'Very timely': public sector's master class in federation, tax reform

By Stephen Easton

September 23, 2015

The twin national processes of federation reform and taxation reform offer big opportunities to improve the lives of all Australians and put us on a secure footing for the future, and the sooner politicians can move them forward, the better.

As the boffins in Treasury and Finance work away behind the scenes, occasionally stopping to anonymously tip off the media about how the recent ministerial reshuffle has affected the process, the Institute for Public Administration Australia is preparing to host some of the brightest thinkers on these subjects at its 2015 national conference.

IPAA president Terry Moran notes that the conference, which is being held in Sydney on October 14 and 15, will be a very timely set of contributions to the debate. The Garran Oration will give New South Wales Premier Mike Baird an excellent opportunity to delve into those themes.

“I think that it’s time that public servants at the national and state level got their heads around the need to reform the federation, because business as usual in the federation is not satisfactory,” said Moran.

The line-up includes a couple of former state premiers. South Australian John Bannon will discuss the gap between the views of public servants and the public, and Victorian John Brumby will address the question: ‘What would it take to achieve reform?’

Moran says he’d like to see Baird use the oration to expand more on the link between federation reform and taxation reform, and the gains to be made from giving states and territories more control over a greater share of the nation’s revenue

“He’s made that statement about GST resources, if increased, going towards paying public hospitals, and that’s absolutely a sensible proposal to put forward,” the former head of the Department of Prime Minister and Cabinet said.

“I think the public has reacted well to that, because they recognise public hospitals are very important. And they’re prepared to be sympathetic to a tax increase if the resources are hypothecated to an acceptable purpose. The hypothecation of the funds flowing from increased GST is as important as the increase.”

One session on the first day looks at the importance of “bringing the public along” with government on important reforms. They don’t get much more important than taxation and federation reform.

“This simply goes to what Prime Minister Turnbull’s been saying in the last week: that you’ve got to have a conversation with the community so that they understand the problem and what is going to be done about it, if you want them to accept change, which for some of them might be a little bit uncomfortable,” explained Moran.

“And therefore, you can’t do big things in our democracy, whether it’s at the national level or the state level, without convincing the public that something has to be done because of a recognised problem. And that’s an important part of federal reform, if federal is to be linked to taxation reform.”

Of course, the federation reform process is generally about devolving more revenue raising power to state and territory governments, which already receive about a quarter of the federal budget each year.

“There’s been a general realisation in the policy community that there are advantages in democratic accountability if the people who deliver the services, in this case the states, raise the revenue to pay for those services,” explained Moran.

“And the closer the level of accountability for services delivered is to where people live is, the more engagement you can get between those responsible in government and the community generally. Canberra is just too remote to effectively play a constructive role in running schools or hospitals or even TAFEs, in my view.”

It’s a mistake, he adds, for state and territory stakeholders to think it doesn’t really matter where the money comes from so they shouldn’t worry about it. “They’re going to be more responsible in the use of that money if they raise more of it themselves.”

There are four key themes which will all be discussed in this context at the IPAA National Conference, in sessions described as roundtable briefings: health, education, housing and tax.

The first two obviously had to be on the agenda, says Moran, since the Abbott government’s first budget removed funding for public hospital and education reforms from the forward estimates. While he thinks talk of an $80 billion funding gap in these areas is overstated, there’s clearly a gap, and its size is significant.

“All the work that had been done to get more clarity as to what the Commonwealth would pay for and what the states were paying for had been set aside, and so now we’re in this situation where there are simply big, unresolved issues about who pays for what in those two important areas.”

As for housing, affordability is clearly a big problem for lots of Australians and there is also what Moran describes as a “demonstrable shortage of social housing” for homeless and other people doing it tough.

As Moran has argued elsewhere, annual Productivity Commission data on service delivery supports the theory that devolution of services increases their efficiency.


On the second day, the conference will focus on “skills for the future” before wrapping up with a final “what’s next” session featuring Moran’s successor as IPAA president, Penny Armytage, as well as federal mandarin and IPAA ACT president Glenys Beauchamp alongside Blair Comley, the head of NSW Department of Premier and Cabinet.

On the menu are digital government, big data, commissioning, and market stewardship.

“If the public sector is to do things that governments want done, the capabilities available in the workforce have to be up to date. In some areas, they’re very much up to date but in other areas we’re not,” said Moran.

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