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Wednesday, 16 March 1927

Senator PEARCE - Hear, hear ! But it is also fair to say that those statements have not been made in this Chamber.

Senator GREENE (NEW SOUTH WALES) - Quite so. I make this personal explanation because, whatever my attitude may he in regard to this matter, I am actuated by a keen sense of duty. I deeply regret that I am unable to see eye to eye with the government of the day, although I may claim to be more definitely in line with the view taken by my party than is the Government itself. I may be opposed to the step which the Government is taking, but I remind Ministers that it is not I, but they, who are at variance with the party, because a plank in the platform of the National party declares definitely that the per capita pay ments should be retained. A little later on I shall have something to say about this departure by the Ministry from that which is laid down in black aud white as the policy upon which our party was elected.

I would say, first of all, to my right honorable friend, 'Senator Pearce, that I do not think the Government has ever been frank with the Parliament, with the party, or with the country, as to the 'true reasons for 'the introduction of this bill. I do not think that Ministers have ever stated what their reasons are. It is perfectly true that after they, inadvisedly as I think, made a very premature declaration of what they intended to do, they started out to find different reasons why they should do it ; but an examination of those reasons shows them to be excuses aud not real reasons at all for what the Government is now proposing to do. A little later on I shall deal with the history of this phase of the subject, but for the moment I say that the principal reason advanced by the Government for the bill is little more than a declaration of an academic principle of government - that the Government which spends the money should raise it. By and by, I propose to examine this principle in order to see if it has any real existence in fact. I shall show how far it has operated in various countries, and the extent to which it has been departed from. In the meantime, I ask the Government whether it is worth, while to arouse the bitter hostility and resentment of every State of the Commonwealth in order to establish such an academic principle ? That is exactly what is happening. After all, what is this entity which we represent? Is it something apart from the States or different from them ? As a matter of fact, the Commonwealth is the embodiment of a common policy of the States. The States created it. It is the creature of the States. And shall the Commonwealth become a sort of Frankenstein monster? Is it to -devour or demolish the people who created it? Was it for that purpose that the Commonwealth was brought into being? This Government is not only arousing the bitter hostility of the States, it is doing its utmost to smash the party to which it belongs. All of the organizations connected with the Nationalist party are, without a doubt, opposed to this move on the part of the Government. I ask again whether it is worth while doing this in order to give effect to what is little more than a mere academic principle of government? Does it lead us anywhere? Is it not manifest to each member of the Government that there can be no political gain in the step it is taking? The political back-wash of this step which the Government is taking, unless it modifies very materially the proposals with which it went to the last conference of State Premiers, will sweep it from power and put our friends opposite in office.

Senator Findley - Hear, hear! We shall help the honorable senator to do that.

Senator GREENE (NEW SOUTH WALES) - I do not wonder at the attitude adopted by my honorable friends opposite, and at their absolute solidarity on this occasion. For them it is a gift from the gods, and they would be ten thousand times foolish if they did not embrace it with open arms. But am I, a private member of the Nationalist party, holding these opinions, to remain silent and see the party, with which I have been associated for so long, led, as I believe it will be, to political extinction? Am I not to raise my voice in protest? No; I shall not remain silent. I shall show that the political back-wash of this step must react more particularly against the Nationalist party than against any other party. I do not think that the effect on the Country party will be anything like as great as it will be on my party. Although tho Nationalist party and the Country party are, to some extent, associated, there is not that close cohesion between them which, in my judgment, warrants the Nationalist party in running any risk for anything the Country party may desire.

Before I deal with the constitutional side of this question, I want to make one other point. I feel that the Ministry, in hanging on to this academic principle of government, has jeopardized its position very materially. Its adherence to it has compelled it to retain every atom of taxation it is raising at the present time, never for once relaxing the demands of the tax gatherer. During these last full and fat years, it should have been reducing taxation, instead of stacking away its surplus revenue into trust funds to be expended in future years. I should like to say, in passing, that this practice is being followed to an extent which is absolutely dangerous from the standpoint of the economic government of the country, and in a way which removes these vast trust funds from the control of Parliament.

Senator Pearce - Is the honorable senator referring to the trust fund to provide for the cruisers?

Senator GREENE (NEW SOUTH WALES) - I am referring to the huge trust funds that have been created. They have no right to be created in this way, and they should be brought to account in the annual payments of the year. Senator Pearce will remember that in 1910, when the agreement for the payment of a -per capita grant to the States went through, a trust fund was created, and the surplus revenue of that year was credited to that fund.

Senator Pearce - Yes, for the payment of old-age pensions.

Senator GREENE (NEW SOUTH WALES) - And also to pay for the Navy. Senator Pearce will also remember that these things were all brought to account in the annual accounts, but if he turns to the budgets of to-day he will see that the true position has been practically hidden from the people. However, that is by the way. My point is that if the Government had done whan I believe it ought to have done in the years of plenty - when there was an overflowing treasury - it would have reduced taxation annually, as there was ample opportunity to do. I shall show a little later how I believe it ought to have been done, and why it was not done. I shall show also why relief should and could have been given all round. But had the Government taken that course it would not have been able to make this bargain with the States; the accounts would not have balanced in the way the Treasurer desires to balance them now by the surrender of so many fields of taxation, and the abolition of the per capita payment. Consequently, as a direct result of hanging on to this purely academic reason, which is not the real reason at all, the Government has been compelled to retain every scrap of taxation in order to put this proposal over the States. If, on the other hand, it had taken the other course there would have been a very considerable amount of political credit accruing to it for having reduced taxation. Since this Government was formed the annual collection of taxation per head has increased by 12s. Id.

Senator Pearce - This Government, since it was formed, has made substantial reductions in income tax.

Senator GREENE (NEW SOUTH WALES) - I know it has, but I am endeavouring to show that if the Government had not clung to this principle it would have been able to make greater reductions not only in income but also in other taxation. The Minister knows very well that when we imposed this taxation we put it on more than the wealthy, and that there are people other than the wealthy who are entitled to relief. The Government, as I say, is adhering to this thing and has deliberately proposed on three occasions to pass over to the States a great mass of taxation. In doing so they say to the States, " You can now flounder in this morass. We are going to take these regular payments from you and you can get out of the morass as best you can." I have little doubt that the State Treasurers would get out of the morass, but I venture to say that in doing so they would sling a good deal of mud, and would take all sorts of good care that the mud stuck where it belonged. They would see that the electors were told in no uncertain voice that the change had been brought about in consequence of an act of the Commonwealth Government, and it is on that account that I am not out to make a Roman holiday for my honorable friends opposite.

Senator Ogden - Even now they are storing this up as political pabulum for the. next elections.

Senator GREENE (NEW SOUTH WALES) - It is abundantly clear from the speech ot the Leader of the Opposition (Senator Needham) this afternoon what is to be the principal line of attack by his party at the next election. These honorable gentlemen will pose as friends of the States. They are going to put it to the people that the Nationalist party is the enemy of the States, and in doing so they will be helped by every State Treasurer in the land. Every State Treasurer will declare that the additional taxation he has imposed has been purely the result of what the Commonwealth has done.

Senator Foll - They would be helped by the State Treasurers in any case, be cause five of them are members of the Labour party.

Senator GREENE (NEW SOUTH WALES) - Are we to give them additional assistance?

Senator Kingsmill - If this measure is passed they are likely to remain in office.

Senator GREENE (NEW SOUTH WALES) - That is what I am endeavouring to show. At the present time, with State elections in front of us, our friends outside are fighting the party opposite who are in power in five of the States, and this is the sort of assistance we are giving Labour to defeat the party to which we belong. If these are the lines of political wisdom then I have to learn my political economy over again.

I do not propose to occupy much time in debating the constitutional position because I venture to say that honorable senators here are as conversant as I am, and some of them probably more so than I am with it. I desire, however, to direct particular attention to one constitutional aspect of this question. Section 87 of the Constitution, the instrument under which we carry on the government of the Commonwealth, follows immediately after the first mention of the question of duties of Customs. Section 86 reads -

On the establishment of the Commonwealth, the collection and control of duties of Customs and of excise, and the control of the payment of bounties, shall pass to the Executive Government of the Commonwealth.

Section 87 to which I have just referred provides -

During a period of 10 years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, of the net revenue of the Commonwealth from duties of Customs and of excise not more than one-fourth shall be applied annually by the Commonwealth towards its expenditure-

I have seen it stated several times recently that originally section 87 of the Constitution guaranteed to the States the return of only three-fourths of the Customs and excise revenue. It did not do that. What it did provide was that the Commonwealth might not spend more than one-fourth; it might give more than three-fourths to the States.

Senator Givens - And it did give more than three-fourths.

Senator GREENE (NEW SOUTH WALES) - Yes. The section continues -

The balance shall, in accordance with this Constitution, be paid to the several States, or applied towardsthe payment of interest on debts of the several States taken over by the Commonwealth.

Section 88 reads -

Uniform duties of Customs shall bo imposed within two years after the establishment of the Commonwealth.

Then follow a number of sections dealing with Customs and excise duties. The position given to section 87 in the Constitution is of itself convincing proof of the tremendous importance that the States of that day, who, I repeat, created the Commonwealth, believed to centre round this question of the Customs and excise duties. They interpolated this provision in the Constitution at that particular point, and, as every one knows, it was as the result of much discussion that they inserted it in its final form. They imposed on the Commonwealth a tremendous responsibility, trusting us always to do the fair thing by the States. We have had one revision of that provision in the Constitution. Did we proceed, in that revision, along the lines which the Government propose to proceed? I ask my friends in the Government to compare what took place before that first revision with what they have done, and, having done so, they con be their own judges as to whether the situation which confronts us to-day is not solely the result of what they themselves have done. Compare the careful manner in which this question was approached before the first revision with the brusque declaration of what the Government proposed to do, which was made in Western Australia by the Prime Minister and the Treasurer on the eve of the Premiers' conference, and there can be no reason to doubt any longer why we are confronted with the present situation.

I do not for a moment question the legal power of this Parliament to amend, in any way it pleases, this provision as laid down in the Constitution. It has undoubted right to amend it. But again I repeat that the men who framed the Constitution, and who finally asked the people to permit section 87 to be included in it, trusted this Parliament. Why did they trust it? They knew how parliaments were constituted. They knew that parliaments came and went; but I venture to say that there was a very strong reason why they felt ultimately, despite much controversy, that they could put that provision in the Constitution and recommend it to the people for their acceptance with absolute confidence. It was that the men responsible for it were also responsible for the creation of this Chamber. It was because they felt that they could, with complete confidence, trust the men who would be sent to the Senate - a House of review, certainly, but also a special body chosen in a special way - a Chamber in which equal representation isgiven to every State of the Commonwealth. They felt they could trust the men sent here to represent the States to see that the Commonwealth did them no injustice. That is the only reason for the constitution of the Senate as we have it to-day.

SenatorPearce. - Who is proposing to do an injustice to the States?

Senator GREENE (NEW SOUTH WALES) - I am not saying that the Government does propose ultimately to do an injustice to theStates. I do not know what is proposed by them. One of my chief complaints in connexion with this bill is that I do not know what is intended.

Senator Ogden - It is a blank cheque.

Senator GREENE (NEW SOUTH WALES) - Yes. The Government come to me with a blank cheque and ask me to sign it. I shall not do so.

Senator McLachlan - The honorable senator can stop payment later on if he so desires.

Senator GREENE (NEW SOUTH WALES) - No. On a matter of such vital importance I refuse absolutely to give a blank cheque to any Government. If the Government were composed of angels from Heaven, I would not do so.

Senator Reid - We might have a worse Government.

Senator GREENE (NEW SOUTH WALES) - We might. With this great responsibility resting upon the shoulders of this branch of the Commonwealth legislature, I am not prepared to sign any blank cheque in connexion with this matter.

Senator Pearce - No one is asking the honorable senator to do that.

Senator GREENE (NEW SOUTH WALES) - Let the Government bring down a definite concrete proposal. I shall then know to what I am asked to commit myself, and will be prepared to record my vote one way or the other. I am not prepared to vote until

I know to what the Government is going to commit me.

Senator Pearce - The honorable senator is not asked to do so.

Senator GREENE (NEW SOUTH WALES) - I am. I am asked in a very definite way to commit myself to this Government on the abolition of the per capita payments which are made to the States out of Customs and excise revenue. I will not do that. This House is not beholden to this or any Government in a matter of this sort. Governments are not made or unmade in the Senate. I admit that, owing to the clash of parties in .regard to the general legislation ou which we are engaged, this chamber, which is a house of review, is generally divided on party lines. But here is a piece of legislation, on which no party question should arise. I regret that honorable senators opposite have made it a party question, and I regret still more that the Government with which I am associated has also done so. It knows - and I am only stating what is common knowledge - that if this had not been made a party issue in another place we should not be discussing the bill to-day.

Senator THOMAS (NEW SOUTH WALES) - Who says so?

Senator Pearce - The division list shows otherwise.

Senator GREENE (NEW SOUTH WALES) - Everybody knows it: the dogs are barking it in the streets. I could tell Senator Thomas the names of half a dozen of his colleagues from New South Wales who, had they been free, would have voted against the bill.

Senator THOMAS (NEW SOUTH WALES) - Every one who voted for it did so because he believed in it.

Senator GREENE (NEW SOUTH WALES) - The Senate has but one duty in this matter - to conserve the interests of the States which they represent.

Senator Thompson - Does the honorable senator mean the interests of the State Governments?

Senator GREENE (NEW SOUTH WALES) - No. Had Senator Thompson been listening to mo---

Senator Thompson - Unfortunately I was not in 'the Chamber.

Senator GREENE (NEW SOUTH WALES) - Our duty as senators is not to the Government, or even to the party to which we belong, but to the States which we represent. Why is this matter of such pre-eminent importance? I believe the reason is that the stability of the Commonwealth is depen dent on the existence of strong, virile, active States. The duties with which the States are charged are infinitely greater than those vested in the Commonwealth. They deal with the social services of a continent, and the welfare of its people. If the Commonwealth takes any action which robs the States of the sinews of war, or leaves them scraping for a financial existence, by depriving them of certain sources of revenue on which they should he able to rely-

Senator Givens - And which they have full power to collect for themselves.

Senator GREENE (NEW SOUTH WALES) - I shall deal with that later. Unless that can he guaranteed to them, their activities must suffer, and, as a consequence, the Commonwealth itself must suffer.

Senator Grant - That would mean larger quantities of foreign goods coming here, and increased Customs revenue.

Senator GREENE (NEW SOUTH WALES) - I feel, strongly, that so long as the relative constitutional obligations of the Commonwealth and the States remain materially the same as they were at the inauguration of federation, we should not depart from those fundamental principles of finance which were embodied in the Constitution.

Senator Pearce - Is there anything embodied in the Constitution requiring the Commonwealth to impose direct taxation for the benefit of the States?

Senator GREENE (NEW SOUTH WALES) - There is. The only substantial ground for altering the basis underlying the financial relations of the Commonwealth and the States would he great constitutional changes in their obligations. Until we reach that stage, a radical alteration of the existing financial basis should not be attempted. Personally, I am of the opinion that material changes in the Constitution affecting the relations of the Commonwealth and the States are desirable. Honorable senators generally are of the same opinion. For those changes I have striven. I fought for them so far as my health would allow at the recent referendum, although I did not agree with . all the Government's actions in connexion with it. But, until such time as those changes have been obtained by constitutional methods, I am not prepared to scrap the financial provisions of the Constitution upon which the federation rests.

Senator Pearce - What are those financial provisions in the Constitution to which the honorable senator alludes?

Senator GREENE (NEW SOUTH WALES) - If the Minister does not know what they are, I do not propose to enlighten him at this stage. I deprecate his action in addressing questions to me with the object of diverting me from the object I have in view. I shall, therefore, not follow the Minister. This Parliament has no right to attempt to force a constitutional change by crippling the States financially. I am not at all sure that that is not one of the objects in the minds of some of the progenitors of this measure. Senator Thomas looks astounded at that statement; but I could tell him of members of this Parliament who have told me, in the most succinct and definite terms, that that is their reason for voting for this measure. In it they see the beginning of the end of the States.

Senator THOMAS (NEW SOUTH WALES) - They must have been supporters of the Labour party.

Senator GREENE (NEW SOUTH WALES) - It is immaterial to which party they belong. In my judgment, this measure is an attempt to cripple the States financially. Its enactment will weaken them to such an extent that before long a situation which will make unification necessary will arise.

Senator Pearce - Is that why the Labour party is opposing the bill ?

Senator GREENE (NEW SOUTH WALES) - Within the four walls of this chamber the infant Commonwealth - the ripe fruit of the womb of a dawning national sentiment - first saw the light. Within the same four walls that infant became a living sentiment and coherent entity. It would be a pity if, after little more than a quarter of a century had elapsed, one of the last acts of this Senate, within the same four walls, should be to pass the first of a series of measures practically to seal the doom of the Commonwealth as originally constituted. If the Senate consents to this measure, the rights of the States to participate in the revenues derived from Customs and excise will pass forever.

Senator Pearce - That right went with the war.

Senator GREENE (NEW SOUTH WALES) - I shall deal with the war presently, and shall show that, had Senator Pearce remained where he was during the war, this measure would never have been introduced.

I now come to the bill itself. Its short title is, " The States Grants Bill." I do not know whether the Treasurer conspired with the Prince of Satire before he decided on that title : it certainly is a misnomer. It is true that to two of the States the bill proposes to make grants, although the reason for that is somewhat vague. Had the per capita question been brought forward in a decently honest manner - Iuse the term in a relative sense, without any personal bias or animus against any one - we should have had two separate measures to attain two such differing objects. Perhaps it was hoped that, because of the provision in the bill affecting those two States, their representatives would vote for it, notwithstanding that it robbed four other States of their rights.

Senator Sir Henry Barwell - They are made dependent, one on the other, as it is.

Senator GREENE (NEW SOUTH WALES) - That is so. Honorable senators from those two States are placed in an invidious position, in that, if they vote against the bill, there is a danger of their action being interpreted to mean that they are opposed to- grants being made to the States which they represent. The Treasurer must have thought long and bard before deciding on such a title to the bill. Perhaps he has graduated in a course of nursery rhymes, a.? I did in days that have passed. I remember well the story of the spider and the fly. I do not know whether the Treasurer, after having spun his web, was prepared to sing the song of the spider in the hope that the States would become enmeshed in the silky folds of his web. It may be that the Treasurer thoughthard and long about the persuasive influence of a bunch of carrots.

Senator Ogden - It was most unfair to insert in the bill provisions relating to payments to certain of the States.

Senator GREENE (NEW SOUTH WALES) - I agree with the honorable senator. I am simply endeavouring to show that the Treasurer, in framing his bill was not acting fairly to the representatives of those States.

Senator Ogden - He was most unfair.

Senator GREENE (NEW SOUTH WALES) - It was distinctly unfair to say, in effect, to the representatives of those States:: " Come along and vote for the bill and deprive the other States of their rights." That is a condition of affairs which, sooner or later, most react upon the Government. It is unreasonable to expect the larger States, which ave to be deprived of all those sources of revenue which they have enjoyed hitherto, to vote large sums of money from the Consolidated Revenue for the benefit of the smaller States. It is unthinkable that such a state of affairs can go on for ever. I admit frankly that at times the smaller States may find it necessary to seek assistance from the Commonwealth.

Senator Duncan - There is no guaratee in this bill that they will get anything.

Senator GREENE (NEW SOUTH WALES) - The only lasting guarantee which I can see in it is that all of the States will, for all time, be precluded from revenues, which they have enjoyed under the Constitution up to the present. It is true that for two years Tasmania, and for five years "Western Australia, will get something; but that will be the end. I say to my friends and colleagues from those States, which with perfect justice might find it necessary to ask the Commonwealth for contributions from time to time, that I can quite realize.that the time may come when the larger States will say - "No; you raise from your own resources what revenue you require. "We are not going to find money for you."

One other thought which occurs to me in connexion with this matter is that the bill has been brought forward by the gentleman who, I believe, has been most active in the movement for the creation of new States. How is it possible for New South Wales or any other large State, if it is to get nothing as the result of the passage of this bill, to contemplate a large slice of its territory being torn from it, and then to be expected through the Commonwealth Parliament, to grant financial assistance to the smaller States. In such an event, the larger States would be robbed both ways. It is extraordinary that the people who have preached this new States doctrine should primarly be responsible for the presentation of this bill.

Senator Thompson - How will it affect the new States. They will get a quid pro quo.

Senator GREENE (NEW SOUTH WALES) - Will they? I am afraid that if my honorable friend votes for this measure he will have to explain away a good deal when he comes to talk about the creation of new States. It is obvious, that he has not fully appreciated the- significance of this move in relation to the possible creation of new States in the future.

Senator Thompson - I shall be able to explain my position quite satisfactorily.

Senator GREENE (NEW SOUTH WALES) - I come now to an examination of the circumstances that have led up to this financial situation. What is the real cause of the position in which we find ourselves to-day 1 Why has the problem of the financial relations of the Commonwealth and the States arisen ? We all know, of course, that it is owing to the fact that there was a war in which Australia participated. Had there not been a war what would have been the attitude of the Seriate if, with a Customs and excise revenue of £44,000,000, this bill had been brought before it?

Senator THOMAS (NEW SOUTH WALES) - But there has been a war.

Senator GREENE (NEW SOUTH WALES) - Exactly.

Senator THOMAS (NEW SOUTH WALES) - And it makes all the difference.

Senator Thompson - And we have had direct taxation, too; the honorable senator seems to forget that.

Senator GREENE (NEW SOUTH WALES) - I propose now to put a question or two to Senator Thomas, who has been interjecting so volubly. I ask the honorable senator - Was the war a State or a national obligation ?

Senator THOMAS (NEW SOUTH WALES) - National, of course.

Senator GREENE (NEW SOUTH WALES) - So I think; and so we all thought during the war.

Senator PEARCE - I say that the war was both a State and a national obligation.

Senator GREENE (NEW SOUTH WALES) - During the war we all thought it was a national obligation. Senator Pearce is beginning to see where this argument is going to lead him. [Extension of time granted."]

I thank honorable senators for their courtesy, and if allowed to pursue the even tenor of my way will quickly conclude. To proceed, I say that the war was a national obligation. Let me now ask Senator Thomas another question. Supposing that during the war the Government with which he was associated had come down to this chamber and said, " We are going to throw the whole cost of the war on to the shoulders of the poor of this community through the Customs House, and we are going to ask, the States to collect the rest of the revenue they want." Would he have supported such a proposition ?

Senator THOMAS (NEW SOUTH WALES) - I do not support Customs duties at all.

Senator GREENE (NEW SOUTH WALES) - Quite so; the honorable senator is beginning to realize what he is up against. I say deliberately that had any Government proposed, during the war, to do what this Government is now doing, it would have been hounded from office with the scorn and obloquy of poor and wealthy alike from one end of Australia to the other. That is the position. During the war we realized that it was a national duty to tax the wealthy people of the Commonwealth for war purposes. The Government in power, knowing full well that it was impossible to meet the obligations of the Commonwealth without resorting to direct taxation, put these taxes on. Senator Pearce was a member of the first Government that was responsible for that policy. Why was it done?

Senator Pearce - Because the Customs and excise revenue was insufficient.

Senator GREENE (NEW SOUTH WALES) - Yes; the Government of the day placed the burden on the shoulders of the wealthy. It did not say to the States, " We are going to monopolize all the Customs and excise revenue, so you must adjust your taxation schemes to provide for your own requirements." No government at that time would have dared to say that.

Sitting suspended from 6.30 to8 p.m.

Senator GREENE (NEW SOUTH WALES) - During the war the Government of the day imposed taxation along two lines. It increased the duties on quite a number of articles that are used by the whole of the people, including beer, wine, spirits, tobacco, motor cars, and silks. A duty which was imposed upon me, as Minister for Trade and Customs, in the 1920-21 tariff, was to add still further to the burdens due to indirect taxation, because the Government of the day recognized that itwas absolutely essential that the per capita payment to the States should continue. I contend that time has not altered the obligation which lay definitely on the shoulders of the Commonwealth during the war, but that, on the contrary, it has equal force to-day. It is perfectly clear to me that as the obligations which arose out of the war begin to diminish - as they undoubtedly will before very long - the Par liament which imposed taxation to meet those obligations must shoulder the duty of gradually relinquishing it. It was our obligation to put it on, and it will be our obligation to take it off. It certainly is not within our province to push on to the States the obligations that we assumed during the war, and to adopt the proposal of the Government to finance the whole of our war obligations out of Customs and excise revenue.

Senator Pearce - What Government has proposed that?

Senator GREENE (NEW SOUTH WALES) - If that was not the original proposal of this Government I do not know what was. The idea, to me, appears to be to lift practically the whole of the direct taxation from the shoulders of those who are bearing it, and to place upon the States the obligation of reimposing it. The Government has retreated from the position that it originally took up, and is now suggesting a compromise with the States. A little while ago it was opposed to the idea of seeking a compromise. If the Government will say definitely that it is prepared to abandon the scheme for shifting its obligation on to the shoulders of the States, and will inform the States that it is willing to pay the same amount as is now paid, but under a different method, I shall offer no objection. I have already told the Prime Minister that I am perfectly willing to support a definite, concrete Proposal in relation to State debts. But I am not, as I have previously stated, prepared to "buy a pig in a poke," or to sign a blank cheque. In a matter of this kind I want to know exactly where I stand.

Senator Pearce - The honorable senator will know that at a later stage.

Senator GREENE (NEW SOUTH WALES) - The Senate is entitled to know where it stands before it agrees to sign the death warrant of the States. When this Parliament last proposed to alter the payments that were made to the States, it was in the Constitutional position that it did not first abolish the payments and then effect a compromise ; it made the compromise first. The Government now says " W e shall not adopt that course; we shall first cut off the payments, then confer with the States, and ultimately place a new proposal before Parliament." That is putting the cart before the horse. It is a wrong way in which to ask this Parliament to act. I say to the Government, " Go to the

States; make your compromise, and then come back to this Parliament and ask it to endorse it."

Senator Pearce - That method has been tried, and the States refused to meet us.

Senator GREENE (NEW SOUTH WALES) - It has bean tried, but in what way? The Government has 5a t at tho conference- table with a gun in each hand,, and has said to the States " With one gun we shall first incapacitate you, and with the other we shall then murder you." That is the attitude which the Government has adopted, at both the conferences that it has held with the States. I am not prepared to trust it with a gun in future, because it places it in an advantageous position and one that is absolutely unfair to the States.

Senator Ogden - What does the Government propose to substitute for the existing system ?

Senator GREENE (NEW SOUTH WALES) - That is what I want to know. If the Government would say definitely, "We have abandoned our original proposals, and are prepared to do something else," and will tell us what that something else is, I should he with it.

Senator Pearce - We are prepared to do what the honorable senator suggests, if the States will agree to it.

Senator GREENE (NEW SOUTH WALES) - Why not do it first?

Senator Pearce - Because the States have shown that they will not meet us.

Senator GREENE (NEW SOUTH WALES) - I presume that the Government is satisfied that it has a sufficient number of honorable senators behind it to ensure the passage of the bill. I do not know whether it has or has not, and I have not taken the trouble to inquire. If it will accept an amendment along the lines of that which has been prepared by Senator Kingsmill, I shall vote for the bill, because my wants will be satisfied. The States will be definitely secured for the future, and the Commonwealth will be precluded from doing what was originally proposed.

There are quite a number of other reasons that I should like to advance, but time will not permit of my doing so. I shall just hint broadly at what they are. The proposal to alter the venue of taxation is based on the assumption that once the Commonwealth retires from the field all that the States have to do is to re-impose what has been lifted. An examination of the taxation systems of the different States will disclose a material variation between each. Not one. State system agrees with the others, and that of the Commonwealth differs from .all, sowidely that it would be utterly impossible for the States to continue the burden on the shoulders of those who are now bearing it - which is essential - unless they were willing to tear up their ex] string systems and start afresh from the base. In business, taxation after a space of time becomes capitalized ; values of all kinds adjust themselves in relation to the taxation that is imposed. I can conceive of no- more disturbing element in the majority of the businesses of this country than for every State to have thrust upon them concurrently -the obligation of tearing up their systems of taxation and of establishing a new system which would cover an area that is outside the present systems. It is impossible to increase the taxation that is at present being imposed by the States in such a way that the burden will fall upon the shoulders of those who are bearing it to-day. That is another reason why I say that under no circumstances should this Senate consent to take the course which the Government originally suggested. There is a further, reason. Some persons assume that once the Commonwealth Parliament surrenders to the States this field of taxation it will be powerless to re-enter it. Every honorable senator knows that that is not so. Let us consider the land tax. I have a pretty shrewd idea that there are in Australia some Parliaments that would not pass it. I can imagine my friends who went to the country in' 1910 with the flaming inscription, "Land tax" emblazoned on their banner, once more adopting that attitude and re-imposing land taxation. I do not think that 1 could find it in my heart to blame them if they did so.

I ask the Government what urgency there is for passing this legislation ? Who is pushing it ? Where is the demand for it? I say deliberately that the Government has no mandate from either its organizations or the country to take this step. This is a deliberate violation of the platform of the National Federation, upon which the majority of the members of the Government were elected. It has been stated that the Government claims to have been given a mandate because of the very vague reference which appeared in the Prime Minister's policy speech to a possible re-adjustment of the financial relationships of the States and the Commonwealth. I am astonished that such a claim should be made by experienced politicians. I can conceive of its being made in some up-country electorates in which the people are not conversant to any reasonable extent with constitutional government. I wish to remind Senator Pearce and the Government of a little of the history that surrounds this matter. Unless the question was referred to in explicit terms in the policy speech of the Prime Minister, the Government had no constitutional right to make it an act of first political importance and to place it in the forefront of its programme immediately Parliament assembled. Everybody knows that that is the constitutional position. Furthermore, I declare that Mr. Bruce was elected in 1922 on an absolutely different basis. Senator Pearce knows perfectly well that when at Brisbane in 1922 Mr. Bruce, then Treasurer in the Hughes National Government, enunciated the policy of that Government on this particular matter, it was no chance utterance, but the considered policy of the Government at that time, and upon it he was elected. Yet immediately after that election wo found a most extraordinary situation. Practically the first act of the Composite Government after it was formed, and after Parliament had risen, was to go to Western Australia, and there make its first announcement of a change of policy in this connexion which was contrary to the deliberate statement of the Government under whose auspices the present PrimeMinister sought election. I recognize that that is a very serious declaration to make, and I want to ask what force was at work to compel Mr. Bruce to go back on the promise he made to the electors of Australia before the election and adopt a policy which was its direct antithesis. Every one knows that the Composite Government put forward its new policy at a Premier's conference, and likewise every one knows the result. But the Government declared that it would not take the slightest ' notice of what 'the Premiers said, and said that it would go ahead with its policy. Next it brought it3 proposals before the National party's conference, and it is no secret that at that conference they were incontinently and utterly rejected. Afterwards the Ministry did not say a word about them, but dropped them like a hot potato, and soon afterwards went to the country. During the course of the campaign that followed I was twice asked what my attitude was towards payments to the States by the Commonwealth, and I said, "I am perfectly prepared to see a readjustment, but I think it can be taken for granted that the original proposals of the Government will never again see the light of day." I am quite prepared now to see a readjustment brought about. I think I had every justification for assuming that the proposals had been dropped, because not a single word was said about them from the beginning to the end of the campaign ; yet immediately afterwards they were resurrected. Evidently some one had been pushing. them. I had my own ideas about the matter, but I did not find out what had happened until last Thursday when, in the press, I saw a statement by Mr. Bruxner, erstwhile Leader of the Country party in New South Wales, to the effect that it was the Country party that was pushing the proposals. I know that there are quite a number of members of the Country party who do not believe in these proposals. It appears, however, some one has been responsible for this change of front on the part of the Prime Minister, elected as he was in 1922, oft the definite promise that no change would be made unless constitutional changes in Australia warranted it. That is an attitude I am prepared to adopt. Yet, although the right honorable gentleman went to the country on that definite promise, immediately after the Composite Government was formed the statement to which I have already referred was made in Western Australia, and now we have Mr. Bruxner saying that the Country party was pushing the Government's proposals.

Senator Foll - Mr. Bruxner also gave reasons why certain people were opposing them.

Senator GREENE (NEW SOUTH WALES) - He did, and as I have already said, and as Senator Pearce generously intimated, the reasons he gave do not apply to me. The fact is that Mr. Bruxner has put the show away. It is a very serious thing for a party such as ours, with a leader such as we have, for whom I have the greatest personal respect, to be forced into the position of going deliberately contrary to a definite plank in its platform and against the election pledges of its leader. I venture to say that he would be the first man to try to get out of that position if it were possible for him to do so.

In the few minutes left to me, I wish to say a few words on the principle said to be involved in these proposals - that the Government which spends the money should be the Government that is responsible for raising it. If it were not a recognized principle throughout the world that superior Governments freely subsidize subsidiary Governments, as they may be termed, there might be something to say in favour of a Government giving its adherence to this principle ; but I defy any one, to show me any federation that does not/subsidize its State Governments.

Senator Pearce - The United States of America does not subsidize State Governments on a per capita basis.

Senator GREENE (NEW SOUTH WALES) - I am not talking about a per capita payment. This Government proposes to sweep away all subsidies on the principle that the spending of the money should be done by the Government that raises it. I say nothing about the method of subsidizing a subsidiary authority, but I hold that the principle upon which the Government, relies does not apply to the federations of the world. Every one knows that State Governments subsidize subsidiary local governments. The British Government gives various bodies powers of local taxation, but it also subsidizes them. Therefore, when we come to examine the principle upon which the Government has laid so much stress, we find that it is really not a principle at all, although, in following it, Ministers are doing something which, in my judgment, means political suicide.

Senator Guthrie - But it is honest.

Senator GREENE (NEW SOUTH WALES) - I am not saying a word against Ministers' honesty, but I say that we should hesitate before we follow a Government, however honest it may be, which is committing an act of political suicide.

Senator Guthrie - The honorable senator would not have a Goverment hanging on to office by any means and bowing to public clamour. If Ministers think that what they are doing is right, are they not justified in going on with it?

Senator GREENE (NEW SOUTH WALES) - Yes, but I do not say that their supporters should immediately follow them into the abyss. I have seen a lot of men prepared to step over precipices, but I have always hesitated to follow them.

Senator Guthrie - If an honorable senator places his seat in Parliament before his principles, he will be very careful; but, if he thinks that the Government is doing the right thing, is he not honest in. following it?

Senator GREENE (NEW SOUTH WALES) - I cannot follow the honorable senator through the whole of his speech, but I say that, if the Government be honest, I am equally honest in the view I take. From the stand-point of constitutional development the proposals of the Government are devoid of every scintilla of statesmanship. As a contribution to politics they are a tragedy. Charged as it is with the definite responsibility of holding the balance between the States and the Commonwealth, I can conceive of no action the Senate could take that would sooner bring it into scorn and derision, and, ultimately, cause the people of Australia to throw it away as useless, than for it to pass the measure which the Government is now submitting for its approval.

Senator SirHENRY BARWELL (South Australia) [8.26]. - My first words to night are words of congratulation to Senator Greene for his very able speech upon this bill. His speech was brimful of argument against the measure - arguments which must make honorable senators hesitate before they record a vote in favour of it, unless their minds be warped by purely party considerations. Unfortunately, some honorable senators do vote on purely party lines. It is something that should not be done in the Senate. Last year, when I was speaking on the budget, I expressed my opposition to the proposals of the Government which' have been embodied in this bill, and, since then, I have given the matter further considera- tion. I have tried to find some virtue in the proposals, but the closer and the more prolonged my study has been, the more I have become convinced that they are unsound, and that the action of the Government in bringing them forward is illadvised. It is perfectly true, as Senator Pearce said, that four or five years ago, at a Premiers' conference, I stated that the first principle of the policy embodied in this legislation appealed to me. In theory it .seemed to me to be right that each Government should raise its own revenue, and that no Government should be dependent on another for the money it has to expend. That opinion was expressed not only by myself, but also by others "who were at the conference at which that principle was propounded. Further consideration has shown that we cannot depend merely on theory. My practical experience as a State Premier, and that of others here who have been State Ministers, show that this is one of the cases where it is not safe to trust to mere theory. As has already been pointed out, no part of the Federal Constitution received more thorough or careful consideration than the provisions relating to the financial position of the Commonwealth and the States. Over and over again during the convention debates it looked as if federation would not be consummated, because of the difficulty of arriving at some satisfactory arrangement for the division of the Commonwealth and State finances. But federation was consummated, as we know, on the basis of a financial partnership between the national Government and the Governments of the various States.

Senator Ogden - After the first bill had been amended.

Senator Sir HENRY BARWELL - Yes, but I want to come to that point, because it is the pivot of my remarks, There was a financial partnership between the Commonwealth and the States without which federation would not have been consummated when it was,, and probably would not have been afterwards. It is true, as the Minister stated, that the arrangement which was finally agreed to at the Premiers' Conference in 1S99, whereby the Commonwealth was to retain for its own use not more than one-fourth of the Customs and excise revenue, and the balance was to be paid to the States, was limited to a period of ten years, and thereafter until Parliament otherwise provided. But that limitation on the Braddon clause was imposed merely to placate a minority of the electors. A majority of the electors who voted on the referendum taken prior to the Premiers' Conference in 1898 were in favour of the Braddon clause as originally drafted.

Senator Ogden - Without any limitation?

Senator Sir HENRYBARWELL.That is so.

Senator Pearce - But the bill was not accepted.

Senator Sir HENRYBARWELL.A majority were in favour of the Braddon clause without limitation being embodied in the Constitution. I admit that that bill was not passed; but I am stating that a majority of the electors who voted were in favour of the Braddon clause as originally drafted, which provided that the Commonwealth should have not more than one-fourth of the Customs and excise revenue, and that the balance should be paid to the States for all time. It was only because of the action of New South Wales that the bill was lost. It stipulated that the bill should not be carried in that State unless a majority of 80,000 voted in favour of it. There was a majority of 70,000 in favour of the bill as it was originally drafted. However, so anxious were the States and people generally that federation should be consummated, that they finally agreed to tha alteration adopted at the Premiers' Conference in 1899', limiting the operation of the Braddon clause to ten years, and thereafter until Parliament otherwise provided. It was to be a probationary period during which this arrangement could be tested. An opportunity was provided to make an alteration in the terms of the financial partnership, which was the basis of federation, if in the light of experience it was shown that an alteration was necessary. As we know, an alteration was made in 1910, but again, I point out, only in the terms of the financial partnership existing between the Commonwealth and the States. There was no annulment of the partnership; that was never contemplated by the framers of the Constitution. A limitation was imposed, but only so that the terms of the partnership might be adjusted from time to time to meet the requirements which experience showed to be necessary. There was a limitation also in 1910, when the Surplus Revenue Acb was passed, which provided that the Commonwealth should pay to the States 25s. per capita, or a part of the interest on State debts. Again there was a limitation of ten years, which was only a probationary period. Once again the opportunity was given to alter the terms of the partnership existing between the Commonwealth and the States, and upon which federation, as I have said, was based. It was never stated, suggested, or even contemplated, that there would be an annulment of the partnership to which I have referred ; if it had . been suggested, federation would not have been consummated when it was. This financial partnership was undoubtedly the main basis upon which federation rested, and without which we would not have had a federation of States. I do not think any one can gainsay that fact.

That brings us up to the present time when the whole position has again to be reviewed. What is the proposal? Not to make some re-adjustment of the terms of the financial partnership, but to dispense with it altogether.

Senator Ogden - And not to substitute anvthing in its place.

Senator Sir HENRYBARWELL.The Minister says that the Government has some proposals in view, which at some future date it will bring forward.

Senator Guthrie - Has it not suggested that it intends to vacate certain fields of taxation in which the States will be allowed to operate?

Senator Sir HENRYBARWELL.That is in connexion with the present proposal, with which I shall deal in a moment. We are asked, as Senator Greene said, to sign a blank cheque. The idea is to remove the main foundation upon which federation rests. With what result? Undoubtedly, the weakening of the whole structure, thus undermining federation. I agree again with the point so forcibly put by Senator Greene, that it will be only the beginning of the end of federation, as we know it, if the Senate agrees to this bill. It will mean the financial strangulation of the States. The Commonwealth does not know what to do with its surplus revenue. Its only difficulty is to keep its expenditure up to its receipts, while the States are at their wits' ends to find oven sufficient money to carry on most urgent public works.

Senator Crawford - That cannot he said of Queensland. That State is throwing money away in every possible direction.

Senator Sir HENRY BARWELL - Queensland may be spending money freely, but there are many directions in which it could be more wisely expended.

Senator Crawford - It certainlyis not wise expenditure.

Senator Sir HENRY BARWELL - The same could be said of New South Wales, where public money is being wasted in various directions. But supposing those States were proceeding, as other States are, and legitimately spending money, there -would not be sufficient to carry out themost, urgent public works with the funds at their disposal, even with the assistance they are receiving from the Commonwealth.

The Senate has to face the position. There is no doubt that the people of Australia are looking to the Senate - the chamber specially constituted to safeguard the interests of the States - to see that their rights are not in any way infringed. I ask honorable senators to follow mewhile I put before them certain aspects, which they should consider in deciding the path of duty which they, as members of this Senate, should tread. In the first place, there is the fact I have already stated, that there is, and has been ever since federation, a financial partnership between the Commonwealth and the States. The first question I am going to ask honorable senators to consider is this : Is there any necessity why this financial partnership should be annulled? Let us consider it first from the view-point of the Commonwealth. There is certainly no reason why there should be any annulment of the present partnership.

Senator Thompson - It is an adjustment, not an annulment.

Senator Sir HENRY BARWELL - It is nothing of the kind. If it were an adjustment, I should be adopting a totally different attitude. How can the honorable senator say it is an adjustment?

We are being asked to sign a blank cheque.

Senator Thompson - It rests with the States.

Senator Sir HENRY BARWELL - It is simply an annulment of the partnership. If we pass the bill the arrangement existing between the Commonwealth and States will be terminated.

Senator Thompson - It rests with the States, to confer with the Commonwealth Government in making an adjustment.

Senator Sir HENRY BARWELL - Not at all. The Commonwealth are saying of this scheme, " Take it, or leave it." Why should the States be placed in that position?

Senator Crawford - No adjustment could be made without parliamentary authority.

Senator Sir HENRYBARWELL.If, as the Minister says, the Commonwealth is anxious to do justice to the States, and is prepared to substitute some other proposals, it ought to withdraw the bill for the time being, bring forward its proposals, and let us at least know what they are. It is useless for it to say, " We cannot come to an arrangement with the States." It is not a question between the Commonwealth. Government and the State Premiers at the present time, but one which this Parliament should decide. If the Government cannot get the States to agree it should at least come forward and say to Parliament, " Here are our counter-proposals which we intend to substitute for the financial payments we are at present making." lt docs not do anything of the kind.

Senator Pearce - We have already done that and have been met with the reply that the States will not consent to the withdrawal of the per capita payments.

Senator Sir HENRY BARWELL - I have heard that before. We have now passed that stage and the question is one between the Government and Parliament. Let the Government submit definite proposals. It could' make its proposals now, not to the Premiers of the States, but to the Parliament, which is the proper authority.

Senator Pearce - That is what we intend doing.

Senator Duncan - The debate should be adjourned until we have that in formation.

Senator Sir HENRYBARWELL.Yes, the bill should be withdrawnuntil we know what is proposed. We have nothing definite before us. Honorable senators must admit that under this bill the States will be financially embarrassed. We have been told that certain proposals are to be submitted, but we have not the slightest indication of what they are.

Senator Pearce - Because we wish to give the States an opportunity to express an opinion.

Senator Sir HENRYBARWELL.The Government should withdraw the bill.

Senator Pearce - The States will not meet us.

Senator Sir HENRY BARWELL - We should have the opportunity of saying whether, inour opinion, to proposals of the Government are fair.

Senator Pearce - The States would still have to be consulted.

Senator Sir HENRYBARWELL.The matter is in the hands of the Government, which can forceits will upon the States. It should submit its proposals, so that we can see if the States can reasonably accept them

Senator Pearce - Weshall do that.

Senator Sir HENRY BARWELL - The bill should be withdrawn until that has been done.we would then know where we were. We do not know at presentwhere we stand; we are asked to vote in the dark. No annulment is necessary from the point of view of the financial requirements of the Commonwealth, because the Commonwealth treasury is overflowing beyond the most sanguine expectations of the Treasurer.

Senator Ogden - Yet the States must " toe the line."

Senator Sir HENRY BARWELL - The annual surplus of the Commonwealth is so great that it is almost a reflection upon the budgeting methods of the Treasurer. Seeing that annulment is not necessary from the point of view of the financial requirements of the Commonwealth let us consider whether it is necessary, from the point of view of the States. The unanimous opposition of the States to the proposal is sufficient evidence that annulment is not necessary from their point of view. There remains yet a third question : Do the people want it?. . With that aspect of the question

Senator Greenedealt effectively this afternoon,, After all, "he electors of Australia ought to be the masters of the situation. From them alone the Commonwealth derives its power to administer the affairs of the country and to dispose of its revenue. Members of Parliament are only the representatives of the people who send them here. As members of this Parliament, it is our duty to carry out the will of the people. Although frequently Ministers of the Crown act as though they were the masters of the people, they are, in reality, only the people's servants. It is their duty to carry out the wishes of the people. The Leader of the Senate said that the Government had received a mandate from the people for this proposal. I shall not traverse that argument, because it has been ably dealt with this afternoon by Senator Greene. Because some passing reference to the financial relations of the Commonwealth and the States was contained in the policy speech of the Prime Minister - the flimsiest of generalities - the Minister now says that the Government has received a mandate to introduce this measure. Any one who has had ministerial experience knows that, if a government is seeking a mandate from electors upon a matter of importance - and surely this is a matter of importance, seeing that it goes to the basis of the federation - it must be clear in the exposition of its policy. But, apart from that aspect of the question, there is abundant evidence that the Government's proposal is contrary to the will of the people. The Government may succeed in forcing this measure through Parliament, but it will eventually find that the will of the people cannot be thwarted with impunity : the people will assert their authority when given the opportunity. For any government to adopt the high-handed procedure which has been indulged in by the present Ministry in this matter is to commit political suicide. Speaking at a recent meeting of the Australian Women's National League, the Prime Minister said -

The very disastrous and undesirable feeling existing between the Commonwealth and the States will be overcome, and they will come together again and work in a spirit of cordial and mutual understanding for the benefit of all the people of Australia.

How little the Prime Minister knows the feelings of the people of Australia, if he thinks that they will come together again without first seeing this wrong righted and the perpetrators punished. Undoubtedly the people will assert their authority. It is evident from the remarks of the Prime Minister at that meeting, that he is not acting blindly ; but that he knows that he is flouting the will of the people. In effect, he says, " Never mind ; they will get over it." There is no possibility of their getting over it. If this were a matter upon which public feeling was fairly evenly divided, or if there were only a small majority opposed to it, there might be some hope of its being forgotten; but where the feeling against the bill is almost unanimous - it certainly is overwhelming

Senator Sampson - How does the honorable senator know that?

Senator Sir HENRYBARWELL.Does Senator Sampson not know it?

Senator Sampson - I do not.

Senator Sir HENRY BARWELL -Perhaps I can enlighten the honorable senator. First, practically the whole of the press of Australia is against the withdrawal of the per capita payments. In the face of such unanimity, can we doubt that they represent public opinion ?

Senator Kingsmill - The opposition comes from those newspapers which lead as well as from those which follow public opinion.

Senator Sir HENRY BARWELL -Exactly. When the press of Australia is almost unanimous on any subject its views can safely be regarded as a reflex of public opinion. Then there is the significant fact that the various political organizations throughout the country arc against this measure. While numerous organizations have passed resolutions against it, not one organization has passed a resolution in its favour. The Minister the other day said that the National Federation in Victoria did not endorse a resolution from a country branch in opposition to this measure.

Senator Pearce - The resolution was rejected.

Senator Sir HENRY BARWELL -That does not necessarily mean that the federation favoured the' Government'3 proposal. Does not the Minister think that if the meeting had been in favour of the action of the Government it would have passed a resolution to that effect?

Senator Pearce - It was not asked to do so.

Senator Sir HENRY BARWELL - The whole matter was before the meeting, which could have passed any resolution, cither for or against the Government's proposal. It refrained from endorsing a resolution condemning the Government.

Senator Pearce - That was not the motion.

Senator Sir HENRYBARWELL.The resolution was not endorsed by the meeting because those present desired to save the face of the Government.

Senator Pearce - A resolution that the per capita payments should not he discontinued was rejected.

Senator Sir HENRYBARWELL.The fact remains that although the meeting may not have endorsed that resolution from a country branch, it refrained from passing a resolution in favour of the Government's proposal. It is clear that throughout Australia even that organization, which usually stands behind the Government, is not supporting it on this occasion. I have in my pocket a telegram which I received to-day from an organization in South Australia which usually stands behind the Government, asking me to use all my influence to defeat this proposal and to endeavour to persuade others to do the same. Should the evidence that I have given that the press of Australia and the various political organizations are opposed to this measure not be sufficient to convince honorable senators, I ask them to consider the attitude of the Governments and the Parliaments of the various States. They are unanimous in their opposition to this proposal.

Senator GREENE (NEW SOUTH WALES) - The opposition comes from all parties.

Senator Sir HENRYBARWELL.Yes; and the fact should make the Government pause. Surely such united and determined opposition should cause this Senate, which has been specially constituted to safeguard the interests of the States, to hesitate before recording a vote in favour of this bill. If in a matter of such vital importance to the States the Senate fails to fulfil the purpose for which it was constituted, the last argument in favour of the retention of the Senate as a part oF the legislative system of Australia falls to the ground. In this proposal there is a clear-cut issue between the Commonwealth and States. In such circumstances it surely is our duty to stand by the States, and to see that their interests are not infringed. The will of the people of Australia has been clearly expressed. Will honorable senators say that the States do not know what their own interests are ? Will they say that that which the Commonwealth Government seeks is in the interests of the States, notwithstanding their united and determined opposition to it ? There can be no question that public opinion throughout Australia is behind the States, and opposed to the Commonwealth Government in this matter. What is this public, whose opinion is against this proposal ?

Senator Crawford - It is a very silent public.

Senator Sir HENRY BARWELL - It is not. Surely its voice has been made known in every part of Australia. We must not lose sight of the fact that the same public which elects members of the Federal Parliament has its representatives also in the State Parliaments.

Senator Cox - What did the Age say to-day ?

Senator Sir HENRYBARWELL.Senator Cox has just awakened. I dealt a quarter of an hour ago with the attitude of the press towards this question. I shall not be drawn off the track by the honorable, senator, whom I advise to go to sleep again. Our duty as representatives of the States is to carry out the will of the people. There cannot be two public opinions in this matter, because there is only one public.

Senator THOMAS (NEW SOUTH WALES) - Will the honorable senator read what- the Sydney Daily Telegraph says?

Senator Sir HENRY BARWELL - I shall not comply with the honorable senators request to read a column and a half from that newspaper at the present moment, but shall pass on to the Prime Minister's statement, that the States have no moral claim to any payment by the Commonwealth.

Senator Pearce - To any share in the Customs revenue.

Senator Sir HENRY BARWELL - Senator Pearce knows well that the per capita payments are not made to the

States as a share of the Customs revenue. If he attempts to hedge in that way, I shall not attempt to follow him.

Senator Pearce - That was the claim put forward by the States at the conference.

Senator Sir HENRY BARWELL - That has nothing to do with the Prime Minister's argument that the States have no moral claim to any payment by the Commonwealth. The moneys paid to the States by the Commonwealth are not derived solely from Customs taxation.

Senator Pearce - The claim made by the representatives of the States at the last conference was that they had a moral right to a share of the Customs and excise revenue.

Senator Sir HENRY BARWELL - Yes; but the right honorable gentleman said that they had no moral claim to a share of Commonwealth revenue.

Senator Pearce - I did not say that.

Senator Sir HENRYBARWELL.I am sure that every honorable senator who listened to the Minister took his remarks to mean that.

Senator Barnes - Unmistakably.

Senator Sir HENRYBARWELL.For once, at all events, I have a strong follower in my honorable friend opposite. The right honorable the Minister knows that any claim by the States to a share in the Customs and excise revenue ended in 1910, but he goes further, and says that the States have no moral claim to what the Commonwealth is now seeking to take from them. Usually I do not care to quote, but since the Minister made several quotations, I should like to place on record the opinions, not of men who do not count for much in the scheme of things, but of men who may be regarded as the founders of the federation. Let me read first of all the opinion of the late Sir George Reid, conveyed in a letter to the Hon. John Murray, Premier of Victoria, who presided at the 1909 Interstate Conference -

I am more responsible than any man for the termination of the Braddon clause. But I never wished to allow the States less than a fair share of Customs and excise revenue, which is the only way in which the States can receive revenue from the masses of their inhabitan's. The object of this letter is to make that sure for all time.

Idonot wish to introduce any views of my own, except to state that there are one or two main points in which I think the States should be considered, viz: -

1.   They should have a fair share of the Commonwealth revenue.

2.   That share should be on a per capita basis.

3.   lt should increase automatically with the growth of the revenue and population, or at least with the population growth.

4.   There should be no other point of contact in matters of revenue between the Commonwealth and the States.

I come now to the view expressed by the Hon. C. G. Wade, K.C., Premier of New South Wales, at the Interstate Conference in Melbourne in 1908 -

The idea dominant in the minds of the Federal Convention all through was that there must be some guarantee of a definite, clear, and precise character as to the solvency of the various States. . . . When the Braddon clause was introduced the views of prominent members of the Convention were in entire accord with it, and when it was modified a concurrent clause was introduced allowing the States to have financial assistance from the Commonwealth.It was put in as a further inducement to the States to vote for the scheme, the understanding being that their solvency should be protected.

The late Sir William Lyne, speaking at the 1897 Federal Convention in Sydney, expressed his views in these words -

If you are going to destroy your States by taking away the money they should receive, and put them in such a position that they cannot raise revenue, except by direct taxation of a very heavy character, you must bring them so low that you might as well have unification everything being managed directly by the Commonwealth Government and the system of shires and boroughs being extended all over the continent.

That is what is happening. It is clear that what the States are getting at present by way of per capita payments comes from the general revenue which, in its turn, comes largely from the Customs and excise duties. That source of revenue which, when federation was inaugurated was taken from the States, had permitted them to tax practically the whole of their people indirectly; but under the existing financial arrangement they have been getting some portion of it back. If this bill is agreed to, the States will lose practically the only means bv which the whole of their people can be taxed. With what result? The States will be forced to increase their direct taxation, and in all probability will seek to make up the loss of revenue by a heavier income tax, which comes from a very small section of the people in each State.

For example, in South Australia, which has a population of over 600,000, there are only about 48,000 payers of income tax. What is now happening was forecast by Sir William Lyne. I come now to the view expressed by the Hon. Bruce Smith, K.C., as reported in Hansard in 1910-

The Premiers recognized that 25s. per head, which, roughly speaking, represents about onehalf of the present Customs revenue, was a fair amount. ... I then considered, and now consider, that 50 ner cent. of the Customs and excise revenue is a fair allocation. Some honorable members have talked of a payment for ten years as if it were to be the final provision of the Commonwealth. It is nothing of the kind.

Those remarks, I remind honorable senators, were made in 1910. Here we have one of the leading public men of the Commonwealth putting it on record that because the financial arrangement with regard to per capita payments was to be limited to a period of ten years it must not be assumed for one moment that it was to be a final provision of the Commonwealth. I quote now the opinion of the late Mr. Alfred Deakin, who took part in the debate at the 1897 Federal Convention -

Federal government might be, and, in my opinion, ought to be, introduced with a guarantee to each Colony of the return to it of the sums it at present receives from the sources which the Federal Government takes over; of course, deducting the cost of the departments which the provincial Governments at present pay in order to obtain the revenue; and I would make that guarantee obtain, not for five or 20 years, but for all time.

At the third session of the Federal Convention, held in Melbourne in 1898, Mr. Deakin expressed his views in these words -

As I understand the position, we all admit that, in federating the services, the States must not bo deprived of that gain which they have been deriving from them in the past- upon which their past budgets have been built, and on which their future budgets must also be built - unless their whole financial systems are to bc dislocated. . . . These States must necessarily grow, and as they grow the Commonwealth revenue necessarily increases; and as the Commonwealth increases possiblythe State requirements from the Commonwealth may increase also.

Sir GeorgeTurner, in presenting his first Federal Budget, as Treasurer of the Commonwealth, said -

Another grave responsibility resting upon us iswith regard to the way in which we frame our tariff. We are bound to, as far as practicable, give back to each State about as much as it would have received if federation had not taken place, and, in addition, there is a responsibility to provide for the expenditure of the Commonwealth. Whatever tariff we, in our wisdom may pass may not realize our expectations, and, therefore, whatever, views we may hold we must be extremely cautious not to do anything to endanger the solvency of the States. In the Customs duties we have taken from the States their most elastic and most important source of revenue, and it is our bounden duty to do everything we can to preserve their solvency, and prevent them from being placed in a dangerous position.

Senator Guthrie - Is it not true that the financial obligations of the Commonwealth and State Governments have been interfered with owing to the fact that the Commonwealth Government is now carrying a war debt of over £400,000,000?

Senator Sir HENRY BARWELL - I do not dispute that for one moment. I realize that the obligations of the Commonwealth have to be met. But that does not touch the problem arising out of the financial partnership between the Commonwealth and the States, and the right of the States to a share of what we may call the "easy money" which comes byway of Customs and excise duties from the great multitude of the people. I now quote the opinion expressed by the Honorable I. A. (now Mr. Justice) Isaacs, who was a member of the Federal Convention in Melbourne in 1898 -

I think we have made a mistake in not properly guaranteeing the States against the loss that may accrue from the giving up of the Customs revenue. I strenuously hold to the opinion that the States ought to be guaranteed against that loss. But when you go beyond that, and introduce a provision allowing any State to come forward and ask, not for rights, but for favours, I say that such a provision is foreign to the Constitution. If we look at what has been done in America, we shall see the abuses to which a course of this kind may lead. . . . Nobody ventures to assert that the States are insolvent, but if you take away their revenue, and leave them their liabilities, they stand an extremely good chance of becoming insolvent.

The late Lord Forrest, speaking at the Melbourne convention, said -

All we desire to say is that three-fourths of the Customs revenue shall be returned to the States. Unless the States have some security of this kind the people cannot bo expected to accept the bill. . . . It is like beating the air to tell us that we are to give up our great revenue producer - the Customs - and that we are to have no guarantee whatever that any part of that money will bc returned to us, although we shall each have to provide for the payment of interest on our public debts.

The late Honorable John Henry, of Tasmania, speaking at the Federal Convention in Adelaide in 1897, expressed his views thus -

Without throwing on the Federal Government a specific and definite obligation, no matter what their revenue may be and how they resist it, of providing a sum of money sufficient for the requirements of the States, it will be unsafe for the States financially to enter into the federation.

The Honorable J. W. Evans, the then Premier of Tasmania, at the second Federal Convention, said -

Sir EdwardBraddon, when he brought forward that historic clause. intended that it should be passed in perpetuity, in order to give the States sufficient revenue from the transferred revenue-producing sources to enable them to maintain their financial equilibrium.

I have made these quotations because they represent the opinions of men who played an important part in the political history of the Commonwealth, and because their views are worth recalling. Clearly, the people have always wished that the finances of the Commonwealth should be distributed in a fair and reasonable way. They are not satisfied to see the Commonwealth' coffers overflowing, as at present, whilst the State Treasuries are starved. Senator Greene, ' this evening, compared the respective functions of the Commonwealth and State Governments. I freely concede that the Commonwealth Government discharges very important national functions, but many people hold that, particularly in times of peace, they are less important than the functions of the State Governments. Actually, the functions of the Commonwealth and the States are complementary; they should dovetail in one -with the other. There should be no administrative overlapping and no friction between administrative authorities in the discharge of their respective obligations. As one who has had considerable State administrative experience, I say without hesitation, that the Commonwealth Government does not understand the difficulties of the States, and it is evident that the Ministry is determined to have its own way in this matter, regardless of the effect which its policy may have upon the finances of the States. Recently the South Australian Government appointed a royal commission to inquire into and report upon the disabilities of that State arising out of federation. Expert evidence was given to the effect that, if these proposals of the Federal Government are agreed to, they will not only result in considerable loss to South Australia, but also inevitably lead to very serious financial embarrassment.

Senator Crawford - A great deal of evidence was given against the per capita payment.

Senator Sir HENRY BARWELL - I do not believe in the per capita payment; I do not think that it is an ideal system. I quite agree that there should be an alteration, and that the financial relations of the Commonwealth and the States should be placed upon some other basis ; but I want to know what is to be substituted for the existing system.

Senator Guthrie - I am glad to hear the honorable senator say that he does not approve of the per capita payment.

Senator Sir HENRYBARWELL.What I have said is that it is not an ideal system. If it were, States like Tasmania and Western Australia would not need to have special grants made to them by the Commonwealth Government.

Senator H Hays - Grants to the State3 would still have to be made under section 96 of the Constitution.

Senator Sir HENRYBARWELL.That is true, as the Constitution stands. Consideration of that matter might lead to an alteration of the Constitution, under which payments by the Commonwealth to the States might be based on the disabilities that are suffered by the States under federation. Those disabilities differ considerably in the case of each State. In a primary producing State like South Australia they are very much greater than in Victoria and New South Wales.

Senator Guthrie - Under the system of per capita payments the wealthier States receive the largest amounts.

Senator Sir HENRYBARWELL.That is perfectly true. I am not arguing in favour of a permanent retention of the per capita payments, but against the annulment of the financial partnership between the Commonwealth and tho States, under which at the present time those payments are made. All that I say is that the financial partnership should be continued, but that the payments might be made upon some other basis. The Government has no right to ask us to annul the financial partnership -without telling us what it proposes to substitute for the existing system. I was dealing with the royal commission which was appointed in South Australia to inquire into the disabilities to that State arising out of federation. The Public Actuary of South Australia, a very able man, said in evidence -

The abolition of the per capita payments, and the withdrawal of the Commonwealth from the field of direct taxation, will seriously aggravate the disabilities of South Australia under federation.

He summarized his evidence in a few words, and gave his deductions thereon. That summary and those deductions are as follow: -

(1)   A high tariff increases prices, cost of living, and wages.

(2)   A high tariff results in a bounding revenue to the Commonwealth Government, and increases expenditure by the State Governments, at the same time depreciating the purchasing power of the per capita grant.

(3)   The decrease in the purchasing power of the pound has almost halved the purchasing power of the per capita grant.

Deduction. - The per capita grant should be increased so as to bear an equitable relation to the Customs revenue.

(4)   The principal effect of the tariff upon Australian industries has been to penalize primary industries for the benefit of secondary industries;

(5)   A tariff penalizes most those States which are dependent upon primary industries;

(6)   A tariff extracts the highest per capita levy from those States which arc least self-contained and have the largest imports per inhabitant;

(7)   Federation has penalized those States with less than the average wealth per head. The wealth per head of South Australia is less than in any State except Tasmania;

(8)   The tariff has benefited most of the States of Victoria and New South Wales, whilst penalizing most the States of South Australia, Western Australia, and Tasmania.

Deduction. - While the principle of payments to the States from the Commonwealth should be retained, the payments should not be upon a per capita basis, but adjusted so as to remove the disabilities of certain States.

(9)   The combination of per capita payments with federal direct taxation has, to some extent, ameliorated the inequities of federation.

Deduction. - The abolition of per capita payments, and the proposed withdrawal of the Commonwealth from the field of direct taxation. will aggravate the disabilities of South Australia.

I stated just now that the per capita system is not just and equitable, and that there should he some alteration. I also pointed out that the fact that Tasmania and Western Australia are dependent upon the Commonwealth Government for special grants to enable them to carry on their activities, proves that the system is not ideal. What will be the position of those two States when the per capita payment is withdrawn?

Senator Ogden - They will have to impose a greater amount of direct taxation.

Senator Sir HENRY BARWELL - Exactly. That extra taxation will fall on the people upon whom the States are dependent for the continuance of their industries. Industry will be paralyzed if a greater amount of direct taxation is imposed upon those particular people. It is all very well for the Commonwealth Government to say that the States can reimpose the taxation which the Commonwealth forgoes . If Commonwealth Ministers had had a week's experience of the administration of a State, they would know better than that. The matter cannot he settled in such a simple way. The disabilities of South Australia, Western Australia, and Tasmania will be enormous if these proposals are agreed to. The evidence of the Public Actuary that I have read was supported by that of other expert witnesses, one of the most prominent of whom was Mr. Alexander Leslie Mackay, lecturer in economics, economic history, public administration, and finance at the Adelaide University. He expressed the opinion that very serious financial embarrassment would be caused to South Australia by these proposals. Such evidence proves that it is nothing but mad folly for the Commonwealth Government to continue along these lines. It is pure humbug for the Prime Minister, or any other Minister, to say that the Government has no desire to cause serious embarrassment to the States. Serious embarrassment will be caused to some, if not to all, of the States. Possibly when the Government launched these proposals it was entirely ignorant of the mischief that would result. It may have been misinformed or illadvised. But when it has the evidence of financial and administrative experts of the highest calibre in Australia, tothe effect that these proposals will result in serious embarrassment to the States, it is wicked for the Government to persist with them. However much it may desire to possess itself of the easy money that is obtained from Customs and excise duties, it must admit that there is not an urgent necessity for the passage of tha bill at the present time. There is any amount of time to probe the opinions that have been, and are still being, expressed regarding the financial embarrassment that will result.[ Extension of lime granted.] The Government does not allege that there is an urgent necessity for this proposal, because it is unable to do so. The whole of its case appeal's to revolve round what is called the inherent viciousness of theper capita system, because it involves the raising of money by the Commonwealth Government for expenditure by the States. The absurdity of that contention is illustrated by the fact that the existing system has been the practice since federation was inaugurated 27 years ago, and has worked without difficulty c r serious objection on the part of any Government except that which is now in power.

Senator Kingsmill - Yet this Government initiated the Federal Aid Roads Grant!

Senator Sir HENRY BARWELL - I intended to mention that. As Senator Greene stated during his speech, no federation in any part of the world can be mentioned in which there is not a division of finance between the federation and the States.

Senator Crawford - The honorable senator cannot point to a federation in which there are sovereign states in the sense that we have them.

Senator Sir HENRY BARWELL - That does not touch the question in any. shape or form. What does it matter whether such states are sovereign or not? As Senator Kingsmill stated just now by interjection it is an absurd anomaly to have this contention of inherent vicious ness advanced by a Government that is foisting upon the States, against the will of some, money to be expended upon roads within the States. I am sure that the Government cannot be serious in its argument that the system is inherently vicious.

There is another point that has not been mentioned, but to which I should like to direct the attention of honorable senators generally, and thu Leader of the Senate in particular. I am not at all sure if the Commonwealth went right out of the field of direct taxation and became entirely dependent for its revenue on Customs and excise duty that it would be an ideal system. The bait the Commonwealth is holding out to the States is that if they will agree to the abolition of the per capita payments the Commonwealth will get right out of land tax, estate duties, and entertainment tax, and will forgo 40 per cent. of the income tax with the idea ultimately of going right out of the income tax arena, and so right out of the field of direct taxation. But supposing that all comes about - I do not think it will - the Commonwealth will be dependent solely for its revenue upon indirect taxation through Customs and excise duties, and that I say is anything but an ideal system. It is the duty of a government to budget neither for a deficit nor for a surplus, but simply for the money needed to carry on operations for the financial year. To do this a government must have an elastic system of taxation which can be increased or decreased according to the financial re- quirements of the year. Is a Customs tariff an elastic system of that kind?

Senator Pearce - Yes, it is, in regard to liquors and tobaccos.

Senator Sir HENRYBARWELL.The Government has told us over and over again that its tariff , is merely for the protection of industry. It is, therefore, not an elastic system of taxation that can be increased or decreased. It is not an ordinary revenue-producing instrument.

Senator Pearce - But it contains revenue duties.

Senator Sir HENRY BARWELL - That contention is somewhat different from the usual contention of Ministers that the tariff is merely protective in its incidence. If it is, it is not an ideal system of taxation on which to rely. As a matter of fact, no single system of taxation is an ideal one, not even if it is the single tax so frequently praised by Senator Grant. Looking at these proposals from every angle. I fail to see one sound or plausible argument in favour of them and when we find, as we do in this case, an almost unanimous public opinion against them, we can be pretty certain that they are faulty. I think it was Bancroft who truly said, " The public are wiser than the wisest critic." No government can be blind to a widelyexpressed public opinion. Our Government is simply stubborn on this matter, and stubbornness, as a rule, is a sign of weakness and not of strength. It was Bishop Whately who said, " If men were stubborn just in proportion as they are right, then stubbornness would take its place among the virtues, hut men are generally stubborn just in proportion as they are ignorant and wrong." Speaking somewhere last week the Prime Minister said : -

The Federal Ministry wished to prove that they are anxious to bring about harmony and to disprove the charge that they are seeking to dictate to the States. " Words sweet as honey," if I may quote Homer, "from his lips distill'd;" but words, mere words, words without deeds, and therefore words that are nothing worth! If one did not know the Prime Minister one would be inclined to say that these words were pure hypocrisy.

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