Spectre of funding has blinded the states on big issues

It's one of the oldest political ploys:  when things get difficult for governments, leaders venture in a new direction.  This is what the states are doing once again at the Council of Australian Governments meeting.

The states are failing on just about every front.  People are voting with their feet and leaving public schools in droves despite large increases in spending.  Queues at public hospitals are large and growing.  An armada of coal ships is queued off eastern ports.  Planning-induced land shortages have forced house prices up to Hollywood levels, ending the dream of home ownership for most young Australians.  Electricity shortages loom in many states because of a lack of regulatory certainty.  Water shortages abound because of a lack of investment and lack of infrastructure.  State tax systems remain a reconstructed mess, destroying wealth and jobs.  And despite endless so-called reforms, the regulatory burden is higher than ever.

This mess has arisen despite the states receiving record revenue flows.  That's not to say there have not been challenges.  The resources boom has placed unexpected demands on infrastructure in Western Australia and Queensland.  The rise of the not-in-my-back-yard class has made decision-making slow and torturous;  a desperate union movement is putting concerted pressure on Labor governments to use the powers of state to preserve union power rather than pursue good policy.  An ageing population and full employment make getting and retaining good staff difficult.  Yet all this provides no excuse.

State governments were elected expressly to meet these challenges, which are mild compared with the past.  Instead of using COAG to advance common priorities, the states will present a new, expansive reform agenda at today's meeting.

The reform agenda has been professionally stage-managed with claims it will transform the economy, creating wealth, jobs and social justice for just $7 billion of additional Commonwealth money.  Desperate for reform, even if modest, most commentators have given it positive treatment.

The problem is that the states' agenda does not address the essential issues.  Moreover, if accepted, it would launch the states into areas beyond their responsibility and competence.  Such a development would increase red tape and put in place programs of questionable value.

Significantly, the states have again failed to take any leadership on reform of the federal system, in particular on the distribution of GST revenue, where leadership has for some time rested with them.

The states' package is mute on the key areas of unfinished business, including common performance reporting such as on hospitals, state taxes, water, land shortage and house prices, project approval processes, and privatisation of electricity generating capacity.  The state package does include commitments on curriculum reform and more spending on numeracy and literacy, but progress on these fronts has largely been forced on them by The Australian and the Commonwealth.

Furthermore, the commitment is to more talk, not clear action.

The big-picture initiatives in the package all entail a large expansion in state responsibility.  A key proposal is for the states to take over and greatly expand the preschool system.  The proposal includes a plan that all four-year-olds and most three-year-olds attend kindergarten;  greatly expanded day care and preschool schemes;  a greater emphasis on formal learning;  and plans to increase the pay and education standards of preschool workers.  The goal is to make preschool an extension of the formal education system, regulated by the states on a national basis.

This is a grand and expansive, albeit flawed, vision.  Its pedagogical and productive benefits are highly questionable.  Indeed, there is virtually no quality Australian research to support the proposal.  The plan is, as is most of the package, key performance indicators-free.  That is, there are no clear measurable objectives proposed against which it can be judged.  Most important, it fails to address the key issue:  the competence of the states.  Do we want state governments to expand their powers over our children when they are doing so poorly in education, an area for which they already have responsibility?

Given its costs and risks, the proposal is not suitable for a national approach.  Instead the benefits of our federal system should be exploited, with the plan's main proponent, the Bracks Government, being allowed, if it wishes, to implement it in Victoria.

The package also proposes a major role for the states in a national carbon trading regime and a program to address type-two diabetes:  areas outside their scope of responsibility and competence.  So the Howard Government would be correct to reject the states' package and funding claim.  This would not only inhibit the states from pursuing new half-baked ventures, it may even force them to address their own outstanding issues.

In their approach to this and other COAG meetings, the states have made a serious error.  The continued existence of the states as functioning governments rather than minions of Canberra depends on them getting serious about reform.

With no state elections looming and a federal election in sight, now is the time to advance a proper program for reform of the federal system.  But once again the states are taking the easy path of pursuing the lure of Commonwealth money rather than focusing on reform of their core activities.

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