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Wednesday, 28 March 1928

Senator HERBERT HAYS (Tasmania) . - The agreement contained in the bill now before the Senate can rightly be described as one of the most important we have ever had to consider. When the Commonwealth Constitution was under consideration at the Federal Convention the greatest difficulty was experienced in arriving at a satisfactory basis for dividing the Commonwealth and States finances so as to ensure the future of the Stages. At the instance of Sir Edward Braddon, provision was made for the return to the States of 75 per cent, of the customs and excise duties. Every endeavour was made by those who were representing the various colonies to find some other solution of the problem, and the section of the Constitution which provided for the payment to the States of 75 per cent, of the customs duties was then described, and has since been known as the Braddon Blot. Whenever efforts were made to review that provision of the Constitution it was a time of extreme anxiety to the States. All State Premiers and Treasurers, irrespective of their politics, approached the question with extreme anxiety. The division of the finances of the Commonwealth and the States has been one of the most contentious matters that has ever been discussed by Commonwealth Prime Ministers and Treasurers with' State Ministers. When the States Grants Bill was before this chamber, I opposed the abolition of the per capita payments. I said that I believed that their abolition would mean the severance of the last financial link that bound the Commonwealth to the States; that while I was prepared to admit that the Commonwealth Government would give favorable and even generous consideration to the position of the States, it was only right and proper that those who represented the States in the Senate, and also State . Ministers should know exactly what the Commonwealth's proposals were before we were asked to agree to repeal the legislation that since the inception of federation had formed the basis of Commonwealth and State finances. The right honorable the Leader of the Senate claims that the agreement now under consideration is the result of a conference between the States and the Commonwealth, and that it is a satisfactory conclusion of what for some time has been a.«very contentious matter. While I must accept the position as I find it, being assured by the right honorable gentleman that the agreement has been signed by all the States, I claim that the States had no alternative but to agree to the terms laid down by the Commonwealth "Government.

Senator Needham - They accepted under duress.

Senator HERBERT HAYS - I would not say that. I take it that the Government was acting as it thought best, and believed that it was treating the States equitably.

Senator Sir George Pearce - The representatives of the States were invited to submit alternative proposals.

Senator HERBERT HAYS - I admit that they were; but it must not be forgotten that the per capita payments, to which they were entitled, had been withdrawn. There can be no doubt that the States always understood that they would participate in the customs revenue raised by the Commonwealth Government. While the Commonwealth has heavy financial commitments, the expanding needs of the States also mean that, with the progress of the years, their financial needs are becoming more urgent. For many years they enjoyed the exclusive right to revenue from certain forms of taxation, and prior to federation State Treasurers could budget for the year's expenditure with a fair degree of certainty. Generally speaking, their finances were easily adjustable. That is not the position to-day.

Senator Thompson - Is it not a fact that the revenue of every State is increasing ?

Senator HERBERT HAYS - That is so; but owing to their rapid development their expenditure also is steadily expanding. We should bear in mind that the same people are being governed in their respective spheres by the Federal and State Governments. Therefore we should not have the anomaly of State Treasurers being in financial difficulties, while the Commonwealth Treasurer each year is able to show a surplus.

Senator Thompson - Does not the honorable senator think that the position of the States is due to bad management ?

Senator HERBERT HAYS - Certainly not. I do not admit that members of State governments are less competent to manage their affairs than are Ministers of the Commonwealth Government, nor do I admit that members of State legislatures are less capable of dealing with their peculiar difficulties than are members of this Parliament to deal with federal problems. They are all representatives of the same people, and without reflecting in any way upon those who may not have sat in State parliaments, I suggest that those who have are in a better position to appreciate the difficulties of the States than are representatives in this Parliament who have not had that experience.

Senator Thompson - Is it not the first duty of the States to live within their income?

Senator HERBERT HAYS - I have yet to learn that the customs revenue which is the principal source of Commonwealth income, is the exclusive prerogative of the Commonwealth Government. The States have a right to a fair share of that revenue. I remind the honorable senator also that the principal expenditure incurred by State governments is in connexion with the management of their railways and the development of their education systems. It is essential that these public services should be efficiently controlled, and to do this large sums of money are required. In my opinion the day is not far distant when the Commonwealth should be called upon to accept some financial responsibility for expenditure on education. It is very desirable that we should have one system for the whole Commonwealth. It has been said that government is finance, and finance is government. If we accept that doctrine we must recognize the claims of the respective States to some reasonable share of the Commonwealth revenue. "Without it they are not in a position to meet their commitments except by unduly taxing their people. This agreement has been accepted by the States, and it has to be submitted to the people in the form of a referendum. I find myself in a difficult position. I oppose the abolition of the per capita payments because I believed that the States were justly entitled to a fair share of the surplus of the Commonwealth revenue. This was laid down as a guiding principle at the inception of federation. The Government has determined that the capitation payments shall not be continued, and as a result we are now called upon to pass judgment on this bill and the agreement which it covers. I am loth to support the proposal ; but I realize to the full the responsibility that must be mine if I vote against the bill. "While other honorable senators may regard the agreement as just and equitable,I submit that, because of their increasing financial responsibilities, the States are entitled to more generous treatment. I hesitate, therefore, to supportthe agreement, believing that it will work to the disadvantage of the States.Ifear that the States will be obliged to seek further financial assistance from the Commonwealth if the agreement is ratified. In my opinion this is a step towards unification. I do not suggest that the Government is taking it by design; but, if we mark the progress that has been made by the Commonwealth Parliament in the last fifteen yearsin the direction of the peaceful absorption and penetration of the rights of the States, we must come to the conclusion that in another fifteen years the States' means of raising revenue will have been restricted to such an extent that little will remain of their sovereign rights as we know them to-day. Whether or not the change will be in the interests of the Commonwealth, time alone will tell. Personally, I have my doubts on the matter. This process of absorption and penetration by the Government of the Commonwealth is depriving the States of those activities that were expressly allotted to them under the Constitution. I support the agreement only because it is the best offering to-day. I have no alternative but to vote for the bill, because it embodies an agreement made between the Commonwealth and the States.

Senator Thompson -Why speak regretfully ?

Senator HERBERT HAYS - Whether I am speaking hopefully or regretfully, I take the responsibility for my own vote, and leave the honorable senator to follow the dictates of his own conscience.

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