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Wednesday, 7 June 2000
Page: 14853


Senator LUDWIG (4:46 PM) —I rise to speak on the Local Government (Financial Assistance) Amendment Bill 2000. This bill is to give effect to the government's undertaking to retain responsibility for the payment of general assistance to local government and to maintain the level of such assistance in real, per capita terms. This is despite an attempt by the government in its initial package to abolish financial assistance grants to local government directly from the Commonwealth and to essentially hand over responsibility for providing that finance to the states. Labor successfully moved an amendment in the Senate ensuring that direct Commonwealth financial assistance for local governments would continue. This was the desired outcome for the local councils throughout Australia.

This legislation also abolishes the link between financial assistance grants to local government and financial assistance grants to the states. The previous arrangement was that local government grants were directly connected to the financial assistance grants to the states. Given that financial assistance grants to the states will cease to occur as a result of the introduction of the GST, this arrangement can no longer function. Although I am pleased that we will continue to see local government receive direct payments from the federal government, it is concerning to say the least that this legislation does nothing—and I say that again: this legislation does nothing—to restore the $15 million that the government cut from federal assistance to local government in the 1997-98 period. There is also no provision made for any real growth in payments to be made to local governments. You only have to be out and about in local government to understand the full impact of that. It is unfortunate that this issue was not addressed in this legislation. It is unfortunate but not surprising, given the government's record on providing for local government.

Local government is one of the biggest service providers in this country, as we well know. Councils, together, spend over $10 billion each year providing a broad range of infrastructure, economic and community services. Local councils employ some 140,000 people. Despite this enormous contribution to our community, the federal government has failed to give councils the vital information they need about how they will be affected by the GST and about adequate compensation. Councils are still wondering if the information they have been given is conclusive or if it will change again prior to 1 July, depending on the government's whim.

On the wider issue of the government's treatment of local councils, the complete disregard for the strain the GST implementation is putting on local councils is reflective of their attitude towards local government generally. Since coming to office in 1996, the government have treated local councils with nothing short of contempt. Not only have they lumped local governments with a GST, they gave them six months of confusion and mayhem where local councils were left scratching their heads as to what was and what was not GST exempt and how the GST was to be implemented. The government failed to give councils the vital information they needed about how they would be affected by the GST. The former President of the Local Government Association of Queensland, Tom Pyne, spoke for most local councils earlier this year when he made the following comment:

How is local government to deal with the GST if the federal government is still working things out?...The delays have meant councils' decision-making processes have been halted. This means councils are unable to put in place future pricing strategies, begin the budget process, or implement the software a new system requires. The federal government runs a very real risk that the GST will collapse even before it starts.

Finally, at the end of January 2000, the government released a draft determination of exempt taxes, fees and charges. This draft lists those taxes, fees and charges levied by state and local governments that are to be GST exempt. All council services not listed in the draft are subject to the GST, as I understand it. This has left councils with something in the order of only four months to finalise their planning and procedures to ensure they will be GST compliant by 1 July 2000. Not only were councils given very little time to plan for the introduction of the GST, they now face exorbitant costs for the implementation process. The Local Government Association of Queensland—the LGAQ—has estimated a total state bill in the order of $7 million to implement the GST. However, in response, the federal government has agreed to allocate only $535,000 to Queensland councils for the GST implementation assistance.

The shortfall between the government's funding for implementation costs and estimated costs by the LGAQ is significant and concerning to say the least. 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. Yet they still chose to waste $410 million on the Unchain My Heart propaganda campaign rather than adequately compensate local councils for their implementation costs. The $410 million would have gone a long way towards compensating local councils for the increased costs of GST compliance—the software, staff training and costs involved with GST implementation. Local councils do not need emotive, politically biased, wasteful propaganda campaigns. They need genuine compensation that will cover their costs in complying with this complex, confusing tax.

Rural Queensland councils in particular are going to feel the brunt of this government's broken promise on the reduction in fuel costs. The government's election promise that the costs of petrol would not rise under the GST has already been thrown into doubt, with the Treasurer admitting that this promise has limits. This is despite the Minister for Regional Services, Territories and Local Government, Senator Ian Macdonald, indicating that councils would benefit from a reduction in fuel costs and the removal of wholesale sales tax. This government went to the last election promising that petrol would not increase under the GST, as the government would reduce the excise on petrol by the amount equivalent to a 10 per cent increase. However, this was based, as I understand it, on a 77c per litre price. Since then, petrol prices in some cities have threatened to reach the $1 a litre mark and have been higher in many rural areas. The government now concedes that there are limits to its election promise and has said that in many areas it will be unable to ensure that petrol prices do not increase with the introduction of the GST. Yet again, the areas that will be primarily affected are rural and regional areas.

The government has since considered a regionally based fuel rebate, in an acknowledgment that in the current environment it cannot deliver on its promise. Local councils were right to be suspicious of this government's promise that councils would benefit from the implementation of the GST. The Australian Local Government Association's comments to the Senate inquiry last year in relation to the introduction of the GST paint a picture of exactly what local councils think of the GST. It is a long quote but I think it summarises quite well the position that local councils find themselves in. They said:

The primary concern of Local Government is that aspects of the Government's tax reform proposals will impact negatively the provision of adequate and equitable services to local communities throughout Australia—



Senator LUDWIG —I will take that interjection, Senator McGauran. You might know, from your town address, but it might be worth listening. They continued:

· The removal of a direct contribution by the Commonwealth to national standards of local services and the real risk of unfavourable treatment of Local Government at the hands of the States;

· Lack of attention to future adequacy of Local Government means to meet increased demand and need for local services;

· Inappropriate taxation of regulatory services and those provided solely for their community benefit;

· Costs of administration compliance.

That was an extract from the Australian Local Government Association's submission to the Senate Select Committee on A New Tax System.

The minister has claimed on numerous occasions in the Senate and in meetings with councils around the country that local government would do well out of the tax package and that local government is very happy with the tax package. The government claims that councils will benefit from substantial cost reductions following the introduction of the GST. However, no concrete studies have been undertaken by the government to substantiate this claim. The quantum of any perceived savings is unclear and would obviously vary considerably, particularly depending on the size and location of the council in question.

The amount of GST compensation given to Queensland councils is hopelessly inadequate, given the cost and complexity of the GST implementation program. As a Queensland Labor senator, I am extremely concerned about the burden that GST implementation is placing on councils throughout Queensland, and I would like to bring to the Senate's attention the enormous costs some Queensland councils are having to endure prior to the start of the GST. And it is not only the larger councils in the urban areas. There are a couple of examples that I wish to mention. The Brisbane City Council, being the largest municipality in Australia, is facing an extraordinary burden with the GST. The Brisbane City Council will be facing a bill—



Senator LUDWIG —Have you asked about yours in your local council? The Brisbane City Council will be facing a bill of $25 million in the first year and $15 million every year thereafter. This includes an initial $10 million in set-up costs and $200,000 annually to maintain those systems. It is expected that the council's own GST bill will come to $14.8 million per annum. The number of staff that the council has employed to look at the impact and implementation of the GST has risen to 35, as I understand it. This is an enormous outlay, for which this federal government has provided very little compensation.

Similarly, the Gold Coast City Council has a GST implementation budget of $2.1 million and has devoted 23 full-time staff to the task of putting in place the appropriate GST systems and procedures, as I understand it. The council has chosen to raise the cost of services which are subject to a GST rather than incorporate the GST into a general rates increase. Unfortunately, those valuable services provided by the Gold Coast City Council will have to cost more now to avoid losing the services altogether. This situation is faced by all local councils as they worry about unknown factors eating into their bottom lines, including compliance costs involved in administering the new tax system and a potential decrease in community support for local councils and their services in the face of increased charges with the 10 per cent GST.

The Diamantina Shire Council has only eight full-time staff—it is a small council—dealing with the administration of the council as a whole. Due to cost restraints, the mammoth task of administering the GST will have to be done internally, among the already overworked staff. Although a lot of rural councils do not have a specific budget for GST implementation, they are extremely concerned about the effect of the GST on other budget line items. For example, the Tambo Shire Council is expecting its budget for office maintenance, which is currently about $26,000, to increase by $5,000 for GST related software alone. This is about a 20 per cent increase for this line item. Again, the increased burden on council services of administering the GST will be worn by the existing council administration employees.

These compliance problems are just the start of the pain which local councils are going to have to endure from 1 July 2000. Councils will have to include a 10 per cent GST in the price of council services. Many of these services are community services that are not provided, or not likely to be provided, by private operators. Councils are therefore left with the dilemma of whether to increase these fees and charges by 10 per cent—and risk making them unavailable to those who most need them—or to absorb this cost by increasing rates. We do not hear you now, Senator McGauran. This is despite the coalition's promise during the 1998 election campaign that non-commercial activities of councils for which a nominal charge is applied would not be subject to the GST. This was in line with the community service, non-profit nature of these activities, which has seen the bulk of charitable organisations also exempted from the GST. It then became clear that the government would define all activities of local government for which a nominal fee is charged as commercial, even though these activities are community service obligations. The result of this government's habit of making and breaking promises is a confused and suspicious situation and makes the local government sector worry even more.

Councils provide many local community services at low cost and often in situations where the services would not otherwise be provided by a private operator. These services can be provided at low cost because they are subsidised by rates. In many remote areas, the swimming pool is often run by the council as a non-profit activity, as well as other services such as library services, sporting and recreational facilities and essential community services for the elderly. It is extraordinary that the government would define all activities of local government for which a nominal fee or charge is levied as commercial, even though these activities are often community service obligations heavily subsidised by rates and not attractive to the private sector. A GST on these services is unfair and inequitable and is further proof that the GST will hit hardest those who are least able to afford it. A further headache for local councils is the unfair distinction being made between activities which have been contracted out and those which councils still undertake themselves. Some local councils have chosen to contract out activities, including some regulatory activities such as building inspections. Under the government's determination of GST exemptions, activities provided by the private sector will attract the GST. However, the same activities provided directly by the council will not be subject to the GST.

Rural councils are going to suffer the most under this GST. Again, this is not surprising given this government's pitiful record on providing assistance to rural and regional Australia. The National Party and, in particular, the National Party senator from Queensland should be ashamed of their record on regional, rural and remote Australia. The Nationals are now indistinguishable from the Liberals. Federal National MPs have supported every anti-farmer, anti-country town and anti-regional development measure introduced by their citycentric coalition partners. The big end of town Liberals have won out again. The federal Nationals have voted to sell off Telstra, voted for the GST, stood silently while their government withdrew services and jobs from country towns, allowed vital infrastructure to run down, cut funding for roads, tried to con farmers that the impact of the GST would be offset by a reduction in transport costs, and slashed over $200 million from the popular AAA package and tried to dress the fact up as a funding increase. They cut $3.9 million from Landcare and supported the deregulation of Australia Post. In recent state and federal elections, country communities have turned to Labor in increasing numbers. They demand parliamentary representatives who listen and respond to their everyday concerns in practical ways. Labor has a proud tradition of standing up for rural concerns and working well with rural councils to improve the services available to their constituencies.

The government needs to do some serious rethinking on its approach to rural and regional Australia. What is needed are some effective targeted programs that the government is committed to and a genuine attempt to provide assistance to rural councils in a way that will actually produce results. In the rural and regional areas which this government has ignored over the past four years, as usual it has been the local councils which have provided the community services necessary for these towns to survive. Yet it is these very community services which are now going to be slugged with a GST. It is clear that local governments will be struggling to meet the requirements of the GST in terms of both implementation costs and subsequent costs, threatening community services. Local government is too important to be left to struggle to survive. This level of government is closest to the community and has an important and integral role to play in the delivery of services to local communities and in allocating priorities in the delivery of those services. The federal government should clearly recognise this and provide adequate resources to ensure that local councils can properly fulfil their role in council and local community development.

It is worth mentioning two other matters that come to mind. The RTCs, or rural transaction centres, are an interesting initiative, one that this government has said will provide significant benefits. Senator Macdonald has sung their praises for some time. There is only a handful in Queensland and I want—(Time expired)