Local government: The referendum we have to have?

A parliamentary committee recommends a referendum on the financial recognition of local government in the Constitution be held at the next Federal election. Dr Gabrielle Appleby considers the issue.

On 24 January 2013, the Joint Select Committee on Constitutional Recognition of Local Government handed down a preliminary report that recommended a referendum on financial recognition of local government be held at the same time as the Federal election in 2013.

There’s no doubt it’s a short lead-in time, and for a constitutional amendment that may not even be technically necessary. But could this be the ‘referendum we have to have’?

Constitutional recognition of local government in Australia: then and now

Debate over constitutional recognition of local government in Australia is not new. There have been constitutional conventions, inquiries and even attempted constitutional referendums since the 1970s. Each to no avail. What makes this one different, at least so the committee claims, is that its recommendation addresses a very specific and now urgent problem.

It is not an attempt to entrench local government against potential abolition, dismissal, unwanted amalgamations, or other drastic changes by the State governments. It is not an attempt to recognise the democratic legitimacy of local government. It is not an attempt to symbolically place local government as the third tier in the constitutional federation. No, the purpose of this amendment is to ensure the Commonwealth government can continue to fund vital services delivered by local governments after the High Court’s landmark ruling in the School Chaplains Case (2012) threw doubt on the constitutionality of the current funding model. It is simply a ‘corrective’ referendum.

The Problem: The School Chaplains Case

The case, in brief, held that the Commonwealth Government cannot enter into contracts and funding agreements without regard to the limits of its constitutional powers. Rather, except for contracts and funding required in the ordinary course of government and some other narrow exceptions, the Commonwealth may only enter contracts and funding agreements where there is legislative approval for the action.

After the ruling, the Commonwealth Parliament (very) quickly passed amendments to the Financial Management and Accountability Act 1997 (Cth) which purport to provide legislative backing to a whole range of Commonwealth contracts and funding agreements — including many to local governments. There is, however, significant doubt about the constitutionality of this remedial legislation – particularly about those contracts and funding programs that lie outside the Commonwealth’s legislative powers – which include many of the local government programs.

The Committee argues that the need for a constitutional referendum to amend the Constitution to specifically provide for grants to local governments is necessary to address the potential unconstitutionality of significant funding to local governments.

A constitutional alternative: grants through the States

But take a step back. Direct funding between the Commonwealth and local governments has not always been a feature of our federal system. It has really only been common practice over the last four decades since Whitlam. Funding was traditionally provided to local governments through the states in what were known as ‘tied grants’. This mechanism continues to be used in many areas. The Constitution specifically provides for these grants in s96, which gives the Commonwealth Parliament the power to make grants to the States ‘on such terms and conditions as the Parliament sees fit’.

If the Commonwealth was worried about the constitutionality of direct funding programs to local government, certainly the most direct way to remedy this is to revert back to the practice of using the States as conduits for the funding. This system has been criticised for its inefficiency – specifically the need to have two administrative regimes for local government funding allocation, one at the federal level and one in the States and concerns that States are able to obstruct the flow of money to local governments – but it is proven to have worked, constitutionally speaking.

An ill-advised referendum?

My initial reaction was that rushing through a constitutional referendum on financial recognition of local government was ill-advised. If the referendum is unsuccessful (and already the Coalition has withheld its support for it on the basis of the failure to consult with and gain the support of State governments and the short time for public consultation provided), it may hamper any push for greater recognition – such as recognition of the democratic mandate or legislative competencies of local governments – in the future. Even if the referendum was successful, it could hamper this movement because the Australian people may be disinclined to tackle the question of local government recognition again. The ‘necessity’ and ‘urgency’ created by the School Chaplain’s Case could be squandered on a (potentially unsuccessful) technical referendum, and an opportunity to draw on it as part of a campaign for broader local government recognition later on would be lost.

Or the referendum we have to have?

But, then again, this referendum could be exactly what Australians need. A harmless, non-political constitutional referendum that is unlikely to divide the two major parties, at least in principle. Holding it at the same time as the federal election, it may take some of the politicking out of the referendum (all the political energy being directed to the election itself). Even without the election, it’s hard to see people getting that hot under the collar about a referendum that restores the previously understood status quo.

If it can jump the hurdle of opposition from the States (and Western Australian Premier Colin Barnett has already expressed concern), it may even pass. That would be the first time a referendum has succeeded since 1977. It may show the Australian people that we can pass referendums in this country!

If it does pass, it might start the momentum towards some really important referendums that we need to have — about constitutional recognition for Indigenous Australians, about extending and fixing parliamentary terms, about whether Australia should be a republic, about the distribution of competencies and financial powers between the Commonwealth and the States.

I’m not saying that Australians’ constitutional amendment malaise is the only factor at play; studies have shown that there are a number of factors that are relevant to the success of a referendum, including bipartisan support and support from the States. There is nonetheless a sense of exceptionalism associated with a referendum proposal in Australia and this perhaps contributes to our national sense of inertia.

So my final thoughts on the proposal? I think that there are sound reasons for making this our next referendum. But I think for it to move Australians out of our constitutional amendment inactivity, we need to give it every opportunity to pass. I worry that the few months before the 2013 Federal election will prove insufficient to foster bi-partisan support, State support, and then finally public support, for the change. If it’s the referendum we have to have, we have to have a positive outcome.