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| Box 1: School counsellors The desire for central control can have unexpected consequences. Twomey has shown that in the school chaplain issue, the ‘price’ of such an appointment is not simply the sum of the grant handed over by the Commonwealth, for there are also the ‘high levels of administration’ that must be dealt with by both the school and the Commonwealth government that has given the money. The administrative load includes: ∙ satisfaction of the terms and conditions of the funding arrangement ∙ insurance requirements ∙ child protection requirements ∙ progress reports and financial acquittals of income and expenditure by Commonwealth bureaucrats ∙ on-site monitoring by Commonwealth bureaucrats ∙ ‘feed-back’ interviews, and ∙ examination of the documents kept by the school. All this is a matter of ‘normal’ bureaucratic procedure. There is also a political aspect to the red tape that comes as a consequence of the conditions involving the ‘recognition and acknowledgement’ of the involvement by the Commonwealth. In accordance with the ‘National School Chaplaincy Program Guidelines’, all published materials relating to the program were required to include a national coat of arms and an acknowledgment of the fact that funding has been Commonwealth-sourced. Any school involved in the program “… must demonstrate in its progress and final reports that it has given effective recognition to Australian Government initiation, ownership and support through the National School Chaplaincy Program”.[16] |
Clearly, the Commonwealth’s determination to have an impact on traditional state and territory areas of responsibility plays a major part in modern intergovernmental relations. However, this desire is closely linked with the possession of a huge purse, combined with a determined use of section 96, that enables the Commonwealth to buy into ‘any state area it wants to, and in the way it wants to’.[17]
What do SPPs do to the federal system? Some argue that contemporary tensions in the federal system are due to the increased importance of SPPs since the Whitlam Government years, and that this has radically altered the federal system. Garnaut and Fitzgerald note, for example, that:
In reality, the enlarged role of SPPs since the 1970s has effectively converted some areas of state responsibility into areas of shared responsibility between the Commonwealth and the States.[18]
The use of SPPs means that today, a great many functions are shared between the Commonwealth and the states to a much greater extent than would have been envisaged by most of Australia’s prime ministers or premiers since Federation. Indeed, when compared with other federations, Australia has a ‘relatively high and increasing degree’ of shared governmental functions’.[19] Associate Professor Neil Warren of the University of New South Wales notes that SPPs can provide national benefits such as:
It must be noted, however, that sharing responsibilities creates problems for Australian federalism, including:
… the inefficiencies which may emerge—as a result, usually, of a blurring of government responsibilities—from cost and blame-shifting among government levels, wasteful duplication of effort or under-provision of services, and a lack of effective policy co-ordination.[21]
The problems of blame-shifting and buck-passing that arise when responsibilities are shared are illustrated in the case of health. In this case, there have been accusations of cost-shifting and arguments over responsibilities.[22] Box 2 illustrates the complicated nature of health funding and service provision that give rise to such problems.
| Box 2: Division of government responsibilities in health care The main features of the current funding arrangements are as follows: • under the Medicare system, the Commonwealth provides access to medical, pharmaceutical and hospital services for all Australians through: i) The Medicare Benefits Scheme rebates for listed medical services ii) the Pharmaceutical Benefits Scheme of subsidies for listed prescription drugs; and iii) the Australian Health Care Agreements (where funding is jointly shared with the states), ensuring access to free public hospital services based on clinical need. Moreover, the Commonwealth provides a premium rebate of between 30 to 40% for private health insurance holders • the largest source of funds for residential and aged care comes from the Commonwealth, which also has responsibility for regulating residential aged care • the states are responsible for most acute and psychiatric hospital services. They also provide and fund the majority of community health care services and public health care activities, including school dental services, child and maternal health care services, disability support, disease control and various inspection functions • local governments may also provide residential and community old-age care services, home care and personal preventive services, such as pre-school immunisation clinics • private providers deliver a significant proportion of primary, specialist and allied heath care through general practitioners, specialists, pharmacists, physiotherapists and dentists. They are funded by a combination of user charges, Medicare and private health insurance.[23] |
Garnaut and Fitzgerald have noted that the confused state of contemporary Australian federalism has been compounded by the ‘considerable’ level of acceptance by the broad Australian community of the sharing of responsibilities. Garnaut and Fitzgerald believe that ‘it is not possible to solve the problems of SPPs simply by abolishing them’.[24] Arguably, public acceptance flows from a general satisfaction with how SPP money is spent. This was illustrated graphically by the apparently high level of local popular support in Devonport when the Commonwealth announced its takeover of the Mersey Hospital during the 2007 federal election campaign.
Not surprisingly, the level of funding of SPPs is an on-going issue between the Commonwealth and the states. The Intergovernmental Agreement on the Reform of Commonwealth–State Financial Relations has governed Commonwealth-state financial relations since the introduction of the goods and services tax (GST). Paragraph 5(v) of the Agreement states:
The Commonwealth will continue to provide Specific Purpose payments (SPPs) to the States and Territories and has no intention of cutting aggregate SPPs as part of the reform process set out in this Agreement, consistent with the objective of the State and Territory Governments being financially better off under the new arrangements.
The reason for this provision is that the states were concerned that the Commonwealth would reduce funding of SPPs following the introduction of the GST and the Commonwealth’s undertaking to provide all revenue from that tax to the states. But from a state perspective, the provision is weak because it cannot ensure that the Commonwealth will not reduce the level of SPPs. Further, the wording of the provision is vague. ‘Cutting’, for example, is not defined. Ultimately the provision is meaningless because constitutionally, the Commonwealth cannot bind a future government. Hence any commitment in the GST legislation could be repealed by any later Act appropriating funds for SPPs, if the amount were cut. While politically it might have been important for the states to obtain some kind of commitment from the Commonwealth, because the provision is not binding on the Commonwealth, whether its terms are ‘weak’ or ‘strong’ is ultimately meaningless.
The states have interpreted the provision to mean that the level of SPPs should be measured in real per capita terms using the consumer price index to remove the effect of inflation. Thus defined, the Commonwealth has, to date, met this criterion.[25]
It is therefore clear that the Commonwealth’s ability to involve itself in the states’ provision of services ultimately rests on its financial power. The consolidation of financial power in the Commonwealth—particularly the power to levy taxes—is a key feature of Australian federalism.[26] The National Commission of Audit observed:
In the Australian context the reality is that the roles and responsibilities of the Commonwealth and States cannot be easily separated. This is largely because the Commonwealth has control of most of the revenue available to governments and because the political opportunities for expanding Commonwealth involvement flow directly from this.[27]
The difference between the relative revenue raising capabilities and spending responsibilities of the Commonwealth compared with the states is called ‘vertical fiscal imbalance’:
Vertical fiscal imbalance refers to situations where the revenue raising powers of one level of government are insufficient to meet their expenditure responsibilities and, for the other level, excessive, thus requiring a system of intergovernmental transfers or grants to correct the imbalance. [28]
The level of vertical fiscal imbalance in Australia is among the highest of any federation.[29] This is reflected in the fact that the Commonwealth collects around 80 per cent of taxation revenue but currently is responsible for around 54 percent of own-purpose spending.[30] In contrast, the states collect about 16 per cent of taxation revenue but account for 40 per cent of own-purpose outlays.[31]
Critics argue that a high degree of vertical fiscal imbalance is antithetical to an effective federal system. Former senior Treasury official, Mr Robert Carling, for example, argues:
The point that requires emphasis here is that fiscal autonomy of sub-national governments is a sine qua non of an effective federal structure. A high degree of financial dependency on central government stifles federalism. The dependency culture is the antithesis of financial responsibility and accountability. Expenditure responsibility needs to be matched by revenue responsibility if sensible public choices are to be made. Vertical fiscal imbalance breaks the link between expenditure and revenue raising decisions. It raises a confusion of accountability in the minds of voters and a tendency for the central government’s influence on sub-national expenditure choices to grow, resulting in overlapping responsibilities. It works against efficiency in public expenditure. And it curtails the flexibility of individual states to carry out their responsibilities differently from other states and to cater to their own residents’ different preferences.[32]
Some argue that expenditure assignment should be matched by an ability to raise taxes to fund those expenditures:
… where the subsidiarity principle supports the allocation of a function to a lower level of government … both the necessary expenditure and taxing powers should also be delegated to that level of government.[33]
Much of the criticism of the Commonwealth’s role in SPP provision pertains to conditionality, that is, the practice whereby the Commonwealth requires the states to meet certain undertakings as a condition of the states receiving grants. While accepting that there are valid reasons for conditionality, some argue the Commonwealth has taken conditionality too far:
There is also a very limited legitimate role for tied grants where the recipient (lower) levels of government left to their own devices would deliver a suboptimal national level of service provision or there is an agreed national policy objective that can only be achieved through coordinated sub-national service delivery. However, tied grants in Australia have gone well beyond this narrow scope.[34]
The states have argued that conditionality has negative consequences for them. For example, it has been argued that conditions are often poorly designed, and can adversely affect the states’ ability to provide services by requiring the states to contribute additional resources without giving thought to what the states already do.[35]
A proposed solution to problems of conditionality is to replace SPPs with untied grants:
Consideration [should] be given to replacing major SPPs ... with unconditional grants (possibly as Identified Funding Grants) to provide greater flexibility, lower risk for States and reduce duplication and administrative costs.[36]
However, from the Commonwealth’s perspective, replacing SPPs with untied grants would mean that the Commonwealth would have to abandon its reasons for conditionality and lose an important control mechanism over the states.
As noted, conditionality sometimes takes the form of so-called input controls such as the states having to match Commonwealth funding. Short of replacing SPPs with untied grants, another option that has been proposed is for conditionality to focus on outcomes and results.[37]
Problems input controls generate include:
A focus on input controls does not place clients first, particularly for SPPs providing services directly to individuals and groups within the community.
A focus on inputs distracts attention from meeting SPP objectives and does not provide any indication of what is being achieved via the service provision.
Input controls limit incentives for service providers to improve their efficiency, and prevent the redirection of efficiency savings into other areas of expenditure.
Input controls do not allow service providers the flexibility to move funds between program elements within SPPs to ensure that overall objectives are achieved. [38]
Not surprisingly, the states have advocated replacing input controls with outcomes measures.[39]
Benefits that might derive from funding SPPs on an outcomes basis rather than an input basis:
… include an improved use of state resources, through granting states greater flexibility on the allocation of federal funds, and incentives to service providers to raise efficiency. Moreover, a focus on outcomes could enhance transparency and accountability.[40]
This assumes, however, that performance in service delivery can be measured. A challenge is to develop outputs and outcomes and a reporting framework for each SPP:
This is an ambitious task as outcome/output measures of service delivery are difficult to define, measure and enforce in a robust way. [41]
The experience of developing outcomes and reporting frameworks for Commonwealth agencies underscores these difficulties.[42] A review prepared for the OECD of results-oriented budget reforms in Australia and the United Kingdom concluded:
When the effects of the results-oriented financial management reforms are examined, it can be stated that the reforms are not a panacea which will solve all financial management problems, but do generate positive as well as negative effects.[43]
The Commonwealth has moved towards placing a greater emphasis on results. As SPPs have been renegotiated, the Commonwealth has sought to clarify objectives, while requiring the states to provide agreed financial information and performance indicators. An example is the requirement that state governments meet a number of new performance conditions in order to obtain federal funding for education over the period 2005–08.[44]
However, a reason the Commonwealth imposes input controls is to prevent the states from shifting costs on to the Commonwealth.[45] According to some commentators, the Commonwealth’s emphasis on inputs thus seems likely to continue:
While the new approach represents a step towards an outcome accountability framework, funding for SPPs will continue to be input-based as, in the Commonwealth’s view, input controls remain the best way to protect the federal government against financial risks associated with service delivery, which is the responsibility of the states. Input controls are further seen by the Commonwealth as a means of ensuring that state sub-national governments do not shift responsibility for service provision over time to the central level.[46]
The need to define clearly the respective roles and responsibilities of the Commonwealth and the states has assumed additional significance following the endorsement of the National Reform Agenda by the Council of Australian Governments in February 2006. The Agenda encompasses human capital, competition and regulatory reform issues and thus entails considerable joint responsibility. For example, with respect to provision of economic infrastructure—which is mainly a state responsibility—processes for its planning, funding and regulation vary and overlap considerably.[47]
A theme of recent reports on problems in Australia’s federal system is that the magnitude of such problems would be reduced if the roles and responsibilities of each tier of government were clarified. For example, an OECD report on fiscal relations across the levels of government in Australia concluded:
The current pattern of widespread shared government involvement increases the necessity to clearly define roles and responsibilities …[48]
Some argue that this should entail a better allocation of financial resources between the Commonwealth and the states, with each managing and funding its own responsibilities.[49]
This raises the question of the basis on which functions could be allocated to the different tiers of government. An attempt to reallocate functions is beyond the scope of this paper. Suffice it to say that there is no ‘best’ model.[50] The ‘subsidiarity’ principle may, however, provide some guidance. This principle holds that the central government should limit its activities to those which lower levels of government cannot perform effectively, that is, responsibility should rest, where possible, with the lowest level of government.[51] With respect to the appropriate role for the Commonwealth, the ALP Advisory Group on Federal-State reform has argued that there are two fundamental principles which must be balanced: the national interest principle, and the subsidiarity principle:
The Commonwealth should be engaged when there are genuine national interests at stake, but only to that extent. Otherwise the subsidiarity principle should prevail …
But as a general principle the Commonwealth should only become involved in those issues traditionally managed by the States where Commonwealth-State inter-action is necessary to enhance efficiency, equity and/or access, or the basic rights and heritage.[52]
The subsidiarity principle would suggest, for example, that the Commonwealth should be responsible for defence, state governments for the delivery of public transport and public hospital services, and local governments for household garbage collection.
Carling argues that applying the subsidiarity principle would not result in a narrowing of state responsibilities and would lead to a reduction in central government interference in state service delivery through the conditionality of tied grants.[53]
It has been argued that assigning complete responsibility for a function to only one tier of government would eliminate some of the problems associated with SPPs.[54] Warren has noted that there is an international trend in this direction. For example, in the case of health, responsibility is largely confined to a single level of government, whether national or subnational.[55]
However, national interest considerations mean that responsibility for some functions should be shared:
… it will never be possible to completely delineate the respective responsibilities of the Commonwealth and the States. Most importantly, the extent of inter-relationships between different policies (eg education and economic performance) means that whole-of-government solutions that necessarily involve both the Commonwealth and the States are increasingly called for.[56]
Twomey and Withers have argued that where responsibilities are shared, an approach needs to be taken to reallocation not in relation to responsibilities but in relation to allocating roles in managing shared responsibilities.[57]
It is important to distinguish between responsibility for funding and responsibility for service provision. Under SPPs, the states are responsible for service provision. Funding, on the other hand, is sometimes shared between the Commonwealth and the states and sometimes not. Reform proposals envisage different combinations of responsibility for service delivery and funding. For example, in the case of health care where funding is shared, it has been suggested that:
Either Canberra or the states can take full responsibility for funding health care, or the state and federal governments can pool their health funds, as proposed by the Victorian government.
The options are not as different as they may sound … If the Australian government became the sole public funder of health care, the states could still play a major role in the provision of health services. That is, the federal government in effect would buy acute health-care services from the states and the private sector.[58]
Proposals that the states assume additional responsibility for funding services are meaningless unless they are also accompanied by an increase in the states’ ability to raise revenue. Assuming that is desirable to reduce vertical fiscal imbalance, a question that arises is: what additional revenue-raising powers should the states have?[59] Given that the states are constitutionally precluded from imposing a broadly-based consumption tax, an option is for the states to impose a surcharge on Commonwealth income tax.[60] This would, however, probably require the Commonwealth to ‘make room’ for the states by lowering personal income tax rates. In 1978, the Fraser Government legislated to allow the states to impose an income tax surcharge to allow the states to broaden their tax base. The initiative failed partly because the Commonwealth did not cut tax rates to make room for surcharges.[61]
State income tax surcharges would have advantages and disadvantages. An advantage is that the cost of administration would not increase greatly if the base were unchanged and identical across the states, and the Commonwealth administered and collected the tax.[62] Another possible advantage is that competition among the states would be likely to limit any increase in surcharge rates. A state surcharge could, however, face considerable barriers because it would entail a fundamental change to Commonwealth–state financial arrangements. That would require the agreement of all jurisdictions which may not be forthcoming.[63]
Proposals to reduce problems associated with shared responsibilities include pooling and broadbanding. Pooling is where funding from both the Commonwealth and the state for related programs—for example, health—is placed in a pool and not earmarked for specific programs. Broadbanding is the grouping together of SPPs that are directed toward broad outcomes for particular groups. The National Commission of Audit, for example, proposed:
For programs where there is joint Commonwealth/State responsibility, funding should go to pools that extend to all related programs, rather than being earmarked to specific programs. Again, this allows the States some allocative discretion within funding pools.[64]
With respect to broadbanding, the National Commission of Audit advocated:
Where specific purpose payments (SPPs) are considered necessary, the Commonwealth should focus on specifying policy objectives and establishing improved accountability frameworks and give the States greater freedom in designing program delivery. This would facilitate a reduction in the number of SPPs by grouping together or 'broadbanding' SPPs which are directed at broad outcomes for particular groups. This would reduce administrative duplication, overlap and inefficiency.[65]
The states have also advocated broadbanding to reduce duplication and administration costs.[66]
An example of broadbanding is that proposed by Garnaut and Fitzgerald:
The centrepiece of the proposed reform is a new cooperative model for SPPs in the key merit areas of health and aged care, and education and training. SPPs in these areas would be broad-banded into two national programs in which the States have clear authority over service delivery, without micromanagement and input controls. A third national program would be established in indigenous community development. The Commonwealth would have primary control over services provided under this program but would work in cooperation with the States. Opportunities would be sought for rationalising responsibility for functions within or closely related to these three areas.[67]
Advantages of broadbanding include clearer responsibility for administration, reduced administrative costs, and increased flexibility as to how funds are spent.[68] However, from the Commonwealth’s perspective, broadbanding would entail a loss of control over how the states spend grants.[69]
Australia’s federal system has changed fundamentally since 1923 when SPPs were first made available to help fund the provision of roads. Power over spending and policy-making has become increasingly centralised in the Commonwealth government, a consequence of the consolidation of financial power in the Commonwealth’s hands. SPPs have been a major mechanism for centralisation by allowing the Commonwealth to become involved in areas well beyond those stipulated in the Constitution to the point where the Commonwealth shares many major functions with the states.
As noted, a large number of complaints about the federal system revolve around the Commonwealth’s use of SPPs, and this paper has examined ways in which their operation could be improved. But major change to arrangements for SPPs does not seem in prospect. Consequently, the problems associated with SPPs—blurring of responsibility, cost and blame-shifting among government levels, wasteful duplication of effort and so on—are likely to remain. Several factors are relevant.
First, Commonwealth involvement in the provision of services will continue while the states lack the own-source revenue to fund those services, and no moves are afoot to give the states greater taxation powers because this would entail fundamental and difficult change. Second, there is an element of political convenience in existing arrangements in that the Commonwealth and the states can blame each other when problems arise. One level of government assuming full responsibility for funding a particular function would mean that it would be unable to blame the other when things went wrong. For their part, the states would be likely to be reluctant to assume increased taxing powers because they would have to bear the opprobrium of having to impose taxes.
The Commonwealth’s involvement through SPPs in ever more areas has led to the perception that the Commonwealth is primarily responsible for an activity even though responsibility rests primarily with the other tiers of government. An example is road funding where calls for additional funding are often directed to the Commonwealth even though it accounts for only about 20 per cent road-related expenditure (the states and local government account for about 40 per cent each).[70] Policies such the Howard Government’s take over of the operation of the Mersey Hospital and the Labor Party’s proposals to take over the operation of public hospitals in certain circumstances can only reinforce such perceptions.
The Rudd Government has promised a new era in Commonwealth–state relations. At the December 2007 meeting of the Council of Australian Governments (COAG), it was agreed to that the focus would be more on outputs and outcomes. The Commonwealth also undertook to provide payments to the states in return for their adopting reforms including reform of SPPs.
Broadbanding: the grouping together of SPPs that are directed toward broad outcomes for particular groups.
Capital purpose grants: payments made by the Commonwealth to the states for investment purposes such as constructing roads.
Conditionality: the practice whereby the Commonwealth imposes conditions with which the states must comply in order to receive funding.
Cost-shifting: the practice whereby a tier of government attempts to move the cost of funding a service to another tier of government. Cost-shifting is most marked when functions are shared.
Current purpose grants: payments made by the Commonwealth to the state for non-capital purposes, for example, legal aid.
Economic infrastructure: refers to physical infrastructure such as roads, airports and power stations. Social infrastructure includes schools, hospitals and libraries.
General purpose grants: grants the Commonwealth makes to the states (and local government) which the recipients can spend as they wish. The main form of such grants is the goods and services tax revenue the Commonwealth provides to the states.
Input controls: requirements that the Commonwealth places on grants often in the form of requiring the states to match Commonwealth funding dollar for dollar or to undertake certain activities.
Outputs: the production of goods and services that contribute to outcomes.
Pooling: where funding from both the Commonwealth and the state for related programs—for example, health—is placed in a pool and is not earmarked for specific programs.
Specific purpose payments: grants the Commonwealth makes to the states under section 96 of the Constitution on whatever conditions the Commonwealth government thinks fit.
Subsidiarity: the principle which holds that responsibility for a particular function should, where practicable, reside with the lowest level of government.
Tied grants: another name for specific purpose payments. Grants are called ‘tied’ because they are subject to conditions the Commonwealth imposes.
Vertical fiscal imbalance: the imbalance between the expenditure responsibilities of each tier of government and its own-source revenue. Australia is characterised by a high degree of fiscal imbalance with the Commonwealth raising about 80 per cent of taxation revenue but currently being responsible for around 54 per cent of own-purpose spending. In contrast, the states collect about 16 per cent of taxation revenue but account for about 40 per cent of own-purpose spending.
[1]. Only a few SPPs are not subject to conditions. An example is the compensation the Commonwealth pays to the states for the revenue that they have forgone following the commencement of the national scheme for the regulation of companies and securities.
[2]. Australian Government, Final Budget Outcome 2006–07, http://www.budget.gov.au/2006-07/fbo/html/index.htm, accessed on 6 December 2007.
[3]. A. Twomey and G. Withers, Australia’s Federal Future. Report prepared for the Council of the Australian Federation, April 2007, p. 47, http://www.crawford.anu.edu.au/pdf/staff/glenn_withers/federalist_paper.pdf, accessed on 6 December 2007.
[4]. Access Economics, ‘The Costs of Federalism’ in Business Council of Australia, Reshaping Australia’s Federation. A New Contract for Federal-State Relations, 2006, http://www.bca.com.au/Content.aspx?ContentID=100801, accessed on 6 December 2007.
[5]. Victoria v. Commonwealth (1926) 38 CLR 399.
[6]. For further information, see Richard Webb, ‘Commonwealth general purpose financial assistance to local government’, Research Paper, no. 9, Parliamentary Library, Canberra, 2007–08 http://www.aph.gov.au/library/pubs/rp/2007-08/08rp09.pdf, accessed on 6 December 2007.
[7]. House of Representatives Standing Committee on Health and Ageing, The Blame Game. Report on the inquiry into health funding, Canberra, 2006, p. 144, http://www.aph.gov.au/house/committee/haa/healthfunding/report/fullreport.pdf, accessed on 9 January 2008.
[8]. V. Koutsogeorgopoulou, Fiscal Relations Across Levels of Government in Australia, OECD Economics Department Working Papers, No. 541, 23 January 2007, p. 15, http://www.olis.oecd.org/olis/2007doc.nsf/LinkTo/NT000009EA/$FILE/JT03220724.PDF, accessed on 6 December 2007.
[9]. For a fuller discussion, see Denis James, Intergovernmental Financial Relations in Australia, Australian Tax Research Foundation, 1992, p. 57.
[10]. ibid.
[11]. ibid.
[12]. ibid.
[13]. National Commission of Audit (Australia), Report to the Commonwealth Government, Canberra, 1996, p. 45, http://www.finance.gov.au/pubs/ncoa/coaintro.htm, accessed on 6 December 2007.
[14]. Scott Bennett, ‘The politics of the Australian federal system’, Research Brief, no. 4, Parliamentary Library, Canberra, 2006–07, pp. 13–15, http://www.aph.gov.au/library/pubs/rb/2006-07/07rb04.pdf, accessed on 6 December 2007.
[15]. A. Twomey, 'Aspirational Nationalism or Opportunistic Federalism?’, Quadrant, October 2007, pp. 41–2.
[16]. ibid.
[17]. T. Colebatch, ‘It’s a federal election, on state issues’, Age, 20 November 2007.
[18]. R. Garnaut and V. Fitzgerald, Review of Commonwealth–State Fundin,. Final Report, August 2002, p. 75, http://www.dtf.wa.gov.au/cms/uploadedFiles/FinalReport_30August%20with%20letter%20of%20transmital.pdf, accessed on 6 December 2007.
[19]. N. Warren, Benchmarking Australia’s Intergovernmental Fiscal Arrangements, Final Report to the NSW Treasury, May 2006, p. xxi, http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0006/5793/fin-bench-rep.pdf, accessed on 6 December 2007.
[20]. ibid., pp. 25–6.
[21]. Koutsogeorgopoulou, op. cit., pp. 16–17.
[22]. Luke Buckmaster and Angela Pratt, ‘Not on my account! Cost shifting in the Australian health system’, Research Note, no. 6, Parliamentary Library, Canberra, 2005–06.
[23]. Koutsogeorgopoulou, op. cit., p. 18.
[24]. R. Garnaut and V. Fitzgerald, Review of Commonwealth–State Funding, Final Report, August 2002, p. 75.
[25]. Richard Webb, ‘Developments in Commonwealth-state financial relations since 2000–01’, Research Brief, no. 11, Parliamentary Library, 2005–06, pp. 11–12.
[26]. For a discussion, see Denis James, ‘Federal-State Financial Relations: The Deakin Prophecy’, Research Paper no. 17, Parliamentary Library, Canberra, 1999–2000, http://www.aph.gov.au/library/pubs/rp/1999-2000/2000rp17.pdf, accessed on 6 December 2007.
[27]. National Commission of Audit (Australia), Report to the Commonwealth Government, Canberra 1996, p. 46.
[28]. See the reference in Productivity Commission, Annual Report 2004–05, Canberra, 2005, p. 4, at http://www.pc.gov.au/__data/assets/pdf_file/0011/8687/annualreport0405.pdf, accessed 6 December 2007.
[29]. Warren, op. cit., p. xx.
[30]. Commonwealth own-purpose spending is revenue less transfers to the states and local governments.
[31]. Warren, op. cit., p. xxxi.
[32]. R. Carling, State Taxation and Fiscal Federalism. A Blueprint for Further Reform, Centre for Independent Studies, Policy Monograph 73, 2006, p. 17, http://www.cis.org.au/policy_monographs/pm73.pdf, accessed on 6 December 2007.
[33]. Productivity Commission, Annual Report 2004–05, Canberra, 2005, p. 4.
[34]. Carling, op. cit., p. 18.
[35]. Western Australia, Department of Treasury and Finance and Department of the Premier and Cabinet, A Strategic Framework for Specific Purpose Payments, Information Booklet, July 2002, p. 4, http://www.dtf.wa.gov.au/cms/uploadedFiles/SPP_StrategicFramework.pdf, accessed on 6 December 2007.
[36]. State and Territory Treasuries, Specific Purpose Payments, Discussion Paper, July 1999, p. 4, http://www.dtf.wa.gov.au/cms/uploadedFiles/FinalReport_30August%20with%20letter%20of%20transmital.pdf, accessed 6 December 2007.
[37]. Garnaut and Fitzgerald, op. cit., p. 71.
[38]. ibid., p. 70.
[39]. State and Territory Treasuries, op. cit., p. 4.
[40]. Koutsogeorgopoulou, op. cit., p. 20.
[41]. ibid., p. 31.
[42]. See Richard Webb, ‘The Commonwealth Budget: process and presentation’, Research Brief, no. 7, Parliamentary Library, Canberra, 2006–07, pp. 16–18, http://www.aph.gov.au/library/pubs/rb/2006-07/07rb07.pdf, accessed on 6 December 2007.
[43]. B. Scheers, M. Sterck and G. Bouckaert, ‘Lessons from Australian and British Reforms in Results-oriented Financial Management’, OECD Journal on Budgeting, vol. 5, no. 2, 2005, p.156, http://www.oecd.org/dataoecd/61/24/37033986.pdf, accessed on 6 December 2007.
[44]. Koutsogeorgopoulou, op. cit., p. 20.
[45]. Garnaut and Fitzgerald, op. cit., p. 71.
[46]. Koutsogeorgopoulou, op. cit., p. 20.
[47]. Allen Consulting Group, Infrastructure Investment for a more Prosperous Australia, report to the Government of Victoria, May 2005, p. 36, http://www.dpc.vic.gov.au/CA256D800027B102/Lookup/COAGInfrastructureReport/$file/COAG%20Infrastructure.pdf, accessed on 6 December 2007.
[48]. Koutsogeorgopoulou, op. cit., p. 30. The Business Council of Australia has advanced similar arguments, see Business Council of Australia, Reshaping Australia’s Federation. A New Contract for Federal-State Relations, November 2006.
[49]. Twomey and Withers, op. cit., p. 5.
[50]. Productivity Commission, Annual Report 2004–05, Canberra, 2005, p. 4.
[51]. For a discussion of the principle, see ibid., p. 3.
[52]. ALP Advisory Group on Federal-State reform, A Framework to Guide the Future Development of Specific Purpose Payments (SPPs), 31 July 2007, p. 3, http://www.alp.org.au/download/now/070731_alp_advisory_group_on_federal_state_reform.pdf, accessed on 6 December 2007.
[53]. Carling, op. cit., p. 17.
[54]. National Commission of Audit (Australia), Report to the Commonwealth Government, Canberra 1996, op. cit., p. 45.
[55]. Warren, op. cit., p. xliii.
[56]. ALP Advisory Group on Federal-State reform, op. cit., pp. 4–5.
[57]. Twomey and Withers, op. cit., p. 47.
[58]. Alan Mitchell, ‘High-stakes health care’, Australian Financial Review, 29 August 2007.
[59]. For a discussion, see Richard Webb, ‘Public finance and Vertical Fiscal Imbalance’, Research Note, no. 13, Parliamentary Library, Canberra, 2002–03, http://www.aph.gov.au/library/pubs/rn/2002-03/03rn13.pdf, accessed on 6 December 2007.
[60]. The states ceded their rights to impose income tax during the Second World War. In 1946, the Commonwealth announced that it intended to continue uniform taxation indefinitely, see James, ‘Federal-State Financial Relations: The Deakin Prophecy’, op. cit., pp. 8-11.
[61]. Denis James, ‘Federal and State Taxation: A Comparison of the Australian, German and Canadian Systems’, Current Issues Brief, no. 5, Parliamentary Library, Canberra, 1997–98, http://www.aph.gov.au/library/pubs/CIB/1997-98/98cib05.htm, accessed on 6 December 2007.
[62]. Koutsogeorgopoulou, op. cit., p. 22.
[63]. ibid., p. 22.
[64]. National Commission of Audit (Australia), Report to the Commonwealth Government, op. cit., p. 48.
[65]. ibid., p. 48.
[66]. State and Territory Treasuries, op. cit., p. 4.
[67]. Garnaut and Fitzgerald, op. cit., p. 3.
[68]. Koutsogeorgopoulou, op. cit., p. 20.
[69]. Koutsogeorgopoulou, op. cit., p. 21.
[70]. Bureau of Transport and Regional Economics, Australian transport statistics 2007, p. 14, http://www.btre.gov.au/publications/46/Files/ATS2007.pdf, accessed on 6 December 2007.
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