In the long history of our democracy (and it is very long on world standards) there has been an ebb and flow of power.
In colonial times power resided mainly in the colonial (state) capitals. London was too far away. Then in 1901 there was a shift of power to the central government (then in Melbourne). Then in 1925 the High Court stopped than trend and power moved back to the states. In 1942 under threat of Japanese invasion power moved back to the centre, where it has stayed by and large until now. In 1942, the states were forced to give up income tax, which the Commonwealth has kept ever since. I suspect things are about to change and some power is about to move back to the states.
This is due to the way the GST has been framed.
In an article on Wednesday I crunched a lot of figures which should not be repeated here. There is some argument of the detail but the central thesis remains. Prime Minister John Howard, in his eagerness to get the GST up gave away too much. He gave away all the GST revenue to the states.
So instead of the states going cap in hand to the Commonwealth every year, they will have a guaranteed income from the GST stream to do whatever they like with. At present half of Commonwelath grants to the states are tied to specific purposes. Virtually all of them are very worthy – blood transfusion serivces, bridges, nursing homes and the like.
As time goes on the GST refvenue will grow like topsy, unlike the present wholesale tax. The GST hits the growing services industry; the WST only hits the comparitively shrinking manufactured good sector.
As the GST grows, state revenues will grow. The Commonwealth will respond by cutting tied grants so the total take for the stes remains the same.
The Commonwealth will be on the back foot while the states wallow in the GST revenue.
But it is not just on the badck foot economically. It will be on the back foot with policy as well. The Commonwealth has only been able to lead the charge with policy since World War II because it holds the purse strings. It hold the purse strings because it gained and kept power over tax. Take away the purse strings and the policy leadership falls away. John Howard ahs given away those purse strings. He has legislated that the states will get all the GST revenue untied.
Forget the tampons or a few cents of tax in rounding up. The real GST story is the way the GST will hand money and power to the states at the expense of the Commonwealth. This will be the real social and political impact of the GST.
The states and territories as a general rule are hopeless at policy development or looking at the big national picture. By and large they spend money on winning the next election. The intellectual calibre of state and territory MPs and Ministers is fairly dismal. The Commonwealth, on the other hand, can always cobble together some moderately competent Ministers. Love them or hate them Gareth Evans could run Foreign Affairs and Peter Costello can run Treasury. That is not true in the states.
The ACT draft Budget revealed that GST revenues are going to give the states and territories a huge windfall.
Hoiward and immediate game. Pit prenset labor states in favour of GST so can spend money on lollies against feds.
Historical trend not all central.
Need not be a bad thing if calibrte of decentralised govt is good and competitive.’
AAP case But when the statSometimes power has moved to the centre. Other times it has moved out. And t