Federalism – where is it headed?

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It is one of the strangest metamorphoses in Australian history that the Howard Government is marching down the path of centralism, trampling over states’ rights, while the ALP limps behind, politically unable to shout its old leftist mantra of ‘more power to Canberra’.

The Coalition has totally taken ownership of the Hawke-Keating market reforms of the 1980s and early 1990s and the passing of the new IR Bills, shows it is not afraid to test its constitutional powers with a hostile takeover of state responsibilities.

Commonwealth/state relations are at a very low point. Funding agreements for health and disability services are routinely delayed, acrimonious and ineffective at binding parties. Buck-passing and cost shifting are still rife and pressing problems like the dearth of supported accommodation and mental health services are unresolved. The agreement on anti-terror was fraught and at least the ACT will not insist on the draconian incommunicado rules for detention.

But where were the signs in 2005 of national leadership in the early Howard years, delivered with the cooperation of premiers and chief ministers? It is hard to imagine gun control, the world-first Australian Greenhouse Office, new federal environment powers, national vehicle and fuel emission standards, the national, mandated renewable energy target and other early initiatives coming out of the current cabinet.

The last few years have been littered with minor examples of interference rather than serious policy leadership such as threatening to take over hospitals and by-passing the states with handouts for tutoring and minor capital works in schools.

The question is – does the Coalition Government have a plan or is it merely Canberra exercising populist, political advantage over Labor state premiers?

Indeed, a look at the legislation rushed through Parliament in the last sitting fortnight of 2005 – the IR Bills, Anti-Terror legislation, Work for Welfare and the VSU – will give readers a good idea of the shape of things to come.

The drive to centralism is not ad hoc but, sadly, neither is it collaborative or visionary. Howard is a pragmatist. He knows that the Labor premiers are going to complain but so what? He keeps winning Federal elections by using wedge politics. It’s a highly successful strategy based on fear of the unknown.

As Greg Craven in his excellent paper, ‘The new Centralism and the Collapse of the Conservative Constitution’ has pointed out, it seems prima facie, highly contradictory that a Liberal Prime Minster should so fundamentally move the party ideology away from the conservative central tenets of the Constitution – which essentially describes and delineates the powers of the states – to a concentration of power in Canberra.

Yet there is more to this than just a centralist Government agenda. What we are witnessing is the successful push for more power of the Executive of Government, the Prime Minister and Cabinet, rather than Parliament and rather than in collaboration with other levels of government. Political power in Australia since Whitlam has always gravitated to Canberra, more by increments than by leaps and bounds, but a more recent and dangerous phenomena is rule by Cabinet where the Parliament is used as a rubber stamp. That is unprecedented in Australian history. I do not feel ‘relaxed and comfortable’ about that.

Tony Abbott in his paper ‘A Conservative Case for Federalism’ made the clearest statement of the Government’s interventions regarding the states.

The Prime Minister declared that he ‘was no longer prepared to do nothing’ and would by-pass the states to fund directly local school communities and to establish 24 new Commonwealth-sponsored technical training colleges. Few commentators seemed to have noticed this sign that conservatives are falling out of love with the states.

Abbott then went on to say that ‘Power divided is power controlled’ which sums up the pragmatism of the Howard Government.

Howard, Abbott and Nelson will continue to use their mandate and the Corporations powers in the Constitution to override state opposition. The Constitution, though, does allow for the High Court to override the Government’s more pernicious legislation as we saw in the Tasmanian Dam case in 1983.

For example, the states will mount a challenge to the new IR legislation as it overrides their state awards. It’s a case that might start a series of other cases about what exactly are the divisions between federal and state governments. Just how far can the Commonwealth Government go in spending money on schools and colleges and other matters that should be dealt with by the states?

The New Zealand Model

NZ PM Helen Clark

Australians should consider the New Zealand model of unitary government and devolution of power to local sectors, as the way of the future.

There are two branches of Government: central and local. There are twelve regional councils that take care of regulation and infrastructure planning and seventy-four territorial authorities which effectively run the domestic economy.

The local regions (which are not unlike our councils) are responsible for almost all service provision in their jurisdictions. There is a strong emphasis on separating policy and service delivery.

Local authorities may provide goods and services in-house by setting up Local Authority Trading Enterprises. These companies are required to pay tax and to be run as successful businesses.

Of course there are still state-owned enterprises and central government plays a major role in setting policy and ensuring that clear and accountable business processes are in place.

In 2002, the Local Government Act said its purpose was to ‘enable democratic local decision-making and action by, and on behalf of communities and promote the social, economic, environmental and other cultural well being of communities.’ This has been accompanied by a selective reduction in central government oversight of local policy matters, although there are exacting audit processes.

The key here is that there are no states. No constitutional constraints (or safe guards depending on your perspective), rather a devolution of power to well organized and often large local areas, which aim to be self sufficient.

Does that sound like some sort of agrarian utopia? Not so. It is a free market initiative where collective action is used to provide goods and services on the local level.

What does the Central Government do? New Zealand doesn’t spend much on defense (which consumes about 30 per cent of the Australian budget) so the focus is on establishing new trading partners and setting up new local industries which may have an international competitive advantage.

All local regions and councils are represented by MPs, who of course advocate for special services for their constituents. Naturally, some areas will lack the ability to provide some services and may require assistance from State Owned Enterprises (SOEs). But the general tenor is a move away from centralization and towards local community.

While New Zealand does not have a formal constitution it does have a number of Acts, including the Treaty of Waitangi – ensuring social and property rights for Maori – and a Bill of Rights, which collectively and effectively form a Constitution.

Meanwhile in Australia

I’m not saying that the New Zealand model is perfect. There are unique social and historical conditions which helped, but in the current light of the Howard Government’s centralist push, it looks inviting.

The Health Minister Tony Abbott says the states can’t get their ‘act together’ to provide adequate hospital care. This is a furphy. The last thing the Minister wants is to be directly responsible for the complex, highly contentious and politically vexed job of fixing Australia’s hospitals. It would be his Vietnam. Politically, it’s far safer to blame the states.

The Attorney General Phillip Ruddock wants to impose uniform defamation laws. This seems like a good idea. Why should there be nine different jurisdictions where a combination of ‘truth and public interest’ or truth alone are defenses against libel or slander?

The Education Minister Brendan Nelson wants Commonwealth control of universities by creating a funding tier system, while introducing a national education certificate and commonwealth funded TAFEs.

But it’s inconceivable in the short term that the Commonwealth would become involved in the large increase of public servants that would be required to administer its policies in such areas as health or education. The Commonwealth sees a role wherein it would link policy change by the states to the receipt of Commonwealth funds – the states would simply act as agents for the national government.

To a certain degree, that’s not unlike the New Zealand model. The Central Government does occasionally make policy decisions for local or regional areas on health and education, but unlike Australia, it’s usually done without the screaming and wailing about states’ rights. That’s because there are no states.

State and Commonwealth relations are not a love story but I fear the Commonwealth, even with the possible intercession of the High Court, has already taken the high financial ground.

Today the Commonwealth raises 71 per cent of tax revenue while the states only raise 29 per cent. The GST, which is raised by the Commonwealth, delivers more than one third of state income. State taxes make up about one third. Special purpose payments, tagged to services such as education and health, are made by the Commonwealth to the states. The Commonwealth has the whip hand and it’s a trend that will accelerate, with more conflict, unless we look at other models of government.

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