Mark Butler (Port Adelaide, Australian Labor Party) Share this | Hansard source

I guess that, given the previous government’s record on federal financial relations, it is no wonder that contributions would seek to focus on justifying why the opposition voted against the biggest stimulus to social housing since the Second World War rather than dealing with the details of the Federal Financial Relations Bill 2009 and the Federal Financial Relations (Consequential Amendments and Transitional Provisions) Bill 2009, which involve the most significant overhaul of federal financial relations—the financial architecture of our Federation—since the Whitlam government.

This government is utterly committed to ending the blame game in the federal system and stopping the buck passing that has dogged our state and federal government relations for far too long. This government—and also while in opposition before the election—is very clear in its view that the federal financial architecture is fundamentally broken. These bills seek to take the first steps in fixing that architecture.

Exhibit A in that breaking down of the federal financial architecture is the constant accretion of section 96 payments, or specific purpose payments, that have become so numerous, so varied in their forms and so detailed as to be completely incomprehensible to most commentators and observers. There was, it is to be noted, some reform to our federal financial architecture with the ANTS—A New Tax System—that surrounded the GST, but there was no serious attempt at all during that process to grapple with the broken specific purpose payment system. These bills implement an agreement by COAG in March 2008 and subsequently in November 2008 to undertake that very important reform.

The Rudd Labor government came to government having talked about these issues for a considerable period of time before the November 2007 election and with very clear expectations from the public that reform would be undertaken. We have delivered that quickly—in March 2008, within only weeks of being elected, the Prime Minister delivered an agreement at COAG that fundamentally overhauled federal financial relations in this country. These bills implement that agreement in very large part. The first element of that March 2008 agreement was to rationalise—long overdue—the specific purpose payment system, firstly with the objective of combining agreements to a smaller, more comprehensible range of agreements; secondly, to institute much clearer demarcations of responsibilities between the different tiers of government; and, thirdly—and perhaps most importantly—to focus on performance and outputs from those agreements, rather than the tendency within SPP agreements to focus on inputs, particularly from state governments, and with those performance benchmarks to be assessed by the independent COAG Reform Council.

The second element of the landmark March 2008 agreement was to introduce national partnership payments—payments intended to reward incentive and reform undertaken by state governments. It is very important to note, particularly given the contribution about these issues of the previous speaker, the shadow minister for housing, that this type of payment is not subject to the principle of horizontal fiscal equalisation or, as the shadow minister—notably from New South Wales—described it, the ‘sunshine subsidy’. Horizontal fiscal equalisation is a principle to which the Labor Party unashamedly adheres. It is a principle that redistributes money among parts of the Federation according to the capacity to raise revenue and the need to spend money. Under horizontal fiscal equalisation, the Commonwealth Grants Commission takes account of differences between states in revenue raising capacity and their different spending needs and readjusts grants accordingly.

It is beyond comprehension, other than for base political purposes, to understand why a member of this federal House would have a problem with that principle as a general proposition, with only this exception: that COAG agrees, and the Prime Minister and the government very much agree, that reform-based incentive payments such as are included within the national partnership payments should reward states that are first movers in reform. In the area of national partnership payments, states are treated on the merit of their contribution to reform or to a particular program. This is an important exception to the principle of horizontal fiscal equalisation which, given the previous speaker’s contribution, I want to reiterate as a fundamental platform of Labor government.

The third element to the COAG agreement in March 2008 was that COAG retain the general revenue sharing framework adopted in 2001 after the introduction of the GST. Firstly, there would be no conditions placed by the federal government on states about how they spent that money and secondly—again—the principle of horizontal fiscal equalisation would apply to the distribution of those funds. Essentially, the Rudd Labor government adopted the system in relation to the distribution of GST money introduced by the former Treasurer, the member for Higgins.

Since that landmark agreement in March last year, very significant work has been undertaken at the COAG level between the Prime Minister and premiers, between other ministers and between officials of the different tiers of government, particularly on the reform of the specific purpose payment system. These bills implement that framework adopted at the March 2008 meeting, adding detail which has been worked on over the subsequent months and agreed at the COAG meeting on 29 November last year. This is the most significant overhaul of specific purpose payments since the provision in the Constitution section 96 began to be used broadly in the early 1970s under the Whitlam government.

Under the November 2008 agreement and these bills there will now only be five specific purpose payments: firstly, for health care; secondly, for schools; thirdly, for skills and workforce development; fourthly, for disabilities; and, fifthly, for affordable housing. Each of those five specific purpose payments will be subject to a separate national agreement between the federal agreement and each of the state and territory governments. Each agreement, for the first time, clarifies very specifically the roles and responsibilities of each tier of government.

In my previous life I dealt on a number of occasions with the specific purpose payment systems governing home and community care, or HACC, and other areas of disabilities. Frankly, it was a minefield, not only in working out quite what the moneys were intended to do but in working out what the responsibility was, in my case, of the South Australian government and what the responsibility was of the Commonwealth government. Commentators, stakeholders and governments have for years complained about the indecipherability of specific purposes payments as they have existed until now. This legislation and the agreements made at COAG in November 2008 make a fundamental reform to that system. Each of the five SPP agreements importantly include performance benchmarks and outcomes. Those, as I said earlier, will be assessed by the COAG Reform Council and, for the first time, will be published annually in a very significant advance in the transparency of government in this country.

The fourth significant reform to the system of specific purpose payments is the removal of very detailed conditions previously imposed by the Commonwealth governments on states. These were more usually related to state inputs rather than to more meaningful outcomes or performance benchmarks that might actually impact on Australians. Now the states will choose how to spend the money, provided that the money is spent in their particular areas, such as health care or disabilities as the case may be. But they need to spend that money bearing in mind the benchmarks that will be assessed on an annual basis—and the assessment will be published—by the COAG Reform Council.

The other significant reform contained in this legislation is the introduction of national partnership payments. The November 2008 COAG meeting agreed on a number of payment systems, and, importantly, given the debate in this place this week, at the COAG of 5 February 2009 the Nation Building and Jobs Plan was also the subject of a separate national partnership payment agreement. As I indicated earlier in my contribution, these payments are not subject to the redistributive principles of horizontal fiscal equalisation. These payments reward states who work hard. The claim has been made by a number of states—particularly the bigger states, such as Victoria—for many years that reform based payments should not be subject to horizontal fiscal equalisation. Our government has heeded those calls in this part of the legislation.

These payments will be the centrepiece of a new wave of microeconomic reform in areas which for too long have been neglected by the federal government. Earlier this week I was very pleased to see the announcement by the Parliamentary Secretary for Early Childhood Education and Child Care, Maxine McKew, of the national partnership payments for early childhood education. Under that agreement $955 million will go to states between now and 2013 to implement one of the centrepiece promises that the Labor Party made before the last election—namely, that the Commonwealth had a place in ensuring that all four-year-olds in Australia had 15 hours a week of preschool education in the year leading up to school, wherever they lived.

I come from South Australia, a state that has taken preschool education very seriously in any event, but I know that there are many states in the Federation that have underfunded particularly four-year-old education but also perhaps the area of nought- to five-year-olds in their state generally. For too long the Commonwealth has sat on its hands and done nothing while there has been such a variable contribution to the education of our four-year-olds. We know from recent research that those five years are the most important years in the development of a human being’s brain. This is just one example of many national partnership payment agreements that have been the subject of debate and ultimately agreement at the COAG level which will deliver very significant reform to our country.

Finally, the Federal Financial Relations Bill 2009deals with appropriations. It is an appropriation bill, and it appropriates an extra $6 billion or so over the next five years for the national specific purpose payment agreements that I referred to for things like fixing up our hospitals and delivering extra services to those Australians with disability. How those opposite, after the Howard government stripped money year after year from our national health system, can complain about our attempts, transparently put before the people before the November 2007 election, beggars belief. This is the government’s implementation of a very clear commitment to the people before November 2007—that we would fix the hospital system, that we would make life better for those with disability in Australia and that we would deliver a proper system of child care and preschool education to Australian children.

In conclusion, this is a very significant reform of our federal financial architecture. It significantly improves the transparency of payments between the Commonwealth and the states and territories. This will be a very good thing for where people complain—and, in many cases, rightly complain—about the service delivery undertaken by state governments. For the first time, those state governments will be accountable against performance assessments by the COAG Reform Council that will be published and available to all Australians. These payments, particularly the national partnership payments, set the foundation for a new wave of microeconomic reform and a new wave of quality service delivery for Australians. I commend COAG for the work that they did between March 2008 and November 2008 in putting together a very significant overhaul of their financial relations, and I commend the legislation to the House.

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