Mr Rudd, health and the Australian constitution.

I continue to watch the debate in Australia about health funding with interest. It remains political theatre. However, I do wonder what it means for the Australian Federation.

By way of background, a post by SamuelJ on Catallaxy Files, The GST – a rough guide, provides a brief history of the GST (Goods and Services) tax. Another earlier post by Ken Parish on Club Troppo, Deconstructing Rudd’s health plan, discusses constitutional issues. This led to a companion post from me, Subsidiarity, the banks and Australian public policy, that discusses in part the way the Commonwealth has used Commonwealth-State agreements to tie the states up.

The problem of fiscal imbalance within the Federation has been a growing one for many years now. Part of the justification for the GST lay in giving the states access to a growth tax. Part of the price extracted from the states was the cessation of a number of state taxes that were seen, correctly, as inefficient from an economic viewpoint.

As the analysis quoted by Ken Parish makes clear, the net effect of the introduction of the GST was to leave the states dependent, as before, on Commonwealth funding. This held notwithstanding rhetoric from the Commonwealth Government to the effect that the states now had access to funds. The existence of the GST became a vehicle that could be used by the Commonwealth as required to argue against the provision of extra funds for particular purposes.

The general approach adopted by the Rudd Government since its election has accelerated centralisation. Mr Rudd believes in measurement and control. The various Commonwealth-State agreements negotiated since the Rudd Government Government came to power have generally been far more prescriptive, the approach more dictatorial; in some cases, the Commonwealth has not only dictated the performance indicators to be met, but has also mandated that it must approve the detailed implementation plans. This leaves the individual states or territories with formal public responsibility, but with little real authority.   

In some ways, Mr Rudd's actions on health have torn the veil away. Mr Rudd made it clear that the Commonwealth must be in control. The states have been told to take it or leave it. The proposed transfer of 30% of GST revenue - the purported state growth tax - to Commonwealth control is intended to ensure Commonwealth control.

The Rudd health care proposals themselves may or may not be good public policy. That is open to debate. What is clear is that Mr Rudd is attempting to bring about a further shift in the balance between Commonwealth and states.

The states are in a difficult position.

The health system needs extra money that they cannot provide. However, if they agree to Mr Rudd's proposals they give effective control away, while confirming the principle that the GST is in fact just another Commonwealth tax. Their problems are further compounded by their experience with previous Rudd Government Partnership arrangements. There is distrust at both official and political level. The states know that they may end up wearing problems not of their making.

As I write, negotiations are proceeding. I really have no idea as to outcome.

I have made my own personal constitutional position clear before.

I would like to see more states than we have at the present time because I think that present state structures, NSW in particular, have become unworkable. However, I think that those states need constitutionally entrenched positions because experience to date with local, regional and territorial governments is that the powers granted to them will simply be over-ridden by the granting body as political exigencies dictate. I also think that there needs to be a degree of flexibility over time in the allocation of powers since needs change.

Regardless of my own views, I think that so far as health itself is concerned, we need clarity as to who is responsible for what. If Mr Rudd is determined to assert the Commonwealth's power and position as seems to be the case, then it would seem sensible to alter the constitution to make the position clear.

It may be true, as Mr Abbott argues, that the Commonwealth already has the power in this area. However, a formal constitutional change would put the matter beyond doubt. It would also make the Commonwealth responsible for and accountable for its own actions. It presently is not.