Rising community expectations, trying to keep up with rapidly aging infrastructure, changing demographics placing additional burdens on Councils, cost shifting and unfunded mandates, the reasons why Councils are struggling financially are many. The Fair Share (Hawker report), now 15 months old, was explicit in its findings – councils are under extreme financial pressure and this must be rectified.
While the position of Local Government has worsened, the State and Federal Governments have continued to improve their fiscal positions. The States have gained the windfall of GST returns, which the Federal Government saw fit not to share with Local Government. And the Federal Government, after gaining control of income tax during World War II, has continued its hold on the nation’s purse strings through this and a raft of other growth taxes.
Federal Minister for Local Government Territories and Roads, Jim Lloyd, has said that one of his priorities will be to progress the Government’s response to the Hawker report (see National Perspective in this edition). He believes the focus of reforms responding to the report’s recommendations must be to strengthen Local Government to improve its capacity to deliver for communities.
The Minister says there is scope to explore the options available to Local Government to borrow, including the possibility of those Local Governments in strong financial positions being given the opportunity to issue investment bonds to finance essential major local infrastructure. He is also in favour of further investigation of the new infrastructure funding model proposed in ALGA’s State of the Regions Report released late last year. In both cases, the emphasis is on Councils borrowing to meet infrastructure needs and community demands for service delivery. This would assist some Councils but the viability and capacity of many to borrow and service long term debt must come into question.
Local Government’s poor financial position and revenue raising capacity is very much bound around the fact that, unlike its Federal and State counterparts, it does not have a stable revenue stream with a built in growth factor. This is a well known situation and has long been argued by ALGA as the key to solving Local Government’s worsening financial problems. The fleeting window of a direct share of income tax revenue for a few years in the 1970s proved this. Thirty years on, and with various Coalition and Labor Governments, Local Government’s call for a direct share has fallen on deaf ears, as did a share of GST returns.
Armed with the findings of the Hawker report and its bipartisan support, ALGA once again is calling on the Australian Government to put Local Government on a more stable financial footing, namely, providing all Councils with access to growth funds. If implemented this year, ALGA says just a one per cent share of the national taxation revenue will provide an increase of $400 million in the coming financial year, rising to larger amounts as the economy grows. This would not be a burden on the Commonwealth because future payments to Local Government will grow in line with the economy and taxation revenue.
With tax reform clearly on the agenda, ALGA has done its homework and has a strong case to argue. It is now calling on all Councillors to urge their local Federal MP to support a fair share for Local Government. Local communities are depending on this.
