Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

I rise to speak on the bill: Constitution Alteration (Local Government) 2013. Our Australian Constitution is not just another piece of legislation; it is the document that is the heart of our very democracy. In drafting our Constitution, our forefathers well understood the dangers of centralisation of powers. They understood that decisions about how our nation is governed are best decided by those closest to the coalface. So our Constitution was designed with built-in checks and balances, to limit the power of politicians and government bureaucrats so that no particular person or group had total control. It has served our nation well for over 100 years. Therefore, we should not make any change to our Constitution lightly.

I suppose it is the sceptic in me but I believe that, when considering any change to our Constitution, no matter how small or how superficial, we should apply the Adam Smith test. Over 200 years ago Adam Smith warned in The Wealth of Nations:

The proposal of any new law or regulation … ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.

And that is the test that we must apply to any proposed change to our Constitution.

These changes that are being proposed are being marketed under the slogan of recognising local government. 'Recognising' is certainly an emotive word—everyone wants to be recognised—and with some notable exceptions the majority of our local councils are doing a very fine job. The electorate of Hughes, which I represent, overlaps three local council areas: Liverpool, Bankstown and Sutherland. All three councils are doing a fine job in very difficult circumstances. They are providing a wide array of services: child care, sporting fields, swimming pools, libraries, local roads, disability programs, arts festivals and galleries, buses and more. We would all like to see our local government recognised for the great work that they are currently doing.

But, coming to the proposed changes, the word 'recognised' does not actually appear in these proposed legislative changes. Section 96—excluding the short preamble—of the Constitution currently states:

… the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

The proposals will see 13 words added to that; so, if amended, it would read:

… the Parliament may grant financial assistance to any State, or to any local government body formed by a law of a State, on such terms and conditions as the Parliament thinks fit.

So the word 'recognition' is not in these changes.

There have been two previous attempts to pass constitutional changes regarding local government, and both have been defeated. If we all agree that our local councils are doing such a good job, despite two previous questions being defeated, why is there a need for change and why is there a need for change now?

I understood that the central argument underpinning the yes case for this proposed referendum question being put arose from two recent High Court cases, Pape v Commissioner of Taxation and Williams v Commonwealth of Australia, and that the High Court's decision in those cases brought into question the legality of direct federal funding to local governments. At first glance, it seems that these High Court decisions gave an overwhelming reason to support the yes case. However, what I found surprising is that these very central arguments about these two court cases, which apparently brought the legality of direct federal funding into question, were not even mentioned anywhere in the explanatory memorandum; nor was this argument used or were these two cases mentioned even once by the Attorney-General when he delivered his second reading speech. So it was with great interest that I read the comments of Anne Twomey, professor of constitutional law at the University of Sydney. The professor has noted:

… neither case threatened, at all, the capacity for the Commonwealth to fund local government, as this may still validly occur through s 96 grants.

… … …

… The Pape and Williams cases appear to be being used to manufacture a ‘problem’ which constitutional amendment can purportedly fix. … Whether there is a genuine ‘problem’ … and whether an amendment will give rise to any tangible benefits … remain matters of debate.

The professor continued:

It is difficult to argue that the potential unconstitutionality of such grants is the ‘problem’ that needs to be ‘fixed’ by a referendum, when there is another, clearly valid, way of giving the same amount of money to the States for the same purposes without the need for a constitutional amendment. In effect, there is no ‘problem’ – merely a perception of a problem …

So what appears to be the very central argument of this referendum appears to carry little weight. The so-called threat to local council funding, according to one of our most respected constitutional experts, appears to be a furphy.

The second argument for the yes case appears to be the thought that local councils will end up with more money in their coffers. According to the ALGA submission to the expert panel on this bill, it appeared to be based upon the assumption that simply changing the Constitution will result in more funding for local government and that funding will be secure. It is simply not clear how this would result from this amendment. If the yes case were successful, the Commonwealth would still increase or decrease its funding to local government as it does now. As Professor Twomey notes:

Arguments that constitutional recognition of local government is ‘required to guarantee Commonwealth funding of local government’ are flawed, because the mere fact that the Constitution is amended to permit the Commonwealth to make grants directly to local government, rather than through the States, does not in any way guarantee that it will give more money, or indeed, any money. It is not an obligation to fund local government, or to fund it to a particular level.

So, rather than more money for councils, could the opposite happen? Could councils get less money from these amendments? This is exactly what Professor Twomey warns—and again I quote:

Most supporters of the campaign, who are by and large members of local government bodies, appear to think that constitutional recognition will improve their status and the respect accorded to local government and that it will give rise to rivers of gold.

…   …   …

As for the rivers of gold, they might yet turn to rivers of tears for local government bodies in the more populous areas if an equalisation approach to direct funding was taken by the Commonwealth as a consequence of a successful referendum.

We need to be clear: there is the potential—through these amendments—that councils in New South Wales, in my electorate of Hughes, could end up with less funding and not more.

There are other concerns but, on balance, although the arguments for the 'yes' case at first blush appear to have merit, upon further analysis they simply do not stand up. So we must closely examine if there are risks of unintended consequences from such a change of little substance. This is exactly what former Prime Minister Howard warned of when he said:

… even a casual reference to local government in the Constitution would end up having legal implications far beyond what might be advocated by the proponents of such a change.

And there does seem to be the real possibility of unintended consequences. There appears to be the chance that this change could give more power to Canberra. So the first question would be: is this a good or a bad thing? There are certainly some on the other side of the chamber that would say more power centralised in Canberra is a good thing. I say it is not. I believe that our local governments know best how to undertake local projects—far better than any state government and definitely far better than any unaccountable bureaucracy in Canberra—and we cannot risk that changing.

In considering this proposed constitutional amendment it is import to consider the full words of the amendment, which finish with: 'the money may be given on such terms and conditions as the parliament thinks fit'. This means that there are no limits whatsoever on the terms and conditions that the federal government can tie to giving a grant. And as the old saying goes, 'He who pays the piper calls the tune.' So if a local council receives federal money to re-turf a local sporting field, a federal government could make it a term and condition of that grant that that local council had to provide greater power to the union movement—or any other term and condition that the federal government might like to come up with. Professor Saunders has rung the bell loud on these dangers. The professor notes:

This is not constitutional recognition of local government. Constitutional recognition is about dignity. There is nothing dignified about receiving conditional grants under these kinds of arrangements.

Professor Saunders warns that this proposed change may mean that federal bureaucrats will be running local councils. A yes vote could see cash-strapped local councils being bullied and dictated to and forced to spend money in line with Canberra policies and priorities—contrary to what is what is good for our local communities.

Professors Aroney and Prasser in their submission to the expert panel also raised these concerns. They said:

Affirming the power of the Commonwealth to make financial grants to local government, though superficially attractive, will not necessarily strengthen local government, but have every potential, especially in the long term, to increase the power of the Commonwealth … over local government.

Local government may appear to benefit from a relatively greater level of independence from the States and from the establishment of a constitutionally secure source of funding, but it would do so at the expense of greater subordination to the Commonwealth, a much more distant government that is inherently less likely to be responsive to the concerns of particular local communities

Funding would also most likely become tied to conditions that impose uniform Commonwealth policies on local government bodies, reducing their autonomy and their capacity to serve the particular interests of their own communities.

That is definitely a serious concern about this proposed amendment.

The other concern is that the panel itself accepted that there is a very real doubt about the constitutional validity of direct grant programs that do not fall under a head of Commonwealth legislative powers, but they acknowledged that they could be made under section 96. The panel further went on to note that one of the reasons it had been argued as to why this was needed was that the Commonwealth was more likely to fund local government if it can do so directly 'with all the political advantages that entails'. This is simply an argument in favour of the Commonwealth government pork-barrelling local councils. If bureaucrats in Canberra can be directed to direct the funding of our local governments based on political agendas and priorities of the Canberra based federal government, how is this in our nation's best interests?

Another concern is that there are currently two lines of authority. Councils at the moment are agencies of the state; they take their directions from the state. But, if passed, this referendum would see local government bodies being in the invidious position of being slaves to two masters: being responsible to both Commonwealth government and state government. They would be subject to the conditions imposed by the Commonwealth on its funding, with conditions that could well extend beyond the use of the grants to any type of policy that the Commonwealth wished local governments to pursue, as well as being subject to state laws, ministerial directions and policies. We would simply have two masters that local councils would be responsible to.

On balance, at best the yes case is weak. Even if direct Commonwealth funding of local government is in peril, which our constitutional experts question, exactly the same amount of funding can be given to local governments under section 96 grants. The problem with this referendum proposal is that it is difficult to find any compelling reason for it, other than it being symbolic.

I am a great supporter of local councils. I want to see our local councils remain independent and strong. It is for this reason, due to the clear risks of the adverse unintended consequences and the potential that it may harm our local councils, as detailed by our most highly respected and recognised constitutional experts, that at this stage—and only by a very fine margin—I cannot support these changes to our Constitution. The process for the proposal that has been brought forward by this government has been deeply flawed. I have doubts about its merits. I know I am not alone in this. The public is yet to be convinced of its merits. Until there is momentum, this process should not go forward, so at this stage I cannot support the proposal. (Time expired)

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