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Thursday, 1 June 2000
Page: 16906


Mr SNOWDON (9:59 AM) —I rise to speak in the debate on the Local Government (Financial Assistance) Amendment Bill 2000 for a number of reasons, not the least of which is to point out the anomalous situation which exists in relation to the distribution of funding for local governments in Australia. I note the amendment which has been moved by the Labor Party. It is worth repeating the elements of that. In our amendment we are concerned to address the question of the cuts, in real terms, that the government has made to financial assistance grants—FAGs—to local government since first coming to office; the attempt to terminate the 25-year Commonwealth-local government funding partnership by trying to transfer responsibility for local government financial assistance grants funding to the states; the failure to exempt local government service from the GST as the government promised before the 1998 election, only to renege on this commitment within months of regaining office; the imposition of a regressive and unfair tax on essential services provided by local government to communities in regional Australia; and the way in which the government has hit councils with major GST compliance costs, with inadequate compensation or assistance.

I want to explore for a moment the way in which the Commonwealth funds local government. The Commonwealth provides local government financial assistance grants and local government untied road funding to the states under the Local Government (Financial Assistance) Act 1995 as a specific-purpose payment for on-passing to local government. This amount in the financial year we are about to complete was $1.3 billion. The total amount is determined by the Commonwealth Treasurer, and it is increased annually by the movement in general revenue grants provided to the states.

The interstate distribution of the financial assistance grants is on an equal per capita basis. The road funding is distributed between the states on the basis of criteria established under the Australian Land Transport Development Act 1988. The state grants commissions determine the intrastate distribution of both these payments to local governments. Distributions must be made in accordance with national principles, which require, firstly, that FAGs be allocated as a minimum grant to all councils which is not less than 30 per cent of the total funds distributed on an equal per capita basis; the remainder on the basis of horizontal equalisation and effort neutrality, and individual council policies should not influence their grants. The principles require recognition of the needs of Aboriginal and Torres Strait Islander people; and that account be taken of other grant support received by local councils, such as through specific-purpose payments. Secondly, the principles require that the identified road component be allocated on the basis of relative needs of councils for expenditure on roads and to preserve road assets.

The interstate distribution on an equal per capita basis and application of these principles means that the distribution of Commonwealth grants to local governments does not achieve horizontal fiscal equalisation among local councils across Australia or within any one state. Work undertaken by the Commonwealth Grants Commission in 1991 suggested that a distribution very different from equal per capita would be required if state grants were allocated on the basis of fiscal equalisation principles. The guaranteed minimum grant means that equalisation within a state cannot be achieved, because councils with no relative needs or more revenue than they need to fund standard service provision receive funding. As a result, the needs of other councils cannot be met and they are not funded to enable them to provide standard services.

That is a very important issue, which impacts gravely on my constituents in the Northern Territory. I want to explain how that is so, and why there should be a review of the way in which the Commonwealth provides these funds to state and territory governments for the allocation for local government purposes.

We require that once these funds are received by the states, whilst they have got a minimum, they use the fundamental principle of fiscal equalisation in their distribution. Yet when taxpayers' funds are made available by the Commonwealth to state and territory governments for distribution to local governments, they are not required to use the same principle. Of course, they are for other Commonwealth grants. All general revenue assistance made available as a result of Grants Commission recommendations are based on this question of horizontal fiscal equalisation. That means that all states and territories are then given resources to provide a similar standard of services to all their citizens so that they are roughly equitable across Australia. This is not the case for local government. In that context, we have seen an abrogation of responsibility by the federal parliament over a number of years—not only since the Howard government came to office—to local government, particularly in more remote communities.

I have in front of me a letter written by Senator the Hon. Ian Macdonald in his capacity as Minister for Regional Services, Territories and Local Government to the President of the Local Government Association of the Northern Territory. The letter is effectively a form letter in which he informs the association, as he is required to do, he says, under section 17 of the Local Government (Financial Assistance) Act 1995, that a review of the act will be undertaken before 30 June 2001. He points out that section 17 of the act specifies some areas that must be covered by a review. The act also requires him to review other matters relating to local government that he may determine. That is significant, Mr Deputy Speaker, for what he did not determine. He points out that he has drafted terms of reference which followed discussions between his department and the Commonwealth Grants Commission. Before finalising these terms of reference, he has sent copies to the respective state and territory ministers. He points out that the review is to commence soon, as he wants comments by 3 May 2000. I would like to quote the following paragraph of his letter:

I am conscious that some in Local Government would have liked wider terms of reference to allow a review of the interstate distribution of funding. I am also aware that there are some that do not want the interstate distribution reviewed at all. This has been a contentious issue between States for some time, and was extensively debated as part of the negotiations over the 1999 Intergovernmental Agreementon theReformof Commonwealth-State Financial Relations. The Federal Government does not support re-examining this matter as part of this review. For those Councils or Associations wishing to pursue this matter I suggest you approach your State Government for appropriate attention.

What a cop-out. The fact is that this minister, and this government, by virtue of this minister's response, have totally washed their hands of looking at any way to fairly distribute these financial assistance grants through state and territory governments to local governments around Australia.

I also have in front of me a letter, in response to the letter from Senator Macdonald, from the Northern Territory President of the Local Government Association, Margaret Vigants, in which she says:

You have advised in your letter of 17 April 2000 that the review is “an important part of the Government's desire to enhance equity between councils”. In view of this objective, Minister, we would ask that before you approve the final terms of reference for the review, you examine the equity issues associated with the current funding levels councils in the Northern Territory receive under this act.

There are 69 councils in the Northern Territory under various forms of local governance. They include metropolitan councils such as the Darwin City Council, the Alice Springs Town Council, the Katherine Town Council, the Tennant Creek Town Council, and others. They also include a number of community government councils which are government councils under specific legislation in the Northern Territory for Aboriginal communities. And they also include incorporated Aboriginal communities and organisations who carry out local government services in Aboriginal communities around the Northern Territory.

This is an important feature because local governments in the Northern Territory do not share the same attributes as local governments elsewhere in Australia, nor do they share the same responsibilities. Their responsibilities are different. What Mrs Vigants has done is provide some information to the minister on the way in which grants are made available in the Northern Territory and what their impact has been.

You need to know that grants to states and territories are done on a per capita basis of around $44 per person. There is, as a result, because it is per capita, no allowance for remoteness, no allowance for disability factors, no allowance for the other issues which are raised when we distribute funds on the fundamental principles of fiscal equalisation. I do not have time to go through those now, but I am quite happy at some future time to point out the elements that go into that determination by the Grants Commission. Suffice to say that, because these are per capita grants, none of these issues are contemplated.

The fundamental issue is that, because grants are made on a per capita basis, states with a larger base, a larger population, get a greater amount of funds to distribute around the state to remote areas. This is significant. You can see how significant it is in the case of Queensland. For example, the Brisbane City Council is eligible for $38 million on a per capita basis, but because of the size of the base in Queensland and the way in which the Queensland government properly distribute those funds, it receives only $12 million, the rest being distributed amongst other councils. The Northern Territory gets a total of $9 million, so there is not enough money to spread around to remote communities on the basis of remoteness and the nature of the services they provide.

As a comparison of how funds are distributed across Australia, in towns with approximately the same population, for example, Darwin City Council and Ballarat, Darwin City Council received $1.3 million as a result of this funding and Ballarat received $5.7 million. Katherine received $450,000 whereas Ararat, of roughly the same population, received$1.4 million. Port Keats, an Aboriginal community to the west of Darwin, received $200,000, and Barcaldine in Queensland, a town of equivalent size, received $1.2 million.

You can see the obvious disparity which results from the way in which the funds are made available. The Aboriginal communities get an operational subsidy from the Northern Territory Grants Commission because significantly they have no rates base. This is true of most of the local governing bodies in the Northern Territory, apart from the metropolitan councils. They do not have a rate base, and they get short-changed in the context of the distribution of these funds because they are distributed unfairly.

Why should it be that residents of North Sydney get the same allocation of resources for local government from this government as do people who live at Kintore? There is no equity at all in the distribution of these funds. Why is it that the people who live in South Yarra get the same level of funding from this federal government as do the people from Tennant Creek, in the case of local government funding? There is no logic to that position. I have made it very clear to others in this place that I intend to make this an issue and continue to develop it as an issue because I do not believe that to allow this disparity to continue is a responsible way to govern.

I note that the government talks about practical reconciliation. I have made the observation before that practical reconciliation, and what the government terms practical reconciliation, is ultimately about giving people the rights they properly deserve: rights to an education, rights to public infrastructure, rights to health care—things which every Australian should at least expect to be made available to them by the government. I do not believe that that is reconciliation at all; I think that is a matter of government accepting its responsibility.

In the context of local government, they have a responsibility, because one of the major deficiencies that exists in this funding is the funding which is not made available as a result of the formula to Aboriginal organisations and remote communities which carry out local government functions. Mr Deputy Speaker, I made some comparisons a little while ago. Let me give you some more. You will be aware that the average grant paid to councils in the Northern Territory or classified as urban capital city, of which there are six, is around $1.3 million. The average grant paid to councils in other states in the same classification is $2.3 million. The average grant paid to the classification of rural, remote and small, of which there are 23 in the Northern Territory, is $75,500; the average across other states is $501,000. So they get almost nine times the amount of money, as a result of this process, than their counterparts in similar situations in the Northern Territory. That is grossly unfair.

I know, Mr Deputy Speaker Nehl, that you have been to some of these communities. You will know the poverty that exists in those communities, the lack of community infrastructure and the lack of service availability. One of the key elements of that is the failure of this government and previous governments to acknowledge this in the way in which they make funding available to local government. I think it is both unfair and unreasonable for this parliament to accept, when we are approaching the centenary of our Federation, that this situation exists. The minister says he represents regional Australia. I note he has been traipsing around northern Australia recently—not very successfully, I might add—talking about issues to do with regional governance. This is a major issue which is not being addressed and he determines that it will not be addressed in the review of the local government act.

It seems to me that he has a responsibility to put this front and centre. The Prime Minister has a responsibility to put this front and centre. I note that in the letter from Mrs Vigants she says:

Your specific exclusion of consideration of the interstate distribution of funds will not allow this review to genuinely achieve a more equitable outcome of funds to councils across Australia.

That is correct, and it is sad. Mr Deputy Speaker, I do not have time to go through in detail the question of local road funding. But put yourself in the situation of these small councils, which might have 200 people, 50 people or 100 people, in remote communities which may be 200 or 300 kilometres away from another community. The local road funding they achieve is based on this small agglomeration of people living together in a very isolated place. The difficulty is that neither this government nor the Northern Territory government have accepted any responsibility for providing the necessary funds needed to provide the transport infrastructure, the roads that link these communities. That is an abrogation of responsibility and, again, something which should be addressed as to the way in which these local government funds are made available or, more specifically, by the government making available a suitable pool of funds for these purposes.

The amendment which has been moved by the Labor Party should be supported. I say to the government: it is about time that you got fair dinkum. It is about time that this parliament got fair dinkum by making sure that resources made available to local government are made available on a fair and equitable basis.