Photo: Tony Abbott's gyrations on relations between state and federal governments have been spectacular. (AAP: Alan Porritt)
On the matter of federation, Tony Abbott is waging a battle between the inner ideologue and the pragmatist, writes Mike Steketee.
According to Malcolm Turnbull, Tony Abbott told him when he went from supporting an emissions trading scheme to opposing one in the space of a few months in 2009: "Mate, mate, I know I'm a bit of a weathervane on this."
Not only on climate change. Just as spectacular have been his gyrations on relations between state and federal governments.
When the Prime Minister released the terms of reference three weeks ago for a White Paper – in other words, a statement of new government policy - into reform of the federation, they included this sentence: "Our federation is not, as some argue, a relic from the past, broken beyond repair and ill-suited to the times." Some have indeed argued something very similar.
Tony Abbott, or was it perhaps his doppelganger, wrote in his book Battlelines, published in 2009 before he became leader: "More than 50 years of increasing Commonwealth involvement in areas of government that were once exclusively the realm of the states means that the federation is broken and does need to be fixed."
True, he did not say then that the federation was beyond repair. And he had a proposal for fixing it: "The only credible way is to give the Commonwealth legal authority commensurate with its political responsibility." This, he wrote, was not centralism. But it looked an awful lot like it. As Annabel Crabb pointed out here two weeks ago, he even drew up a constitutional amendment to turn his idea into practice. It gave the Federal Government authority to make laws on "any other matters" not listed as Commonwealth powers in the Constitution, which covers all those that are the states' responsibilities.
Today's solution is the opposite: as the terms of reference put it, "rather than seeking ever greater centralisation of power in the national government as a way of dealing with increasing complexity, now is the time to strengthen the way our federal system works by being clear about who is responsible for what."
Five years ago, the only practical alternatives to sorting out responsibilities in areas where both levels of government were involved were, to quote Battlelines, "to accept the existing situation as the least worst outcome or to give the national government power it does not currently have to bring the states into line". Now, says the Prime Minister, the states and territories should be, as far as possible, "sovereign in their own sphere".
Abbott is not the first politician to wage a battle between the inner ideologue and the pragmatist. In 2009, he was venting his frustrations with dealing with Labor state governments during the Howard years. Now, with mostly Liberal governments around the country, he is reverting to the more natural conservative position of dispersing power rather than centralising it.
If he carries through with his intentions, it would mean the biggest change in how Australian democracy functions since the nation was founded 113 years ago.
One sign that he is serious is the $80 billion in cuts to health and education funding to the states over the next decade. The states can cop it and pare back their two largest spending programs - and in the case of health, the fastest growing - or they can find the money elsewhere, which means from their own revenue.
Abbott is putting weight on the states to take up the second option. One of the items in the White Paper's terms of reference is "how to address the issue of state governments raising insufficient revenues from their own sources to finance their spending responsibilities." As well, the White Paper "will be closely aligned" with the findings of the separate review of the tax system now underway and will draw on the recommendations of the Commission of Audit. The main option canvassed in the Audit Commission report is the states raising their own income taxes. Another is increasing the rate of the GST or extending its scope.
In theory, it makes sense for the states to raise more of their own revenue, so that they are more careful about how they spend it, rather than blaming Canberra every time they are short of money. The Audit Commission says Commonwealth funding of the states represents 40 per cent of state revenue, which is the biggest imbalance between spending and revenue of any comparable federation.
In practice, the result of the Abbott reforms is likely to mean hospital and school funding being squeezed even harder than they are today, while lower profile state programs such as housing and homelessness would run the risk of disappearing altogether.
The history of the Australian federation is clear. Ever since the states handed over their income taxing power to the Commonwealth in World War II, every offer to them to raise more of their own taxes has come to nought. The Fraser government legislated to enable the states to impose a surcharge on income tax or give a rebate. No state took up the offer. None of them wanted to be the first to jump. In any state approaching an election, both sides quickly feel compelled to rule out tax increases.
The states still have the power to impose income taxes but they show no more sign of taking it up now than they ever did. One argument is that if the Commonwealth cut its taxes to make room for the states, they would be more likely to act. Don't bet on it. Governments still would be looking over their shoulders at their counterparts in other states, and at their oppositions.
When the Howard government introduced the GST, it handed over all the revenue to the states, with the aim of ending the need for the states to take their begging bowls to Canberra. But what was supposed to be a growth tax has not kept pace with the overall economy, let alone fast expanding spending areas such as health. The states can do something about it: provided they all agree on an increase in the GST, then under current legislation Canberra will implement it. There is no sign of it happening. The changes have been mainly in the other direction, with states competing with each other to cut their payroll and other taxes.
Gough Whitlam wrote in his 1985 book The Whitlam Government:
The experience in Australia during the 1950s and 1960s was that any community service solely dependent on state government tended to deteriorate, while any service for which the federal government assumed a financial responsibility tended to prosper... Unless the national government becomes involved in a major function or costly service, that function or service will either not be financed fairly or not financed adequately or not financed at all.
Nothing has changed. Abbott's current proposal to fix the federation is a recipe for smaller government. That fits his ideological predisposition. Politics will determine whether the pragmatist takes over again down the line.
Mike Steketee is a freelance journalist. He was formerly a columnist and national affairs editor for The Australian. View his full profile here.
Fixing the federation: a tale of two Tonys - The Drum (Australian Broadcasting Corporation)
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