The trouble with federalism

An upcoming audit finds strengths and deficits in Australian federalism, writes Marian Sawer AUSTRALIA is one of the world’s oldest continuing democracies and certainly the first to create itself through the democratic mechanism of the referendum. The compatibility of federalism and democracy, however, is a question that has never been resolved and that has taken on new dimensions in an era of shared decision-making rather than divided responsibilities. This relationship is closely examined in the forthcoming capstone volume of the Democratic Audit of Australia. The audit framework, developed by International IDEA in Stockholm, uses indicators derived from democratic principles to assess both formal and informal political institutions. In the Australian context these underlying principles are expressed as political equality, popular control of government, civil liberties and human rights and the quality of public debate or deliberation. If we start with the key democratic principle of political equality, federalism causes immediate difficulties. The negotiation of federal compacts typically provides guarantees of political representation that contradict the principle of one vote one value. The smaller component units are characteristically over-represented, as is the case in Australia. In 2007, a Tasmanian Senate vote was worth almost 13 times a NSW Senate vote. In principle, this prevents government from ignoring the interests of the smaller federal units. In practice, party loyalties generally trump territorial representation. One way in which federalism can uphold the principle of equal citizenship across constituent units of varying resources is through the principle of fiscal equalisation. In Australia the implementation of this principle is the responsibility of the Grants Commission. It is intended to ensure that all citizens are able to receive services at the same level and for the same tax rates, regardless of where they live. It takes into account both the differing capacity of the states to raise revenue and the differing costs of providing services – given geography, the age structure of the population and the proportion from “non-English speaking background.” A different way that federalism can uphold the principle of equal citizenship is through providing more opportunities for popular participation in government and opportunities that are “closer to home.” In A Federal Republic Brian Galligan describes as “dual citizenship” the fact that citizens can participate in more than one government and suggests that the smaller scale of the subnational units promotes citizen engagement. The idea that federalism multiplies the possibilities for political participation is an attractive one but tends to overlook the role of local government. This is often weaker in federal systems than in unitary systems of government and was ignored in the constitutions of the older federations. In Australia, the position of local government is particularly weak compared to a unitary democracy such as Norway. Turning to the second principle, that of popular control over government, one of the advertised virtues of federalism, from its American origins in the eighteenth century, has been the way it tames democracy rather than encourages it, creating a defence against overbearing majorities. Supporters of federalism often emphasise the way in which divided sovereignty ensures limited government by creating competing centres of power. Of course, the frustration of popular majorities may not necessarily result in smaller government. Public choice theorists argue that each of the multiple and competing centres of public authority within federal systems has a tendency to continuous expansion. The beneficial effects of the Australian Senate in ensuring parliamentary control over executive government have sometimes been attributed to federalism but can be shown to be the consequence of other factors. Strong bicameralism is not a necessary corollary of federalism (think of Canada with its appointed Senate). It is strong bicameralism in conjunction with the adoption of proportional representation that has made the Australian Senate into an effective house of legislative review and executive scrutiny. Rather than strengthening parliamentary control, we shall see that the intergovernmental institutions of federalism may result in an increased amount of decision-making taking place well away from parliamentary oversight. Linked to the argument about how federalism limits government has been an argument that it serves to protect the liberties of individuals. As federalism expert Gwendolyn Gray has pointed out, little empirical evidence has been presented for this claim, or indeed for many of the claims made in the name of federalism. Reformers seeking to increase protection for individual rights or the rights of minorities have often come up against the stumbling block of “states’ rights” — as in the long campaign for a Commonwealth power in relation to Aboriginal affairs. Protection of civil rights in Australia currently varies considerably between jurisdictions, with rights such as the freedom of speech and assembly more secure in jurisdictions with a charter of rights (such as the ACT and Victoria) than in NSW, where last year the government attempted to remove the right of peaceful protest during World Youth Day celebrations. Ideally such pluralism might act to raise standards across all jurisdictions, with the best setting benchmarks for others to follow but there is no assurance this will happen. Political scientists like Andrew Parkin have argued that federalism does provide scope for policy to be more responsive to local needs and preferences and to facilitate policy experimentation and innovation. This is a stronger argument for federalism than many others and there is evidence of successful dissemination of policy experiments that have originated in one jurisdiction (often South Australia). Less convincingly, it has been suggested that federalism offers citizens the right of choice and exit, enabling them to compare political offerings and to move from one jurisdiction to another in pursuit of better services or public goods. The accelerating drift of power from the States and Territories towards the Commonwealth in recent years has led commentators to question the future of federalism itself. Responsibilities that once belonged to the States become shared ones as the Commonwealth exerts its financial power. In an era of global markets, inconsistencies in policy or regulation between jurisdictions are subject to increased criticism for undermining Australian competitiveness. The strengthened co-ordinating role of the Council of Australian Governments (COAG) has addressed such issues, but also contributes to increased levels of shared decision-making across all portfolio areas. As Constitutional lawyer Cheryl Saunders has observed, there are now literally hundreds of intergovernmental agreements in Australia and no routine arrangements for their parliamentary oversight. Decision-making shared between different governments makes it difficult for citizens to determine where responsibility lies and who to hold to account. There is an accountability gap in relation to both parliament and the broader public. This brings us to our final democratic principle, the quality of public deliberation. The “behind closed doors” character of the intergovernmental decision-making pre-empts proper processes of community consultation and may also pre-empt proper parliamentary deliberation, as nine governments present their respective parliaments with already agreed-upon template legislation. Federalism is here serving to multiply the strengths of executive government vis à vis parliament. The nature of executive federalism is exemplified by the competition policy agreements of the 1990s, largely unaccompanied by any public deliberative processes, whether at the parliamentary or community levels, and certainly lacking gender impact analysis, despite their implications for the female-dominated community sector. Moreover, the values of transparency and open government, currently a priority of Special Minister of State Senator Faulkner, have never been part of intergovernmental processes. In the words of Martin Painter, ministerial councils tend to be “notoriously opaque and hard to access for the public, with conventions and secrecy and bureaucratic habits of confidentiality dominant most of the time.” The protocols now governing the ministerial councils ensure such confidentiality and, like COAG, they often simply issue press releases with brief reports of decisions. One jurisdiction that attempted to address such democratic deficits was the ACT. Under the Administrative (Interstate Agreements) Act 1997 ministers were required to consult with Legislative Assembly committees when they were about to enter into an interstate agreement. While this Act was repealed in 2005, the House of Representatives Legal and Constitutional Affairs Committee has taken up the baton, recommending in both 2006 and 2008 that all draft intergovernmental agreements be referred to a parliamentary committee for scrutiny and report. It appears anomalous that while intergovernmental agreements at the international level are now subjected to scrutiny by the Joint Standing Committee on Treaties, the same scrutiny is not applied to intergovernmental agreements within Australia. Overall, how democratic is the Australian federal system? The Australian Audit has found democratic strengths in the areas of policy innovation, political participation, potential for regional responsiveness and fiscal equalisation. It has found deficits in the lack of transparency in intergovernmental decision-making, the limited scope for community consultation and parliamentary deliberation and the accountability issues arising from shared decision-making, blame-shifting and voter confusion. Perhaps it is time for the Rudd government to respond to that House of Representatives report tabled nine months ago. • Marian Sawer is an Adjunct Professor in the School of Social Sciences ANU and Director of the Democratic Audit–ANU, and co-author of the forthcoming book, Australia: The State of Democracy (Federation Press, 2009). This article was first published in the in the Public Sector Informant section of the Canberra Times. Photo: Andrew Jeffre