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Thursday, 1 June 2000
Page: 16921

Mr WILKIE (11:18 AM) —I appreciate the opportunity today to speak on a matter that perhaps, unfortunately, will not get the public recognition it deserves but, nonetheless, will affect the lives of all constituents because they, of course, fall under the umbrella of local government.

Before entering federal parliament I had the pleasure of representing the people of the then Civic Ward of the City of South Perth for a period of 4½ years. Being a member of local government offered the opportunity to pursue practical initiatives which have a direct and important impact on the lives of the local community. As a former councillor, I fully appreciate the extent to which local government is stretched in terms of resources and know the difficulties faced in meeting the financial cost of operating in this sphere of government.

It is particularly galling to see legislation before this House that places even more pressure on local authorities. 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. As we shall see by any benchmark, their strategies have fallen way short of the mark.

The draft bill contains information on three critical points that illustrate this. The first is a reduction in the financial assistance grants funding of $15 million in the 1997-98 budget which has still not been replaced. In this respect 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.

The second is its lack of commitment to any real growth in the sector. As I understand it, there is a provision for an increase factor, which is a growth on a real per capita basis each year. That, of course, reflects roughly what there has been 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 amount in special circumstances. Members of the community will take some note of that and want to exercise some scrutiny over any attempt to vary that escalation factor. On past performance I would not give the Treasurer the opportunity to dabble in anything lest we regress to open sewers and dirt roads.

The third is the lack of support or information supplied by the Howard government to local government on implementing the new taxation system. 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 voluntary or notional GST payments for which it should be liable. This 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.

I note with some concern the views expressed by the members on the other side of the House and I quote the member for Barker when, referring to real reductions in past grants, he said:

It is not the fault of the Commonwealth government; it is because of the decentralisation process between state and local government.

He went on to add:

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 to take the matter of increasing cost to their respective state governments.

Madam Deputy Speaker, this is plain rubbish. As this government has to learn, with power comes responsibility and obligation.

Worse still, this government also changed the role of state and local government interrelations. In the past, state governments assumed the role of banker in trust to local government. They did this by forwarding the financial assistance grants to all local government authorities. Under this bill, this role will be altered to provide states with the power to withhold these financial assistance grants in cases where the local government fails to act as the tax collector for the federal government.

As many of us who have been in local government are aware, the relationship between council and state and federal governments can be a complex and obtuse beast. It is also notable that in many states that relationship has been increasingly tense due to political and economic pressures. It is in some cases unfortunate that, over the years, 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 do not keep up with their ever increasing costs.

Importantly, it must also be stressed that the inherent nonsense that this government and other conservative governments espouse about devolution will come back to haunt them. The irony is that whilst they have devolved or, to put it more appropriately, abrogated their responsibilities to other forms of government, they have not been prepared to back it up financially. Here is the situation—and I will give an example of a case in my electorate of Swan. They are forced to spend $50,000 to comply with the new tax and they get about $1,000 compensation for their efforts. They might be running close to the bone because their grants in the past have been reduced and now they are an unpaid tax collector who, if they do not comply adequately, will have all their funds held over.

I doubt if the community at large fully appreciate that their rates are being used to subsidise the government's new tax. The perplexing issue and one well understood in the wider electorate is the increased burden that is going to fall on local government in delivering and paying for all services. This will increase rates even further. In fact, the sum of $50,000 can be equated, for example, to a ½ per cent rate increase in South Perth, one of my local government authorities. That ½ per cent, $50,000, is a significant impost on the people of South Perth, particularly given that they were told that rates were GST free. This is nonsense, because somewhere along the line they have to pay for the GST. It will not be because they will get increased revenue from the GST but because the compliance costs and the burden that will fall on local government to administer this complex tax are going to make things very unpleasant for all residents.

The government knew a long time ago about the level of complexity and the strains that would be placed on local government with the increasing burden of the GST, and yet we find that they did surprisingly little to assist. I also understand that there has been much concern expressed by peak bodies such as the Western Australian Municipal Association. They indicate that the total compliance cost for local government authorities could approach $2.5 million in Western Australia alone.

The other issue I think is rather important and should be remarked upon is the fact that the federal government is giving something like $2.5 million to local governments throughout the entire Australian nation to help with the implementation of the GST. In Western Australia in their generosity the federal government scratched up a measly $402,000. To put that in perspective, local government in Western Australia has a total budget of around $1.73 billion. It employs 9,900 full-time staff and 1,900 part-time staff. It covers an area of about twice the size of Europe. Yet this government only allocates a fraction of the required amount to implement this tax.

As I understand it from various discussions I have had with one local government in the area, compliance costs could reach $50,000, if not more, to put the necessary computer equipment in and just to handle the most basic elements associated with the application of the GST and comply. However, I have been informed that that local government has only been given $1,000 by way of assistance. Taken in this light, that $1,000 is not going to go very far to help them comply.

The $50,000 per council that they need to implement the GST compliance requirements certainly will not be met by those funds. It is not just me saying this. It is coming from local government associations and a whole range of councils right across Australia. As Mr Michael Robson, Secretary of the City of Belmont Ratepayers and Residents Association states:

The government's funding to assist in the implementation of the GST falls far short of the expected direct cost to each local council. It is inevitable that the shortfall will be passed on through a significant council rate increase. This cost shifting caused by the federal government should be highlighted to the community as we will be ultimately paying for the shortfall in funding.

As a local councillor and having been a representative of the Western Australian Local Government Association executive, I can also appreciate the pain that smaller regional authorities will have to bear with increasing compliance and input costs. They will still feel the impact, yet their capacity to respond to compliance costs and the cash flow burden of the GST will be significantly harder because of their lower rate base.

I therefore find it appalling that at the last count the cost of the propaganda campaign launched by this government to sell the GST has risen to something like $420 million and that only $2.5 million will be split between every local government area in Australia to help them implement the GST. That $420 million might have been better spent on roads and footpaths in local suburbs, or better spent helping run libraries, or assist with the underground power in my electorate.

I am sure that the local authorities could have spent this money very wisely. In fact, to this end I have sought some examples of expenditure in our local area. It costs local government around $35,000 to $40,000 per kilometre to upgrade a footpath. That is from the old slab style footpath to the new in situ concrete. In South Perth alone there are around 170 kilometres of footpaths, and based on current budgetary allocations it will take this authority 10 years for the upgrade to be completed. With an ageing population, the issue of footpath upgrades becomes critical. As our senior citizens use existing slab style footpaths they are prone to tripping on the uneven surface, causing falls which have resulted in serious injuries. Over a kilometre of additional paths could be upgraded in South Perth every year just for the cost of GST compliance.

Consider also that it costs local government about $1 million per annum to run a library, or that the construction and maintenance of a major sector of road can be around $100,000 per kilometre. What a waste to see so much have to go on the GST propaganda campaign. How unfair is it to deny citizens proper services when money is being allocated for political messages.

In conclusion I say to members of this House that we should feel for the plight of local government because much of the necessary funding to maintain this vital link to the community has been savagely cut by this government. We know that, while they cry crocodile tears for local authorities that are doing it tough, they have also spent $420 million on a political propaganda exercise. Secondly, the opposition is correct in its criticism that this bill should not allow the Treasurer to use his discretion to determine the escalation factor. We may also claim that this is an opportunity of providing local government with a fixed percentage of Commonwealth revenue. Thirdly, given the cost in terms of compliance, there should be an appropriate investment to cope with the GST, which is estimated to be in the order of $2.5 million in WA alone, yet there is little or no real evidence of compensation. Therefore this government stands condemned for its hypocrisy. It talks of its belief in local government and devolving democracy but its action does not match the rhetoric. What they have done is give more responsibility without matching this with the necessary resources to accompany their goals.