The States look like caving in to Federal Treasurer Peter Costello’s demands that they abolish seven taxes that they agreed to “review” in 2005 as part of the GST agreement with the Commonwealth.
This development is certainly part of the crisis in federalism about which I’ve been blogging for some time now (also here). However, arguably it’s less important than Howard government threats to move in on health (about which John Howard has now seemingly backed off), education, industrial relations and defamation law.
After all, although the States only agreed to “review” the 7 listed taxes (after basic foodstuffs were removed from the GST as part of the deal with the Australian Democrats to get it through the Senate), the fairly clear intent was that they would remove them to the extent that actual GST revenue made this fiscally possible. And the sheer extent of “windfall” (higher than expected) GST revenue means that it is possible for the States to remove them without difficulty. It’s certainly true, as some have argued, that there might be other taxes whose abolition would be preferable, or that it might be better to retain at least part of the windfall revenue and use it to repair crumbling pulic infrastructure. But the fact is that either expedient would contradict the spirit if not the letter of the original GST deal between Commonwealth and States.
As I mentioned above, I’m much more concerned by the ongoing threat of a federal takeover in education, industrial relations and defamation law, both from a federalist viewpoint and because of the likely content of Commonwealth initaitives in these areas.
The performance of the Commonwealth Department of Education, Science and Training (DEST) in micro-managing Australia’s higher education institutions in an extraordinarily rigid and inept manner hardly inspires confidence about what this bureaucracy would be likely to do if it ever got its hands on the VET, secondary and primary education sectors as well. A-G Phillip Ruddock’s proposed defamation law reforms appear ill-considered, unimaginative and unbalanced at best. And the proposed Commonwealth industrial relations reforms need a post all their own to analyse their deficiencies.
From a federalist viewpoint, such wide-ranging assaults on traditional areas of State power are extremely disturbing irrespective of the content of federal legislative intervention, and Howard’s backing off from intervention in state health responsibilities only reduces my concerns marginally. Mark Bahnisch has added to the traditional federalist arguments (division of power to reduce abuse and excessive exercise of power, democratic checks and balances, diversity, choice, facilitating experimentation) the European notion of “subsidiarity” as an additional conceptual underpinning for federalism. The key aspect of subsidiarity for present purposes is:
* Decisions should be taken as closely as possible to the citizen (the close to the citizen criterion).
It’s certainly a useful point to make in a situation where the central government is attempting to move into areas traditionally administered by the States. However, there’s an obvious problem with the principle in an Australian context. The governments of the larger States aren’t obviously any closer in any meaningful way to the citizens of their outlying regions than is Canberra. Is Bob Carr more in touch than John Howard with the concerns of people in Bourke or Broken Hill? Peter Beattie with those of citizens of Mount Isa or Cooktown? Geoff Gallop with people in Broome or Kunnunurra?
If anything, the subsidiarity principle might point to the desirability of the Whitlamite notion of smaller regional governments that really would be closer to citizens’ real concerns than either the Commonwealth or the existing States. Certainly the experience of Territorians since self-government in 1978 indicates that a small-ish, accessible regional government (which is what the NT government really is) is vastly more responsive to local needs and concerns than Canberra ever was. However, John Quiggin recently argued pretty persuasively that the regional government model really wasn’t a practical option in modern Australia.
On the other hand, the subsidiarity principle should at least remind politicians and bureaucrats that devolving power to the local and individual institutional level as much as possible, keeping central oversight flexible and light-handed, and avoiding rigid prescriptive, micro-management of any policy area, are essential attributes of effective modern governance. I can’t think of an obvious way in which such principles could usefully be constitutionally entrenched or otherwise effectively enforced (although Senate committees in the absence of government control could certainly make a contribution), but they remain critically important principles nonetheless.