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Wednesday, 7 June 2000
Page: 14776

Senator MACKAY (10:33 AM) —This bill is essentially a creature of the government's GST package. In many ways, as far as this government is concerned, the bill marks a failure and a loss for the Howard government in relation to local government. It is a mark of failure because the original tax reform package was designed to abolish financial assistance grants to local government. The ANTS package was meant to use the GST to transfer the Commonwealth's responsibility for financial assistance grants to state governments, in the process totally removing the Commonwealth government from any funding responsibility whatsoever for local government. However, at that point the Labor Party, with the assistance of the Democrats, was able to move an amendment in the Senate to the ANTS legislation to ensure that the direct financial link between the Commonwealth and local government was maintained. Subsequent to that amendment, the Democrats and the government struck a deal on the complete GST package, and that nexus remained in relation to that deal. The outcome of this deal is the bill before the Senate today.

The content of this bill deals with a number of issues relating to financial assistance grants. Firstly, it abolishes the old link between financial assistance grants to local government and financial assistance grants to the states. In the past, there was a direct connection between local government grants and financial assistance grants to the states and then to local government. In effect the states were previously a postbox for financial assistance grants. This bill has the effect of changing the nature of that relationship. As financial assistance grants to the states have been abolished as a result of the GST legislation and will cease, as everybody knows, on 1 July this year, the connection between local government financial assistance grants and state financial assistance grants could no longer be maintained. That is the machinery aspect, if you like, in relation to this.

Secondly, the provision for an escalation factor in this legislation is retained. This escalation factor is an increase on a real per capita basis each year. This is simply a reflection of what has been occurring over the last decade. Local government grants have continued to increase on that basis in line with two major indicators in relation to the escalation factor: inflation and population increase. It is worth noting that the Treasurer still has a discretionary power to vary the escalation factor in special circumstances. This is a bit of a cause for concern and it is something that we will monitor for reasons that I will come to a bit later in my contribution. The assumption is that if the escalation factor is going to be revised, it will obviously, under this government, be revised downwards or be suspended rather than increased. We know from history that this government has no compunction at all in using this power to penalise local government, just as it did in the 1997-98 financial year—a penalty that has, in fact, cost local government over $61 million since 1997-98. I refer of course to the freezing of the escalation factor in the first Costello budget, which deprived local government of $15 million. That escalation factor and that money have never been returned. The aggregate is currently $61 million in terms of loss to local government.

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 from any council which refuses to pay voluntary or notional GST payments for which it should be liable. This arises directly from the GST package itself and the need to enforce compliance from the government's perspective upon local government for GST payments. This provision ensures that the part of the IGA that applies to the execution of those GST liabilities is in fact implemented by this legislation.

They are basically the objectives of the legislation before us today. We are not opposing this bill but we have opposed every piece of legislation that led to this bill. We opposed the ANTS package. We opposed the GST. We opposed it in relation to Australia and also in relation to local government. A number of issues ought to be highlighted in this debate, issues which in turn will highlight the Howard government's real agenda in relation to local government. From our perspective, local government has been abused and ignored by this government. They have every right to feel outraged and they are outraged by the way that they have been treated by this government. It is not good enough for this government to ignore or pay lip service to local communities, particularly in regional areas. Tokenism and rhetoric will not keep communities silent. Saying something is not so will not in fact make it not so. The Orwellian nature of this government and the rhetoric that it uses do not wash in regional Australia.

I notice Senator Kemp seems to think this is funny. I presume he thought the change of government in Victoria was similarly hilarious and the Benalla by-election was also extremely amusing. Both of those incidences show that the approach does not work. Nobody in regional Australia believes this government and nobody in local government believes this government.

As I said before, the biggest act of abuse of the local government sector by the Howard government came in the first Costello budget, when financial assistance grants to local government were dealt a major blow by this government. Financial assistance grants were cut by $15 million in that 1997-98 budget. This was never restored. Despite the fact—from Mr Costello's own lips—that there were budget surpluses, this was never restored to local government. As I said previously, this has meant a cut to the local government sector of $61.4 million. If we average that out across every council in Australia, we are talking a cut of $87,000 per council since this government came into power. That is only in relation to financial assistance grants. There are a whole lot of other things in relation to this that I will come to later on. I will bet London to a brick that every council in Australia would be desperate right now to have that money, given the cuts to this sector by this government. It is extremely disappointing, and it is not just disappointing from the Labor Party's position. Local government is very, very disillusioned with this government. If anybody on the other side has the intestinal fortitude to go out and have a chat to any councils, they will get that response.

Essentially, this reveals the real nature of the coalition government's attitude to local government. It also, from our perspective, serves as a sharp distinction between the coalition and Labor when it comes to local government. The Democrats will obviously contribute later on in the debate. Let us do a quick comparison with what we did for local government in the final years of the Labor government leading up to 1996. It provides a very stark illustration of how this government feels about local government and how Labor feels about local government. Under the Labor government and the direct guidance of Brian Howe, who was the then minister for housing and regional government and who is spoken of extremely highly in local government around Australia—unlike the current minister, which is an understatement—local government was on the verge of entering into a new deal with the federal government. This deal would have left local government far better equipped to face this century than the non-existent policies of the Howard government. That is the best they could be described as. I suspect that they are not just non-existent; they are in fact retrograde.

During the final years of the Labor government we saw the signing of an accord with the Australian Local Government Association, between local government and the Commonwealth. We saw the establishment of a local government development program designed to provide project assistance across a range of areas that local government has responsibility for. It was $45 million worth, and of course that has hit the wall now. We saw a strong commitment to developing urban and regional Australia in terms of the nexus relationship that inherently exists between those two, through the Building Better Cities program, a program which went not just to cities but to provincial and regional areas. I was extremely interested to notice that the now minister's home town of Townsville recently got the remainder of some Better Cities money in relation to projects in Townsville. Better Cities was not simply cities—it was also regional.

Senator Kemp —Why was it called Better Cities, then?

Senator MACKAY —The reason it was called Better Cities was because cities are not just Melbourne and Sydney. I know Senator Kemp comes from Melbourne. I know he rarely gets out into regional Australia as does his colleague Mr Costello, for whom regional Australians have an extremely interesting epithet these days. Cities actually exist in regional Australia as well.

The ACTING DEPUTY PRESIDENT (Senator McKiernan)—Order, Senator Kemp!

Senator MACKAY —I might say—


Senator MACKAY —I might say that Senator Kemp's laughter is an indication of the government's attitude towards regional Australia and local government. Senator Kemp and this government just do not get it in relation to regional Australia.


The ACTING DEPUTY PRESIDENT —Senator Kemp, I have asked you about four times to control yourself. Please do so, or I will call you again and perhaps deal with you in another way.

Senator MACKAY —The more that Senator Kemp laughs at regional Australia, the better it is for the fortunes of the Labor Party at the next election. What have we seen in relation to the local government development program? We saw the wholesale abolition of the entire regional development program—not just the local government program, but the entire regional development program. The first thing this government did was to abolish that under the then Minister Sharp, who is famous for saying, `Federal government has no constitutional role in regional development', something which this government is now attempting to pretend that it did not say. But nobody has repudiated former Minister Sharp's comment on that.

This government has vacated the urban policy field entirely. This government's own back bench is now starting to scream about the lack of action on urban policy. This government thinks regional means rural—not regional in the way most Australians understand it. The abolition of this program is, from our perspective, typical of the mean-spirited and shortsighted approach of this government to local government, to urban communities and to regional communities. This mean-spirited and, from Senator Kemp's perspective, risible attitude towards regional Australia and local government has had an impact in this sector.

The 1988 referendum on the constitutional recognition of local government is the most damning example. The Labor Party attempted to enshrine the role of local government in the Constitution in the 1988 referendum. This was torpedoed by—guess who? It was Minister Reith—Just Say No Reith. Despite the fact that the Labor Party attempted to enshrine constitutional recognition of local government in the Constitution and failed, we retain it in our platform and we retain it as a policy. We will at the appropriate time ensure it. I am sure that at that point we will have Mr Just Say No Reith trying to torpedo it yet again. Peter Reith singlehandedly sank local government's opportunity for constitutional recognition.

Labor is also committed to a partnership with local government built on a common vision, not on imposing large cuts on financial assistance grants to local government. The challenge for any government is to listen to local communities and develop policies that address the issues in a direct and efficient manner. This is a challenge that this government has no intention whatsoever of taking up, but we are interested in this challenge. We have been in the past and we will be in the future. We believe that all three spheres of government must work together. We empirically attempted to enshrine processes which would make sure that happened through the setting up of COAG, something we have not yet seen since this government came to power in 1996. COAG, for the benefit of those opposite in their ignorance, is where local government sits at the table with the other two levels of government. We have not seen COAG at all. Labor pledged to restore the role of COAG and to restore the role of local government as an equal partner in governance in Australia.

Since I was appointed to the shadow ministry I have spoken to a large number of councils right throughout Australia as well as to regional organisations and so on. One thing is crystal clear. This partnership needs to be re-established, something that local government correctly says will establish security to their operations. Something which this government will not accept is that councils are not simply a creature of the states. Be they in urban, rural, remote or regional areas, they are at the centre of their communities.

Local government is the level of government which is closest to the people. If you are a councillor, which many in this chamber have been, and you are out there representing your constituency—Senator Calvert has been; I agree—you get questions about everything. You get questions about local government, you get questions about state governments and you get questions about federal government. You are the major interface, as a local councillor, between the community and government and the closest to the community. I might exempt Senator Calvert—because I know that Senator Calvert does have an appreciation and a commitment to local government—from my criticism of the federal government.

Senator Calvert —I am the only federal politician on the eastern shore. You left the eastern shore.

Senator MACKAY —Pardon?

Senator Calvert —You left the eastern shore.

The ACTING DEPUTY PRESIDENT —Senator Calvert, order! Senator Mackay, you have the call. Please address the chair.

Senator MACKAY —I will remind Senator Calvert that the Labor Party holds the seat of Franklin. I know this is something that Senator Calvert does not want to hear. In fact, the Labor Party holds all five seats in Tasmania.

Senator Quirke —Five-nil.

Senator MACKAY —Five-nil; that is correct, Senator Quirke. This is thanks to the efforts of Senator Calvert and his esteemed colleague Senator Abetz, who we are hoping and praying gets the ministerial spot. The day that happens and Senator Abetz comes to the front bench there will be a party in the Labor Party headquarters. I will not digress any further.

Local government must be seen as a partner. Recently I made a speech to WSROC in Sydney in which I outlined the nature of regions. I will not repeat that, other than to say that regions are not just rural; regions are urban, regions are outer metro, regions are suburban, regions are provincial cities and regions are rural. Since the election of the Howard government nothing has happened. A classic example of the government's disregard can be seen in the delayed payment of FAGs moneys last year. This caused all kinds of difficulties for local government. The ALGA has estimated that it cost the states and local government approximately $500,000 a week. This is the kind of uncertainty local government does not need.

The impact of the GST is something which I will touch on very briefly. The minister for local government was gracious enough to offer local government a measly $2,000 each to handle the implementation of the GST—$2,000 per council. We discovered in the Senate recently that the LGIP program had been underspent by $1 million. So the measly $2,000 could have been a measly $4,000 but it was underspent by $1 million. Anybody who goes out and talks to councils will tell you very sad stories about the cost of implementation of the GST. This is another issue that local government are very angry about.

Local government are also very angry about the broken promise. Prior to the election, the New South Wales Local Government Association wrote to the Prime Minister and said, `What is the status of the GST in relation to local government?' Lynton Crosby wrote back on behalf of the Prime Minister and said, `You are exempt.' What was the first thing that happened after the election? Senator Macdonald said, `Lynton Crosby was wrong. We are reneging on that. We are breaking that promise.' This is an example of this government's real agenda in relation to local government. This is in stark contrast to our agenda in relation to local government. I will say this to the government and the members sitting opposite: local government know it; they know what this government has done to that sector; they are not happy, irrespective of whether they be Labor councils or National Party councils, in particular. We are committed to local government. We have been in the past, and we will be in the future. I move the second reading amendment:

At the end of the motion, add “but the Senate expresses its concern that the Government:

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

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

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

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

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