Grattan on Friday: Turnbull's idea of Commonwealth withdrawing from funding state schools is fraught

Malcolm Turnbull is the venture capitalist of politics who, with his bid to force the states to raise a slice of income tax, has invested heavily in a risky enterprise.

As one who exhorts entrepreneurs not to fear failure the Prime Minister doesn’t seem deterred by the danger, despite the prospect of facing his shareholders as early as July 2.

His approach as he began talks with the premiers appeared to be that he’d either stare the states down, so they start negotiations on new arrangements, or he’d do them down, squeezing their resources if they won’t co-operate.

At Thursday’s dinner at the Lodge, with lamb and fish on the menu, premiers and chief ministers found a Prime Minister convinced he had discovered the answer to the ills of the federation, and pushing hard for them to get on board.

Turnbull was very keen to see his plan happen, and made it clear he wants endorsement in principle ASAP. The premiers had their feet on the brake, inclined only to have more work done on the idea. There was testiness between Turnbull and Labor premiers Daniel Andrews and Annastacia Palaszczuk.

If we rewind to the start of the government’s desire to reform both federalism and taxation, it is remarkable what a shambles has resulted. Here are two case studies in bad policy process – an indictment of the Coalition’s first term administration.

The Abbott government promised green and white papers on both the federation and tax. The tax papers were canned. A federation discussion paper was issued last year after it leaked but what progress the task force working on the area has made since is shrouded in mystery. It is said Turnbull will clarify its future soon.

Turnbull’s state income tax plan might be in better shape if it had come after the case for change had been made in a detailed policy released well ahead of the meeting with premiers, rather than in the ad hoc way we saw this week. Proper process could have at least focused greater attention on the substance.

The Prime Minister has two audiences in this debate – premiers and chief ministers, and the public. The various messages ordinary people will have picked up are that they may face “double taxation”; health and education could be in for very lean times; and the Commonwealth could vacate the funding of state schooling.

On a complicated issue it is vital to get the communications right early on, and Turnbull failed to do so. He insists much work on his plan has been done over quite a time, which may be right, but the way the announcement was handled – with Turnbull spelling out details during a visit to a sporting venue and Treasurer Scott Morrison off key - gave the impression this was policy on the fly.

Such a radical proposal ideally needed to be unveiled well before the fag end of the parliamentary term, but because he grabbed the prime ministership only in September, Turnbull has run out of time.

The question of what areas the Commonwealth might vacate under the plan is especially sensitive. Turnbull says there would be a powerful case, if the states had access to a portion of income tax, for them to be fully responsible for funding state schools, which are the schools they manage. This opens up big questions about compatibility between systems and national oversight, which could be quite dangerous for the government in the election run up.

Last year’s federation discussion paper warned such a move could mean “very different funding models being applied across the states and territories and between the government and non-government sectors, leading to differences in the level of public funding for schools with similar population characteristics”. The result would be concerns about fairness.

Interestingly, there is a notable difference on schools between the Coalition under Tony Abbott before the 2013 election and its current stand.

In 2013 the Abbott opposition was anxious to get as close as possible to Labor on schools policy, or at least to seem to be close – in fact there were strict limits on its funding promise which have resulted in the present grief over the shortfall in the money for Gonski.

In contrast, Turnbull is setting up a striking difference with the ALP policy on schools. It is almost as if the government regards schools policy as Labor territory that is not worth its competing on.

But the prospect of the federal government signalling it could vacate the state schools field – while still being responsible for independent schools - will bring a big negative reaction. If that idea became too hot, what alternative areas could be thrown up? It’s surely too hard to get out of hospitals. Roads? Hear the Nationals scream.

All significant areas and programs are fraught, especially because stakeholders – and many MPs – want to have them in the federal bailiwick.