Why we gave up on federalism reform (this time)

By David Donaldson

Thursday May 5, 2016

The Reform of the Federation White Paper process has finally been officially put down after several months of inaction.

The cancellation was confirmed by the Department of the Prime Minister and Cabinet in a Senate committee hearing last week — as was the fact that the government spent $4.45 million on it.

But it’s just one — albeit symbolic — example of the Commonwealth government’s indecisiveness about whether it wants to return some of its power to the states or keep it for itself.

The problems the white paper was supposed to address are well known in policy circles: a huge imbalance between who holds the purse strings (the Commonwealth) and those with the Constitutional right to many policy areas (the states), resulting in a lack of accountability, bureaucratic duplication and decisions often not being made by those closest to the action.

It’s been a long-standing problem throughout the existence of a federated Australia, but especially so with the centralisation of taxation in World War II and the gradually expanding social policy spend. The Rudd government made progress on simplifying Commonwealth-state financial relations in 2008, but there’s been slippage since then and plenty remains to be fixed.

The launch of the white paper process generated hopes the states would be given more leeway to decide settings on policies they have constitutional responsibility for, such as education, health and housing, as well as another look at intergovernmental financial relations, which many believe would lead to better services at lower cost.

Former prime minister Tony Abbott set up the process with the notion that states should be “sovereign in their own sphere” in mid-2014. Subsidiarity was listed as one of the six principles to be applied when allocating roles and responsibilities between different levels of government.

It seemed Prime Minister Malcolm Turnbull was on board with reform, ever-so-briefly floating the idea of giving a cut of the income tax directly to the states, which would allow them to spend the money how they like — even if that move was poorly handled.

Yet despite all this, just this past week the Commonwealth caved in to temptation to control the way states spend their money, announcing a range of conditions on additional education funding, creating more hurdles for states to jump over in running schools.

The ‘really terrible’ green paper

Following the excitement around the launch of the white paper process, federal reform “dropped off the radar” sometime during Abbott’s prime ministership, says Melbourne Law School federalism expert emeritus professor Cheryl Saunders.

The beginning of the end seemed to come when the “really terrible” draft green paper was leaked, probably long before it was ready. It was quickly repackaged as a “discussion paper” and officially released a few days later, but was widely criticised, she tells The Mandarin.

Proposals that the Commonwealth cease funding all schools, or all public schools, inevitably invited significant backlash.

The announcement that the white paper had finally been shelved merely confirmed that the government had long since given up on federation reform as a priority, she believes.

“A number of things started going wrong very early on.”

“The cancelling of the white paper process was just putting it out of its misery,” Saunders said. “I don’t know whether anyone was still working on it, but the official in charge had long since left.”

Despite an “encouraging” start to the process she wasn’t disappointed when it was officially ended, arguing the leaked green paper made it clear the “whole process was a waste of what was a very promising process at one point”.

“A number of things started going wrong very early on,” she explained. “One of the problems is that federal reform was treated as something that concerns a very small range of stakeholders — governments and bureaucracies, very often with extensive overlordship by the Commonwealth.

“There was no consideration that this is something that affects the lives and wellbeings of all Australians and that to open it up might be beneficial and not problematic. It was kept very tight to the government’s chest from very early on.”

Some blame the states for the process going off the rails, while others think the feds gave up when they realised it would probably miss the original deadline of late 2015 and may not be finished before the election. Perhaps the negative reaction to the green paper convinced the Commonwealth it was all too hard.

But Saunders thinks the ease with which it was dropped raises questions about whether there was ever a genuine attempt at reform or just a cost-saving move, as some states suspected.

The government has stated work on the federation will continue through the Council of Australian Governments. This means it’s “just back to what normally goes on”, thinks Saunders, but COAG’s “very much less transparent nature” will make it harder to know what’s going on, and for new ideas to be introduced.

“The Commonwealth doesn’t have much of a vision,” she said. “What’s the goal? The goal of the white paper was never clear either. Until you start articulating what you’re working towards, it’s just going to be tinkering at the edges.”

Education conditions: contrast to reform rhetoric

The new conditions attached to the school funding package “are really a stark contrast to what the government has been saying for much of the last few years”, argues Mitchell Institute education and federalism researcher Bronwyn Hinz.

The sizeable list includes teacher recruitment targets, standardised year one testing, providing reports to parents according to national standards and minimum literacy and numeracy standards.

Education Minister Simon Birmingham argues the Commonwealth “will hold states and territories to account for distributing funding according to need and demonstrating how they are applying it to best practice” — not an unusual statement for a Commonwealth government, but one at odds with allowing states to be “sovereign in their own sphere”.

“Most of the conditions are things the states are already doing.”

Hinz thinks the new rules are unnecessary. “Most of the conditions are things the states are already doing,” she told The Mandarin.

“It would be better if they didn’t have to rejig it to make it look like they’re complying, so the money could flow to the schools to allow them to get on with the job.”

The evidence is behind allowing states — more aware of how their education systems are travelling and what their citizens want — greater control over education policy. “There are reams of research saying this is generally much better,” Hinz said. “Some overlap is good, but the current degree is not really helping things.”

She’s hopeful the move of federal reform from the white paper process to COAG might allow a more collaborative approach between the Commonwealth and states. “We are a federal system, it’s not boss and minions,” she said.

The benefit of the white paper was that it “had much more authority” — and extra resourcing. “It’s demonstrably lower on the government’s agenda now,” she said.

But all is not lost. Federal reform is a perennial issue that comes and goes. “Just having these debates is deeply valuable and enriching,” Hinz said.

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