This section comprises a number of reports. Included are :
- Mark's postings about the Federal - Unitary continuum
- A dialogue with David arising from the above postings
- Abstract and details of AJ's "after the party" paper
- Details of AJ's paper "Can't wait for the sequel: Australian
federation as unfinished business"
- AJ, writing on "Social Capital"
- Mark, writing on exchange rates
- Klaas, some general comments
- Follow ups to the above
- an extract from a paper by Dr Lyn Carson, on consensus building
and similar issues, pointed out by Charles.
- Two references provided by Mark
- Mark's savings update for other government models (unfortunately
the formatting does not translate well to text)
- Some comments on the above
# Mark, general statement:
Clearly some among our group like the idea of a form of government with just
the national level holding overriding sovereign power, which could/would be
classified as a unitary system, but I know many of us are open-minded on the
federal versus unitary issue, and as you wisely advise AJ, our collective
position must be that Beyond Federation indeed does NOT necessarily imply
"beyond any form of federal system" - what it does imply, merely but
significantly, is support for a system better than that which the 1901 Act
of Federation gave us. We seem to overwhelmingly agree on the need for (1)
a better, more effective national government, and (2) better, more effective
close to the people government - this is a more than sufficient basis for
cooperation.
The federal-unitary distinction in theory is a nice, crisp dichotomy but in
practice countries seem to fall more on a continuum between idealised
unitary and federal forms. I've seen South Africa, for example, classified
by some experts as a federal system and by others as a decentralised unitary
system!! The South African Constitution on paper can be classified as
federal or at least quasi-federal, but with the ANC (African National
Congress - the dominant political party) in power many think South Africa
operates as a unitary system in practice.
Anyhow, over-emphasis on this federal-unitary distinction can be unhelpful
by distracting much-needed attention away from more substantive
considerations of, for example, a balance between centralised and
decentralised democratic and funding features of the system we'd be working
toward. I believe we should "design away" on substantive bases and then
allow people to classify the resultant system however they like.
On a related issue, inspired by Klaas' advocacy in favour of a
"decentralised unitary system", I've recently checked out some Constitutions
of countries classified as decentralised unitary states (generally on
account of local government accounting for a very large percentage of total
government spending) - especially Sweden (typical of the Scandinavian styles
of government found also in Finland, Denmark and Norway), the Netherlands
and Japan - in which local and/or regional government is recognised in the
Constitutions. Sweden, the Netherlands and Japan are classified as unitary
states because their Constitutions contain clauses which make it clear that
the central governments have overriding powers. For The Netherlands, see
Chapter 7 at http://www.uni-wuerzburg.de/law/nl00000_.html); for Sweden see
Chapters 1, 8, 11, 12 and 13 at
http://www.uni-wuerzburg.de/law/sw00000_.html; for Japan see Chapter VIII at
http://www.uni-wuerzburg.de/law/ja00000_.html; and for a full list of
national constitutions on the web see
http://www.uni-wuerzburg.de/law/home.html).
Our states are unitary (subnational) states as well, but of the highly
centralised variety - the state government Constitutions in respect of local
government are as follows:
South Australian Constitution ACT 1934; see Part 2A Clause 64A (at
http://www.austlii.edu.au/au/legis/sa/consol_act/ca1934188/s64a.html)
Victorian Constitution ACT of 1975; see Clauses 74A and 74B in Part IIA (at
http://www.vic.gov.au/constitution/const3a.htm)
WA Constitution ACT of 1889 as amended in 1899; see Clauses 52 and 53 of
Part 5 [aka Part IIIB] (at http://www.wa.gov.au/wacon/cowa/part5.html)
NSW Constitution ACT 1902; see Part 8, Clause 51 (at
http://www.austlii.edu.au/au/legis/nsw/consol_act/ca1902188/s51.html)
Tasmania Constitution ACT 1934; see Part IVA Clauses 45A-45C (at
http://www.thelaw.tas.gov.au/fullview/94++1934+GS45A@EN+2002011600)
Queensland Constitution ACT 2001 (brand new! see Chapter 7 at
http://constitution.qld.gov.au/pdf/ConstitutionAct.pdf - takes a while to
download sorry)
(also note, for the NT, a Memorandum of Understanding dated 1997 (at
http://www.nt.gov.au/localgov/nextstep/memorandum.shtml - a statement of
intent envisaging NT statehood)
The wording of our Australian State Constitutions in respect of local
government seems to reflect the paternalistic/condescending manner in which
state governments have presided over local government (as well as
citizens!). I find myself much more impressed with the wording style and
substance of many of the European and Japanese Constitutions than with the
Australian state and federal constitutions. Certainly we can only benefit
by identifying good features in other constitutions in operation around the
world.
I've provided the above Constitutions in part to offer details of the
decentralised unitary systems supported by Klaas' decentralised unitary
preference, but also to back up AJ's important recommendation that we remain
open on the issue of federalism. I think we can do better than all the
constitutions shown above - at least in respect of local/regional
autonomy/government. I think we can provide for effective, strong national
government (of the kind that Klaas argues we need - I agree we certainly
need a strong, effective national government) but still provide better
guarantees of local autonomy than is provided by the three decentralised
unitary states I've referred to above - for example, through an improved
Grants Commission equity-providing facility (to provide equitable funding
levels for public services etc. to all parts of the country) - with
associated constitutional guarantees such as might give at least a degree of
federal character beyond that present in these "decentralised unitary
states" referred to above. The Grants Commission equity-providing approach
is one aspect of Australia's federal heritage that appears to be "world
class" (on the basis of how it's viewed by overseas researchers looking at
our system in comparison with other systems) and worth keeping in an
improved system. This is only one angle on the whole challenge we face but
I hope it suffices to encourage an intelligent open-mindedness on the
federal-unitary divide.
# Mark, more stuff :
Firstly let me make it 100% clear that I am NOT closeminded on the issue
of federalism. My position is always that open-mindedness is
inherently superior to close-mindedness.
My understanding is that the federal versus unitary dimension is a
continuum rather than a discrete dichotomy, and that sovereignty
likewise sits on a continuum. I am unable to treat sovereignty and
federalism as simple "black and white" terms, but this is probably
regarded more as a matter of agreed understanding among experts on
federalism than a matter of opinion.
Attached is the full text of my Masters thesis on the subject. I'd
spent several years on this general area before I began the Masters
research task and still don't claim to understand everything about the
subject but I am confident that having an open-mind on the issue gives
one the best possible chance of assessing the appropriateness or
otherwise of federal features in possible models of government for
Australia.
Since completing my Masters I have become increasingly comfortable in
the view that whilst Australia appears to host conditions which make it
relatively well suitable to a federal form of government, our present
form of government provides little of the alleged benefits of federal
systems, and further, I believe a system further to the unitary side of
the federal-unitary continuum would indeed better suit our needs...
a best possible system must host a balance between centralisation and
decentralisation. This goes to the very essence of democracy
Sovereignty starts with individual human rights and standing as equals
in society. It then extends to varying degrees through various levels
of democratic/political organisation. Notions of political distance and
proximity (the quest is to have politicians close to and responsive to
the needs and aspirations of their constituents) and substantive
local/community empowerment must be taken fully into account if we are
to avoid backing a system which alienates the vast majority on account
of being grossly over-centralised.
Mark, writing on the range of issues with ASC and BF :
... any consensus position we take CAN and SHOULD
accommodate the breadth of positions declared
So whilst there has been quite a breadth of views/positions/preferences
expressed, what binds us all is an underlying consensus that the states
in their present form can be significantly improved on. Everyone
perceives a need to move beyond the states in their present form.
Perhaps the term "beyond the states" might indeed be worth us
considering for use in some circles if/where "abolish the states" may be
considered too abrupt.
Klaas and I have expressed enthusiasm for a system which Klaas calls a
decentralised unitary state. I agree with this classification but would
add that if local/regional governments are granted some sort of fiscal
guarantee (i.e. entitlement to raise taxes, receive equity-based
equalisation revenues like those determined by the Grants commission
"federality" - namely, "fiscal federality". This is no insignificant
point. Indeed, in recent years studies of federalism have increasingly
focused upon fiscal federalism, based no doubt on the plain reality that
political/democratic autonomy at subnational level becomes very hollow
without buckets of money to back it up.
Max accepts the need for increased financial resourcing of local
government, but has not pushed for local sovereignty despite his local
government background. Anthony HAS emphasised the need for a more
secure/guaranteed power base at the local level - a position I share.
I think we need to accept that some of these finer points of the nature
and extent of subnational power/autonomy/sovereignty will take us time
to work through. We've put numerous relevant issues on the table and
have thrashed them round quite constructively, but I think we need to
accept that we all have our legitimate views/preferences, and we are now
at a point when we can most gainfully turn our attention toward some
sort of advocacy effort. We don't let the centenary of Federation year
run out on us!!
# Mark reply to David
I further said:
> Words like federalism and sovereignty will scare people off because of
> their inherent complexity and the shades of grey they entail.
D:
>> "Shades of grey"? I think there's a lot more grey areas in your version
>> than the one discussed at the meeting, in fact I thought you thought
>> shades of grey were good. Maybe I misunderstand what you mean.
earlier email to you David:
> Some of the Scandinavian countries, for example, have constitutional
> recognition of local government - they call it sovereignty, though it
> would generally be classed as a less legalistic/contractual type of
> sovereignty than that held by subnational governments in federal
> systems. In essence a federal system involves a legal
> constitution/contract setting out powers, sovereignty etc. I believe we
> should be prepared to use the term sovereignty in a manner which is
> inclusive of non-federal forms of sovereignty, not just federal forms of
> sovereignty.
> The six federal principles enumerated by Sawer as cited in my thesis
> provide one way of viewing federalism as a continuum. Systems which
> host all six principles can be regarded as "more federal" than those
> which host less than all six, for example.
I'm into this PhD 2 years out of (at this stage) 4 and am very much
still learning about the differing shades of grey in terms of
subnational sovereignty found among the many governmental systems across
the world. I have very recently had a good look at some European
systems, some of which are classified as such things as "decentralised
unitary" systems and/or "quasi-federal" systems, depending on the nature
of subnational sovereignty or indeed the definition used by the
respective commentator.
My point here is that sovereignty varies across a continuum, as does
extent of federalism and indeed decentralisation. It would makes things
simpler if things were black and white but they're just not!
But what is most important for us to recognise is that the shades of
grey in concepts such as federalism, sovereignty etc. can work to our
advantage ... as long as we respect the existence of these shades of
federal or unitary system etc. To make explicit support for or
opposition to, say, a federal system is both naive (given the shades of
grey associated with the term federalism - especially taking into
account practice as well as theory) and tactically disadvantageous on
the "reduced probability" grounds described above.
# After the Party, AJ :
Many will remember our pilot project running a survey with the Local
Government Association of Queensland and Courier-Mail in September 2001
associated with the future of federation.
My paper 'After the party' is now available, setting out some of the major
results (see abstract below). Drop me a line if you'd like a copy and I'll
email it direct.
It's pretty interesting stuff, particularly relevant to the politics of
constitutional change. We had 750 internet and newspaper respondents as
well as our 265 local govt sample and 301 random telephone sample. The
paper is currently being considered for publication in the Melbourne-based
Public Law Review; hopefully a copy will soon appear on the Beyond
Federation website and all respondents will also be mailed/emailed a copy.
After the party: public attitudes to Australian federalism, regionalism and
reform in the 21st century
A. J. Brown, Key Centre for Ethics Law Justice & Governance, Griffith
University, 15 May 2002
Abstract: During Australia's centenary of federation (2001), the author,
Local Government Association of Queensland and Courier-Mail newspaper
surveyed 1,264 Queenslanders for their attitudes to the federal system and
future constitutional change. The results suggest that despite
satisfaction with their political system, a majority of the population
(62-63%) also expect and look forward to change in its basic structure over
the next 100 years. Further, the results indicate a substantial proportion
(around 40%) may be interested in more than minor change, including options
such as complete replacement of the current states. This
higher-than-expected interest in change challenges assumptions that
Australians are inherently conservative in their views about their
constitutional system and opens new lines of inquiry about the problematic
relationship between Australian federalism and regionalism.
AJ:
There's an article coming out soon in Melbourne Journal of Politics
called 'Can't wait for the sequel: Australian federation as unfinished
business' which highlights many of our issues - from the title you can
catch my drift, there are some principles and concepts from federalism
which are consistent with most peoples' reform goals (e.g. some
guaranteed autonomy of local/regional laws) even though others aren't.
Some/most people involved seem to have an instinctive preference for a
unitary i.e. non-federal system, but it is important to keep a range of
options on the table if only for purposes of comparing say a two-tiered
federation of regional governments (Hurford model) with a decentralised
unitary state such as Klaas and many others prefer.
Basically I think the charter is appropriately vague on whether 'Beyond
Federation' is pro- or anti-federal per se, and it would be both
intellectually and tactically wise for it to remain so.
FYI we here at Griffith recently got some more research funding to work
up an edited book to be called 'Restructuring Australia', focusing on
regionalism and republican reform issues, about half to be dedicated to
Beyond Federation issues. It will draw on our pilot project in September
last year, including Geoffrey Blainey's speeches. Don't hold your breath
but whenever it appears it should be useful and fairly practical (not too
big and not too academic).
Also we are writing up results from our survey work with Courier-Mail and
Local Government Association of Queensland, and designing a national
research project methodology on (1) public attitudes to regionalism-based
reform and (2) economic cost-benefit analysis of regionalism-based reform
options. Will keep everyone posted as results appear.
# AJ, outline of "social capital"
The following from www.bowlingalone.com, the website for Robert Putnam's
major book in this area
" What does "social capital" mean?
The central premise of social capital is that social networks have value.
Social capital refers to the collective value of all "social networks" [who
people know] and the inclinations that arise from these networks to do
things for each other ["norms of reciprocity"].
" How does social capital work?
The term social capital emphasises not just warm and cuddly feelings, but a
wide variety of quite specific benefits that flow from the trust,
reciprocity, information, and cooperation associated with social networks.
Social capital creates value for the people who are connected and - at
least sometimes - for bystanders as well. "
Putnam has been an incredibly influential public policy academic in the US,
a pal of Bill Clinton's (I don't think George W finds him as useful). It's
all a bit faddish but very readable and interesting and the intentions are
good.
>AJ, can you define social capital? Is it the value inherent in social
>structures? e.g. We spend a heap of money setting up a bureaucracy or
>parliament (separate to what we pay to maintain it) and then we can
>use it for things?
# AJ's survey
1. Different conceptions of regions
Not meaning to plug the recent work again but for anyone interested, in the
'After the party' survey we asked people 'how many regional governments for
Australia' versus 'how many states'. Just a toe in the water for the bulk
of work that needs to be done on how people think about these things but
very interesting.
Mark writes :
I think it is important that the abolition state governments is at all times
recognised as a means to higher ends in respect of substantive outcomes in
environmental and social terms (and to an audience containing economists,
and perhaps in any event, its good to also include economic outcomes as
well). Different people have different priorities on how scarce government
resources should be used/invested, but my own assessment is that we simply
won't get the $65 billion to spend on the Murray Darling over the next 10
years (assessed as necessary by the Aust conservation foundation and the
National Farmers federation) ANY OTHER WAY but through abolishing state
governments (or, in effect, amalgamating/coalescing the state and federal
governments into a single national government).
If this $30 billion (and it may be more or less) became freed up,
we could move to an affordable system in which the Liberals might tax less
but still invest enough on the environment, health, education etc., and
Labor might spend much more on the environment, health, education etc., but
still contain tax rates to a level acceptable from economic viewpoints.
Evidence that our present system is less than affordable derives from the
obvious lack of attention to the environment, health, education etc., but
the lack of affordability also reduces the quality of our democratic
choices. The very lack of affordability of our system paints the major
parties into a corner. Labor might WANT to spend much more on public
education etc., but the present system, which demands that so much
resourcing be consumed in duplicated bureaucracy, means there simply isn't
enough money available - so we saw the ALP go to last year's election
claiming they'd increase spending on public education, but only by piddly
little amounts. In terms of allocating moneys to achieve public outcomes,
the unaffordability of our present system leaves simply too little room to
move - we are like in a straightjacket. What began as a constitutional
straightjacket has become an economic/fiscal straightjacket and hence a
democratic, social and environmental straightjacket.
# Mark, writing on exchange rates :
If we accept
Graham's statement that "75 to 80 percent of our economy is domestic and
quite impervious to the exchange rate, and unaffected by it", then my
letter might only apply to some 20 to 25% of the story - but this is
still a big chunk ... My point is simply that an overall assessment of
Australia's economic health/integrity needs to incorporate
foreign/global measures/perspectives as well as domestic ones. Any
assessment which is either wholly based upon or oblivious to one of
these two components (domestic and foreign alike) is unbalanced,
incomplete and unhelpful, to an extent commensurate with our level of
integration into the world economy.
Ken, as Graham correctly suggested, the "real" in real income growth
does not mean that exchange rates have been taken into account fully or
even at all, rather that inflation (CPI) has been taken into account.
I think Graham makes well balanced assessments - Ken I was glad to see
that your thoughts were quickly enhanced upon reading Graham's email!
I accept your points Graham on the undervaluation of our dollar relative
to other currencies, but of course market economics assigns great weight
to the idea that the value of something should be assessed in terms of
what people are prepared to pay for it, whether it be a "widget", a
company share or a foreign exchange unit. In tutorial after tutorial -
in subjects I teach in management and politics - I constantly find
myself repeating the following one-liner:
it follows from the very definition of the word power that what
happens in the world is what powerful people make happen, or at least
allow to happen (active and passive power expressions of power
respectively).
Applying this apparently fundamental reality to the discussion of our
dollar value, it appears as though, as a country of our level of global
power and influence, we might need to get used to our dollar being
valued as powerful players/forces see fit.
The value of our dollar is somewhat analogous to the concept of
potential energy in science/physics. A falling dollar is like an object
falling through gravity. The fall can be
impressive/exhilarating/beneficial - it's what happens as the bottom is
approached and reached that can be problematic. If we accept that there
are times when a reduction in the value of our dollar can provide a
necessary/apt boost to our economy, then it would be nice if we retain
the opportunity to benefit from this for as long as possible. Our
capacity for future benefits along these lines, and options and room to
move generally, diminish as our dollar devalues relative to other
powerful currencies.
There would also appear to be a correlation between exchange rate and
how inward-looking countries are encouraged to become and actually do
become generally. A falling dollar will tend to make all things foreign
increasingly expensive, unattractive and associated with negative
perceptions and all things domestic increasingly attractive and
associated with positive perceptions, relatively speaking at least (and
perceptions do of count in our capitalist world - I am not
anti-capitalist incidentally; I do however believe that social-market
links are dysfunctional in Australia and elsewhere - the private health
rebate is a close to home example of this as is excessive and reckless
ideologically driven privatisation along with blind faith in markets
that are inherently susceptible to failure given our low population and
sparse settlement patterns [both major parties have fallen for much of
this]). Excessive nationalism with economic and socio-cultural
dimensions has the potential to degenerate into an isolationism that
will accelerate our decline and compromise our very sovereignty.
Another analogy arises with a car. Economic growth at a time of falling
dollar value is like increasing revs in your car after changing down a
gear. You can't tell if you've sped up or not merely by looking at the
tachometer! It's the speedo that matters.
The match-ups here are as follows:
gear ratio <=3D=3D> exchange rate
domestic growth <=3D=3D> rate of change of revs
substantive growth <=3D=3D> actual acceleration
To the extent that markets are legitimate means of exchange, our dollar
value is unavoidably at least some measure of the value the world places
upon Australia and all things Australian. If we are happy to say that a
falling share price represents falling confidence in a company, its
represent falling confidence in a country, its economic management etc.
We have sold off public assets at marked down prices (Telstra) and sold
off and privatised to an extent that makes us a world leader in
privatisation. We have sold off and marked down our public assets and
should hardly be surprised if the world follows the lead of our
government and likewise marks down Australia generally through our
dollar. We do not have nearly the consumer population and
concentrations of people and wealth generally of Western Europe nor
North America and hence if ever a conservative approach was called for
in respect of privatisation it is here! We are vain as a country and
take the rest of the world for mugs if we fail to recognise that much of
what we have done in recent years - including a withdrawal from Asia -
has given good grounds for the rest of the world to mark down our value
through our dollar. Of course this is not the full story, but it is
again part of the story. Ken I hope you see that this position
significantly overlaps with your comments as follows:
I suspect that another factor is the EU common market. By having a
group of countries (most of whom to a greater or lesser extent - except
the UK and Ireland - maintain somewhat less open economies than
Australia, the US etc) banding together and effectively giving each
consequences that would otherwise flow from having uncompetitive cost
structures. This is a strategy that isn't open to Australia, because the
SE Asian econmies are largely open anyway, and they don't want to form a
trading bloc with us (or even let us join ASEAN).
Since 1981 our dollar has lost about 4% per annum against the $US. In
present terms 4% of our annual GDP is about $25 billion. My hope is
that an improved system of government, with just a single "big" national
government (in place of our present federal and state governments) and
stronger close-to-the-people local/regional governments, absent of state
governments in their present form (and the regulatory and bureaucratic
duplication and coordination burdens of our present system), can
facilitate improvements in this $25 billion per annum ballpark. (Note:
at present local government accounts for just 6% of government spending
at all levels in Australia; in the US it's 24%, Canada 18%, Switzerland
21% - and the local government areas [communes] in Switzerland have
average population of about 2000 and average land area of about 14 sq
km!! ... if ever a country needed well resourced local government it's
us!!)!
[recent attempts at articulating how we could be some $30 billion better
off if we move beyond our present system are provided at
http://arachnid.apana.org.au/asc/cost.htm,
http://arachnid.apana.org.au/asc/costlocal.htm and
http://arachnid.apana.org.au/asc/costregion.htm].
I say we CAN achieve prosperity, and a sustainable economic, social and
environmental whole of a country, but we need to be smart - not half
smart, impeded by blind spots, smug, complacent and blindly faithful
believers in any old claim of sound economic management and growth that
governments and other commentators try and sell us with.
# Klaas, general comments
Thirty years ago I wrote an MA thesis on federalism (Sydney) and a few
years later a Ph. D. thesis on Inter-Regional Polarisation of
international regions (UNSW). The first one required that I had to
demonstrate familiarity with the then quite extensive - and interesting
- literature of federalism (especially in the light of newly independent
nations emerging from former colonial units) and the second one required
an extensive treatment of the concept of regions - although especially
in an international setting. Many of the arguments touched on in recent
days bring back memories of that research. One can very easily get lost
in definitional controversy though. We need to guard against this even
though discussion is essential. There are no ideal configurations for
federalism and regional structures, even assuming that there is some
definitional agreement, because the political realities and
practicalities will tend to interfere with implementation.
Rather than
over-debate such concepts we need to concentrate on the task we have set
ourselves which is to replace the existing system with a different one
which is (a) more efficient and cost effective, (b) more democratic and
participative (c) and is straightforward, simple, instead of ambiguous
and (too) open-ended. To that end the language we use needs to be
deliberately different from the old language. This is not really an
academic exercise. For the reason I recommend that we refrain from
using _federalism_ for a new organisation even though it is likely to
have some quasi-federal qualities.
Consensus
It is desirable that we move towards a consensus or at least agreement
on the most fundamental issues. As a group we need to present a clear
platform. There may be some details which can be left _open-ended_ but
not critical aspects of the proposals. New members who come to the
Collective should know what the agreed fundamentals are - these are not
up for reconsideration and new debate. We would be re-inventing the
wheel many times if that was the case. Clearly, if some people come to
us and, say, some of your key proposals are wrong in my view we should
be able to say, well, that's our position, we have discussed these
matters fully - you don't have to join us. There will certainly be lots
of people who are sympathetic to the changes proposed but who will say
that it is just too difficult - we're stuck with federation (I mentioned
Helen Irving at the dinner, Brian Gallighan is another one). Obviously,
I do not at all agree with such views and I counter them where and when
they pop up but we should not spend too much time on them. The main
issue to develop our program and policies and have clear position of (a)
what we advocate; (b) how to get there.
The consensus positions developed by Mark have merit. John's addition
(Emailed on lst May is less convincing to me. You talk about "improving
allocation of powers and responsibilities between the three tiers_ - but
we suggest shedding a tier. In the same possible addition _less
competition between the states_ - doesn't that suggest that the states
continue to exist?
The name of _Abolish the States_
The issue was raised should that name be changed? Abolish is somewhat
negative unless you have an alternative proposal to go with it. We have
but the name doesn't say it.
So the terms Replacing should be in it or Regions. Like Regional Reform
Movement or A Republic with Regions , Regions In - States Out, Replacing
States with Regions. Strengthen Local Government, Replace the States,
Regions instead of States.
Section 128 problems.
A. J. Brown from Brisbane expresses real concerns about getting any of
our proposals for major constitutional changes passed. I have a theory
about a developing/accelerating process (and enthusiasm) for
constitutional change, which should start with a preferential referendum
about a Republic and its President, as part of a much more comprehensive
program - instead of piecemeal tinkering which has been the unsuccessful
dominant mode in the 20th century. I can explain this more full later
but the core of is that constitutional referendums be tackled through an
Enabling Question 1. Here is a segment of material from Republic Now!
(about you will hear more later)
Question 1 - Enabling question.
_For the sole purpose of voting on this package of proposed
constitutional changes, detailed in the sections below, are you in
favour of disregarding a requirement of Section 128 that a
constitutional referendum needs to be carried by a majority in a
majority of states, and replacing it by _a majority in three of the six
states_ (in addition to an overall national majority)?_
YES/NO
Thus the first question would mean that amendments put in later sections
of that particular referendum ONLY would be carried if they are approved
by an overall national majority and a majority in at least three
(instead of at least four) of the six states. Obviously, those who
oppose any constitutional change would not accept that but those who
accept the substantive changes that are proposed would almost certainly
approve it. Clearly, this is therefore not a blanket change to Section
128 - which was attempted, unsuccessfully, by the Whitlam Government
some 27 years ago, in quite different circumstances.
Naturally, the enabling question itself would need to be approved in
terms of the existing Section 128 provisions, meaning that it must be
carried by at least four out of six states. It is suggested that the
First Preferential Referendum package, as proposed here, would be
carried readily and Australia would become a Republic with a Directly
Elected symbolic President - something that over 70% of voters have
fairly consistently supported prior to the Referendum of 1999, for at
least two years.
That very success would set the tone for subsequent referendums and
sweep away the NO syndrome. The procedure can be repeated for the
Second set of Preferential Referendums most of which would be carried.
The following Parliamentary election would the be contested on a new
electoral system, Proportional Representation which will ensure a
democratically elected Parliament where the term One Vote One Value
actually means what it says. In this way, further far-reaching changes
would be still more likely, quite legitimately, even within the
amendment framework of the present Constitution. Thus, continuity and
legitimacy would be observed.
Mark :
> Whilst supporting Klaas and Charles re S128, I think this is a very
> interesting point Simon makes here - might indeed represent the path of
> least resistance - provides a new angle on NT statehood or New States
> generally in terms of the majority of states requirement for
> constitutional change:
Simon :
> Perhaps an easier path is the creation of a seventh (and hopefully more
> forward-thinking) state. The ACT is an obvious choice. With 7 states a
> YES-majority required in four of the seven, instead of four out of six
> as is currently the case.
# Charles drew attention to the following extract from a paper by Dr Lyn
Carson, on consensus building and similar issues.
Charles writes :
> The paper goes on to talk about processes to enable direct, deliberative
> democracy using samples typical of the general public - such things as
> Deliberative Polls, Peoples' Panels, Citizens' Survey Panels, Citizens'
> Juries and Consensus Conferences.
The extract :
I do not think for a moment that deliberation and representativeness are
the only criteria for effective decision making. If I was to offer
criteria for effective decision making it would look like this:
Criteria for Effective Participation.
Participation is timely. Participation should not be so late in the
life of an issue that it is tokenistic. The timing should occur when
citizens have the best chance of influencing outcomes.
Participants reflect a cross section of population. Participants should
be selected in a way that is not open to manipulation. Random selection
offers the best chance of achieving this outcome (Carson & Martin 1999).
Outcomes are focused on community, not self interest. Participants are
not asked what they want personally but rather what they consider is
appropriate in their role as citizen (Barber 1992).
Process is interactive and deliberative. Questions or problems should
not be reduced to a simplistic either/or response. Participation
involves consideration of the big picture in discussion with fellow
citizens and professional and non-professional experts.
Decision making procedures are effective, preferably consensual.
Complete agreement need not be the outcome but the process should enable
participants to strive towards consensus.
Likelihood of recommendations being adopted is high. Faith in the
process is important by both the power holders and participants.
Contracts can be signed to ensure that recommendations will be acted on
and, if not, the decision-making body should offer a public explanation
for its inaction.
Process is in the hands of an independent, skilled, flexible
facilitator. It is important that all participants control the agenda
and content because this will give the process more credibility. A
skilled facilitator with no vested interest is essential in order to
achieve this.
Process is open, fair and subject to evaluation. In advance, evaluation
questions should be formulated -- for example, how will success be
measured? What are the indicators of success, beyond the adoption of
recommendations?
Process is cost effective. This might be difficult to establish. For
example, how does one measure community wellbeing or savings in costly
litigation that could arise in the absence of consultation and
participation? What price does one attach to achieving clearer planning
goals?
# Mark, a reference
> The Stephen Soul PhD thesis which Max refers to below, titled 'Population
> Size and Economic and Political Performance of Local Government ' is at:
> www.lgma.org.au/national/images/full_thesis.pdf
>
> Whilst I do not necessarily agree with Stephen Soul's "bigger councils are
> better" conclusions, I do believe he very well covers much ground that is
> very pertient to us. It's a terrific piece of work.
In the invite to the 4th Shed a Tier congress, Mark included the following
references :
The National Farmers Federation and the Australian
Conservation Foundation in 2000 called for $65 billion to be spent over
the next decade to address salinity and land degradation - see:
Fact Sheet: Why should Australians Invest $3.7 billion p.a. in repairing the
country?
at: http://www.acfonline.org.au/asp/pages/document.asp?IdDoc=268
National Investment in Rural Landscapes
at: http://www.acfonline.org.au/asp/pages/document.asp?IdDoc=270
[This was the significant work calling for $6.5 billion per annum over 10
years to address salinity/degradation, as follows early on in the 50 or so
page report: "A capital investment of $60 billion, with an ongoing
maintenance program of $0.5 billion, will be required to implement the
required changes over a 10-year period - a total investment of around $6.5
billion per year."]
## Mark's cost update
Have just completed an intensive process of roughly updating the cost
have a
new addition. Basically, there's now two alternative estimations:
(1) for the model the original savings estimates have been based on up
till now, involving a two tier system of national and regional
government, where regional governments are defined as like the ACT
government now minus responsibilities for health, education and public
order and safety (including law and order and hence the court system ...
incidentally, a Monday 15 October Canberra Times article mentions the
federal Attorney General Daryl Williams calling for a national legal
profession at the 32nd Australian Legal Convention in Canberra on Sunday
14 October)
(2) for what is called a national-local model (largely that which Max
Bradley, Klaas and others have favoured - which I too see great merit in
whilst I also see great merit in a good regional government model -
either way we can significantly improve on what we have now ...) in
which local government is left more or less in its present form.
Under both models (i.e. the national-regional model and the
national-local model) I provide savings estimation for different numbers
of subnational governments, in the ranges from 0 to 131 for regional
governments (for 132 we'd have a more expensive system!) and from 0 to
632 for local governments (632 being the number of local government
areas according to the bureau of statistics.
National-Regional model
Formula: $53.47 billion - (# reg govts)*($408 million)
Table of savings versus
number of local governments:
# Reg Savings
Govts ($billion)
0 53.47
5 51.43
10 49.39
15 47.35
20 45.31
25 43.27
30 41.23
35 39.19
40 37.15
45 35.11
50 33.07
55 31.03
60 28.99
65 26.95
70 24.91
75 22.87
80 20.83
85 18.78
90 16.74
95 14.70
100 12.66
105 10.62
110 8.58
115 6.54
120 4.50
125 2.46
130 0.42
131 0.01
51 32.66
National-Local model
Formula: $53.47 billion - (# local govts)*($26.068 million)
Table of savings versus
number of local governments:
# Local Savings
Govts ($billion)
632 37.00
600 37.83
550 39.14
500 40.44
450 41.74
400 43.05
350 44.35
300 45.65
250 46.96
200 48.26
150 49.56
100 50.87
50 52.17
0 53.47
In the above please note that I've "reconciled" the two formulas for the
two different models by matching up the savings values for the case of
zero subnational governments - since in either model, if there are no
subnational governments (hence the national government would have all
powers and responsibilities) the national-regional and national-local
models become the same. In a maths sense I've applied an "initial
conditions" assumption that both models will give the same system and
hence the same savings if there are no subnational governments, so
whilst we'd never seriously entertain such a model, as a hypothetical
construct such a model is helpful in reconciling the two estimations
presented here.
Its not exact of course!! Its still work in progress, but I CAN report,
confidently and excitedly, that the latest Aust Bureau of Stats figures
(especially in Catalogue 5512.0 - Government Finance Statistics) are
much more supportive of a larger cost savings figure than they were back
in 1995. There is anecdotal evidence (and some substantive evidence)
that senior executive service (senior bureaucracy) numbers have
significantly increased across all states and territories, as has the
salary levels of such senior bureaucrats. When living in Victoria from
97-99 I collected many articles to $400,000; many over $300,000)
Victorian public servants especially under the government of Mr Kennett.
I'm presently trying to track down betters stats on all of this. I've
tracked down an interesting Victorian website called WasteWatch, at:
http://www.wastewatch.com.au/ with archived articles at
http://www.wastewatch.com.au/arch.htm
# Mark's detailed calculations
What follows leads to an estimation that with our present 600+ local
governments a saving of some $37 billion is possible.
I was able to carry out a regression analysis on local government
expenditure levels which indicated to me that each local government
"amalgamation" could save $7.90 million on the public sector side and a
further $18.17 million on the private sector side (this latter figure was
selected to reconcile with the national-regional estimation figures - which
I've done in an Excel spreadsheet but not yet neatly documented).
So adding the $7.90 million and $18.17 million figures above leads to the
figure of $26.07 million (or $26.068 million) which appears in the formula
of
savings estimate = $53.47 billion - (# local govts)*($26.068 million)
The $53.47 billion figure is simply $37 billion plus 632 lots of this $26.08
million figure introduced so that when we place
# local govts = 632 into the formula above, it gives us $37 billion.
Here goes ... the more constructive criticism the better! Regards Mark
An estimation of the annual savings achievable through moving to a
National-Local system of government, comprising just a national government
and local governments, with the national government being an amalgamation of
present federal, state and territory governments, and local government
remaining essentially in its present form.
1. Presented herein is an estimation of the annual cost savings
that could be achieved if Australia's present Commonwealth (or federal),
state and territory governments amalgamated into just a single national
government, with local government remaining essentially as it is. The
resultant form of government shall be referred to throughout as a
National-Local system of government, comprising the following two tiers of
government:
Tiers of government in National-Local Government System
Tier A. A single national government with powers and responsibilities shared
among the Commonwealth, state and territory governments in the present
system.
Tier B. Local government in its present form - doing all that it
presently does in terms of quality and quantity of functions and activities;
with regional organisations of councils (ROCs) in their present form.
2. It is advantageous to divide this overall amalgamation into two
the following two processes:
2a. an initial process of horizontal amalgamation, and
2b. a subsequent process of vertical amalgamation.
3. In the process of horizontal amalgamation, the eight state and
territory governments will amalgamate into a single Australia wide
state/territory type government which would operate in parallel to the
federal government. So the result of this horizontal amalgamation process
would be a hypothetical system that will be referred to herein as a Dual
National Government system, comprising the following three tiers of
government:
Tiers of Government in Dual National Government System
Tier A1. A single federal government in its present form - doing all that it
presently does in terms of quality and quantity of functions and activities,
except for those coordination/harmonisation activities no longer required
due to the horizontal amalgamation of state/territory governments.
Tier A2. A single Australia-wide state/territory type government - doing all
that the present state/territory governments in terms of quality and
quantity of functions and activities at the service delivery coalfaces.
Tier B. Local government in its present form - doing all that it
presently does in terms of quality and quantity of functions and activities;
with regional organisations of councils in their present form.
So, again, Tiers A1 and A2 above represent two Australia-wide, national
governments operating in parallel to one another under the Dual National
system.
4. The total savings figure to be estimated shall have public and
private sector components, as follows:
Stot = Stot,pub + Stot,priv [1]
5. We shall first determine an estimation for the public sector
savings component Stot,pub, and then determine an estimation for the private
sector savings component Stot,priv, in turn, as follows.
6. The total public sector savings component Stot,pub represents:
the public sector costs that would be avoided in moving from our present
system to the National-Local system as defined above - that is, the combined
bureaucratic overhead costs of the present Commonwealth, state and territory
governments MINUS the bureaucratic overhead costs of the single Tier A
national government in the National-Local system defined as above.
7. This public sector savings component Stot,pub can be divided into
two components as follows:
7a. a horizontal savings component SH,pub achievable as a result of
the initial horizontal amalgamation process that transforms our present
system into the Dual National government system as in paragraph 3 above; and
7b. a vertical savings component SV,pub achievable as a result of the
subsequent vertical amalgamation process that transforms the Dual National
government system into the National-Local system as in paragraph 1 above.
8. So we have that: Stot,pub = SH,pub + SV,pub [2]
9. To estimate SH,pub we first obtain that total public sector
expenditure levels of state/territory governments are, approximately, as
follows:
EpubS/T = $1.772 billion plus $6,166 per head [3]
10. The above equation is found by applying linear regression to the
total public sector expenditure figures provided in Table 12 of the 1999-00
ABS Catalogue 5512.0, titled 'Government Finance Statistics'.
11. The significant reliability of equation [3] is demonstrated by the
very high values of the coefficient of determination and F-statistic
associated with the regression, as follows:
11a. The coefficient of determination (r2) is found to be 0.9870
and the correlation coefficient (the square root of the coefficient of
determination) is found to be r = 0.9935. So state/territory public sector
expenditures are very well described by the linear approximation given by
[3] above.
11b. The F-statistic is used to determine if the regression
relationship given by [3] above occurred due to a
systematic/substantive/non-random relationship between the dependent
variable (expenditure) and the independent variable (population) rather than
just by (random) chance.
11c. At the 99.9% confidence level, the critical value of the
F-statistic for a regression analysis such as that done here, with a single
independent variable - namely population (so n1 = 1) and n = 8 data points
(i.e. the 8 state/territory sets of expenditure and accompanying
populations), hence a degree of freedom of n2 = 6 [= n - n1 - 1 = 8 - 1 -
1], is
F1,6(99.9) = 35.51 [4]
11d. So if the F-statistic found for the regression data exceeds
this, we can be at least 99.9% certain that the relationship occurred
because of a systematic/substantive relationship between expenditure and
population rather than by chance.
11e. For the regression analysis in this case The F-observed
value is found to be 456.6, which is substantially greater than the
F-critical value of 35.51. Therefore, we can be well over 99.9% confident
that the regression equation [1] is useful in predicting state/territory
public sector expenditure levels in terms of population.
12. The $1.772 billion figure is an "overhead cost" or "fixed cost" or
"bureaucratic overhead" component largely representing central/head office
activities/functions, whereas the $6166 per head figure is a "unit cost" or
"variable cost" or "marginal cost" or, most obviously, a "per capita cost"
component representing activities/functions at service delivery "coalface"
units (schools, hospitals, police stations etc.)
13. In our present system the eight state/territory governments incur
a total of eight lots of this $1.772 billion bureaucratic overhead cost,
amounting to a total cost of $14.17 billion (= 8 x $1.772 billion) per
annum. So if our eight states and territories were horizontally amalgamated
into a single state/territory type government (i.e. a single Australia wide
government with present state/territory type responsibilities), the
resultant government, with just its single $1.772 billion bureaucratic
overhead cost component, would generate savings amounting to the surplus of
seven lots of this $1.772 billion bureaucratic overhead component - that is,
a saving of $12.40 billion (=7 x $1.772 billion).
14. This $12.40 billion represents the annual cost of horizontal
duplication, SHD_DN, among our eight state and territory governments in the
present system, which could be avoided/saved in moving to the Dual National
system, by amalgamating state and territory governments into the single Tier
A2 national government. So we have that, approximately:
SHD_DN = 7 x $1.772 billion = $12.40 billion [5]
15. In terms of paragraph 3 above, SHD_DN represents the horizontal
duplication cost savings component that could be achieved through the
process of horizontally amalgamating the eight state and territory public
sectors into the single Tier A2 national government. In other words, SHD_DN
represents the combined total bureaucratic overhead costs of the present
eight state and territory governments MINUS the bureaucratic overhead costs
of a Tier A2 national government.
16. Whilst SHD_DN is a significant component of SH,pub, SHD_DN only
represents the savings accrued by the Tier A2 national government formed
through the horizontal amalgamation process. SH,pub will also contain a
component representing the savings accrued by the Tier A1 national
government as a result of the horizontal amalgamation process.
17. In our present system, a vast proportion of Commonwealth
government activities involve coordination (1) vertically with and (2)
horizontally across the eight state and territory governments, in the
interests of national harmonisation, compatibility, uniformity, consistency
etc., in respect of laws, regulations and policies and practices generally.
Much of this coordination function will no longer be necessary, however, in
the Dual National system formed through the horizontal amalgamation process
described above. And these cross-jurisdictional coordination roles would
disappear altogether in the National-Local system produced through the
process of vertical amalgamation. So vast savings would be achieved through
moving from the present system to a national-local system. Furthermore,
whereas it might be claimed that a national-local system would incur
additional national-local coordination costs, these are already taken into
account in the amalgamation of state/territory governments into the Tier A2
national government. And similarly, whereas the Tier A national government
in the final National-Local system would need to host regions for purposes
of functional service delivery and delegated administration, such regions
and their associated coordination demands are already in place - at both
state and Commonwealth levels, with the functional integrity of state
regions invariably compromised by the constraints of state boundaries. So
the move to the National-Local system will generate savings by reducing
overlapping and duplicated regional administration and service delivery
efforts, and at the same time improve the functional integrity of such
regions by eliminating the constraints of state boundaries.
18. In the Dual National system, the Tier A1 national government will
still need to coordinate vertically with the Tier A2 national government,
but such vertical coordination will be much simpler and cheaper than the
vertical coordination process which the Commonwealth government undertakes
with the eight states and territories in the present system. So the move to
the dual national system can be expected to generate significant vertical
coordination cost savings, SVC_A1.
19. Furthermore, The Tier A1 national government will no longer
need to coordinate horizontally across the Tier A2 national government at
all since the Tier A2 government is only one in number! So the move to the
dual national system can be expected to generate very significant horizontal
coordination cost savings, SHC_A1.
20. Finally, the $12.40 billion figure in [5] is based on Tier A2
national government expenditure levels as per [3] above - in particular the
$1.772 bureaucratic overhead cost component. However, the Tier A2 national
government will actually be spared of some core "head office" activities,
presently carried out by state and territory governments, which contribute
to the $1.772 billion bureaucratic overhead component - specifically,
activities associated with coordination horizontally across states and
territories. We shall let SHC_A2 represent this savings component that
could be achieved because the Tier A2 national government would no longer
need to coordinate with other states and territories.
21. Noting paragraphs 16-20 above, a complete equation for SH,pub
would appear to be:
SH,pub = SHD_DN + SHC_A1 + SVC_A1 + SHC_A2 [6]
And with [5], [6] becomes:
SH,pub = $12.40 billion + SHC_A1 + SVC_A1 + SHC_A2 [7]
22. It might be expected that, of SHC_A1, SVC_A1 and SHC_A2 in [7]:
22a. SHC_A1 would amount to a very large figure, probably in order of at
least several hundred $million to a few $billion per annum; and
22b. SVC_A1 would only amount to a figure in the order of several tens
of $million per annum; and
22c. SHC_A2 would only amount to a relatively small figure, probably in
the order of a few $million per annum.
23. Of course, SHC_A1 and SVC_A1 could be rationalised into a single
measure:
SCtot_A1 = SHC_A1 + SVC_A1 [8]
24. And all three coordination cost components present in [7] can be
combined to form a single overall coordination component associated with the
move to the Dual National system, SC_DN, as follows:
SC_DN = SCtot_A1 + SHC_A2 = SHC_A1 + SVC_A1 + SHC_A2 [9]
25. Result [2] shows that SH,pub in [4] and [5] above is only the
first component of Stot,pub . The second component SV,pub shall now be
examined.
26. Paragraph 7a stated that SV,pub represents the savings
achievable as a result of the vertical amalgamation process that transforms
the Dual National government system into the National-Local system as in
paragraph 1 above. As with the horizontal amalgamation process that led to
the Dual National system, the vertical amalgamation process will also
generate savings through reducing or eliminating (1) bureaucratic overhead
costs and (2) coordination costs.
27. We shall let SVD_NL represent the vertical duplication cost
savings component that could be achieved through the process of vertically
amalgamating the Tier A1 and A2 national governments of the Dual National
system into the single Tier A national government of the National-Local
system. This SVD_NL component would include the savings achieved by
rationalising the Tier A1 health department and the Tier A2 health
department into a single Tier A national health department, and so one
across other functional areas.
28. We shall further let SVC_NL represent the vertical coordination
cost savings component that could be achieved through the process of
vertically amalgamating the Tier A1 and A2 national governments of the Dual
National system into the single Tier A national government of the
National-Local system. With just the single Tier A national government,
such coordination will no longer be necessary at all.
29. There would appear to be overlap between SVD_NL and SVC_NL above,
such that it may be difficult in practice to neatly distill these out from
one another. The savings component SVD_NL will be achieved essentially by
merging the Tier A1 and A2 national government departments into single
national departments across all functional areas. This will involve
eliminating many positions of employment - the more so the higher the level
in the bureaucratic hierarchy. Furthermore, the newly formed Departments
will be spared of all activities associated with coordination between the
Tier A1 and A2 national governments. Such Departments would no longer be
burdened with cross-jurisdictional political pressures and coordination
demands and could concentrate on substantive planning and policy issues
relating to the outcomes of the various functional areas.
30. So we can write:
SV,pub = SVD_NL + SVC_NL [10]
31. And so, substituting [7] and [10] into [2] gives that:
Stot,pub = $12.40 billion + SHC_A1 + SVC_A1 + SHC_A2 + SVD_NL + SVC_NL
[11]
32. We can define an overall public sector coordination cost savings
component, SCtot,pub, as follows:
SCtot,pub = SHC_A1 + SVC_A1 + SHC_A2 + SVC_NL [12]
or, noting [9]:
SCtot,pub = SC_DN + SVC_NL [13]
33. With [12], [11] can be written as:
Stot,pub = $12.40 billion + SVD_NL + SCtot,pub [14]
34. Equation [14] above gives the total public sector savings
estimate as the sum of duplication cost savings components, SHD_DN = $12.40
billion and SVD_NL, and a combined coordination cost component, SCtot,pub as
given by [12].
35. Several further points should be noted at this juncture. In areas
such as education and health, for which state governments have
constitutional power and responsibility, newly formed Departments - spared
of coordination demands - could be expected to more closely resemble state
government departments than Commonwealth government departments, though of
course such departments would amount to a rationalisation of both types of
Department (traditional state and Commonwealth).
36. Whereas in our present system, state/territory type
governments are principally responsible for coalface service delivery, a
vast proportion of federal government activities and functions are devoted
to the coordination with and across states/territories in the interests of
national harmonisation, uniformity, consistency etc. Following the broad
estimates proposed in paragraph 22, it might be similarly predicted that
SVC_NL would again amount to a very large figure, probably in order of at
least several hundred $million to a few $billion per annum. This would
suggest that the total public sector coordination cost savings estimation,
SCtot,pub, would probably be at least $1 billion per annum, and probably at
least in the order of a few $billion per annum, such that we could safely
conclude that:
SCtot,pub > $1 billion [15]
hospital or school - it is pointed out that schools and hospitals are the
direct constitutional responsibility of state and territory governments.
Yet of total government spending (across all levels) of $37.47 billion per
annum on Health, the states (including local governments) and territories
account for just $20.46 billion, leaving $17.01 billion spent by the
Commonwealth government on Health. And of total government spending (across
all levels) of $32.54 billion per annum on Education, $23.216 is spent by
state, territory and local governments, leaving $9.327 billion spent by the
Commonwealth government on Education. The fact that Commonwealth government
expenditure exceeds $26 billion per annum in the areas of health and
education alone, combined with the well known reality that coordination with
and across state and territory governments indeed represents a significant
fraction of Commonwealth government activities in health, education and
other functional areas, again suggests that the total coordination cost
savings SCtot,pub, would be at least a few $billion per annum, such that we
could safely conclude that:
SCtot,pub > $2 billion [16]
38. The figures in paragraph 37 above suggest that in Health and
Education alone the bureaucratic overhead costs of the Commonwealth
government must run into several $billion per annum at least. It would seem
clear then that the bureaucratic overhead costs of the Tier A1 national
government (i.e. the Commonwealth government in its present form minus
coordination activities) would well exceed the $1.772 billion bureaucratic
overhead costs of state/territory type governments and hence the Tier A2
national government, though much of such bureaucratic overhead expenditures
would remain in the National-Local system and would not count towards SVD_NL
nor SCtot,pub. It could clearly be expected, nevertheless, that SVD_NL -
the vertical duplication cost savings component achievable through this
vertical amalgamation process - would well exceed $1.772 billion, so we
could write:
SVD_NL > $1.772 billion [17]
39. This $1.772 billion figure represents the savings achieved for
each single amalgamation of state and territory governments (noting from
equation [5] that the $12.40 billion represented the savings achievable
through seven such amalgamations - in reducing from eight state/territory
governments to the single Tier A2 national government). Clearly there would
seem to be greater scope for savings through amalgamating the Tier A1
(modified Commonwealth) national government and the Tier A2 (modified
state/territory type) national government, than would be possible through a
single amalgamation of state/territory governments (which would yield
savings of $1.772 billion).
efforts of state and territory governments and/or coordinate with and across
state and territory governments, then SVD_NL would amount to the full extent
of the Commonwealth government's own purpose public sector expenditures, or
about $108 billion in 1999-2000. This $108 billion figure would clearly be
a gross over-estimation of SVD_NL, however, since the Commonwealth
government clearly does much more than merely duplicate state and territory
activities and and/or coordinate with and across states and territories.
The Commonwealth government carries out policy development, planning and
implementation roles in functional areas which are not state/territory
responsibilities. The Commonwealth government also provides direct
"coalface" services, in areas such as Defence, Customs, Foreign Affairs,
Social Security and Policing (via the Federal Police).
40. The reflections in paragraph 36 suggest that SVD_NL could easily
amount to several $billion and could even exceed SHD_DN = $12.40 billion.
Certainly most of such vertical amalgamation savings could be expected to
arise on the Tier A1 (modified Commonwealth) side, though again it would be
difficult and somewhat artificial to neatly separate coordination costs from
vertical duplication costs here.
41. Noting results [15]-[17] and paragraphs 36-40 above, and the
difficulty in separating out vertical duplication costs from coordination
costs (as discussed in paragraph 29), it would appear to be more appropriate
to give an estimation of the combined total of SVD_NL + SCtot,pub from [14],
rather than of the components SVD_NL and SCtot,pub individually. Clearly
more work could be done to refine the processes used to estimate SVD_NL and
SCtot,pub and the sub-components appearing in [12] above, but at this point
evidence would clearly support at least the following the claim:
SVD_NL + SCtot,pub > $3.0 billion [18]
42. Admitting lack of direct supporting evidence, but noting the
inherent value of best estimations, the following educated guess is offered
as a tentative estimation:
SVD_NL + SCtot,pub = approx. $6.0 billion [19]
43. Combining [18] with [14] gives that:
Stot,pub > $12.40 billion + $3.0 billion
so that Stot,pub > $15.4 billion [20]
44. Combining [19] and [14] gives that:
Stot,pub = approx. $12.40 billion + $6.0 billion
so that Stot,pub = approx. $18.4 billion [21]
45. The estimation so far makes no assumptions concerning the quality
of public administration in achieving good public outcomes across various
functional areas. Professor Neville Norman of Melbourne University, in his
'Reforming Fiscal Reform', prepared for the Australian Business Council in
1995, states that potential cost savings of $3 billion per annum could be
achieved through an elevation to world best practice standards in government
(with $2.9 to $3.4 billion 95% confidence intervals). Conservatively, we
shall assume that at least $1.0 billion per annum of such 'room for
improvement' would 'survive' a move to a National-Local system. So with
this additional $1 billion, where "BP" in the subscripts stand for "best
practice", results [20] and [21] above can be modified to give that:
Stot,pubBP > $16.4 billion [22]
and
Stot,pubBP = approx. $19.4 billion [23]
46. We shall now turn our attention to the estimation of Stot,priv.
The public sector cost savings figures provided so far relate mainly to the
provision and production roles of government in Australia and the
bureaucratic costs of regulation. However it is also clear that government
regulation imposes significant costs on the private sector.
47. According to the Review of Business Regulations Information
Paper No. 2 (by the Business Regulation Review Unit, Commonwealth of
Australia, May 1986, pages 3-5), the overall cost of business regulation
comprises (1) the cost of employing regulators, (2) "paperburden costs", and
(3) compliance costs - the latter being by far the most significant
component. This report states (on page 5) that "[a]ggregating the three
components brings the estimated overall cost of business regulation to ...
15-30% of Australia's $250B gross domestic product". The Figures in this
1986 report are present as follows, along with percentages of GDP in 1986,
and the figures that would apply in 1999-2000 if these same percentages
applied, noting that around 1999-2000 GDP was at approximately $600 billion
per annum:
Year 1986($billion) % of GDP 1999-2000 ($ billion)
Cost of
Employing
Regulators 1.8 to 3.6 0.72 to 1.44 4.32 to 8.64
Paperburden
Costs 3.6 to 7.2 1.44 to 2.88 8.64 to 17.28
Compliance
Costs 36 to 72 14.4 to 28.8 86.4 to 172.8
Overall
Costs 41.4 to 82.8 16.56 to 33.12 99.4 to 198.7
48. Of the figures as above, the Cost of Employing Regulators is
already addressed as a public sector cost - to count it again would amount
to double-counting. Paperburden and compliance cost burdens, however, are
costs incurred by the private sector. Leaving the "Cost of Employing
Regulators" rows out of the above Tables leaves the following figures
applicable to the private sector alone:
Year 1986($billion) % of GDP 1999-2000 ($ billion)
Paperburden
Costs 3.6 to 7.2 1.44 to 2.88 8.64 to 17.28
Compliance
Costs 36 to 72 14.4 to 28.8 86.4 to 172.8
Overall
Costs 41.4 to 82.8 16.56 to 33.12 99.4 to 198.7
Overall
Private
Sector
Costs 39.6 to 79.2 15.88 to 31.76 95.0 to 190.1
49. The Business Regulation Review Unit Report on which the above
figures are based admits that these paperburden and compliance costs are
only gross costs rather than the costs net of benefits (in terms of safety
and standards generally), but also states (on page 5) that "massive costs
are associated with unwarranted regulations and vast gains possible from
their removal".
50. For present purposes it shall be assumed that our private sector,
in 1999-2000 terms, incurs a total of paperburden and compliance costs
amounting to $142.6 billion, that being the average of the $95.0 billion and
$190.1 billion limits in the Table above. The National-Local system will
only impose two levels of regulation and associated paperburden and
compliance cost burdens.
51. The following Table, based on 1999-2000 general government
expenditure figures from ABS Catalogue 5512.0 (Table 1), shows the own
purpose expenditure levels (defined as total expenditure less
transfers/grants to other levels of government) of our three levels of
government, as approximations in percentage terms (a level of uncertainty
arises because university funding is classified as a multi-jurisdictional
expense):
Level of Total own ($ billion) %
Government purpose expenditures
Commonwealth 118.687 53.4
State/Territory 88.579 39.9
Local 14.84 16.7
TOTAL 222.107 100
52. If the $142.6 billion overall private sector regulatory cost
burden accrued in proportion to the own purpose expenditures of the three
levels of government as above, then this $142.6 billion could be
approximately broken down as follows:
Level of Total own % share of $142.56
Government purpose billion private sector
expenditures regulatory cost
($ billion) burden ($ billion)
Commonwealth 118.687 53.4 76.18
State/Territory 88.579 39.9 56.85
Local 14.841 6.7 9.53
TOTAL 222.107 100 142.6
53. If the $142.6 billion overall private sector regulatory cost
burden was simply divided equally among the three levels of government, then
this $142.6 billion could be approximately broken down as follows:
Level of Government share of $142.56 billion private
sector regulatory cost burden
Commonwealth $47.52 billion
State/Territory $47.52 billion
Local $47.52 billion
TOTAL $142.6 billion
54. As with public sector costs, the private sector regulatory cost
burdens will again be subject to overlap and duplication in terms of their
impact on the private sector. Private companies need to apply separate
efforts to address the paperburden and compliance cost burdens imposed upon
them by the overlapping and duplicated regulatory systems of our three
levels of government in our present system. These cost burdens are taken
here to include those incurred in compliance with tax laws, accounting
that would amount to double counting.
55. To elaborate on this double counting issue, please note that the
public sector savings realisable through moving to a National-Local system,
as estimated earlier, are based on expenditures rather than revenues, but
obviously any such expenditure savings can be directly transferred to the
revenue side in the form of taxation cuts. For example, payroll tax, which
earns state and territory governments some $7 billion per annum at present,
could be abolished if public sector cost savings to the value of $7 billion
were found on the expenditure side. But the $7 billion saving on the
expenditure and the $7 billion reduction on the revenue side would only
count as one lot of $7 billion, not two lots totalling $14 billion! It is
always intended that any "savings" claimed herein will be gainfully
exploited through either productive expenditure (whether that be in schools,
hospitals, the environment etc.) or reduction in tax/revenue burdens, or
both! Savings herein refer to the costs of wasteful duplication in
bureaucracy and regulation, and wasted effort generally, among both the
public and private sectors, which could be avoided (hence "saved") by moving
to a National-Local system.
56. In a National-Local system, it is intended that regulatory
overlap, duplication and lack of coordination, and its associated compliance
cost burdens, would be reduced to such an extent that virtually the full
extent of such burdens imposed by the State/Territory level could be
eliminated. The tables above suggest that the private sector could save
some $50 billion in this way. There is anecdotal and substantive evidence
available, however, that suggests that local government - especially in
areas relating to land taxation, land
planning and building regulations, imposes disproportionately high
regulatory and compliance cost burdens. Furthermore, with the Commonwealth
government responsible for income tax and most business taxes besides
government, in the present system, impose a lesser share of private sector
regulatory cost burdens than is implied by either of the Tables presented in
paragraphs 52 and 53 above. The following Table is a composite of those
presented in paragraphs 52 and 53, taking the larger of the two figures for
the commonwealth and local governments, and then assigning to the
State/Territory level the residue needed to make up the total of $142.6
billion assumed here:
Level of share of share of share of
Government $142.56 billion $142.56 billion $142.56 billion
private sector private sector private
sector
regulatory cost regulatory cost regulatory
cost
burden assuming burden assuming burden
in proportion to equal three way assumed
own purpose split split
expenditure
($ billion) ($ billion) ($
billion)
Commonwealth 76.18 47.52 76.18
State/Territory 56.85 47.52 18.86
Local 9.53 47.52 47.52
TOTAL 142.6 142.6 142.6
57. If, instead of $142.6 billion, $100 billion (just above the lower
limit shown in the paragraph 48 Table) was assumed to cover the full extent
of the private sector regulatory cost burden of our present system, the
Table above would become as follows (all figures being scaled down in the
same proportions):
Level of share of share of share of
Govt $100 billion $100 billion $100 billion
private sector private sector private
sector
regulatory cost regulatory cost regulatory cost
burden assuming burden assuming burden
in proportion to equal three assumed
own purpose way split
expenditure
($ billion) ($ billion) ($
billion)
Commonwealth 53.4 33.3 53.4
State/Territory 39.9 33.3 13.2
Local 6.7 33.3
33.3
TOTAL 100 100 100
58. The various Tables above attribute to the State/Territory
government level a share of the private sector regulatory cost burden
ranging from $13.2 billion to $56.85 billion.
59. More work would be needed to confirm an accurate figure here, but
for present purposes, the $13.2 billion figure, attributed to the
State/Territory level in the Table directly above, shall be used as a
minimum estimation for Stot,priv, so that:
Stot,priv > $13.2 billion [24]
60. The $18.9 billion figure, attributed to the State/Territory level
in the Table in paragraph 56, shall be used as a "best estimation" for
Stot,priv, so that:
Stot,priv = approx. $18.9 billion [25]
61. Substituting [20] and [24] into [1] gives that:
Stot = Stot,pub + Stot,priv > $15.4 billion + $13.2 billion
so that: Stot > $28.6 billion [26]
62. Similarly, substituting [21] and [25] into [1] gives that:
Stot = Stot,pub + Stot,priv = approx. $18.4 billion + $18.9 billion
so that: Stot = approx. $37.3 billion [27]
63. Noting paragraph 45 and results [22] and [23], it is
conservatively estimated that if best practices were employed by National
and local governments in a National-Local model we would at least obtain:
StotBP > $30.0 billion [26]
64. Even ignoring the best practice considerations of paragraphs 45
and 63, it emerges above that a move to a National-Local system of
government, comprising national and local tiers of government as set out in
paragraph, should save Australia at least $30 billion per annum, and
probably closer to $40 billion per annum, with:
64a. the public sector expected to benefit to the value of at least
$15.4 billion, and probably around $18.4 billion, per annum; and
64b. the private sector expected to benefit to the value of at least
$13.2 billion, and probably around $18.9 billion, per annum.
65. Since 1981, the value of the Australian dollar, in US dollar
terms, has slipped by an average of 4% per annum. So with our GDP now over
$600 billion per annum, and 4% of GDP amounting to some $24 billion per
annum, Australia apparently needs to implement changes conferring benefits
of around about this $24 billion per annum figure, in order to hold its own
against the American benchmark. The move to the National-Local system as
considered herein apparently offers one economically sustainable solution to
this challenge, conferring annual benefits in excess of $24 billion per
annum.
Mark Drummond
12 October 2001
## Explanation of Mark's paper
An estimation of the savings achievable through the abolition of the States
and Territories, and the establishment of a two-tier national-regional
system of government, consisting of up to 131 regional governments.
The roles of governments are basically to (1) provide and produce goods and
services (through allocative, distributive, stabilising and subsiding
measures) and (2) regulate (by establishing and enforcing laws, regulations
and standards). Among Australia's three-tiers of government, duplication
and overlap in these roles occurs to an enormously expensive extent, and
such duplication costs can be broken into the following five components:
· horizontal duplication costs among State and Territory governments (the
total of which shall be referred to here as CHS);
· horizontal duplication costs among Local governments (CHL);
· vertical duplication costs between Commonwealth and State/Territory
governments (CVS);
· vertical duplication costs between Commonwealth and Local governments
(CVL); and
· vertical duplication costs between State/Territory and Local governments
(CVSL).
(Note that in relation to the above duplication costs, the ACT is an
exception in that it is already only subject to two tiers of government)
In contrast, the proposed two-tier system of government would only incur the
following two components of duplicated costs:
· horizontal duplication costs among Regional governments (CHR); and
· vertical duplication costs between Commonwealth and Regional governments
(CVR).
So the total duplication cost savings (S3->2) achievable through a move to a
two-tier system of government would be given by the formula
S3->2 = (CHS + CHL + CVS + CVL + CVSL) - (CHR + CVR) ... [1]
An estimation of the costs of State/Territory type governments, and hence
part of the CHS component, shall now be detailed by of illustration.
For present purposes it is appropriate to apply an accounting model in which
the expenditure of State/Territory type governments is given by the
expression:
ES = FCS + VCS x pS .... [2]
where ES is the expenditure (in terms of government outlays) of a
State/Territory government;
FCS is the 'fixed' cost, or 'overhead' cost, incurred by State/Territory
governments;
VCS is the 'variable' (or marginal, or 'per unit' - in this case 'per capita
') cost incurred by State/Territory governments;
and pS is the population of the State/Territory
This model assumes two basic components of government expenditure:
(1) a 'fixed' cost component (FCS) of expenditure which is incurred
irrespective of the size of the governed population. So the 'fixed' costs
incurred by the Tasmanian government will be the same as for New South Wales
and the other States and Territories. The salaries of the State Premiers
and Territory Chief Ministers would obviously fall directly within this
component, as would most 'head office' costs.
AND
(2) a 'variable' cost component (VCS x pS), which accrues in proportion to
the size of the governed population. These 'variable' costs include
components such as the costs of running schools themselves (as distinct from
'fixed' head office' costs), and VS (a per capita measure) is again assumed
to be the same for each State and Territory.
Furthermore, expression [2] is equivalent to the following equation of a
straight line as taught in high school:
y = mx + b = b + mx ... [3]
where ES in [2] is a variable quantity like the y in [3];
pS in [2] is a variable quantity like the x in [3];
FCS in [2], like b in [3], provides the vertical axis intercept (or
'y-intercept') of the graphical representation of [2];
and VCS in [2], like m in [3], provides the gradient of the graphical
representation of [2].
So the task of finding best estimates of the quantities FCS and VCS is
essentially that of determining the line of best fit of a graphical
representation of expression [2]. The sought after 'line of best fit', and
hence the values of FCS and VCS, are estimated here through the application
of least-square linear regression techniques to government outlay and
population data for the various States and Territories as obtained from the
Australian Bureau of Statistics Government Finance Statistics publication
(Catalogue Number 5512.0). Data from the financial year 1999/2000
has been used here.
Graphs 1 and 2 following show the plotted data points, the lines of best
fit, and the gradients and vertical-axis-intercepts which provide estimates
for FCS and VCS. These results and other relevant measures are summarised
as follows:
Table 1 - Fixed and Per Capita Costs based on Total Public Sector and
General Government Expenditures
Data set best best correlation F-statistic
set estimate estimate coefficient (Fcrit = 35.51)
used of FCS of VCS
($ million) ($ per person)
States
and
Territories
Total
Public
Sector 1771.74 6165.86 0.9935 456.58
States
and
Territories
General
Government 830.15 5085.89 0.9975 1186.92
The high correlation coefficients achieved here confirm the validity of the
model described by expression [2].
Now ideally, taxpayers would be burdened not with eight lots of fixed costs
associated with the eight State and Territory governments, but just one lot
of such costs, so the outlay component of the horizontal duplication costs
of the State and Territory governments is approximately $12.4 billion (this
being 7 x $1771.74 million) in total. So our best estimate of the outlay
component of CHS is:
CHS(outlays) = $12.40 billion ... [4]
Data on individual local government outlays is not as readily available as
that for States and Territories, however we can still derive an estimate of
the outlays component of the savings figure S3->2, as follows:
Estimating the costs of a two-tier system based
on insights from the ACT!
Of all provincial governments in Australia, the ACT Assembly is that which
might be expected to most closely reflect what a regional government might
be like in a two-tier system. Regional governments would probably lie
somewhere between the ACT Assembly and the Brisbane City Council in terms of
their roles and responsibilities and the populations they would serve. But
the ACT form of government is of interest particularly in terms of the quite
substantial cost saving synergies it achieves through combining traditional
State and local government functions.
Now Australia's population at June 1999 was some 61.134 times greater than
that of the ACT, and using total public sector expenditure figures from ABS
Catalogue 5512.0 (Table 12), the 1999/2000 total public expenditure for the
ACT was $2.149 billion, and for all states (including local government) and
territories combined was $131.102 billion. Now 61.134 lots of $2.149
billion amounts to $131.377 billion, so, based on these 1999/2000 figures, a
system comprising of 61.134 ACT style governments would be some $0.275
billion ($13.377 billion - $13.102 billion) more expensive than the present
system is.
If general government expenditure figures rather than total public sector
expenditure figures are used (Table 10 of ABS Catalogue 5512.0), the $0.275
billion per annum figure obtained above (using total public sector figures)
becomes $9.275 billion (61.134 x $1.838 billion - $103.089 billion).
The idea now is that if instead of 61.134 ACT type governments are operated
in a national-regional system we have a different number of ACT type
regional governments, we will save one lot of the fixed costs (FCS) for each
reduction by one in the number of such regional governments, and hence would
achieve savings as follows:
Table 2 - Savings for Various Numbers of ACT Type Governments
Number of savings ($ billion) savings ($ billion)
ACT type based on total based on general
governments public sector FCS government FCS
value of value of
$1771.74 million $830.15 million
61.134 -0.275 -9.275
61 -0.038 -9.164
60 1.734 -8.334
50 19.452 -0.033
40 37.169 8.269
30 54.886 16.571
20 72.604 24.872
10 90.321 33.174
0 108.038 41.475
Furthermore, when our statistical regression technique is applied to State
and Territory outlay figures for individual government purpose areas, the
following best estimates emerge:
Table 3 - Fixed Costs in Particular Functional Areas
Government best estimate of FCS correlation
purpose area component ($ million) coefficient
Public Order
and Safety 75.7 0.9983
Education 194.1 0.9994
Health 152.2 0.9972
TOTAL of
the above 422.0 N/A
The above results suggest that if public order and safety, health and
education were transferred to the national government, a further $422
million could be saved for each government, as follows:
Table 4 - Additional Savings if Health, Education and Public Order & Safety
are Transferred to National Government
Number of ACT type Savings Estimate
governments ($ billion)
61.134 25.800
61 25.744
60 25.322
50 21.101
40 16.881
30 12.661
20 8.441
10 4.220
0 0.000
Table 5 below provides four separate overall savings estimations. The
second and fourth columns repeat Table 2 whereas the third and fifth columns
are the respective Table 2 Figures with the Table 4 figures added to them.
Table 5 - Public Sector Savings Estimates According to Four Options
No. of savings savings savings savings
ACT based on based on based on based on
type Total Total General General
govts Public Public Government Government
Sector Sector figures figures
figures figures assuming
assuming Health,
Health, Education &
Education & Public Order
Public Order & Safety
& Safety transferred
transferred to national
to national government
61.134 -0.3 25.5 -9.3 16.5
61 0.0 25.7 -9.2 16.6
60 1.7 27.1 -8.3 17.0
50 19.5 40.6 0.0 21.1
40 37.2 54.1 8.3 25.2
30 54.9 67.5 16.6 29.2
20 72.6 81.0 24.9 33.3
10 90.3 94.5 33.2 37.4
0 108.0 108.0 41.5 41.5
The figures in the second and third columns above appear to be excessive and
those in the fourth and fifth columns shall be used for the sought after
savings estimations.
The formula for the figures in the rightmost column above, which shall be
used as the best estimates here (assuming regional governments in a form
more or less like the ACT government less powers and responsibilities in
health, education and public order & safety) is:
Savings = $41.47 billion - (# govts)*($0.408 billion) [5]
[Note that the $0.408 billion figure is the $830 million figure from Table 1
MINUS the $422 million figure from Table 3]
All the above is just for the public sector side of things. Assuming $12
billion in savings for the private sector side of things takes the above to:
Savings = $53.47 billion - (# govts)*($0.408 billion) [6]
The equation of [6] suggests total savings as follows:
Table 6 - Total (Public and Private combined) Savings Estimates - Based on
$12 billion Private Sector Savings Component
No. of ACT type govts without Total Savings Estimate
powers and responsibilities Based on Equation [6]
for health, education and ($ billion)
public order & safety
132 -0.40
131 0.01
130 0.42
125 2.46
120 4.50
115 6.54
110 8.58
105 10.62
100 12.66
95 14.70
90 16.74
85 18.78
80 20.83
75 22.87
70 24.91
65 26.95
60 28.99
55 31.03
50 33.07
45 35.11
40 37.15
35 39.19
30 41.23
25 43.27
20 45.31
15 47.35
10 49.39
5 51.43
0 53.47
C:
> Are the fixed costs incurred in Regional Gov'ts factored in? That is,
> the more Regional gov'ts we have, the higher the fixed costs?
> Have I missed something?
> I found the definition of the role of government interesting, Mark, it
> is not clear whether this is your definition or Rodney Hall's?
M:
Regarding the fixed costs of regional governments, the $0.408 billion = $408
million in the formula [6] is intended to be an estimation of the fixed cost
of regional type governments.
The formula is as follows:
Savings = $53.47 billion - (# govts)*($0.408 billion) [6]
The idea is that if there was just one centralised government and no
regional governments, no fixed costs of regional government would be
incurred. For each additional regional government in a proposed system, the
system incurs an additional $408 million, so the savings estimation comes
down by this amount. The following is like Table 6 from my email of 21 Oct
01 (titled 'Explanation of savings for National-Regional model'), but this
time with the numbers of regional governments starting at zero then
increasing by 10 going down the table - note that for every 10 additional
regional governments, savings come down by $4.08 billion (this being 10 lots
of the fixed cost of regional governm):
0 53.47
10 49.39
20 45.31
30 41.23
40 37.15
50 33.07
60 28.99
70 24.91
80 20.83
90 16.74
100 12.66
110 8.58
120 4.50
130 0.42
131 0.01
132 -0.40
Regarding the definition of the role of government, I stated:
The roles of governments are basically to (1) provide and produce goods and
services (through allocative, distributive, stabilising and subsiding
measures) and (2) regulate (by establishing and enforcing laws, regulations
and standards).
This definition perhaps stresses the economic role of government more than
the social role. I accept there are more comprehensive definitions around
but felt it would be apt for a statement which set out financial/numerical
estimations.
In any event, I'd appreciate any constructive criticism of anything I've
proposed.
Regarding the specific formula [6] above, this is something that can
hopefully be refined. At this stage my main desire is to suggest that
savings in tens of $billion per annum appear to be plausible/possible/"in
the right ballpark" if we move to an improved system absent of states in
their present form.
Again, constructive criticism, advice and Devil's advocacy can only help in
something like this.