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Thursday, 16 September 1971
Page: 1439

Dr GUN (Kingston) - I regret that no Government supporter has seen fit to come in to bat on this measure. Perhaps there are 2 constructions we can put on this. The first is that I will presumably be able to say what I like without being refuted at the end of the debate. But the other more important inference is, I think, that it appears that as far as the Government is concerned we have now reached the perfect financial arrangement with the States and we do not need to comment about it any further because everything in the garden is rosy. 1 do not agree with this, and I would first like to underline the basis for the Opposition's objection to this measure and that is the nature of payroll tax itself. I think perhaps the most obnoxious feature of it is that it is actually a regressive tax. As it is a tax that is levied on payrolls I have no doubt that it will continue to be passed on, as are most other similar taxes, in the form of higher prices. In other words, it will eventually pass on to the consumer in the community in higher commodity prices and this will, of course, affect the people with a lower capacity to pay. So in that sense it is a regressive tax. That is our first objection to it. Another one is that if it is to be a levy on payrolls it constitutes a selective imposition on labour intensive industries. In that sense it is much less fair than straight out company tax or corporate tax. I think these are 2 very important objections to the method of imposing this tax on payrolls.

This measure that we are debating at the moment is the latest of a series of ad hoc measures that have been devised by the Commonwealth Government to try to overcome some of the budgetary difficulties experienced by the State governments. The first measure that was introduced to overcome the problems that have arisen in recent years was the receipts tax. This was eventually declared to be invalid and so something else had to be found. That is when the Commonwealth, under the previous Prime Minister, the right honourable member for Higgins (Mr Gorton), at the Premiers Conference in 1970 decided to make some alteration to the arrangement with the States. A number of measures came out of this. For a start the base loading factor and the betterment factor, which increased the disbursements to the States each year, were increased. The betterment factor was increased from 1.2 per cent to 1.8 per cent per annum for the purpose of determining the grants for 1971-72 and subsequent years. Then, as I mentioned, the base loading which is used to determine the grants was also increased. There were other things such as interest free capital grants to try to tak? some of the debt burden off the shoulders of the State governments.

We have done that but even these measures have not been sufficient for the State governments to be able to cope with the tremendously increased demands on their services - services which I think should have the highest priority, those that happen to fall within the responsibility of the State governments, namely health, many aspects of social welfare, and, most particularly, education. So what do we have at the moment? We do not seem to have any concrete plans as to how the State governments are going to finance their future programmes. We have a hotchpotch. We have the current formula for disbursements to the States concocted at the 1970 Premiers Conference. We have payroll tax, which has recently been handed over to the States, and we have various specific purpose grants, such as grants for independent schools, Commonwealth secondary education and a whole host of other things, but we do not really know whether we will get the best value for our money.

I suppose it could be argued that the money is going to the State governments, anyway, and that it does not really matter what formula is used, so long as the money is given to the States and they spend it. But I do not agree with this because I think that we need to have an overall programme for allocating our national resources so that we get the best value for our money. At the present time we do not know how far we are advancing in the various programmes which the State governments are trying to formulate in health and education. We do not know whether there might be better ways of spending our money in order to achieve the same ends.

I do not agree with the general formula underlying the present Budget, that we need less government expenditure. This is where we differ very markedly from the Liberal Government. We believe that there is room for, and that it is imperative that there should be, much more government expenditure, but in spending more funds we have to get the best value for our money. There are areas in which government expenditure is excessive and unnecessary, and these are the things we have to prune. Where it is necessary, we must boldly increase government expenditure.

There are 2 things wrong with the present overall broad Commonwealth-State financial relationships. First, State governments seem to be the poor relatives who get the leftovers. If a matter is mainly within the responsibility of the State governments, somehow that matter seems to have secondary importance. I suppose it is because the Commonwealth is the one that collects the moneys.

For example, State governments are responsible for education. 1 suggest that it is because education is a State responsibility that the Commonwealth tends to think that education is less important than civil aviation, the Postmaster-General's Department, or defence. I suggest that if, by some constitutional change, education became a Commonwealth responsibility, we would regard education as having the same priority as other matters with which the Commonwealth is concerned. I think that we must get away from this attitude that if a thing is the Commonwealth's responsibility it is more important. The Commonwealth takes its chop first and the poor relatives, the State governments, take what is left over. I think that we have to look at all the programmes of the Commonwealth and the States, put them alongside each other and determine the priorities. The other great weakness in Commonwealth and State relationships is our present system of having budgeting on a purely annual basis.

Mr DEPUTY SPEAKER (Mr Drury - Order! I point out to the honourable member that he is straying from the Bills before the House. We are discussing the matter of payroll tax.

Dr GUN - With respect, Sir, 1 am only trying to point out that in our opposition to these Bills we are not opposing the principle of making payments to the States, but we believe that there are better ways of going about this than through levying payroll tax, and 1 am only trying to endeavour to establish the alternative arrangements which could be made. We are discussing an extremely important measure. It is the basis upon which State governments are increasing their expenditure. For example, the South Australian Government has increased enormously its expenditure on education this year. I think that the financial programme and the basis upon which it is formulated are of quite critical importance to this debate and to the Commonwealth Parliament. However, I do not want to canvass this matter much further. I believe that as part of the programme for improving Commonwealth-

State financial relationships we should look more towards adopting a system of programme budgeting. We should budget not so much on the basis of the type of expenditure - whether it is for postage, telephones, transport or something like that - but on the basis of the end use, on the programme for which the expenditure will be incurred. Of course, this also implies that we should budget for periods of more than one year and that we should have much greater emphasis on cost-utility analyses. 1 was going to say a little more about that, Mr Deputy Speaker, but perhaps I might be pushing your tolerance a little too far. I should like to point out how important it is that we should have broad programmes for Commonwealth and State expenditure on a programme budgeting basis so that we can decide the broad national priorities. This would save a lot of unnecessary government expenditure. This annual budgeting system has a great number of weaknesses.

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