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Tuesday, 30 May 2000
Page: 16579


Mr TANNER (8:32 PM) —The Local Government (Financial Assistance) Amendment Bill 2000 is yet another piece of legislation that arises from the GST package. It follows the attempt by the government in its initial ANTS package to introduce the GST to abolish financial assistance grants to local government direct from the Commonwealth and to essentially hand over responsibility for providing that finance to the states. Fortunately, Labor was successful in the Senate in moving an amendment to the legislation to ensure that direct Commonwealth financial assistance to the local government sector could continue. This was subsequently superseded by the deal that was agreed to by the government and the Democrats with respect to the entirety of the GST package. As a result of that, this legislation before the House this evening is a new model of Commonwealth assistance to local government, replacing the old financial assistance grants model.

The legislation does a number of things. Firstly, it abolishes the old link between financial assistance grants to local government and financial assistance grants to the states. Previously, the local government grants were in effect a subset of or directly connected to the financial assistance grants to the states. Clearly, as financial assistance grants to the states have been abolished and will cease to exist as of 1 July this year, that nexus could no longer function. Secondly, there is provision for an escalation factor, which is an increase on a real per capita basis each year. That, of course, reflects roughly what has been occurring over the bulk of this decade, that the financial assistance grants to local government have continued to increase on that basis, reflecting both inflation and population increase. It is worth noting that the Treasurer retains a discretion to vary the uplift factor, or the escalation factor, in special circumstances. We obviously will take some note of that and want to exercise some scrutiny over any attempt to vary that escalation factor. One would assume that if it is varied it is going to be varied down, rather than up.

Thirdly, the legislation implements a provision in the intergovernmental agreement with respect to the GST package which provides that financial assistance grants to local government may be withheld to any local government body which refuses to pay the voluntarily or notional GST payments for which it should be liable. This, of course, also arises from the nature of the GST package and the need to force compliance upon local government for GST payments. This provision ensures that part of the intergovernmental agreement that applies to the execution of those GST liabilities is in fact implemented by the legislation.

Labor is not opposed to the legislation, and in fact is rather pleased at one level that we are seeing the continuation of direct Commonwealth assistance to local government. It is unfortunate that this is occurring in the context of the GST legislation. One or two of the aspects of the legislation are a little bit troubling, nonetheless it is of some significance that we will continue to see local government receiving direct payments from the federal government. However, it is worth noting that the legislation does not restore the $15 million that was cut by the Howard government from federal assistance to local government in 1997-98. Secondly, there is no provision made for any real growth in payments to local government, hence my comments about the escalation factor and the unlikelihood of that actually being raised by discretionary action of the Treasurer.

Thirdly, there is no provision for any substantial support for local government with respect to the costs of implementing the GST. The Municipal Association of Victoria—in the state which I represent in this parliament—estimates that the cost per individual council of implementing the GST is going to be in the vicinity of $1 million per council. That is obviously a rough estimate, and it will vary to some extent from council to council, but there can be no doubt that the cost burden for individual councils for implementing the GST will be quite substantial and will reflect the same sorts of problems in many respects that Australia's small businesses are already grappling with and finding themselves snowed under from.

When we look at that spectrum of implementation costs for the councils of Australia and contrast that with the provisions that the government has made to defray those costs, we see a fund of $2.5 million, which is barely over a couple of thousand dollars per council to provide assistance for implementing the GST. It is worth noting that the government's assistance to local government for implementing the GST is grossly inadequate. This legislation, much as it provides for the continuation of federal assistance to local government, does not provide in any way for that particular problem. There is no doubt that that will be a major problem for councils.

Councils throughout Australia operate on very tight budgets. They operate under considerable constraints, particularly in recent times in Victoria where they had severe problems under the former Kennett government. That, hopefully, will be gradually relieved as a result of the election of a Labor government in Victoria.

The withholding of financial assistance grants from local government for failing to comply with the GST and for failing to provide a voluntary or notional GST payment where it is deemed appropriate is an extreme punishment for councils when you consider, first, the cost of implementing the GST, which I have already referred to, and, secondly, the fact that the division 81 determination on which local government activities are exempt from the GST and which are subject to the GST has only just been finalised—on 1 March in fact, so only a couple of months ago. In other words, councils are effectively being told, `Comply or else, but it is going to cost you. And, by the way, we will give you very short notice of precisely what it is you have to comply with.'

On the assumption that this legislation does ultimately become law, I urge the government to exercise a degree of constraint and commonsense in dealing with this particular issue because I suspect there will be instances of councils failing to comply for no other reason than the confusion, the mess and the difficulty that they and many other organisations in this country will experience as a result of the introduction of the GST. So I urge a lenient approach by the government on this particular issue.

It is worth noting in a more general sense that this particular provision is typical of a long-standing and long-term conservative distaste for local government in this country. We need look back no further than the infamous 1988 anti-referendum campaign led by the now Minister for Employment, Workplace Relations and Small Business, Peter Reith, when, amongst other things, he opposed the inclusion of formal recognition of local government in the Australian Constitution. We need look no further than the sorts of funding cuts to local government which I have referred to. Nor, indeed, need we look any further than the harsh implementation of compulsory competitive tendering by the Kennett Liberal government in Victoria which gutted local communities in many areas, particularly in rural Victoria, and created circumstances where, for relatively limited reductions in rates, contractors and local day labour working for councils were put out of jobs and were replaced by fly-in and fly-out operators who live in and spend their money in other communities some distance away.

We also need to look at the way that mergers of councils have been pursued by governments such as the Kennett government. The merger of councils as a general principle in Victoria made a lot of sense; however, in some of the relatively thinly populated small towns in Victoria it caused significant difficulties. In the town where I come from originally—Orbost in East Gippsland—the council was merged. That meant ultimately a slight reduction in rates for the 2,500 people who live in Orbost. It also meant a significant reduction in the number of jobs. There is no question that, for a community of that size which has been suffering population loss and is now one of the most depressed and disadvantaged communities in Victoria, the loss of those jobs and the implications of that far outweigh any rate reductions that came from council rationalisation. All this tells us that these issues need to be approached in a fairly sensitive and commonsense way and that what may be an intelligent strategy for metropolitan Melbourne—where having large numbers of councils with small rate bases makes no sense—is not necessarily a smart strategy for parts of Victoria or other parts of Australia where you have more sparse and thinly spread populations.

Local government is playing an increasingly important role in service delivery in Australia. This is in part because of things like amalgamations in major areas and major provincial cities like Geelong and Bendigo. We have already seen it for many years in large councils such as Townsville and Brisbane in Queensland and in other parts of the country. Of course councils that have critical mass and scale can deliver services at a level which smaller councils that have dotted the landscape in metropolitan areas find it difficult to do.

I certainly believe there is an important future for local government in Australia to deliver services because it is the level of government that is closest to the community and that is in a sense the most representative at that direct local, parochial level. Therefore, it should have a very important role in the delivery of services to local communities and in the making of decisions and the allocation of priorities in the delivery of those services. We should be on about strengthening that role, strengthening the links between local government and the community, and ensuring that there is a formal role for local government in our constitutional framework and that the Commonwealth provides appropriate funding support to local government.

In conclusion, it is pleasing that we still have direct local government funding by the Commonwealth, in spite of the initial intentions of the government. This bill is by no means perfect and there are a number of aspects of it which do give us some cause for concern, but the opposition is not opposing the bill. I move the second reading amendment which stands in my name:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the Bill a second reading, the House expresses its concern that the Government:

(1) has cut Financial Assistance Grants (FAGs) to local government in real terms since coming to office;

(2) attempted to terminate the 25 year Commonwealth local government funding partnership by trying to transfer responsibility for local government FAGs funding to the states;

(3) promised to exempt local government services from the GST before the 1998 election only to renege on this commitment within months of regaining office;

(4) through the GST, has imposed a regressive and unfair tax on essential services provided by local government to communities in regional Australia; and

(5) has hit councils with major GST compliance costs with inadequate compensation or assistance”.


Madam DEPUTY SPEAKER (Mrs De-Anne Kelly)—Is the amendment seconded?


Mr Kelvin Thomson —I second the amendment and reserve my right to speak.