ESSAY 7: FEDERATION REFORM # 2
We have split the nuts and bolts of federation reform between consecutive essays.
This essay addresses the delivery of government services (who spends money). Future essays will address funding of government services (who raises money).
It is common sense that any federal system of government should adhere (so far as practicable) to two principles:
First, subsidiarity: Government services are best delivered via principles of subsidiarity (localised decision making).
Second, responsibility: Each level of government must be accountable to voters, for raising the money it spends.
Both principles are among Common Sense for Australia Inc’s Core Beliefs.
The Federal Government’s draft Reform of the Federation – Discussion Paper, 2015 (Note 1) identified the ‘key area for reform’ to be:
1. Health (mixed federal and state funding);
2. Education (mixed federal and state funding); and
3. Housing/Homelessness (federal funding of allowances/state funding of housing).
The same draft Discussion Paper listed future funding options as (broadly):
1. Federal government taking over the states’ delivery of services;
2. Federal government giving appropriate revenue raising capacity to the states; and/or
3. Federal government ending ‘tied’ grants (ceasing to dictate how states spend money).
No reports on Federation Reform have been published by the Federal Government since 2015.
Proposals – Delivery of Services
Consistent with Subsidiarity, we propose that our federal government vacate all responsibility and involvement, in the delivery and related regulation of:
1. All Health Services excepting:
(i) the Commonwealth Pharmaceutical Benefits Scheme;
(ii) such Responsibilities Pertaining to Human Pandemics as are consistent with the federal government’s specific constitutional power over quarantine laws.
2. All Education Services:
(i) early childhood education (plus childcare);
(iii) vocational education and training;
(iv) university and other higher education.
We acknowledge that there are arguments, which favour the states leaving responsibility for university and/or vocational education, to federal government.
The reason we favour these sectors being responsibilities of the states rather than federal government, is that both sectors require improvement in outcomes.
We anticipate such improvements (including funding issues) are more likely to eventuate, with the benefit of interstate lessons of ‘competitive federalism’.
As we noted in Essay 6, which level of government (federal, state or local) should be responsible for what functions, is the easier part of federation reform. The more difficult part of federation reform (funding – who raises the money) is addressed in Essays 8 to 10.
Whilst consensus between federal and state governments for federation reform – about who delivers which services – is ideal, it is not essential.
A Federal Government (with the will to do so, and/or co-operation of the Opposition) could simply advise the states (and territories) of its determinations to:
(a) eliminate all ‘tied’ grants in respect of education and health services;
(b) vacate responsibility and involvement in education and health services (excluding ‘PBS’ and ‘quarantine’ matters);
(c) impose debt ceilings (and balanced budgets) on state (and territory) governments.
Proposed changes are not intended ‘in isolation’. They are proposed as part of – huge – corresponding reforms.
Proposals in this essay are not intended as applicable to services focussed on indigenous communities (which involve factors additional to this essay’s scope).
This essay similarly does not seek to address Public Housing & Homelessness. Both involve inherent intersections between federal responsibilities (in social welfare) and state responsibilities (in planning and approval processes for our built environment).
Proposed changes are not intended as ideological. They are proposed as a compact of potential bipartisan political reform.
The proposed ‘debt ceiling’ for the states does not exclude the Commonwealth from using “section 96 tied grants sparingly for genuine purposes of assisting smaller states and for addressing genuine issues of national interest” (Note 2).
For and on behalf of Common Sense for Australia Inc
Authorised for publication, 9 December 2021
Note 2: Part of Essay 6’s quotation of Brian Gallaghan, sourced from: