This week Queensland stole the Sandown car races from Victoria. That was another small skirmish in competitive federalism. But there is a bigger picture that will affect us more profoundly, and signs of that also came this week with the annual Report on Government Services.
A few sporting events don’t matter much, even if the state dogs are sniffing around our territorial futsal competition (as they were this week), or even around Floriade.
Queensland gloated over Sandown. Hitherto, Victoria’s Jeff Kennett was the highwayman of state Premiers, kidnapping various sporting and cultural events from other states.
Before that Queensland was the leader in beating the other states as a low-tax state to attract people and industry, first abolishing death duties and more recently cutting stamp duties on share transactions.
It was pretty silly stuff. The Productivity Commission demonstrated that the kidnapping state did not benefit in the long term. The inducements (I hesitate to use the word bribe) often outweighed the benefits. And Australia as a whole loses as racing tracks and futsal slabs have to be relocated or unnecessarily rebuilt elsewhere.
As for tax, Queensland shot itself in the foot by eroding its tax base. Moreover, other states followed. The states have been squealing ever since that they haven’t got enough money. They then made demands on the Commonwealth
The Commonwealth found itself supplying large sums of money to the states using its more robust tax base, which was, incidentally made more robust by in effect taking over death duties from the states by imposing a capital-gains tax (there is nothing like death to force the realisation of capital gains).
But the Commonwealth often wondered whether the money it was giving the states was being well spent. Since the early 1970s the Commonwealth found itself maintaining large bureaucracies, particularly in health and education, which did little more than detailed check whether the states were spending their money well – which, of course, they had not been. Give any Premier some case and he or she will inevitably spend it vote catching rather than delivering services. Immunisation was the worse example.
The duplication was quite wasteful.
So about five years ago the Commonwealth got smart. Rather than have lots of bureaucrats supervising the details of programs run in the states, it got the states to agree to a much more effective and efficient regime of ensuring Australia got bang for its bucks. An annual Review of Commonwealth/State Service Provision was set up. It now reports annually, as it did this week. Its reports are getting smarter and more detailed. This one ran to 1200 pages.
Instead of the Commonwealth doing all the supervision, the states are pitted against each other. The review compares costs and general effectiveness of state delivery of services. It is not just a cost comparison, but also a quality and quantity comparison.
It puts the state premiers on the spot, but it also arms them against bunglers and bludgers in their own systems. The review explains to each state and territory how much over the odds it is on the quality, quantity and costs of its services compared to the other states and territories.
That will not totally solve the question of (ital) why (end ital) a state or territory is under-performing. Kate Carnell might argue it is because the nurses are being paid too much or that their shifts are a rort, or whatever. The nurses and doctors might argue it is because the ACT is treating a lot of expensive high-end patients from NSW, or whatever. The important thing, however, is that at least there is a search for reasons for under-performance.
The competition among the states is slowly moving. It has gone from the self-defeating “”Look how little tax we charge and I’ll steal your sport event or big company’s headquarters” to a more constructive (for the taxpayer) “”Look at the quality, quantity and low cost of our service delivery compared to yours.”
I fear is the next step. Rather than merely attracting the best assets the review process may cause the states to engage in repelling the worst liabilities. Some states, say through the reintroduction of death duties or the abandonment of programs for the disadvantaged, might deliberately drive the old and the disadvantaged out because they are so costly to service. The only thing preventing that is that each of the old and disadvantaged are voters.
In any event the annual review has got to be better than states stealing each others’ sporting events.