Memorandum by Adrian Beresford-Wylie,
Chief Executive of the Australian Local Government Association
in response to questions posed by the Second Clerk of the CLG
Select Committee (BOP 60)
(A) THE RELATIONSHIP
BETWEEN CENTRAL
AND LOCAL
GOVERNMENT
1. How would you describe the relationship
between central (either federal or territorial) and local government
in Australia?
There are around 567 local councils in
Australia.
Each state and the Northern Territory has local
government legislation which establishes a system of local government,
determines the scope of local government activities and sets the
accountability framework (ie, the requirement for annual reporting).
Local government is often referred to as a creature of the states.
The Federal (national) government does not have
a direct legislative relationship with local government. The Australian
Constitution is a written document which sets out the exclusive
powers of the Federal Government and the areas over which the
Federal and state governments share power. Where the Constitution
is silent about an area, the states retain legislative power over
the area. The Constitution is silent about local government and
so the states retain legislative responsibility for local government.
The relationship between the Federal Government
and local government has mostly been a financial relationship,
with the Federal government providing general revenue support
through what is known as the Financial Assistance Grants (which
currently amount to around $1.9 billion per annum) which
are paid as grants to the states but then passed on to local government
. The Federal Government has also provided specific funding through
programs to achieve particular policy objectives (for example,
improving the condition of local roads through funding the Roads
to Recovery program).
2. Does local government In Australia need
greater autonomy from central government? If so, in what ways?
The better question would be does local government
need greater autonomy from state/territory government rather than
the national government. The central government (the Australian
Government) does not have an accountability relationship with
local government.
At the state level, local governments have been
subject to forced restructuring and amalgamation. This has been
opposed by local government which favours voluntary amalgamation
and resource sharing.
Local government across the state jurisdictions
accepts the needs for an accountability framework through state
government rather then central government.
3. Is it important for local government to
have its role protected within a written constitution and if so
why?
The issue is not protection of local government's
role in the Australian Constitution, rather it is inclusion of
local government in the Constitution to acknowledge local government's
role in the Federation.
Each state has a constitution and local government
is included in those constitutions.
In 1974 there was a referendum to change
the Australian Constitution to strengthen the direct financial
relationship between the Australian Government and local councils.
The Constitution provides that the Commonwealth Parliament (ie
the central government) can provide grants to state governments
on whatever terms and conditions it sees fit. It can also take
over the debts of states. The proposed change top the Constitution
would have placed local government on the same footing as the
states—able to receive grants and have its debts paid. The
referendum was not passed by the Australian electorate.
A second referendum in 1988 to recongise
the system of local government in the Constitution in much the
same language as used in state constitutions also failed at the
ballot box.
Local government recently considered the issue,
given that the new Federal Labor Government has constitutional
recognition of local government as policy.
A special summit of local government convened
by ALGA on 9-11 December 2008 supported the inclusion
of local government in the Federal Constitution based on the following
principles:
— The Australian people should be represented
in the community by democratically elected and accountable local
government representatives;
— The power of the Commonwealth to provide
direct funding to local government should be explicitly recognised;
and
— If a new preamble [for the Constitution]
is proposed, it should ensure that local government is recognised
as one of the components making up the modern Australian Federation.
These principles would reinforce the view that
communities should have democratically elected local representatives
and seek to ensure that the Commonwealth has the capacity to provide
direct funding to local government to improve the infrastructure
and services communities legitimately expect at the local level.
(B) LOCAL GOVERNMENT
POWERS
4. How much variation of priorities, standards
and delivery of public services is acceptable at the local level
in Australia?
There is a wide variation of services and standard
at the local level depending on the capacity of the individual
council. There is an expectation that councils will maintain local
roads and provide waste disposal. In some states (Queensland,
Tasmania and parts of western New South Wales) councils also provide
water and sewerage.
State Government local government legislation
no longer specifies the services to be provide. Rather they provide
powers of general competence to councils allowing them to provide
the services and infrastructure they see fit providing they can
fund them and they do not conflict with other levels of government.
The provision of general purpose funding by
the Commonwealth through the Financial Assistance Grants is aimed
in principle at assisting councils to provide a minimum level
of services to communities.
5. To what extent does local government in
Australia have to prioritise national (or territorial) performance
targets over local priorities?
There are conflicts between state government
requirements and local priorities which are manifested in unfunded
mandates ("cost shifting") from state government onto
local government in areas such as health, the environment and
planning.
(C) INDEPENDENT
COMMISSION QUESTIONS
6. Is the Australian Commonwealth Grants
Commission's allocation system fair and transparent?
The Commonwealth Grants Commission (CGC) does
NOT allocate the grants provided by the Australian Government
to local councils. The CGC does play a role in allocating GST
(ie an indirect tax not dissimilar to VAT) between the state and
territories based on relativities which reflect relative need
and relative revenue raising capacity.
Each state (and the Northern Territory, but
not the ACT which has a unitary system of government) receives
general revenue support from the Australian Government for local
government under the Commonwealth's Local government (Financial
Assistance) Act 1995. The funding is distributed between states
on the basis of population and within states on the basis of methodologies
which reflect the seven national principles set out in the Act.
This results in most of the funding being allocated between councils
in each jurisdiction on the basis of relative need. Each states
is required to maintain (at its own expense) a local government
grants commission to develop a methodology for this funding distribution
and to collect data from councils which can be used to make an
annual recommendation on funding allocations. In practice this
means each jurisdiction runs a grants commission as a small agency
(often located within its department of local government) with
two or three professional staff and several part-time commissioners.
While the methodologies must be consistent with
the seven national principles, they do not need to be identical.
That said, considerable efforts have been made in recent years
by the Commonwealth to encourage an exchange of information between
the grants commissions on their methodologies to promote greater
consistency.
The methodologies are complex and include a
large number of costs adjustors which are given specific weightings
to determine relative need and relative revenue raising capacities.
An annual conference of the grants commissions helps to promote
greater consistency of methodologies.
7. On balance, is it better to have an independent
allocation system or a politically accountable government allocation
system?
The current allocation system is a politically
accountable system. Although allocations between the states are
based on population, allocations within the states are based on
allocation recommended by the local government grants commissions
and determined in a transparent fashion by applying a public methodology.
However, the Federal Minister makes the final allocation (usually
by accepting the recommended allocation from the state local government
minister who in turn accepts the recommendation of the local government
grants commission but he or she can vary the allocation if desired).
8. To what extent is local government affected
by decisions made by the Australian Commonwealth Grants Commission?
The decisions of the Commonwealth Grants Commission
have no meaningful impact on local government. Occasionally the
Commonwealth Government may task the CGC with reviewing the operation
of the Federal act (reviews ion 1991, 2001) or the fixed distribution
of the local roads component of the Financial Assistance Grants
(2006). It is then up to the Federal Minister to accept any recommendation
from the CGC.
9. What is the role of Local Government Grants
Commissions in Australia?
As above, to make recommendations to the state
minister for local government (who then makes a recommendation
to the Federal Minister) on the distribution of the Financial
Assistance Grants.
10. To what extent are they independent of
government?
They are usually part of the state local government
department. Their administrative costs are met by state governments.
Their staff are state government public servants.
11. Are they fair and transparent?
Yes. Each state local government grants commission
publishes an annual report which details the distribution methodology
and the actual distribution of grants.
12. To what extent is local government financially
dependent upon funding allocated by a Local Government Grants
Commission?
Financial Assistance Grants total about $1.9
billion out of total funding around $23 billion per annum.
7 January 2009
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