This week saw yet another erosion of “states’ rights” — yet another lock of hair being removed by the federal Delilah from the Sampson states’ hair. But it is unlikely to result in the collapse of the whole temple.
This week the National Competition Council told the states that they have had enough time to get their houses in order. More precisely, the council reported to the federal Treasurer the detail of the states’ failings in competition policy and recommended the withholding of money from them according to the level of failing.
NSW Premier Bob Carr immediately branded the Treasurer’s acceptance of the recommendations as “fines”. He squealed loudly that NSW was being “fined” $50 million for not falling into line with federal wishes on liquor trading. He painted a picture of drunken ruffians being able to get liquor where and when they like under a federally dictated scheme. But because he could not afford to lose the $50 million that the NSW was “entitled” to, he would be forced to legislate to allow booze to be sold anywhere, anytime. The Feds would be responsible for the increased crime and violence.
It was high-level grandstanding.
There are no fines. There are no entitlements.
Competition policy does not work like that.
Rather it calculates the benefit to the Australian economy of competition in parts of the economy in which state legislation had hitherto propped up monopolies (public or private). It then passes on the lion’s share (this year, $800 million) of this via federal tax revenue back to the states to do useful things like health and education. The arrangement was agreed to in 1997.
So it was grandiose political humbug for Carr to say that he succumbing to pressure from the Feds to deregulate liquor licensing because he could not afford the $50 million fine and that he needed the $50 million for health and education.
Whether one calls it bribery or blackmail is neither here nor there. There would be no $50 million to bribe or blackmail over unless the states got rid of anti-competitive laws. Old Mates Acts had to be repealed. Old back-scratching arrangements where cosy monopolists paid state coffers unjustified licence fees or, worse, slush funds into state Labor (or Liberal) campaign funds in return for the continuance of their monopolies had to end. Without their demise there would be no $50 million.
National Competition policy says that if states want to continue with anti-competitive laws, they must be justified in the public interest. Now, it may well be in the public interest to restrict liquor outlets to stop drunken yobos from vandalising the night. It might even be in the public interest to have one taxi co-operative to provide an orderly and safe taxi system. But it has to be properly justified – not on the basis that the taxi industry will scream at election time or contribute to party funds, but because the public will benefit. The public probably does not benefit from artificially high plate prices which are passed on to the consumer. But then again, the public would not benefit from a whole lot of cowboys running wild with old bomb taxis.
The point of national competition policy is to make sure consumers are not being ripped off by cosy deals between state and territory governments and industry pressure groups. The council thought that the NSW failure to deregulate liquor was worth 5 per cent of NSW’s $250 million share of the $800 million national cake. Failure to deregulate chooks was another 5 per cent and general failure to move on other cosy monopolies (water, electricity, law, medical and so on) was worth another 10 per cent.
The great grandstander Carr seized on booze. His PR machine got the media to run with “Feds to cause free-for-all with booze”. No mention of chooks or the other NSW failures to give consumers the benefit of competition which totaled three times the so-called “fine” for booze.
Carr had plenty of chance to justify a more restrictive booze licensing system but did not. Rather he allowed the Feds to “fine” him to he could grandstand and divert attention away from the other areas where NSW failure to introduce competition has cost consumers.
And the states need the incentive. State and Territory Governments are more susceptible to bowing to pressure from existing monopolists than the Feds (though the Feds are not immune). So it is not such a bad things for the Feds to “interfere” when the states are not doing the right thing by consumers.
Also, the states are frequently incompetent in programs they are asked to administer. Handed over immunisation, they drove immunisation levels in Australia down to dangerous third world levels. Given the administration of a first home-buyers scheme to help struggling 20 somethings, they dished it out to the babies of millionaires. The states have to be watched by Federal eagles.
In Australia, the states are an unfortunate accident of the colonial past – like the boundaries in Africa, but fortunately not as genocidal. We are at least blessed with a federal level government (importantly with its skilled bureaucracy) which is awake to the chicanery of the states. We cannot get rid of the states, but maybe there is less need to as the Commonwealth exercises the powers given to it in the Constitution in ever more-far-reaching ways.
For decades the Commonwealth engaged artful lawyers to draft Commonwealth laws within the heads of constitutional power so the Commonwealth could direct the national destiny (as seen by whichever party was in power federal at the time). Examples were laws under the corporations power to effect (SUBS EFFECT WITH AN E) discrimination and employment policy and laws ostensibly for foreign affairs to effect environmental policy and so on. Now there is less need. The game was been up for the states once the High Court held in the 1940s that the Commonwealth could tax as high as it liked (to shut out the states from income tax) and held in the 1970s that the Commonwealth could give money to the states under whatever conditions the Commonwealth wanted to impose.
Now the Commonwealth does not have to legislate its will. Instead it can demand that the states legislate the Commonwealth’s will on pain of losing money.
Hence Bob Carr’s statement this week that NSW legislation to do the Commonwealth’s bidding (against Carr’s will) on competition policy would be introduced immediately — $50 million has gone a long way to reinterpret the Constitution.
For the first five years of competition policy the Treasurer was lenient with the states. No more.
It is not such a bad thing. If the states’ policy does not withstand the public-interest test in competition policy it is not worth upholding.
This week saw a large power grab by the Commonwealth. But it was one the states agreed to; one where the benefits go back to the states if they behave; and one which benefits consumers over monopolists.