Wednesday, October 29, 2014
But there's nothing to make me feel more disillusioned and cynical than the latest prime minister popping up to tell us his grand plans to revitalise federal-state relations. Really? That's what they all try. What makes Tony Abbott likely to succeed where his many predecessors - going right back to Whitlam - failed so dismally?
Since Abbott's plan raises the possibility of tax reforms - "including changes to the indirect tax base" - he'll be lucky if the "mature debate" and "rational discussion about who does what" he seeks doesn't erupt immediately into an Abbott-strength scare campaign about increasing the goods and services tax, led by a Labor Party with a long record of hypocrisy on the topic and a thirst for revenge.
In such a climate, the various premiers facing re-election in coming months are likely to swear total opposition to any change in the GST. These days our politicians excel in the Mexican standoff.
Whitlam was seen as the great centraliser, drawing furious attack from the premiers and a Coalition sworn to uphold "states' rights". But subsequent thought has been kind to his notion that the ideal model would be a strong central government dealing with many regional governments, closer to the ground than the present state governments and given flexibility to modify national rules to suit local conditions.
Forty years later it's obvious that ain't going to happen. However anachronistic, the state governments - within their own borders, just as centralist as any federal government - won't ever give up their rights and privileges.
Malcolm Fraser's "new federalism" involved making the states more self-sufficient by giving each the right to impose their own surcharge or discount on federal income tax. The premiers, always full of complaints about the inadequate money they're given, weren't the least bit attracted to new taxing powers.
The Hawke-Keating government continued the process of ever-increasing federal involvement in areas of state responsibility. It pioneered the practice of bribing the premiers to undertake desired reforms.
John Howard did little to conceal his centralist tendencies, dropping any pretence of favouring states' rights. More and more "specific-purpose payments" to the states came with detailed rules about how the money was to be spent.
Part of his reason for introducing a GST was the need to replace the revenue from various state taxes the High Court had ruled unconstitutional. His decision to give all the proceeds from the new tax to the states (and cut back other grants to fit) was an inspired move to neutralise the premiers' opposition to it.
His greatest act of centralisation came with Work Choices, which ended a century of (highly inefficient) shared federal-state responsibility for industrial relations.
Kevin Rudd tried to improve federal-state relations by greatly rationalising the thousands of conditions attached to federal grants. His efforts to reach federal-state agreement on removing regulatory inconsistencies ground to a halt as states dragged their heels. He lacked the resolve to carry out his threat of a full federal takeover of state public hospitals.
Now Abbott says he wants to reverse the creeping centralisation, reaching a rational division of roles that would make each level of government "sovereign in its own sphere". As part of this, he'd support a joint plan to increase collections from the (withering) GST and give all the proceeds to the states, taking it to the next federal election for voters' approval.
Trouble is, there's no suggestion this would leave the premiers with more money overall and, if this year's budget is any indication, no guarantee the feds wouldn't try to solve their own budget problems at the states' expense.
It's unlikely federal and state governments could ever reach a lasting division of responsibilities that would end the duplication, cost-shifting and blame-shifting. That's for a host of reasons.
Most of the economic arguments favour nationally uniform regulations. If the feds are to retain ultimate responsibility for the health of the economy, they need the ability to influence the building blocks of economic performance, such as schools and TAFE.
Federal Medicare and pharmaceutical benefits, and state public hospitals, are each parts of the same system, which must be co-ordinated.
The underlying problem of "vertical fiscal imbalance" - most tax revenue (including the GST) is raised by the feds, whereas most government spending is done by the states - is intractable, the product of history and constitutional law.
When the feds cop most of the opprobrium for extracting taxation, it's only human for them to want a say in how it's spent.
But when the premiers get used to spending lots of money without having to raise it, to demanding more from the miserly feds on behalf of their deserving constituents and to blaming any and all problems on those terrible incompetents in Canberra, it's only human for them to want to continue evading responsibility.
The premiers' "revealed preference", as economists say, is that they prefer the federal system as it is, including their right to complain bitterly about it and demand another handout.