Bills Digest no. 103 2008–09
Federal Financial Relations Bill 2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced: 12 February
2009
House: House of Representatives
Portfolio: Treasury
Commencement:
1 April
2009
Links: The
relevant links to the Bill, Explanatory Memorandum and
second reading speech can be accessed via BillsNet, which is at
http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To
provide for three categories of payments of financial assistance to
the states and territories, namely:
The Bill also appropriates an additional $6.3 billion over five
years for financial assistance grants to the states and
territories.
The Howard Government implemented the last major reforms of
Commonwealth-state financial relations.[1] These reforms are contained in the
Intergovernmental Agreement on the Reform of Commonwealth State
Financial Relations [this is Schedule 2 to the
A New Tax System (Commonwealth State Financial Relations) Act
1999].[2]
This Intergovernmental Agreement provides, among other
things, that:
- the Commonwealth will pay to the states all the revenue it
collects from the GST (less administrative costs)
- the states can spend the GST-related grants as they wish
- the distribution of GST-related grants among the states is to
be based on horizontal fiscal equalisation principles[3]
- the Commonwealth will, for a transitional period expiring on 30
June 2006, ensure that no state is worse off under the new
arrangements than under the old arrangements the guaranteed minimum
amount undertaking[4]
- should a state s guaranteed minimum amount fall short of its
GST entitlement, the Commonwealth will make up the difference by
providing budget balancing assistance to that state[5]
- the states will abolish bed taxes, financial institutions duty,
stamp duty on marketable securities, and debits tax by specified
dates, and
- the Ministerial Council for Commonwealth State Financial
Relations will, by 2005, review the need to retain certain stamp
duties (hereafter review taxes ).[6]
By 1 July 2005, the states had abolished the bed taxes etc. as
agreed. A reason the states did so was because, in effect, the
Commonwealth compensated the states for the revenue they
forwent.
In the case of the review taxes, however, the states incur the
loss of revenue resulting from their abolition. Consequently, the
states have been reluctant to abolish the review taxes. However, in
2006, the Commonwealth reached agreement with all the states on a
schedule for the abolition of review taxes by 30 June 2011 subject
to two exceptions.[7]
First, no state agreed to abolish stamp duty on conveyances of real
non-residential property (for example, business real estate).
Probably the main reason is that this tax is a significant revenue
source.[8] Second,
NSW was not scheduled to abolish non-real non-residential
conveyance duty (for example, on the sale of a business) until 2012
13.
Specific purpose payments (SPPs) are payments the Commonwealth
makes to the states to help fund services and infrastructure in
areas such as education, health and roads. The states are
responsible for administering and delivering the services. SPPs are
usually subject to prescriptions (terms and conditions) whereby the
Commonwealth requires the states to meet certain undertakings in
order to receive grants ( conditionality ).
The Commonwealth s power to provide SPPs under section 96 of the
Constitution has allowed the Commonwealth to be involved in areas
far beyond those stipulated in the Constitution. The sharing of
responsibility for services between the Commonwealth and the states
has given rise to numerous problems including the blurring of roles
and responsibility as to which level of government is responsible
for what, blame shifting, duplication of administration and waste,
and cost-shifting.
Proposals to resolve these problems include defining the
respective roles and responsibilities of the Commonwealth and the
states, the broadbanding of related SPPs (for example, those
dealing with health) into one SPP, and a greater focus on results
and outcomes (as distinct from inputs).[9]
In March 2008, the Council of Australian Governments (COAG)
announced major reforms to Commonwealth-state financial
relations.[10] Key
features of the reform include:
- a rationalisation of, and reduction in, the number of SPPs
without a reduction in Commonwealth funding
- rationalisation is to be achieved mainly by combining
(broadbanding) related SPPs into new national SPP agreements
- some SPPs are to be paid as general revenue assistance (for
example, payments to the ACT government to compensate it for costs
resulting from its role as the national capital)
- a new category of payment of SPP known as national partnership
payments to:
- support specific projects in areas of joint responsibility
(such as transport, water and early childhood)
- encourage the states to adopt reforms (facilitation), and
- reward the states for implementing nationally-significant
reform
- national SPP agreements will not be subject to prescriptiveness
(conditionality) financial or otherwise[11]
- the focus of SPPs will shift to results, outcomes and outputs,
that is, away from inputs
- indicators are to be developed to measure performance against
agreed outputs and outcomes
- the COAG Reform Council will independently assess performance
against the indicators
- a state s share of a national SPP will be its share of the
population
-
- the distribution of the non-government schools component of the
national schools SPP will be determined in accordance with the
Schools Assistance Act 2008[12]
- the adoption of a new Intergovernmental Agreement on Federal
Financial Relations, which contains these proposals[13]
- payment arrangements are to begin on 1 January 2009, and
- the Commonwealth agreed to introduce the legislation necessary
to implement the new Agreement on Federal Financial Relations in
the autumn parliamentary sittings of 2009
Notwithstanding when the legislation receives royal assent, the
legislation is to have effect from 1 January 2009.[14]
In short, under the COAG reforms, Commonwealth payments to the
states fall into three categories:
- national SPPs covering key sectors such as health and social
housing
- three categories of national partnership payments:
- project payments
- facilitation payments
- incentive payments
- general revenue assistance comprising:
- GST payments, and
- other general revenue assistance.
The claimed benefits of the reforms include clearer lines of
responsibility, reduced duplication and waste, and enhanced
accountability. Further, broadbanding related SPPs into
national SPPs and reduced conditionality will give the states
greater flexibility to allocate resources to areas of highest
priority.
Back to top
On 29 November 2008, COAG agreed to the March 2008
proposals.[15] COAG
also announced an additional $7.1 billion in SPP funding to
the States over five years , and the creation of five new
(broadbanded) national SPPs and funding of:
- $60.5 billion in a National Healthcare SPP
- $18 billion in a National Schools SPP
- $6.7 billion in a National Skills and Workforce Development
SPP
- $5.3 billion in a National Disability Services SPP, and
- $6.2 billion in a National Affordable Housing SPP.
Each National Agreement/SPP:
contains the objectives, outcomes, outputs and
performance indicators, and clarifies the roles and
responsibilities that will guide the Commonwealth and States in the
delivery of services across the relevant sectors. The performance
of all governments in achieving mutually-agreed outcomes and
benchmarks specified in each SPP will be monitored and assessed by
the independent COAG Reform Council and reported publicly on an
annual basis.[16]
COAG also agreed that the new national SPPs would be distributed
among the states on an equal per capita basis phased in over five
years (with the exception of schools).
Also on 29 November 2008, COAG announced that funding of
national partnership payments would be decided at a later date, and
that the first national partnership payments would begin in 2009,
including:
- Hospitals and Health Workforce Reform
- Preventive Health
- Taking Pressure off Public Hospitals
- Smarter Schools - Quality Teaching
- Smarter Schools - Low Socio-economic Status School
Communities
- Smarter Schools - Literacy and Numeracy
- Productivity Places Program
- Early Childhood Education
- Fee Waiver for Childcare Places
- Indigenous Remote Service Delivery
- Indigenous Economic Development
- Remote Indigenous Housing
- Indigenous Health
- Social Housing
- Homelessness, and
- Seamless National Economy.
The first National Partnership payments have been agreed. They
are:
- preventive health[17]
- improving teacher quality[18]
- literacy and numeracy[19]
- TAFE fee waiver for childcare places[20]
- remote service delivery[21]
- social housing,[22] and
- homelessness.[23]
On 5 February 2009, COAG held a special council on the Rudd
Government s nation building and jobs plan.[24] The purpose of the meeting was to
ensure that the plan was implemented speedily. To help achieve this
objective, COAG adopted a national partnership agreement on the
plan.[25]
Back to top
Overall, the reforms are a major step towards a more rational
system of SPPs. A major feature of the reforms is that they address
directly problems associated with existing SPP arrangements such as
the blurring of roles and responsibility between the Commonwealth
and the states.
That said, not all of the COAG proposals are new. Indeed, the
new arrangements contain key features of the Howard Government s
reforms including:
- the states will continue to receive GST revenue, which they can
spend as they wish[26]
- the Commonwealth Grants Commission will continue to apply the
horizontal fiscal equalisation principle in its calculations to
determine the allocation of GST revenue among the states,[27] and
- the states have reaffirmed their undertaking to abolish the
review taxes albeit with some differences (see below).[28]
As noted, one of the problems resulting from the sharing of
functions between the Commonwealth and the states has been blurred
roles and responsibility, and duplication of administration. A
feature of the reforms is that they seek to establish the areas of
responsibility of each tier of government. The National Healthcare
Agreement, for example, classifies responsibilities into three
categories: those shared by the Commonwealth, states and
territories; those for which the states and territories are
responsible; and those for which the Commonwealth is
responsible.[29]
This is a commendable feature in that it should help resolve
problems of overlap and duplication.
The specification of areas of responsibility is not, however, a
panacea since grey areas remain. For example, in the case of the
National Affordable Housing Agreement, one of the Commonwealth s
responsibilities is leadership for national housing and
homelessness policy including Indigenous housing policy , while the
states are responsible for leadership for housing and homelessness
policy, including Indigenous housing policy .[30] This begs the questions of what
constitutes national and whether there might still be overlap.
As noted, the COAG reforms seek to shift the emphasis from
inputs and conditionality to outcomes and results. An example of
outcomes is those for schools:
The Agreement will contribute to the following
outcomes:
- all children are engaged in and benefiting from schooling;
- young people are meeting basic literacy and numeracy standards,
and overall levels of literacy and numeracy achievement are
improving;
- Australian students excel by international standards;
- schooling promotes the social inclusion and reduces the
educational disadvantage of children, especially Indigenous
children; and
- young people make a successful transition from school to work
and further study.[31]
Performance data will be collected for national agreements, and
for National Partnerships to the extent that they support the
objectives in National Agreements .[32] The COAG Reform Council will
therefore have to determine which national partnerships meet this
criterion.
The emphasis on outcomes and outputs is not, however, without
problems. A major challenge is to develop meaningful outcomes and
outputs and useful performance indicators:
This is an ambitious task as outcome/output
measures of service delivery are difficult to define, measure and
enforce in a robust way.[33]
Indicators of quality and efficiency of service delivery, for
example, are notoriously difficult to devise. Further,
organisations tend to focus on attaining the identified outcomes
with the result that other areas can be neglected.
A positive feature of the reforms is the proposed role for the
COAG Reform Council in undertaking independent assessments of the
merits of performance information and benchmarks. The COAG Reform
Council s roles are:
As set out in this Agreement, or otherwise
requested by COAG, the Council will report to the Prime Minister,
as Chair of COAG, on:
- the publication of performance information for all
jurisdictions against National Agreement outcomes and performance
benchmarks;
- production of an analytical overview of performance information
for each National Agreement, and National Partnership to the extent
it supports the objectives in a National Agreement, noting that the
Council would draw on a range of sources, including existing
subject experts;
- independent assessment of whether predetermined performance
benchmarks have been achieved before an incentive payment to reward
nationally significant reforms under National Partnerships is
made;
- monitoring the aggregate pace of activity in progressing COAG s
agreed reform agenda; and
- other matters referred by COAG.
Through the assessment and reporting process,
the Council will highlight examples of good practice and
performance, but will not have a policy-advising role.[34]
On the other hand, paragraph 20 of the new Intergovernmental
Agreement on Federal Financial Relations provides:
National SPPs may be associated with National
Agreements, but there is no provision for National SPPs to be
withheld in the case of a jurisdiction not meeting a performance
benchmark specified in a National Agreement.[35]
This raises the question of why a jurisdiction should not
attract some form of penalty for non-performance. The absence of
conditionality on National SPPs limits what the Commonwealth can do
when there is non-performance.
In contrast, the COAG reforms adopt a penalty approach for
national partnerships:
The COAG Reform Council will be the independent
assessor of whether pre‑determined milestones and performance
benchmarks have been achieved before an incentive payment to reward
nationally significant reforms or service delivery improvements
under a National Partnership reward payment is made. The final
decision on payments will be made by the Commonwealth.[36]
This approach is similar to that for the former National
Competition Payments. Under these arrangements, the Commonwealth
Treasurer could withhold payment to a state if the National
Competition Council independently determined that a state had not
met its obligations under the Agreement to Implement the
National Competition Policy and Related
Reforms.[37] In the case of national partnership payments, the
relevant Commonwealth minister must similarly determine whether an
incentive payment will be made.[38]
Much of the criticism of existing SPPs relates to conditionality
whereby the Commonwealth requires the states to meet certain
undertakings in order to receive grants. Conditionality sometimes
takes the form of input controls such as the states having to match
Commonwealth funding. The focus on outcomes and results constitutes
a shift away from conditionality.
Overall, the reforms reduce conditionality with national SPPs
not subject to conditionality:
While the States and
Territories will not be able to redistribute National SPPs from one
sector to another, there will be no conditions attached to the
National SPPs in respect of how States or Territories allocate
their own funding across or within sectors.[39]
The abolition of conditionality on national SPPs amounts to the
Commonwealth ceding some power to the states. Conditionality can
prevent the states from shifting costs on to the Commonwealth, and
is one way of ensuring that the states spend grants for the
purposes for which they were intended. On the other hand, releasing
SPPs from conditionality gives the states greater flexibility to
divert resources to areas they see as having greatest priority.
Other SPPs (that is, non-national SPPs) will, however, remain
subject to conditionality. Thus while the reforms reduce the level
of conditionality overall, conditionality will remain important in
some areas.
There has been some slippage in the new arrangements with
respect to the review taxes.[40] First, as noted, no state agreed to abolish stamp
duty on conveyances of real non-residential property. Whereas
previously, the Commonwealth had continued to push for the
abolition of this tax, it is now not listed for abolition. This
suggests that the Commonwealth has accepted that the states will
not abolish this tax. Second, whereas all the states except NSW had
agreed to abolish review taxes by 30 June 2011, the deadline has
been extended to 30 June 2013. Some states have used this to
reschedule the abolition of certain taxes.[41] For example, in its 2008 09
Mini-Budget, the NSW Government announced:
New South Wales previously announced a schedule
for the abolition of a number of taxes that were listed for review
in the Intergovernmental Agreement on the Reform of
Commonwealth-State Financial Relations (IGA).
This schedule for the abolition of mortgage
duty and the transfer of non-land business assets was brought
forward in the past two Budgets. Currently, duty on unquoted
marketable securities is scheduled to be abolished from 1 January
2009, mortgage duty on business loans is scheduled to be abolished
on 1 July 2009 and transfer duty on non-land business assets is
scheduled to be abolished on 1 January 2011. Mortgage duty has been
abolished for individuals taking out mortgages on both owner
occupier and investor residential properties.
New South Wales remains committed to the
abolition of these taxes. However, as a cyclical response to the
deterioration in revenue, the abolition of these three stamp duties
will be deferred until 1 July 2012. This initiative will generate
an additional $36 million in 2008-09, $197 million in 2009-10, $298
million in 2010-11 and $401 million in 2011-12.[42]
While the COAG reforms retain the main features of the
distribution arrangements for financial assistance among the states
under the Howard Government s reforms, the new arrangements differ
in several respects.
As noted, COAG agreed that the national SPPs are to be
distributed among the states on an equal per capita basis (except
schools). COAG also agreed to continue to apply the horizontal
fiscal equalisation principle to the national SPPs. This principle
is that if each state made the same effort to raise revenue from
its own sources and operated at the same level of efficiency, each
state would have the capacity to provide services at the same
standard.[43] (The
Commonwealth Grants Commission applies the horizontal fiscal
equalisation principle when it determines the relativities used to
calculate the distribution of the GST among the states). The effect
of the decision to continue to apply horizontal fiscal equalisation
will be that while the national SPPs grants will initially be
distributed on a per capita basis, the grants will be redistributed
among the states.[44]
COAG also agreed that the horizontal fiscal equalisation
principle would apply to national partnership project payments,
that is, they too can, in effect, be redistributed among the
states.
In contrast, national partnership facilitation and incentive
payments cannot be redistributed among the states under the
horizontal fiscal equalisation principle.[45] The intent seems to be to ensure that
a state retains the benefit from having undertaken reform. This is
sensible given that the purpose of the facilitation and incentive
payments is to encourage the states to undertake reform. However,
this treatment is not binding on the Commonwealth Grants Commission
which may treat, on a case by case basis, any National Partnership
payment differently if it considers that such treatment is more
appropriate [46]
COAG decided that other general revenue assistance
that is, general revenue assistance other than the GST will be
available for redistribution among the states. However, COAG also
agreed that the Commonwealth Grants Commission may treat, on a case
by case basis, any component of general revenue assistance as out
of scope if it considers such treatment is more appropriate. This
could mean, for example, that the crude oil condensate payments
made to Western Australia will be available for redistribution to
the other states but that the payments made to the ACT for national
capital influences will not be available for redistribution.
As noted, a key feature of the COAG reforms is a number of
national SPPs and national partnerships. The following examines
these in more detail.
Historically, funding agreements between the states and
territories and the Commonwealth for health care have been fraught.
Most notable was the walk-out by the states in the 2003 Australian
Health Care Agreement (AHCA) negotiations. Under Federal-state
arrangements for health funding, the Commonwealth has a shared
responsibility with the states to fund public hospitals and a range
of other public health activities (such as population
health)[47]. States
have a responsibility for management and funding of the public
hospital system and management and funding of community health.
As part of its election commitment, the Rudd Government promised
additional funding for hospitals and health care more broadly. The
first instalment of the additional funding was announced at the
COAG meeting on 26 March 2008, with an immediate allocation of one
billion dollars to the public hospital system, half of which was to
be provided in 2007 08.[48] At the same meeting, funding of $9.7 billion for public
hospitals was announced for 2008 09.[49]
At the 29 November 2008 COAG meeting, the new National
Healthcare Agreement was announced.[50] This was put forward as the new
arrangements for prevention, primary and community care, hospital
and related care and aged care for the Commonwealth, state and
territory governments.[51] Funding of $60.5 billion over four years was agreed
with $4.8 billion in additional base funding.[52] It was claimed that the States,
are, on average, better off by nearly $1 billion each year over the
five years .[53]
The indexation of the base payment was increased to 7.3 per
cent.[54] In
addition there will be a $500 million boost to the base funding
each year from 2008 09 for the next five years.[55] This Agreement does not have an
end date but the parties have agreed that it will be reviewed
periodically, at least every five years to ensure the adequacy of
Commonwealth funding.[56] The Healthcare Agreement will be reviewed midway
through each four to five year period to address any unintended
consequences .[57]
As with other Agreements put forward in this package, there are
defined outcomes, progress measures and outputs, responsibilities
and performance benchmarks.[58] It also puts forward policy and reform directions
but it is noted that these will be contingent on available
resources .[59]
In addition, the roles and responsibilities of each party as
well as the areas of joint responsibility are defined. Broadly
speaking, these are not dissimilar from previous healthcare
agreements.
The outcomes, progress measures and outputs are designed to
enable achievement of the performance benchmarks contained in the
Agreement. In some instances, there do not appear to be clear
linkages between the performance benchmark and the progress
measures and outputs. For example, the output for hospital and
related care relates to rates of service provided by public and
private hospitals per 1 000 weighted population whereas the
performance measure is a nationally consistent approach to
activity-based funding for public hospitals. In contrast, the
performance benchmarks for prevention are more closely aligned with
progress measures and outputs. It may be that the lack of
nationally consistent data limits the extent to which the
Commonwealth can measure performance and may also possibly explain
the lack of congruence, in some instances, between the performance
benchmarks and the outcomes, progress measures and outputs.
The methodology for reporting on progress measures and outputs
has been developed by the Australian Institute of Health and
Welfare and it is intended that it will incorporate data from
private sector services. Reporting on progress measures, outputs
and benchmarks will be made publicly available.
Back to top
Outcomes, progress measures and outputs focus on the following
themes.
Prevention
The preventive effort is focussed on child health and management
of risk factors. Progress measures include low birth weight,
incidence/prevalence of preventable diseases and risk factor
prevalence. Outputs include immunisation rates (according to the
national schedule), cancer screening rates (breast, cervical,
bowel) and the proportion of children with fourth year development
check.
Primary and community health
This is largely focussed on appropriate and timely access to
health care which is comprehensive and integrated. Progress
measures include access to general practitioners, dental and other
primary healthcare professionals; reduction in diabetics with
HbA1c; life expectancy (including the gap between Indigenous and
non-Indigenous); infant/young child mortality rate (including the
gap between Indigenous and non-Indigenous); potentially avoidable
deaths; treated prevalence rates for mental illness; selected
potentially preventable hospitalisations; and selected avoidable
general practitioner type presentations to emergency departments.
Outputs include the number of primary care services per 1,000
population (by location), the number of mental health services,
planned health care for specific diseases for some Australians
(asthma, diabetes, mental health) and the number of women with at
least one antenatal visit in the first trimester of pregnancy.
Hospital and related care
This is to ensure timely and appropriate access to high quality
hospital and hospital-related care. Progress measures include
waiting times, selected adverse events in acute and sub-acute
settings, unplanned/unexpected readmissions within 28 days of
selected surgical admissions, survival of people diagnosed with
cancer (five year relative rate). Outputs include rates of services
provided by public and private hospitals per 1000 weighted
population by patient type.
Aged care
This includes appropriate care for older
Australians that is of high quality and affordable. It also seeks
to ensure choice and easy transitions between sectors (e.g., from
hospital to aged care facility or community care). Progress
measures include residential and community aged care services per
1,000 population aged 70+ and selected adverse events in
residential care. Outputs include the number of people receiving
aged care services by type (community and residential settings),
the number of aged care assessments conducted, the number of
younger people with disabilities using selected aged care services,
the number of people 65+ receiving sub-acute and rehabilitation
services, and the number of hospital patient days by those eligible
and waiting for residential aged care.
Patient experience
This seeks to improve patient experience of health care and
ensure quality of health information as well as safe care when
transferring between health care settings. Progress measures
include nationally-consistent information about patient
satisfaction regarding care.
Social inclusion and indigenous health
Activities in this area seek to improve health outcomes of
Indigenous Australians living in rural and remote areas or on low
incomes. Progress measures include age-standardised mortality,
access to services by type of service compared to need, teenage
birth rate, hospitalisation for injury and poisoning, and children
s hearing loss. Outputs include participation by Indigenous
Australians in the health workforce.
Sustainability
This relates to the future sustainability of the health system
as well as the capacity of the health care system to respond to
future needs. Progress measures include net growth in the health
workforce, allocation of health and aged care expenditure and cost
per case mix-adjusted separation for both acute and non-acute care
episodes. Outputs include the number of accredited/filled clinical
training positions.
This Agreement contains a number of performance benchmarks in
the following areas.
Prevention
These include specific reductions within defined timeframes for
the age-prevalence rate for Type 2 diabetes, national smoking rate,
the Indigenous smoking rate and improvements to the number of
Australians at a healthy body weight within defined timelines.
Hospital and related care
Administration
A nationally-consistent approach to activity-based funding for
public hospitals within five years.
Emergency departments
Improvements in the waiting times at emergency departments,
consistent with the recommendations by the Australian College of
Emergency Medicine by 2012 13.
Quality and Safety
Specific targets for the rate of staphylococcus aureus
(including MRSA) in each acute care public hospital by 2001 12.
Primary care
Increased provision of primary care and reduced proportion of
potentially preventable hospital admissions by 2014 15.
Social inclusion and indigenous health
Close the life expectancy gap for Indigenous Australians within
a generation and halve the mortality gap for Indigenous Australians
under five within a decade.
According to Schedule C of the Intergovernmental Agreement
on Federal Financial Relations, progress measures and outputs
are used to measure performance against the performance
benchmarks.[60]
Unlike the previous AHCAs, there are no financial penalties if
states and territories do not meet performance benchmarks.[61] The COAG Reform
Council will determine whether a performance benchmark has been
met.
In the absence of financial incentives, it appears that the
various performance measures are designed to encourage greater
accountability and scrutiny in the delivery of health care by both
the state and Commonwealth governments. Previous AHCAs have all
included performance indicators but the capacity of the Department
of Health to monitor whether the states and territories are meeting
these objectives has been limited.[62]
The approach to performance management adopted in the Healthcare
Agreement is somewhat different to the accompanying Preventive
Health National Partnership which has defined targets with
facilitation and reward payments. This is not inconsistent with
what has been recommended by the National Health and Hospitals
Reform Commission which advocates pay for performance incentives in
health care and in the administration of the health care
system.[63] It is
acknowledged, however, that this can be difficult to implement in
the absence of quality data.[64] Although there are no financial incentives to
achieving performance benchmarks under the Healthcare Agreement, it
may be that the public reporting of progress and achievement by
each government may be sufficient.
This Agreement has been negotiated in the context of the
establishment of numerous Reviews, Taskforces and the pledge by the
Rudd Government to end the blame game . Many of these reviews and
taskforces have not yet reported to government and it is not clear
what direction health reform might take in the next five to ten
years. This perhaps has constrained the extent to which the
Agreement could shift from existing models of health financing.
According to the COAG Communiqu , this agreement represents a
historic reform package yet it has not been met with the approval
of all stakeholders.[65] The AMA has argued that the Agreement is a bit thin and
will not adequately address the current pressures on the health
care system.[66]
The Australian Hospitals and Healthcare Association expressed
disappointment that the indexation rate was not higher but welcomed
the overall objectives of the Agreement.[67] The state and territory governments
were reported as seeking a nine per cent indexation payment but
appear to have accepted the Agreement as it currently
stands.[68]
As with the Preventive Health national partnership, it will be
some time before performance under the Healthcare Agreement can be
adequately evaluated. Despite this, the Agreement does put forward
a framework which, if fully adopted, will go some way to improved
measuring of the performance of Australia s health care system.
Of note, this Agreement does not include any matching
arrangements with states and territories.[69] Previous AHCAs have attempted to
ensure that states matched any Commonwealth funding and this has
often led to an adversarial approach to discussions about health
financing. Time will tell if the partnership approach and defined
performance benchmarks will lead to improvements in
Commonwealth-State relations and, ultimately, improved health
outcomes for all Australians.
Back to top
This national partnership agreement establishes a number of
broadly-based population health campaigns that will address the
rising prevalence of lifestyle-related chronic diseases and
establishes a dedicated National Preventive Health Agency. National
collaboration for eating disorders will also be established.
Expected outcomes of the partnership include:
- improvements in the numbers of children and adults within the
healthy weight range
- increased levels of physical activity for children and adults
as well as increased fruit and vegetable consumption
- reduction in smoking rates
- reduction in the hazardous consumption of alcohol, and
- improvements to the health of younger Australians with a focus
on positive parenting and supportive communities.[70]
An underlying focus on this partnership is improving the health
outcomes of socially disadvantaged Australians. The partnership
expires in 2015.
The major direction of the partnerships is detailed in Part 2,
which focuses on Objectives, Outcomes and Outputs. It defines clear
targets as well as specific programs/initiatives to be delivered
under the Agreement. Programs in the following areas will be
delivered.
Healthy children
Programs will focus on physical activity, healthy eating and
primary and secondary prevention .[71] Programs are to be delivered by state
and territory governments.
Healthy workforce
This includes the delivery of healthy living programs such as
physical activity, healthy eating, alcohol consumption and smoking
cessation.[72] The
Commonwealth has a responsibility to develop a national healthy
workplace charter in conjunction with peak employer groups to
encourage a nationally consistent approach.
Healthy communities
This will support the implementation of social marketing
health-based campaigns for physical activity and healthy eating. A
specific focus will be on disadvantages populations and the
unemployed as well as priority, high needs areas identified by
local governments. The intention is to use existing programs and
infrastructure (for example commercial fitness and weight-loss
sectors) to support implementation. The Commonwealth will have a
role in accreditation of programs and service providers.
Industry partnership
The Commonwealth, in consultation with the states and
territories, will develop partnerships with relevant industry and
non-government sectors to effect change. These industries and
non-government sectors have not been defined in the national
partnership, nor have the specific initiatives that the partnership
might undertake.
Social marketing
The Commonwealth will fund a social marketing campaign to
complement the existing Australian Better Health Initiative
campaign. A National Preventive Health Agency will oversee the
campaign and this will be established and funded by the
Commonwealth.
The Commonwealth will also fund the states and territories to
conduct local activities that support the national social marketing
campaign. In addition, the Commonwealth will also fund a tobacco
social marketing campaign to be supported by State/Territory funded
activities.
Enabling infrastructure
This effectively establishes the infrastructure to report and
evaluate the partnership. It includes improved data collection of
the National Nutrition and Physical Activity Survey as well as the
establishment of a research fund. An Eating Disorder Collaboration
and a national preventive health agency will also be established by
the Commonwealth. States and territories will be required to
conduct more frequent health, nutrition and physical monitoring
surveys.
Part 3 outlines the roles and responsibilities of the
Commonwealth and states and territories. The Commonwealth will play
leadership and oversight roles by developing partnerships and
infrastructure and establishing the national preventive health
agency. The states and territories will deliver and manage programs
and services.
Part 4 of the Agreement details performance benchmarks,
timeframes and reporting. These have been agreed by Commonwealth,
state and territory governments and are quite specific. For
example, it includes a reduction in smoking rates by two percentage
points from the 2007 national baseline by 2011.[73]
Apart from smoking, the baseline for all performance benchmarks
will be June 2009. Performance against the benchmarks will be
assessed at June 2013 and December 2014. The Agreement notes that
the COAG Reform Council may further review a state or territory s
performance in the following areas:
- children and adults at healthy bodyweight
- children and adults meeting guidelines for fruit and vegetable
consumption
- children and adults meeting the guidelines for physical
activity, and
- Australians smoking daily[74]
For the Healthy children and Healthy workers initiatives,
payment is structured on a 50 per facilitation and 50 per cent
reward basis. Facilitation payments will be paid to the states and
territories for the development of some of the social marketing
campaigns and some of the enabling infrastructure but these will
not be subject to a reward payment.
Payment of the reward component will be staggered with 20 per
cent to be paid in June 2013, and 30 per cent to be paid in
December 2014. For states and territories which do not meet
performance targets, a partial payment will be made proportional to
achievement.
This is the first time that the Australian Government has
explicitly linked performance in preventive health with payments.
Although targets have been set in health care previously[75] and funding has been
provided for specific priority areas (such as diabetes,
cardiovascular health, cancer control, injury prevention, and
mental health), it has rarely been linked to specific targets such
as reduction by a pre-determined amount.
Clearly, it will take some time to determine the effectiveness
of this approach and whether financial incentives will translate to
improved health outcomes. Furthermore, States and Territories will
need to develop capabilities in reporting against these performance
benchmarks as they will have responsibility for reporting. It is
not clear what role, if any, the Australian Institute of Health and
Welfare or the Australian Bureau of Statistics will have in data
collection and analysis of these performance indicators. Both of
these organisations have extensive experience in population health
surveys and comparison of data across jurisdictions. Furthermore,
they would also provide a level of independence when reporting, and
assessing, performance. However, if these agencies were to take on
such a role, it is not clear if their current resource constraints,
such as the efficiency dividend, would allow for an increase in
their responsibilities.
This approach to prevention has been described as a landmark
change in health funding[76]. Nevertheless, there has been little stakeholder
comment about the National Partnership Agreement on preventive
health. Throughout 2008, commentary on preventive health has
focussed on the need for prevention activities to be linked with
adequate access to health care.[77] Other commentators have considered how preventive
health might be defined, what the responsibilities of government
might be, integration and funding of preventive health in the
health care system and how this might be evaluated.[78]
Many of the targets, outcomes and outputs of the partnership
reflect the recommendations of the Preventative Health Taskforce
established by the Rudd Government in early 2008. For example, the
Obesity in Australia: a need for urgent action report suggests the
development of social marketing campaigns for physical activity and
healthy eating, a national approach to encouraging physical
activity and closing the gap for disadvantaged communities.[79] Although the
Preventative Health Taskforce Tobacco Working Group recommended a
much more ambitious reduction in smoking rates (9 per cent
reduction by 2020), the targets put forward in the partnership
will, if realised, go some way in achieving this goal.[80]
The Bill appropriates base funding of $3.3 billion in 2009 10
for the National Schools SPP, which will be based on enrolments,
provided on an ongoing basis and indexed annually. It also
authorises the COAG Reform Fund to be credited to fund National
Partnership Agreements with schools. The Improving Teacher Quality
($550 million) and the Literacy and Numeracy ($540 million)
National Partnerships have been agreed. A third national
partnership to assist disadvantaged schools ($1.1 billion) is still
being negotiated.[81] These partnerships are for periods of four to five
years.
The Bill marks a fundamental change in Commonwealth funding
arrangements for government schools. Previously, Commonwealth SPPs
for both government and non-government schools were provided on a
four-yearly basis. The legislative authorisation for school SPPs
was a single Act that covered both school sectors and provided
funding for general recurrent grants, capital works and targeted
programs. The legislation was supported by a framework of
legislative regulations, administrative guidelines and agreements
with government and non-government education authorities. [82]
Now there will be a
single SPP for government school education under the terms of the
National Education Agreement (the NEA), supported by the three
National Partnership Agreements. The funding for the new SPP
includes funding previously provided under the Schools
Assistance (Learning Together Achievement Through Choice and
Opportunity) Act 2004, the Indigenous Education (Targeted
Assistance) Act 2000 and annual appropriations. The SPP also
provides additional funding for government primary schools ($635.1
million), the National Secondary School Computer Fund: Additional
Funding for On-Costs ($807.0 million) and new indexation
arrangements whereby the growth in government school enrolments
will become part of the ongoing funding formula
($412.4 million).[83]
In effect, school programs which existed under the previous SPP
arrangements cease to exist for government schools. However, under
the terms of the NEA, government school education systems will
still be required to meet similar outcomes to those targeted by
these previous programs.
Funding arrangements for the agreed National Partnerships vary.
For the Improving Teacher Quality National Partnership, funding is
distributed on the basis of their share of national full-time
equivalent teaching numbers, adjusted to take into account issues
such as remoteness. Of the total funding of $550 million, $444
million will be provided to the states and territories. The
remainder ($106 million) will be retained by the Australian
Government to support personal development for principals ($50
million) and national activities ($56 million).[84]
Of the total funding for the Literacy and Numeracy National
Partnership ($540 million), $150 million will be distributed in
2009 and 2010 on the basis of each state and territory s share of
students at or below the minimum standard in reading and numeracy
for Years 3, 5 and 7. A further $350 million will be distributed in
2011 and 2012 as reward reform, based on the achievement of
predetermined milestones and benchmarks as determined by COAG. A
proportion of this funding will be specifically for improvements in
Indigenous student education outcomes. Presumably the remaining
National Partnership funding ($40 million) will be used for
national activities.[85]
The funding arrangements for the National Partnership for
disadvantaged schools have not yet been announced.
Back to top
The SPP and National Partnership funding for schools will be
augmented by the Building the Education Revolution (BER)
initiatives ($14.7 billion for government and non-government
schools over three years), announced as part of the National
Partnership Agreement on the Nation Building and Jobs
Plan.[86]
There are also some other school programs, such as the National
Asian Languages and Studies in Schools (NALSS) program and the
Digital Education Revolution, which also fall outside the SPP and
National Partnerships framework. These programs are funded through
annual appropriations.
Commonwealth funding for non-government schools is continuing
much as before with similar programs, and funding and
administrative arrangements. The Schools Assistance Act
2008 provides an estimated $28 billion from 2009 to 2012 for
non-government schools; that is, the non-government school SPP
which will continue to be paid through the states and
territories.[87]
Under the terms of their funding agreements with the Commonwealth,
non-government school education systems and schools will be obliged
to meet the same educational goals as are government schools under
the NEA.
Non-government schools are also entitled to access the funding
available through the National Partnerships. As the agreements for
the National Partnerships state, the Commonwealth and the states
will work together to involve the non-government sector and:
States will invite non-government sector
authorities to participate These authorities will be involved in
the design, operation and evaluation of State Implementation
Plans.[88]
There is also provision for the Commonwealth to establish
separate Partnership Agreements with non-government education
authorities if the states and non-government education authorities
cannot negotiate an agreement.
Commonwealth SPP funding for government and non-government
schools will total an estimated $42.0 billion from 2009 to 2012,
compared to $34.1 billion (excluding Indigenous education funding)
over 2005 to 2008.[89] While some of this increase is new money, the majority
of the increase will be the result of indexation as has been the
case in the past.[90]
The funding for the three National Partnerships for schools will
total $2.2 billion. Of this funding, the $1.7 billion for the
National Partnerships for teaching and disadvantaged schools is new
money. The funding for the Literacy and Numeracy National
Partnership has already been provided in the forward estimates,
seemingly the result of a literacy and numeracy 2008 09 budget
measure which redirected funds from previous programs.[91] At this stage it is
not apparent how much of the National Partnerships funding will be
allocated to the non-government school sector or how much that
sector will contribute to the Commonwealth s co-investment
requirements.
The SPP and National Partnership funding is of course exclusive
of the BER initiatives and some other programs as mentioned above.
The BER funding will go some way to redressing the balance of total
Commonwealth funding between the two school sectors; albeit, mostly
for government primary schools and taking into account the BER
initiatives are non-ongoing.[92]
Commonwealth funding for government schools has been simplified,
with the states now determining how those funds will be used to
achieve the agreed outcomes. These new funding arrangements and the
increased funding for government schools have been welcomed.
However, given that the estimated non-government schools SPP is $28
billion for 2009 to 2012, the previous pattern of Commonwealth SPPs
for schools will continue, with the non-government sector receiving
two-thirds of the funds. There are still those, therefore, keen for
the Commonwealth to go further to redress the balance between the
two school sectors.[93]
Since it was established in 1992 the national vocational
education and training (VET) system has been governed by a series
of Commonwealth/State agreements commencing with the Australian
National Training Authority Agreement (ANTA Agreement). The
agreements have determined government funding levels and
arrangements and strategic priorities for the national VET system.
Commonwealth government grants to the states and territories to
assist them in the running of their VET systems (or specific
purpose payments (SPPs) for VET) have been an essential part of the
funding arrangements under these agreements.
In addition to the SPP funding provided by the Commonwealth
under these agreements (approximately $1.3 billion for 2008 09),
the Commonwealth has also provided funding for its own VET
programmes such as the Australian Apprenticeships programme
(estimated expenditure on Apprenticeship incentives, the major part
of this programme, for 2008 09 is $746 million). The Rudd
Government has also placed a considerable amount of emphasis on its
Productivity Places Program, funded under the new form of payment
known as National Partnership (NP) payments. A commitment of $1.2
billion has been made over the four year life of this NP which
commences 1 January 2009 and expires 30 June 2012.[94]
The new
National Agreement for Skills and Workforce
Development [95] (the Agreement) effectively replaces the Howard
Government s
2005 08 Commonwealth State Agreement for Skilling Australia s
Workforce which had in turn replaced the ANTA Agreement,
and was to expire at the end of 2008. Unlike its predecessors that
were negotiated under the auspices of the Ministerial Council and
signed by State and Territory Ministers responsible for VET, this
new Agreement is a product of the Council of Australian Governments
and is subject to the provisions of the
Intergovernmental Agreement on Federal Financial
Relations.
While the Agreement brings together much Commonwealth government
funding of skills and workforce development, as with its
predecessors a number of Commonwealth Own Purpose Expenses (COPE)
such as funding for Australian Apprenticeships continue to sit
outside the Agreement. However, in scoping the objectives of the
Agreement it is noted that:
The funding that each jurisdiction agrees to,
including the SPP and the related Commonwealth Own Purpose Expenses
(COPE) and National Partnership, Productivity Places Program, will
contribute to achieving the objectives and outcomes.
Whereas the 2005 08 Commonwealth State Agreement for
Skilling Australia s Workforce was notable for the conditions
that it placed on the states/territories for the running of their
VET systems, it would appear that the new Agreement provides for
greater flexibility in the way that the states and territories
manage and utilise their funds to meet the agreed outcomes.[96] Progress towards
achieving the following agreed outcomes will be monitored:
- the working age population have gaps in foundation skill levels
reduced to enable effective educational, labour market and social
participation
- the working age population has the depth and breadth of skills
and capabilities required for the 21st century labour market
- the supply of skills provided by the national training system
responds to meet changing labour market demand, and
- skills are used effectively to increase labour market
efficiency, productivity, innovation and ensure increased
utilisation of human capital.
The Agreement provides for measurable outputs and
progress measures. These include that nationally, over the period
of the Agreement the States will deliver up to 1.15 million VET
course completions. Schedule A of the Agreement provides state
details of the outputs for 2009 to 2012.
The Agreement defines the respective
responsibilities of the Commonwealth and State and Territory
governments. Among other policy and reform directions it identifies
a more demand and client driven system, further competition,
optimising investment from all sources, reinforcement of the role
of industry and the implementation of changes needed in the
structure and operation of the training system. Underlying
principles include client focus, partnership between government and
industry, maximising both social and economic returns and
flexibility and client responsiveness.
The Agreement details the current governance
structures and associated bodies but in so doing notes that they
are currently under review.
It would appear that the parameters provided by
the Agreement offer the states and territories scope to determine
how they will run their systems and how they will allocate
resources in such a way that would meet local needs and optimise
agreed outcomes. Therefore while changes to the operation of the
VET system, including more demand driven and competitive mechanisms
are being advocated, there would at this stage appear to be no
prescription for the introduction of the more radical changes
recently introduced in Victoria involving a contestable market
based approach.[97]
Regardless, there is the expectation that the market reform agenda
will proceed in time.[98] In support of Victoria s reforms the Rudd Government is
in the process of relaxing the recently introduced income
contingent loans for VET, VET FEE-HELP, to allow access to
government subsidised students. This opportunity to further
increase the capacity for private investment in the VET sector is
itself likely to provide a powerful incentive for reform among
other state and territory governments attempting to expand their
sectors in the face of financial pressures.[99]
The less prescriptive arrangements provided by
the Agreement are also being promoted on the grounds that they will
provide States with greater funding certainty and reduce
administrative costs associated with previous, burdensome reporting
requirements .[100]
The Rudd Government, in its first Budget, maintained the real
value of Commonwealth SPPs to the states and territories for their
vocational education and training systems by providing $1.3 billion
under the Skilling Australia s Workforce Act 2005.
Under the Skills and Workforce Development SPP, the Commonwealth
will again provide $1.3 billion in base funding for 2009
10.[101] The COAG
Communique anticipates an estimated $6.7 billion over the forward
estimates from 1 January 2009 to 2012-13, including $37 million in
skills and workforce development funding. The States acknowledged
that the base funding provided includes the Commonwealth s
contribution to capital development and maintenance in the training
sector. In addition, the base funding will include funding
previously provided to the States for VET through
Indigenous-specific funding elements, and also include
VET-in-Schools funding. To ensure that non-government schools are
not disadvantaged by this change, the States agreed to ensure that
VET in Schools funding levels for non-government schools is to be
maintained . [102]
The Agreement also provides that funding of $47.4 million
annually (plus indexation) for management of the National Training
System be quarantined from the Agreement and that Training
Ministers and Senior Officials monitor and advise on how this
funding is allocated. This allocation is to be reviewed annually by
the National Senior Officials Committee.
The new National Disability Agreement replaces the previous
national framework for the delivery, funding and development of
specialist disability services the Commonwealth State Territory
Disability Agreement (CSTDA).[103]
In the new agreement the areas of responsibility remain
essentially the same as before. The Commonwealth s main areas of
responsibility continue to be in the provision of employment
services and income support, while the states and territories
continue to be responsible for the provision of most other
specialist disability services such as accommodation, respite and
disability related support in schools.
However, there is a greater emphasis in the new agreement on the
need to work towards consistency in service provision across
jurisdictions; to increase the social and economic participation of
people with disabilities; and to develop better performance
reporting and data collection. For example, the performance
indicators in the agreement include a commitment to publish new
annual data on labour force participation of people with
disabilities and their carers, and data on clients expressing unmet
demand for disability services. Performance benchmarks include a
commitment to increase work force participation for people with a
disability; to assist more young people with disabilities to access
appropriate accommodation; and to increase the proportion of
Indigenous people accessing disability services.
The agreement identifies several key priority areas for initial
national efforts to improve service provision that were not present
in older agreements, specifically:
- a National Population Benchmarking Framework
- a National Disability Priorities Framework targeting more
vulnerable population groups such as older carers and Indigenous
people with disabilities
- a National Disability Quality Framework and National Quality
Assurance System based on Disability Standards to improve quality
assurance nationally
- a National Framework for Service Planning and Access to
simplify access to specialist disability services
- an Early Intervention and Prevention Framework to ensure people
receive timely support
- a national workforce strategy to increase workforce
participation for people with disabilities
- a National Indigenous Access Framework addressing service
delivery issues for Indigenous people, and
- improvements in data collection through the existing ABS Survey
of Disability, Ageing and Carers.
The agreement also specifies that the parties will agree to:
- establish a National Disability Strategy
- harmonise rules for accessible parking
- establish a National Companion Card Scheme
- ensure young veterans have access to specialist disability
services
- modernise print disability services
- provide top-up disability support for people living in group
homes through Community Aged Care Packages, and
- develop more consistent access to aids and equipment and
disability services nationally.
The new agreement has been well received so far by stakeholders,
but some have expressed concern on the lack of clarity regarding
the new approach to funding. National Disability Services (NDS),
for example, points out that the new arrangements only specify
Commonwealth funding commitments and no longer require the states
and territories to match Commonwealth contributions. Commonwealth
payments will be made directly to the states and territories and
disability departments will then have to bid for the funds how this
works in practice remains to be seen.
NDS also argues that while the new agreement requires
accountability in relation to outcomes, it allows states and
territories greater flexibility in how they achieve them than
before. NDS suggests that much of the work to define exactly how
outcomes will be measured and monitored is far from finalised and
should be monitored closely.[104]
For more detail on government funded disability support and
services and links to key resources see J. Phillips,
Disability support and services in Australia, Background
Note, Parliamentary Library, 2007-08.
Back to top
The National Affordable Housing Agreement has its origins in the
National Summit on Housing Affordability, held in June 2004. One of
the key priorities for action identified by summit participants was
the development of a five year National Affordable Housing
Agreement between Commonwealth, state, territory and local
governments to integrate, rationalise and strengthen government
assistance for affordable housing .[105] The National Affordable Housing
Agreement was further developed through the Achieving a New
National Affordable Housing Agreement forum, held in July 2006, and
two subsequent National Round Tables of five lead agencies, held in
December 2007.
The National Affordable Housing Agreement replaces the
Commonwealth-State Housing Agreement (CSHA) the previous national
framework concerned with the provision of public rental housing,
community housing, crisis accommodation, Aboriginal rental housing,
private rental support and home ownership support. The National
Affordable Housing Agreement will be an ongoing agreement, but one
that is reviewed every five years and amended as necessary by the
agreement of the Council of Australian Governments (COAG).[106] The agreement
appears to consolidate a majority of forms of government assistance
for providers or consumers of affordable housing. However, it is
not clear whether or not the Commonwealth Rent Assistance (CRA)
program will form a part of the new agreement. The same holds for
the National Rental Affordability Scheme, Housing Affordability
Fund, First Home Saver Accounts or National Housing Supply
Council.
The agreement also subsumes the Supported Accommodation
Assistance Program (SAAP) the main program through which the
Commonwealth provides funding for accommodation and assistance
services for people who are homeless or at imminent risk of
becoming homeless.
Under the National Housing Affordability Agreement, there is no
identified program funding that is, funding provided for a specific
housing or homelessness purpose (as was the case under the CSHA).
Instead, the states are to be responsible for determining the
amount of funding to be directed to particular government programs
and services. In addition, the states are no longer required to
provide matching funding, which was a requirement under the
CSHA.[107]
Funding for specified outputs or projects is to be provided
under two National Partnership Agreements an agreement on social
housing and on homelessness that have been established within the
broader National Affordable Housing Agreement.[108] These payments serve as
incentive payments; they are to facilitate and/or reward states
that deliver on specific objectives that contribute to the overall
goals of the National Affordable Housing Agreement.
In the case of the National Partnership Agreement on Housing,
the specific objective is the implementation of a Social Housing
Growth Fund, which is to provide capital funding to support various
projects that will increase the supply of social housing in the
short term (within two years of the funding being allocated). To an
extent, competition for funding is being encouraged under this
agreement. While funding under the National Partnership Agreement
on Social Housing is to be offered to the states and territories on
a per capita basis, jurisdictions are able to submit for
consideration proposals that exceed their per capita share.
Under the National Partnership Agreement on Homelessness,
payments are to be made to the states and territories where they
achieve performance benchmarks detailed in Implementation Plans.
These plans are to establish priorities and relative effort for
each jurisdiction, based on their specific circumstances.
The National Affordable Housing Agreement represents a change to
previous funding arrangements in two main, related respects.
Firstly, by bringing together under a single framework existing
affordable housing and homelessness programs, the agreement
potentially provides for the greater integration and coordination
of housing and homelessness responses, and improved housing
affordability and homelessness outcomes.
Secondly, by reducing Commonwealth prescriptions on service
delivery by the states and territories the agreement could enable
greater diversity and innovation in states and territories measures
to improve housing affordability and homelessness outcomes.[109]
The agreement also provides for greater (and wider) government
accountability than was previously the case. The states and
territories are obliged to publicly report on a range of
performance indicators in the areas of affordable rental,
affordable home purchase, homelessness, indigenous housing and
housing market efficiency.[110] It is not clear, as yet, precisely what form
this reporting is to take.[111] It is worth noting, however, that should
jurisdictions fail to meet performance benchmarks specified in the
National Affordable Housing Agreement, there is no provision for
the withholding of payments.[112] The states are to be given a substantial amount
of responsibility, and leeway, under the new agreement.
The National Affordable Housing Agreement has been generally
welcomed by stakeholders. One early criticism of the agreement was
that it provided insufficient funding for public and community
housing. National Shelter argued that funding of $400 million
over the next two financial years for capital investment in social
housing and homelessness would only stimulate short term growth in
the social housing sector.[113] Such arguments have been rendered all but
redundant in light of the recent announcement of up to $6.4 billion
for public and community housing as a part of the Nation Building
and Jobs Plan. Nevertheless, National Shelter s point that the
National Affordable Housing Agreement only provides indexation of 2
per cent, which is substantially lower than the current Consumer
Price Index (CPI) rate, could pose problems in terms of the ongoing
provision of funding for public housing. The Council of Australian
Governments has agreed to review periodically, and at least every
five years, the level of Commonwealth funding support to ensure its
on-going adequacy .[114] However, it is worth bearing in mind that the level of
indexation and how it was to be measured and applied was a source
of constant tension between the Commonwealth and the states under
the CSHA.
Funding for the National Affordable Housing Agreement is to be
$6.2 billion over five years from 2008-09.
The Australian Labor Party s National Platform and
Constitution 2007 contained the following:
6. Many of Australia s biggest policy
challenges involve the intersection of Commonwealth and State
government responsibilities. In government, reforming the
Federation will be an important priority for Labor. The cost shift
and blame shift between governments costs Australian taxpayers
billions of dollars each year. There is too much ambiguity about
which level of government is responsible for a particular
government program. This often creates difficulties for Australians
who want to access the range of services shared by governments, in
areas such as health care, aged care, childcare, disability
services, and dental care. It is also often a significant problem
for Australian businesses in dealing with conflicting and costly
regulatory environments between Commonwealth, state and
governments.
7. Accordingly, Labor will:
- Review areas of overlap and duplication of responsibility
between the Commonwealth and State and Territory governments, with
the aim of eliminating inefficiencies and clarifying
responsibilities;
- maintain a comprehensive system of horizontal fiscal
equalisation based upon the per capita relativity recommendations
of the Commonwealth Grants Commission;
- maintain a system of general purpose funding to local
governments which provides adequate funding for their needs;
- continue to support specific purpose payments to States and
Territories where these are appropriate to meet national objectives
or ensure national standards, and ensure that those payments are
used for the purpose for which they have been allocated; and
- ensure that State, Territory and local governments and their
authorities are able to maintain and steadily improve their
economic and social infrastructure.
8. Labor will also:
- seek to eliminate inappropriate duplication between
Commonwealth, State and Territory, and local government functions
and activities;
- support arrangements to voluntarily harmonise revenue bases and
tax administration between the Commonwealth, States and
Territories; and
- support arrangements to voluntarily integrate the
administration of Commonwealth and State and Territory taxes and
charges, where this has the potential to lead to economic benefits
such as lower compliance costs for business.
9. Labor opposes companies shifting
jurisdictions to avoid their OHS and workers compensation
responsibilities and obligations. Labor will stop this.[115]
Back to top
There would be two main consequences of a failure to pass the
Bill:
- the revised arrangements for Commonwealth-state financial
relations could not implemented, and
- the states would not receive additional assistance worth $6.3
billion.
According to the Explanatory Memorandum, the Bills the Federal
Financial Relations Bill 2009 and the Federal Financial Relations
(Consequential Amendments and Transitional Provisions) Bill 2009
appropriate an additional $6.3 billion over five years.[116] However, the total
of the amounts shown in the table in the Explanatory Memorandum is
$6.819 billion, a difference of $500 million. The table is
reproduced below.
|
2008-09
|
2009-10
|
2010-1
|
2011-12
|
2012-13
|
|
$1131 million
|
$875 million
|
$1215 million
|
$1587 million
|
$2011 million
|
The Federal Financial Relations (Consequential Amendments and
Transitional Provisions) Bill 2009 appropriates $500 million to
increase the amount available under the Health Care
(Appropriation) Act 1998. This suggests that the Federal
Financial Relations Bill 2009 appropriates $6.3 billion. The
components of the $6.3 billion are not clear.
The Explanatory Memorandum also states that the Bill provides
appropriations for the Commonwealth to provide an additional $5.8
billion in National SPP funding to the States over five years
[117] However,
the COAG Communiqu of 29 November 2008 states :
Central to these reforms is a substantial
financial package that provides an additional $7.1 billion in
SPP funding to the States over five years to improve services for
all Australians.[118]
The difference between $7.1 billion and $5.8 billion is $1.3
billion. The reason for the difference is not clear.
As noted, general revenue assistance (also sometimes called
general purpose assistance) has two components: the GST and other .
Appropriations for other general purpose payments are made through
annual Appropriation Acts or as special appropriations. The Bill
provides that in future, the annual Appropriation Acts will not
appropriate funds for other general purpose assistance. Rather, the
annual Appropriation Acts will specify the maximum amount that can
be credited to the COAG Reform Fund.
The Federal Financial Relations Bill 2009 (the Bill) establishes
the new arrangements for Commonwealth-state financial relations,
and appropriates an additional $6.3 billion of financial assistance
to the states.
To understand the provisions in the Bill
relating to the GST, it is necessary to know how the GST is
distributed among the states. The following explains this
process.
The Commonwealth Grants Commission calculates the relativities
that are used to determine the distribution of the GST among the
states. (The relativities are recommended only and the government
is not bound to accept them). The Commonwealth Grants Commission s
calculations are based on the horizontal fiscal equalisation
principle. The Howard Government s Intergovernmental Agreement
on the Reform of Commonwealth State Financial Relations
defines the GST pool as consisting of two components: GST payments,
and unquarantined health care grants paid to the states under the
Australian Health Care Agreements. The Commonwealth Grants
Commission s relativities are applied to estimated state
populations to calculate an adjusted population for each state.
Each state's share of the adjusted population is then applied to
the pool to estimate weighted shares of the GST pool. The
distribution of GST payments is finally determined by deducting the
unquarantined health care grants which are separately provided to
the States from each state s share of the GST pool.
The Commissioner of Taxation estimates GST receipts for a
financial year and payments are based on this estimate. When actual
receipts are known, an adjustment is made in the following
financial year to ensure that each state receives its correct
entitlement.
Clause 5 establishes that each state is
entitled to receive a share of the revenue from the GST. That share
is the proportion of that state s population in the total
population as at 31 December of each year.
Clause 6 establishes the amount of GST that is
available for distribution. Subclause 6(1)
provides that the Minister must determine this amount. In short,
the amount is GST collections, actual and notional
[subclause 6(3)] less refunds [subclause
6(4)]. Collections include interest on
unpaid GST debts [paragraph 6(3)(b)].
Paragraphs 6(3)(c) to 6(3)(e)
cover notional receipts.
Note: notional receipts arise, for example, in
the case of Commonwealth agencies. They do not actually pay GST
because that would mean the Commonwealth paying GST to itself.
Rather, they pay notional GST. Excluding notional receipts would
reduce the total amount of GST available for distribution.
Subclause 6(6) provides that the Minister s
determination under subclause 6(1) is not a
legislative instrument.
In relation to clause 6, the Explanatory Memorandum states
that:
The Minister is constrained to determine GST
revenue in accordance with the definition provided in section 6 and
the audited amount as published in the Final Budget
Outcome.[119]
The Bill does not, however, refer to the Final Budget
Outcome.[120] As
noted, currently, the Commissioner of Taxation estimates GST
receipts for a financial year and payments are based on this
estimate (with subsequent adjustments).
As noted, the Commonwealth Grants Commission recommends the
relativities used to determine the distribution of the GST among
the states. Clause 8 retains the principle that
the relativities are recommendations only. Subclause
8(1) provides that the Minister may determine that a
factor, specified in the determination, is the GST revenue sharing
relativity for a state for a payment year. Subclause
8(2) provides that the Minister must consult each of the
states before making a determination under subclause
(8)1. Subclause 8(3) provides that a
determination made under subclause 8(1) is a
legislative instrument but that section 42 (relating to
disallowance) of the
Legislative Instruments Act 2003 does not apply to the
determination. This means that the Minister s determination is not
disallowable by Parliament.
As noted, general revenue assistance (also sometimes called
general purpose assistance) has two components: the GST and other .
Division 2 deals with the latter.
Subclause 9(1) provides that the Minister may
determine that a grant of general purpose financial assistance is
to be paid to a state. The amount must be credited to the COAG
Reform Fund [paragraph 9(2)(a)].
Note: the COAG Reform Fund was established
under the
COAG Reform Fund Act 2008 as a Special Account through
which financial assistance is passed to the states.
Subclause 9(3) limits the amounts that can be
credited (paid into) and paid (debited as drawing rights) from the
COAG Reform Fund. For the financial year starting on 1 July
2008, the maximum is $500 000 000 [paragraph
9(3)(a)].
In a later financial year, the maximum is an amount, specified
in an Appropriation Act for that year, which declares that a
specified amount is the general drawing rights limit
[paragraph 9(3)(b)].
Note: paragraph 9(3)(b) gives
effect to the Government s intention that the annual Appropriation
Acts will not appropriate funds but instead specify the maximums
than can be credited and debited.[121]
Clause 9(4) provides that where an
Appropriation Act does not set a drawing rights limit, no money can
be credited to or paid from the COAG Reform Fund.[122]
Clause 9(5) provides that a determination under
subclause 1 is a legislative instrument, but
section 42 (disallowance) of the Legislative Instruments
Act 2003 does not apply to the determination.
Part 3 deals with the national specific purpose payments.
Clauses 10, 11,
12, 13 and 14
deal respectively with healthcare, schools, skills and workforce
development, disability services, and housing services. The five
clauses are largely identical and differ only in three respects:
whether the reference is to schools or disability services etc.,
the financial years provisions, and the amounts of money.
Note: clause 22 (see below)
appropriates the amounts in clauses 10 to
14 inclusive.
Subclause
10(1) establishes that financial
assistance is payable for healthcare for the financial year
starting on 1 July 2009 and for subsequent financial
years.
Subclause 10(2) provides that the
total assistance payable under subsection (1) is $11 224 185
000 for the financial year starting on 1 July 2009
[paragraph 10(2)(a)] or, for a later financial
year, the total amount under this subsection for the preceding
financial year, indexed in accordance with subclause
10(3) [paragraph 10(2)(b)].
Note: the components of the indexation factors
for each national specific purpose payment are contained in
Schedule D to the Intergovernmental Agreement on Federal
Financial Relations.[123]
Subclause 10(3) provides that
the Minister may, by legislative instrument,
determine the manner in which the total amount under
paragraph 10 (2)(b) is to be indexed for a
particular financial year. The determination must include a
statement of the total amount for that financial year. This
legislative instrument is disallowable.
Subclause 10(4) provides that the Minister may,
by legislative instrument, determine, for each financial year, the
manner in which the total amount under subclause
10(2) is to be divided between the states. This
legislative instrument is disallowable.
Subclause 10(5) provides that financial
assistance is payable to a state on condition that the state spends
the assistance on healthcare.
The wording in clauses 11,
12, 13 and 14 is
identical except that they deal respectively with healthcare,
schools, skills and workforce development, disability services, and
housing services, and provide for different amounts. The following
therefore takes clause 11 as representative of
clauses 11, 12,
13 and 14.
Subclause 11(1) provides that financial
assistance is payable to a state, for the financial year starting
on 1 July 2008 and for subsequent financial years, for
expenditure on schools.
Subclause 11(2) provides that the total
financial assistance payable under subclause 11(1)
to the states for a financial year is:
for the financial year starting on 1 July
2008, the amount determined by the Minister [paragraph
11(2)(a)]
or for the financial year starting on 1 July
2009 $3 286 594 000 [paragraph 11(2)(b)]
or for a later financial year the total amount
under subclause 11(2) for the preceding financial
year, indexed in accordance with
subclause 11(4) [paragraph
11(2)(c)].
Subclause 11(3) provides that a determination
under paragraph 11(2)(a) is a legislative
instrument, but section 42 (disallowance) of the
Legislative Instruments Act 2003 does not apply to the
determination.
Subclause 11(4) provides that
the Minister may, by legislative instrument,
determine the manner in which the total amount under
paragraph 11 (2)(c) is to be indexed for a
particular financial year. The determination must include a
statement of the total amount for that financial year. This
legislative instrument is disallowable.
Subclause 11(5) provides that the Minister may,
by legislative instrument, determine, for each financial year, the
manner in which the total amount under subclause
11(2) is to be divided between the states. This
legislative instrument is disallowable.
Subclause 11(6) provides that financial
assistance is payable to a state on condition that the state spends
the assistance on schools.
For the financial year beginning 1 July 2009, the total amounts
allocated for the other specific purpose payments are:
skills and workforce development: $1,317,877,000
[subclause 12(2)(b)]
disability services: $903,686,000
[subclause 13(2)(b)]
housing services: $1,202,590,000
[subclause 14(2)(b)].
Clause 15 limits the total of financial
assistance for the financial year starting on 1 July 2008 by
providing that the total amount of
financial assistance for the 2008 2009 financial year that is
payable under subclauses 11(1),
12(1), 13(1) and
14(1) must not exceed $4 000 000 000.
Clause 16
establishes the power of the Minister to make three types of
national partnership payments. Subclause
16(1) provides that the Minister may
determine that an amount is to be paid to a state as financial
assistance to support the delivery by that state of specified
outputs or projects [paragraph 16(1)(a)] or to
facilitate reforms by the state [paragraph
16(1)(b)] or to reward the state for nationally
significant reforms[paragraph 16(1)(c)]. This
amount must be credited to the COAG Reform Fund [paragraph
16(2)(a)].
Subclause 16(3) limits the amounts that can be
credited to the COAG Reform Fund. In the financial year starting on
1 July 2008, the total must not exceed $8 000 000 000
[paragraph 16(3)(a)]. In a later financial year,
the amount is limited to that specified in an Appropriation Act
where the Appropriation Act declares that a specified amount is the
general drawing rights limit [paragraph
16(3)(b)].
Like clause 9(4), subclause
16(4) provides that where an Appropriation Act does not
set a drawing rights limit, then no money can be credited to or
paid from the COAG Reform Fund.
Subclause 16(4) provides that a determination
under subclause 16(1) is a legislative instrument,
but section 42 (disallowance) of the Legislative
Instruments Act 2003 does not apply to the determination.
Clause 19 empowers the
Minister to fix amounts and times of payments of financial
assistance by a written determination.
Clause 20 provides that
where a state has not fulfilled a condition in respect of a
payment, the Minister can, by determination, require the state to
repay the amount in the determination. If the state does not repay
the amount, the Minister may deduct the amount unpaid from any
amount that the state is entitled to receive in a future financial
year.
Determinations under clauses 19 and
20 are not legislative instruments.
Clause 21 provides
that when making determinations, the Minister must have regard to
the Intergovernmental Agreement [subclause 21(a)]
and, if a determination relates to financial assistance to a
particular state, any other written agreement between the
Commonwealth and the state that relates to the financial assistance
[subclause 21(b)]
Clause 22 appropriates
money from the Consolidated Revenue Fund. Clause
22 provides that payments under Division 1 of
Part 2, Part 3 or Part 5 are to be made out of the
Consolidated Revenue Fund, which is appropriated accordingly.
Back to top
It has long been recognised that there are numerous problems
associated with the sharing of responsibility for services between
the Commonwealth and the states. While numerous proposals have been
advance to improve the operation of SPPs, few have been
implemented. The reforms underlying this Bill are a major attempt
to address these problems directly.
Although not in the Bill, another positive feature of the
reforms is that their worth will be subject to independent scrutiny
in the form of a requirement that the Productivity Commission
report to COAG on the economic impacts and benefits of COAG s
agreed reform agenda every two to three years .[124]
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2464.
[66] Australian Medical Association,
Federal offer lacks fat, Media release, 28 November 2008. http://www.ama.com.au/node/4340,
accessed 19 February 2009.
Richard Webb, Rebecca de Boer, Marilyn Harrington,
Carol Kempner, Janet Phillips, Matthew Thomas
16 March 2009
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted
by the Copyright Act 1968, no person may reproduce or transmit any
part of this work by any process without the prior written consent
of the Parliamentary Librarian. This requirement does not apply to
members of the Parliament of Australia acting in the course of
their official duties.
This work has been prepared to support the work of the Australian
Parliament using information available at the time of production.
The views expressed do not reflect an official position of the
Parliamentary Library, nor do they constitute professional legal
opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au. Any
concerns or complaints should be directed to the Parliamentary
Librarian. Parliamentary Library staff are available to discuss the
contents of publications with Senators and Members and their staff.
To access this service, clients may contact the author or the
Library’s Central Entry Point for referral.
Back to top