Bob Day
Former senator for South Australia. Former national president of the Housing Industry Association. Current federal director of the Australian Family Party.
According to former Prime Minister Bob Hawke, “We’re all Australians, whether we’re from Melbourne or Sydney.”
Those of us from the ‘outlying states’ (as Paul Keating called them), felt a bit left out.
The confusing power structures between the states and the Federal Government – and between individual states – was exposed during Covid and led many to call for the abolition of state governments and the formation of one national government.
As Covid revealed, the Federal Government didn’t have the power it thought it had. The states have the power; the Feds have the money.
We don’t tax people in order to set up government supermarkets to feed our children, or government clothing stores to clothe them, so why do it with education?
When Australia came together as a nation in 1901 – as a federation of six individual British colonies – it did so after much debate. During the first of the convention debates in 1891, Sir Samuel Griffith, who would later become the first chief justice of the High Court of Australia, nailed it by saying:
We must not lose sight of the essential condition that this is to be a federation of states and not a single government of Australia. The separate states are to continue as autonomous bodies, surrendering only so much of their power as is necessary for the establishment of a general government to do for them collectively what they cannot do individually for themselves.
The powers given to the Federal Government by the states in 1901 included trade and commerce, corporations, currency, banking, pensions, taxation, foreign affairs, quarantine, and defence.
Not surprisingly, the first area where the boundaries between state and federal governments were tested related to tax. The fight over money had begun.
In 1942, all income taxing power was handed to the Federal Government for the duration of World War II under the ‘defence’ power of the Constitution. This was intended to be temporary and to last until the end of the war. But as predictable as the sunrise, when the war ended the Feds did not relinquish their income tax collector role.
Since then, the tax revenue balance has continued to move away from the states and towards the Feds.
The Federal Government raises over 70 per cent of all government revenues – much more than is required to fund its own operations – while the states don’t raise anywhere near enough to fund theirs. The Feds then make up the states’ shortfall through Commonwealth grants.
This is known as ‘vertical fiscal imbalance’. Australia has the highest level of vertical fiscal imbalance of any federal country in the world.
Former Premier of Western Australia Richard Court once said:
All the things that the states do best are under attack from the empire builders in Canberra. The bureaucracy running the Federal education system is large, but it doesn’t teach any students. There is an equally large health bureaucracy which doesn’t treat any patients.
It costs Australian taxpayers approximately $20,000 pa to educate a student in a government school and $12,000 pa to educate a student in a non-government school.
With around four million students in Australia, that adds up to nearly $70 billion pa. A lot of taxpayers’ money.
Considering non-government schools consistently outperform government schools in overall student performance, why can’t the government simply offer every family $8,000 – the difference between government and non-government funding – and give parents the option of sending their child to a non-government school if they wish?
Since the majority of non-government schools charge less than $8,000 pa in school fees, parents could send their children to a non-government school and pay no fees. For those schools that charge more than $8,000, parents who make sacrifices in order to send their children to higher-cost schools would be $8,000 better off.
Not surprisingly, the first area where the boundaries between state and Federal governments were tested related to tax.
This is an example of ‘funding the user’ of the service (the family), not ‘funding the provider’ (the school). It allows the family to choose what is best for them – starting with education. It also reinforces the primacy of parents in the education of their children.
Feeding, clothing and educating children are some of the key necessities the family provides. We don’t tax people in order to set up government supermarkets to feed our children, or government clothing stores to clothe them, so why do it with education? Walk into any supermarket and see the incredible range of food and other essential goods available at affordable prices. Or clothing… or motor cars. The same would happen with education. The quality and range would increase.
All this is important as families pay enormous amounts of tax in the form of GST, stamp duties, registrations, and numerous other levies and taxes hidden in water and power costs which are then handed to the ‘providers’.
Private companies that base their business models on providing services to consumers but are either paid by the government or persuade governments to prevent or limit competition are called rent-seekers. Aged care, child care, disability care, energy, housing, superannuation, pharmaceuticals, education, public transport and many others are a huge burden on taxpayers and cost families a fortune. It is a form of taxation that low-income families cannot avoid and cannot afford.
The answer is to fund the user, not the provider.
This article was originally published by Liberty Itch.
