11th SHED A TIER CONGRESS
Sunday, July 10, 2005
Hacienda International Motor Inn, Sale
Opening Address
"RESTRUCTURING GOVERNMENT IN AUSTRALIA: A LOCAL GOVERNMENT PERSPECTIVE"
Councillor Dr John Jago
Wellington Shire Council
As the opening speaker in today's Seminar, it is my task to set a context for the day's proceedings and to raise a few important issues.
Whatever views are held about the usefulness of the States in Australia, I think most people would agree that their abolition would be a hard slog over a long period. For all long-term projects we need to think realistically and futuristically.
The basic long-term reality for all the world is the approaching end of the Age of Oil. On present global trends of production and consumption of oil, that will happen about 2030, and the lifestyle of everybody from then on will radically change. Every sensible government will start preparing for it now. It's very important to have efficient and sustainable governance of the nation as we manage the transition, hopefully in a planned way. Bear that in mind for everything that is said this afternoon.
Australia before European occupation was governed by over 500 autonomous Aboriginal tribes. In the past two centuries that has been replaced by an evolving system of governance, which first established a number of separate British colonies, then a federal system of "sovereign" States with a limited number of defined powers being ceded to the federal government, and now a hundred years later to a federal system which is clearly in crisis.
Local government slowly evolved in the latter half of the 19th century, commonly out of roads boards, into a subordinate sphere of governance under colonial government, continued subsequently under state government until the present time.
Local Government relations with State Government are typically tense
Go to any one-day conference where local government people (Councillors or officers) are together and sooner or later someone will raise the sentiment "abolish State governments" and about 90% will express agreement, either softly or in a loud voice with a cheer.
In Victoria, the Local Government Act 1989 permits a very wide range of Council functions, replacing the highly prescriptive nature of the 1958 Act. Nevertheless, the state government effectively controls local government. The way that it does that is by limiting the resources of local governments. The details vary in other states but the general picture is the same.
The Victorian State government also imposes on the local government sector conditions that it does not practise itself. Most importantly, it is very difficult for any Victorian Parliament to hold any Victorian government financially accountable because the government keeps on changing the accounting goalposts from year to year. By contrast, local government financial reporting is consistent and open, so that anybody with reasonable ability to read accounts can understand the financial situation of the Council from year to year. Another important item that the State imposes on local government is the system of "Best Value". And, you guessed it, the State does not require "Best Value" from its own departments.
Cost shifting and under-funding are the most evident crunch points of the State-Local relationship
Cost shifting is where a state government imposes the provision of a service on a Council without providing the necessary funds or resources, or offers initial funding to a Council to carry out a state program with the expectation that the Council will continue the service without continued state funding. The Hawker Report sets out a large number of these.
For example, in Victoria the Bracks Government recently enacted the Road Management Act and one of the consequences was that Wellington Council had to employ three more staff to comply.
Cost shifting has captured the public imagination but under-funding is a much more serious problem:
In Victoria the Kennett Government in the mid-1990s imposed drastic cuts to local government rates (20 plus per cent) plus a cap on rates (increases must be at least 1 per cent below the inflation rate). One consequence is that many, perhaps most Councils, have enormous gaps in their infrastructure needs.
The effect on our Wellington Shire Council budget is that Council rates, charges and user fees now account for 62 per cent of Council expenditure, compared with about half that of the five smaller Councils before amalgamation.
But there is some potentially good news. Bearing in mind that all three spheres of governance - federal, state and local - have separate but overlapping responsibilities in infrastructure provision, transport, health, education and so on at their differing levels, there will shortly be a conference to examine a proposal for an Inter Governmental Agreement between the federal, state and local government spheres on their respective roles and funding, and a major aim of the Australian Local Government Association at that conference is to forestall further cost shifting and under-funding.
Efficiency of local government
Local Government is recognised as by far the most efficient tier of government in Australia. Local government raises 3 per cent of the total government tax take, expends over 6 per cent of total government expenditure and employs over 10per cent of the total public sector workforce.
Section 96 of the Federal Constitution permits the Federal Government to make grants to State Governments. Federal grants for local government projects have up till recently always been made through the States. Two exceptions are worthwhile highlighting:
In 1993 the Keating Government funded a program of special employment projects directly to local government, which were administered through the peak body (the Municipal Association of Victoria) at an administration cost less than 2 per cent. This efficiency greatly impressed the Federal government and bureaucracy.
Beginning in 2002 the Howard Government funded the 4-year Roads to Recovery program direct to local government (in spite of Howard's State's rights rhetoric) to help overcome the huge backlog of local government asset renewal, and has recently announced that it will continue the program for a further 4 years.
So, if local government is the most efficient form of government, why does it not play a larger role in governance in Australia? - especially if the current dominant economic ideology claims to be rational?
A major problem is the Federal system itself, which in many ways has outlived its usefulness. Take just two examples:
The States engage in stealing major events from each other, e.g. Grand Prix motor bike and Formula One racing, and in intense competition for major projects, for instance, navy contracts
Then there is the stupidity of the location of State boundaries, which bear little relationship to resources. Apart from Tasmania, which has its own natural boundaries, state boundaries in Australia poorly reflect natural environmental realities such as bioregions or water catchments, which ought to be major determinants of regional and state boundaries.
The Heart of the Problem
Nobody should under-estimate the political difficulty, perhaps even the impossibility, of abolishing the states.
A Federal referendum is required, and there must be a majority of voters overall and in all 6 States favouring the proposal (which is why Keating went for a republic, this needed a majority saying yes in only 4 States)
Then there is the question of the desirability of a unitary system. Canadian economist Jane Jacobs in her book Dark Age Ahead describes how China was the world leader in technology and ruled the seas in the early fifteenth century, but then lost its technological lead to formerly backward Europe following a political power struggle waged between two factions in the Chinese imperial bureaucracy. The losing faction had championed treasure fleets. The winning faction asserted its success by abruptly calling a halt to voyages, forbidding further ocean voyaging, and dismantling shipyards. China's long stagnation began from then on. The underlying cause was China's political centralization.
Third, there is the question of power: seen as an all powerful Federal government riding roughshod over the states. Menzies understood that issue from his experiences in relation to ALP State governments: in spite of the difficulties of a federal system he was fearful of an all-powerful Federal Labor government. Similar fears are being expressed today about the Howard Government in relationship to industrial relations.
Contrary to Menzies, Prime Minister Howard is now trying to find alternative ways of getting around his lack of constitutional power to undermine the power of State governments without abolishing them. He recently branded State Governments as inept, and is using funding as his main weapon, including increased use of Section 96 grants, e.g. education (where the Commonwealth has no constitutional power) and direct grants to local governments instead of going through the states.
Determining our Future
So what do we do? Clearly, the thousands of communities around this nation need to determine their own future rather than have it imposed on them, either by a powerful political elite within this country or by transnational corporations based in New York, London, Tokyo or Beijing.
What we need is a system of governance that will enable connected communities. In other words, we need a system that enables across the whole country a workable system that integrates top-down and bottom-up democratic decision-making, we need a system that integrates big picture and little picture governance.
Bearing in mind the geographic and demographic realities of Australia, we need a system of governance that could be distributed at up to five levels, namely - national, sub-national, large regional, small regional and local.
Many ideas will come out during the course of today, but I will start by suggesting two practical things for consideration:
A nation-wide Constitutional Convention is needed to re-order the powers and responsibilities of the various possible spheres of governance in this nation.
Australia is a continent, in area it is a very large nation state. It is also a democracy, with governance at various levels to enable it to be effective, efficient and accountable. Up till now that has manifested in three levels of government, still evolving, but the question I ask is this: with modern methods of communication is that still valid? We need a national debate on the present-day issues analogous to the debates leading up to Federation over a hundred years ago.
Properly structured and administered Regional Organizations of Councils could perform many of the functions now carried out by state governments
Those of us who are privileged to live in Gippsland recognize Gippsland as a distinct region of Australia (not Victoria), situated between the Great Dividing Range and Bass Strait, with outer metropolitan Melbourne as its western boundary. The six Councils that make up the Gippsland natural region together constitute a loose alliance at present, in the form of the Gippsland Local Government Network or GLGN. If, however, those six Councils were structured as a Regional Organization of Councils with the constitutional powers of a tier of governance, they could perform more effectively, efficiently and accountably most (or maybe all) of the functions now carried out by the Victorian State Government in our region.
Finally, let me issue a warning. My mind goes back to August/September 1994 when the then Minister for Local Government in the Kennett-McNamara Victorian Government, Roger Hallam, spoke at a Gippsland local government meeting at Cowes. He was speaking on the impending local government restructure in Gippsland which came about three months later, and he said - "left to itself, local government restructure would proceed at glacial pace". In reply, I wrote Roger Hallam a letter which included the need for State government restructure, and I stated "left to itself, State government restructure would proceed at glacial pace". I never got even an acknowledgement from the Minister.
Eleven years have passed and very little has changed.
But I claim the promise that those of us in this room who see the need for State government restructure will be among the shock troops for a national movement that will build up like wildfire to ensure that Ministers both State and Federal will respond to the nationwide demand for a structure of governance in this country that fully meets the requirements of the 21st century.