Wednesday, 21 April 2010

If only we could abolish the States....

Many years ago, at drinkies for the aftermath of a Council of Australian Governments (COAG) negotiation (which had, as usual for these events, resulted in a hopelessly muddled compromise and millions of unneeded dollars flowing to the States in order to persuade them to do something they should have been doing anyway), one of the senior policy gurus involved in its establishment confessed in his cups that the then PM and his advisors had idly tossed around (in the course of a long and boring overseas plane trip where entertainment was scarce) the idea of attempting to abolish the States  - but had quickly decided that it was politically untenable, and so gone for the creation of COAG instead.  If only they'd given it a try, he suggested, they might not have succeeded then, but the groundwork laid might have eventually had an effect.

A similar comment might be made about the peculiar outcomes of PM Rudd's latest health care negotiations - perhaps a referendum over the Commonwealth takingover health care, even if lost, might be a better outcome than the mish-mash of funding arrangements now agreed to by all the States and Territories bar Western Australia.

You see the issue is this.  Good government is essential for the well-being of a country. 

And there are few more important tests of a nation's commitment to its citizens in the modern world than ensuring (whether through a public, private or mixed system) effective access to health services.

Yet Australia, at least at the State and Territory level, does not, in general, have good government.  The Northern Territory is an outright 'failed State' in the view of many; but the terrible corruption and incompetence that has characterised most of the other States, and resulted in bizarre outcomes like the new Tasmanian Labor-Green coalition, isn't that far behind. 

One can point to Tasmania's long history of signing up to projects (from damming the Franklin to the Gunn's pulp mill) that destroy its natural beauty with low expected returns to economic development; to South Australia, the ACT and others' utter failure to invest in the water infrastructure necessary to support population growth; to the outright corruption of politicians brought out in cases in Queensland, WA and NSW, and let's not even talk about police forces while Underbelly is running on tv...

Health is where our peculiar mixed system of split responsibilities (for overseas readers, the Federal Government subsidizes  - but does not directly run - General Practitioner and other services out of hospitals, as well as pharmaceuticals, and medical insurance; the States run the hospital system; public hospitals provide semi-free services as a safety net, but also serve private patients; depending on location, private hospitals mainly provide elective surgery, not necessarily able to offer all of the services available in public hospitals) holds together only with stitches, the wounds oozing out the seams.

Fall seriously ill (or just fracture a bone or two as I have recently!) and you will find yourself trapped in a system with long queues (because there are some services that the private system simply does not offer, or times when it does not offer them), high costs (even if you have insurance), and often less than optimal treatment regimes.

So any attempt to reform the system, such as that by Kevin Rudd, which involves decentralising control of hospitals to local area boards, funding based on efficient service prices, and trying to ensure that the money really is spent on health, has to be worth trying.

But the problem is the old one of getting between a State Premier and dollars: Western Australia is refusing to give up the 30% of GST revenue required for the Rudd model to work.  It's all former PM John Howard's fault really: his GST deal with the States in 1998 gave the States a guaranteed revenue stream.  And as Alan Kohler has pointed out that the States have ignored the requirements of the deal to abolish taxes such as payroll and stamp duty, and instead used the money to grow the size of government:

"Specifically, they have blown the GST on employing public servants. A recent study of state budgets by the Institute of Public Affairs reveals that expenditure on employment and remuneration of state government employees has gone from $43 billion in 2000, when the GST introduced to $78 billion in 2009, an increase of 78 per cent or 8 per cent a year.

Between 1990 and 1997, the number of state public servants declined from 1.08 million to 941,500. Now it is back to 1.2 million. The largest percentage increase has been in Victoria – up 36.8 per cent...."

Nor is it in the least obvious that we have more and better services as a result - quite the reverse in the case of our public health system.

Not of course, that the Federal system is much better: under Howard, the Federal public service too expanded dramatically.  But, poor policy design of stimulus spending aside, the Federal system has generally proved much more transparent (albeit with some notable exceptions such as the Department of Defense) much more efficient, and much less subject to corruption and utter incompetence than the States.

Not of course that I'm advocating that everything be centralized: those who dream of abolishing the States have always seen the optimal solution as a system of strong regional level government.

The current proposals are at least a small step in this direction I suppose (albeit one compromised by the compromises), so let's hope that Rudd's optimism about getting WA on board proves warranted, and something actually happens this time.

And those bribes to get the States to sign up are mostly sensible ones: personally, I'm just looking forward to only having to wait the new guaranteed maximum of four hours in Emergency (rather than the seven I spent but a few weeks ago) next time I have a serious medical crisis, or I have to sit with someone I know having one.

No comments: