2013 Local Government Referendum - FAQs

In May the federal Government announced its intention to hold a referendum on the recognition of local government in the Australian Constitution. However, when Prime MInister Kevin Rudd announced that the election would be held on 7 September 2013, this effectively postponed the referendum until the next parliamentary term. This is because, due to a combination of constitutional and electoral rules, the earliest date on which the referendum could be held was 14 September. The Abbott government is yet to announce whether it intends to proceed with the referendum or not. In the meantime, we leave these FAQs on the Centre website to serve as an information resource for readers interested in the issue.

What is the referendum about?

The referendum seeks to amend the Constitution to give ‘financial recognition’ to local government. It would amend section 96 of the Constitution so that it reads (new words underlined):

During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State, or to any local government body formed by a law of a State, on such terms and conditions as the Parliament thinks fit.

The main purpose of this amendment is to give the Commonwealth the power to directly fund local governments, rather than having to provide funding indirectly through the states. Currently, the Commonwealth provides both direct and indirect funding to local government bodies. While its capacity to provide indirect funding is unquestioned, its constitutional ability to provide direct funding (which supports the Roads to Recovery program, among others) has been cast into doubt by recent High Court decisions.
 

Why has the government announced this referendum now?

There are two main reasons why this referendum is being held now. First, it fulfils a promise that Prime Minister Julia Gillard made to the Greens and the Independents, Tony Windsor and Rob Oakeshott, after the 2010 election. As part of their power-sharing agreement, Julia Gillard undertook to hold a referendum on the constitutional recognition of local government before the end of this parliamentary term.

Second, two recent High Court decisions in the Pape (2009) and Williams (2012) cases raised doubts about the constitutional validity of the Commonwealth’s direct payments to local government. The proposed amendment seeks to remove those doubts and put direct funding on a firm constitutional footing.

The groundwork for the referendum proposal was put in place by the Expert Panel on the Constitutional Recognition of Local Government. This Panel was appointed by the federal government in August 2011 and chaired by former Chief Justice of NSW James Spigelman. The Panel conducted stakeholder and community consultations and reported to the government in December 2011. It supported a referendum on the financial recognition of local government.

In early 2013 the Joint Select Committee on Constitutional Recognition of Local Government conducted its own inquiry into the issue. On 7 March it recommended that a referendum on financial recognition of local government be put to Australian voters at the 2013 federal election.

On 9 May, the Prime Minister, the Attorney-General and the Minister for Local Government announced that a referendum in line with the recommendation of the Expert Panel would be held at the upcoming election.
 

What are the referendum’s chances of success?

An Australian Financial Review/ Nielsen poll published on 20 May 2013 found that 65 per cent of voters nationally support the recognition of local government in the Constitution. The poll also found that the proposal has majority support in a majority of states (New South Wales, Victoria, Queensland, South Australia/Northern Territory, and Western Australia).

As a general indicator, in 2010 the Australian Constitutional Values Survey found that 51% of Australians believed that local government should be recognized in the Constitution. Before the referendum was announced, research commissioned by the Expert Panel suggested that 64% of voters might support a referendum on financial recognition of local government.

Past referendums have shown that bipartisan support is critical to a referendum’s success. At this stage it is unclear what position the Opposition parties will take on the issue, although Opposition Leader Tony Abbott has indicated his in-principle support (see further below). It is also uncertain how vigorously opposing States will campaign against the proposal.

Some commentators have suggested that the timing of the announcement of the poll will reduce its chances of success. While the Local Government Minister, Anthony Albanese, has assured the electorate that four months is sufficient to obtain support for a referendum “that is essentially housekeeping”, constitutional law expert Cheryl Saunders believes that too little time has been allowed for effective public debate on the issue, in particular because “there has been absolutely no public consultation about it”.

Generally, any Australian referendum faces an uphill battle – only 8 of 44 proposals put to a referendum have been successful. The last successful referendum was 36 years ago. To succeed, a referendum must be supported not only by a majority of Australians but also by a majority of states, and this has proven very difficult to achieve.
 

What are the positions of the major parties on the proposed amendment? 

Australian Labor Party

  • The federal government has expressed its confidence about the passage of the referendum. The Prime Minister, Julia Gillard, announced that it would be presented “in a bipartisan spirit”, and that it proposes a “small but important change” to the Constitution. Local Government Minister Anthony Albanese said that the referendum would recognize “the reality of modern Australia”, particularly since local government “long ago moved beyond being rates, roads and rubbish”.

Coalition Parties

  • Federal Opposition Leader Tony Abbott has signalled his party’s in-principle support for the referendum, though it is unclear whether this will translate into strong public endorsement. While he has stated that “we certainly do think that it’s important to continue the Commonwealth’s ability to be able to pay money under programs such as Roads to Recovery direct to local government”, he has also said that “[w]e have some reservations about it, because we think that the government hasn’t done the work necessary to get a yes vote.”
     
  • Up to four Coalition backbenchers are expected to vote gainst the bill establishing the referendum, with South Australian MP Cory Bernadi already expressing his intention to do so.
     
  • The Coalition backbenders are expected to vote against the bill establishing the referendum, with South Australian MP Cory Bernadi already expressing his intention to do so.
     
  • The Coalition's spokesperson on the matter, Barnaby Joyce, has expressed his support for the referendum.

Australian Greens

  • Greens leader Christine Milne has said that the referendum “legitimizes what we already do ... and it’s a great thing to celebrate the contribution that local government makes.” Senator Lee Rhiannon has also expressed strong support for the referendum, stating that constitutional recognition of local government is “long overdue”.

Independents

  • Tony Windsor has welcomed the announcement of the referendum, stating that it “will tidy up concerns about the ability the federal government has to directly fund local government."
     
  • Rob Oakeshott has not made a formal statement in response to the announcement of the referendum, but he has tweeted calling for a ‘yes’ vote.
     

What are the positions of the States on the proposed amendment?

Victoria: has stated that it does not support the referendum, with a spokesman for its Local Government Minister warning that Victorian councils could end up being worse off, and expressing concern that Victorian councils could be “punished by money being directed to other places”. The Minister, Jeanette Powell, said that the wording of the proposal confirmed her state’s “worst fears” in this respect.

Western Australia: has expressed doubts about the proposal; Premier Colin Barnett has said: “[w]e would be prepared to support constitutional recognition of local government as long as it is recognised as a function of the state and does not give new powers over local government to the Commonwealth.” Once the wording of the proposal was released, Premier Barnett stated that the amendment “appears to go well beyond the symbolic recognition that the WA Government has indicated it would support.”

New South Wales: describes the timing of the referendum as “problematic”, and Premier Barry O’Farrell has expressed his opposition, arguing that “[l]ocal government across Australia is set up by state parliaments”, and that this recognition would “chang[e] the relationship”. He reaffirmed his opposition to the referendum when the proposed wording was released. Local Government Minister Don Page has expressed concern, in particular, that Commonwealth money to local councils could be ”politically inspired, [and] would be inconsistent with state objectives.”

Queensland: supports the proposal, with its Local Government Minister David Crisafulli saying that “[o]ur number one priority is to make sure constitutional recognition allows councils to be funded directly by the federal government”.

South Australia: has said that it “supports in principle the constitutional recognition of local government.”

Tasmania: has declared itself agnostic on the issue; Deputy Premier Bryan Green stated that “the government recognizes that if the Commonwealth pursues a referendum, it will be up to the community to have their say.”

Even for those states that have expressed their opposition to the referendum proposal, it is not yet known whether they will actively campaign against the referendum.
 

Have Australians voted on this issue before?

Australians have voted twice on the constitutional recognition of local governments – in 1974 and 1988 – but neither sought the same amendment as the present referendum does. Both referenda were unsuccessful.

In 1974, a proposal similar to the present one was put by the Whitlam government. Two new sections were sought to be added to the Constitution: to allow the Commonwealth to make direct financial grants to local governments, and to create a new legislative head of power to borrow money for local governments. (The latter change is not an element of the 2013 referendum.) Across the country, 46.85% of voters supported the proposal, and it was carried only in NSW.

In 1988, the proposal was simply to recognize local governments in the Constitution, and to ensure that they would always be democratically elected. No financial consequences were intended as a result. This referendum fared even more poorly than the previous one: only 33.61% of Australians voted in favour, and it did not obtain a majority in any state.

What are some arguments in favour of the proposed amendment? 

1. It would remove constitutional doubts about direct funding

As noted above, the constitutional power of the Commonwealth to provide funding directly to local governments has been cast into doubt by recent High Court decisions. This potentially threatens the continuation of programs such as Roads to Recovery, as well as the Commonwealth’s ability to respond quickly to urgent needs – as it did in response to the GFC, when it directly funded thousands of small community infrastructure projects as a means of injecting money into the economy. For this reason, Professor George Williams has said that “it makes sense to change the Constitution to fix this problem.”

2. It would ensure greater efficiency

While the Commonwealth does have constitutional power to fund local governments indirectly through the states, some argue that this process creates efficiency problems. It has been estimated by Professor John Kane of Griffith University that up to $18 million per year is wasted by using the states as ‘middlemen’, and critics say that it makes delays in the provision of funds are inevitable. Taking the example of the Roads to Recovery program, one local council told the Joint Parliamentary Committee that “local councils do deliver roads at a more efficient rate than through places like VicRoads. There are less management overheads.”

3. It would bring overdue recognition to local government

The proposed amendment would have the effect of constitutionally recognising local councils for the first time. The absence of any reference to local government in the Constitution is due to their comparative unimportance at the time of its drafting in the 1890s. While this made sense back then, when their responsibilities were few, today local governments provide a wide range of services including footpaths, drainage, aged care, health care, fire-fighting, libraries, art galleries and museums. Recognition would thus address what some see as a constitutional anachronism.

4. Some projects are more effective through local-federal partnerships

Some local councils that receive direct funding from the Commonwealth have expressed doubts that state governments would be willing to enter into the same partnership agreements that the councils have done. One local councillor, referring to an affordable housing agreement that his council entered into with the Commonwealth, told the Joint Parliamentary Committee that “[t]here is no way in the world we could convince the state to enter into that contract, because there is nothing in it for them, or they would be too divorced from it.”
 

What are some arguments against the proposed amendment?

1. It would increase Commonwealth power at the States’ expense

Opponents argue that the Commonwealth will use its new power to provide ‘tied funding’ to local councils – that is, that the Commonwealth will grant money on the condition that it be spent in a certain way. In this way, the Commonwealth could simply bypass the states and implement its own policies via local governments – even if they are contrary to state policies. The consequence would be a further centralization of government power by the Commonwealth, to the detriment of the states. Professor Greg Craven has said that, though the referendum is being sold as a modest change, its long-term impact would be “like a scorpion, small but lethal.”

2. The proposed amendment would not increase efficiency

It has been argued that there is in fact very little inefficiency in the system of indirect Commonwealth funding that uses the states as ‘middlemen’. The Expert Panel considered this issue and sought evidence from local government associations across Australia, but concluded that “although there may be delays, nothing presented to the panel suggests that these are substantial. Nor was the Panel able to conclude that there has been a significant diminution of funds by reason of state deduction of administrative charges.”

3. The Commonwealth is already able to fund local government via the States

Opponents argue that there is no need for a constitutional amendment because the Commonwealth can already fund local governments indirectly through the states. Indeed, around 80% of the Commonwealth’s funding of local governments is presently channelled in this way. If necessary, the Commonwealth could provide the remainder of its funding through the States.

4. The proposed amendment will not necessarily result in increased funding for local governments

It has been argued that there is no reason why local councils (many of which are severely cash-strapped) should expect any extra money from the Commonwealth even if direct funding were constitutionally enshrined. The Expert Panel noted that there was a widely held assumption that constitutional recognition would lead to increased federal funding but, as Professor Anne Twomey has stated, “the mere fact that the Constitution is amended to permit the Commonwealth to make grants directly to local government ... does not in any way guarantee that it will give more money, or indeed, any money.”
 

Where can I find out more?

A good starting point is this explanatory article in The Conversation, as well as this fact sheet from the Australian Local Government Association). The federal government will soon commence a national civic education program, which will promote the ‘yes’ and ‘no’ cases.

A more exhaustive list of resources can be found on the Centre’s Resources page.