Big implications in council vote

Bookmark and Share Deregulation Unit | Mikayla Novak
West Australian 11th June, 2013

The Federal Government is pitching its case for local government recognition in the Australian Constitution as "small" and "modest" change.

The reality is that the effect of this proposal, to be put to the public in a referendum at the September election, would be large and immodest, most notably because it will exacerbate centralising tendencies in our Federal system.

The proposal is that local government bodies be added to Section 96 of the Constitution, which presently enables Federal Parliament to grant financial assistance to the States on terms and conditions it thinks fit.

To appreciate why this proposal is dangerous to the integrity of Australian Federalism, one only need recognise that the best predictor for future political behaviour is past political behaviour.

Since the early 1920s, successive Commonwealth governments have used Section 96 to intrude into the affairs of WA and other States, by imposing increasingly prescriptive conditions on State governments as a condition of funding.

Federal politicians have used Section 96 grants to dictate to States the policy objectives to be pursued, specifications of service targeting and delivery standards, and even administrative structures which must be put in place.

National Partnership Payments, introduced under former prime minister Kevin Rudd, are arguably even more intrusive, since States can now only receive funds if they adhere to Federally dictated milestones or performance benchmarks.

The effects of these arrangements on the quality of our public governance have been dramatic, with voters finding it increasingly difficult to identify which level of government is responsible for failures in policy performance or service delivery.

Federal and State politicians have capitalised on this blurring of democratic accountability by fomenting blame games against each other, much to the frustration of average voters.

So far, the financial relationship between the Commonwealth and 565 councils has been on a much smaller scale.

However, the problems bedevilling Federal-State relations will become a reality for local governments should Canberra receive a constitutional green light to fund councils on any terms and conditions it thinks fit.

About 83 per cent of the $2.6 billion in Federal funding to councils is given in accordance with Section 96, with funds sent to each State on the proviso that they then pass the funds on to their local government authorities.

However, the remaining Federal funding, which flows directly to local government bypassing the States altogether, remains controversial and has come under greater scrutiny in recent years.

In 2001 the Howard government introduced the Roads to Recovery program, which is today the single largest direct funding program to local governments, costing $335 million last year.

Prior to his election as a parliamentarian in 2010, economist Andrew Leigh found evidence of pork-barrelling within this program, as the funding distribution favoured councils in coalition regional electorates.

In the Pape and Williams cases of 2009 and last year respectively, High Court judges ruled that the Commonwealth could not directly appropriate funds unless explicitly supported by powers explicitly stated in the Constitution.

The Gillard Government is now proposal asking the public to enshrine local government financial recognition in the Constitution, to allegedly allow the imperilled Roads to Recovery and other direct funding programs to continue.

However, just last year the Government passed the Financial Framework Legislation Amendment Bill (No. 3) 2012, authorising it to spend on local government, and 414 other areas of public policy, without having to ask Parliament for future authorisation.

The referendum proposal is left politically exposed for what it truly is: a plea by Canberra's political class for an unprecedented ability to interfere in local community affairs, with a good dose of pork-barrelling for votes along the way.

It is no coincidence that referendum proponents argue the proposal would somehow reduce Australian over-government, claiming that channelling most Federal funding to local governments through the State middlemen is a needless exercise.

Such assertions do not stand up to scrutiny, in that the States are legally obligated to pass on the full amount of relevant funding to councils without undue delay.

Federal funding of councils through the States is generally agreed to be constitutionally valid, and allows State politicians to scrutinise these Federal funds flowing through to their local government administrations.

This funding methodology also pays respects to the reality that councils are administrative sub-units of State governments, and are recognised as such within State constitutions.

Indeed, there is no good argument for the Commonwealth to not direct every last cent of its funding to councils through the States, on democratic accountability and financial probity grounds.

The Australian people resoundingly rejected two similar constitutional amendment proposals in 1974 and 1988, and the argument against allowing Canberra to infiltrate every town hall remains as valid this year as it was in the past.