Mr MILES (Parliamentary Secretary [Cabinet] to the Prime Minister)(8.50 p.m.) —in reply—I want to make a few comments after listening to the honourable member for Shortland (Mr Peter Morris), who spoke about gambling. I think a lot of us in this House would share his concern about the seemingly growing dependence on gambling for state revenues. I think a large number of us are concerned also about the social fallout that sometimes occurs in association with gambling in this country. I thank the honourable member for his thoughtful comments in this regard. It is not the main substance of this states grants legislation and what other speakers have spoken about, but obviously it is pertinent to this debate.

I want to make a few remarks in response to comments made by speakers. In regard to state fiscal contributions, I make the general comment that it was the states who agreed to make the fiscal contributions to the Commonwealth for three years to assist the national savings task. It was not something which was foisted on them. It was an agreement between the states and the Commonwealth to undertake this task for the purpose of national savings. The Commonwealth also agreed to maintain real per capita growth in financial assistance grants. I underline that because some speakers have indicated that that may not have been the case.

The need for state fiscal contributions in 1998-99 also will be reviewed at the 1998 Premiers Conference in the light of developments in the Commonwealth's fiscal position. Also, as noted by my colleague, the Commonwealth and states agreed to a deferral of half of the 1997-98 fiscal contributions of Tasmania and the ACT until 1988-99 in the light of their difficult economic circumstances.

I want to make two comments about vertical fiscal imbalance. Firstly, as announced by the Prime Minister (Mr Howard), reform of Commonwealth-state financial relations must be addressed in the work of the taxation task force and the government's consideration of tax reform. Secondly, the Prime Minister has indicated that a special Premiers Conference will be convened to seek the views of the states on these matters.

The opposition spokesman, the Hon. Gareth Evans, asked for some assurances in regard to a number of matters, and I just want to address some of those in the debate in the House. First of all, in regard to distribution of revenues among the states, state shares of revenue to replace payments were agreed among the states and advised to the Commonwealth. They were a state decision. The shares are based on Commonwealth Grants Commission estimates for 1996-97 on a business franchise fee revenue basis. The distribution will result in some states receiving more revenue than they previously raised under their business franchise fees, due to the constitutional constraint requiring the Commonwealth to apply taxes uniformly across the states, and the wish that no state be worse off as a result of the High Court decision. However, excess revenues are to be refunded to manufacturers and wholesalers in order to avoid, as far as possible, price increases for consumers and petroleum users.

The second area which the honourable member referred to was in regard to no extra taxes. The states acknowledge that this will represent a state tax imposed and collected by the Commonwealth at the request of and on behalf of the states. All revenue collected by the Commonwealth under these arrangements will be returned to the states, after allowing for Commonwealth administrative costs. The Commonwealth is not increasing its revenue—and I want to stress that: there is no increase in revenue by the Commonwealth in this matter.

The safety net arrangements are intended to be temporary and will be reviewed within six months. Regulations may be necessary under the act to ensure that any further variations in surcharges are reflected in revenue replace ment payments to the states. However, given the expected duration of the arrangements, any such variations are likely to be minor and technical. If a state wished to increase its revenue from this source, it would be a longer term issue, outside the scope of the arrangements as currently framed, and a matter for consideration if and when it occurred.

The opposition spokesman also raised the matter of equitable impact on businesses affected. As these are effectively state taxes, the impact on individual businesses and classes of businesses is largely a matter for the states. For the Commonwealth's part, however, it would wish to see the arrangements operate as smoothly and equitably as possible. I thank the members who have participated in this debate and I commend the bill to the House.

Question resolved in the affirmative.

Bill read a second time.

Messages from the Governor-General recommending appropriation for the bill and proposed amendments announced.