Chapter 1 Preliminary report
This report provides the Committee’s major conclusions and
recommendations about the majority finding of the Expert Panel on
Constitutional Recognition of Local Government, as directed by the Committee’s
resolution of appointment.
This preliminary report relies on publicly available information, 131 submissions
to the inquiry and evidence taken at a public hearing in Sydney on 16 January
The Committee will seek an amendment to its resolution of appointment to
enable it to present a final report in March 2013. That report will contain a
comprehensive discussion of the evidence received during the inquiry.
Addressing the uncertainty
Evidence emphasised the uncertainty around those programs delivered by
local governments that the Commonwealth Government funds directly.
Previous inquiries, as well as reviews by agencies such as the
Commonwealth Grants Commission and the Productivity Commission, have
highlighted the expanding roles, responsibilities and functions of local
government. These services provide the essential foundation and structure that
enable local communities to prosper and grow.
Past crises in Australia have highlighted the need for governments to be
able to respond rapidly and flexibly to ensure the well-being of their
communities. In some circumstances the most effective way to do that is for the
Commonwealth to deliver funds directly to local government. Examples of such
responses involving direct funding from the Commonwealth to local government include
the Regional and Local Community Infrastructure Program (RLCIP), which was
established as a response to the global financial crisis.
Direct funding of local government by the Commonwealth has been common
practice for the past two decades. Indeed, as noted by Professor Anne Twomey,
direct funding has increased in proportion to Commonwealth grants, which are
made under Section 96 of the Constitution, since the mid-1990s.
The High Court’s decisions in Pape and Williams
have created significant uncertainty about the ability of the Commonwealth
Government to respond in this way in the future. These decisions have also
created uncertainty regarding critical ongoing direct funding programs such as
Roads to Recovery, which experts have confirmed would most likely be found
Whilst the Commonwealth Parliament passed the Financial Framework
Legislation Amendment Act (No. 3) 2012, to address implications of the Williams
decision, evidence to the Committee has suggested that this legislation may itself be subject
to constitutional challenge. Experts agree that if this were to occur, it would
most likely be found that the legislation does not provide a basis for the
Commonwealth to fund areas for which it does not have a direct legislative head
of power. The legislative support for the Roads to Recovery program could
be found invalid on similar grounds if challenged. As noted by Professor Anne
Twomey, ‘My own point of view, as a constitutional lawyer—particularly looking
at the Roads to Recovery program—is that it is more likely than not that it is
The Committee heard evidence that indicates there are already attempts
to challenge the constitutionality of forms of direct funding by the
Commonwealth. The High Court’s decision in Williams is only likely to
bolster the confidence of people willing and able to challenge the Commonwealth
on constitutional grounds. It is therefore not a matter of ‘if’ but of ‘when’
the presently understood ability for the Commonwealth to fund local government
directly is struck down as unconstitutional by the High Court.
The urgency of addressing the present situation comes from two sources.
Firstly, there is an imperative to address potential unconstitutionality and
the threat to funding it represents ahead of a possible High Court Challenge. Secondly,
and as Professor Brown stated in his evidence to the Committee, Commonwealth
funding to local government could be impacted even in the absence of a pending
High Court challenge because of the uncertainty surrounding the ultimate
constitutional status of such funding.
The Committee recommends that a referendum on financial
recognition of local government be held in 2013.
Given the importance of securing state and territory
support, the Committee further recommends that, in addition to the efforts of
the local government sector, Commonwealth Government Ministers, particularly
the Minister for Regional Australia, Regional Development and Local
Government, the Attorney-General and the Special Minister for State,
immediately commence negotiations with state and territory governments to
secure their support for the referendum proposal.
By tasking the Joint Select Committee to look into the majority view of
the Expert Panel, the Parliament directed the Committee to further develop and
refine proposals for financial recognition. This includes determining the best
form of words to be used as the amendment proposal.
The Committee supports the Expert Panel’s proposed form of words for the
amendment. Section 96 should be amended to insert new words (shown in italics
with one drafting alteration, in square brackets):
the Parliament may grant financial assistance to any State or
to any local government body formed by State or Territory [l]egislation on
such terms and conditions as the Parliament sees fit.
Evidence to the Committee confirmed that the Expert Panel’s proposal
would adequately address the uncertainty created by the Pape and Williams
cases. Professor George Williams considers that the proposal is sufficient in
legal terms to achieve certainty for direct funding of local government.
Professor Williams, at the public hearing on 16 January 2013, also stated
that the form of words proposed by the Expert Panel adequately addressed state
and territory government concerns that a reference to local government in
Section 96 would undermine their responsibility for and control of local
Contrary to assertions in some submissions, such as that from the Premier
of Western Australia, constitutional experts do not believe that the form of
words proposed by the Expert Panel would dilute the existing powers of state
and territory governments. The submission by the
Gilbert + Tobin Centre of Public Law submitted that an amendment to Section 96
in the form of words proposed by the Panel would not enable the Commonwealth to
take over the regulation of local government from the states and territories. Including
local government in Section 96, this submission states, ‘does not amount to a
head of power that can be used to over-ride the States’. 
This submission also dismissed the idea that the Commonwealth could use
conditions attached to Section 96 grants that would ‘force local government to
operate outside the framework of regulation created by the States’.
The High Court has confirmed that Section 96 is confined to granting money, and
that it is not a power to make laws with respect to a general subject matter.
In addition, these words have been in the public domain for over a year
and have been considered by governments, academics and stakeholders. The
proposal also has the invaluable advantage of being simple and easy to
For many state and territory governments, no formal position on a
referendum can be given until there is a concrete proposal. Because this
Committee’s role includes making recommendations in this regard, the
Commonwealth Government has been unable to commence formal negotiations to
secure state and territory government support. In addition, the Australian
Local Government Association (ALGA) – and its member organisations – have not
commenced negotiations and lobbying to secure similar support for the formal
Now that the Committee has recommended a concrete proposal, the
Commonwealth Government should commence negotiations immediately with state and
territory governments. Additionally, ALGA and its membership should immediately
commence negotiations and lobbying to secure the support of state and territory
governments for the proposal.
Given the importance and urgency of this issue and the need to ensure a
successful referendum outcome, negotiations should begin without delay.
The Committee recommends that the referendum propose an amendment
to Section 96 of the Constitution:
…the Parliament may grant
financial assistance to any State or to any local government body formed by State or Territory legislation on such terms and conditions as the Parliament thinks fit.
Timing of the referendum
Evidence put significant emphasis on holding the referendum at a time
that ‘maximises its chances of success’. There does not appear to be any
consensus from stakeholders and experts around when the ‘right time’ may be.
Indeed, there is a danger in waiting passively for the ‘right time’ to present
The Committee believes that the uncertainty created by the Pape and
Williams cases creates a moment for action. In this situation, those
concerned about that continuing uncertainty must act to create the
‘right time’ for a referendum.
The Committee’s position is supported by evidence received from the
submission from the Gilbert + Tobin Centre of Public Law that stated that referenda
to address problems identified by the High Court are most likely to succeed if
held as close to those decisions as possible. They noted that there is a risk
that the ‘urgency and importance of the problem will lose its punch if there is
a significant delay’.
The Gilbert + Tobin Centre of Public Law submission noted one of the few
successful referenda held in Australia was the one held in 1946 which was based
on the need to remedy a problem identified by the High Court.
This referendum sought to restore the ability of the Commonwealth, which
had been undermined by a High Court decision, to bring about a national pharmaceutical
benefits scheme. As the submission notes, ‘Australians voted Yes to restore
that scheme and the ability generally of the Commonwealth to provide important
The Australian community is facing a similar problem right now. As noted
by Professor George Williams, the referendum proposal would correct a specific
problem identified by the High Court, and in substance would merely return
Australia’s legal framework to the status quo that existed prior to the Pape
and Williams decisions. Such a ‘corrective’ referendum is highly likely
to succeed, as demonstrated by the 1946 example.
Some advocates for financial recognition of local government have
expressed concerns that there is not enough time between now and the next
federal election to build the necessary support. One reason for this is a
belief that a better time would be when the political environment was ‘less
toxic’. Concerns about sacrificing a proposal to financially recognise local
government ignore the evident consensus between federal parliamentary parties,
as demonstrated by unanimous support for the appointment of this committee, the
bipartisan participation in the work of the Expert Panel and statements by
party leaders giving support for financial recognition of local government.
The Committee believes that, in addition to the momentum created by the Williams
decision, there is ample time to build community support and ensure that the
necessary legislation and arrangements are in place.
In terms of public engagement and awareness, the Committee notes that, as
Professor Brown acknowledged, we are now in a digital age where social media
plays a significant part in informing and influencing public opinions. A
partisan campaign phase of 6 – 8 weeks, as suggested by Professor Williams,
would be realistic, achievable and above all, meaningful.
In terms of holding the referendum with the next federal election, the Committee
draws attention to the evidence provided by Professor George Williams who cited
the example of New South Wales referenda which are held at the same time as
state elections. Professor Williams suggested that one of the reasons for this success
is because the referendum question is rarely the most contentious political
issue at stake in the campaign leading to the election.
For these reasons, the Committee believes that a referendum to recognise
local government in Section 96 of the Australian Constitution should be held at
the same time as the 2013 federal election.
The Committee recommends that a referendum on financial recognition
of local government be held at the same time as the 2013 federal election.
Assessing the likelihood of success
Significant Commonwealth resources will be required to ensure an
The Australian Electoral Commission (AEC) will make a vital contribution
on enrolment and voting matters, particularly given the additional complexity
for voters having to vote in a referendum as well as a federal election at the
The AEC clearly demonstrated that it is well prepared for a referendum
at the next election. However, the Committee understands that further delays in
the development of these referendum materials could impact on the quality of
these products, which may result in uninformed votes.
Public engagement and information beyond that provided by the AEC will
also be critical for a successful outcome. The Australian community will need
information on the Constitution itself, constitutional change and factual
information on the question itself. This is the national civics education
campaign recommended by the Expert Panel.
The 2009 Report of the House of Representatives Legal and Constitutional
Affairs Committee inquiry into the machinery of referendums (the LACA report)
recommended that a non-partisan Referendum Panel should be established prior to
any referendum to develop an overarching communications strategy for the
referendum, including educational material. The Committee believes that the
Commonwealth Government should consider establishing a Referendum Panel.
The Committee considers funding for partisan campaigns as essential to
promoting public awareness and public engagement with the issue. It could also
result in the type of popular ownership viewed as essential for a successful
The Committee disagrees with ALGA’s recommendation that public funding
for partisan campaigns be distributed according to the proportion of support
for or against the proposal in Parliament. The Committee believes that funding
should be distributed to partisan campaigns on an equal basis, with both sides
of the question receiving equal funding.
The Commonwealth Government should be
responsible for determining the total funding available to support
well-financed partisan campaigns, and how this funding is distributed.
The Committee heard evidence from the Department of Regional Australia,
Local Government, Arts and Sport (DRALGAS) and the Attorney-General’s
Department. DRALGAS advised that they have responsibility for local government
policy as well as some local government programs. The Attorney-General’s
Department is responsible for constitutional matters.
Both Departments indicated that implementing this referendum merely
depends on direction from Government. The Departments clearly
display a high degree of preparedness, and given the urgency of the task, the
Committee believes that the Department of Regional Australia, Local Government,
Arts and Sport should be the lead Commonwealth agency in coordinating and implementing
this referendum. The Attorney-General’s Department, which is responsible for
constitutional matters, will of course be a key player in the
The Committee invited the Department of Prime Minister and Cabinet, the
Department of Finance and Deregulation, and the Treasury to attend the hearing
and provide submissions to the inquiry. Given that these three Departments all
declined the Committee’s invitation, the Committee can only assume that these
Departments are comfortable with including local government in Section 96.
The Committee notes that, despite the current fiscal environment, trying
to undertake public information and engagement activities such as the national
civics education campaign and the funding of partisan campaigns cannot be done
successfully on a shoe-string budget.
The Committee is aware of its responsibility to assist the Parliament to
make decisions about temporary amendments to the Referendum (Machinery
Provisions) Act 1984. In consideration of the Commonwealth Government’s
position that these changes should be considered on a referendum-by-referendum
basis, these recommendations
are outlined below.
Funding for both a civics education campaign and the public funding of
partisan campaigns would require the temporary suspension of the legislative
limit on spending contained in the Referendum (Machinery Provisions) Act
1984. The Committee believes that this limit should be temporarily
suspended for a referendum on financial recognition of local government.
The Committee agrees with the findings of the LACA report and believes
that the official Yes/No cases should continue to be drafted and approved by
There are other matters discussed in the LACA report that would improve
the conduct of a referendum, particularly relating to the official pamphlet and
communication methods. The Committee believes that addressing these matters
will be beneficial for the referendum process.
The Yes/No pamphlet should be sent to every household rather than to
every voter, in order to avoid waste. All Commonwealth Government activities
relating to the referendum should utilise a range of communication methods to
ensure that the referendum engages all parts of society. Format guidelines
should be adopted to ensure that the Yes/No pamphlet is easily comprehensible
to all voters.
The Committee recommends that the Commonwealth Government
begin all necessary preparatory activities to ensure a successful outcome for
a referendum on financial recognition in 2013. The preparatory activities
Australian Electoral Commission begin the necessary preparatory activities
for a referendum in 2013;
Department of Regional Australia, Local Government, Arts and Sport, as lead
coordinating and implementing agency, take the necessary steps for
implementing a national civics education campaign and managing funding of partisan
Attorney-General’s Department release a draft of the constitution amendment
bill by 31 January 2013 in order to begin the process of public consultation;
amendments be made to the Referendum (Machinery Provisions) Act 1984, to
effect the following outcomes:
- remove the legislative limit on Government spending;
- confirm that Parliamentarians should draft and approve the
‘Yes’ and ‘No’ cases for the official referendum pamphlet for financial
recognition of local government. In the event that there is no requirement
for a ‘No’ case, the Committee recommends that there should be an official
‘Yes’ case only;
- allow the official Yes/No pamphlet to be sent to every
household rather than every voter;
- enable a range of communication methods to educate and reach
across all Australian demographics; and
- use format guidelines for the official ‘Yes/No’ referendum
pamphlet to ensure the factual nature and comparability of the cases in the
hands of voters.