Pearls and Irritations

There is a great opportunity for honest discussion of more efficient and effective divisions of power and responsibility, writes Jack Waterhouse.

“On many issues, I have more in common with my Labor counterparts at a state level than a Coalition treasurer at a federal level. We might sledge each other every now and then, but within the Board of Treasurers politics doesn’t really have a place — the focus is ‘outcomes’.”

The speaker was NSW Liberal Premier Dominic Perrottet, addressing the National Press Club last week, on his ambitions for state-led reform of the federation.

Yesterday, I examined Perrottet’s lineage and his commitment to fresh thinking in the post-Covid world. While he applauds the success of the national cabinet of federal and state leaders as an alternative to COAG, he has been disappointed by the workings of a similar body for treasurers. Perrottet said that his disappointment as treasurer with its workings had led him to organise informal meetings with state treasurers and the creation of a new body — the Board of State and Federal Treasurers.

“The board’s work has made the states a more potent force in shaping federal financial relations again. Rather than picking states off, the Commonwealth government on many issues is now confronted with a strong unified voice.

“Ultimately this is about the states accepting their share of responsibility for our nation’s destiny. Federation reform must be driven from the bottom up — that is, from the frontline.”

Australia’s strength during the pandemic had been in its ability to implement tailored responses at the state level, but within the context of the national interest and co-ordination through the national cabinet. From contact tracing and testing, hotel quarantine and the economic response, states had been able to try different approaches.

But the pandemic had also identified systemic weaknesses — all too-familiar ones such as a lack of clarity about who was responsible for what; buck passing, blame shifting, and, sometimes, hyper-parochialism.

Mixed responsibilities in health and education as key problems. They couldn’t be solved by mere dollars and cents — where the argument all too often ended — but by providing better, more timely and more integrated care, Perrottet said.

In education, he wants his state to take responsibility for childcare and early childhood education as well as primary and secondary education. Interestingly, he implied, without directly saying so, that this could include responsibility for private or non-government schools — which, he said, were, like skills and vocational training, a mish-mash of mixed responsibilities  … a “dog’s breakfast’’ that no one could understand.

The extra cost to his educational budget might be addressed by the Commonwealth taking full responsibility for the National Disability Insurance Scheme, the problems of which were aggravated by joint Commonwealth-state administration.

Naturally, he called for more funding autonomy, and fewer conditional grants. State premiers always do. But, he suggested, it might be possible for each state or territory to negotiate its own different division of responsibility. Some states, for example, might not have any responsibility for childcare.

The Commonwealth would have the latitude to seek more constructive ways, perhaps with incentives, of supporting good policy outcomes without being tied to a one-size-fits-all approach.

“In NSW, our property tax proposal — to swap stamp duty with a broad-based property tax — is another example. By lifting productivity in Australia’s biggest economy, it would boost Commonwealth revenue in the process,” Perrottet said.

“By contrast, at the state level, it would cut something in the vicinity of $2-3 billion out of our budget each year.

“The short-term disincentive is on the state side — and the benefit is on the Commonwealth side — yet to date the Commonwealth hasn’t expressed interest in this idea.

“Paul Keating famously said never get between a premier and a bucket of cash. That single line has become the reflexive dismissal of so many premiers’ ideas to make our federation better.

“Well I’m less interested in a bucket of cash, and more interested in a bucket of outcomes. If NSW has to take on a bigger burden to deliver better services, so be it.

“We cannot achieve coherent reform if these services are divided between the states and the Commonwealth. This is not a problem for the Commonwealth to solve. The responsibility lies with the states.”

Now the mere fact that some premier or chief minister says something thoughtful, displays some interest in national as well as local outcomes, or manifests some willingness to make sacrifices, including loss of personal power, for better outcomes does not mean that we should accept or adopt his ideas uncritically.

But there was never a better opportunity than now for some honest discussion of better outcomes in government, more efficient and effective divisions of power and responsibility, and perhaps some policy and program discussion not completely hidebound by partisan politics. It’s an opportunity that should be embraced, including by people who disagree with Perrottet’s approaches or ideas.

Some might lament that this could happen at a time of Commonwealth negotiating weakness — a weakness that is not merely a function of the prime minister’s lack of vision, or of any sort of agenda for government other than the belated application of bandaids to problems as they turn up.

The most serious weakness is the lack of intellectual firepower within the engine-room of government, in the bureaucracy. The public service has been deliberately run down, and not only by the recent Coalition governments. It has much diminished capacity for policy discussion and review, and is seriously weaker than 15 years ago in its capacity to manage service delivery.

The attrition of the best minds and good leadership has been aggravated by the ideological use of often deeply compromised private sector consultants, by abuses of the ministerial adviser system, and by the virtual collapse, whether among ministers or senior civil servants of fundamental concepts of accountability, responsibility or transparency. Central agencies have lost much of their old reputations for independence of advice, being a constantly renewed and developed academy of ideas interested in attracting the best minds, or for care and maintenance of the essential institutions and ideas of constitutional government, including honesty and integrity.

Perrottet, and a few other premiers, insist that these days the quality of state and territorial public administrations is superior to the Commonwealth’s. That could not have been said a generation ago. They may be right — probably are in terms of more effective program delivery, and for a generally more attentive eye, ear and nose for public feedback and accountability. That experience and capacity deserves a place at the negotiating table.

Not all of the diminished capacity and competence of the Commonwealth is a result of failures of public-service leadership. Recent governments have had genuine enthusiasm in handing over power and responsibility for traditionally public sector functions. This has not been for genuine expectation of  cheaper or better outcomes. It has been from a compact to share public loot with mates and cronies — and with only a skerrick of accountability. Treasurer Josh Frydenberg has gone to great lengths, as he gathered unimaginable quantities of fresh cash to make sure that it did not build up the size, the power or the capacity of the public sector. He instead doled out hundreds of millions, with few controls, to private companies, often without result.

It would be nice to ask, 10 years from now, whether the big four private consultants — who have received more than $1 billion in recent years for telling government, unaccountably, exactly what it wanted to hear — have come up with a single useful or lasting policy or program idea that deserves to endure. On pandemic matters, the answer would seem to be no.

Open as he appears to be to ideas, Perrottet is seriously infected with many of the heresies that have made both the Commonwealth, and constituent parts of the federation, weaker centres of good government or better service delivery. Perrottet personally has a bad record on privatisation and sale of public assets — a reflection of the fact that his economic faith is unshaken by facts.  While it is very easy to agree with him that preschool, primary and secondary education would be much improved by a more accountable division of responsibility, that gap cannot explain a serious diminishment in innovation and improvement in schools, in spite of extra funds. One reason for some zeal for Commonwealth interference in education has been state ministerial negativity to what are, in Australia but not elsewhere, new ideas.

Nor has extra money done much to improve the quality and quantity of health services, including mental health services, going to chronically ill people. It is a continuing paradox of Australia that we have perhaps the healthiest population in the world, with generally excellent outcomes when ordinary citizens (as opposed to disadvantaged ones) are sick. But we manage our resources, from either state or Commonwealth level, very badly indeed, with a productivity that could be increased by 30 per cent. Lucky for us, most comparable countries manage even more badly, a reason why one should never shrink from ideas of reform, wherever they come from.

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