TAKING SUBSIDIARITY SERIOUSLY: threat or opportunity for State governments?

2. Brian Head Griffith University and Australian Research Alliance for Children & Youth TAKING SUBSIDIARITY SERIOUSLY:threat or opportunity for State governments?

3. In this presentation I will briefly: Consider why the current 3-tier federal system has been severely criticised – from five sectoral perspectives: - local govt; State govt; C’wealth; business; NGOs. Note that the problems and solutions are defined in different ways. OVERVIEW

4. Suggest that the “subsidiarity” principle provides a useful benchmark for assessment, and for reform, while noting its inherent vagueness; Summarise attempts to implement subsidiarity to address primarily regional issues; Summarise attempts to improve federalism to address primarily national issues. OVERVIEW (cont’d)

5. My conclusion will be: The business case for 2-tier federalism remains rhetorical and impractical; more work is needed; IF we are likely to have 3-tier federalism for the next generation, we should make it work better; The current half-hearted attempts at regional policy and programs (by both C’wealth & States) need to be made genuinely cooperative and involve genuine devolution. This requires taking subsidiarity more seriously, within agreed national policy frameworks. Overview (cont’d)

6. Local government sector sees itself as: close to the people; but deprived of power and resources; subject to cost-shifting (more unfunded tasks); increasing boldness in identifying State governments as the oppressor [and the unnecessary and costly layer of bureaucracy in a future 2-tiered federal system]. Commonwealth, incidentally, has made a point of “courting” local government over the last 30 years, and involving local government in various regional “partnership” arrangements that reduce the direct responsibilities of the States. Criticisms (1) – localgovt

7. For 8 States/Territories the problems of the federal system over the last 30 years arise from: fiscal centralisation (though GST helps); functional overlap/duplication, and intrusion into traditional State areas of service delivery; increasing centralisation of policy controls in Canberra (regardless of political party): by financial leverage (tied grants) expansion of the Commonwealth’s powers through international agreements. Criticisms(2) –State govt

9. For the Commonwealth, the problems of the federal system over 30 years arise from the behaviour of the States: their capacity to delay or frustrate sound C’wealth initiatives, e.g. national standards; their failure to spend enough on key services or economic infrastructure; their failure in some instances to support significant “national” reform programs; their tolerance of regulatory inconsistencies among States and high costs for business. Criticisms(3) –Commonwealth

10. For large business organisations and associations, e.g BCA, federal system creates a higher regulatory burden and business imposts: lack of uniformity/consistency in regulations, complex project-approval processes, industrial relations complexity. Business concerned to ensure that “national” economic competitiveness issues (e.g. trade, infrastructure & micro-economic reform) can be addressed rapidly and decisively. Hence, support in principle for 2-tier federalism. Criticisms(4) –Big Business

11. For the major national interest groups (e.g. NGOs concerned with community services, aboriginal issues, and the environment): there is often an impatience with fragmentation of responsibility for key outcomes; a preference for a less complex (and more uniform/national) approach to major issues of program design; a desire for strong national standards; occasional sympathy for 2-tier federalism, if necessary to achieve such standards. Criticisms(5) –majorNGOs

12. These five critical perspectives define and locate the problems in different ways. Is the key problem -- -- structural inequality of powers/roles? -- revenue needs at lower levels? -- capacity for relational coordination/cooperation? -- poor outcomes for citizens and business? It follows that the recipes and prescriptions for change are also diverse. There are large divides between incremental models for change (adapt/improve current arrangements) and radical models (fundamental reconstruction). Reform and innovation

13. One increasingly common model involves abolition of States, and building up the local/regional level. Economic rationalists and political centralists both argue for abolishing States, in order to cut wasteful duplication, cut costs of surplus politicians and bureaucracy, and promote national standards. They are usually less clear about regional options. They generally pay little attention to ensuring that the alleged deficiencies of States would not be repeated on a wider scale among many regional entities. Two-tier federalism

14. Another approach is more sensitive to regional identity and sense of place. Regional champions argue that ‘communities of interest’ are not sufficiently recognised; the historical boundaries of the large States are inappropriate. Hence regional entities may be the answer. Question: are Tasmania and ACT more coherent regional entities and thus more legitimate in eyes of their citizens? Two-tier federalism (cont’d)

15. 2-tier federalism has many different supporters and structural variants: -- number of regions (12? 30? 80? over 100?); -- broad or narrow regional powers; -- reliance on ‘new states’ constitutional device to multiply regions/States over time; -- administrative or legal-constitutional approaches to creating robust regional entities. Questions: do we need regional entities to produce better regional results? and : would more regional entities produce better results than fewer entities? Two-tier federalism

16. Lower levels of government usually favour the devolutionist principle of “subsidiarity”: i.e., Decisions should be taken as close as possible to the citizens by the lowest-level competent authority. Central authority performs only those tasks that are its exclusive domain, plus those tasks which (for reasons of scale, capacity or powers) cannot be effectively undertaken at lower levels. As a principle, it is widely supported, but in practice is highly contested and could lead to a variety of outcomes. Subsidiarity – is it the answer?

17. This principle was used by States in arguments with Commonwealth during the Special Premiers Conferences of 1990-91 and in COAG since 1992. Can equally be used to support local and regional entities – against either the States or Canberra. States have not seriously tried to devolve large functions to local government (though some cost-shifting); content for LGAs to have narrow role. States have been experimenting with regional planning and program administration, e.g. in natural resource management. Role of LGAs is uncertain. Subsidiarity in practice - States

18. Canberra is major player for future development of improved service patterns/programs. Choices: Direct central management of policy and program implementation - requiring a large service-delivery workforce; OR Indirect control through agreements, standards, and tied funding, with a variety of potential providers: -- other levels of government (State, local, regional) -- private sector contractors -- community NFP organisations. Changing balance over time; shift towards indirect and contractual controls. Choices for central government

19. Commonwealth claims credit for trying [over last 30 years] to devolve some regional-scale planning & development activities to regional & local levels. e.g. -- social services (AAP 1970s; CfC 2004) -- regional econ devt (1970s, 1990s….) -- regional forestry agreements (1990s) -- regional NRM (NHT 1998, NAPSWQ) But C’wealth model is generally contractual, retaining ultimate regulatory and funding power, while promoting involvement of non-State actors at local and regional levels. Subsidiarity – the C’wealth

20. National policy frameworks are an economical and effective way of achieving benefits without structural redesign of federalism. The States have been increasingly willing to enter into national agreements with C’wealth on many policy areas: e.g. corporate business regulation, competition policy, govt trading enterprises, mutual recognition, energy, water, transport, environment, benchmarking of service delivery. COAG forum is more productive than portfolio-based ministerial councils Financial incentives are helpful. National agreements

21. 1. The business case for 2-tier federalism remains rhetorical and impractical; especially the big-bang version of constitutional change to abolish the States. 2. More work is needed on options and transitional arrangements, and testing public support for various options (evidence-based policy dev’t). 3. IF we are likely to have 3-tier federalism for the next generation, we should make it work better by innovative attempts to deliver better regional services through cooperative arrangements. Conclusions

22. 4. The current half-hearted attempts at regional policy and programs need to be made genuinely cooperative and involve genuine devolution. 5. This requires C’wealth and States both taking subsidiarity more seriously, but within agreed national policy frameworks. 6. We need more research and debate on options for reform along these lines. 7. The States need to take this opportunity to rethink their core business (what works best at State level?) and support both sensible devolution and national frameworks. Conclusions (2)