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The Liberal and National Country Parties: Federalism policy

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The Liberal and National Country Parties




September 1975


1. POWER, RESPONSIBILITY AND PEOPLE: The Liberal and National Country Parties view as the main objective of government the creation of a society and an environment in which individuals may best fulfil them-selves.

If this is to be achieved, individuals must be free to parti cipate fully in government and the forms of government must be decentralised to permit maximum response and

involvement. Government must be brought as close as possible to the people.

Accordingly, the Liberal and National Country Parties wholly support the concept of Federalism in which there are three areas of government — Federal, State and local -and in which the powers and functions are distributed to achieve continuous response and to provide an effective

barrier against centralist authoritarian control.

In a crowded world of massive and growing complexities of laws and regulations, individual freedom is increasingly threatened unless the nature and shape of our democratic institutions adapt themselves to provide safeguards.

Federalism, therefore, is not merely a structural concept.

Its principal justification is a philosophical one. It aims to prevent dangerous concentration of power in a few hands.

In so doing, it provides a guarantee of political and individual freedom.


The Liberal and National Country Parties are keen to accept the challenge to achieve major and continuing democratic reforms. We are heartened by the significant advances in effective decentralisation already achieved in countries

such as Canada, West Germany and America where centra-list philosophies have been rejected as dangerous, inefficient and divisive. We are hastened in our endeavours by the onrush of centralist legislation and decision-making of the Whitlam Government.


All experience, both in Australia and in other countries underlines this vital principle:

If effective government, geared to the needs of the 1980s and beyond, is to be achieved ... if the great issues of national and local concern such as education, health, social welfare, housing and urban development are to receive maximum intelligent attention ... if all our resources

including human talents and local knowledge are to be effectively harnessed ... if innovation, diversity and imaginative reforms are to be encouraged ... then we

must restructure our forms and institutions of government and our attitudes of mind to achieve co-operation not con-flict, partnership and not domination.

For true national concern to be achieved and maximised, it must be done through a partnership effort by all forms of government. Canberra should not meddle with power-hungry hands at levels where local knowledge and talents can perform so much better.

There is a need to redefine the functions of each form of government, particularly where such clear definition is

possible. There is equally a need to cater for those many functions which overlap governments and which demand co-operation and goodwill.

What is needed is not merely a patching-up of the currently degenerated Federal system. We must recognise and provide for the growing demands of individuals and community groups to be heard and to participate meaningfully in the democratic process.


If government is to be effective, it must be accountable for its actions. It should raise the moneys which it spends.

A practical solution to effective and responsible government must incorporate the following principles:

1. It must be practical and long-term.

2. It must give the States access to a fair tax-sharing programme.

3. It must protect and maintain the position of the less populous States viz-a-viz New South Wales and Victoria, by providing an adequate equalisation mechanism.

4. It must provide the minimum of inconvenience or additional burden to the community.

5. It must maintain the authority of the Common-wealth over economic management.

6. A method of continuous review and up-dating must be provided.

7. Provision must be made for the determination of functions, together with a mechanism for enforcing that determination.

8. Local government must be given clearly defined func-tions and a known share of national revenues.

9. The taxpayer must be able to identify clearly his individual payments to Commonwealth, State and local authorities.


The question of a major tax or taxes suitable for revenue-sharing purposes will be under constant review.

At this moment, personal income tax is virtually self-selective.

The States will not be immutably tied to any one tax or taxes as their main source of revenue. As trends in taxation change, the States and, indeed, local authorities will be free to argue for appropriate changes.


We acknowledge the severity and distortion of existing income tax rates and are pledged to reform them. These reforms can be undertaken during the transition period and beyond without prejudice to the States.

The Liberal and National Country Parties, in co-operation with the States, will undertake a thorough survey of all existing forms of taxation and charges currently imposed throughout Australia, with a view to progressive reform and rationalisation.


7. REVENUE -SHARING PROPOSALS (i) Permanent Share of Income Tax —

The Liberal and National Country Parties propose to ensure the States permanent access to revenue-raising through personal income tax. In so doing, the existing rights of the less populous States will be fully pro-tected. No State will be disadvantaged and the rela-tive positions of the States will be preserved.

The Commonwealth will be the sole collecting agency There will be a standard tax form, embracing uniform concessional allowances. Commonwealth and State

taxes will be separately identified on one assessment so that the taxpayer can see the amount being levied by each form of government.

The new system is intended to ensure that the States will have substantially the financial capacity to meet their responsibilities.

In exercising their revenue raising powers the States will be expected to accept responsibility to work in parallel with and not in negation of the overall econo-mic management policies of the Commonwealth.

Transition to Flexibility

A transition period will be provided, involving two main stages:

Stage I: A calculation will be made of the percentage which in the previous year general revenue grants to the States bore to total personal income tax collec-

tions in that year. That percentage will be used to ascertain the share of personal income tax to the States in Year 1, and will also take into account the transfer of such Section 96 grants as should be absorbed into

this base figure. In so doing, the relativities of the equalisation grants to the less populous States will be preserved.

Stage II: In order to increase the budgetary indepen-dence, responsibility and flexibility of the States, it is proposed that as soon as possible each State government will have discretion to impose a surcharge or allow a rebate on the total personal income tax of that State.

Economic Management —

The proposals allow the Commonwealth to maintain and pursue its role in economic management. A whole armoury of fiscal and monetary weapons is available to the , government. It is generally accepted that the use of personal income tax for revenue-sharing pur-

poses will not weaken the Commonwealth's capacity.

Apart from overall tax reform, the Commonwealth will retain the right to alter Commonwealth income tax upwards or downwards by surcharge or rebate.

To ensure full understanding and effective co-opera-tion, the Commonwealth will convene pre-Budget meetings of the Premiers' Conference in addition to other regular meetings of that body.

(iv) Local Government —

The Liberal and National Country Parties also propose to earmark a fixed percentage of personal income tax for distribution through the States to local govern-ment. This percentage will be shown on the tax form.

The money is intended for two distinct purposes:

(i) a per capita grant to ALL local government bodies, with a "weighted" formula in contemplation

and (ii) an equalisation or "topping up" grant to be distributed through State Grants Commissions.

This will be a vital new reform for local government.

Under these proposals, municipalities and shires will have revenues of known dimensions to assist forward budgetting. At the same time, they will have very much greater independence of action.

Artificial regions will NOT be forced on local authori-ties from Canberra. Local bodies will be free to establish formal or informal groupings from time to

ti me for particular functional purposes, but regions will not be used by the Commonwealth as centralist instruments to by-pass the States, to amalgamate areas or to impose Commonwealth policies.


It is intended that the principle of equalisation and the current advantages accruing to the less populous States viz-a-viz New South Wales and Victoria shall be sustained at all stages.


The Grants Commission will be fully retained with regard to its existing State functions. However, the responsibilities for local government inquiries will be transferred to State Grants Commissions.


The Whitlam Government has used its powers under Section 96 of the Commonwealth Constitution to achieve its centralist goals. These grants now dominate State revenue.

The coalition parties are convinced that national objectives can be fully asserted and social reforms achieved and main-tained with a more selective use of such grants and without heavy-handed interference and duplication of functions.

Many of the existing Section 96 grants are now part of well-established and universally accepted programmes within the States. The moneys for such programmes could be trans-ferred to general purpose revenue reimbursement and ultimately absorbed in the States' income tax revenue.

Under such circumstances, the programmes would continue in full without prejudice. A Liberal-National Country Party Federal Government would seek agreement from the States that this would be so, prior to making the transfer.

If a future initiative should prove necessary to maintain or to increase the programme, the Government would retain the initiative to invoke an appropriate special purpose grant. We would use such grants, where necessary, to ini-tiate programmes in agreed areas of national need, to encou-rage innovation and to meet special situations.


A continuing review of all programmes would be main-tained by the relevant Federal Minister and through him with the appropriate Council of Federal and State Mini-


In suitable circumstances, the principle of block grants (which substantially increase the flexibility and initiative of the States) would be used.

By such techniques, true national concern and involvement can be achieved far more effectively than at present.

Indeed, Section 96 will be used as it was originally intended it should be used, namely to make grants to the States for special purposes and not to make inroads into the constitu-tional responsibilities of the States.


As a vital institution of co-operation within the various forms of government, we propose to establish a Council for Inter-government Relations.

This will be an independent statutory body of major status.

Its membership will include nominees to Federal, State and local governments and also a number of citizens.

The Council will have wide-ranging advisory and investiga-tory powers. By reference from either Federal, State or local government, it will examine in depth the problems

which emerge between the various branches of government and will consider the definition and rationalisation of functions.

Its recommendations and reports will be available to all areas of government.


With the removal of the revenue reimbursement battle the Premiers' Conference will become a more realistic forum for general debate, particularly on broad economic matters and upon issues developed by the Council for Inter-govern-

ment Relations.

One of the first acts of the new government would be to convene a Premiers' Conference to discuss the implemen-tation of the financial implications of this policy.


The appointment by the non-Labor State Governments of special Ministers for Federal Affairs is a clear recognition by those States of the mounting problems and conflicts within the Federal structure.

The establishment by the Federal Opposition of a Shadow Minister for Federalism and Inter-government Relations is a further acknowledgement of those trends and a practical desire to ensure a continuing mechanism for day-to-day co-operation and consultation.


The Liberal and National Country Parties propose to achieve greater co-operation, including the strengthen-ing of the functions of the various Councils of Ministers and consultative bodies (e.g., Australian Agricultural Council, Australian Minerals Council, etc).

Our aim will be to maintain and assert national concern and to stimulate initiative, while eliminating unnecessary overlapping, waste and interference.

Authorised by: Tony Eggleton, Liberal Party Federal Secretariat, Canberra A.C. T. Printed by: Paragon Printers, Fyshwick A.C.T.