A Renewed Federalism
Ours will not be a modern society until we permit local government to widen its role; it will be unable to do so as long as the financial squeeze on local government persists."
Gough Whitlam: A New Federalism.
It's time to realise the other half of Whitlam's vision
In the closing line of his 1971 manifesto, Whitlam wrote that 'the new federalism will rest on a national framework for the establishment of investment priorities and a regional framework for participation in all those decisions that most directly determine the quality of our lives.'
His local government legacy is unparalleled: he addressed the vertical fiscal imbalance in our system (federal-state-local) by establishing ongoing financial assistance that has enabled local government to expand its role beyond the '3Rs'...
But we must recognise the other half of his vision is unrealised, and without a healthy participatory democracy the big bureaucracy cannot get a grip on expenditure needs. How does it establish the investment priorities? This is a barrier to horizontal equalisation (state-state and local-local).
The systemic problem is evident at all levels of our federation: at state level, Western Australia gets more than its 'fair share' of the GST; at local level, more populous states and relatively self sufficient metro councils get more than their fair share.
Who misses out? Smaller regional and rural communities who need more help but don't have the votes in our 'democracy' to get it. So there is a political problem... but there's also a technical problem. Unless we can quantify expenditure need (functions) alongside revenue capacity (finances) we cannot quantify how much is a 'fair' slice for each community.
Think about it: if we can't slice the GST into 8 fair shares, how can we possibly slice financial assistance grants into 537?
A new (old) federalism
Whitlam described the new federalism as an 'alteration of administrative arrangements.' In establishing a program of ongoing financial assistance from Commonwealth through states to local governments he addressed the vertical fiscal imbalance in our federal system... but his new federalism is now our old federalism. It's time to finish what he started! We need to tackle the far more complex problem of horizontal equalisation. Our federal government cannot do this alone because: (a) the big bureaucracy needs information from our participatory democracy about our expenditure needs (functions) to establish investment priorities (finances) and (b) there's no votes this redistribution... we're asking the Sheriff of Nottingham to behave like Robin Hood :-)
A renewed federalism (step 1)...
This problem is (a) complex and (b) political so we need to start simple: redistributing the ≈ $2 billion p.a. in federal grants to support local governments to provide our 650,000 kilometre local road network. Distribution of federal funding to states is based on historical shares dating back to 1991, it doesn't get a grip on expenditure need and it ignores revenue capacity. We can't ask our leaders to tackle the political problem of taking money from relatively self sufficient metro councils to give it to relatively grant dependent rural councils (who have the most roads, which benefit our whole nation) unless and until we back them up with the technical evidence that this is equitable based on both expenditure need (HOW much it costs to do WHAT we do) and revenue capacity (HOW much of the burden different local communities can shoulder without help).
A renewed federalism (step 2)...
Once we've got the hang of walking we learn to run... with a framework in place to gather data on expenditure need (functions) to inform investment priorities (finances) for roads we can expand its scope to all services delivered by local government. Which will solve the technical problem that will otherwise continue to prevent redistribution of the general component of the financial assistance grant as it has done for decades. But here's where this idea for A Renewed Federalism gets interesting....
A post-modern society?
Whitlam aspired to create a 'modern society.' He recognised that local government had a pivotal role to play in it, but also that it would be unable to do so as long as the financial squeeze on it persisted... but here we are, 5 decades on, still talking about this (very!) persistent financial problem!
Kim Beazley said Bob Hawke made modern Australia... but he built it on Whitlam's foundations (Hawke showed us HOW... Whitlam showed us WHERE). Paul Kelly said Hawke's new form of government, unveiled in 1983, was one in which stakeholders agree on WHAT our common goals are and HOW to reach them... but here we are, 4 decades on, struggling with social cohesion. Put simply: our lack of agreement on common goals and how to reach them. Paul Kelly describes the Hawke-Keating era as 'the end of certainty.'
The problem for our leaders at all levels of our federal system of government in our late modern society (we're at the end of something but we've got nothing yet to replace it) is that the tools which once served us well don't work. When the only tool in your toolbox is a hammer, everything looks like a nail... but it's not! It's time to recognise that social cohesion cannot be built from the top down. It can only be built up from the bottom up. A community can't cohere around the abstract idea of social cohesion... WHAT holds us together must be concrete. The real world in which we live together. By all means think global... but humans are only able to act local.
Local government and a healthy participatory democracy holds the key to a renewal of our federal system of government... the creation of a post-modern society, perhaps? Yet this is nothing other than WHAT Whitlam himself said half a century ago! What he didn't say was HOW to realise this vision in practice. That's where Hawke can help.
To come..
To come...
To come..
To come...