Friday, May 02, 2014

The Commission of Audit, the States and the Right

Let me be clear, I have only read a very little of the National Commission of Audit report. Like most people, however, I have been bombarded with news reports.

The immediate impression is that the report contains all the recommendations one would expect from the typically shallow analysis provided by a cadre trained in "modern economics", which is just classical marginal economics tarted up a bit. But in part this is because that was the mission given to the Commission.

The Terrms of Reference specify that:
It is therefore timely that there should be another full-scale review of the activities of the Commonwealth government to: ;
– ensure taxpayers are receiving value-for-money from each dollar spent;
– eliminate wasteful spending;
– identify areas of unnecessary duplication between the activities of the Commonwealth and other levels of government;
– identify areas or programs where Commonwealth involvement is inappropriate, no longer needed, or blurs lines of accountability; and
– improve the overall efficiency and effectiveness with which government services and policy advice are delivered.

So addressing vertical fiscal imbalance and possible "duplication" of activities was a core function of the report.

The Terms of Reference also specify that:
The Commission should also be guided in its work by the principles that:
– government should have respect for taxpayers in the care with which it spends every dollar of revenue;
– government should do for people what they cannot do, or cannot do efficiently, for themselves, but no more; and
– government should live within its means.

As a consequence, the ideas in the report that are all about shrinking Government activity are part of the requirements of the report, not necessarily conclusions. Specifically the Commission was excluded from having any consideration of whether additional permanent revenue was an appropriate conclusion.

Prime Minister Abbott was even more succinct in his framing in his address in April 2014 to the Sydney Institute, where he said:
Every time a government spends people’s money for them, it limits their own freedom; hence the famous dictum that government should do what the people cannot do for themselves, and no more. (see note)

In addressing the question of "unnecessary duplication between the activities of the Commonwealth and other levels of government", the Commission has proposed two key principles that should apply to Commonwealth-State relations. These are:
• Subsidiarity - As far as practicable, policy and service delivery should be devolved to the level of government closest to the ultimate clients, to allow programmes to be tailored to meet community needs. Governments should operate at their natural levels (policy oversight for national issues should go to the Commonwealth and regional and local issues should go to the State governments).
• Sovereignty – As far as practicable, each level of government should be sovereign in its own sphere. When reviewing roles and responsibilities, government activities should be allocated to one level of government only, in order to provide greater clarity and accountability.

The recommendations of the Commission on devolving responsibilities and changing funding to untied grants and even increasing the States own taxing powers are consistent with these principles - if it is accepted that the current delineation of responsibilities in a three tier system are appropriate.

There are a number of reasons why the issues should be considered in a wider view.

1. The first and most obvious is that there are scale efficiencies inherent in many policy decisions in service delivery. Why instead of nine Governments (the Federal and the eight State and Territory Governments) grappling with the same issues does it make sense to have only eight Governments doing it, rather than one. This becomes particularly relevant when the contrasts between the capabilities in NSW and Victoria are compared to Tasmania, the ACT and NT.

2. The principle of the government that is "closest" to the ultimate clients is the flip side of the scale efficiencies. How significantly closer is the NSW Government, that administers 40% of the nation, or even Victoria at about 30%, to the "clients" than the Federal Government? The large States have historically experimented with issues like regional Health Boards to deal with their own remoteness. Would not a devolution of administrative functions to a democratic level below these State Governments not achieve better outcomes?

3. The existing State boundaries continue to limit the operation of the national economy. Cross border professional recognition has been a challenge. So too has been the development of innovative technology based service delivery models that can't be accredited, or funded, if the service cross State boundaries.

If the discussion on Government efficiency was not blinkered by a bias towards "small government" and existing constitutional arrangements, the correct response would be to try to develop a twenty or thirty year program that dealt permanently with the structure of Government.

It is one hundred and thirteen years since the colonies agreed to federate without giving up their sovereignty. It is a credit to the nation and a benefit of its geography that this is one of the world's longest continuing democracies. To refresh its structure does not invalidate this continuity.

Reform to the structure of the tiers of Government is not new. Bob Hawke advocated it in the first of his 1979 Boyer Lectures "Resolution of Conflict". He advocated it again at Woodford in December 2013.

A 2010 Newspoll reported that 4 out of 10 Australians supported the abolition of State Governments as they were the least effective level of Government. (The Australian article asserted this was due to voter dissatisfaction with various State Labor Governments. A later Newspoll in 2012 found a dramatic shift from 2008 to 2012 in the faith in the Federal Government - which the Oz was also keen to blame on Labor - but faith in the States had declined further and was still below the Federal Government ).

There are at least two very useful resources on the issue of the future of the States available online. The Abolish the States Collective and a political party called No State Governments.

The Commission of Audit report notes that there is a commitment for a White Paper on "Reform of the Federation". It is to be hoped that this White Paper is prepared with a remit to consider a wider agenda than that provided to the National Commission of Audit.

Note: A Canberra Times article sourced the so-called "dictum" as follows:
The words seem to have been lifted from, of all places, a speech by President Barack Obama, in which he summarised and distorted the views of Abraham Lincoln. Lincoln said: ''The legitimate object of government is to do for a community of people whatever they need to have done but cannot do at all or cannot do so well for themselves.''

This is an apparent reference to President Obama's 2012 State of the Union address. That annotated version of the address includes the correct original Lincoln quote as an annotation.

Commentators quickly noted that Obama was misquoting Lincoln - even describing it as deliberately misquoting. However, this critic thought that Obama was misquoting it to justify a bigger role for Government than Lincoln accepted. I'm not so sure.

The original is an 1854 piece by Lincoln The Nature and Objects of Government, with Special Reference to Slavery. The relevant longer quotes are:
Government is a combination of the people of a country to effect certain objects by joint effort. The best framed and best administered governments are necessarily expensive; while by errors in frame and maladministration most of them are more onerous than they need be, and some of them very oppressive.
The legitimate object of government is "to do for the people what needs to be done, but which they can not, by individual effort, do at all, or do so well, for themselves. There are many such things—some of them exist independently of the injustice in the world. Making and maintaining roads, bridges, and the like; providing for the helpless young and afflicted; common schools; and disposing of deceased men's property, are instances.
The legitimate object of government is to do for a community of people whatever they need to have done, but cannot do at all, or cannot so well do, for themselves, in their separate and individual capacities. In all that the people can individually do as well for themselves, government ought not to interfere. The desirable things which the individuals of a people cannot do, or cannot well do, for themselves, fall into two classes: those which have relation to wrongs, and those which have not. Each of these branches off into an infinite variety of subdivisions.
The first—that in relation to wrongs—embraces all crimes, misdemeanors, and non-performance of contracts. The other embraces all which, in its nature, and without wrong, requires combined action, as public roads and highways, public schools, charities, pauperism, orphanage,estates of the deceased, and the machinery of government itself.
From this it appears that if all men were just, there still would be some, though not so much, need of government.
It is worthwhile to note that Lincoln made these comments leading up to a statement on slavery, where he wrote:
Equality in society alike beats inequality, whether the latter be of the British aristocratic sort or of the domestic slavery sort. We know Southern men declare that their slaves are better off than hired laborers among us. How little they know whereof they speak! There is no permanent class of hired laborers amongst us. Twenty-five years ago I was a hired laborer. The hired laborer of yesterday labors on his own account to-day, and will hire others to labor for him to-morrow. Advancement—improvement in condition—is the order of things in a society of equals. As labor is the common burden of our race, so the effort of some to shift their share of the burden onto the shoulders of others is the great durable curse of the race. Originally a curse for transgression upon the whole race, when, as by slavery, it is concentrated on a part only, it becomes the double-refined curse of God upon his creatures....
Most governments have been based, practically, on the denial of the equal rights of men, as I have, in part, stated them; ours began by affirming those rights. They said, some men are too ignorant and vicious to share in government. Possibly so, said we; and, by your system, you would always keep them ignorant and vicious. We proposed to give all a chance; and we expected the weak to grow stronger, the ignorant wiser, and all better and happier together.
We made the experiment, and the fruit is before us. Look at it, think of it. Look at it in its aggregate grandeur, of extent of country, and numbers of population—of ship, and steamboat, and railroad.

It can be very easy to mistake Lincoln's sentiments as being something akin to neo-liberal, a mistake that can be made because he was a Republican President.
But in the application of his comments to the present case it is worth noting that Lincoln was making the case for Government action on slavery. As President he took the view that the Federal Government should outlaw slavery in the new territories being opened up, and the reaction to this by the South resulted in a Civil War that ultimately ended slavery and was as much a war about the relative positions of State and Federal Governments as it was about the specific issue of slavery.

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