement Branch, and that there had been no progress on the matters discussed at the workshop.
17. DPI advised the FCRSC that Minutes had been taken at that meeting, and that DPI would provide those Minutes to the FCRSC. DPI further advised the FCRSC that it was focusing its resources on new technology priorities at present such as resolving issues with the reporting function for the Integrated Catch & Effort system, and the risks posed by the current platforms for FILS and FishWeb.
18. DPI advised the FCRSC that there is a need to engage with industry on a medium term course of action regarding new technology options, however DPI does not have the resources to progress this matter at this time.

ACTION ITEM:

1. DPI to determine the process, timetable, etc. to implement Option A (Fishery specific forums).
2. DPI to provide the FCRSC with the Minutes from the technology workshop.

4(c) Regulation construction

BACKGROUND: There is a need for Fisheries Victoria to provide advice to DPI?s legislative services branch with detailed instructions on the drafting of new or amending regulations.

At FCRSC #30, DPI tabled a paper outlining the nature of amendments to existing regulations required to introduce the proposed prospective cost recovery system.
DPI provided an updated paper on 28/3/13 for review.

RECOMMENDATION: For Noting.

OUTCOME:

1. DPI tabled an updated paper outlining the nature of amendments to existing regulations required to introduce the proposed prospective cost recovery system.
2. The FCRSC noted the regulatory amendments required to introduce the proposed prospective cost recovery system, including the changes made to the paper previously tabled at FCRSC #30.
3. The FCRSC noted the regulatory amendment required to maintain the SIV funding through calculation of the Grants levy.
4. DPI proposes to provide more detail in the regulations about the purpose of the Grants levy and the entities for which they are destined, i.e. the commercial fishing industry representative entity (SIV) (with amount per licence and per quota unit specified) and the representative entity for each of the Western Zone and Central Zone abalone fisheries.
5. There was some discussion about whether VAPA and AIC should be dealt with in the same manner. This was not resolved. The FCRSC noted that further discussion between SIV and DPI would take place outside of the FCRSC to resolve this matter.
6. The FCRSC noted that further amendments to the drafting regulations are required, and that DPI will circulate an amended paper to the FCRSC.

ACTION ITEM:

1. DPI to provide the FCRSC with an amended regulation construction paper.

4 (d) Progress on Action Items from meeting #30

 Progress on Action Items from meeting #26

 4(e) Proposed levies for 2014/15

BACKGROUND: DPI has provided the templates in which the cost recoverable services (Function, Description, and Deliverables / Milestones) are described for each fishery.

At FCRSC #30, the Chair noted that DPI had asked industry on three separate occasions to review the GVP data provided to the FCRSC and that DPI had only received correspondence from the Gippsland Lakes and the eel industry advisors on this matter. DPI has therefore used available GVP data to assist in the review of the proposed levies by the FCRSC.

A summary s/sheet outlining the proposed levies from 1 April 2014 for each cost recoverable regulatory service in each fishery, including the proposed levies as a percentage of GVP has also been provided for discussion.

RECOMMENDATION: For Discussion.

OUTCOME:

1. The Committee noted that the updated spreadsheet contained a number of amendments as a direct result of dialogue between some industry members/advisors and DPI. For example, industry advised that there is no need for DPI to develop and distribute educational pamphlets, fact sheets, newsletters and videos to aquaculture licence holders. DPI agreed with industry which has resulted in a reduction in the level of effort, and by extension costs incurred by DPI, to deliver ?operational management? service in each of the aquaculture fisheries.
2. The FCRSC agreed that it was helpful to know what percentage of GVP the proposed levies were.
3. The FCRSC acknowledged that for certain fisheries, what appears to be a significant increase in dollar terms is only a small increase in levies as a percentage of GVP.
4. Industry sought clarification on the manner in which GVP is calculated for various fisheries. For example, in wild-catch abalone, GVP is based on beach price, whereas the finfish fisheries GVP appears to be calculated after deducting transportation costs.
5. The FCRSC noted that the proposed levies in a few fisheries were significantly higher than GVP, even allowing for the proposed concessions. This remains an on-going concern. In the context of affordability of services, the Committee revisited the question??What if services (and by extension, costs) can?t be reduced any further in a fishery?? The FCRSC noted that this question was first raised at FCRSC #27, and DPI tabled a paper at FCSRC #28 that provided a number of options to prevent closure of a fishery under cost recovery. If, after each of the options had been explored, with the minimum of services being provided to deliver statutory obligations for sustainable management, and addressed the risks posed by the fishery, the fishery remains unprofitable to pursue, the fishery would likely be closed. DPI advised that this would be a last resort, and is not a good outcome for any party. The FCRSC again noted that the nature and extent of services to be provided to industry for the 2014/15 licensing year are quite different to the number of services contained in FACS (approximately 93) and the level of recoverability also varies. For example, under FACS, the levels of recoverability for all science activities was 50%, whereas under the prospective system, it is dependent on the level of commercial harvest.The FCRSC noted the Minister?s confirmation that the new prospective system of cost recovery will be phased in over a three year period. This will ease the initial impact on licence holders and provide opportunities for further consideration of necessary services and technology that could continue to improve efficiency.
6. Industry queried why the total proposed levies to be recovered for the 2014/15 licensing year did not reflect the 30% phase-in towards full cost recovery. DPI advised the FCRSC that the phase-in of 30% for 2014/15 applies to each cost recoverable service within each fishery, not to the total amount of levies to be recovered.

ACTION ITEM:

1. DPI to confirm how the currently available GVP was calculated for various fisheries.

4(f) Fisheries Activity Costing System

BACKGROUND: Vin Gannon, industry member FCRSC, sought a discussion regarding the Fisheries Activity Costing System (FACS).

As requested, DPI prepared a summary of the operation of FACS and its use, and how it does (or does not) feature in the discussions/calculations going forward. This was circulated in advance of the meeting.

RECOMMENDATION: For Discussion.

OUTCOME:

1. Beginning in April 2004, a dedicated Fisheries Activity Costing System (FACS) was put in place to track specific activities carried out by Fisheries Victoria staff. This FACS data was first used to set FMS levies for the 2005/06 licensing year.
2. In 2008, the FCRSC lost faith in the accuracy and reliability of FACS data. As such, the 2008/09 licensing year levies, based on FACS data for the 2006/07 financial year (the first year of full cost recovery of attributable costs) were rolled over (with inflation adjustment) for the 2009/10, 2010/11, 2011/12 and 2012/13 licensing years. The rollover of the first year (2009/10) was due to the failure of the FACS and the pending introduction of a prospective cost recovery system.
3. The FCRSC first identified the need to move to forward budgeting in order to better link budget with expenditure in 2005, and in 2007 DPI and SIV agreed to work together on a suitable framework for forward-budgeting and monitoring. In early 2008, the preparation of a joint paper by DPI and SIV on forward-budgeting and monitoring for cost recovery was overtaken by agreement to undertake a more comprehensive review of the cost recovery process. The original timeframe for delivery of the review was the end of 2008, however due to a range of delays and other work priorities within DPI, the draft report become available in July 2012.
4. The FCRSC has previously noted that the move towards forward-budgeting has taken longer than expected. Over the period since 2008/09, there has been an increased gap between actual and recovered costs in most fisheries.
5. The system currently in place is retrospective and is based on setting levies for the coming year using information provided by FACS on time spent on recoverable activities in the preceding year.
6. Both DPI and industry acknowledged the shortcomings of FACS, and the need to move to forward budgeting, which would allow an increase in transparency, and enable industry to have strategic input on the nature, extent and design of services to be provided by DPI or alternative service providers, potentially realising both improved efficiency and cost savings. The problems with incurring costs and being charged after the event were acknowledged by the FCRSC.
7. FMS levies for the various fisheries within the industry for the 2013/14 licensing year has been based on a 30% increase to the levies paid by industry for the 2012/13 licensing year. The Minister has authorised the 30% increase on last year's levies because of the wide gap identified between funds raised under the retrospective cost recovery regime and the amount that is proposed to be raised under the new prospective cost recovery regime. The 30% is a step in the transition to the new levies structure to be introduced for the 2014/15 licensing year. In making this decision, the Minister noted that there have been no increases in cost recovery levies for at least four years in real terms. This step is separate to the 30%, 60%, 100% annual transition steps already agreed with the Committee for implementation of the prospective cost recovery system from 1 April 2014. The FCRSC noted that recent FACS data played no role in the determination of levies for the 2013/14 licensing year.
8. DPI again advised the FCRSC that DPI staff had been instructed to continue to complete FACS timesheets. Some Committee members expressed surprise at this and felt that it was an inefficient use of staff resources. The Committee noted that it did not agree that DPI should stop completing FACS timesheets at FCRSC #30.
9. DPI advised the FCRSC that a prospective cost recovery system will be phased in from 1 April 2014 in line with the Minister?s directions. As such, the FCRSC agreed that DPI should stop completing FACS timesheets.
10. The information provided was noted.

ACTION:

1. DPI to stop the operation of FACS.

5) Other Business

5(a) 2013/14 Licensing year levies

OUTCOME:

1. The FCRSC recalled the Chair?s opening statement of FCRSC #25 of 5 September 2012?. ?On the matter of 2012/13 levies (2013/14 licensing year) and the issue of rolling over by the Consumer Price Index, or apply some other level of increase, the Minister does not require comments from the FCRSC. The matter will be determined in consultation with SIV. Essentially this matter is off the FCRSC table?.
2. The FCRSC noted that SIV had written to the Minister for Agriculture and Food Security on 28 February 2013 seeking clarification on the proposed levies for the 2013/14 licensing year, and recommended that the proposed levies be rolled over by CPI pending the introduction of the prospective cost recovery system on 1 April 2014.
3. DPI tabled the Minister?s letter of 8 March 2013 to SIV which advises that ?the Minister considered the available information on the economic impacts of an increase in levies in assessing the requirement for a RIS, and that the increases would be unlikely to impact significantly on the economic viability of any particular fishery sector or the commercial fishing industry overall, while acknowledging that the financial implications for individual fishing businesses are likely to vary due to a range of other fisheries and market factors.?
4. The Minister?s letter also stated that the Minister ?was conscious of the work being undertaken by the FCRSC, including SIV as a permanent observer, on the design of the new prospective cost recovery system, which indicates a substantial under recovery of attributable costs under the current arrangements, and that there has been no increases in recoverable costs for four years, except for increases in line with CPI. The increase for 1 April 2013 will be a step in the process to transition to recovery of attributable costs?.
5. Industry advised the Committee that it did not believe that sufficient consultation on this matter occurred between the Minister?s Office and SIV. Despite the Minister?s advice to the Committee at FCRSC #29 that the RIS consultation on 2014/15 licensing year levies will be an 'open' process and that there will be opportunity for broad consultation on a range of issues within each sector, with a view to revision of draft regulations as necessary, industry expressed concern that in their opinion, insufficient consultation will occur again.
6. Industry further advised the FCRSC that the 30% increase on levies paid by industry in 2011/12 was ?arbitrary? and ?indefensible?, and that industry is ?outraged? and ?confused?.
7. Industry queried the decision of the Minister that a RIS for 2013/14 licensing year levies was not required, as the increases in fisheries levies will increase revenue from levies by more than $500,000.
8. Regulations currently specify that the combined royalty and cost recovery payable annually in the wild-catch abalone fisheries is limited to 7.2% of GVP. Industry have previously advised the FCRSC of their strong view that this cap on recovery for the abalone sector should be retained.
9. DPI advised the FCRSC that when excluding the wild-catch abalone fisheries and impacts of royalties, the increases are approximately $220,000. The FCRSC noted that there was an increase on the GVP for wild-catch abalone, and that as DPI had applied the abalone royalty formula of 7.2%, the proposed dollar amounts of the levies increased in proportion with the GVP increase. The FCRSC noted that the Treasurer had approved the 30% increase in levies, and confirmed that the preparation of a RIS for the 2013/14 levies was not required. The Victorian Competition & Efficiency Competition was also consulted about the requirement to conduct a RIS. Hence, the Victorian Government considers that it is in compliance with the Subordinate Legislation Act.
10. Industry advised the FCRSC that paragraph three of the letter of 7 March 2013 from Anthony Hurst, Executive Director Fisheries Victoria to licence holders infers that the FCRSC was complicit with the decision to increase the levies by 30% for the 2013/14 licensing year. Industry further advised that any trust that industry members/advisors had gained from consulting with commercial operators in different fisheries on the prospective cost recovery system had been eroded, as a result of the phrasing within this letter.
11. The FCRSC noted that it did not discuss the 2013/14 licensing year levies as requested by the Minister in the Chair?s opening statement at FCRSC #25 of 5 September 2012.
12. DPI advised the FCRSC that the wording in paragraph three of Mr Hurst?s letter is technically correct with regard to DPI continuing to work with the FCRSC and SIV to progressively implement new cost recovery arrangements for 2014 onwards. It was certainly not DPI?s intention to provide any inference that the FCRSC or SIV had endorsed the 2013/14 licensing year levies.
13. The Chair noted that decisions are ultimately made by the Minister, and that the FCRSC should now focus its attention on finalising the development and implementation of the prospective cost recovery system for the 2014/15 licensing year.

5(b) Miscellaneous matters related to the introduction of a prospective cost recovery system

OUTCOME:

1. The Chair reminded the FCRSC that it had done a lot of work on the development of the cost recovery system thus far, including the development of a timeline for implementation, cost recovery principles, draft Guidelines for the operation of the system, Recoverability for each service, and working with DPI to define the nature and extent of services in each fishery.
2. Industry again unanimously requested that the preliminary costs be released to all of industry to allow a more robust debate about the cost recoverable services and deliverables to be provided by DPI. Industry opined that without this data, the problem of insufficient feedback being provided to assist in the development of the prospective cost recovery system remains. The Chair acknowledged industry?s request to distribute the cost data outside of the Committee, but pointed out that the Committee had been established to work strategically on the design and operation of cost recovery, and reminded the FCRSC that he has sought the Minister?s approval to release the preliminary cost data on three occasions. The Minister?s advice to the Chair was that industry attendance had been expanded as requested to include a wider range of industry expertise to be involved in the development and implementation of the new cost recovery system, and that the preliminary cost data would remain Committee-in-Confidence at this time. Wider industry consultation will occur via the RIS, to be conducted in mid-2013.
3. Accordingly, the Committee noted that costs are confidential to committee members/advisors at this time, but that the services, milestones, guidelines, etc. may be discussed more broadly with other industry groups/persons as appropriate.
4. The Chair reminded the FCRSC that the Minister has previously (FCRSC #28) indicated that there may be an opportunity to consult with wider industry on the proposed levies prior to the RIS being released for consultation. The Chair advised the FCRSC that, on further consideration, the Minister has indicated that he would prefer to make use of the RIS process rather than release the detailed levy information now, beyond the FCRSC and its expanded membership through advisors. The Minister believed that the advantages of outlining the proposed approach in a RIS are that the information will be provided including the full context, rationale and facts for the changes, rather than interactions being based on the proposed levy changes alone. The Minister wants to emphasise that the RIS will be a fully consultative process and consideration will be given to amending the proposed operation of the regime and regulations as appropriate, in response to submissions received.
5. The FCRSC again discussed the introduction of a time recording system. One industry advisor was of the strong opinion that a time recording system is required to ?prove? to industry that the effort indicated by DPI in the schedules for each fishery is accurate. The majority of the FCRSC expressed real reservations about the cost of implementing a time recording system that would be linked to DPI?s Project Costing Model, finance and budget systems, estimated to be $350,000 which would then be recovered from industry, and the usefulness of a time recording system to address any accountability concerns. Overall, the option of a time recording system was again considered as inappropriate.
6. In noting the need for transparency about the delivery of cost recovered services, the FCRSC also acknowledged the need for practicality and simplicity. The Committee recognised that it would be the deliverables and milestones that would be most important within any year. Detailed tracking of hours would be expensive and not necessary. The Committee reiterated the conclusion reached at meeting #26 that reporting on services at the fishery level would support transparency and accountability. The Chair reminded the Committee that once the prospective cost recovery system was implemented, it would be a key role of the FCRSC, or fishery specific bodies to review the fishery-level reports that will report against the milestones contained in the schedules.
7. An action item assigned to an abalone industry advisor was to confirm whether all four abalone members/advisors to the FCRSC have changed their previously stated position, and now support the proposed compliance concessions for the three abalone fisheries. The FCRSC noted the email correspondence between DPI and the advisor that VADA and EZAIA support the concessions for the abalone central zone only, but that the four abalone members/advisors have not changed their previously stated position for the three abalone fisheries.
8. Industry was of the opinion that the three abalone fisheries are all completely independent fisheries, and that the abalone central zone should not be treated the same as the other two zones.
9. DPI maintain the advice previously provided to the advisor via email that the level of recovery (either 0% or 100%) for intelligence, investigations and surveillance costs should be the same for each abalone zone. The three wild-catch abalone fisheries are already treated differently than the remaining commercial fisheries due to the 7.2% cap, and introducing different levels of recovery for different abalone fisheries would create further complexity and does not comply with one of the cost recovery principles to have an administratively simple cost recovery system. The FCRSC noted VADA?s rationale that the reason that the abalone central zone would consider 0% cost recovery for compliance costs, was so that the royalty component was still positive (i.e. funds paid to Treasury)DPI advised the FCSRC that applying a concession does not reduce the costs incurred to deliver the service, it just reduces the amount of costs recovered from industry. The cost to deliver the service remains the same.
10. As previously discussed, each of the 3 abalone zones will continue to receive the current level of services. No additional services can be requested, nor does industry have the ability to increase the level of services up to 7.2% of GVP. If the cost of the current services goes above 7.2% in the Central Zone, then DPI would continue to provide those services, central zone would pay no royalty, just 7.2% for FRDC and costs, and the tax-payer would subsidise the delivery of those current services above 7.2%.
11. The FCRSC noted that this is what is currently happening in the western zone. DPI still deliver the current services at a cost greater than 7.2%, but industry only pay 7.2% GVP.

5(c) DPI to provide more detail about the relationship between cost recovery and emergency response

OUTCOME:

1. The FCRSC recalled that at meeting #26, the Committee asked DPI to provide more detail on the relationship between cost recovery and emergency management, including what are deemed cost recoverable and non-cost recoverable ?emergencies?.
2. DPI advised the FCRSC that the ?Guidelines for the operation of the prospective cost recovery system? provide for adjustments of levies if the delivery of cost recoverable services is affected by Fisheries Victoria staff being deployed to support emergency management activities.
3. The FCRSC noted that the Government does provide assistance as necessary in emergency situations, however this is done on a case by case basis.
4. Industry suggested that the Fisheries Act 1995 should be amended to include a provision for a waiver in circumstances of hardship.
5. DPI advised the FCRSC that the Fisheries Act 1995 provides for the creation of regulations to provide a reduction or waiver of a levy in whole or in part. DPI has received advice that this power only relates to any direct variation in the provision of those services, and cannot be applied to recognise disaster circumstances or economic hardship. Regulations are currently being drafted to enable the reduction or waiver, in whole or in part, of levies that relate to the non-provision of services.
6. A reduction or waiver could be provided according to a range of circumstances which resulted in a material reduction in services, e.g. marine biosecurity, drought, pollution of inland waters, floods, fire, water contamination, etc. Material is defined as 25% or greater variance in the delivery of service milestones for an attributable function specified in the service schedule for that fishery. The length of the reduction or waiver would depend on the severity of the impact on the level of services provided and the duration of the circumstances. The FCRSC noted that a reduction or waiver for the non-provision of services would be applied in the following licensing year.
7. In circumstances where there is a change in licence ownership from one year to the next, it was agreed that any reduction or waiver would accrue to the licence holder at the time of next licence renewal.
8. DPI advised the FCRSC that it would amend its discussion paper on the relationship between cost recovery and emergency management to reflect discussion in FCRSC, and provide it to the FCRSC for consideration.
9. Industry requested DPI provide it with a copy of the advice received that the Fisheries Act 1995 only allows waivers where services are not provided so that industry may be able to obtain an independent opinion.
10. The Committee noted that environmental variation leading to changes in the strength of recruitment is not an emergency. It is a business consideration for primary producers.
11. The FCRSC noted that due to the 7.2% GVP cap on fisheries cost recoverable services, FRDC levy and royalty for wild-catch abalone fisheries, no reduction or waiver would apply, if services were reduced due to emergency management, as the amount of levies paid is fixed at 7.2% of GVP.
12. DPI reminded the FCRSC that all cost recovery revenue goes to the consolidated fund (Treasury), and at present, there is no link between DPI?s appropriation and the levies paid by industry.
13. Industry suggested that DPI has a standing emergency response unit, i.e. Victorian Public Servants, and as such a reduction in levies paid by industry should apply. DPI disagreed and advised the FCRSC that the Victorian Public Servants are employed to complete their role, but that in emergencies, may be called upon for the good of the State. The FCRSC agreed that in times of emergency, it was appropriate for the Government to call on Victorian public servants to assist.
14. Industry advised the FCRSC that the Victorian Government?s Cost Recovery Guidelines state ?Where the government is providing goods and services on a commercial basis in competition with the private sector, then it is appropriate for charges to be set at the commercial market price?. DPI advised the FCRSC that the Victorian Government provides regulatory services to the commercial wild-catch and aquaculture sector in order to meet its obligations under the Fisheries Act 1995. A proportion of some of the costs incurred to deliver those services is then recovered from industry (the beneficiary of those services) in line with Government policy on cost recovery. It is not the same as a contract entered into between two parties in the private sector. However, the FCRSC noted that it does involve similar features such as the description of services, key deliverables, providing transparency and a basis for improved reporting.
15. DPI reminded the FCRSC that it is supportive, in principle, of alternative service providers delivering cost recoverable services to industry at a lower cost than DPI, noting that some types of services could not be delivered outside of Government. DPI advised the FCRSC that it has created the schedules, in consultation with the FCRSC, to specify the cost recoverable service to be delivered, including a definition of the service, the milestones against which performance can be measured, and the time and cost incurred by DPI to deliver that service on behalf of industry. Such information could provide a basis for the consideration of outsourcing options where appropriate. The FCRSC noted that additional work would need to be done to properly specify this process.
16. Industry queried whether there would be a reduction in the following year?s levies if Fisheries Officers were seconded to assist with duck season compliance. Industry suggested that this is not an emergency, and that there should be an appropriate reduction/waiver applied. DPI noted that the schedules for each fishery that have been created set out the services to be provided taking into account these matters. The FCRSC noted that only a proportion of Fisheries Victoria?s staff time and operating expenses is to be recovered via the prospective cost recovery system. The FCRSC also acknowledged the need for practicality and simplicity. The Committee recognised that it would be the deliverables and milestones that would be important within any year, and that if services to industry by DPI are materially under-delivered, then the proposed waiver could be applied.

ACTION ITEM:

1. DPI to provide the FCRSC with the discussion paper on the relationship between cost recovery and emergency management for consideration.
2. DPI to investigate whether it is authorised to provide the FCRSC with a copy of the advice received that the Fisheries Act 1995 only allows waivers where services are not provided so that industry may be able to obtain an independent opinion.

5(d) Request from Crown Land (eel) aquaculture sector to waive 2013/14 licensing year levies

OUTCOME:

1. An industry advisor tabled an open letter to the Minister from the Victorian Commercial Eel Fisherman?s Association seeking the Minister?s endorsement to have non-productive Crown Land Eel licences placed into abeyance, and the levies for the 2013/14 licensing year, apart from an administrative cost, waived.
2. The letter advised the Minister that the fishery is facing economic difficulties due to the 2011 floods which destroyed the sectors processing and export facility at Skipton, and the return to production of only a few waters. The letter suggests that these flood waters have created an opportunity for licence holders to produce eels, however DPI has made a decision not to issue new re-stock collection permits.
3. The letter cites a precedent that the FCRSC has previously recommended the waiving of levies for some fisheries regulatory services, which the Government of the day endorsed.
4. DPI noted that there had been two consecutive years of above average rainfall in Victoria following long periods of drought. If waters have not returned to production, a question arises as to whether they would ever be suitable and require on-going access.
5. DPI asked industry why a licence holder would simply not renew their licence during this uncertain time, and apply for a new licence if/when favourable environmental conditions return. Industry advised DPI that a number of licence holders have used their licence as collateral with financial institutions, and as such, could not afford to let them lapse.
6. The Fisheries Act 1995 provides for the creation of regulations to provide a reduction or waiver of a levy in whole or in part. DPI has received advice that this power is only applicable where there is a reduction in the provision of services. Regulations are currently being drafted to enable the reduction or waiver, in whole or in part, of levies in prescribed circumstances that relate to the non-provision of services.
7. DPI noted that if there would be a reduction in cost recoverable services to the fishery, that the Minister has the authority under the Fisheries Act 1995 to waive or reduce levies, once the above mentioned regulations have been put in place. DPI noted that any effects of variable environmental conditions are a business consideration for all primary producers, and not necessarily a suitable reason to waive or reduce levies unless there is a direct link to the provision of fisheries regulatory services.
8. DPI agreed to investigate whether there would be a reduction in attributable services if a number of licences were placed in ?abeyance?.
9. The FCRSC noted that the levies of $746 (management $256, compliance $246, research $65, and Fisheries Research & Development Corporation levy) for the Crown Land (Eel) licence class had already been invoiced to 11 licence holders for the 2013/14 licensing year, with payment required by 31 May 2013
10. Industry members of the FCRSC provided support of the proposal (that levies attributable to the Crown Land Eel fishery, other than administrative costs, be waived).

ACTION ITEM:

1. The Chair to write to the Minister advising of support from industry members of the FCRSC for the proposal (that levies attributable to the Crown Land Eel fishery, other than administrative costs, be waived).

6) Next meeting:

September/October 2013 - TBC.

Meeting closed at: 4:30pm