David Fawcett (SA, Liberal Party) Share this | Hansard source

I start by highlighting the importance of local government and talking about the framing of this debate on the constitutional recognition of local government and how it has been represented in many quarters. I would then like to talk about the premise of the question at hand, and how it is about the uncertainty which is driven by risk, and I will look in a little more detail at how we assess and treat risk—the probability of the occurrence and the consequence if that risk does eventuate. I will look at the process and ask if the premise is valid, does that justify a lack of due diligence with respect to value for money for the taxpayer and the ratepayer as well as equity for the Australian people.

Lastly, I will look at principle: does the argument have sufficient validity that it should lead us to override due diligence around the important process of reforming Australia's Constitution, the Constitution that has been the bedrock of the stability of the governance in this nation since Federation? I would argue that, although not a perfect document, it has been the bedrock of a democracy which is the envy of many nations around the world. My predecessor in my former life as the member for Wakefield, Mr Neil Andrew, made the comment that our democracy is not perfect and that, while sometimes it appears as though we have two steps forward and one step backward, generally speaking we shuffle in the right direction, compared to some nations which act with great haste and end up falling off, quite often, a fiscal or social cliff.

Firstly, I would like to address this point of how the argument has been framed, almost as though it is a case of those who support the referendum being for local government and those who do not support the referendum being against local government. That premise is clearly false. That framing is inaccurate. Any member of parliament or any senator who is in touch with the local community is undoubtedly for local government. I would like to use this address to place on record my appreciation for the advocacy of the Local Government Association of South Australia and South Australian councils, not only in this issue but in many issues, about their impact on the communities that we represent in this place. I constantly receive letters and phone calls from and have meetings with councils, council members and the Local Government Association over issues that impact on communities in South Australia, looking at ways to work together across all three levels of government where possible, or, if needs be, just between the federal government and local government, in the interests of the community. As has been well canvassed in this debate, local government now do not just do roads, drains and rubbish, but they have a broad remit where they add value to our community.

Certainly, as a member of the joint select committee looking into this constitutional recognition of local government, I have had the opportunity to interact with local government from across the whole of Australia as opposed to just South Australia. I can say with confidence that what I know to be the fact in South Australia appears to be well replicated throughout the nation. In particular, I would like to mention Felicity-ann Lewis, the Mayor of Marion, and her leadership role in the Australian Local Government Association and thank her for her very effective leadership and advocacy on this and a number of other issues.

I would like also to mention, when it comes to a strategic view of local government, the efforts of the Wakefield Group. When I was the member for Wakefield, the council areas within that electorate—Salisbury, Playford,the Town of Gawler, the Light Regional Council, the District Council of Mallala, the Clare and Gilbert Valleys Council and theWakefield Regional Council—decided to meet together on a regional basis so that, rather than putting in individual submissions for a small part of South Australia that they represented, we could take the time to work collaboratively as a group of local government bodies and as the federal government to look at regional priorities, to come up with transport plans, employment plans and other things that worked for the whole region and then to put in submissions for grants which represented a regional strategic investment as opposed to one local government body.

This had a couple of benefits. It meant that the Commonwealth government, when assessing that grant, recognised that this was indeed a strategic investment as opposed to just a local priority. It also meant that, because at the planning stage there was that collaboration and cooperation between councils, when that federal funding arrived the councils could add value to that in how they implemented the funding and work. They could sequence roadworks. They could add their own funding to it so that the taxpayer and ratepayer actually got far more value for the dollars spent. Currently, there are things like the Suburban Jobs Program in Playford, where some $11.3 million has been received. People still talk about and still benefit from one of the Howard government programs, of waterproofing northern Adelaide, where the councils of Salisbury—taking the lead in terms of the actual technology—and Playford and Tea Tree Gully came on board to significantly develop and enhance world-leading stormwater capture and re-use, using the aquifer system in South Australia.

Local government is important. It takes leadership in a number of areas, covering housing, employment and community facilities. I recognise that the Local Government Association of South Australia even did a report looking at the viability of regional airports, an issue which is important and often overlooked, given the importance of those facilities. So there is no doubt that local government is important and that federal funding for local government programs is likewise important. During the joint select committee inquiry, the Wagga council talked about the $15 million upgrade they had made to their airport and the $2.4 million that the federal government put into it. For the Roads to Recovery program—and I have seen clearly, during my time in Wakefield and before, the importance of that program—the total funding between 2009 and 2014 is $1.75 billion, a considerable amount of money.

These are all good outcomes for local government, and I highlight that they are particularly good for local government areas with smaller populations that have large land masses: they have a small rate base but very large infrastructure responsibilities, and so federal funding is quite important for them. So it is understandable, coming to the premise of the argument, that these councils are concerned that the combined effect of the decisions in the Pape and Williams cases has cast doubt on the validity of many programs funded by the Commonwealth government, included those that directly fund local government.

People are aware that the parliament responded to the decision in the Williams case by passing the Financial Framework Legislation Amendment Act (No. 3) 2012, which has provided what many would call a stopgap measure to make sure that funding can continue. But the concern that people have is: what if that were challenged; would this funding be at risk? The questions that have to be asked are: how likely is that challenge, is it necessarily the case that a challenge would also involve the government's ability to directly fund councils, is there another way to provide that funding and, lastly, how much is that funding in the first place?

Drawing on the extensive evidence that Dr Anne Twomey, a professor of constitutional law at the University of Sydney, provided to the joint select committee, it is obvious that in aggregate—and I recognise that this depends on which council you are talking about—local government in Australia is relatively financially autonomous. Commonwealth funding makes up about eight per cent of local government operating revenue, in contrast to the states, which receive about 50 per cent of their revenue from the Commonwealth. As Dr Twomey stated in her submission:

PriceWaterhouseCoopers noted in a 2006 study that dependence of individual councils on grants varies from less than 2% to more than 70% of revenue.

That is why to some councils, particularly the small regional councils that have a large land mass with a small rate base, those grants are very important. Dr Twomey also noted:

The Productivity Commission … found in 2008 that 10 percent of councils were highly dependent on grants, with grants amounting to more than 58% of their total revenue, but that these councils represented about 0.4% of the total resident population of all councils.

To get things in perspective, what we are dealing with here is approximately 1.8 per cent of local government revenue. It is still a significant amount of money for some councils, and it is very important to those councils who need it for the construction or repair of infrastructure. But, as a balance of the total revenue, it is sometimes misrepresented in the debate, which tends to lend to the urgency and the catastrophic assumption about what would happen if there were another challenge to this funding.

By contrast, in 2011-12, the Commonwealth provided $2,722,866,000 to local government through grants to the states under section 96 of the Constitution. This amount was divided up between the states according to the population of each state. It was then distributed within each state on an equalisation basis, as determined by the relevant state local government grants commission, subject to the first 30 per cent being distributed to each local government area by reference to population. In the same period, $624 million—only about 23 per cent of Commonwealth funding to local government—was paid directly through programs such as Roads to Recovery. These grants, while coming directly from the Commonwealth, still relied on assessments made by the relevant state local government grants commissions.

Whilst, in the view of constitutional experts, this funding is vulnerable to a challenge, would that be a catastrophic problem? The answer is clearly no—because that money could still be validly given under section 96 grants, as has been happening since 1923. There is a perception out there that this direct funding is new money—that, if it were not given directly, it would not be available. But the Parliamentary Research Service has found that, while financial assistance grants for local government have gone down as a proportion of GDP since 1996, direct grants have gone up. The result is that Commonwealth funding of local government, as a proportion of GDP, is about the same as in the late 1990s.

The other aspect of certainty to note is that the Commonwealth makes grants to local government in accordance with its capacity. In the current economic conditions, for example, if the government feels it does not have the capacity to make grants, it will change the amount. It will open or close programs. So local government funding, regardless of whether it is direct or through section 96, is only as certain as the will and capacity of the federal government to make those payments. That uncertainty is probably greater than any uncertainty arising out of a potential constitutional challenge.

That raises some questions. Given that there are alternative methods of payment and given that the state governments still have a say—and, despite rumours to the contrary, it has been proven, including through audits, that state governments do not reduce the amounts going to local government by skimming an administrative cost off the top—can we justify such an assault, as is now becoming apparent, on equity? And can we afford to set a precedent in the process of constitutional reform given that we cannot even guarantee that it is going to deliver the intended outcome of increased certainty?

I move now to the issue of process. When the government spends taxpayers' money to establish an expert panel to look deeply into an issue, to engage with stakeholders and to provide advice, there is a reasonable expectation that their advice will be heeded and followed in what the government subsequently does. The expert panel made it quite clear that, for a referendum for the recognition of local government to succeed, a number of preconditions would have to be met. These preconditions have not been met, either with respect to the uniform concurrence of states—some states, at least, will just play dead on the issue—or with respect to the time frame for the referendum.

The testimony from the Australian Local Government Association to the select committee was that they viewed the preconditions as being absolutely essential. In the early stages of the inquiry, at least, they expressed doubt that they could be met. In January, in fact, they expressed their strong concern that they could not be. For reasons best known to them, they have changed their position. But the fact is that the preconditions the expert panel set down have not been met, yet the government is pressing ahead.

You therefore have to ask whether the funding allocated to run the machinery of the referendum and to fund the yes and no cases is now at risk. Whether or not you support the constitutional recognition of local government, if the chances of the referendum succeeding are low—according to the evidence of the expert panel—then this money, at a time of tight financial constraint, is potentially being wasted.

Finally, to principle: Greg Craven, the Vice-Chancellor of the Australian Catholic University and a constitutional lawyer, said that the lopsided funding for the 'yes' and 'no' campaigns is unconstitutional and 'would fail the smell test' with the High Court. The decision by this government to deviate from the principles of past referendums—such as the 1999 republican debate—where funding was equal, regardless of the preferences of the Prime Minister or the government of the day for the outcome, is a dangerous precedent. It essentially means that a government can choose, in future, to use its numbers to push through legislation that will seek to buy the outcome that it wants, as opposed to giving the Australian people a fair and equitable information campaign to inform them equally about the effectiveness or veracity of both the 'yes' and the 'no' case. This is a dreadful precedent to set.

It also ignores the role of the Senate, which is directly in contravention of section 128 of the Constitution. The Senate is not only an integral part of the whole parliament but also a protector of states' rights and the provision of checks and balances. To just cut the Senate out in the decision, like this government has, is not only ignoring the Constitution but also taking away from the due diligence that is built into the Constitution as a check and balance in the interests of the people of Australia.

The 'no' case convener, Mr Julian Leeser, highlights that so far some $31.6 million of public funding has been allocated to the 'yes' case, including $10 million of ratepayers' funding through the Local Government Association, $10 million from the federal government through the 'yes' campaign and $11.6 million from the federal government to run a national civics education campaign to promote the 'yes' case. Only $500,000 is for the 'no' case. That inequity is just not right. It is unfair and, I would say, unconstitutional. It offends the Australian precedent and sense of the right thing to do.

I note also the misleading remarks from the Greens party, who quoted the ALGA as saying that the funding should be according to vote, and therefore the government has just followed the report and evidence given to it. But they have ignored the fact that the committee highlighted in that report the committee's preference for the funding to be equal for the campaign. So I am disappointed by that misleading remark, which did not take the full context.

So, because there are valid alternative funding pathways to address the funding uncertainty that was introduced by the recent High Court cases, that reduces the imperative to pursue constitutional change in the face of things such as the fact that the preconditions for success have not been met. To conclude, I just wish to recap the fact that all members and senators who are in touch with communities support local government because of the very important job that they do. The direct funding that they receive is important, and it is being used well. But it is not the majority of funding to local government. It is not certain, and it depends on the capacity and the will of the government to deliver it. It does not equate to new funding. It can be delivered, as it has been since 1923, by section 96 of the Constitution, without dilution by the state. Finally, it is only at risk if somebody challenges it and the courts decide to apply that beyond the scope. So the referendum is not guaranteed to succeed. It potentially will waste taxpayers' money. I cannot support the bill, with the government's current amendment on the funding, as it stands. I support the coalition's amendment.