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Tuesday, 30 May 2000
Page: 16589


Mr SECKER (9:20 PM) —Isn't it interesting that those opposite continue to claim that the so-called Joe Cocker adverts are costing $400 million, when they know that comment is completely misleading? The opposition knows that that is not the case. All of that $400 million is providing valuable information to the public. Those opposite cry out for more information and then complain about the cost. This is typical of the Labor Party's populist approach to government. I believe that those opposite are deeply concerned about the Joe Cocker ads not for the reasons they are espousing but because those ads are so effective.

I rise to speak on the Local Government (Financial Assistance) Amendment Bill 2000 because of its importance to good government not only at the federal level but also at the local government level. In the years 1981 to 1992, some 11 years, I had the pleasure and privilege to serve as a councillor on the Mount Barker Council. In some ways, it was part of my upbringing. My father had served as a councillor and chairman of the Meadows District Council, and two of his brothers had also served in local government—one as mayor and the other as a councillor. Therefore, four closely related Seckers that I know of have served as councillors on four different councils. So I think, without any false modesty, I can speak with some experience on this matter.

The purpose of the Local Government (Financial Assistance) Amendment Bill 2000 is to give effect to the government's undertaking to retain responsibility for the payment of general purpose assistance to local government and to maintain the level of such assistance in real per capita terms. Unfortunately, over the years all state governments have taken the opportunity to pass over some of their responsibilities and, more importantly, their costs to local government which has led to local government, in general, saying that these financial assistance grants—or FAGs, as they are known in local government circles—do not keep up with their ever increasing costs. However, I point out that this is not the fault of the Commonwealth government; it is because of the decentralisation process between state and local government. I know that this has been the case in South Australia, and I am sure it has also been the case in other states, and in many ways I applaud the decentralisation of power to local government for local people to make the decisions that affect them. In most cases, local people can best determine the needs and aspirations of their own residents, and it is for the local governments in each state to take the matter of increasing costs to their respective state governments.

It is interesting to note that in South Australia the state government has recently reduced the costs to local government of providing for emergency services with the Emergency Services Levy. Unfortunately, it has not been a popular move because it has been seen as an extra tax rather than a replacement levy, or tax as it really is. Every member of state parliament voted for the Emergency Services Levy because it is a fairer system that spreads the levy over the whole population and removes the costs of providing those valuable services, much of which is provided by volunteers such as the Country Fire Authority and the State Emergency Service.

It also removed the levy from insurance premiums. Unfortunately, those who did not insure or insured offshore were able to get out of paying their fair share toward providing those valuable emergency services, and the emergency services levy enabled the government to capture this group as well. But the public have not acknowledged that they are no longer paying these two levies. They have looked only at the negative of the levy rather than the positive of not paying the other two levies in local government charges and insurance premiums. I know that, in the Mount Barker Council, the cost of providing emergency services was nearly 10 per cent of the total budget. It seems ironic that, as a councillor of the Mount Barker Council and now as a member of parliament representing the seat of Barker, I get the same problem with A New Tax System whereby many voters look only at the negative aspects of the GST and do not acknowledge the many positive ones such as lower taxes overall, the scrapping of 10 other taxes, including the wholesale sales tax, the removing of huge tax burdens on business, the biggest personal tax cuts in Australia's history and important tax reform.

But, getting back to this bill, it is also important to put the case that, in general, South Australia is getting a rough deal compared with other states. As many members would realise, local government gets two types of federal grants—the financial assistance grants and the untied road grants. Some states do better than they should in one area and not so good in the other area and vice versa. South Australia, unfortunately, is the only state that does worse than it should in both types of grants, and it is about time there was some sort of equalisation process—although I do know that Queensland argues that it has a similar problem, but it is certainly not to the extent of South Australia.

To look at each grant area would get opposition from each state in turn but in different areas. For example, Tasmania receives far more in road grants than it should—and I will come to that in a minute—but it probably should do better in financial assistance grants. The opposite probably occurs in Western Australia. But, if we put both grants together into one set of grants, there would be less pain and less opposition from other states who overall would not be that much different in an equalisation program similar to the aged care funding equalisation program. There is no valid reason why we could not put the two grants together anyway because they are both untied. We could put them together and call them the local government assistance and roads grant.

I had the privilege of being part of the House of Representatives Standing Committee on Primary Industries and Regional Services visit in November last year to Tasmania. I was amazed at the wonderful road network there in comparison to South Australia. It is no wonder that Tasmania's road network is far better than ours in South Australia because Tasmania receives the same amount in road grants as South Australia, even though it has a third of the population and is one-fourteenth the size of South Australia. When you ask why and what logical formula is used to work out the road funding grants, there is no logical answer, and the formula was set so long ago that it has been lost in the mists of time. When we look at the basis of the Commonwealth grants to local government, we know that they are provided through the states to local government and have been since 1974-75. This means that, because of this constitutional requirement, the states decide where the grants go and to which councils.

It is interesting to note that the South Australian government recently changed the allocations to give more emphasis to rural councils and, as a result, the rural councils were smiling because they got extra money. For example, in my electorate of Barker, the regional city of Mount Gambier screamed blue murder because they got less. They do have an argument, however, because they got much less than the regional centre of Whyalla, which has about the same population as Mount Gambier. In 1976, the Fraser government passed the Local Government Personal Income Tax Sharing Act, which entitled local government to a specified percentage of net personal income tax revenue received in the previous year. The distribution of this revenue was based on horizontal equalisation principles, which most members of this parliament would agree with. In May 1984, the then government established the national inquiry into local government finance, referred to as the Self report after its chairman, Professor Peter Self. After considering the report, the Hawke government abandoned the tax sharing arrangements of the Fraser government and tied the general revenue funding to growth in general purpose funding to the states.

The problem with the Hawke government decision was that, although this indexation places a floor under assistance, indexation does not provide any real growth. One of the policies that I pursued was to ensure that local government received a fixed percentage of the GST revenue, which will of course all go to the states. This way local government would have received the same benefits as the states and would have been part of a growth tax which grew with consumption. Because the Labor Party and a certain Senator Harradine in the other house would not see reason, it became necessary for this government to accept amendments from the Democrats in the Senate, especially in regard to food being GST free.

Not only have these amendments meant that we now have extra compliance problems and exemptions—and we see that in the meat processing industry, the fruit industry, the egg industry and so on—but, because this meant a huge reduction in the GST revenue going to the states, this has led to the need for the Commonwealth government to continue the type of funding that this bill allows for rather than allow local government to be part of receiving the same benefits as the state governments. It is unfortunate that local government did not lobby the Democrats, Senator Harradine or the Labor Party successfully to show this problem. It is also unfortunate that the Labor Party chose the path of cheap populism instead of a more responsible path. If the Labor Party had put the good of the nation ahead of their own short-term populism, then we could have come up with a better tax reform system with fewer compliance costs, compliance anomalies and a guarantee to local government of a growing revenue.

In essence, this bill proposes the continuation of existing practice whereby local government general purpose assistance is indexed to population and inflation. This does provide for a floor in grants to local government. I hoped that the Labor Party would have acted more responsibly than they have tonight with the silly amendments they have moved because, if this amendment does not pass through both houses of parliament by 30 June 2000, just one month away, then the Commonwealth will be unable to pay financial assistance grants to local government for the next financial year. This amendment honours the government's commitment in the original tax reform plan to maintain the funding guarantee arrangements for local government on a real per capita basis. But, as I said before, because of the Labor Party's intransigence, we have no chance whatsoever of having a fixed year of GST revenue for local government, which I am sure would have suited local government bodies all over Australia and would have provided a lot of those services which the previous opposition speaker spoke about.

This amendment also provides a mechanism to encourage local government bodies to register for an ABN, Australian Business Number, so that each council is part of the GST system and receives the benefit. I noted that the previous speaker did suggest that local government was wholesale sales tax exempt. That is correct. For example, the purchase of motor vehicles will still be wholesale sales tax exempt and, when the full input credits come into place in the year 2002, they will receive that rebate. But it fails to recognise that there are a lot of embedded wholesale sales taxes in the things that they purchase which make those things more expensive and the present Labor Party wholesale sales tax system does not enable them to get an input credit for those wholesale sales tax costs. Of course the Labor Party would not want to let the truth get in the way of a good story.

This amendment continues the Commonwealth's funding of local government on a real per capita basis with an annual escalation factor, and the coalition is honouring its pre-election commitment and also the commitment that government later made in the agreement with the Democrats. The opposition may be critical that the bill does not contain provision to prevent the Treasurer using his discretion to determine the escalation factor, as had to happen in 1996 to account for Beazley's black hole. The response to this is that the relevant section is not being changed significantly from Labor's 1995 act which allowed the Treasurer to make such changes. The opposition may also claim that this is an opportunity of providing local government with a fixed percentage of Commonwealth revenue. I think the response to this is that Labor had 13 years to do this when they were in government and also that these amendments maintain a similar escalation factor as existed under Labor. I commend this bill to the House.