The blame game hydra rises again

So, we can’t start pilot programs for the National Disability Insurance Scheme in the Liberal states because the States and Commonwealth can’t agree on who should fund them.

NSW Premier Barry O’Farrell’s position is that the Commonwealth government should fund the lot. Campbell Newman claims to not be able to fund the NDIS because Anna Bligh blew the lot or some such nonsense.

The actual amounts the state governments are being asked to find are piddling, of course. The $40 million asked of the Victorian state government is, funnily enough, the same amount of money that he’s prepared to throw at Alcoa to keep a very old and carbon-intensive aluminium smelter running – or roughly what they’re going to spend to upgrade police station and and train station facilities to have a couple of armed guards sitting around at Surrey Hills station at 11pm on a Monday night. Or, for that matter, the Formula One Grand Prix.

And while Campbell Newman claims that Queensland can’t afford the NDIS, apparently the Queensland Government can afford to fund goat racing.

But take away the “can” for a moment – let’s examine the “should”. As it so happens, the Productivity Commission’s report discusses the question of a funding model in some detail.

It is important that the NDIS get adequate and stable levels of funding – and the PC recommends using a formula to determine funding levels set in the legislation and not subject to the usual budget argy-bargy. The question is then whether whether this comes out of consolidated revenue (of the federal and/or state governments) or a special (hypothecated) tax is used is primarily one of politics; they’re two sides of the same coin. If a special hypothecated tax is necessary to sell the need for a tax rise to fund the scheme, so be it, but it’s still basically cosmetics.

But on to the question of the states and whether and how they should kick in. AS the PC notes, the states currently fund about $4.7 billion worth of disability services. Once the NDIS is fully functional, those state government services will be supplanted by NDIS-funded services. If the Commonwealth funds the lot, therefore, this would act as a $4.7 billion transfer of undirected funds from the Commonwealth to the states.

So, on the basis of existing responsibilities either they should kick in some cash, or they should forego some grants that they currently receive from the Commonwealth, to maintain the status quo. So it doesn’t seem unreasonable that they contribute to the startup costs of the scheme while the longer-term arrangements are sorted out.

To be fair, the budgetary position of the states is fragile, with rising costs and inefficient and slowly growing tax bases. But in substantial part that’s a political choice of the states because they won’t introduce efficient but politically unpopular taxes (like better land taxes or congestion charging, or bring back inheritance tax). Or – god forbid – come to the not unreasonable conclusion that the GST revenue is now inadequate and either raise the rate or apply it to some of the currently exempted goods and services.

Ultimately, though, this is yet another example of the difficulties caused by our fiscal arrangements, where state governments are currently responsible for delivering most of the services we rely on, but the federal government raises the taxes to pay for them. Until, one fine day, our governments bite the bullet and do something about this, we’ll continue to have these ridiculous federal-state conflicts.

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2 Responses to The blame game hydra rises again

  1. “Ultimately, though, this is yet another example of the difficulties caused by our fiscal arrangements, where state governments are currently responsible for delivering most of the services we rely on, but the federal government raises the taxes to pay for them. Until, one fine day, our governments bite the bullet and do something about this, we’ll continue to have these ridiculous federal-state conflicts.”

    Although I support the NDIS – or what I know of it – not sure I agree on this last point.

    Fixing the problem will just take the shackles off spending.

    One doesn’t need to have much education about history – or the current state of the planet – to know what happens next.

    • Matthew, I’m not sure that it will take the shackles off spending.

      But, either way, surely it would be better if there were clearer lines of accountability – so voters could have the clear choice of voting for governments that choose to raise higher taxes and spend them on higher levels of services, or voting for governments that have lower taxes and fewer services.

      At the moment, we don’t get that because there’s this disconnect.

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