Identificación de los culpables del atentado.

The nature of the relationships between local government and state/territory governments as well as the Australian Government impacts on their ability to efficiently provide

infrastructure and services for their local communities. Hence, the historical development and context of these relationships can have a significant bearing on the expense

response and revenue-raising capacity of each council.

3.2.1

Local and Australian Government

The significance of the relationship between local government and the Australian Government is reflected by the quantum of funding provided to local government, which was in excess of $2 billion in 2005-06 including both FAGs and R2R. This represents less than 0.9% of total commonwealth tax revenue.

The Hawker Report stated that the federal/local government relationship has grown in importance as a result of: 62

• increasing focus on local delivery and devolution of a number of Federal programs

• local government input into some policy and program development, and

• reduction in financial support for local government by state governments, exacerbated by cost shifting.

General purpose assistance funding from the Australian Government was first provided to local government in 1974-75, under the Whitlam Government as a means to promote better geographic equity between regions. The Fraser Government (1975-1983) amended this initial funding program to distribute taxation revenue to local government under the Local Government (Personal Income Tax Sharing) Act 1976, in order to reflect the tax sharing arrangements with the state and territory governments. This shifted the focus from full equalisation to a method based partly on per capita grants (ie minimum grants) and partly on equalisation. Local government was provided with 1.52% of net personal income tax in 1976-77, which increased to 1.75% in 1979-80 and 2% in 1980- 81. 63

Following an inquiry into local government in 1984, reforms were made to the level and form of Australian Government funding. The implementation of the Local Government (Financial Assistance) Act 1986 saw the introduction of FAGs and an end to the personal income tax sharing approach. FAGs were to be increased by the greater of either the 1985-86 level of assistance adjusted for inflation, (which was known as the ‘real terms’ guarantee) or the percentage change in the general purpose payments to states (which were escalated by CPI and population growth indexation). Since 1989-90 interstate distribution of grants has been on an equal per capita basis.

62 _{House of Representatives, SCEFPA 2003, Rates and Taxes: A Fair Share for Responsible Local} Government, October 2003, p.98.

63

ibid, p.101.

Another review of the local government funding system was undertaken in 1993, which saw the introduction of the current FAGs Act. The main change under this Act was to require that national principles of intrastate funding distribution replaced state formulated principles. When GST revenue funding to states replaced financial assistance grants to states, the link between grants to states and grants to local government that was

established under the 1986 Act was broken. Hence, the FAGs Act was amended in 2000 in order to maintain the escalation factor based on population growth and the increase in CPI.

The relationship between the Australian Government and local government has

continued to evolve over the past 30 years, since financial support was initially provided. Over this period the Australian Government has increasingly recognised the potential strategic importance of local government in achieving national objectives in local and regional policy areas. The successful use of SPP and direct payments to local

government, as discussed in section 2.2.3, particularly R2R, is evidence of the potential progress that can be achieved through collaboration between the Australian Government and local government. Text Box 14 below provides further details on the value and benefits offered by local government in delivering regional policy objectives of the Australian Government.

Text Box 14: Value of local government to the Australian Government Benefits provided by local government in delivering regional policy objectives of the Australian Government

The Australian Government, through DOTARS, has acknowledged the benefits of local government taking a stronger role in regional development and delivering regional policy objectives of the Australian Government: • local government offers a wide and well-established national network of public administration which may

be capable of taking on extra responsibilities and functions. This includes a significant presence in rural and regional Australia. (In some cases local government is the only institutional presence in small rural and remote areas)

• local government has strong links to the community and is accountable to the communities its represents. Its legislative basis makes it both durable and financially stable – unlike some community or interest groups

• local government has a practical service orientation and good organisational skills which make it capable of innovative, speedy and flexible responses. The integrated structure of councils can allow a high level of co-ordination between different activities

• the links between local government and local business and industry puts councils in a good position to foster a ‘bottom up’ approach to regional development

• local government is now playing an increasingly important role in providing information to support Commonwealth regional policy development and as a key stakeholder in the implementation of Commonwealth regional policy initiatives, and

• extensive contact /transactions between business and local government makes local government an ideal entry point for access to information about other governments’ services and programmes and a possible location for delivery of such services.

Source: DOTARS, Submission No. 103., p. 39., in House of Representatives, SCEFPA, 2003, Rates and

Taxes: A Fair Share for Responsible Local Government, p. 91.

3.2.2

State/territory and Local Government

The relationship between state/territory governments and the local government sector in each jurisdiction has significant bearing on the operations of councils. The nature of the relationship and the degree of trust and autonomy given to local government is reflected in the legislative framework and the level of funding support. Overall, the relationships and extent of collaboration between local government and state/territory governments differs significantly between jurisdictions. This is largely a product of the historical and political context in which the relationships have developed.

The quantum of state funding support to local government is a partial indicator of the nature of the relationships; however it also reflects the relative financial capacity of each state/territory government. As shown in Table 2.4, in 2003-04 Queensland and WA provided the highest net state grants per capita at $89 and $84 per capita respectively. State funding as a proportion of total intergovernmental transfers from all spheres of government is also among the highest in these states at 54% in Queensland and 49% in WA. The collaborative relationship fostered between the Queensland Government and local government is further evidenced by the state support of current SSS review (see section 1.4.4) and the Queensland Road Alliance (see Text Box 11). The hypothecation of vehicle registration revenue to local government may be evidence of a positive

relationship with the WA Government, summarised below in (Text Box 15).

Interestingly, at $21 per person, NT provides the lowest net state grants per capita; however state grants comprise 67% of total NT local government funding. This is largely due to the relatively low quantum of FAGs provided to NT and the limited financial

capacity and sources of own-source revenue of the local government sector in NT. At the other end of the spectrum, Tasmania, SA and NSW have the lowest state grants per capita and as a proportion of total intergovernmental transfers from all spheres of government. In NSW, which arguably has relatively high financial capacity, the nature of the relationship and trust in local government is reflected by policies such as rate

pegging, and the propensity to dismiss councils and place them under administration and to override development consents with state building controls.

As a result of the recent focus on stemming cost shifting from state to local government, the adequacy of these grants are generally being re-evaluated. The areas and impacts of cost shifting are highlighted in section 2.4.3.

Text Box 15: Hypothecation of vehicle registration revenue, WA Hypothecation of vehicle registration revenue, WA

The WA Government has entered into a roads funding agreement under which 20% of all state government vehicle registration fees are hypothecated to local government. Hypothecation is a promise by government to spend the revenue raised from a charge on a predetermined activity. The funding is tied and must be spent on roads. This hypothecation agreement will provide $94.1 million in road funding to local government in 2006-07. This is a favourable arrangement for local government considering vehicle registration fees are a growth tax in line with increasing car ownership and growth in road freight tonnages. It assists local government in addressing the shortfall of funding to allow adequate delivery of road services and improve funding certainty. There is some risk that vehicle taxes and charges could be reduced due to COAG National Competition Policy.

Overall, significant progress has been made in several states in terms of negotiating state-local government protocols covering areas of shared responsibility and, more recently, through partnership agreements. Partnership agreements are in place or under negotiation in Tasmania, SA, WA and Queensland. Although the nature of these

agreements varies, they represent an attempt to clarify priorities and rationalise the distribution of powers and financial resources between state and local governments.