The Constitution should be amended so the Federal Government can give money directly to local councils, Australian Local Government Association president Councillor Geoff Lake said today.

“Local government believes that a referendum should be held during the next parliamentary term to consider whether a new financial power should be inserted in the Constitution to expressly enable the commonwealth to directly fund councils,” Cr Lake said.

He suggested GST and income tax revenue as possible sources of income for local councils.

“Councils are still predominately funded by a property tax – rates – collected in the same way as it was 100 years ago,” Cr Lake said.

“There is a compelling case that the way we fund local government today is antiquated and in need of reform and rejuvenation.”

Cr Lake said a report commissioned by the Local Government Association showed a $14.5 billion backlog of infrastructure, and that 10 percent and 30 percent of councils were financially unsustainable.

When academic Bryan Pape went to the High Court last year to stop the Federal Government’s stimulus payments, the Court’s final decision meant direct payments from the Federal Government to local councils might have been unconstitutional, Cr Lake said.

“The consequences of a legal challenge would be disastrous,” he said.

“Not only would a successful challenge invalidate current and future funding, but it
would also render all past payments to councils illegal and require the money to be paid back to the commonwealth.”

Cr Lake said that Commonwealth income and consumption tax revenue should be shared directly with councils. The GST is the Federal Government’s main source of consumption tax.

He said the Federal Constitution could be amended to allow the Federal Government to make payments directly to local councils.

“It’s as easy as amending section 96 – the section which sets out that the commonwealth may grant financial assistance to the states on such terms and conditions as it thinks fit – and simply adding the words ‘and local government’”.

Cr Lake said using the states to pass Federal Government money to local councils was ridiculous.

Cr Lake also praised the Prime Minister, Mr Rudd, for turning Council of Australian Government meetings from talkfests to a sharper, more reform-focused body which now meets four times a year. The Local Government Association’s president is automatically a member of COAG.

Cr Lake said Ben Chifley served as a local councillor while he was Australia’s treasurer and prime minister during World War II.

“Ben Chifley understood the importance of the local,” Cr Lake said.

“He wanted to be as involved in the decisions affecting his immediate locality in which he lived, as in the big decisions affecting Australia’s war effort and its post war reconstruction. He found that his capacity to shape issues as treasurer or prime minister was enhanced by his understanding of service delivery at the local level”.