Stone the crows! The feds want to fix federalism, at least in principle. On Friday, the Commonwealth government released a brief for the federation white paper process, due at the end of 2015. One of the key ideas on the agenda is “the practicalities of limiting Commonwealth policies and funding to core national interest matters (and) reducing or, if appropriate, eliminating overlap between local, state and Commonwealth responsibility or involvement in the delivery and funding of public programmes.” [i]

It was a low-key launch – too late for big hits in the Saturday papers and late in the day for the online commentariat to activate the outrage, which is the default response to any Abbott Government announcement. But a news report from Laura Tingle in the AFR set out a predictable Fin case for the process. [ii]

The absence of attention turned out to be a positive for the credibility of the process. It took a hit on Sunday morning when Education Minister Christopher Pyne demonstrated the fundamental problem any plan to fix the policy and funding ad-hockery that is now the foundation of the federation. Mr Pyne and Victorian Education minister Martin Dixon jointly announced, “Federal funding to increase autonomy in Victorian government schools.” [iii]

If there is an area the feds should stay out of it is schools – for a start the Constitution does not give Canberra control of education.[iv] And the states are long used to running enormous school systems. The NSW public education system is one of the largest in the world; with 774 000 students, bigger than Los Angeles, which is number two in the United States.[v]

The Commission of Audit argued that schools are a matter for the states under the two core principles of federalism:

Under the principle of subsidiarity, policy and service delivery should, as far as practicable, be devolved to the level of government closest to the people receiving the services. This recognises sub-national governments are likely to have greater knowledge of the needs of citizens affected by their policies. It allows programmes to be tailored to meet community needs and recognises the significant differences across the nation.

Under the principle of sovereignty, as far as practicable, each level of government should be sovereign in its own sphere. When reviewing roles and responsibilities, government activities should be allocated to one level of government where possible. This provides greater clarity and accountability.[vi]

The CoA applied these principles to all areas where Canberra funds services provided by the states in a comprehensive analysis of the mismatch between formal responsibility and economic authority, so comprehensive that the Crows wonder why the feds are going through the discussion paper stage at all as a precursor to the federalism green paper.

In the case of schools, the Commission made the case that Canberra should provide the states with sufficient cash to manage education in three separate, non-transferable pools – one for public, a second for Catholic systemic and a third for independent schools.

And that would be it except the CoA added – “of course national standards and performance reporting to the community should be maintained.” [vii]

Which effectively finishes federalism, at least for policy and the funding that follows in Australia under the existing funding models. Because there are cases where a national approach is unavoidable. The contents of school syllabi do not matter all that much, but knowledge and skills students leave with does. As Labor used to argue when fighting with Liberal states-righters over a national curriculum in the 1990s, the laws of physics don’t change when you cross the Murray or the Nullarbor. It is why we have federal accreditation and accountability in training and higher education.

And schools are a high-benefit, low-risk opportunity for any federal minister – they can say what suits knowing that the states cop the flack. There are even times when federal ministers can act in the national interest where their state colleagues, who have to avoid annoying teachers unions, dare not. Julia Gillard did this with NAPLAN especially publishing school results.[viii] Christopher Pyne has created an inquiry into teacher education.

And from an inquiry it is not far to the feds making policy through special purpose payments. As Mr Pyne acknowledged when he created the teacher education inquiry:

In the last election (we) said that we would have a very relentless focus on teacher quality, and the one area where the federal government can influence teacher quality is at the training level at university. Because obviously we don’t fund any schools, we don’t own any schools, we don’t fund any teachers, we don’t employ teachers. But we do have a big role in university teacher training.[ix]

The obvious answer to this is to allow the states to raise the revenue they need to run their own services and to compete against each to lower taxes through more efficient service delivery. According to the Commission of Audit, “The Commonwealth should make room and reduce its personal income tax rate by an equivalent percentage point amount to a new state surcharge to ensure that taxes do not rise overall. Revenue raised would be hypothecated to the states; andthe states be provided with a capacity to periodically vary the surcharge they impose as a means of injecting further competition into the Federation.”[x]

Good luck with that. The states would prefer more money without the responsibility of raising it and federal ministers love bossing their opposite numbers around. But it can’t go on. As constitutional lawyer George Williams, puts it:

Our federal system was conceived in the 1890s, the age of the horse and buggy. We are in the mess we are today because our system of government has passed its used-by date. It was created in 1901 and has not been modernised to meet the challenges facing us a century later.

We face a stark choice: to continue to pay extra tax for second-rate services, or to accept the challenge and opportunity of reform and fix the system of government by a proper allocation of tax revenue and a more appropriate division of power over areas of responsibility.[xi]

So is Canberra game to have a go?

With the Commission of Audit report out, and the federation and tax white papers to come, optimists argue that the Abbott Government is putting in place the basis for a nation-changing debate on federation. Pessimists suggest that, given the way much of the Audit Report was ignored, the two papers to come will be similarly filed under “C” – for crazy brave, not constitution.

The Crows go with the optimists. While none of the big nation-changing Commission of Audit ideas got up in the budget, many specific proposals are being implemented. And it, plus the two papers to come, will percolate into politics over the next five years. The introduction of the GST proved it takes years to get Australians to accept change. If the government is still there, I’m guessing the 2019 election will be about big-picture policy, the biggest.


Disclosure: Stephen Matchett was retained by the Commission of Audit to work on the final draft of its report

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[i] Department of the Prime Minister and Cabinet, “Reform of the Federation White Paper,” 12 September @ recovered on 14 September

[ii] Laura Tingle, “Reform key to productivity boost,” Australian Financial Review, 13 September

[iii] emailed release 9.07 am, 14 September

[iv] Commonwealth of Australia, Australia’s Constitution, S5.1 Legislative powers of the parliament @ recovered on 14 September

[v] NSW Government, “NSW public school February census data,” February 2014 @ recovered on 14 September, American School and University, “Enrolment in largest US school districts,” 2013 @ recovered on 14 September

[vi] Commission of Audit, “Towards responsible government,” 14 February xviii @ recovered on 14 September

[vii] Commission of Audit op cit xxii

[viii] Julia Gillard, “NAPLAN tests to go ahead,” 6 May 2010 @ recovered on 14 September

[ix] Christopher Pyne, “Announcement of teacher education ministerial advisory group, Pyne on Line 19 February @ recovered on 8 September

[x] Commission of Audit, Recommendation Eight, @ recovered on 14 September

[xi] George Williams, “A guide to our constitution,” National Archives of Australia, 10 July 2011 @ recovered on 14 September 2014