tag:theconversation.com,2011:/fr/topics/renewing-federalism-12286/articlesRenewing Federalism – The Conversation2014-12-12T06:14:38Ztag:theconversation.com,2011:article/354262014-12-12T06:14:38Z2014-12-12T06:14:38ZUnscrambling the federalism omelette: but will the people buy the recipe?<figure><img src="https://images.theconversation.com/files/67072/original/image-20141212-6033-48b719.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Two issues papers give a recipe to reforming federalism, if we care to follow it.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/nickwheeleroz/2475011402/in/photolist-4LH5kJ-4LCUmt-5mZMqc-cCQKpw-9unueP-cbc6X9-7LtVjT-7CpFLk-4LH5Eo-7QuJui-p2ECwc-6BPQqM-2UxM-j65JGC-gkCf9-gkCf7-9wRoT9-ae8X3Q-9uqv6u-gkBjj">Flickr/Nick Wheeler</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Australia’s <a href="https://federation.dpmc.gov.au/">Reform of the Federation</a> taskforce has released two major issues papers on the scrambled roles and responsibilities of governments in the areas of housing and homelessness, and health.</p>
<p>The way the reform taskforce has analysed the funding flows and current roles and responsibilities in these two complex policy areas show the first signs of how meaningful reform might be achieved.</p>
<p>For the first time, these case studies present intelligible pictures of the way responsibility for these areas has come to be so confused in terms of overlapping funding streams, but also in the unplanned way policy, regulatory and service delivery roles have come to be mixed up. In ways that might allow these to now be unscrambled – or, at least, rescrambled in ways that make more sense.</p>
<p>Both papers start with the six principles agreed in June’s terms of reference: accountability for performance in delivering outcomes; subsidiarity; national interest considerations; equity, efficiency and effectiveness in service delivery; durability; and fiscal sustainability.</p>
<p>However, the papers make clear there are problems ahead if we think a better mix of roles can be achieved by the Commonwealth government simply backing out of responsibility in areas where the states have large funding and delivery roles, as implied by Prime Minister Tony Abbott’s objective of making the states “sovereign in their own sphere”.</p>
<h2>Housing</h2>
<p>The funding flows in the housing issues paper show this up clearly.</p>
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<a href="https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=335&fit=crop&dpr=1 600w, https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=335&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=335&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=421&fit=crop&dpr=1 754w, https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=421&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/67048/original/image-20141212-6033-wg6fpu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=421&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Figure 1. Housing & homelessness – Commonwealth and State and Territory funding shares, 2012-13.</span>
<span class="attribution"><span class="source">Reform of the Federation Issues Paper 2, December 2014, p.16.</span></span>
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<p>While the states currently have the lion’s share of responsibility for funding social housing, does anyone really expect that the Commonwealth will vacate the field by handing the states its current A$3.6 billion role in Commonwealth Rent Assistance?</p>
<p>The issues paper sets out good reasons for revisiting the relationship between these, including for financial sustainability. But a total “clean lines” division seems impossible, unless we wish to see the states either build, or take over, a parallel national social security system.</p>
<p>Underpinning this reality is one of the key questions asked by the paper: “Is one level of government better placed to address equity issues?”</p>
<p>The results of this year’s fourth <a href="http://www.griffith.edu.au/business-government/centre-governance-public-policy/research-programs/federalism,-regionalism-and-devolution">Australian Constitutional Values Survey</a> show majority public support for the principle of “subsidiarity”, with 52% agreeing it is “better for decisions to be made at the lowest level of government competent to deal with the decision” than at higher levels of government.</p>
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<a href="https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=332&fit=crop&dpr=1 600w, https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=332&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=332&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=417&fit=crop&dpr=1 754w, https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=417&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/67076/original/image-20141212-6027-93lc3o.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=417&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Figure 3. Who should be responsible for what? The citizen view (2014)</span>
<span class="attribution"><span class="source">Griffith University, Australian Constitutional Values Survey, 2014. Conducted by Newspoll of a stratified random sample of 1,204 adults, August-September 2014.</span></span>
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<p>However, when it comes to specific policy areas, relatively few citizens wish to see the federal government back out of some of the key areas where the states have a big role.</p>
<p>In housing, 37% of Australian adults say the states should have sole responsibility, but 28% believe it should be the Commonwealth, while 26% think it should be shared.</p>
<p>It’s clear people believe the national government should involved at some level, especially to support disadvantaged Australians. Even if the Commonwealth backed out of funding, its policy and regulatory roles – helping ensure information is collected, pooled and analysed and triggering state policy responses - might actually increase.</p>
<p>This all means that we’re not likely to see “clean line” divisions in all areas, but ones where policy and regulation continue to be shared between the tiers of government.</p>
<h2>Health</h2>
<p>The health issues paper has a similar message. The Commonwealth’s funding role is even bigger here than in housing, and the overall funding picture is even more of a scramble. </p>
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<a href="https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=517&fit=crop&dpr=1 600w, https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=517&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=517&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=649&fit=crop&dpr=1 754w, https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=649&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/67049/original/image-20141212-6048-jyc7js.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=649&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Figure 2. Funding flows in Australia’s health care arrangements 2012-13.</span>
<span class="attribution"><span class="source">Reform of the Federation Issues Paper 3, December 2014, p.22.</span></span>
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<p>For the same reasons the Commonwealth is unlikely to give up rent assistance, Australians are unlikely to let it back out of responsibility for providing universal Medicare – with or without a co-payment.</p>
<p>However, in addition to unscrambling the funding streams for some of the most costly parts of the system (like public hospitals), major breakthroughs appear to lie in further agreed co-ordinated reforms such as the recent creation of the <a href="https://www.ahpra.gov.au/">Australian Health Practitioner Regulation Agency</a> – a joint State-led initiative, supported by the Commonwealth, responsible for regulating 14 health professions nationally.</p>
<p>The issues paper points out clear gains in extending this cooperative approach to other areas of health workforce regulation – and especially, workforce policy and planning, where there is little to no coordination.</p>
<p>But rather than meaning that the Commonwealth either backs out, or takes over, it just means a different, clearer and more strategic role.</p>
<h2>Weaknesses</h2>
<p>There are two issues where the issues papers are weakest, so far: how to make any new mix of roles and funding durable to political challenge, and secondly, how reform will include stronger and better “service deliver to the regions” – an explicit and important part of the terms of reference.</p>
<p>On the first issue, no-one seems to want to put the fundamentals of any new mix to a referendum, and lock it into the Constitution, for a range of pragmatic reasons. </p>
<p>Yet we know from experience that governments will find ways of usurping each others’ spheres of influence – as demonstrated by the <a href="https://theconversation.com/renewing-federalism-what-are-the-solutions-to-vertical-fiscal-imbalance-31422">vertical fiscal imbalance</a> – unless some new, legally enforceable and robust mechanism is found for locking in policy roles and funding streams.</p>
<p>The second challenge is related – how to strengthen the lower parts of the federal system so that where the states do have clearer responsibility and funding for service delivery, there is real change and improvement on the ground.</p>
<p>This focus on the regions is vital. Why has the Commonwealth previously crept into more and more of these fields? Because it is in actually delivering outcomes at the local and regional level that state governments are most often perceived as falling down – especially in the large, bureaucratic states like NSW and Queensland.</p>
<p>Such a focus can distract from meaningful reform, but only where “regionalism” is assumed to mean replacing federalism altogether – whereas a better strategy for making the system serve the needs of both rural and urban regions can be the key to making federalism work. This is especially so if we want to see real flexibility, community responsiveness and innovation.</p>
<h2>Major differences</h2>
<p>The question is a major difference between the two issues papers. In housing, there is no direct response to this aspect. The paper points to plenty of reasons why strategies for housing might benefit from stronger regional planning and delivery. </p>
<p>It stands out that while public housing has been reduced in all states and territories since 2004, per capita public housing (and for the most part social housing) is still substantially higher in the smaller, more “regional” jurisdictions (South Australia, Tasmania, the ACT and NT) where the state government is better placed to respond more directly to basic community needs.</p>
<p>However, the paper itself is silent on the regional dimension.</p>
<p>By contrast, the health issues paper engages with how a more coordinated public health system might be delivered, if subsidiarity and devolution are taken seriously.</p>
<p>The paper reminds us that the crucial issue of better on-ground coordination and integration of health care in local communities is already being tackled by Medicare Locals – recently regionalised through the Commonwealth’s 30 Primary Health Networks. And that the national strategy for Local Hospital Networks has already been agreed as key to delivering decentralised and specialised hospital services.</p>
<p>When the paper asks: “would a model of subsidiarity with local/regional bodies organising and delivering health services work?”, the answer is it is inevitable, and already happening. The real question is how to continue to rejig and sustain a stronger role for local and regional governance in ways that face up to the drawbacks, and not just the advantages, of large federal and state bureaucracies.</p>
<p>Like any recipe, our new federal blueprint is still going to have many of the same ingredients and deal with all the same problems. But by giving us a clearer understanding of our present scramble, the issues papers give us a new basis for imagining what kind of recipe might work better, across different portfolios – something for which Australian citizens have plenty of appetite.</p>
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<p><em>Interested in the federalism debate? Read our Renewing Federalism series <a href="https://theconversation.com/au/topics/renewing-federalism">here</a>.</em></p><img src="https://counter.theconversation.com/content/35426/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>A J Brown receives funding from the Australian Research Council. </span></em></p>Australia’s Reform of the Federation taskforce has released two major issues papers on the scrambled roles and responsibilities of governments in the areas of housing and homelessness, and health. The…A J Brown, Professor of Public Policy & Law, Centre for Governance & Public Policy, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/324962014-10-14T19:31:56Z2014-10-14T19:31:56ZRenewing Australian Federalism: What you think are the challenges<figure><img src="https://images.theconversation.com/files/61007/original/bsthnfvk-1412658553.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Our federation is in need of some fixing. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/cat.mhtml?lang=en&language=en&ref_site=photo&search_source=search_form&version=llv1&anyorall=all&safesearch=1&searchterm=australia%20broken%20&show_color_wheel=1&orient=&commercial_ok=&media_type=images&search_cat=&searchtermx=&photographer_name=&people_gender=&people_age=&people_ethnicity=&people_number=&color=&page=1&inline=214831759">Bildagentur Zoonar GmbH/Shutterstock</a></span></figcaption></figure><p><em>The <a href="https://theconversation.com/au/topics/renewing-federalism">Renewing Federalism</a> series, in partnership with Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government, attracted more than 200 comments and culminated in a live event held at the ANU’s Crawford School on Thursday, 2 October.</em></p>
<p><em>You can watch and listen to the event:</em> </p>
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<p><em>Or read the official Issues Paper for Reform of the Federation and all subsequent consultation documents <a href="http://federation.dpmc.gov.au/">here</a>.</em></p>
<p><em>Miranda Stewart summarises a few of the key problems, challenges and solutions you proposed, together with some of the key points picked up in the live forum.</em></p>
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<p>There is broad agreement among contributors and punters of the Renewing Federalism Forum that the federation does need some fixing. Some proposed big picture reforms: changing the number of states, or the constitutional framework; a few, but not so many, argued for abolition of states altogether. There is widespread scepticism about the potential for success of any reform. As John Hewson noted in the live forum, we need to find ways to get past short-term vested interests and party politics.</p>
<p>Cheryl Saunders observed that we need to <a href="https://theconversation.com/federalism-is-a-natural-fit-for-australia-but-we-need-to-make-it-work-31846">revitalise democratic participation and address growing cynicism</a>, a view widely shared by readers and attendees at the live forum. </p>
<p>Gregory Melleuish points to a trend to <a href="https://theconversation.com/to-restore-federalism-strengthen-the-states-and-make-australia-more-republican-31367">monarchical</a> government by the Commonwealth executive and courtier behaviour by States. As Professor Saunders said, we should see a positive relationship between federalism and democracy: but most of us see a negative relationship. A democratic deficit was acknowledged as important by First Assistant Secretary of the white paper Taskforce at Department of Prime Minister and Cabinet, David De Carvalho. </p>
<p>There is increased recognition of the principle of subsidiarity in service delivery: the <a href="http://federation.dpmc.gov.au/download-issues-paper-full">Federalism Issues Paper</a>, released in September, defines this as a key principle, “whereby responsibility lies with the lowest level of government possible”. Its not a concept which has been widely used in Australia but it is a key principle in the <a href="http://europa.eu/legislation_summaries/glossary/subsidiarity_en.htm">European Union</a> where, ideally, it emphasises accountability of governments to member state representative Parliaments.</p>
<p>A subsidiarity approach was suggested by contributor Bronwyn Hinz on <a href="https://theconversation.com/renewing-schooling-federalism-getting-the-settings-right-31369">schools</a> being delivered and regulated by State governments. But such an approach could still take very different forms depending on how it is carried out: for example, <a href="https://theconversation.com/renewing-federalism-school-education-within-a-federal-system-31366">Kevin Donnelly</a> agrees on subsidiarity but wants to eliminate government provision of education altogether (though funding would continue).</p>
<p>It’s less clear what should happen with tertiary education but the current system treats people in vocational and technical training <a href="https://theconversation.com/renewing-federalism-our-tertiary-education-system-needs-a-rethink-31370http://example.com/">less generously</a> than university students - and that is even taking into account potential large fee increases. That points to the bigger challenge: fiscal sustainability of state and Commonwealth budgets, and the crowding out of education expenditure by increases on health and infrastructure.</p>
<p>Our contributors agree that even if roles are more clearly defined and allocated to states, intergovernmental decision-making processes must be put on a secure footing underpinned by law. John Phillimore and Linda Botterill correctly <a href="https://theconversation.com/why-we-need-clear-rules-between-the-states-and-commonwealth-31368">identify</a> that our current <a href="https://www.coag.gov.au/">COAG</a> system, in which the Commonwealth executive controls meetings and agendas in a way that is completely non-transparent, and a new government can renege on major previous intergovernmental agreements and commitments, is not acceptable. </p>
<p>Most agree that vertical fiscal imbalance - where State governments raise less revenue than the Commonwealth relative to their expenditure and governing responsibilities - is a problem, indeed a <a href="https://theconversation.com/taxation-the-states-and-redrawing-our-fiscal-constitution-31361http://example.com/">pathology</a>. As Alan Fenna observed, the “low hanging fruit” might be increasing the revenues from the GST and giving that to the States. But this is a <a href="https://theconversation.com/renewing-federalism-increasing-the-gst-will-increase-inequality-31360http://example.com/">regressive tax</a> as pointed out by Scott Brenton and we did not solve how it could be raised fairly in this forum.</p>
<p>Even a larger GST would probably not deliver enough money for the future pressures on government services. There is considerable support for reforming income tax and eliminating perverse incentives by <a href="https://theconversation.com/renewing-federalism-what-are-the-solutions-to-vertical-fiscal-imbalance-31422http://example.com/">sharing Commonwealth income tax revenues with the states</a>. Views vary as to whether state governments should levy income taxes or should just be entitled to a share of the revenue. Many tax policy people such as John Freebairn (and me) <a href="https://theconversation.com/renewing-federalism-state-budgets-vfi-and-a-hard-budget-constraint-31359">prefer income tax collection at a central level</a>, conscious of issues of national fairness and prosperity. </p>
<p>We focused less in this series on horizontal fiscal equalisation between states, but as Eva Cox says, addressing <a href="https://theconversation.com/national-well-being-should-come-before-states-rights-31365http://example.com/">regional inequalities and individual citizen wellbeing</a> are critical goals of national policy. Many readers commented on these issues especially if you don’t live in a capital city. Can we have a fair national policy in key areas, without Commonwealth responsibility?</p>
<p>The government will release Issues Papers on education, health, housing and federal financial relations, and a Green Paper outlining specific reform options for public consultation by mid-2015. As the White Paper process proceeds into 2015, we hope to invite further contributions and debate on these important issues.</p><img src="https://counter.theconversation.com/content/32496/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Miranda Stewart receives funding from the Australian Research Council.</span></em></p>The Renewing Federalism series, in partnership with Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School…Miranda Stewart, Professor and Director, Australian Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313652014-09-26T01:59:41Z2014-09-26T01:59:41ZNational well-being should come before states’ rights<figure><img src="https://images.theconversation.com/files/59847/original/bfdw5s9q-1411528575.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Devolving federal responsibilities for social services may cause inequities among the states.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/buggle_89/5197485043">Flickr/Lisa Mayne</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>In our final piece, Eva Cox argues the rather than worrying about duplication and overlap of services between the Commonwealth and states, we should set equity goals that ensure the national well-being.</em> </p>
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<p>As discussed elsewhere in the <a href="https://theconversation.com/au/topics/renewing-federalism">Renewing Federalism series</a>, vertical fiscal imbalance gives the Commonwealth considerable coercive powers to set priorities and set national policies for funding on programs it does not control and for which it is not constitutionally mandated. This is obviously important in economic and defence areas, but also in setting social priorities. </p>
<p>The current pressures for economic growth to be the dominant issue for governments has tended to overshadow nation building with wealth building functions of governments. It is the balance of these functions in any examination of federation which may become problematic. </p>
<p>There are signs that interest in the current Federation exercise may lead to more devolved national policy decisions and related service delivery processes to the states. While current collaborative efforts like COAG or may be cumbersome, the rapid moves post-election to demolish the Gonski education reform national agreements does not send out good messages on national goal setting. </p>
<p>My concern is that the Government’s emphasis on “open for business” would increase the pressure to devolve large proportions of decision-making power back to the states and thereby reduce the costs of public services. This could result in serious risks of increased inequality between citizens depending on what state or territory they live in. </p>
<p>We need therefore to ensure we clearly identify why and where it is necessary to retain the national capacity to set and enforce national social goals so Australians have equitable access to those resources that are distributed via government. </p>
<p>We may otherwise find people’s access to preschool education, legal aid, aged and health care will be tied to where people live, with no possibilities of appealing to a higher authority for national fairness. </p>
<p>There are signs already that the states are pursuing self interest in some salvos being fired around the distribution of the GST. The basic untied grants that are offered by the states as their share of taxation revenue are currently allocated via formulae designed to balance spending possibilities equitably across states. As these differ in size, population density and age mixes, as well as access to natural resources, there have always been arguments on this allocation. </p>
<p>Wealthier states object when they receive less per capita than other states and often less than the GST collected from their residents. Now Western Australia is demanding the formula be adjusted to what they pay into the tax system and receiving some sympathy. This is opposed by those smaller states which have few resources and need higher subsidies.</p>
<p>If state-based financial self interest becomes part of the basis for new funding in return for more local decision making and control over setting priorities, the concept of setting national well being goals will be lost. </p>
<p>If debates on Federation focus on worrying about duplication and overlap at the expense of retaining the necessary means of setting national equity goals, the national well-being can be seriously damaged. </p>
<p>Questions such as inequality, which even the <a href="http://www.imf.org/external/np/fad/inequality/">IMF now sees as a problem</a>, will no longer be part of the national agenda. </p>
<p>Making financial growth less encumbered by reducing complexities is important, but not if it undermines our capacities as a nation state. While we may need to discuss subsidiarities, devolving decisions around which tier of government delivers our social structures cannot take on irrelevant colonial boundaries drawn up over more than a century ago.</p>
<p>Most of us define ourselves as Australians, not by state of residence or origin. The power moves over the past century have mainly been towards more centralised decision making as national governments took on more roles in setting policies across the spectrum. Moving towards a more federated decision making model seems to deny the need for a relatively small population like ours to make clear national decisions. </p>
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<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
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<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31365/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eva Cox does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Eva Cox, Professorial Fellow Jumbunna IHL, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/319552014-09-25T20:07:33Z2014-09-25T20:07:33ZWhy we should consider ourselves a nation first, a federation second<figure><img src="https://images.theconversation.com/files/59763/original/42zw925k-1411448488.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A review of federalism and taxation should begin with recognising the value of what we have created as a nation.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/rpt/116702800/in/photolist-gnM92-b1tyPZ-bj8Ff-8Zx4MA-7yx4tG-d7NY5o-5wr2Jn-bgxg5V-o8cevz-5nqn4o-ntU5Qj-btPuXj-9dgoph-9Q9BfE-52rAhJ-52nmoV-4MZ339-cQTi4-apRST6-52rAgh-dAUfic-6xLzw3-cLFKL-cxQHaN-9dfNfw-e6Xmge-bBo6fX-99ngm7-eiUgc1-9RQpLa-5M485h-yJ2ye-jWyVJ6-wkBBB-9L43p-bxSfQj-3U2de7-bz6Bix-nVMyk5-a4hNjH-6JhcB-7ys3b3-4AeJLi-9ceqmu-56z2xw-kegUuy-edXNzR-2UwEXF-dPETmD-dPLtxN">Flickr/Ross Thomson</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. So far in our special series, leading Australian academics have discussed the future of the federation when it comes to taxation, education and health; today, we look at the broader issues of democracy.</em></p>
<p><em>Honorary Professorial Fellow at the ANU’s Crawford School John Hewson argues the whole, rather than the parts, need to be the focus.</em></p>
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<p>Australia has built a very effective federalism that has provided us with a pretty effective national economy and society, operating with a common currency. This success should not be underestimated or forgotten as we work towards a review and further reform.</p>
<p>The recent decision by the Scottish electorate to remain part of the UK avoided what could have been devastating economic and social consequences. </p>
<p>So much was uncertain: what currency would Scotland use? How would it run monetary policy? What share would it be allocated of UK debt, and how would this be determined? Would it be allowed to remain in the EU and, if so, on what terms? What rights would it have over North Sea oil? What would happen to its financial services sector – one of the biggest in Europe? And, of course, how could the Scottish government possibly deliver on the promises made to increase government expenditure, especially social spending?</p>
<p>These, and many other, questions would probably have bedeviled/constrained the break up of the “old” UK for years, if not decades. Similar issues/questions must be addressed, explicitly or implicitly, in the reviews of our Federation and taxation, as we consider the division of policy and service delivery responsibilities, and their most effective funding.</p>
<p>The “romance”, especially among the young, of an independent Scotland, was effectively mugged by the reality of the difficulties, if not unsustainability, likely to be encountered by attempting to structure the break-up of the UK.
Some of the initial enthusiasm for an independent Scotland came from the simplistic notion that North Sea oil (NSO) was the basis of their wealth and ensured their future financial viability. However, in the process it has been recognised that NSO had “peaked” and future potential would be constraining.</p>
<h2>Sharing both the good and the bad</h2>
<p>At times in our past, resource rich states such as Western Australia and Queensland have “contemplated/threatened” to pursue “independence/secede”, as they felt the wealth they created, and thereby the national revenue they generated, was not sufficiently recognised by other states, yet they were unjustifiably required to share it with those other states.</p>
<p>These arguments seem to emerge with most vigour in the “good” years, when it is all too easy to overlook, aside from the historic constitutional and legislative structures, that resources are national assets, owned by all Australians, and that a successful federation necessitates that we develop an effective mechanism that ensures that their benefits are fairly distributed across all Australians.
It is also easy to forget that these same resource rich states had their “bad” years in the past, years in which they were significant recipients of support from the other States.</p>
<p>It is also worth recalling that, to a very large extent, our Federation is an “historical accident” - up until the last of the Conventions of the 1890s that negotiated the structure of our federation, New Zealand was in and NSW was out – a situation that was reversed at the last Convention. Of course, some are still envious of the “independence” of NZ that has been able to operate as a nation without states (and without an Upper House).</p>
<h2>Recognising the value of the Federation</h2>
<p>Clearly, the White Paper review of our Federation should attempt, once and for all, to determine which level of government is responsible for what, in terms of both policy development, and service delivery.</p>
<p>Then, to decide the most effective way to finance this structure, obviously linking with the Abbott Government’s Tax review, which needs to focus on both State and National tax structures, actual and potential. </p>
<p>One of the thrusts of the debate here is to minimise the so-called “vertical fiscal imbalance”, essentially to ensure that “those who do the spending should also do the taxing”, notionally to ensure the discipline that such a requirement would impose on government spending. </p>
<p>However, it has been a failing of state taxation that some of the most technically efficient tax bases, such as payroll and land taxes, have been so easily “neutered” by short-term politics, as states “compete” with each other to attract business and population.</p>
<p>It is so easy to “hypothecate” a percentage of say, income tax and GST revenue to the states to fund specified responsibilities - but so hard to stop them furthering competitive federalism. </p>
<p>Let’s begin these reviews by recognising the value of what we have created in our Federation, and thinking as a nation first, and a confederation of independent states, second.</p>
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<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
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<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31955/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hewson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reform of Australia’s federation is under review. So far in our special series, leading Australian academics have discussed the future of the federation when it comes to taxation, education and health…John Hewson, Honorary Professorial Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/318462014-09-24T03:21:36Z2014-09-24T03:21:36ZFederalism is a natural fit for Australia, but we need to make it work<figure><img src="https://images.theconversation.com/files/59769/original/hgwd9rgj-1411453666.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Federalism infuses every aspect of the Australian system of government.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/75905404@N00/8249413626/in/photolist-dyYpgq-cyEvTj-5HHqy1-91SFLf-6fSZkG-bjaRur-bAiERG-aShcCR-aSheir-aShcSi-aShec8-aShcwt-aShcKH-2xqyZo-C4xHY-3csME-4coe9-7MQw2V-3cscA-3csf3-3cshV-7MUyof-7tb5an-9d2QzJ-9d2Tu5-9d2PSy-62nCfU-7yN2oW-75Q3Sh-7a82i-81ua3N-7yN36y-hE5oza-7yJeFK-7yJgvv-5ABykW-7yLFAC-7yJdTP-7yJemP-91Pzmv-fWN2f-91SGs3-7yLDSN-7yLCUY-7yGToD-7yLuof-7yGSN6-7yGUMK-dzcF5L-926eZ1">Flickr/OzinOH</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. So far in our special series, leading Australian academics have discussed the future of the federation when it comes to taxation, education and health; today, we look at the broader issues of democracy.</em></p>
<p><em>The University of Melbourne’s Cheryl Saunders argues recalibrating federalism involves the creation of genuinely democratic institutions.</em></p>
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<p>Talk about federalism reform is not new; it has been a perennial topic for decades. At different times, however, it means different things. Sometimes it is synonymous with greater integration of Commonwealth and state functions through complex mechanisms described as “co-operative” in character. Sometimes, as in this instance, it involves disentanglement of functions.</p>
<p>Neither complete integration nor complete disentanglement can or should be fully achieved. What is needed is a balance between the two. This should deliver the kind of government we want in a way that is responsive, accountable and transparent.</p>
<h2>The matter of money</h2>
<p>The entanglement of government functions has been driven largely, although not entirely, by money. On the face of the Constitution, both the Commonwealth and states can impose almost any form of tax, with the exception of taxes on goods, which are prohibited to the states. Since World War II, however, the Commonwealth has acquired a monopoly over the major tax sources, leaving the states with a range of minor taxes, which continues to shrink.</p>
<p>The Commonwealth thus has much more money than it needs for its own constitutional responsibilities to the public; the states have much less for theirs. Substantial transfers are needed from one to the other. Because the Constitution does not contemplate this degree of fiscal imbalance, it also does not clearly displace the assumption that the government that is responsible for raising money is also
accountable for spending it (as occurs in some other federations, of which Germany is an example).</p>
<p>At least half the transfers from the Commonwealth to the states seek to control how state functions are exercised. Education, health and infrastructure are examples. The results include a massive duplication of bureaucracy, the emergence of what effectively is a third tier of government through the so-called “COAG Councils”; a concentration of power in executive government, sidelining parliaments; opaque and
confused lines of accountability; and a growing homogeneity in policy that stifles innovation and difference.</p>
<p>In a more recent development, the Commonwealth has begun spending the money it raises directly in policy areas outside its constitutionally allocated functions, bypassing the states. Doubts about the constitutionality of this practice have caused further concentration of power in the executive, diminishing accountability through Parliament.</p>
<p>Money is not the only driver of integration: the other is an urge to secure uniformity in legislation and its implementation across a wide and increasing range of policy areas. The elaborate legislative schemes that result contribute to the complexity and blurred lines of accountability that characterise Australian federalism today.</p>
<h2>Collaboration counters central control</h2>
<p>The functions of the levels of government are interdependent in every federation. Co-operation is a necessary and valued practice. What differ in Australia are the extent of integration; the manner in which it occurs; and the absence of effective constitutional ground rules for it.</p>
<p>The potential benefits of federalism are wasted, including innovation, diversity and responsiveness. One of the relatively few checks and balances in the Australian system of government is weakened. And democracy itself is undermined, by erosion of the principal mechanism for democratic control of governments, through parliaments, by the people.</p>
<p>Recalibrating the way that federation works does not involve a return to 1901, claims to the contrary notwithstanding. It involves crafting a functional, federal democracy for 21st-century Australia, in a world in which multi-level government is the norm.</p>
<p>In the spirit of what sometimes is called subsidiarity it would accept that many decisions must be made nationally – indeed, internationally – but also values the possibility of decision-making at lower levels over which communities have more effective control. Ironically, the Australian federation is quite well designed for this purpose. The states are large enough for effective government, few enough for
effective collaboration and their dispersal across a very large land mass positions them to respond to regional needs in a way that is not practicable for a single set of institutions based in Canberra.</p>
<h2>Federalism’s triple challenge</h2>
<p>Federalism reform must deal with at least three challenges. The first is the fallout of the fiscal imbalance. Two quite different approaches are possible here.</p>
<p>One is to restore state tax-raising capacity so as to limit transfers from the Commonwealth and maintain the nexus between responsibility for taxing and spending. The other is to accept that, for reasons of convenience, the Commonwealth imposes most taxes but that it does not “own” the proceeds. Instead, each level of government is entitled to a share in joint tax revenues commensurate with its expenditure responsibilities, and for the use of which it is directly accountable to the voters.</p>
<p>Each of these approaches is viable, but each also requires considerable working out, to resolve a problem that has dogged Australian federal democracy for decades.</p>
<p>A second challenge is to manage the urge to uniformity. Not all government action requires central co-ordination and not all co-ordination requires uniformity.</p>
<p>Decisions about whether and to what extent to co-ordinate government action need to be made more openly and justified on the basis of principles that also acknowledge the values of innovation and difference. And when co-ordination occurs, as undoubtedly it will continue to do, programs must be designed to maintain as much as possible of the democratic and legal accountability that we expect in other contexts.</p>
<p>The third challenge is to revive the state level of government as a capable and responsible player in an effective Australian federation. Decades of marginalisation have run down the states.</p>
<p>Revival of state politics has advantages for democracy too. State institutions are the most accessible democratic role models for most Australians. The states are responsible for the day-to-day public services on which most Australians depend and on which they are most likely to have a view: education, health, transport, roads and urban planning, among others.</p>
<p>State politics should be attractive to a diverse range of talented people seeking a career in public life who are unable or unwilling to commute to Canberra on a regular basis. In a sense, this is part of the project of revitalising democratic participation in Australia in the face of declining membership of political parties and growing cynicism about organised politics. Genuinely democratic institutions
in the state sphere are critical to this end.</p>
<h2>Tinkering at the edges won’t do</h2>
<p>The danger is that we will do nothing except fiddle with reforming federalism at the edges. Substantial change must overcome entrenched preconceptions, vested interests and the pull of inertia.</p>
<p>Too often federalism reform has foundered on futile regrets over whether Australia should have a federal form of government at all. This calls for a reality check on at least two fronts.</p>
<p>The first is logistical. Federalism infuses every aspect of the Australian system of government. It would not be possible to abandon it without an upheaval involving a completely new constitution approved (ironically) by majorities in all states. This degree of consensus seems highly improbable.</p>
<p>Much more importantly, however, abandonment of federalism is not desirable either. It is impossible to imagine democracy without federalism in a country with Australia’s geographical size, history and characteristics. So-called regionalism is no alternative: it would maintain three levels of government in a country with even more boundaries in which all effective decisions are made centrally.</p>
<p>To make progress this time we need to avoid such diversions, so as to tackle the really hard questions in the interests of genuine, lasting, federal democratic reform.</p>
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<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
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<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31846/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cheryl Saunders does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reform of Australia’s federation is under review. So far in our special series, leading Australian academics have discussed the future of the federation when it comes to taxation, education and health…Cheryl Saunders, Laureate Professor, Melbourne Law School, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313712014-09-23T20:40:18Z2014-09-23T20:40:18ZFederalism reform and trade policy must go hand in hand<p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>The ANU’s Annmarie Elijah argues why reform of the federation must be international in its focus when it comes to trade.</em></p>
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<p>The terms of reference for the forthcoming federalism White Paper cite Australia’s increasing integration into the global economy as a key reason for ensuring that the federation works. One of the stated objectives is to support Australia’s economic growth and international competitiveness. Yet the debate so far seems to focus on domestic issues, rather than international ones. This is understandable, given the sensitivities over fiscal issues and the division of roles and responsibilities. But there are dangers here if the international dimension is entirely overlooked. </p>
<p>The proliferation of ambitious bilateral and mega-regional trade deals across the globe has widened the trade policy agenda. Trade policy experts talk of liberalising “behind borders” in the new deals. Essentially this means that negotiations are not just about reducing tariffs or quotas, but rather tackling barriers to trade which are embedded in domestic policy. Governments increasingly sign deals which intrude on domestic politics and sub-national governments. </p>
<p>The politics of this cuts both ways. Trade agreements have implications for Australian states and territories, and the peculiarities of the federation impact on – even constrain – Australia’s international commitments. This is not new. The program of economic cooperation between Australia and New Zealand since 1983 and the Singapore – Australian Free Trade Agreement (2003) are just two examples where extensive cooperation between the Commonwealth and states and territories was required. </p>
<p>In the case of mutual recognition of goods and occupations with New Zealand, the international agreement was preceded by a similar commitment among the states and territories. Resolving outstanding issues has been a long-haul process in train since the mid-1990s. All evidence suggests that the <em>internal</em> reforms were every bit as difficult as the international commitment. </p>
<p>The trend for ambitious, broad-ranging trade agreements is likely to continue. As agreements stray further “behind borders” and accumulate diverse chapters covering issues such as services, competition policy and education cooperation, we can reasonably expect substantive implications for the federation. The recently completed <a href="http://ec.europa.eu/trade/policy/countries-and-regions/countries/canada/">Comprehensive Economic Trade Agreement</a> between Canada and the European Union (not yet available in full) is a case in point. </p>
<p>It includes, for example, broad coverage on government procurement at federal, provincial and territory levels in Canada. The agreement even allows for the provinces to be represented in relevant negotiations. If Australia was to embark on trade negotiations with the EU there will be similar expectations. In the context of the new trade deals, the federation will matter. </p>
<p>The terms of reference for the White Paper have a decentralisation bias. Consideration is being given to “limiting Commonwealth policies and funding to core national interest matters”, and applying the subsidiarity principle, defined as allocating responsibility at the “lowest level of government possible”. </p>
<p>Yet international commitments on trade tend to expose the regulatory inconsistencies across the federation in ways that are not always anticipated or politically convenient. In practice, subsidiarity in other contexts (for example the EU) means that responsibilities move both up AND down. Commitments in trade deals such as cross-border recognition of occupations may build the case for centralisation, not the reverse. </p>
<p>The terms of reference correctly marries Australia’s integration into the global economy with domestic – in this case federal – reform. It acknowledges that there may be cases where a “national approach” is preferable to diversity across jurisdictions. </p>
<p>For trade policy purposes this is promising. It represents an opportunity to iron out some of the “system friction” which impedes trade inside the federation and complicates international deals. Even so, as the White Paper process gets underway and domestic arguments take centre-stage, the Taskforce will need to have an eye on international developments. Any rethink of responsibilities <em>will</em> have an international dimension. And the question of how the federation fits into evolving architectures of regional and global economic governance grows more complicated. </p>
<hr>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
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<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31371/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Annmarie Elijah does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Annmarie Elijah, Deputy Director, Centre for European Studies, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313692014-09-22T20:27:08Z2014-09-22T20:27:08ZRenewing schooling federalism: getting the settings right<figure><img src="https://images.theconversation.com/files/59351/original/z4ztkcq3-1411005376.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Allowing the states full responsibility for funding for all schools would lead to more coherent allocation decisions.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/amonroy/3672158684/in/photolist-6AuLQL-a9p7AF-ii42L-6vabe9-chf4im-46kgBe-a6URXp-4wVccL-4RRB1L-dReRPV-6m6k8k-6gz3yq-5hiMD1-a9rS4j-n5aif5-9m63Xv-nZypy-5KS8nD-6v61rc-amc3ed-8jqk5p-8oMKDS-6RPcgQ-6v61ZR-edGd8x-3wUdju-6vaboq-bVACx8-mjFxi-62vsdL-7v4ENF-CH2LQ-5KS87n-7APiqo-8ZSeP-6RmCVA-53smjJ-bt7A76-sCL3E-5KWmUQ-HM1dw-6vaaDY-7eSEJS-2RxLpE-6hnnGF-e8PC2C-b6LqXF-eUvCDR-6p7Dh9-2gbpeV">Flickr/andresmh</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>Bronwyn Hinz from the Mitchell Institute for Health and Education Policy and The University of Melbourne argues why the states should have full responsibility for funding all schools.</em></p>
<hr>
<p>Riddled by unhelpful duplication, <a href="http://www.acer.edu.au/documents/PISA-2012-Report.pdf">stagnating performance</a>, <a href="http://www.smh.com.au/national/education/schools-worse-now-than-when-gonski-wrote-report-20140913-10gepz.html">growing inequities</a>, <a href="http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB8QFjAA&url=http%3A%2F%2Fwww.appa.asn.au%2Fcontent%2Fgonski-report%2FReview-of-Funding-for-Schooling-Final-Report-Dec-2011.pdf&ei=0ewYVIe6BYK-uASGnoL4DQ&usg=AFQjCNGdKMH2ymxVfi7Ygd-H8yH7PxVCEQ&sig2=TOYpzN2CXdYNnQY8jAngbw&bvm=bv.75558745,d.c2E">poor investment and limited cooperation</a>, schooling is often cited as an example of what is wrong with Australia’s federal system. Most of these <a href="http://melbourneinstitute.com/Outlook_2014/audio/ESOC_7B.mp3">problems stem</a> from inadequate coordination, mis-matched revenue to responsibilities, and inappropriate Commonwealth involvement which restricts or perverts policy goals. </p>
<p>It needn’t be this way. Federalism as a system of governance offers <a href="http://www.caf.gov.au/Documents/AustraliasFederalFuture.pdf">greater opportunities</a> than unitary systems for policy innovation and customisation to local needs, is more cost-effective, more democratic and is better placed to respond to the challenges in our changing economic and global context, which require greater policy sophistication and flexibility. But for this to occur, we need to get the settings right. </p>
<h2>Lessons on federalism and schooling</h2>
<p>I’ve previously discussed the complexity of our <a href="https://theconversation.com/explainer-what-is-a-gonski-anyway-13599">intergovernmental school funding and policy settlement</a> that Gonski sought to untangle. More recently I outlined the reasons <a href="https://theconversation.com/hands-off-canberra-education-is-better-off-with-the-states-28920">why the states are better placed than the Commonwealth</a> to manage the schooling portfolio. Arguably, the current Commonwealth government has taken some steps in the right direction by untying <a href="http://www.news.com.au/national/backflip-on-a-backflip-government-announces-agreement-on-national-schools-funding-system/story-fncynjr2-1226773183418">some</a> of the school funding provided to states. </p>
<p>However, the states should have full responsibility for funding all schools. This would lead to more coherent allocation decisions and go a long way to ensuring that more money flows to where needs are greatest. This would also mean that all schools, government and non-government schools could be held accountable for the outcomes they provide, would be better supported in doing so, and that state education ministers could fulfil their responsibilities for outcomes for all children. <a href="http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB8QFjAA&url=http%3A%2F%2Fwww.appa.asn.au%2Fcontent%2Fgonski-report%2FReview-of-Funding-for-Schooling-Final-Report-Dec-2011.pdf&ei=0ewYVIe6BYK-uASGnoL4DQ&usg=AFQjCNGdKMH2ymxVfi7Ygd-H8yH7PxVCEQ&sig2=TOYpzN2CXdYNnQY8jAngbw&bvm=bv.75558745,d.c2E">Research</a> suggests that this would lift the performance not only of struggling schools, but of the system as a whole. </p>
<p>States – and their schools – would have the flexibility and support to develop their own cohesive improvement strategies that respond to the needs of their school communities, without being distracted from their own priorities by the passing “gravy train” of Commonwealth grants. (Of course, to meet these restored and enhanced responsibilities they would need restored or enhanced revenues, such as a share of income tax or larger untied grants from the Commonwealth.)</p>
<p>The significant benefits that accrue to the nation from a well-educated population make some strategic intergovernmental coordination and collaboration towards shared goals a worthy pursuit.</p>
<p>The <a href="http://ncp.ncc.gov.au/">National Competition Policy</a> of the 1990s is a model worth emulating. Reforms to be pursued were agreed collaboratively rather than imposed from above. States had the freedom to determine how they would achieve the reforms, which were monitored by an independent body, the National Competition Council. The benefits of these microeconomic reforms – greater productivity and revenue – were shared.</p>
<p>The <a href="https://www.coag.gov.au/reform_agenda">COAG Reform Agenda</a> attempted a similar strategy to pursue a new wave of reform focused on human capital. Despite many significant achievements, the mountains of data collected by the states were not always readily comparable, timely, accessible or helpful. And the Reform Council monitoring the progress was recently <a href="https://theconversation.com/federal-budget-2014-political-experts-react-26574">abolished as part of the Commonwealth’s 2014 budget</a>, demonstrating the Commonwealth’s undue predominance. The National Education Agreement <a href="https://www.coag.gov.au/node/302">(NEA)</a> of 2009 likewise tried to achieve intergovernmentally-determined goals and restore greater policy autonomy to the states. But Commonwealth conditions quickly multiplied and data and monitoring problems remained, limiting the NEA’s effectiveness. </p>
<p>These experiences teach us the importance of effective national architecture to enable sustained improvements. </p>
<h2>States have more experience and expertise</h2>
<p>We need a robust forum for productive intergovernmental collaboration and discussion, supported by strong agreements, and an independent institution to support and monitor reforms. Data must be comparable, “fine grain”, timely and accessible to all those working or researching in the policy sphere.</p>
<p>The Australian Curriculum, Assessment and Reporting Authority (ACARA) - with modifications - could serve in this role. It is already responsible for NAPLAN (the national assessment program) MySchool, the National Curriculum and the National Report on Schooling. Although it <a href="http://www.acara.edu.au/about_us/about_us.html">officially</a> acts on the instructions of all the state, territory and Commonwealth education ministers through the Education Council, the disproportionately heavy influence of the Commonwealth in both the Council and ACARA is widely acknowledged and should be dramatically reduced. States have far greater experience and expertise to take this leadership role. </p>
<p>Most of the Commonwealth’s activities in schooling could be returned to the states or to ACARA, who could also drive improvements to consistency in reporting on student achievement, expenditure, program outcomes and how these were achieved, without limiting flexibility at the school, system and state levels. This could be complemented by a philanthropic entity to channel large donations towards needy schools and worthy initiatives.</p>
<p>The experience of Canada, a comparable federation, demonstrates that federal government involvement isn’t necessary to achieve a high performing, high equity school system. But complete Commonwealth withdrawal from Australian schooling is highly unlikely. It is also unwise, removing flexibility and “insurance” mechanisms from our system, desirable features when facing complex and changing policy problems. The Commonwealth could and should still play a role supporting national policy goals as determined by the Education Council, or providing supplementary funding in exceptional circumstances.</p>
<p>The substantial differences in <a href="http://www.coagreformcouncil.gov.au/sites/default/files/files/Education%20in%20Australia%202012,%20Five%20years%20of%20performance.pdf">schooling outcomes</a> and <a href="http://www.acer.edu.au/documents/PISA-2012-Report.pdf">performance</a> in different Australian states indicate the large impact that even small differences in policy settings can make. </p>
<p>The suggestions above would maximise the opportunities offered by our federal system for the states and other players to collaborate, target resources, improve accountability and learn from each other in a continuous cycle of improvement - without sacrificing innovation and local responsiveness on the altar of uniformity or control. </p>
<hr>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31369/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bronwyn Hinz has previously received funding for her research from the Australian Research Council, the University of Melbourne, the Comparative Education Society and the Education Foundation. </span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Bronwyn Hinz, Policy Fellow at the Mitchell Institute for Health and Education Policy (Victoria University) & PhD Candidate, School of Social and Political Sciences & Melbourne Graduate School of Education, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313662014-09-21T20:42:13Z2014-09-21T20:42:13ZRenewing federalism: school education within a federal system<p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p>The Australian Catholic University’s Kevin Donnelly argues…</p>
<hr>
<p>One of the unique characteristics of Australian schools is that they operate within a federal system. State and territory schools are answerable to their own jurisdictions as well as, increasingly, to the Commonwealth government.</p>
<p>This is unlike the majority of education systems overseas, especially many of the high performing countries as measured by <a href="http://timssandpirls.bc.edu/">various</a> international <a href="http://www.oecd.org/pisa/">tests</a>. Under the Australian Constitution school education, unlike tertiary, is a responsibility of the states and not the Commonwealth government. This explains why the Commonwealth government does not manage any schools nor employ any staff.</p>
<h2>The Commonwealth has the money, thus the power</h2>
<p>The Commonwealth government has been increasing its influence over schools, with recurrent funding to Catholic and independent schools contributing approximately 74% of government expenditure (<a href="http://www.pc.gov.au/gsp/rogs">based on 2011/12 figures</a>). They have also initiated specific programs such as <a href="http://www1.curriculum.edu.au/ddunits/">Discovering Democracy</a>, <a href="http://www.valueseducation.edu.au/values/val_national_framework_nine_values,14515.html">Values Education</a>, <a href="https://www.coag.gov.au/node/302">Closing the Gap</a> between indigenous and non-indigenous students, a National Literacy and Numeracy Plan and implementing the <a href="http://www.federalfinancialrelations.gov.au/content/npa/education/digital_education_revolution/national_partnership.pdf">Digital Education Revolution</a>. </p>
<p>Especially during the Rudd/Gillard years of government the Commonwealth was very involved in schools. Measures they supported included a national curriculum, national testing, national teacher standards and certification and the imposition of a range of performance indicators and benchmarks designed to hold schools and jurisdictions more accountable.</p>
<p>Brian Caldwell, in <a href="http://educationaltransformations.com.au/wp-content/uploads/ANU-Caldwell-Paper.pdf">Realigning the Governance of Schools in Australia: Energising an Experimentalist Approach</a>, describes increased Commonwealth involvement as a command-and-control model of public policy and governance, where </p>
<blockquote>
<p>states must adhere to an array of terms and conditions in order to receive funds.</p>
</blockquote>
<p>Given the reality of the <a href="http://en.wikipedia.org/wiki/Fiscal_imbalance_in_Australia">vertical fiscal imbalance</a> where the central government controls the purse strings, the fact is that jurisdictions and schools have little alternative but to do as they are told.</p>
<p>Schools and state and territory education authorities across Australia, with the occasional exception, have accepted increased Commonwealth involvement in education. They don’t have much choice given there is usually additional funding attached. However there are a number of concerns with leaving the feds in charge.</p>
<h2>Those closer to the action generally know what’s best</h2>
<p>As noted by Brian Caldwell in the paper previously referred to, one of the concerns relates to the contradiction involved when governments on one hand promote school autonomy while, at the same time, increase their control over schools:</p>
<blockquote>
<p>There is a paradox in a situation in which federal governments have, as they have often done, adopted a ‘command-and-control’ approach to what should occur in schools and, at the same time, have advocated a higher level of school autonomy.</p>
</blockquote>
<p>A second concern relates to the belief that school autonomy, known in the Catholic system as subsidiarity, is an inherent good. Allowing decisions to be made as far as practicable by those most affected empowers school communities and helps to engender a sense of collaboration and responsibility.</p>
<p>Best illustrated by the <a href="http://trove.nla.gov.au/work/153835585?selectedversion=NBD48426573">Building the Education Revolution Taskforce</a> report, promoting school autonomy is more cost effective, transparent and efficient as proven by the fact that Catholic and independent schools, compared to government controlled state schools, were able to deliver more with less, and on time.</p>
<p>Commonwealth intervention in how schools are managed and held accountable not only increases red tape and compliance costs, it also weakens subsidiarity and the ability of school communities, including parents, to contribute and be involved.</p>
<p>In the light of the impending Commonwealth White Paper on federalism it is also useful to note what a number of recent official reports say about school autonomy. A 2012 <a href="http://www.pc.gov.au/__data/assets/pdf_file/0020/116651/schools-workforce.pdf">Productivity Commission Report</a>, while noting a number of caveats, concludes:</p>
<blockquote>
<p>Increased school autonomy removes impediments that can prevent principals and other school leaders tailoring school operations to best meet the needs of the local communities they serve. It thus has the potential to improve student outcomes.</p>
</blockquote>
<p>A 2013 report by the <a href="http://apo.org.au/research/making-grade-autonomy-and-accountability-victorian-schools-draft-report">Victorian Competition & Efficiency Commission</a>, while also noting a number of caveats, including the fact that evidence about the benefits of autonomy are mixed, is positive overall. It suggests:</p>
<blockquote>
<p>the debate is not in fact about whether there should be devolved decision making. Rather it is about how far it should extend, through what means it should be given effect, and what accountabilities are required.</p>
</blockquote>
<p>While not specifically referring to school autonomy, it is also relevant to note what the Victorian Secretary of the Department of Education and Early Childhood, Richard Bolt, said about the role of the Commonwealth in school education. </p>
<p>At the joint The Australian/Melbourne Institute Economic Social Outlook <a href="http://melbourneinstitute.com/miaesr/events/conferences/Outlook_2014/default.html">Conference</a> held in Melbourne earlier this year, where federalism was a major topic, Bolt is <a href="http://www.theaustralian.com.au/national-affairs/education/states-should-be-left-to-lead-schools-reform-says-victorian-education-chief-richard-bolt/story-fn59nlz9-1226977814671">reported</a> as saying</p>
<blockquote>
<p>Most of the leadership in school reform should come from the states and territories. Their [the Commonwealth’s] role should be largely non-directive.</p>
</blockquote>
<p>Such a view would also appear to be in tune with what Prime Minister Tony Abbott suggests in his book <a href="https://www.mup.com.au/items/120931">Battlelines</a> where he argues for greater community control over education and health. It seems many are in agreement that those closest to the daily happenings in schools know what is in their schools best interests.</p>
<hr>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31366/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Kevin Donnelly is Director of the Education Standards Institute, a conservative think-tank committed to autonomy, diversity and choice in education. He recently co-chaired the Commonwealth commissioned review of the Australian national curriculum.</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Kevin Donnelly, Senior Research Fellow - School of Education, Australian Catholic UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313702014-09-18T04:44:21Z2014-09-18T04:44:21ZRenewing federalism: our tertiary education system needs a rethink<figure><img src="https://images.theconversation.com/files/58848/original/xkvtmmf2-1410497409.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Funding of vocational education is suffering given neither the state nor Federal government has sole responsibility.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/downloading_tips.mhtml?code=&id=150587615&size=huge&image_format=jpg&method=download&super_url=http%3A%2F%2Fdownload.shutterstock.com%2Fgatekeeper%2FW3siZSI6MTQxMDUyNjEzOCwiYyI6Il9waG90b19zZXNzaW9uX2lkIiwiZGMiOiJpZGxfMTUwNTg3NjE1IiwicCI6InYxfDEwMTI3NTg4fDE1MDU4NzYxNSIsImsiOiJwaG90by8xNTA1ODc2MTUvaHVnZS5qcGciLCJtIjoiMSIsImQiOiJzaHV0dGVyc3RvY2stbWVkaWEifSwiT1p2aHA5UHI5NU1ZeFpyMW9rMGpnc2dFNUI4Il0%2Fshutterstock_150587615.jpg&racksite_id=ny&chosen_subscription=1&license=standard&src=jgXb_TEZzdUmTTFA_aaYMQ-1-1">Shutterstock</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>Victoria University’s Peter Noonan examines the effect of the funding relationship between the state and Commonwealth on tertiary education.</em></p>
<hr>
<p>A major imbalance exists in Australia’s tertiary education system. Left unaddressed it will lead to growing disparities in funding between higher education and vocational education and training, distort student choices and create an imbalance in skills in the Australian labour market. </p>
<p>An effective tertiary education system would comprise a range of high quality courses and providers operating across the vocational education and training (VET) and higher education sectors under an equitable funding system.</p>
<h2>What would an effective funding system look like?</h2>
<p>An effective tertiary education funding system should have three main features:</p>
<ol>
<li><p>Public subsidies that balance public and private benefits, course costs and the circumstances of individual students</p></li>
<li><p>Private contributions supported by income contingent student loans that ensure that students only pay when they start to get personal benefits</p></li>
<li><p>Student income support targeted to the needs and circumstances of individual students.</p></li>
</ol>
<p>There is already great diversity of courses and providers across the Australian tertiary education system with growing and better connections between the sectors. The Commonwealth also operates a consistent and comprehensive student income support system for tertiary education students. </p>
<p>But the potential of this system is undermined by growing divergence in how, and at what levels, VET and higher education are funded, and how, and at what level, the states fund their VET systems.</p>
<h2>The nature of the problem lies in the Federal/state divide</h2>
<p>This divergence in funding levels and models occurs because of the way higher education and VET are funded by the Commonwealth and the states.</p>
<p>The Commonwealth has full responsibility for funding higher education providers. It funds them through public subsidies supplemented by student fees. These fees are paid to providers either directly by students, or by the Commonwealth on their behalf through an income contingent loan. Student fees are regulated by the Commonwealth, but this could change if the government’s <a href="https://theconversation.com/where-to-now-for-the-higher-education-bill-31017">Higher Education Bill passes</a>.</p>
<p>The states have full responsibility for funding VET providers. VET student fees are regulated in some states and deregulated in others. However only VET students in Diploma, Advanced Diploma and a few Certificate IV courses have access to the Commonwealth’s income contingent loans schemes. Other students have to pay their fees upfront. </p>
<p>The major flaw in the funding system is that VET funding is a shared responsibility between the Commonwealth and state governments. The Commonwealth contributes to VET provider funding through agreements with each state and territory. These agreements were designed to provide a sustainable base for VET funding and VET enrolments but which have now broken down.</p>
<p>Most states don’t have the capacity or the will to make VET funding a priority. Victoria is the notable exception. VET fees are increasing but most VET students can’t access income contingent loans. They also generally have less capacity to pay than higher education students given a larger proportion of VET students are from <a href="http://avetra.org.au/wp-content/uploads/2010/04/48.00-Leesa-Wheelahan.pdf">low socio-economic backgrounds</a>. </p>
<p>As a consequence public investment in VET <a href="http://www.vu.edu.au/sites/default/files/mitchell-institute/pdfs/Peter-Noonan-TDA-speech-2Sep2014.pdf">has plateaued since 2011</a> and the future VET funding outlook is even bleaker. The Commonwealth has reduced its funding for the VET agreements with <a href="http://www.budget.gov.au/2014-15/content/bp3/html/bp3_03_part_2a.htm">the states from 2017-18</a>.</p>
<h2>The funding gap in tertiary education will widen</h2>
<p>The major gap between investment in higher education and VET - which has always existed - has widened significantly in recent years as the following graph shows. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/58965/original/r6mk499g-1410742363.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>Unsurprisingly VET enrolments decreased by <a href="http://www.ncver.edu.au/wps/portal/vetdataportal/restricted/dataContent/!ut/p/a1/pVPbTuMwFPyaPlo-cS5OHksDOBXhkoBo8lI5tlNStWmonQrx9Til0mqFCF3Wb5bmjGfGc3CJF7hs-aFZcdPsWr4Z7mWwTBwyY8yD-R1jAST06jHL2ZMLjOJnXOJStKYzL7hoxUHtl_qF75WcgOSGT0CbXqrWaMRbicSu32ulEQHHRbzXZs83DR8oOr5SUulm1R5vopG48F3qRSQIUeBUEfKICyiSoBCvK08KV_gyoAO61ypWNe835lG9GVzAUdOuNfbdJM5-QxQrLQaiBS6sf_jmTGE0Hic4zd-z64BcWEDIUoDkNs-u0svchZD-3zwE582PAM75XguZXU-ZR2-sZy8kkMQXLKbRoIWeAGMRHQFjGYwCrMnCuqDfy_Rx_qc0kVuHNa8FCkPpIk8oB3EiQwSccDfyiag9wPMzcmvWr6_l9FQkW6vF3-3u-mrTiOOe6AkQalnHZd57nzKfZ-ny4ekys-ivxS2-VrD4TZP_YYHmP3Xg5yzO3_Ruuw3XqnpXlZ9lWZ0na787vN_Ut-mUbZep_gBWgen3/dl5/d5/L2dBISEvZ0FBIS9nQSEh/?useDefaultText=0&contentIDR=53749268-61b9-4230-9d0e-afb4dc3c5d67&useDefaultDesc=0#">3.4% between 2012 and 2013</a>.</p>
<p>While the balance between public and private funding for higher education will change with budget cuts and fee deregulation, the growth trajectory in higher education funding will increase even if universities set fees at minimum levels required to offset budget cuts. </p>
<p>As a consequence the gap between investment in VET and higher education is likely to widen potentially leading to distortions in enrolments in the sectors, with declining quality and outcomes in VET. </p>
<p>VET is a prime candidate for reform in the federation, and reform has been attempted in the past. In 1992 the Commonwealth offered to assume full responsibility for VET funding from the states. The now dysfunctional shared funding model emerged as a compromise.</p>
<p>Various reviews since then have proposed that either the Commonwealth or the states should take full responsibility for VET funding based on the principle that a single level of government should have responsibility and accountability for specific areas of service delivery.</p>
<h2>What are the alternatives?</h2>
<p>A full reallocation of responsibility for VET from one level of government to the other is unlikely.</p>
<p>Perhaps its time for a different approach, based around tertiary education entitlement. The Commonwealth could extend the established higher education model of consistent public subsidies, student contributions and income contingent loans into VET by negotiating an agreed per student subsidy level with the states, leaving the states or institutions to set fee levels. </p>
<p>Alternatively the Commonwealth could negotiate a one-off transfer of VET funding from the states for agreed student cohorts (for example school leavers) and provide ongoing funding of an entitlement in both VET and higher education. The states could provide subsidies for student places in VET in areas of state priorities. </p>
<p>Different ways of thinking about the roles of the Commonwealth and the states in tertiary education are needed if we are to have a balanced and fair system across higher and vocational education. </p>
<hr>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31370/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Noonan is Professorial Fellow at the Mitchell Institute for Health and Education Policy at Victoria University and Professor of Tertiary Education Policy at the University. The University receives VET funding from the Victorian Government. </span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Peter Noonan, Mitchell Professorial Fellow, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313672014-09-17T20:29:21Z2014-09-17T20:29:21ZTo restore federalism, strengthen the states and make Australia more republican<figure><img src="https://images.theconversation.com/files/59118/original/djv37md7-1410845190.jpg?ixlib=rb-1.1.0&rect=1%2C28%2C544%2C404&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australian federalism has moved away from the intent of its founders. </span> <span class="attribution"><a class="source" href="http://commons.wikimedia.org/wiki/Edmund_Barton#mediaviewer/File:Opening_hca_melb.jpg">Stephen Bain/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>The University of Wollongong’s Gregory Melleuish explains how the current state-federal relationship has warped from the ideals of Australia’s constitution and why a return to republican principles must be the remedy.</em></p>
<hr>
<p>When the Australian colonies federated in 1901, the assumption was that the Commonwealth government would not have a lot to do and that most of those day-to-day concerns that impinge on the lives of individuals would remain with the newly christened states. This is reflected in the limited range of areas for which the Commonwealth was given the power to legislate.</p>
<p>However, over time, the power of the Commonwealth has increased considerably in relation to the states. One reason for this has been the rulings of the High Court, especially since the <a href="http://www.e-airc.gov.au/files/kirbyarchives/engineers.htm">Engineers Case in 1920</a>. However, one of the primary causes for the decline in power of the states has been the loss of their capacity to raise taxes sufficient to fund their expenditure. </p>
<p>The Commonwealth has a monopoly on collecting both customs and excise through Section 90 of the Constitution and, since 1942, income tax. Moreover the High Court has interpreted the term excise broadly such that it is impossible for the states to impose any sort of sales tax.</p>
<p>The Goods and Services Tax was meant to resolve problems raised by the inability of the states to raise sales taxes. The issue, though, is that the Commonwealth collects this tax and hence has the power to allocate it. As the Commonwealth power over income tax is not constitutional but legislative, the possibility of income tax powers being restored to the states is not out of the question.</p>
<p>Very few effective taxing measures remain to the states. They include such things as licences, land taxes, stamp duty, payroll tax and gambling. It should be noted that all states abolished death duties in 1979, following the lead of then-Queensland premier Joh Bjelke-Petersen.</p>
<h2>Far from the founding vision</h2>
<p>The consequence has been the creation of a very bad condition of vertical fiscal imbalance, which means that while the Commonwealth collects most of the taxation in Australia the states do the majority of the spending. Following <a href="http://www.cis.org.au/publications/policy-magazine/article/4639-the-state-of-australian-federalism-first-principles">Robert Carling</a> (“The State of Australian Federalism: First Principles”, Policy, 28, 2, 2012, 11), this means that the Commonwealth collects 80% of the taxation in Australia while 22% of Commonwealth outlays go to the states. These outlays on average represent 43% of total state revenue.</p>
<p>This situation is far from that envisaged by the Federation Fathers and indicates how circumstances can lead to an outcome the opposite of what was intended by the original constitution document. Given the opportunity, any government, and especially its bureaucratic advisors, will happily seek to acquire as much power as possible. Hence Commonwealth governments of recent times have sought increasing control over matters that the founders never intended them to have, from universities to schools to hospitals and health.</p>
<p>In this regard, it is worth reflecting on the fact that the federal separation of powers is a form of republican check and balance (similar to the separation of powers) designed to check the power of executive power. It is one of the great tragedies of Australian political life that the years leading up to the Centenary of Federation were spent not in strengthening this form of practical republicanism but in attempting to impose a form of romantic republicanism, which had as one of its goals creating an even more powerful Commonwealth government.</p>
<h2>Evolving into a monarchical political system</h2>
<p>The real political issue regarding Australian federalism is that it is dysfunctional and fails to prevent ever greater accretions of power by the Commonwealth government. It eats away at the idea of Australia as a Commonwealth and puts in its place practices that are essentially monarchical. The modern equivalent is the vision of Australia as a company and the prime minister as its CEO. A political system founded on monarchy turns citizens into courtiers and subjects.</p>
<p>This can be seen quite clearly in the behaviour of the states. The Commonwealth government holds effective power in Australia through its control of the finances. The states must behave as courtiers if they are to receive the funds they need from the Commonwealth.</p>
<p>Considered in terms of political culture, this means that the states no longer think of themselves as responsible, independent entities but as dependents. They actively avoid responsibility and instead squabble about how much money they should receive from the Commonwealth. The Commonwealth uses its financial power to impose such things as the national school curriculum, regardless of what the states want.</p>
<p>There can be no respect without financial independence. For individuals this means useful employment as opposed to welfare dependency. For political entities this means the capacity to exercise independent judgement rather than subservience to another political entity. </p>
<p>This is a basic republican principle. The issue is how to restore some self-respect to the states so that they can act as they should in our political system.</p>
<h2>Why the answer is taxation autonomy</h2>
<p>As discussed above the constitution limits the financial options for the states. Indirect taxation in the shape of sales taxes is ruled out for the states. They could make greater use of land taxes or re-introduce death duties, neither of which is particularly palatable or would raise sufficient funds.</p>
<p>The states can, however, once again levy income taxes. It would make a lot of sense for the states to regain the power to raise income taxes.</p>
<p>The Commonwealth raises far much more in taxation than it needs. Much of this money is then given to the states, in a form of churn. It would make much more sense if the states raised this money themselves. </p>
<p>It would also make much greater sense if the Commonwealth used the GST to fund its operations and left the states to raise their own income taxes. This would allow the Commonwealth government to get out of the many areas for which it was not given legislative responsibility, including education, universities and health. Such a move would encourage a smaller Commonwealth government.</p>
<p>At the same time a regular, non-regressive and adequate form of taxation would restore greater independence to the states. They would possess the capacity to behave in a responsible fashion and to take decisions in the best interests of their citizens. Moreover, it would encourage the states to use their finances more effectively.</p>
<p>Only by providing states with the capacity to raise the taxes they need to finance their operations can we restore them to their rightful place as responsible political actors within the Australian federal system. Only in this way can the republican principles inherent in federalism be restored and the slow, but inexorable, movement towards a 21st-century monarchy based on the CEO ideal not only be halted but reversed.</p>
<hr>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31367/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gregory Melleuish receives funding from the Australian Research Council He is a member of the academic advisory board of the Menzies Research centre</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Gregory Melleuish, Associate Professor, School of History and Politics, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313602014-09-17T04:48:25Z2014-09-17T04:48:25ZRenewing federalism: increasing the GST will increase inequality<figure><img src="https://images.theconversation.com/files/58771/original/s7tzrvmp-1410411821.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Proponents of increasing the GST ignore its implications for equality.</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>While many argue increasing or expanding the GST is the central fiscal reform required when it comes to tackling the lopsided state-Commonwealth funding relationship, the University of Melbourne’s Scott Brenton argues that it will come at a cost to equality.</em></p>
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<p>Tax reform is often poli-speak for raising the Goods and Services Tax (GST). In a brilliant piece of political marketing, the GST was introduced at the turn of the century as a “states” tax that was meant to provide rivers of gold and simplify the tax system. Of course these optimistic projections have fallen short and a range of state taxes remain. </p>
<p>The GST is a national tax, levied at the same rate across the country, and collected by the Commonwealth government. The Commonwealth government chooses to earmark this particular source of revenue as untied grants to the states, but they could just easily earmark another source of revenue. Indeed the recent <a href="http://www.ncoa.gov.au/">National Commission of Audit</a> recommended “providing the States with access to the Commonwealth’s personal income base”, which would return us closer to the original federal bargain.</p>
<p>The Commonwealth government likes us to think that the GST is a states’ tax because it makes the political arguments for raising it more convincing: the states need money to provide services and this is the only way. In spurring the states to make this case, the Commonwealth government helpfully cut funding to the states for essential services in the recent budget.</p>
<h2>Becoming the scare campaign</h2>
<p>When it was introduced we were told the GST would be the panacea of fiscal woes, and critics predictions that it would rise in the future were dismissed as a “scare campaign”. Now we are being told the solution is a rate rise, and if you disagree you are part of that scare campaign.</p>
<p>But we should be scared of increasing inequality in the country. Oxfam <a href="http://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-summ-en.pdf">recently cited a survey</a> showing that 70% of Australians think it is unfair that richest 1% of Australians own more than the poorest 60% of Australians. </p>
<p>Increasing a tax that does not take into account people’s capacity to pay is regressive, particularly when lower income Australians tend to spend a higher proportion of their income on taxable goods and services. While we often think about tax as necessary to be able to fund services and infrastructure, the taxation system has another important role in advanced economies, and that is wealth redistribution. You will certainly not hear many politicians or economists ever mention that. Progressive income tax rates are a better way to do this.</p>
<p>Yet incomes tax rates have decreased, as we are told that they are too high when compared internationally. Similarly, we are told company taxes are also comparatively high; that a tax on the biggest polluters is a cost of living tax; and that the most profitable mining companies should not pay extra tax. At the same time we are meant to believe that the GST is not high enough. Indeed the GST is higher in many other European countries, for example, but so are a range of other taxes and welfare benefits. Furthermore, the cost of goods and services in Australia is already high by international standards, even with just a 10% consumption tax.</p>
<h2>Shifting the burden to the poor</h2>
<p>Raising the GST would simply continue to shift the tax burden onto groups in society that are least able to afford it, and not coincidentally, least able to politically mount real scare campaigns, such as the one against the mining super profits tax. While there may be solid economic modelling that attempts to compensate those who would be most negatively affected, the compensation is delivered through the tax and welfare system. Many Australians subsist outside of this system, particularly as welfare eligibility continues to be tightened. </p>
<p>Furthermore, higher income earners are best able to minimise their tax, in addition to a range of concessions from superannuation to investment properties, that are already an inefficient and inequitable feature of our tax system. The loopholes in our existing tax base need to closed first, before we countenance increases in the GST.</p>
<p>The Australian federation does need to be renewed with a new bargain that better acknowledges that the federation only exists because of the states and not the other way around. Currently the federal government collects about 82% of total revenue, with only around 15% going to the states. Yet the states are responsible for much of the social service delivery, and these costs are increasing much faster than revenue. The states need to have responsibility for or control of significant revenue bases, and not just depend on grants. A share of income tax merits further consideration.</p>
<p>Unfortunately an increase to the GST appears to be least painful politically. If the proposal continues to gather momentum then at least make it an actual states’ tax. If each state can set its own rates, as is the case in other federations, then there could be some downward pressure due to competition. However, before getting to that point, it is worth thinking about not just what sort of federation we want, but what sort of society we want to live in. </p>
<p>And with no disrespect to my economist friends intended, that is not a question best answered by them.</p>
<hr>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31360/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Scott Brenton receives research funding from the State Government of Victoria. He contributes financially to Oxfam and has previously conducted research for them.</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Scott Brenton, Lecturer in Political Science, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313612014-09-16T20:26:09Z2014-09-16T20:26:09ZTaxation, the states, and redrawing our fiscal constitution<figure><img src="https://images.theconversation.com/files/58970/original/cmsfbqx7-1410743308.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">States must be able to lessen their reliance from the much larger Commonwealth. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-74454625/stock-photo-a-regular-sized-businessman-is-looking-at-the-giant-legs-of-a-competitor-digital-illustration.html?src=csl_recent_image-1">AndreaDanti/Shutterstock</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>Curtin University’s Alan Fenna argues the Commonwealth must be prepared to relinquish its monopoly over personal and corporate income tax.</em></p>
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<p>It is hard to believe today, but the Constitution assigns the States powers over taxation almost equal to those of the Commonwealth. One wouldn’t know this for the simple reason that for well over half a century now, the Commonwealth and the High Court have ensured that the States cannot exercise those powers. </p>
<p>The result is that Australian federalism is crippled by an extraordinarily high degree of <a href="https://theconversation.com/renewing-federalism-what-are-the-solutions-to-vertical-fiscal-imbalance-31422">‘vertical fiscal imbalance’</a> (VFI). The Commonwealth has access to revenue far in excess of its needs and the States have service delivery responsibilities far in excess of their revenues. With money comes power, and with power comes endless interference.</p>
<p>In 1942, the Commonwealth used its “spending power” under s.96 to drive the States out of the income tax field. This was a cruel irony, given that s.96 was inserted to facilitate aid to the states. Meanwhile, the High Court has imposed an idiosyncratic interpretation of “excise” duties under s.90 that has made it impossible for the States to levy the kind of general sales taxes that their counterparts do in federations such as Canada or the United States. </p>
<p>The main direct and indirect tax bases are thus off limits to the states. They are left scrounging for revenue in economically inefficient or socially undesirable ways and going cap in hand to the Commonwealth. The Commonwealth has always responded by providing substantial “general revenue” grants to the States. Originally these were called “reimbursement grants” — implicitly acknowledging that the money was not really the Commonwealth’s. However, that terminology was eventually dropped and the arrangements were formalised in 1999 with the agreement to hypothecate the net revenue of the GST to the states. </p>
<p>At the same time, though, the Commonwealth developed a substantial appetite for conditional transfers. These are the “tied grants” that use the spending power to buy influence or control over extensive areas of State responsibility. Important reforms to the system of tied grants were implemented by the Rudd government in 2009; however, the underlying realities remained unaffected.</p>
<p>Many of the pathologies of Australian federalism can be traced back to this extreme degree of fiscal imbalance and the resulting dominance enjoyed by the Commonwealth. These include overlap and duplication; opportunistic intervention; excessive entanglement; one-size-fits-all programs and lack of policy diversity; blame shifting and obscured accountability; and the degree to which ‘cooperative federalism’ is a euphemism for Commonwealth hegemony. </p>
<p>Reforming Australia’s fiscal arrangements is thus the key to reforming Australian federalism.</p>
<p>The good news is that identifying a solution is not difficult. The first, and most obvious, measure is to broaden and deepen the GST — and reduce income tax take commensurately. The GST base could be broadened by removing the health and education exemptions, while the rate could easily be raised by at least 5%. This boost to the GST would provide two benefits simultaneously: increasing the general revenue flow to the states and reducing Australia’s excessive reliance on direct taxes. The second measure is to acknowledge that the income tax is not the exclusive privilege of the Commonwealth and legislate for a revenue-sharing arrangement. Under that arrangement the States would receive a set share of the personal and corporate income tax. These two taxes provide the great bulk of revenue in Australia. </p>
<p>The Abbott government’s National Commission of Audit recently likewise recommended restoring income tax access to the states, but they opted for base sharing rather than simple revenue sharing. Base sharing gives individual states the power to change rates and thus provides them with greater autonomy in the field. However, the postulated benefits of such a system would in all likelihood be outweighed by the counterproductive race to the bottom it would invite.</p>
<p>The bad news (though it’s hardly news) is that the obstacles to implementing such reforms are considerable — in no small part because the Commonwealth holds all the cards. However, the States are themselves partly to blame. In particular, they have failed to grasp recent opportunities to push for an increase in the GST, largely because of <a href="https://theconversation.com/gst-reform-a-golden-opportunity-soon-to-be-missed-by-the-states-26748">shortsighted and counterproductive opposition</a> to the equalising way in which the GST revenues are distributed. Ultimately they have no control over the GST: it is a Commonwealth tax that can be altered at any point by the Commonwealth. However, it is hard to see the Commonwealth wearing the odium of raising the GST just to improve the position of the States. </p>
<p>The real challenge, though, is to get the Commonwealth to relinquish its monopoly on the personal and corporate income tax. This might seem as impossible as it is reasonable. However, if the prime minister is dinkum about his <a href="http://www.pm.gov.au/media/2014-06-28/white-paper-reform-federation">commitment</a> to “clarify roles and responsibilities for States and Territories so that they are, as far as possible, sovereign in their own sphere’ and reduce ‘Commonwealth intervention”, then that is exactly what will happen. </p>
<hr>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31361/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Fenna receives funding from the Australia Research Council (ARC).</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Alan Fenna, Professor of Politics, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/314222014-09-15T20:30:37Z2014-09-15T20:30:37ZRenewing federalism: what are the solutions to Vertical Fiscal Imbalance?<figure><img src="https://images.theconversation.com/files/58957/original/sgtc9nb9-1410739801.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The relationship between state-federal funding is a jigsaw puzzle.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/10361931@N06/4273913228/in/photolist-7vEVv7-esubhQ-h3AyJ2-gVFMgQ-b3qEP2-54NBZ8-b3ok66-6vBv1U-82s4Hh-65ySbj-9YB5By-54NC4X-nuwHZw-83JFWX-7gCiqb-hVZMqK-f8n7bn-cLAj7Y-8WMRk-f92HqT-fLsVPh-hqadgP-kgSEp7-6pieNf-hiQHUi-o5hWLZ-kbKuTY-g9RUJr-fUEw2D-j48VsE-j8KGVP-jYZJqH-hKiDAs-nqAHNG-gUnwvm-m42FEf-bWaeno-jjJHhQ-jX5DiD-gjc8tU-ij8NMn-kDsGBZ-iWcvJm-ndfar3-hzxLvw-iQbCeH-jgFtAe-krWgUv-iArHBR-jpEe8S-ine7zF">HoriaVarlan/Flickr </a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>The University of Melbourne’s Brian Galligan explains the reasons behind the vertical fiscal imbalance and the challenges of reforming state-federal funding relations.</em></p>
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<p>Vertical fiscal imbalance (VFI) defines Australian fiscal federalism. VFI matters greatly because it distorts Australian federalism, causes unnecessary overlap and duplication, fosters fiscal irresponsibility, and blurs democratic accountability. So why do we persist with it, when the solutions are achievable through changing political and intergovernmental practice, and without constitutional amendment? </p>
<p>VFI sums up the skewed fiscal arrangements whereby the Commonwealth collects most taxation revenue, well in excess of its expenditure responsibilities and needs. It gives a large slice of this, $101 billion or 24.4% of its total revenue in 2014-15, to the states (and territories) in general and tied grants. Tied grants, where the Commonwealth sets the terms and conditions to suit its policy purposes, make up $46 billion of total grants, mainly for health and education, 32% and 31% of tied grants respectively.</p>
<p>The states are left with small and less efficient taxes, and depend on extensive Commonwealth grants for nearly half of their revenue. For example, in 2014-15 Victoria received $25 billion, equivalent to 47% of in its total revenue, from Commonwealth grants. Its own tax collection totalled $18 billion, with the main taxes being payroll $5.1 billion, land transfer $4.4 billion, gambling $1.8 billion, and motor vehicles $2.1 billion. Smaller states are more dependent — in 2014-15, South Australia received 51.5% of its total state revenue from grants, and Tasmania 61%.</p>
<h2>No constitutional right</h2>
<p>VFI has allowed Commonwealth governments to move into state policy areas such as hospitals and schools where they have no constitutional right. This is due to political advantage and opportunism, but also at times for good reasons of national interest. Good governance requires that constitutional roles be respected rather than subverted; and that governments’ responsibilities be matched with appropriate revenue sources. Both principles have been subverted through VFI.</p>
<p>Although it runs no hospitals or schools, the Commonwealth has massive health and education departments in Canberra. These jostle with state departments that actually run hospitals and schools in proposing policy additions and changes. This blurs responsibilities, causes policy dissonance, and diminishes public accountability. </p>
<p>Excessive Commonwealth encroachments are sustained by money, politics, and anti-federal presumptions about good governance. Commonwealth ministers and bureaucracies win kudos by expanding their domain; and stakeholders are drawn to money pots and Commonwealth blandishments. In addition, there has been a justifying discourse of Commonwealth-knows-best that favours action and intervention without critically assessing its effectiveness. In some instances to do with welfare and redistribution, or to break log jams in policy areas, national interest considerations are quite legitimate, but hardly justify the scale and duration of Commonwealth encroachments.</p>
<h2>Blame game</h2>
<p>States share the blame for sustaining VFI, being weak and complicit in allowing Commonwealth invasion of their policy domain. Most accept the maxim that “the only good tax is a Commonwealth tax”, championed by Queensland premier Joh Bjelke-Petersen in defeating an earlier move by the Malcolm Fraser government to allow states a small window into income tax. Despite periodic whinging, state premiers prefer grantsmanship to taking responsibility for raising their own revenue, preferring to spend “50 cent dollars” minted from the Commonwealth’s fiscal largesse. </p>
<p>They take the Commonwealth’s money, often disguise how it is spent, and readily shift the blame for their own policy failures to the Commonwealth.</p>
<p>The 2014 budget signalled something of a sea change in the Commonwealth’s approach to Australian federalism. The Abbott government announced massive cuts of $80 billion in funding for schools and hospitals from forward estimates. Defending this decision, government leaders including education minister Christopher Pyne insisted that because the Commonwealth did not run any schools or hospitals, it was the States’ responsibility to plug the gap. </p>
<p>Curiously, no one asked Pyne how he could justify his portfolio and huge department if indeed they ran no schools.</p>
<h2>Perverse game</h2>
<p>Nor could the states plug this massive shortfall without a corresponding realignment of fiscal federalism. This might occur in two ways: either the states get back into levying a portion of the income tax; or the rate and/or coverage of the GST is increased. Since all GST proceeds are distributed to the states, this would boost their revenues. The Commonwealth was passing the buck to the states to push for increasing the GST that would be electorally unpopular. Again we see the perverse games that VFI encourages. </p>
<p>The solutions to VFI are relatively straight forward. The Commonwealth retreats to its national purposes and leaves the states to manage their policy domains—in effect honouring the federal constitution. The Commonwealth uses section 96 tied grants sparingly for genuine purposes of assisting smaller states and for addressing genuine issues of national interest. </p>
<p>The states are given appropriate revenue capacity and made responsible for raising most of their own revenue. Subject to precise calculations being done, a first approximation might be giving the states the equivalent of half the $101 billion grant figure, including most of $46 billion tied grant component, as a proportionate share of income tax capacity. </p>
<p>A comparable federal country where provinces share income tax and have superior schools run by the provinces without any national department of education is Canada. Australia might follow suit with political leadership and better intergovernmental relations.</p>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31422/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Brian Galligan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…Brian Galligan, Professor of Political Science, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313592014-09-15T04:57:41Z2014-09-15T04:57:41ZRenewing federalism: state budgets, VFI and a ‘hard budget’ constraint<figure><img src="https://images.theconversation.com/files/58642/original/fx7bq9fm-1410318383.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Finding the balance in state-federal funding is harder than it should be.</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>The University of Melbourne’s John Freebairn argues how hard budget constraints are a way to ensure state governments act responsibly in the way they fund services.</em> </p>
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<p>State (and territory) budgets depend on grants from the Commonwealth for about half of their revenue. This dependence on funds from the Commonwealth is referred to as vertical fiscal imbalance (VFI). For good reasons, some level of VFI seems inevitable. </p>
<p>If state budgets face a hard budget constraint, it is meant that when a state increases (or decreases) a major expenditure program, say another $500 million on health or education, it raises (or reduces) the required revenue from an increase (or decrease) of its own taxes. </p>
<p>Conditions supporting a “hard budget” constraint, combined with VFI, result in accountability of state budgets and good allocations of limited resources between the private and public sectors. </p>
<p>Unfortunately, Australian federal-financial relations are far from meeting a “hard budget” constraint.</p>
<h2>Vertical Fiscal Imbalance (VFI)</h2>
<p>Consideration of the better location of different taxes and of different public expenditure programs at the national or Commonwealth level versus at the decentralised or state level has resulted in VFI across different federal systems across the globe, including Australia.</p>
<p>Key areas of public expenditure at the federal level include defence, external affairs and social security outlays for redistribution to meet general society objectives of equity. The use of fiscal policy to manage the economy makes more sense at the national level.</p>
<p>On the other hand, there are strong arguments for having state governments responsible for the delivery of education, health, law and order, transport and other services. Often society preferences for the quantity and form of these services vary from state to state, as do circumstances affecting the relative costs of different supply options. Greater accountability for the quantity and quality of supply is likely with a decentralised supply strategy. Importantly, there is imperfect information about the relative merits of different supply options. </p>
<p>This state of imperfect knowledge favours competitive federalism and experimentation to find better supply and delivery options, rather than a one-size-fits-all centralised supply strategy, and often a lowest common denominator choice.</p>
<p>Turning to taxation to fund public expenditures, the larger revenue collecting taxes are better collected at the national level. This includes income taxes, broad based consumption taxes, and specific indirect taxes to internalise external costs with a national dimension, such as tobacco, alcohol and greenhouse gas emissions. These taxes affect decisions on the geographic location of businesses and people; different effective tax rates between the different states would involve significant distortions and efficiency costs.</p>
<p>Taxes better suited to the states involve geographically immobile tax bases, including land tax, special taxes on the economic rent of mining and other natural resources, and user fees for transport services and to internalise external costs of congestion.</p>
<p>Combining the more desired allocation of different expenditure programs and different taxes between the Commonwealth and the states, with current outlays and taxes, results in VFI well in excess of 50%, the present level.</p>
<p>Such a high level of VFI, if not matched by a hard budget constraint, can result in poor government decisions. If a particular state budget deficit easily can be financed by extra Commonwealth money on request, the cost to the particular state is spread across other states, resulting in excess government. </p>
<p>Particularly where there is some overlap of funding and programs, as for health and education in Australia, each level of government likes to blame the other level rather than take responsibility and be accountable to the voter. Also, scarce and valuable bureaucratic resources in both the Commonwealth and the states are wasted in blame-shifting and gaming, rather than in the delivery of better services.</p>
<h2>Ingredients for a hard budget constraint</h2>
<p>When state governments are responsible and accountable to their electorate for funding expenditure changes from their own taxes, a hard budget constraint, VFI approach would be consistent with good budget policy. A hard budget requires minimum overlap of federal and state spending programs and responsibility, that Commonwealth grants to the states are transparent and insensitive to individual state budget fiscal outcomes, and the states have access to their own broad based tax bases and the right to change tax rates to fund marginal changes in their expenditures.</p>
<p>Unfortunately, neither level of government is close to being able to achieve this - and the blame lies with both. Commonwealth encroachment almost since Federation in 2001 on education, health and other services provision has led to confusion, the lack of accountability, and the blame game on the quantity and quality of services provided.</p>
<p>For their part, the states have eroded their potential broad based taxes, including on land and payrolls. Various special exemptions mean these tax bases are about a half of their potential comprehensive base. In the case of land tax, the progressive rate schedule adds distortions, and is far less direct and effective in achieving distributional equity than the Commonwealth income tax base, which includes rent income. </p>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here</a></strong></p><img src="https://counter.theconversation.com/content/31359/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Freebairn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…John Freebairn, Professor, Department of Economics , The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313732014-09-14T20:20:41Z2014-09-14T20:20:41ZRenewing Australian federalism<figure><img src="https://images.theconversation.com/files/58833/original/2pm37qyc-1410489625.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The way we are governed has changed radically from the world of the Constitutional founders.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/alegrya/6638970347/in/photolist-b7EszZ-b7EEZM-b7EwjV-8CGrYK-b7Ev8p-b7DZcn-dTVx2w-6EZu9V-7tb9mn-fEv6JT-bPdrAn-bPdome-bPdnTX-bAiLkd-bAiGAQ-7tf8r1-7tkXW4-7tpR7W-bPdiua-7tkS3Z-7tb5an-nTs4ve-62nCfU-odNkX6-ihND2e-oMWzp2-ovJqtx-oLbDUJ-oMWzfp-9o3Nc8-xauwm-7tfa1G-7teUj9-7tbdB4-xauVF-7teXGQ-7tb6zp-7taXTH-7tf5Cq-7teYVY-7tkQJn-7tbk8e-7teQKo-7t7ieD-7tpTe9-xauq8-oc5f5j-dV6u1v-ovHKm6-oNdxBr">Flickr/Alison Young</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p><em>The reform of Australia’s federation is under review, with a White Paper process currently underway. In partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government, we have asked leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>Kicking off the series today, Professor Miranda Stewart considers what reform issues should be foremost.</em></p>
<hr>
<p>Australia is a country that benefits from great political and legal stability. We are, in 2014, one of the older and most stable federations in the world. Our short written Constitution, famously amended only <a href="http://www.peo.gov.au/learning/fact-sheets/australian-constitution.html">eight times</a> following successful referendums, still stands in the language of more than a century ago. To be honest, this can make debates about the federation seem pretty dull, and talk of changing how it all works seem unachievable.</p>
<p>But it would be wrong to assume that the law and norms that establish how we fund and run government are unchanged. In fact, Australia as a country, and the way we are governed has changed radically from the world of the Constitutional founders. </p>
<p>That change has taken place mostly without Constitutional amendment, and in response to changing popular demands for equality, welfare and redistribution, and changing economic circumstances globally and nationally.</p>
<p>The White Paper <a href="http://www.pm.gov.au/media/2014-06-28/white-paper-reform-federation">terms of reference</a> announced by Prime Minister Tony Abbott are wide-reaching, carefully reasoned and cover all the bases. They were generated in consultation with the States and Territories.</p>
<p>At bottom, the mood of the federal government, as well as the global and economic realities that Australia is facing in coming decades, are about cost. There are some important implications for all Australians in the White Paper terms of reference and most of them come down to your money - that is, to taxing, spending and democratic accountability for public provision by all levels of government.</p>
<p>First, taxes. The White Paper states the blunt challenge of “how to address the issue of State governments raising insufficient revenues from their own sources to finance their spending responsibilities”. While this implies that <a href="http://www.treasury.qld.gov.au/office/clients/commonwealth/intergovernmental/vertical-imbalance.shtml">vertical fiscal imbalance</a> is new, it has been an issue for <a href="http://www.hetsa.org.au/pdf/36-A-03.pdf">most of the last century</a>. </p>
<p>Our biggest and most effective taxes, the GST and income tax, are federal and should apply nationally - for efficiency and social equality reasons. State and local governments are much better placed to levy land taxes, royalties on resource production, user fees and charges for services and activities in each state. It is often considered that accountability and spending follow taxing powers. </p>
<p>But does this really mean we should hand the power to tax - and to compete down the rates and base - to the states, for our biggest national taxes? </p>
<p>Second, what about inequalities between states, in terms of taxing capacity and cost of government? Currently, the GST is distributed to State and Territory governments according to a <a href="https://www.cgc.gov.au/index.php?option=com_content&view=article&id=37&Itemid=153">horizontal fiscal equalisation</a> formula applied by the Commonwealth Grants Commission. The formula works on a national average of revenue and spending for State and Territory governments, based on the last three years. At present, New South Wales, Victoria and Western Australia are contributing to support South Australia, the Northern Territory and Tasmania. </p>
<p>That means that Western Australia gets less as it comes off the mining boom - but in the early boom years, it got a larger amount. Prime Minister Tony Abbott has <a href="http://www.skynews.com.au/news/politics/national/2014/09/02/abbott-hoses-down-coalition-gst-battle.html">stated</a> that if HFE is to be re-examined, the smaller states would need to be protected and this should be negotiated between the larger - or wealthier - states. </p>
<p>The formula in general terms aims to support equality in opportunity through provision of public goods for people across Australia, while not leading to a free ride in which some State or Territory governments do not tax enough, and also spend their funds poorly.</p>
<p>Third, the White Paper terms of reference emphasise removing “duplication” in government. Just because the Commonwealth government is best placed to raise taxes nationally does not mean it should be in charge of all spending. The Commonwealth is good at making payments to individuals: the social security system. Australians think this is important: we <a href="http://www.aph.gov.au/About_Parliament/Senate/Powers_practice_n_procedures/%7E/link.aspx?_id=F74707A5A4934E05A67EE5969B156435&_z=z">put this into the Constitution</a>, in s 51(xxiii) and expanded Commonwealth powers in 1946, in a successful referendum (s 51(xxiiiA)). </p>
<p>But the Commonwealth is much less good at service delivery. There is increasing impatience with the proliferation of responsibilities between State, Territory and the Commonwealth governments across areas as diverse as mental health, education, age care, welfare interventions and environmental policy. We can find better ways to ensure that State governments, and the cities and localities in their domain, which are good at public goods and service delivery, can do that. We also need to learn to distinguish between “Commonwealth” policy and “national” policy. </p>
<p>Should we go down the path of Canada and <a href="http://www.cicic.ca/en/702/ministries-of-education.canada">not have a federal department of education at all</a>? It would help if the Commonwealth government could restrain itself from saying or doing things on, say, <a href="http://blogs.unimelb.edu.au/opinionsonhigh/2014/06/23/evans-williams/">chaplains</a>, or <a href="http://www.theage.com.au/news/national/kids-may-need-the-strap-abbott/2007/06/15/1181414549921.html">corporal punishment</a> in schools - neither of which is a Commonwealth function. </p>
<p>More fundamentally, we need to be careful that the debate about who has power to spend, or about duplication, does not obscure the question about how governments best deliver public goods and programs to individual citizens.</p>
<p>This Forum aims to start the Conversation about renewing our federation. It brings together diverse perspectives from politics, law, economics and social policy to debate the key issues, with a focus on fiscal and democratic accountability issues, and on the hot topic of education. </p>
<p>We hope it will provoke some thoughts on how we can pursue federal reform to support both sustainable financing for government and a good society for all Australians in future. </p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here.</a></strong></p><img src="https://counter.theconversation.com/content/31373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Miranda Stewart receives funding from the Australian Research Council and with the Melbourne School of Government, from the Victorian Department of Premier and Cabinet for the project <a href="http://www.government.unimelb.edu.au/renewing-federalism">http://www.government.unimelb.edu.au/renewing-federalism</a> .</span></em></p>The reform of Australia’s federation is under review, with a White Paper process currently underway. In partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford…Miranda Stewart, Professor and Director, Australian Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/313682014-09-14T20:20:39Z2014-09-14T20:20:39ZWhy we need clear rules between the states and Commonwealth<figure><img src="https://images.theconversation.com/files/58633/original/zqgbwb6c-1410316655.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Does COAG help the Prime Minister and the Premiers collaborate - or create a platform for empty grandstanding?</span> <span class="attribution"><span class="source">Alan Porritt/AAP</span></span></figcaption></figure><p><em>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.</em></p>
<p><em>Curtin University’s John Phillimore and Professor Linda Botterill from the University of Canberra argue there needs to be clear rules around the way Commonwealth–State cooperate.</em></p>
<hr>
<p>Debate around federalism is often, understandably, dominated by the fiscal relationship between the Commonwealth and the States. However, the position of the States vis à vis the Commonwealth is weak not only because of the <a href="http://en.wikipedia.org/wiki/Fiscal_imbalance_in_Australia">vertical fiscal imbalance</a>. Another important factor is the lack of strong, stable and predictable structures of policy cooperation and coordination.</p>
<p>The terms of reference for the federalism <a href="http://www.pm.gov.au/media/2014-06-28/white-paper-reform-federation">White Paper</a> specifically “seek to clarify roles and responsibilities to ensure that, as far as possible, the States and Territories are sovereign in their own sphere”. Arguably, for the federation to function effectively, this should be interpreted to include consideration of the institutional arrangements at the heart of the Commonwealth-State relationship, as well as the financial component.</p>
<p>One approach to reform, which former Labor prime minister Kevin Rudd <a href="http://www.theaustralian.com.au/national-affairs/opinion/new-senate-might-reform/story-e6frgd0x-1226716373957">initially emphasised</a>, is to focus on cooperation between governments, or what is often called “cooperative federalism”. This view recognises that policy complexity and overlap makes some degree of cooperation between governments inevitable if the federal system is to function.</p>
<p>The problem with “cooperative federalism” is what we mean by “cooperation”. There is a scene in an episode of Yes, Prime Minister, in which PM Jim Hacker is upset at one of his Cabinet colleagues. He laments to his private secretary, Bernard Woolley:</p>
<blockquote>
<p>Jim Hacker: He’s got to learn to cooperate.</p>
<p>Bernard Woolley: What do you mean cooperate?</p>
<p>Jim Hacker: I mean obey my commands. That’s what cooperate means when you’re Prime Minister.</p>
</blockquote>
<p>There are many premiers and state governments who probably feel that this describes the situation in Australia over many decades. So, how might cooperation become real and not forced?</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/58644/original/7dd9n8qf-1410318418.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/58644/original/7dd9n8qf-1410318418.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=884&fit=crop&dpr=1 600w, https://images.theconversation.com/files/58644/original/7dd9n8qf-1410318418.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=884&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/58644/original/7dd9n8qf-1410318418.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=884&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/58644/original/7dd9n8qf-1410318418.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1111&fit=crop&dpr=1 754w, https://images.theconversation.com/files/58644/original/7dd9n8qf-1410318418.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1111&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/58644/original/7dd9n8qf-1410318418.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1111&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The current arrangments between the State and Federal governments might not be as stable as it seems.</span>
<span class="attribution"><span class="source">Marina del Castell/Flickr</span></span>
</figcaption>
</figure>
<p>One problem is that in spite of the importance of Commonwealth–State cooperation and coordination in many areas of policy, the Australian constitution is largely silent on how the two levels of government should interact, aside from recourse to the High Court where their laws conflict. </p>
<p>This has caused problems as new policy concerns have emerged and as policy areas that were once seen as primarily local matters are increasingly seen as having a national dimension and hence being of political and policy interest to the Commonwealth.</p>
<p>Since the establishment of the first Ministerial Council in 1934, an array of institutional arrangements has developed to address the problem of cooperation and coordination. These include: heads of government meetings such as <a href="http://www.coag.gov.au/">COAG</a> – the Council of Australian Governments which comprises the Prime Minister, Premiers, Chief Ministers and the head of the Australian Local Government Association; ministerial councils; intergovernmental agreements; and specific agencies such as Food Standards Australia New Zealand or the National Transport Commission. </p>
<p>The proliferation of these institutions has not always been welcomed, and COAG acted in 1992, 2004 and most recently 2013 to reduce the number of ministerial councils. This has been largely an ad hoc process which has run the risk of leaving important areas of policy involving both levels of government in limbo, and undermining successful examples of cooperation between governments. </p>
<p>The White Paper provides an opportunity to not only address the fiscal challenges of federalism but also the structure and roles of its institutions. At present, key bodies such as COAG and related ministerial councils are essentially meetings, without underlying legislation or enforceable rules. </p>
<p>Legislation to establish COAG and its operating procedures is one option, but at a minimum this could be addressed in the first instance through the establishment of an Intergovernmental Agreement to underpin the operations of COAG which:</p>
<ul>
<li> Articulates principles to guide the federation, such as subsidiarity and the need for respect, trust and good faith in negotiations;</li>
<li> Specifies COAG’s operations, including meeting frequency, agenda-setting and chairmanship; and</li>
<li> Establishes an independent COAG secretariat.</li>
</ul>
<p>At the moment, COAG meets as often or as seldom as the prime minister wishes. The PM also sets the meeting agenda and controls the COAG secretariat through the Department of the Prime Minister and Cabinet. An IGA would minimise Hacker-esque approaches to cooperative IGR by providing the states with some certainty around their dealings with the Commonwealth. </p>
<p>It would also go some way to preventing developments such as in the recent <a href="http://www.smh.com.au/business/federal-budget/states-face-huge-shortfall-in-funding-20140513-388b8.html">federal budget</a> when the Commonwealth reneged on a number of signed funding agreements, <a href="https://theconversation.com/states-told-to-be-adults-as-abbott-rules-out-meeting-26704">refused to hold a COAG meeting</a> despite a request to do so from seven premiers and chief ministers, and abolished the <a href="http://www.coagreformcouncil.gov.au/">COAG Reform Council</a> without prior reference to the States and Territories.</p>
<p>No-one wants meetings or institutions for their own sake. But without properly working intergovernmental institutions covering the major areas of policy making, operating under effective and fair rules and practices so that governments can be held accountable to each other, then we may get the worst of both worlds – a lack of clarity in terms of roles and responsibilities, and ongoing opportunistic behaviour by both the Commonwealth and the States in dealing with each other on important national issues.</p>
<p><em>Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.</em></p>
<p><em>Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and <a href="https://taxpolicy.crawford.anu.edu.au/events/4661/renewing-australian-federalism-starting-conversation">RSVP here</a>.</em></p>
<hr>
<p><strong>Read more in the series <a href="https://theconversation.com/au/topics/renewing-federalism">here</a></strong></p><img src="https://counter.theconversation.com/content/31368/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy…John Phillimore, Executive Director, John Curtin Institute of Public Policy, Curtin UniversityLinda Botterill, Professor in Australian Public Policy, University of CanberraLicensed as Creative Commons – attribution, no derivatives.