Federation ‘starving’ states, says reform plan David Crowe Political Correspondent AUSTRALIAN OCTOBER 27, 2014 TAX reform will be essential if Australia wants to improve health and education and halt a dangerous erosion in state services, according to a bipartisan reform plan that throws powerful support behind Tony Abbott’s call to fix the federation. Australians are being urged to accept land taxes, road tolls and possibly an increase in the GST to fund a transformation in the way Canberra and the states divide their work, helping to eliminate waste and duplication. The ideas will be outlined today by a group of former Labor and Liberal leaders and public service chiefs, who warn that state governments are being “held to ransom” by a system that starves them of cash for the services that taxpayers expect. The ambitious proposals add momentum to the Prime Minister’s weekend call for an end to the “dog’s breakfast” of duplication between Canberra and the states, triggering a political storm over GST increases or other contentious changes that could be needed to restructure the federation. Mr Abbott declared it was too early to rule anything in or out but he said he was determined to avoid any change that increased the overall tax burden. Successful reform would deliver “multi-billion-dollar benefits” in better services and lower costs but could be achieved only with a bipartisan approach for the greater good, the Prime Minister said in a major speech that signals the scale of the reform plan he could take to the 2016 election. Bill Shorten moved quickly to limit the scope for agreement and raise the risks for the government, telling voters the Prime Minister wanted to lift the GST. The Australian can reveal that the Committee for the Economic Development of Australia will step up the debate today by releasing reform options to give the states a share of income-tax revenue, a higher GST or greater land taxes to fund their needs. Backing the call for action is a group including former NSW Liberal premier Nick Greiner, former Victorian Labor premier John Brumby, former federal public service chief Terry Moran and former federal Liberal minister Fred Chaney. CEDA chief executive and former federal Labor frontbencher Stephen Martin will propose a series of federal conventions over the year ahead to build a consensus for change, matching the government timetable to produce a final reform paper at the end of next year. A key part of the CEDA report is a proposal from Mr Moran, who was the secretary of the Prime Minister’s Department under Labor from 2008 to 2011 and a former head of the Premier’s Department in Victoria, for giving the states greater powers and more certainty over their tax revenue. The ideas include giving the states a guaranteed share of federal income tax in order to pay for schools or the proceeds of a bigger GST to fund the expansion of hospitals. “If state governments operate schools, for example, then they should have the revenue to do that, without confusing the public through multiple levels of accountability,” Mr Moran writes. “In essence, we need to shatter the illusion that the commonwealth is the ‘Swiss army pocketknife’ of government in Australia.” He cites the current state of aged-care services — largely a federal responsibility — as an example of the danger of believing the commonwealth can manage everything, but he also applies the lesson to schools, hospitals and indigenous services. “It is clear to me that commonwealth departments have now lost all capacity for effective interventions in large-scale service delivery systems such as schools and hospitals,” he writes in the report to be issued today. Mr Moran and others in the CEDA report back the proposal from the federal government’s National Commission of Audit in April to give states a set share of income-tax revenue and the independence to run their services. “The commonwealth should walk its own talk on schools by assigning responsibility for schooling to the states and transferring an agreed share of income-tax revenue to them for that purpose,” Mr Moran writes. “There is also considerable merit in the broadly mooted proposal to increase the rate and coverage of the GST and transferring the extra revenue generated to the states to support growing demands on public hospitals.” Mr Moran also says the states should pursue ways to build more roads and rail projects rather than depending on federal help. “State governments should be encouraged to develop a land tax, or property charge, with a broader base of applicability but at a much lower rate than currently applies,” he writes. Putting tolls on existing freeways within cities — as recommended by the Productivity Commission — could also pay for more infrastructure. The findings are a rebuke to the Rudd government’s attempts at tighter control of the states — including a hospital “takeover” that would have cut their GST — and are more in line with Mr Abbott’s view that states should be “sovereign in their own sphere”. The Prime Minister used his Saturday speech to mark the anniversary of a key moment in federation, Henry Parkes’s Tenterfield Oration, and to discuss a new wave of reform that could include tax changes. Mr Abbott asked whether states might be prepared to accept responsibility for broadening the “indirect tax base” — a phrase that is usually code for a bigger GST — or change the funding formulas agreed with Canberra. This came with a powerful appeal for a measured debate on change in which all sides of politics could set aside rivalries, as they did on the federation more than a century ago. “In an atmosphere of rancid partisanship, few great national questions can ever satisfactorily be decided,” he said. “The fathers of Federation were often political opponents but they worked together patiently for the greater good, on the understanding that getting something invariably meant giving something too. Any debate over the future of our federation needs the same give and take if it is to produce significant change.” In a sign he would walk away from “big-bang reform” if partisan debate made it too hard, Mr Abbott said it would be a disappointment rather than a disaster if the current system prevailed. The Opposition Leader responded with a clear warning not to expect a bipartisan deal, telling voters the Prime Minister wanted to increase taxes. “Australians won’t be fooled by Tony Abbott’s egging on the states to ask for an increase in the GST — this is Tony Abbott calling for an increase in GST and other taxes,” Mr Shorten said yesterday. “He’s blackmailing the states into making his GST arguments for him by cutting $80 billion from schools and hospitals — all because he’s too scared to be upfront about his plans to increase the GST.” The $80bn cut was a reduction in long-term funding forecasts for health and education in the May budget, even though federal spending in both areas increases over the next four years. Backing the national debate on change, CEDA will hold a series of forums over the next two weeks in Sydney, Melbourne, Perth, Brisbane and Adelaide to canvass the reform options. Speakers include Mr Greiner, Mr Brumby, Mr Moran, former West Australian Liberal premier Richard Court and, at the Melbourne event, the Prime Minister’s Department chief Ian Watt. In another part of the CEDA report, ACIL Allen Consulting director Vince FitzGerald and Victorian University professor Peter Noonan back the use of “competitive tenders” for government services such as vocational education and training. “Service delivery is generally a local activity and is best funded and managed at that level,” write Professor Noonan and Dr FitzGerald
Posted on: Sun, 26 Oct 2014 15:09:12 +0000
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