Foreword: Reflections on Australia's Recent Efforts at Federal Reform 2013-15

David de Carvalho

Those familiar with the Game of Thrones books and television series will know that the popular saga depicts the seven clans who rule the seven kingdoms of Westeros involved in a multi-generational and bloodthirsty struggle for politi­cal supremacy.

The key question is whether the seven kingdoms will finally be united into a peaceful and prosperous federation, in which the most powerful clan is also the wisest and most benevolent, allowing the other six clans a high degree of autonomy to run their own kingdoms, but at the same time setting the overall direction and tone of civic affairs and politics.

From my experience as a senior public servant, the story of Westeros's seven kingdoms could be creatively construed as a parable about the perils of fed­eral reform, with some violence, sex, magic, zombies and dragons thrown in to make it more interesting. I have no doubt that the author, George Martin, had the travails of federalism front of mind in writing Game of Thrones—though perhaps not to the same extent as William Shakespeare had the problem of tyr­anny front of mind when he wrote Richard in, The Winter’s Tale and Macbeth. Martin may, apocryphally, even have had Australia's federation in mind, judg­ing by the presence of a seven-pointed star above the Iron Throne, reminiscent of the ‘Federation Star' depicted on our national flag.

In Australia, our most recent concerted effort at reforming relations between the national and provincial governments came after the election of Tony Abbott's Coalition government in 2013, and the establishment of a White Paper process on the ‘Reform of the Federation'. In this Foreword, I want to pro­vide a brief account of that White Paper process from an insider's viewpoint, up until September 2015 when the prime minister was removed from his role in a bloodless version of a Game of Thrones sub-plot. I will conclude by offering some observations, based on this experience, about how federal reform might be prosecuted in the future.

After winning the 2013 federal election, the new prime minister established a dedicated taskforce in his department to run the reform process and provide expert advice on reform options. I regard myself as very fortunate to have been asked to run that taskforce. However, the usual reaction to this news from my colleagues in the Australian Public Service was merely one of pity. ‘Good luck with that', was a common response from my peers. Many colleagues offered the helpful and only half-joking suggestion along the lines of: ‘Oh, reforming the federation is easy—just get rid of the states!'.

This fresh attempt to cut the Gordian knot of tangled relationships and responsibilities followed reforms introduced under the prime ministership of Kevin Rudd in 2008, which were intended to usher in a new era of collabora­tive or cooperative federalism, and which involved the establishment of the c oag Reform Council—c oag being the acronym for the Council of Australian Governments set up in the 1990s.

The coag Reform Council was an independent, cross-jurisdictional body charged with monitoring progress on, and fidelity to, a vastly reduced number of intergovernmental agreements. It was intended to accurately measure com­parative performance against ‘agreed' targets and funding regimes. An early indication of Prime Minister Abbott's approach to federal reform was to abol­ish the coag Reform Council entirely.

In announcing the White Paper process, Abbott said, like many of his pre­decessors, that he wanted to address the growing problem of ‘overlap, duplica­tion and inefficiency' associated with the fact that in many areas of public pol­icy, both the national and state/territory governments were running programs and initiatives that took no account of the impact of existing programs run by the other layer of government, resulting in misalignment and waste, and con­fusion for the citizenry (Abbott 2014).

In a landmark speech to mark the 125th anniversary of the famous Tenterfield address by Sir Henry Parkes, widely recognized as the leader of the movement to unite the various colonies of Australia into a single federation, he noted that when Parkes delivered his important address:

Then we had no national government. Then we had six colonies, each of them with a prime minister. No army, no unified railway, an embryonic sense of Australian-ness, but no nation that we could call our own, no government that was our national government... That was then—these days are different. We certainly have a national government and yet we have an unsatisfactory system of governance, because all too often wher­ever you look—whether it be the roads, the schools, the hospitals—it's hard to know who is in charge.

ABBOTT 2014

The importance of ‘knowing who is in charge' was the key idea behind Abbott's publicly declared aspiration to shrink the role of the national government in those matters which were constitutionally the responsibility of states. He wanted what he referred to as ‘clean lines' that clarified what areas the national government was responsible for and what areas were the preserve of the states. He urged his fellow jurisdictional leaders to ‘fix the dog's breakfast of divided responsibilities', so that, in his vision, states would be ‘sovereign in their own sphere'.

To this end, at the same time he initiated a Tax Reform White Paper, and the two processes were intended to progress in lock step, such that the reform of the tax system would enable a ‘grand federal bargain', with the states taking on more responsibility for their own fiscal situation, and being given more scope to do so as the result of the Commonwealth ceding some of its fiscal power to the provincial level of government.

In adopting this forceful attitude, Abbott was guilty of what many people operating at the national level regarded as heresy. The point of the national government, according to the orthodox view from Canberra, was to leverage the Commonwealth's superior fiscal power to bend the states to the will of the national government through financial bribery, while at the same time avoid­ing as far as possible any political responsibility when your meddling in state affairs turns out to have unintended negative consequences.

Ever since the transfer of income-taxing powers to the Commonwealth during the Second World War, enabling the Commonwealth to collect the lion's share of revenues, it has exploited, in a fairly undisciplined way, Section 96 of the Australian constitution, which says that the Commonwealth can make grants on conditions to the states for any purpose. In doing so, it has reversed the balance of power between the Commonwealth and states envisaged by the original framers of the constitution.

That is not to say that evolving democratic development should remain constrained within the imagination only of the original framers. It is, rather, simply to highlight that through the course of Australian constitutional his­tory, the power and reach of the national government has grown considerably, so much so that there is virtually no major area of state responsibility that is not significantly affected by national policy and national money.

As the power of the purse in Great Britain established by degrees the authority of the Commons, it will ultimately establish in Australia the authority of the Commonwealth. The rights of self-government of the States have been fondly supposed to be safeguarded by the Constitution. It left them legally free but financially bound to the chariot wheels of the Central Government.

Prime Minister Abbott, at least in theory, wanted to remove the ability of the states to blame the Commonwealth for inadequately funding those services for which they were constitutionally responsible. Indeed, he regularly stated that he wanted each level of government to exercise ‘sovereignty in its own sphere'—it became his mantra.

To that extent, the prime minister's aspirations aligned with the political scientist Robert Dahl's 1983 definition of a federal democracy as

a system in which some matters are exclusively within the competence of certain local units—cantons, states, provinces—and are constitution­ally beyond the scope of the authority of the national government; and when certain other matters are constitutionally outside the scope of the authority of the smaller units.

The White Paper review process got off to a promising start. The timing meant that, after the Victorian election in November 2014, there was going to be clear electoral air for about 18 months around the country. And the officials at both levels of government worked cooperatively to prepare and publish a range of well-researched issues papers covering health, housing, education and federal financial relations (see Australian Government 2015). Each paper put a number of questions to readers wishing to express views either through written feed­back or by participating in round-table discussions that were well attended by the key business and civil society stakeholder groups.

At the political level, the process was being conducted well by the prime minister.

As the prime minister stated,

Reforming the federation is not something that one person, one party or one parliament can determine alone. Because it involves numerous gov­ernments of different political persuasion, reforming the federation will require people from across the usual political divides and from different levels of government to work together over an extended period of time.

ABBOTT 2014

Ultimately, however, this proved too difficult to sustain. The causes that led to the eventual demise of the process are various, both in number and in kind. I will go through them in no particular order.

First, while the prime minister may have had a clear view about what he wanted to achieve from the process—such as cleaner lines of responsibility, a smaller national role in state responsibilities—it was not the case that his own ministers or their departments were fully on board with the program. There was a degree of passive resistance from Commonwealth line agencies to par­ticipation in the interdepartmental committees set up by the prime minister's department to develop the various options for reform.

There were some noble and not-so-noble reasons for this lack of enthusi­asm. The noble motivation sprung from a genuine belief—for which there is no shortage of empirical evidence—that the default tactical position of states and territories is to take as much ‘Commonwealth money' with as little accountability for how it is spent, and that therefore states cannot be trusted to deliver better outcomes to citizens. The less noble motivation sprang from the threat to the influence of Commonwealth ministers and departments were the national government to wind back its involvement in key areas.

Second, apart from the standard process of producing issues papers, call­ing for submissions, holding a series of roundtables with insider stakeholder groups,and producing a Green Paper outlining options, no genuine effort was made to engage the wider public and generate a strong case for change. A suggestion from the Expert Advisory Panel of eminent persons announced in the ‘Parkes Oration' to run a nationwide ‘deliberative democracy' process, was deemed too politically risky, as it could not be easily managed nor the outcome controlled.

Third, the prime minister's own standing within the government was increas­ingly under threat. His political near-death experience in March 2015 led him to establish a number of backbench policy committees in an effort to counter the accusation that he did not listen to his parliamentary colleagues. One of those was a backbench committee on the Federalism White Paper, chaired by up-and-coming then parliamentary secretary Alan Tudge. This committee met four times between March and July (when I departed the process to take up a role in the Nsw public service). It generated good engagement from the back­bench members, but clearly was too little too late to save the prime minister from the fate that awaited him.

Fourth, trust between the states and the Commonwealth was weakening. The new Labor Government in Victoria was less engaged in the process than its predecessor. And in June 2015, the good work done by officials over the course of the previous 18 months was undermined by the leaking of a very early draft of the Green Paper, probably for opportunistic reasons. The draft included a number of recommendations that had been included at the request of the prime minister, as well as a number whose inclusion was dictated by the­oretical policy logic, without any real regard to political practicalities. All the officials regarded it very much as a working draft and shared the view that the final version would be more politically saleable. The leak allowed the federal Labor opposition to highlight the less likely options as if they were government policy—for example, the idea that the Commonwealth would cease funding government schools. The prime minister took the view that, in this situation, it was better to release the whole document and call it a ‘discussion paper'. Recovering from that damaging loss of trust was always going to be difficult, and arguably the process was terminal from that point.

Fifth, one of the very factors that made the process successful in the early phases—the ability of officials in all jurisdictions to work collaboratively to negotiate and agree on the wording of the key public documents—made the process less effective as an instrument of reform. That is, when it comes to gen­uine reform, it is going to be hard to get agreement, so if you try too hard to get agreement on the issues to be addressed, it is not surprising your agenda ends up being less genuinely transformative than it could have been.

Sixth, once the change of leader to Malcolm Turnbull took place at the national level in September 2015, the whole case had to be re-prosecuted to the new prime minister by the bureaucracy, and the prime minister's department was not successful in persuading Turnbull of the benefits of his predecessor's priority. It is unlikely that the prime minister's department would have had any assistance in this task from any of the line departments that would have been most affected.

Seventh, the government was taking policy positions that were at complete odds with the rhetoric of states being sovereign in their own sphere. The new education minister was negotiating a new school-funding agreement with the states that was completely inconsistent with the Intergovernmental Agreement on Federal Financial Relations, resorting to standard Commonwealth rhetoric about holding the states accountable for how the money provided to them for schools was distributed and how it was spent.

Finally, the one aspect of the agenda that the new prime minister seemed particularly interested in was the issue of allowing the states to have a defined share of income tax. But when this proposal was presented to them, at the coag meeting held, perhaps auspiciously, on 1 April 2016, there had been little or no prior discussion between Commonwealth and state officials or any of the normal, formal preparations for such an important discussion. In that context, it was completely unsurprising that few states were prepared to even consider it. The Victorian premier even ridiculed it as a ‘thought bub­ble'. Prime Minister Turnbull's response was to cite the off-hand rejection of the Commonwealth's proposal as further evidence that the states were not interested in any reform that would reduce their ability to blame the Commonwealth for their own policy failures. This further undermined enthu­siasm for the reform process.

Nothing more was heard of the Reform of Federation White Paper until its death was announced posthumously later the same month by officials in the prime minister's department in response to questions at Senate Estimates hearings. No other public statement was made to explain its demise.

So what useful lessons could be drawn from this experience for those who are interested in reforming federal systems to make them better serve the interests of citizens?

1. Federal reform needs to be driven by prime ministers and they need to get complete buy-in from key ministers, who in turn need to ensure they get buy-in from their officials.

2. There needs to be a coherent communications strategy across national government, prosecuted with equal fervour by those key ministers as well as the prime minister, and drawing on powerful examples of how the current arrangements result in citizens experiencing inefficient and ineffective service delivery.

3. Genuine efforts need to be made to engage the broad public to build the case for change; people need to be convinced of ‘the problem' and sup­port the proposed ‘solutions'.

4. In terms of communications, actions speak louder than words, so fed­eral reformers must ensure the actions of their government align with their stated intentions in regard to relationships with the lower level of government—above all, show respect for their expertise and experience in local service delivery.

5. Strong leadership is also needed at the state level. The prime minister needs cross-party allies at the state level for reform.

6. Clean air politically is necessary. Once political considerations begin to loom larger with the approach of elections, the temptation to political opportunism is hard to resist.

7. Big Bang reform initiatives involving ‘grand bargains' are very hard to pull off if reformers do not have all these pre-conditions in place. Arguably, the Abbott reform process was too bold, too ambitious and too high risk. Too much could go wrong and did. The policy logic was right—in order to drive true reform you had to be able to address taxation issues as well as expenditure issues across areas that matter deeply to citizens: education, health, housing, in particular. But going about reform of the Australian federation this way is the equivalent of solving a Rubik's cube that has 100 squares on each face, not just nine. Clearly, there were just too many moving pieces, too many vested interests to contain the politics. At this point I am reminded of the prescient warning issued by Machiavelli to would-be reformers:

it must be remembered that there is nothing more doubtful of success, nor more dangerous to manage than a new system. for the initiator has the enmity of all those who would profit by the preservation of the old institutions, and merely lukewarm defenders in those who gain by the new ones.

8. Finally, in reflecting on our trajectory of reform, it appears that the love of money is the root of all evil. In other words, the centralized fiscal power of the national government must not be allowed to get to a point where, when it gets too extreme, it cannot but be involved in almost every area of state responsibility, where the notion of genuine autonomy for provin­cial governments is little more than a fiction. I think Australia has for too long been drifting into this situation, so that it is now difficult for citizens and politicians and officials to imagine that things might be different. It is more than likely that state governments have become so used to their financial dependence on the Commonwealth that they do not actually want more autonomy and the political responsibility that comes with it. This is a pity for good government in Australia.

But someone has to keep that flame alive, and point out how the federa­tion could be better if the underpinning principle of subsidiarity was more respected. To return to my Game of Thrones analogy, perhaps the White Paper was killed off like some of the characters in the drama, but can be brought back to life by those carrying the fire of the federalist faith. Many of the peo­ple attending the 2018 federalism conference hosted by the International Association of Centers for Federal Studies are those who will keep the flame alive. I wish them all the best in their future endeavours.

References

Abbott, Tony (2014). Sir Henry Parkes' oration. Address by the prime minister, Tenterfield, Nsw, 25 Oct.

Australian Government (2015). Reform of the Federation Green Paper, Discussion Paper, Canberra.

Dahl, Robert A. (1983). Federalism and the democratic process, in J. R. Pennock and J. W. Chapman (eds), Liberal Democracy. Nomos 25, New York: New York University Press, pp. 95-108.