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Wednesday, 7 June 2000
Page: 14783

Senator CROSSIN (11:08 AM) —I rise to speak on the Local Government (Financial Assistance) Amendment Bill 2000. I will highlight a number of concerns with this legislation and place on record the inequity which exists in the distribution of funding for local government, particularly in my electorate of the Northern Territory. The debate on this legislation provides me with an opportunity to address the issue of funding cuts the government has made through the financial assistance grants—or FAGs as they are known in the industry—to local government since it first came to office.

The real essence of this bill is the intent to terminate the 25-year Commonwealth-local government funding partnership by transferring responsibility for local government financial assistance grants funding to the states. In May 1984, following a national inquiry into local government finance, the Hawke government abandoned the tax sharing arrangements of the Fraser government and introduced the Local Government (Financial Assistance) Act in 1986. The key feature of this act was that growth of local government general revenue funding was tied to growth in general purpose funding to the states. This linkage was retained in the Local Government (Financial Assistance) Act 1995, the legislation under which the Commonwealth now provides for local government financial assistance and road grants. The formula is based on the annual increase in state financial assistance grants and special revenue assistance. Since 1994-95, the state grants—and, hence, grants to local government—have increased annually in line with population and CPI movements. Under the 1995 act, local government should receive around $1.32 billion in financial assistance grants in 2000-01. This bill breaks the link between the local government financial assistance grants and state financial assistance grants. From 1 July this year, the Commonwealth will cease paying financial assistance grants to the states and will replace them with the revenue from the GST. Consequently, the link between local government assistance and general revenue assistance to the states will be severed.

This bill also provides me with an opportunity to highlight the failure to exempt local government services from the GST, which this government promised before the 1998 election, only to renege on this commitment within months of regaining office. The GST is the imposition of a regressive and unfair tax on essential services provided by local government to communities in regional Australia, and local councils now have to contend with major GST compliance costs, with inadequate compensation or assistance from this government. We will recall that, in the budget this year, an amount averaged out at only $2,000 per local council has been provided to assist in the implementation of this new tax.

At the beginning of May, the Darwin City Council announced that 270 fees and charges would be affected by the GST. These include: cemetery charges, car parking charges, hire of ovals, library fees, pool entry fees and community centre charges—to name but a few. This situation is the same for each and every town council in the Territory. It is unfortunate the Minister for Regional Services, Territories and Local Government has not been honest with local governments. He claimed that no council would be forced to increase rates or to cut services as a result of the GST. It is now known that most medium-sized councils are facing GST bills of more than $150,000, but this government fails to comprehend that, if services bring in increased costs, it is likely that fewer people will use these services and councils will be forced in future to reassess the level of services being offered in the community. Further, with councils looking at massive GST compliance bills, these will have to be recouped in some aspect of their business. Surely it will be passed on to the ratepayer and, as a consequence of the GST, an increase in rates and garbage collection will follow.

I want to take this opportunity to highlight a very important issue which impacts very severely on local governments in the Northern Territory. It goes to the method of funding 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 of local government purposes. The states grants commissions determine the intrastate distribution of both these payments to local governments. Distributions must be made in accordance with the national principles, which require that grants be allocated as a minimum grant to all councils—that not less than 30 per cent of the total funds be distributed on an equal per capita basis, the remainder being on the basis of horizontal equalisation and effort neutrality; that individual council policies should not influence their grants; that the needs of Aboriginal and Torres Strait Islander people are recognised; that account is taken of other grant support received by local councils, such as through specific purpose payments; and, that the identified road component should 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 government 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 need or with more revenue than they need to fund standard service provisions 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.

The funding arrangements require that once these funds are received by the states, whilst they have a minimum, they use the fundamental principle of fiscal equalisation in the distribution. Yet when the Commonwealth makes funding available to state and territory governments for distribution to local governments they are not required to use the same principle. Of course, other Commonwealth grants are. All general revenue assistance made available as a result of Grants Commission recommendations is based on this question of horizontal fiscal equalisation. This means that all states and territories are then given resources to provide a similar standard of service for their citizens so that they are roughly equitable across Australia. This is not the case for local government.

I am aware of 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—that a review of the act will be undertaken before 30 June 2001. He points out that section 17 of the act specifies that some areas must be covered by a review. The act also requires him to review other matters relating to local government that he may determine. He points out that he has drafted terms of reference, which followed discussions between his department and the Commonwealth Grants Commission. Before finalising the terms of reference, he 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 for the record:

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—

so he knows it is out there—

I am also aware that there are some that do not want the interstate distribution reviewed at all—

of course, we all know the conflict occurring between the major capital cities and local government in places like the Northern Territory—

This has been a contentious issue between States for some time—

that is correct—

and was extensively debated as part of the negotiations over the 1999 Intergovernmental Agreement on the Reform of 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.

That is a most unfortunate response, and I believe it shows that the minister is either not aware of the inequities that occur as a result of this funding, although the response in the letter does not seem to lead us to believe that, or not prepared to tackle and confront the wrath of the major councils in the eastern states if this review was in fact undertaken. The President of the Local Government Association of the Northern Territory, Margaret Vigants, responded to the minister's letter on 3 May 2000. She said:

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 the specific legislation in the Northern Territory for Aboriginal communities. They also include incorporated Aboriginal communities and organisations that carry out local government services in Aboriginal communities around the Northern Territory. This is an important feature because local government in the Northern Territory does not share the same attributes as local governments elsewhere in Australia. One example is that they do not have any defined boundaries in remote parts of the Northern Territory, 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 to the Northern Territory and what impact that has.

You need to know that grants to states and territories are done on a per capita basis of around $44 per person. As a result, because it is per capita, there is no allowance for remoteness, no allowance for disability factors and no allowance for the other issues that are raised when we distribute the funds on the fundamental principles of fiscal equalisation. The fundamental issue is that, because grants are made on a per capita basis, states with a larger population base get a greater amount of funds to distribute around the state to remote areas. This is significant when you actually compare the figures on a state by state basis. In the case of Queensland, for example, the Brisbane City Council is eligible for $38 million per year on a per capita basis but, because of the size of the base in Queensland and the way in which the Queensland government properly distributes those funds, it receives only $12 million, and the rest is distributed amongst other councils. The Northern Territory gets a total of $9 million. Of this, the Darwin City Council gets around $2.6 million, so there is not enough money left 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 for towns with approximately the same population—as outlined in the 1997-98 local government national report that I have with me here—Katherine received $849,000, which includes the general purpose and roads funding money; whereas Charters Towers, of roughly the same population, received $1.1 million. Similarly, Alice Springs was allocated $1.5 million but Mitchell in Victoria received $3.2 million, and it has the same population base. The following example is fairly amazing: Peppimenarti, which is an Aboriginal community in the Northern Territory that has a population of 260, got $216,000 but Upper Gascoyne, which is a shire in Western Australia with 261 people, on the basis of this report—so that is one person more—received nearly $1.016 million. So, on the basis of one additional person, they got an additional $800,000. It is the same with Numbulwar in the Northern Territory. They received $245,000, but if you go to Jericho in Queensland, which has the same population base, they got $1.1 million, and Richmond in Queensland got $1.3 million. Port Keats, an Aboriginal community to the west of Darwin, got $200,000, with a population of almost 2,000; Barcaldine in Queensland, a town of an equivalent size, received $1.2 million.

You can see the obvious disparity which results from the way in which the funds are made available. 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 rates base and they get short-changed in the distribution of funds, because they are distributed unfairly.

The letter from the Local Government Association of the Northern Territory compared the average funding for councils in the Northern Territory with the average for all other states in each of the categories for the 1998-99 year. To provide you with a quick example, the urban council in the capital city, Darwin, receives $1.3 million. The average grant paid to other councils in other states is $2.3 million. Where you have a small, remote council, of which there are 23 in the Territory, the average grant paid to councils is about $75,500, but in other states it is over $500,000.

As the President of the Local Government Association in the Northern Territory says:

With the loss of this magnitude being experienced each year by Northern Territory councils as a specific outcome of this Act, we regard this as a complete failure to distribute funding on a fair and equitable basis.

In the context of local government, this government has a responsibility, I believe, to examine the equity issues associated with the funding which councils in the Northern Territory receive under this act. One of the major deficiencies is that the funding, which is not made available as a result of the formula to organisations and remote communities which carry out local government functions, is inequitable. If this government truly represents regional Australia, then this major issue will be addressed.

We have heard the minister brag in this chamber about his regional and northern consultations. You should be aware, Minister Macdonald, that the minute people leave your consultations and step outside the room, they are not impressed with your performance. They believe they are being used and that your efforts are not genuine. I would say to you: keep traipsing around northern Australia. You assist our campaign greatly when you talk about issues to do with regional governments. In fact, I think one quote from your meeting in Katherine was: `I'm here to listen but let me tell you there will not be one more dollar—not today, not next week, not even next year.' People were quite impressed with that statement in Katherine.

This is a major issue which is not being addressed, and the minister has determined that it will not be addressed in the review of the local government act. 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.

This bill also goes to the matter of road funding. I do not have the time to go through, in detail, local road funding in the Northern Territory, but it is a major issue. Put yourself in the situation of these small councils which might have 50, 100 or 200 people in remote communities and they are 200 or 300 kilometres away from another community. The local road funding they receive is based on a population of people living together in a very isolated place. The difficulty is that neither this government nor the Northern Territory government has accepted any responsibility for providing the necessary funds for transport infrastructure—the roads that link these communities. That is an abrogation of responsibility and, again, the way in which these local government funds are made available should be addressed; or, more specifically, the government should make available a suitable pool of funds for these purposes.

The identified local road grants have received no additional funding beyond the per capita funding and CPI indexes. The Local Government Association of the Northern Territory has said, `There are also major equity issues with the interstate distribution of local road grants, and the draft terms of reference for the review do not allow obvious road funding inequities to be revised.'

This bill is the legacy of the government's attempts to shift all responsibility for local government funding to state and territory governments. It will fundamentally change the role of state governments in relation to local government. It is about time this government was serious about addressing the issues being raised by local government and people in rural and remote Australia. It is about time this government stopped window-dressing its approach to rural and remote Australia by taking travelling roadshows out bush but, at the end of the day, doing nothing and ignoring the concerns that are being raised—particularly by people in local government in the Northern Territory.