Wednesday, April 13, 2005
States take off their gloves
Buoyed by their federal election victory which will soon give them control of the Senate, the (conservative) Coalition seems hell bent on picking a fight with their Labor cousins in power in the States.

Political Australia is in an odd position. All States and Territories are in the hands of Labour governments, and in many cases overwhelmingly so. Yet for some reason, Australian voters decided to give the Howard government yet more time in power in Canberra.

Not missing this opportunity, Howard is pushing a hard line conservative economic and social agenda.

But it is not this specific agenda which has got the States offside – they understand Howard has a clear federal mandate.

It is the Feds muscling in on hitherto State responsibilities that is creating the tension; in particular, reform of industrial relations, a central part of Howard’s continuing New-Right agenda of deregulation, privatisation, marketising public services and attacking welfare recipients.

The Australian Constitution seems fairly clear. The Commonwealth is competent to make law in some 39 areas, as sketched out in Section 51. Not one of these areas relates to 'industrial relations'. Yet Howard has made it clear that he intends to legislate if his State counterparts refuse to do his bidding. And Section 109 states that where a valid Commonwealth law is inconsistent with a State law, the Commonwealth will prevail.

Howard justifies this as Section 51 (xx) specifies that the Commonwealth can make law with respect to “trading or financial corporations formed within the limits of the Commonwealth”. It is estimated that this covers some 80-85% of all employees, excluding those sole traders, partnerships and those employed by unincorporated organisations.

However, Howard's plans would create a two-tier work force, with employees unclear about whether the terms and conditions of their livelihood are regulated by the States or the Commonwealth.

Howard’s stated hopes are that once the States have 85% of the work force taken out of their hands, the remaining State bureaucracies will be unsustainable and would 'whither away', handing over power to Commonwealth voluntarily.

On the face of it, it makes economic sense. Having one industrial relations bureaucracy and set of regulations, instead of 8, saves money, is easier for business, employees and consumers to understand and creates a level playing field for foreign investment. But what Howard fails to see is that centralising power to the Commonwealth creates its own problems.

This latest spat is on the back of a long list of skirmishes. Kick starting this current crisis was (Federal) Treasurer Peter Costello's demands that States become accountable to the Commonwealth over how they spend GST (sales tax) receipts. In a series of summits (well, seething arguments, really) between the Commonwealth and State Treasurers, Costello demanded that the States abolish a long list of their stamp-duty taxes, now that GST has been a success beyond belief by madly spending Australians.

This has left the State Premiers in a rather unenviable position. Costello tells the States - via the nightly news mostly - to 'cut your taxes', leaving the State Premiers seeking to protect their sovereignty, interests and, indeed, dignity by saying 'no'.

Divide and rule is Costello's tactic - shamelessly lying on national radio, seeking to drive a wedge between the Labor States. This evening he suggested that most States had agreed to his tax reform plan, yet Beattie (QLD) and Carr (NSW) are both still promising war.

Of course, the States are not accountable to the Commonwealth for how they spend their money and they certainly do not have to answer the Commonwealth Treasurer. Demanding that they do is patronising to the extreme. States are accountable to their own voters.

But this goes right to the heart of the current crisis and provides ample theoretical inconsistencies to keep any avid political scientist interested. Particularly since the introduction of GST, their has been a growing 'fiscal imbalance' - the Commonwealth are collecting more and more of the taxes (well, actually, Australian businesses are doing it for them) yet the States are the biggest spenders, responsible for delivering most public services which affect people's daily lives.

Howard and Costello assume -rightly or wrongly - that this puts the Commonwealth in the driving seat, able to dictate the terms on which it hands over tax revenues.

And while debate rages over industrial relations reform and fiscal imbalances, the Commonwealth is fingering the pie in health (when Health Minister Tony Abbott suggested that the Commonwealth take over the management of public hospitals), education with the mooting of a 'national curriculum and police.

(Interestingly, Howard has rowed back from Abbott’s outburst – there’s noting quite more like a poisoned chalice than being in charge of public hospitals – ask Tony Blair and Gordon Brown – doesn’t matter how much money you throw at them, people will say they are never satisfied, yet they will continue to avid support the institution.)

To outsiders - and no doubt to me, a year ago - this must all seems a little odd. After all – it is all 'Australia', surely? Why does it matter who delivers the services or makes the laws?

But Australia is a nation borne of the federation of 6 different Colonies. The States remain sovereign bodies; the States chose to federate to make laws in a list of defined fields. It is only the State Parliaments that retain the competency to legislate in any area of law, bar customs and excise and raising a defence force.

Despite being more culturally homogenous than the United Kingdom, the Australian States retain far more power than the Welsh Assembly or even the Scottish Parliament. At any time, Westminster could make a law to dissolve any of these chambers. Howard could never do that.

Howard’s muscle flexing is no doubt simple posturing, emphasising his strong electoral position,. But when he begins to tamper with the constitution, he perhaps needs to act with greater sensitivity and maturity.

Any undergraduate politics student could recount the philosophical underpinnings of 'conservatism' - small and instrumental government, institutionalising self sufficiency of the family unit and devolution of power to lowest level appropriate.

So where has this current rush for centralisation come from? Certainly not Howard’s political philosophy. This is political opportunism from the political opportunist par excellence. Is Howard and Costello calling the State's bluff on industrial relations and taxation? We shall see.

It also remains to be seen whether the Senate, under the control of the Coalition, will act on behalf of the States in Parliament (as it should) or at the behest of its political masters in the House of Representatives.

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