The role of local government in Australia’s federal constitutional system is one I’ve been thinking about while working up the People’s Northern Territory Constitutional Convention wiki. Constitutional recognition of local government was one of several seemingly innocuous and positive constitutional amendments rejected by the Australian people at the 1988 referendum (mindless obstructionism by the Coalition?).
The draft NT State Constitution I’ve posted on the wiki adopts the very strong provisions of the Queensland Constitution recognising and protecting local government. It also further strengthens those provisions by requiring the executive government and legislature to take account of the principle of “subsidiarity” when enacting laws or making administrative decisions. This principle holds that “an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority, and indeed that a central authority should have a subsidiary function, performing only those tasks which cannot be performed effectively at a more immediate or local level” should be the main guiding principle in allocating functions and powers between tiers of government.
In a very real sense this principle is the antithesis of the centralising tendency that is dominant in modern Australian political discourse. More than a century of rule by a remote “colonial” power, first SA and then the Commonwealth, has taught Territorians (at least those who have lived here for a long time) that even a very mediocre local government is better than a remote one. Direct Canberra rule (from 1911 to 1978) tended to oscillate between complete disinterest and heavy-handed, dictatorial interference, usually involving imposition of inappropriate measures through failure to consult locals.
Also see A J Brown, ‘Subsidiarity or Subterfuge? Resolving the Future of Local Government in the Australian Federal System’ (2002) 61 Australian Journal of Public Administration 24. The article includes discussion of public opinion about local government reform, constitutional recognition thereof and the role of the States. It makes the rather surprising finding that around 50% of respondents appear to favour abolition of existing States in favour of a 2 tiered system consisting of just the Commonwealth and local government. Brown concludes that there has been “a slump, if not collapse, in the presumed legitimacy of the ‘state’ as a unit of self-determination within the federation”.
I disagree strongly with abolition of existing States. Apart from anything else, local government lacks the size and clout to stand up to the federal government when needed. Having just two tiers of government where the lower one consists of smallish local government bodies would be a weakening of the democratic checks and balances which help to “keep the bastards honest”.
But how would a “beefed up” local government sector fit into Australia’s federal structure? That’s potentially a really interesting question whose answer could help reshape Australian federalism in a fairly fundamental way (albeit picking up and formalising developments that are already happening).
For a start, although subsidiarity suggests that local decisions should be taken at a local level (cf the environmentalist slogan “Think global act local”), longstanding experience in Australia indicates that local councils are sometimes drastically corrupt or incompetent and need to be dismissed and a temporary administrator appointed.
Moreover, financial prudential supervision and quality assurance/maintenance of standards need to be undertaken from a higher tier of government. In our system that can only be the State or Federal government. Similarly, overarching policies may need to be set at a State or national level.
Finally, I would regard local school and hospital boards, which are part of the Rudd/Gillard government’s national health and education reforms, as part of this localised subsidiarity governance model. Readers will recall that they are intended to be funded on a needs basis, in the case of local hospital boards under a funding model adapted from Victoria’s ‘case mix” system.
The overall picture under a sophisticated subsidiarity model in the Australian context would be one where the Federal government sets national policy directions and provides a significant portion of funding directly to local government (including school and hospital boards), while State governments would also provide some funding and act as local government’s operational “line management”.
This sort of clear role differentiation would, I think, go a long way towards resolving the confusion, blame-shifting and cost-shifting that have characterised Australian federalism for a long time and contributed to the public disillusionment reflected in AJ Brown’s research. Importantly, the federal role of delivering tied grant funding to local service delivery entities on an objectively assessed needs basis would inhibit state governments from shifting funding from areas of greatest need to areas of greatest electoral advantage. That phenomenon is not confined to the Northern Territory. I strongly suspect that it was no coincidence that the hospitals that attracted the most adverse publicity for poor facilities under the recently defeated NSW Labor government were Hornsby Hospital and Royal North Shore Hospital. Both are situated on Sydney’s north shore, an area never likely to vote Labor.
What is really needed to achieve this sort of structure, it seems to me, is a fundamental restructuring of the federal division of powers in Australia’s constitutional system. However, the chances of achieving this through a constitutional referendum are slight. Only eight referenda out of 44 have succeeded since Federation in 1901.
Fortunately there is another possible solution. States could refer a reasonably extensive agreed set of State powers to the Commonwealth under the referral power in the Commonwealth Constitution (s 51(xxxvii). Those powers would certainly include control of river waters (especially the Murray-Darling basin) and some other key environmental powers that need a national approach. They might also include health and education, but on condition that day-to-day operational control remain with the States and local government. It is reasonably clear that a State can set conditions and limitations on any referral of power, including limiting a referral to policy and prudential oversight functions. See R v Public Vehicles Licensing Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207, 226.
But why should the States refer powers to the Commonwealth and thereby further reduce their already severely disempowered constitutional position? My answer is because the key reason for the States’ disempowerment is their fiscal dependence on the Commonwealth. A century of political history and High Court jurisprudence have proven that Alfred Deakin was clairvoyant when he said in 1902:
The rights of self-government of the States have been fondly supposed to be safeguarded by the Constitution. It left them legally free, but financially bound to the chariot-wheels of the central government. Their need will be its opportunity.
My admittedly utopian idea is that the States could negotiate with the Commonwealth for referral of State powers that the Commonwealth needs in the national interest (including policy and prudential oversight of health and education), in exchange for a guaranteed share of income tax and CGT revenue (the major growth taxes) calculated as sufficient to meet their genuine needs on an ongoing basis as untied grants (less the needs-based tied grants to local government already discussed). If a deal like that could be brokered, it would certainly solve the vertical fiscal imbalance, blame-shifting and cost-shifting behaviours that have bedevilled Australian federalism for many years.
Of course, the reason why the concept is utopian is that the Commonwealth can already exercise effective power over most areas, albeit indirectly, through the terms of tied grants under Constitution s 96. Accordingly, why would the Commonwealth surrender complete control of revenue when it has no need to do so? That revenue control allows it to play Santa Claus with impunity and nearly always win the blame game with the States. Still, it’s a neat idea IMO.
For a more detailed discussion of unresolved aspects of the referral power, see Andrew Lynch, ‘After a referral : the amendment and termination of Commonwealth laws relying on s 51(xxxvii)’ (2010) 32 Sydney Law Review 363.
PS Some of the issues I discuss here (though not my proposed solution) are traversed by George Williams in an essay in the excellent anthology Re-Imagining Australia (full text of the essays linked from this page – click on “essays” towards the bottom of the page). From memory, former econo-blogger and now federal Labor politician Andrew Leigh was one of the editors.