Mr SETTER - 1995-05-25
Can the minister advise the Assembly of the status of the Northern Territory government's submission to the Commonwealth regarding redress of the inequities caused by its per capita distribution policy?
ANSWER
Mr Speaker, I welcome the opportunity to clarify, for the benefit of honourable members, the situation regarding local government funding and the inequities the Territory experiences as a consequence. At the outset, I must say that I am acting as advocate for local government and association councils in the Northern Territory. Nothing in this will have one cent's effect on the Northern Territory government's funding. This is money that comes from the Commonwealth government, through the Northern Territory government, and is distributed to local government councils, community government councils and association councils around the Northern Territory.
For a number of years, the Northern Territory government has expressed concern regarding the Commonwealth's inequitable policy of per capita interstate distributions for its local government financial assistance grants, and the severe impact it has on councils in the Northern Territory. To explain simply, funding comes in 2 forms - vertical fiscal equalisation or horizontal fiscal equalisation. Essentially, vertical fiscal equalisation is per capita funding - that is, if we have 1% of Australia's population, we receive 1% of the money. Horizontal fiscal equalisation says that, wherever a council is in Australia, the funding it receives gives it an equal ability to provide the same standard of services and facilities. Therefore, remote areas receive higher per capita funding than the major cities. It is important to understand that this higher level of funding is not a special bonus to councils, and the failure to take that into account acts as an inequity in relation to small and remote local governments.
The fact is that we receive our funding and all states receive their funding under the Commonwealth-states tax- sharing arrangement based on the principles of horizontal fiscal equalisation. The Northern Territory and every state in Australia are required to distribute funds between councils within our state or territory in accordance with the principle of horizontal fiscal equalisation. However, according to Commonwealth policy, the funding distribution between the states is made on a straight per capita basis. That causes gross inequity to local governments in the Northern Territory. Over the past 5 years ...
Mr Bell: Created by your local roads funding policy.
Mr HATTON: I would be happy to take a separate question on that subject. I would not want to be accused of making a ministerial statement in this answer. Although that is an open invitation, I will resist the temptation.
Over the past 5 years, the Commonwealth has had numerous opportunities at which to address the question of a more equitable distribution of its funding to local government but, each time, it has shirked its social justice and equity responsibilities in this regard. Firstly, the
Page 609
issue of interstate relativities was excluded specifically from the terms of reference of the Commonwealth's recent review of the Local Government (Financial Assistance) Act. Why? Because it knows that they cannot stand up to scrutiny, and that was demonstrated. This is the legislation under which Northern Territory councils receive Commonwealth general purpose funds, via the Northern Territory Local Government Grants Commission.
It is not surprising that the Commonwealth will not have it reviewed considering that, in 1990, Canberra requested the Commonwealth Grants Commission to look specifically at the issue. The commission recommended the adoption of complementary relativities which, had they been accepted by the federal government, would have allocated the Northern Territory local government sector approximately $31m as opposed to the paltry $6.7m it actually received at that time. I do not think there can be a more stark demonstration of the extent of inequity suffered by local government in the Northern Territory as a result of per capita funding. This was another opportunity for the Commonwealth to address the inequity, but it did not have the courage to accept the commission's recommendations. The reason for that was primarily to ensure that the 2 wealthiest and most populous states received the money. That was in 1990.
This is not a unique example of the way in which this federal government is sucking money from the rural and remote parts of Australia ...
Mr Bell: That is what you people do. You suck funds out of the rural and remote parts of the Northern Territory.
Mr HATTON: ... states into Sydney and Melbourne, where most of the federal seats in Australia are located.
Members opposite should not be complaining too loudly about my making this point because their electorates will benefit most if I succeed in this task. I ask them to support us in this cause. I sought the support of the federal member, Hon Warren Snowdon but, yet again, he ran into his rabbit warren. He will not take the issue up on behalf of Territorians, on behalf of Aboriginal people in the Territory, or on behalf of local government in the Territory. He is too busy backing his factional mate, Hon Brian Howe, and the federal government's policy, and acting directly against the interests of the Northern Territory. The Local Government Association of the Northern Territory is itself making representations unsuccessfully to both the local member and the federal government.
Further, the Commonwealth has ignored the recent review and its consultants' reports, which referred clearly to the inequities entrenched in the per capita allocation. One of the reports, produced for the review by Morton Consultant Services, looks at the methodologies adopted by the individual state and territory grants commissions. Morton's report said, when referring to grant levels received by Territory municipal councils, that they `typically receive lower grants than would be expected when compared with similar councils in their classification group'. It continued:
As already noted, the Northern Territory situation is more likely explained by the per capita distribution of
funding to the Territory compared with the equalisation basis of distribution within the Territory.
Page 610
In view of this and other comments made during the recent review, my department engaged the services of Morton Consultant Services to examine further the specific disadvantages being suffered by Territory local government and to consider possible solutions. I will not go into the details of the report, but the paper is available for anyone to read, and I urge members to read it. The overwhelming result arrived at by Morton is that, regardless of which methodology was used, all show a significant disadvantage being suffered by the Territory and its councils in terms of their capacity to deliver services, according to need, at a similar level to that in the states. This inequity is caused primarily by the initial per capita distribution from the Commonwealth. That fact is quite unequivocal and clear.
In relation to these funds from the Commonwealth, local government in the Territory is achieving currently a 20% level of equalisation in the allocation of local government grants or assistance grants, as opposed to a national average of 54%, with the next lowest state achieving 40%. The Territory's funding allocation, being approximately $7.2m at the moment, allows Territory councils to fund only 20% of their identified needs whereas councils around Australia can service a whopping 54%. This is due primarily to the fact that service provision is far more cost-effective in those areas than it is in the Northern Territory. It is as simple as that. It costs more to deliver services at Papunya, Kintore or Borroloola than it does in Sydney or Melbourne. That is a truism, but there has been a failure to accept it. I know that Hon Brian Howe understands it because I put this argument to him at every Local Government Ministers Conference, and I have the support of the smaller states which are being ripped off also. Every time I put this argument to him, all he can say is that it is federal government policy. He cannot justify it except on the basis of government policy.
Mr Bell: How many pages are there of this guff?
Mr HATTON: Mr Speaker, I am happy to go on or I am happy to leave it.
Mr Bell: It should be a ministerial statement.
Mr HATTON: Don't you think that it is important to your electorate ...
Mr Bell: You people are so scared that you come up with these dorothy dixers.
Mr SPEAKER: Order!
Mr Bell interjecting.
Mr SPEAKER: Order! Would the Minister for Lands, Housing and Local Government resume his seat? I warn members that I have been up just as long as they have. I am just as cranky as they are. If the honourable member wants to be put out of the House, I suggest he just tries me.
Mr HATTON: Mr Speaker, I am actually winding up now.
Morton asserted that it was unreasonable for the Territory to be able to achieve only a 20% level of equalisation. Therefore, he proposed the appropriateness of building a safety net for councils. He recommended that the safety net should be at 35%. He said that this would
Page 611
affect only Northern Territory funding, but that it would have the effect of adding 67% to the federal government's funding to every local government council and association council in the Northern Territory. Even then, they would still be underfunded and that is a significant difference which I do not believe that we should have to cop. However, we are trying to find something to assist local government in the face of a federal government which has no interest in dealing with these issues and a federal member who has no interest in putting these matters forward.
We have been unable to obtain any response, so what did they do? Everyone, except the federal government, New South Wales and Victoria, voted in favour of a resolution by the Local Government Ministers Council that the issue of state funding be referred to the Premiers Conference. We thought that that was a beauty and that it would come up at the 1995 Premiers Conference. That would provide an opportunity to have the Premiers of all states address the issue, because it is clearly unfair, inequitable and illogical. What happened? The federal government secretariat decided that it was not its responsibility to forward this resolution to the Premiers Conference, therefore it was not placed on to the agenda. A Premiers Conference has been held since then and you may be assured, Mr Speaker, that I had my say about the approach being adopted by the federal secretariat and the federal minister. The federal minister did not want even to have his name attached to the resolution of the ministerial council on this question. Therefore, the states have decided that we will refer the matter to COAG and the Premiers Conference to try to have the matter addressed with some sense of equity, to obtain fairness for local government in the Northern Territory.
Page 612
ANSWER
Mr Speaker, I welcome the opportunity to clarify, for the benefit of honourable members, the situation regarding local government funding and the inequities the Territory experiences as a consequence. At the outset, I must say that I am acting as advocate for local government and association councils in the Northern Territory. Nothing in this will have one cent's effect on the Northern Territory government's funding. This is money that comes from the Commonwealth government, through the Northern Territory government, and is distributed to local government councils, community government councils and association councils around the Northern Territory.
For a number of years, the Northern Territory government has expressed concern regarding the Commonwealth's inequitable policy of per capita interstate distributions for its local government financial assistance grants, and the severe impact it has on councils in the Northern Territory. To explain simply, funding comes in 2 forms - vertical fiscal equalisation or horizontal fiscal equalisation. Essentially, vertical fiscal equalisation is per capita funding - that is, if we have 1% of Australia's population, we receive 1% of the money. Horizontal fiscal equalisation says that, wherever a council is in Australia, the funding it receives gives it an equal ability to provide the same standard of services and facilities. Therefore, remote areas receive higher per capita funding than the major cities. It is important to understand that this higher level of funding is not a special bonus to councils, and the failure to take that into account acts as an inequity in relation to small and remote local governments.
The fact is that we receive our funding and all states receive their funding under the Commonwealth-states tax- sharing arrangement based on the principles of horizontal fiscal equalisation. The Northern Territory and every state in Australia are required to distribute funds between councils within our state or territory in accordance with the principle of horizontal fiscal equalisation. However, according to Commonwealth policy, the funding distribution between the states is made on a straight per capita basis. That causes gross inequity to local governments in the Northern Territory. Over the past 5 years ...
Mr Bell: Created by your local roads funding policy.
Mr HATTON: I would be happy to take a separate question on that subject. I would not want to be accused of making a ministerial statement in this answer. Although that is an open invitation, I will resist the temptation.
Over the past 5 years, the Commonwealth has had numerous opportunities at which to address the question of a more equitable distribution of its funding to local government but, each time, it has shirked its social justice and equity responsibilities in this regard. Firstly, the
Page 609
issue of interstate relativities was excluded specifically from the terms of reference of the Commonwealth's recent review of the Local Government (Financial Assistance) Act. Why? Because it knows that they cannot stand up to scrutiny, and that was demonstrated. This is the legislation under which Northern Territory councils receive Commonwealth general purpose funds, via the Northern Territory Local Government Grants Commission.
It is not surprising that the Commonwealth will not have it reviewed considering that, in 1990, Canberra requested the Commonwealth Grants Commission to look specifically at the issue. The commission recommended the adoption of complementary relativities which, had they been accepted by the federal government, would have allocated the Northern Territory local government sector approximately $31m as opposed to the paltry $6.7m it actually received at that time. I do not think there can be a more stark demonstration of the extent of inequity suffered by local government in the Northern Territory as a result of per capita funding. This was another opportunity for the Commonwealth to address the inequity, but it did not have the courage to accept the commission's recommendations. The reason for that was primarily to ensure that the 2 wealthiest and most populous states received the money. That was in 1990.
This is not a unique example of the way in which this federal government is sucking money from the rural and remote parts of Australia ...
Mr Bell: That is what you people do. You suck funds out of the rural and remote parts of the Northern Territory.
Mr HATTON: ... states into Sydney and Melbourne, where most of the federal seats in Australia are located.
Members opposite should not be complaining too loudly about my making this point because their electorates will benefit most if I succeed in this task. I ask them to support us in this cause. I sought the support of the federal member, Hon Warren Snowdon but, yet again, he ran into his rabbit warren. He will not take the issue up on behalf of Territorians, on behalf of Aboriginal people in the Territory, or on behalf of local government in the Territory. He is too busy backing his factional mate, Hon Brian Howe, and the federal government's policy, and acting directly against the interests of the Northern Territory. The Local Government Association of the Northern Territory is itself making representations unsuccessfully to both the local member and the federal government.
Further, the Commonwealth has ignored the recent review and its consultants' reports, which referred clearly to the inequities entrenched in the per capita allocation. One of the reports, produced for the review by Morton Consultant Services, looks at the methodologies adopted by the individual state and territory grants commissions. Morton's report said, when referring to grant levels received by Territory municipal councils, that they `typically receive lower grants than would be expected when compared with similar councils in their classification group'. It continued:
As already noted, the Northern Territory situation is more likely explained by the per capita distribution of
funding to the Territory compared with the equalisation basis of distribution within the Territory.
Page 610
In view of this and other comments made during the recent review, my department engaged the services of Morton Consultant Services to examine further the specific disadvantages being suffered by Territory local government and to consider possible solutions. I will not go into the details of the report, but the paper is available for anyone to read, and I urge members to read it. The overwhelming result arrived at by Morton is that, regardless of which methodology was used, all show a significant disadvantage being suffered by the Territory and its councils in terms of their capacity to deliver services, according to need, at a similar level to that in the states. This inequity is caused primarily by the initial per capita distribution from the Commonwealth. That fact is quite unequivocal and clear.
In relation to these funds from the Commonwealth, local government in the Territory is achieving currently a 20% level of equalisation in the allocation of local government grants or assistance grants, as opposed to a national average of 54%, with the next lowest state achieving 40%. The Territory's funding allocation, being approximately $7.2m at the moment, allows Territory councils to fund only 20% of their identified needs whereas councils around Australia can service a whopping 54%. This is due primarily to the fact that service provision is far more cost-effective in those areas than it is in the Northern Territory. It is as simple as that. It costs more to deliver services at Papunya, Kintore or Borroloola than it does in Sydney or Melbourne. That is a truism, but there has been a failure to accept it. I know that Hon Brian Howe understands it because I put this argument to him at every Local Government Ministers Conference, and I have the support of the smaller states which are being ripped off also. Every time I put this argument to him, all he can say is that it is federal government policy. He cannot justify it except on the basis of government policy.
Mr Bell: How many pages are there of this guff?
Mr HATTON: Mr Speaker, I am happy to go on or I am happy to leave it.
Mr Bell: It should be a ministerial statement.
Mr HATTON: Don't you think that it is important to your electorate ...
Mr Bell: You people are so scared that you come up with these dorothy dixers.
Mr SPEAKER: Order!
Mr Bell interjecting.
Mr SPEAKER: Order! Would the Minister for Lands, Housing and Local Government resume his seat? I warn members that I have been up just as long as they have. I am just as cranky as they are. If the honourable member wants to be put out of the House, I suggest he just tries me.
Mr HATTON: Mr Speaker, I am actually winding up now.
Morton asserted that it was unreasonable for the Territory to be able to achieve only a 20% level of equalisation. Therefore, he proposed the appropriateness of building a safety net for councils. He recommended that the safety net should be at 35%. He said that this would
Page 611
affect only Northern Territory funding, but that it would have the effect of adding 67% to the federal government's funding to every local government council and association council in the Northern Territory. Even then, they would still be underfunded and that is a significant difference which I do not believe that we should have to cop. However, we are trying to find something to assist local government in the face of a federal government which has no interest in dealing with these issues and a federal member who has no interest in putting these matters forward.
We have been unable to obtain any response, so what did they do? Everyone, except the federal government, New South Wales and Victoria, voted in favour of a resolution by the Local Government Ministers Council that the issue of state funding be referred to the Premiers Conference. We thought that that was a beauty and that it would come up at the 1995 Premiers Conference. That would provide an opportunity to have the Premiers of all states address the issue, because it is clearly unfair, inequitable and illogical. What happened? The federal government secretariat decided that it was not its responsibility to forward this resolution to the Premiers Conference, therefore it was not placed on to the agenda. A Premiers Conference has been held since then and you may be assured, Mr Speaker, that I had my say about the approach being adopted by the federal secretariat and the federal minister. The federal minister did not want even to have his name attached to the resolution of the ministerial council on this question. Therefore, the states have decided that we will refer the matter to COAG and the Premiers Conference to try to have the matter addressed with some sense of equity, to obtain fairness for local government in the Northern Territory.
Page 612
Last updated: 09 Aug 2016