Ideas for Australia: To really reform the federation, you must build strong bipartisan support

The Conversation has asked 20 academics to examine the big ideas facing Australia for the 2016 federal election and beyond. The 20-piece series will examine, among others, the state of democracy, health, education, environment, equality, freedom of speech, federation and economic reform.

Every Australian prime minister since at least Robert Menzies has committed to an improved federal system. The Whitlam, Hawke, Howard and even Keating governments grappled with it, sometimes helped and sometimes hindered by the 50 or so premiers and chief ministers who have served over the last 30 years.

Kevin Rudd made the most noise about ending the “blame game”. But his attempt at streamlining federal finances largely failed. Nothing was done to change the culture of federal and state governments pursuing a myriad of ad-hoc funding deals in major policy areas, often based on unsustainable income projections.

The scramble of responsibilities, finances, inefficiencies and buck-passing remained.

The recent moves

The first Rudd prime ministership also attempted to make the Council of Australian Governments (COAG) a true “workhorse of the nation”. That too was unsustainable without more permanent institutions to support the collaborative frenzy.

Enter Tony Abbott’s historic commitment, in 2013, to developing a long-term policy strategy for a reformed federation. But it also suffered major setbacks, mostly of his own making.

Abbott undermined his own initiative by failing to consult the states when his first budget pulled back on income and funding projections. He abolished the COAG Reform Council, one of the few institutions helping to drive high-level co-operation.

The Abbott approach also suffered two other flaws. Its objective of making each level “sovereign in its own sphere”, or creating clean lines of policy responsibility, was never realistic for major shared policy areas such as health, education and infrastructure. What was needed was clearer thinking on how the different roles within these fields should be shared and funded, rather than divvied up.

And while Abbott did succeed in starting a new reform conversation with both Labor and Coalition states in 2015, he never lifted a finger in pursuit of bipartisanship on federal reform at the federal level itself.

Enter Malcolm Turnbull, and the apparent debacle over reforms to give the states more control over income tax. An apparent debacle, because the outcome was logical and historic.

And enter too the latest data on how federal reform is seen across the political parties, and federal and state parliaments.

This snapshot of the views of 201 MPs, across all parliaments and parties, was collected from September 2015 to January 2016. The results show why federation reform will not go away. Like the community, most federal and state MPs agree federation reform is important, irrespective of their political persuasion.

Fortunately, the recent debates confirm that the Turnbull government knows it must map out a path forward, however difficult this may be.

How to do reform? Views diverge dramatically on both party lines and federal-versus-state lines on where to focus for solutions, or what the eventual outcomes should be. When asked about the importance of different areas of reform, Coalition MPs at both levels are more likely than Labor MPs to nominate reform of the roles and responsibilities of the different levels. This helps explain the Abbott “clean lines” instinct. By contrast, Labor MPs – especially federal ones – are more likely than their Coalition counterparts to prioritise intergovernmental co-operation. This is consistent with Labor’s history of trying to make the whole scramble deliver, rather than trying to make it less of a mess. Federal Labor MPs are also less likely to want to back out of state affairs, and remain more likely to support abolishing or replacing the states. But, importantly, abolishing or replacing the states is not just a Labor dream. It is supported by 28% of federal Coalition respondents and 17% of state and territory respondents. As recorded by successive Australian Constitutional Values surveys, 25% of the wider community agree. Perceptions differ massively as to how the federation should be reformed. However, more than 70% of Australians and at least 60% of every group of MPs would prefer to have something other than what we have now, irrespective of party or level. These longer-term aspirations confirm that we can’t simply throw up our hands and leave federation reform alive and kicking – but unresolved – in the too-hard basket. What can be done now? Even if federal Labor and the Coalition have fundamental differences on how the federation should work and be reformed – and it seems they do – we can, and must, move on the areas of common ground. The survey shows the best common ground is to reform financial relationships so the inefficiencies, gaming and uncertainties are reduced. In the present system, the federal government collects almost all the money, but the Federation depends on massive proportions being laundered back to the states. When it comes to financial reform, there are a range of possible answers. One is getting the states to raise more of their own revenue. The support for this among Coalition members, federal and state, explains why Turnbull’s recent proposal was not just a mere thought bubble, but a genuine option. That option is now dead, and for good reason. Australian citizens, business and government like having a system that is flexible but also simple; which supports the community and economy by helping those who need it, but in which everyone is fundamentally equal. This can be seen in strong support for fiscal equalisation. Taxes on individuals and business should be uniform, but the revenue generated should be distributed so that those who genuinely need it less are helping those who need it more. But where the most recent COAG meeting ended up, and the next phase of the Turnbull and/or Bill Shorten reform process needs to go, is in making the system clearer and more sustainable by redistributing federally collected funds in a more fixed, guaranteed, accountable way. This is the principle with the most consistent support across all types of parliaments and parties. It may not be the reform that everyone sees as most important, but it provides the strong common ground which is vital in making other reforms possible. There is much to be done. All the other issues – clearer roles and responsibilities, better accountability to the community, more effective support for intergovernmental collaboration, more clarity and resources for local and regional levels of governance – still have to be tackled. But the crucial thing is that we keep going, even if the odd stumble is inevitable. This is why commitment to a stronger, ongoing and more bipartisan federal reform process – one that not only continues but upgrades the effort to shape a better Federation – remains one of the true tests of modern-day Australian political leadership. You can read other articles in the series here. Find out more about the way forward at the upcoming national conference A People’s Federation for the 21st Century? in Brisbane on June 16-17.