Inter-governmental relations in Australia: the cost-shifting inquiry story so far …

On May 30, 2002 the House of Representatives Standing Committee on Economics, Finance and Public Administration commenced its inquiry into local government and cost-shifting as referred by Wilson Tuckey, then Minister for Regional Services, Territories and Local Government.

The Local Government Association of Queensland (LGAQ), together with peak local government bodies at a national level and from other states and territories, felt the inquiry represented the first real opportunity in almost two decades to have a frank and meaningful participation in the debate about the roles and relationships between the three spheres of government.

Considerable effort was put in by the LGAQ and other local government stakeholders in the form of inquiry submissions, reports, and participation in public hearings and roundtables.

The LGAQ submissions centred on the following key matters:

• The rate base of councils in Queensland has been stretched beyond reasonable capacity, impacting on their ability to provide the required services.
• The wider range of service responsibilities, particularly water and sewerage, of Queensland local government in comparison with other states, and the impact this has on finances, including debt.
• The rapid population growth occurring in Queensland in comparison with Australia as a whole, and the impact this has on the capacity to meet service needs.
• The impact on the roles and responsibilities of Queensland local government resulting from a range of legislative changes implemented by the state over the last ten years.
• The need for the Commonwealth (Federal Government) to identify an enhanced revenue base for local government to ensure councils can effectively meet the needs of the communities they serve.
• The requirement for the Commonwealth (Federal Government) to review its sharing of funds for local government across all states to ensure that they are distributed fairly in terms of both expenditure needs and revenue capacity.
• The importance of recent state funding initiatives for capital works and the need to maintain current levels of state grants in real terms per capita in the longer term.
• The importance of Commonwealth (Federal Government) recognition of governance processes established at the regional level by states and local government rather than introducing new arrangements that do not effectively engage local government.
• Opportunities for rationalisation of service delivery, but with a clear requirement for long term funding arrangements to be agreed if local government is to undertake an expanded role in service delivery.
• The need for the Commonwealth (Federal Government) to amend the Constitution Act to provide recognition of local government.
• The inadequacy of financial data provided by the Australian Bureau of Statistics in relation to the local government sector in each state.

November 2003 saw the release of the inquiry’s report Rates and Taxes: A Fair Share for Responsible Local Government, making 18 recommendations.

In general terms, the report was considered by LGAQ as a positive contribution to a review of governance arrangements between the three spheres of government. The report noted that duplication and co-ordination costs of all levels of government in Australia under current arrangements probably amount to more than $20 billion per annum.

A review of the committee's 18 unanimous recommendations (an unusual result in itself) showed that, if implemented, many would have the potential for positive effects for Queensland local government. The wide ranging recommendations would provide significant impetus to formalised and improved relations with the federal and state governments, and initiate the development of a new mechanism for Financial Assistance Grants (FAGs) distribution.

One recommendation indicated that Intergovernmental Agreements (IGAs) could clarify roles and responsibilities for; improve financial security for; and reduce potential cost shifting to local government.

On 22 June 2005, over three years after the inquiry commenced, the Federal Government has responded to the 18 recommendations made by the all-party committee.

The response supports the development of the IGA, a study by the Productivity Commission on local government revenue raising barriers and supports the recognition of local government by federal parliament. (This is still short of the constitutional recognition sought by local government.)

Unfortunately the Federal Government's response is still short of other Queensland local government expectations. There will be no review of the interstate share of the Financial Assistance Grants (FAGs). It was expected that such a review of FAGs would redefine the level of funding received by Queensland local government due to growth.

However, the positive response on the IGA has resulted in preliminary work being undertaken by a tri-partite working group composed of representatives from federal, state and local governments under the direction of Australian and state and local government ministers.

The local government position seeks a "robust" agreement that: assigns functions to local government by negotiated agreement; has funding arrangements locked in place; contains a mechanism to ensure agreements are not breached; and includes penalties for breaches.

Given the inherent sensitivities of the states to any action to control and or eliminate cost-shifting and the efforts of local government to achieve a "robust" IGA as outlined above, it is anticipated development of the IGA and negotiations with the states will take longer than local government would prefer. However, if the IGA is to be of any real value it needs to have teeth and produce outcomes to address cost-shifting.

The next meeting on August 4, 2005 of the Local Government Ministerial Council, consisting of local government ministers at the Commonwealth, state and territory levels plus the President of the Australian Local Government Association, Cr Paul Bell, will consider an early draft of the IGA and determine further action.

Prospects are that a useful outcome will be a while incoming!