10th Parliament · 1st Session
Mr. Speaker (Hon. Sir Littleton E. Groom) took the chair at 3 p.m., and read prayers.
– I am informed that, as the brewers of Australia will not renew an agreement at present existing between them and the hopgrowers for more than a year from the 1st of May, no protection will be afforded the hop-growers beyond the present season’s crop. I ask whether the Prime Minister will consider the matter as soon as possible, and bring it before the Government with a view to the introduction, before the House goes into recess, of Customs legislation which will protect the interests of the hop-growers?
– I shall consult with my colleague, the Minister for Trade and Customs, to ascertain what the position is, and will then give consideraton to the honorable member’s suggestion.
Broadcasting of Political Speeches
– An application has been made by the Secretary to the Country Progressive party of Victoria to permit of the broadcasting of the speeches of the leader of that party during the present State electoral campaign. Permission has been given to the leaders of three political parties in Victoria to broadcast their speeches. There are two other parties - the Liberal party, with a distinct platform and policy, and the Country Progressive party. The Country Progressive party has made application for the same privileges in this regard as have already been granted to three other parties. I ask the PostmasterGeneral whether it is not possible for him to reconsider his decision in this matter, and to say what are the reasons for that decision.
– The reasons are that in this matter the Postal Department recognizes only those political parties that are recognized in the legislature itself.
There are three such recognized parties in Victoria - the Nationalist party, the Country party, and the Labour party. If the same privileges were to be extended to other parties, we should have Mr. McLachlan, of Sale, an honorable member who is a party in himself, claiming to have his speeches broadcast.
Mr.Stewart. - He is but an individual.
– The Country Progressive party is represented in the State legislature by only one individual. I cannot, for the reasons I have stated, reconsider my decision in this matter.
Living Conditions offettlers.
– Has the attention of the Minister for Works and Railways been drawn to a report of the scandalous conditions under which fettlers on the East-West railway are called upon to live? If the report has not been brought under the honorable gentleman’s notice, will he make inquiries as to its correctness; and, if the living conditions of these men are such as is reported, will he have the cubicles in which they are called upon to live made more fit for human habitation?
– I have seen a report, for which I understand Mr. Butterfield, of South Australia, is responsible. I went into the matter with the Commonwealth Commissioner for Railways, and I entirely disagree with Mr. Butterfield that the men referred to are living under bad and insanitary conditions. As a matter of fact, they are living under conditions with which they are perfectly satisfied. The small rents charged for the dwellings in which they live are quite acceptable to them. When certain proposals were madefor the putting up of a better class of houses for them, they were unwilling to pay the increased rent which would have been charged, and expressed themselves as perfectly happy in their present surroundings. Three main depots have beenestablished - at Tarcoola, Cook and Rawlinna. At Tarcoola and Rawlinna a better class of house has been provided, for which 10s. to 12s. per week is charged, and it is intended to provide similar accommodation next financial year at Cook. Between these permanent depots there are numerous lengthsmen’s camps, the position of which will be altered when the ballasting is completed and there is through fast traffic.
– Some time ago it was announced that the Government intended to continue the bounty on the export of wine. As the season is becoming very far advanced, I should like to know from the Minister for Markets and Migration whether the Government proposes, without any further delay, to make public the conditions under which the bounty will be continued?
– The honorable member’s question should have been addressed to my colleague, the Minister for Trade and Customs.
– Has the Prime Minister noticed the fact that a French steamer recently arrived in Australia with 900 migrants? Did the right honorable gentleman, whilst abroad, make any arrangements in connexion with migration to this country from Europe?
– I did not know of the arrival of the steamer to which the honorable member has referred. Whilst absent recently from Australia, I made no arrangements in regard to the admission of foreigners to this country.
– Has the Prime Minister read the policy speech of the Premier of Victoria, and particularly that part relating to certain proposals which the State Government has made to the Federal Government concerning the establishment of a textile school in Victoria? The right honorable gentleman will remember that earlier in the session I referred to this matter. It was then under discussion by the Board of Trade. I should like to know whether finality has been reached, and if not whether the Primo Minister will expedite the settlement of the matter ?
– I saw that the Premier of Victoria made his policy speech last night. I did not read the part of it to which the honorable member refers. I have not had an opportunity since my return to Australia to ascertain the position in regard to the technical school. I shall look into the matter and let the honorable member know the result later.
– Quite recently two appalling coal mining disasters have occurred within the Empire, one at Monmouthshire and the other at Nottingham. After the hard fight for better and safer conditions of working in which the men have been engaged - a fight in which the Government of Great Britain assisted to bring about the defeat of the miners - will the Prime Minister afford the House an opportunity to pass a resolution expressing sympathy with the widows, fatherless children, and other dependants of those who perished in those awful disasters, or, if not, will he allow the Leader of the Opposition to move such a resolution for transmission to the people of Great Britain ?
– There i3 no need for this House to pass a special resolution to indicate how deeply it sympathizes with the relatives of those men who lost their lives in the disaster referred to. Unfortunately, there are constantly such occurrences within the Empire, and it would be impossible for this House to pass a resolution of sympathy in. each case. Therefore, it is not possible to adopt the honorable member’s suggestion.
– I should like to ask the Minister representing the Minister for Defence whether the Government has’ recently given any further consideration to the hardship and injustice suffered by military veterans who, unfortunately, do not come within the scope of the Superannuation Act, and are cut out of other allowances made by the Defence Department. It would take too long for me to explain the circumstances in which these veterans are placed; but I want to know if the Government has given any further consideration to their request, which has already been submitted on many occasions?
– The matter to which, the honorable member has drawn attention has been considered by the Government; but, as the Minister for Defence (Sir Neville Howse), had been giving it his personal attention, it was left over until his return from Great Britain. Now that the Minister is back in Australia, I can promise the honorable member that the requests of the military veterans will be given close and earnest attention.
COST O.rf LIVING STATISTICS.
– Is the Prime Minister aware that, in the compilation of the cost-of-living figures at Broken Hill the Commonwealth Statistician collects particulars from the various business nien to arrive at an average? Is he also aware that grave dissatisfaction exists at Broken Hill because of the low average arrived at by the statistician, and in view of this dissatisfaction, will he allow the Industrial Council at Broken Hill to cooperate with the statistician in order to arrive at the average cost of living in that city?
– I think the honorable member will agree that the Commonwealth Statistician performs his duties in a most admirable manner, and that there should be no doubt as to the impartiality of statistics. In the circumstances, therefore, I could not accept the honorable member’s suggestion. But if ho desires to make representations as to the correctness or otherwise of the method of calculating the costofliving figures, they will be submitted to the statistician, to enable the latter to have the opportunity of stating his view, and the whole matter can then be examined.
– Seeing that a very serious position confronts the dairying industry of Australia, inasmuch as a time limit, which is rapidly approaching, has been placed upon the use of preservatives in butter exported to Great Britain, I should like to know what steps the Government has taken to ensure that Australian butter without these preservatives shall reach the British consumer in good condition, and whether any step3 have been taken by the Government m conjunction with the dairying industry to deal with this problem.
– The matter referred to by the honorable member has been dealt with very fully by the newlyappointed Council of Scientific and Industrial Research, and has also been gone into very fully by the Commonwealth grading staff. It is hoped that before the regulation becomes operative some means will be found by which we can ensure the export of our very best quality butter without the use of boric acid.
– I desire to ask thu Minister in charge of foreign affairs whether the Commonwealth Government has been consulted as to what is or will be the Imperial foreign policy in China?
– The Government baa been kept fully informed about every action taken by the British Government -in connexion with the present unfortunate situation in China.
– Has the Government been consulted on the Imperial policy in China, in accordance with the principles enunciated by the Prime Minister in his report on the Imperial Conference, or has he been merely “fully informed” as to what has taken place, as he stated in hi3 reply to my previous question?
– The usual practice of consultation has been followed in this case. The British Government advises the Commonwealth Government of its contemplated action, and it is open to this Government or that of any other dominion to assent or dissent. In the absence of dissent it is taken that the Governments consulted have no desire to express any view. The honorable member will recognize that, in some cases, it has been quite impossible for the British Government to consult the dominions, because immediate action has been necessary to safeguard British lives and property. Except in such cases, the fullest opportunity for consideration and consultation has been given.
– I wish to ask the Prime Minister a question in relation to his reply of last week, when he informed me that several commanders, chief engineers, stewards, and other sea-going ratings employed on thu Australian Commonwealth Line of Steamers are receiving Australian rates of pay while their families are living iri England. If the Prime Minister is in agreement with me that Australians should have preference of employment on their own vessels, and not English or Scotchmen having their homes in Great Britain, will he inform the Shipping Board that Australians should have first choice of employment ?
– There is no need for me to assure the honorable member that it is the policy of the Commonwealth Government, in connexion with the Australian Commonwealth Line of Steamers, to give first preference in employment to Australian citizens, but the reply which I gave the honorable member last week sufficiently outlined the position and the attitude of the Shipping Board. I can assure the honorable member that any stop taken by the board to provide employment for those who are not actually resident in Australia has been necessitated by special circumstances relating to particular classes of employment.
– As it has been stated that Parliament is not likely to assemble for permanent business in Canberra until after July next, I should like to ask (he Prime Minister whether it will bt possible for him to make arrangements for those honorable members who have not yet seen the Mandeted Territories to visit them during the recess following lbc opening of the new Parliament House in May next?
– Last year an endeavour was made to arrange for a tour of the islands by honorable members who were desirous of seeing them; but, unfortunately, there was not a convenient opportunity to do so. The honorable member’s suggestion will be taken into consideration, and if it is practicable to arrange such a trip the Government will be pleased to make the necessary arrangements for members to visit the Mandated Territories.
– Is the Minister representing the Minister for Defence in a position to state whether the recommendation of the Naval authorities and the Public Works Committee that Osborne House should be utilized as a training school for the Naval Forces is likely to be carried into effect?
– As honorable members are aware, some time ago it was decided, because of her unseaworthiness, to place the ss. Tingira out of commission as a naval training ship on the 30th June next, and to train lads for the Navy at Osborne House; but when the proposal was referred to the Public Works Committee for investigation, it was found that it would be necessary to make considerable alterations before the building would be suitable for the purpose. This rendered it impossible to take the boys to Osborne House for at least a couple of years, and, as a consequence, the Government has considered the advisability of training them elsewhere. It has been decided, for the time being, to accept lads for training at a later age at Flinders Naval Base, and- special accommodation is now being provided for their housing there. The Government hope3, however, that in the near future it will be able to provide for training to be undertaken at Osborne House, thus allowing the lads to be accepted at an earlier age.
– Will the present session be continued at the opening of the Federal Parliament at Canberra and subsequent thereto? For what reason is this particular session of the Federal Parliament being extended over such a lengthy period ?
– It will be a matter for determination whether this Parliament shall be continued or prorogued. The recent practice has been not to prorogue Parliament, but to call it together after recesses by notice given to members by the President of the Senate and by Mr. Speaker. This has been found more convenient than the system of proroguing.
JM.r. PERKINS- Is it a fact that in New South Wales about 80 post offices are classified as semi-official, this applying to the same proportion in the other States, that the officers in charge of the post offices are usually returned soldiers or widows, and that the conditions under which they labour are not so good as those obtaining at the official offices? Seeing that the work is of a similar nature, will the Minister consider bringing the conditions of hours and payment more into line with those enjoyed at the official offices?
– I am not aware of the number of these semi-official post offices or of the conditions of work in them, but 1 shall investigate the matter and ascertain the exact position.
– Has the Treasurer received a communication from a committee representing the fruit-growers of Queensland, with reference to sending a delegation to America to study the fruit transport and marketing methods adopted there? As the Treasurer has recently visited America, can he say whether .the fruit-growers of Australia would profit from such an investigation ?
– I have received such a, communication from the committee, and forwarded it to the Minister for Markets and Migration for comment and report.
– Is the Government or the Federal Capital Commission responsible for the stupid regulation which provides that a person having an orchard, dairy farm, or poultry farm at Canberra may dispose of his products only within the Territory? Will the Government investigate the position with the object of reviewing this regulation ?
– The Federal Capital Commission frames all regulations governing the leasing of land. These, of course, are submitted to the Minister for Home and Territories, and I shall bring the matter under his notice and obtain a reply.
– This morning I received a letter from the Werribee Shire Council voicing a complaint, which I understand has also been made direct to the Minister, respecting the practice of the aviators from Point Cook of flying at a low altitude. This practice has caused horses to be frightened, and, in some instances, breakages in telegraph and telephone wires. The traffic along the main road between Melbourne and Geelong has also been endangered. Would it be possible for the Minister to frame and enforce a regulation prohibiting low flying, in order to protect the lives, not only of the general public, but also of the airmen themselves’
– I promise the honorable member that if the complaint proves to be correct, drastic action will be taken to prevent a repetition of this practice.
Disposal of Proceeds on Re-sale.
asked the Prime Minister, upon notice -
If the Right Hon. W. M. Hughes, P.C., K.C., the then Prime Minister, was not consulted, what reason has Sir J. M. Higgins for not submitting for approval so serious an alteration to a contract entered into toy the Prime Minister?
– These questions were asked and answered by me on the 13th July, 1926. The answer then given was as follows: - “ In the agreement and appendices attached thereto made on the 31st day of March, 1921, between His Majesty’s Imperial Government and the Commonwealth Government, and in the agreement and appendices attached thereto made on the 1st April, 1921, between the Commonwealth Government and British Australian Wool Realization Association Limited, both agreements having been executed for and on behalf of the Commonwealth by the then Prime Minister (the Right Hon. W. M. Hughes, P.C.), all matters between the Governments respecting Imperial wool contracts were concluded. Furthermore, as litigation in connexion with wool contracts has not yet been brought to an end, beyond supplying the foregoing general information, answers cannot be given to a series of questions relating to matters which are still sub judice.”
There is nothing to add to this reply except that the litigation referred to has been continued against the Commonwealth Government and Central Wool Committee by resort to every possible process of law, but without any success whatever.
asked the Prime Minister, upon notice - 1.Whether any invitation for the Commonwealth to be represented at the Disarmament Conference proposed by the United States President has been received?
– The replies to the honorable member’s questions are as follows : - 1, 2, and 3. The question of convening a formal conference has not yet been decided, and no invitations have been issued. Tho position is that the United States Government has inquired whether the Governments signatory of the Washington Treaty of 1922 are disposed to empower their representatives on the Preparatory Commission in connexion with the proposed League of Nations Conference on Disarmament to take part in conversations aiming at an agreement providing for limitations in the classes of naval vessels not covered by the Washington Treaty.
The British Government on receipt of the communication from the United States Government consulted the Dominions, and as indicated in the press reports, has replied that the British Empire is prepared to take part in the proposed conversations to consider to what extent the principles adopted at Washington can be carried further, either as regards the ratio in different classes of ships between the various Powers, or in other important ways.
In these preliminary conversations the Commonwealth Government does not propose to be separately represented.
Child Endowment - DivisionalReturning Officers- Weekly Salaries.
asked the Primp Minister, upon notice -
Is it also a fact that Federal taxation officers transferred under agreement to the State Taxation Department have been requested to refund child endowment where remuneration exceeds £500 ?
– The replies to the honorable member’s questions are as follow: -
asked the Prime Minister, upon notice -
– The replies to the honorable member’s questions are -
asked the Prime Minister, upon notice -
– The replies to the honorable member’s questions are - 1 and 2. It is regretted that the heavy additional work which would be involved in the payment of salaries of the Public Service on a weekly basis precludes the adoption of a weekly pay-day either for the Public Service as a whole or any large section of it.
asked the Prime Minister, upon notice - 1 When was the agreement made between the Commonwealth Government, the British Government, and the Anglo-Persian Oil Company in connexion witli boring for oil in Papua?
– The replies to the honorable member’s questions are -
The agreement provided that the company; as agent for the two Governments should -
The agreement also provided -
That the Governments would defray all expenses, not to exceed £100,000, unless specially approved in writing.
Grant by British Government.
asked tho Minister for Markets and Migration, upon notice -
– The replies to the honorable member’s questions are: - 1 and 2. The British Government has made a grant of £500,000 during the financial year which ends on the 31st March, 1927, for the purpose of furthering the sale in the United Kingdom of Empire products, including homegrown agricultural products. Next vear the grant will be £1,000,000. An Empire Marketing Board, consisting of representatives of Great Britain and each British dominion,has been established to advise the Secretary of State for Dominion Affairs as to the manner in which the annual grant should be expended. The board, which was appointed in May, 1026, has already secured grants for the advertising of Empire products; scientific research in connexion with the mineral contents of the grass crops of the Empire; the promotion of research into cold storage methods (a key problem of vital importance to Empire agriculture) ; investigation into the problem of damage, deterioration, and loss of fruit in transit; tropical and sub-tropical agricultural research; entomological research in connexion with the ravages of insect pests; and research regarding the marketing of Empire products. In this connexion a representative of the dried fruit-growers of the Commonwealth will leave for England next month to confer with the Empire Marketing Board. Practically the whole cost of his visit is being defrayed by the board. The question of making available from the Empire marketing grant financial assistance for the export of pedigree animals from the United Kingdom to the various parts of the Empire is also under consideration.
asked the Minister for Trade and Customs, upon notice -
– The answers to the honorable member’s questions are : -
– On the 4th March the honorable member for Melbourne (Dr. Maloney) asked the following question : -
What amounts had been paid in the form of bounties to various industries during the last ten years?
The reply I gave was that the information was being obtained. I am now able to furnish the honorable member with the following information for the ten years ended 30th” June, 1926 : -
– On the 2nd March the honorable member for Reid (Mr. Coleman) asked me a question relating to an ordinance of the Federal Capital Commission concerning trial by jury. In reply I said that no representations on the subject had been received from the residents of Canberra. That statement was made as a result of inquiries instituted in my own department. I have learnt subsequently that representations have been made to the Home, and Territories Department, and I desire to correct my reply accordingly.
The following papers were presented : -
Postmaster-General’s Department - Sixteenth Annual Report, 1925-26.
Public Works Committee Act - Twelfth General Report of the Parliamentary Standing Committee on Public Works.
Seat of Government (Administration) Act Second Annual Report of the Federal Capital Commission, for the period ended 30th June, 1920.
Ordered to be printed.
Beer Excise Act - Regulataions Amended - Statutory Rules 1927, No. 18.
Commonwealth Shipping Act - Commonwealth Shipping Board - Profit and Loss Account for the year 1st April, 1925, to 31st March, 1920, and Balance-sheet as at 31st March, 1920; together with AuditorGeneral’s Report thereon.
Cotton Bounty Act - Cotton Bounty (Seed Cotton) Regulations - Statutory Rules 1927, No. 21.
Customs Act - Regulations Amended - Statutory Rules 1927, No. 17.
Lands Acquisition Act- Land acquired at - Albury, New South Wales - For Defence purposes.
Seymour, Victoria - For Defence purposes.
Northern Territory Acceptance Act and Northern Territory (Administration) Act - Ordinance of 1927 - No. 2 - Northern Territory Government.
Public Service Act - Appointments - Department of -
Health - H. G. Furphy, J. J. Graydon, R. T. Simmons.
Home and Territories - W. L. James.
Works and Railways - J. I. Strachan.
Debate resumed from 4th March (vide page 148), on motion by Dr. Earle Page -
That the Bill be now read a second time.
Upon which Mr. Charlton had moved, by way of amendment -
That all the words after the word “ That “ be omitted with a view to insert in lieu thereof the following words: - “, in view of the State Governments’ heavy financial responsibilities, the bill be withdrawn.”
– In the few minutes occupied by me on Friday last in discussing this bill, I pointed out that considerable duplication existed in fields of taxation that were drawn upon by the Commonwealth and the States, and that they included land, probate, entertainments, and income taxation. I also tried to show that, while the position so far as income tax was concerned, had improved, under the regime of the present Government, to the extent that a saving of £200,000 per annum has been brought about by the almost complete abolition of the Federal Income Tax Department in consequence of a mutual arrangement between the Commonwealth and the various State. Governments the net result was that the Commonwealth levied income tax, and the States collected it, and handed it over to the Commonwealth, most of the money being returned to them again in the form of per capita payments. No honorable member who has any respect for simplicity in taxation can defend such a state of affairs. Of all the proposals submitted to this Parliament, probably none has been more misrepresented than that relating to the per capita payments. Practically all the emphasishas been laid on the discontinuance of these payments, and very little mention has been made of the revenues which the Commonwealth proposes to surrender as compensation to the States. The Commonwealth is depicted by certain newspapers and other critics as rolling in wealth and embarrassed by huge surpluses of Customs revenue. It is said that most of the direct taxation now levied was imposed during the war, and, the war being over, is no longer necessary and should be abolished, although the per capita payments to the States should continue. That is not an exaggeration of the arguments advanced by certain people who do not trouble to look very deeply into this problem. What is the true position? On Wednesday last the Prime Minister dealt in detail with the financial obligations of the Commonwealth, and without traversing the same ground, I propose to emphasize briefly what the right honorable gentleman said. Some of those critics who state so glibly that the Commonwealth Government has enormous revenues, greater than it requires, may be surprised to learn that its postwar obligations are heavier than the financial burdens it had to bear during the actual period of the war. The annual interest and sinking fund contributions amount to £21,000,000. It is true that the present Government has succeeded in reducing the dead weight war debt by £28,500,000- a very creditable achievement in so brief a period by a country with only 6,000,000 people. Nevertheless, the interest charges on the outstanding balance are heavier than was the original interest on the whole debt. This is explained by the fact that,, since the first war loans were floated, the price of money has increased, and loans originally floated at a little more than 4 per cent, have had to be converted at much higher rates. Another burden borne by the Commonwealth is the payment for pensions and medical services to soldiers. Last year the Minister for Defence and Health predicted that these payments will continue to increase over a number of years. Many ex-soldiers who to-day are 25 or 50 per cent, incapacitated will, as the years go by, become further incapacitated and the payments to them and to their dependants, who also are becoming more numerous, will automatically increase. The liabilities directly attributable to the war total £29,000,000- £21,000,000 for interest and sinking fund and £S,000,000 for soldiers’ pensions and medical services. Most of this obligation will continue for another generation and a half. In addition there are the old-age pensions and the maternity allowance. which absorb nearly £1.0,000,000 per annum. Undoubtedly the payment, of old-age and invalid pensions by the Commonwealth relieves to an enormous extent the State parliaments, which otherwise would have to make some provision of this kind, although probably not on so generous a scale as the Commonwealth has adopted. Thus, the Commonwealth’s annual obligation is increased to £39,000,000. A further inescapable liability is that of defence. Some honorable members think that no expenditure on defence is necessary. That is the view of the honorable member for Ballarat (Mr. McGrath), but I was glad to hear that the honorable member for Dalley (Mr. Theodore) did not agree with him. In his maiden speech, to which I listened with much interest, he expressed the opinion that the Commonwealth was not doing sufficient in that direction, and, indeed, had been somewhat neglectful of its defence responsibilities. Wisdom is generally vo be found midway between two extremes, and the two extremes in this instance are probably the views expressed by the honorable member for Ballarat and the honorable member for Dalley. Certainly the present government is doing all it can reasonably be expected to do with the financial resources at its command to ensure the defence of the country. Exclusive of the special expenditure on naval construction, the Commonwealt is expending this year on defence nearly £5,500.000. Three inescapable Commonwealth obligations - post war liabilities, old-age and invalid pensions, and maternity allowance, and defence - total £44,500,000, an amount greater than has ever been collected in Customs and excise revenue in any one year. Having exhausted the funds produced by indirect taxation, the Commonwealth has dipped into fields of direct taxation, generally, but not universally, regarded as the province of the States. In order to carry on the ordinary functions of government and pay to the States a uniform amount of 25s. per capita, tho Federal authority is compelled to dip still more deeply into the pockets of the direct taxpayer, and thus deplete the reservoir of liquid wealth upon which the States must draw. The per capita payments are still sometimes referred to as refunds of “surplus revenue.” Can it be seriously contended that revenue is surplus if, in order to obtain it, the Government is compelled to tax outside its ordinary province and invade a field previously regarded as reserved for the States? Can any government be said to have a surplus when it is saddled with a war debt of £3.00,000,000?
– Wherein is it laid down that these fields of direct taxation are reserved to the States?
– While it is not universally admitted, it is generally claimed that those fields should if possible be left to the States. But the phrase “surplus revenue” was coined by people who never contemplated that the Commonwealth would one day carry a war burden which would make the total proceeds of indirect taxation insufficient for its needs. Not only was it stated that the per capita payments come oue of surplus revenue, but it was also seriously contended by some people - I heard the argument in this chamber - that these payments come out of Customs revenue. How is it possible to put revenue into a watertight compartment? . The honorable member for Dalley (Mr. Theodore) the other day said it was fair to speak of it as coming out of the Consolidated Revenue. It is worth while to pursue this aspect of the problem a little further. If we try to divide our sources of revenue and expenditure into two main classes, what do we find ? Dealing first with revenue, it may be said that Customs receipts are the inevitable and automatic result of our protectionist policy, whilst our direct taxation receipts are the result of a deliberate planning to raise a definite amount to avert a deficit. If we take our avenues of expenditure we find on the one hand certain inescapable obligations, peculiarly the responsibility of the Commonwealth Government. Such are our post-war liabilities, our defence expenditure, and invalid and old-age pensions, as well as expenses for ordinary governmental activities. Secondly, we have certain obligations which may be continued or discontinued at the will of this Parliament, such, for example, as the uniform payments per head to the States. If we bring together the receipts and expenditure, subdivided as I have suggested, we can come to no other conclusion than that those inescapable obligations to which I have referred must be a first claim upon the main source of Commonwealth revenue, namely, indirect taxation, whilst those liabilities which may be continued or discontinued at will, and these include the per capita payments, can only be provided for by an incursion into the field of direct taxation. In other words, they may be met only by dipping into those sources of revenue already taxed by the States. Thus in providing for these payments we do not merely rob Peter to pay Paul, but actually we roh Peter to pay Peter. It has been said that these per capita payments represent really the cream of the States revenue. If this view be indorsed it should be remembered that we can only provide the cream by first milking the State cow half dry. Whilst the Government wishes to maintain, and, if possible, to increase that supply of cream - if we may still use the illustration - it believes that the States should do their own milking. Whether we are dealing with the dairy or considering problems in the realm of high finance, we must acknowledge that it is more economical, and better for the cow, to have the milking done by one operation. I trust that my useof that illustration will not result in my being charged with having used an epithet disrespectful to that long-suffering gentleman, the general taxpayer. With regard to the statement that our Customs receipts are so great as to encourage extravagance, we have to remember that if we had to depend on Customs revenue alone we should be hopelessly insolvent to-day, without paying one penny of the per capita payments. I listened last week with a very great amount of interest, as invariably I do, to the honorable member for Yarra (Mr. Scullin), for whether or not one agrees with him, he is always interesting - and I formed the opinion that he did not attach much weight to the principle that governments should raise what they spend. The honorable member treated the principle in a light and airy manner, and as something of not very much consequence. On this point I remind him that his views are not shared by all those who are or have been members of the party of which he is so distinguished an ornament. The late Mr. Tudor, formerly leader of the Labour party in this House, speaking on the debate on the Constitution Alteration Finance Bill 1909, said-
Under this agreement, we are to raise every year, £5,000,000, or more, according to the population of the States, and hand it over to the State Parliaments, saying, “ Spend this as you please.” … As the Commonwealth has to raise the money, it ought to expend it.
– There is no affirmation of principle there, anyhow.
– The honorable member for Yarra himself, speaking in 1910, to the debate on the Surplus Revenue Bill, made remarks which indicated almost prophetic prescience on his part. On that occasion, the honorable gentleman said - we object to the agreement being placed in the Constitution so as to tie the hands of Federal Parliaments of the future. . . No statesman or party could foretell what would be our troubles in the days to come. . . There might come such a calamity as war; but that very argument proves that it is desirable to make such an arrangement as this somewhat elastic and to refrain from placing it in the Constitution.
That was a statesmanlike utterance. The war came four years later, and on such a scale that it will affect out finances very seriously for at least another generation and a half. The financial load we have to carry was regarded by the Hughes Government in 1919, and by the right honorable member for Balaclava (Mr. Watt), who at that time was Treasurer in the Hughes administration, as of itself sufficient justification for a readjustment of ‘ finances between the Commonwealth and the States. But this Government does not approach the subject from that angle. It is not complaining of the financial burden which has been imposed upon it, nor docs it seek to place it upon other shoulders. What this Government is concerned about, however, is that these heavy liabilities have resulted in wholesale duplication and overlapping in taxation, and that our existing system of finance leaves no escape from an invasion of State sources of revenue, and the depletion of their finances. So little desirous is this Government of getting rid of its burden, that it is really the first administration that has attempted to bring about a financial readjustment of the relations between the Commonwealth and the States on the basis of offering something in the nature of a quid pro quo. What is the history of all previous adjustments? If we go back to the inception of federation, we find that the first arrangement resulted iu a loss to the States of one quarter of their Customs revenue, which was to be retained by the Commonwealth. In 1910, a reduction _ of the grant to 25s. ner head of population caused an immediate loss to the States, of £3,000,000 per annum. In 1919, during tho regime of the Hughes Government, the right honorable member for Balaclava (Mr. Watt), who was not only Treasurer, but also Acting Prime Minister, submitted to a conference of State Treasurers a proposal for an annual reduction, for six years successively, of 2s. 6d. in the then existing grant. Had his proposals come to fruition, the grant would now be 10s. per head, and the States would, be suffering a net loss of a little over £4,500.000 a year. There would have been smaller losses for the six years from 1st July, 1920, to 30th June, 1926. What were the extent of the Commonwealth’s post war liabilities in 1919? We had at that time to meet a bill of £13,000,000 for interest and sinking fund, and £5,000,000 for soldiers’ pensions and medical services, making a total under those two headings of £18,000,000. To-day the obligation has increased from £13,000,000 to £21,000,000 for interest and sinking fund, and from £5,000,000 to £8,000,000 for soldiers’ pensions and medical services, making a total increase from £18,000,000 to £29,000,000, or 61 per cent. The right honorable member for Balaclava expressed clearly to the conference held in 1919 his views on the practice of one Government collecting revenue for another Government to spend. It is interesting to recall what he said on that occasion -
It is a subject for regret that this course is necessary, but I feel that it is absolutely imperative. It is better that the States should raise the money for themselves in the difficult circumstances operating than that the Commonwealth should attempt to raise it for them. Sooner or later the States may have to do without any help whatever from the Commonwealth. As against that, however, the business concerns of the States are very valuable assets which must prove fruitful sources of revenue. Almost certainly in the near future, there will be a great increase in population, particularly if, by combined Governmental activities, we reach out for it; while the large expenditure on soldier settlement must increase production, and create additional revenue in various ways The railways and other producing assets will, for instance, be benefited, and I do not anticipate that the States will be greatly embarrassed by the gradual reduction in the payments made to them. The proposal that the. amount payable shall be reduced gradually is, of course, made in order that the States may have time to set their finances in order.
Although I agree with much that the right honorable gentleman said at the beginning of his remarks, I disagree entirely with the suggestion contained in the last sentence I have just quoted, in which he _ said that the reason for proposing to reduce the per capita payments gradually by 2s. 6d. a year for six years was to give the States time to adjust their finances. It appears to me to be preferable, even from the point of view of the States, to make the change in one operation, rather than in a succession of operations. If it is done a little at a time, year by year, the States must be continually altering their systems of taxation.
– The Minister did not say that at Warragul.
– I would say it at Warragul or anywhere else. Any honorable member who had to submit to an amputation would prefer it to be done at one operation rather than to have a few inches of his limb removed at each of six successive operations. The States are in a much better position under a proposal which gives them ample time to bring down the necessary legislation to readjust their finances. If necessary, the taxes taken off by the Commonwealth can be reimposed by the States.
– Was the statement of the right honorable member for Balaclava put forward as a suggestion, or as an ultimatum?
– I ant not prepared to answer that question ; it ought to be addressed to the right honorable gentleman himself. The history of the alterations and proposed alterations in the financial arrangements between the Commonwealth and the States shows that when the Federation was consummated the cost to the States amounted to one-fourth of the Customs revenue; in 1910, when the per capita arrangement was substituted for the payment of three-fourths of the Customs revenue, the States suffered a further loss of £3,000,000; and at a later stage the proposal of the right honorable member for Balaclava would have resulted in a loss to them of .£4,500,000 per annum. The proposal now submitted is the first attempt made by any government to bring about a change in the financial arrangements between the Commonwealth and the States, and at the same time to give the States a quid pro quo. The proposal is, in fact, accompanied by a guarantee that the States will be even better off in the future than they are to-d,ay. The honorable member for Yarra, when speaking last week, took exception to the inclusion in the bill of the special grants to Tasmania and Western Australia, and said that they had. nothing to do with the matter. At least, the special grants which appear in this bill- £300,000 to Western Australia, and £378,000 to Tasmania - have proved conclusively to my mind that the payment of a uniform rate per head of the population in each of the States is useless and ineffective, inasmuch as two States out of the six have needed special grants to enable them to carry on.
– South Australia is now seeking a special grant.
– By that interjection the honorable member provides me with a further argument for saying that something else should be substituted for the present obsolete aud indefensible system. Not only do those special grants prove that the per capita arrangement is obsolete and ineffective, but between 1910 and 1920 it was virtually admitted, by the payment to Western Australia of a special allowance, half of which was contributed by the other States, that a uniform payment to each of the States is not just. Some honorable members are inclined to regard special grants to States such as Western Australia and Tasmania as something in the nature of doles, and to taunt those undeveloped States as being poor relations.
– That is not their position.
– I said “ some “ honorable members.
– The grants to those States were agreed to unanimously.
– Would it not be far more satisfactory if, as a result of a conference between the Commonwealth and the States, greater consideration could be given to the needs of those States which have not been developed to the same extent as have others, with larger populations? That can never be properly achieved under the present system. The honorable member for Yarra, in dealing with the principle that the authority spending money should raise it, mentioned the roads agreement which, he said, is an abnegation of the principle which the Government has laid down.
– Is it not? Mr. PATERSON. - That argument is so superficial as to be unworthy of a gentleman of the mental calibre of the honorable member. In that connexion money is not handed to the States to handle as they please, but is spent under the joint control of the Commonwealth and the States.
– Still the Commonwealth raises the money, and the States spend it.
– The Commonwealth raises the money; but the States spend it under conditions laid down by the Commonwealth.
– That is only begging the question.
– It is not. Certain grants are paid to the States for a specific purpose. It is generally recognized that there is a difference between handing over revenue to the States to expend as they desire, and utilizing it to provide a national system of roads as a joint responsibility of the Commonwealth and the States. The honorable member for Yarra further expressed the opinion that the per capita payments should not be discontinued until the whole question had been discussed at the proposed conference.
– That was not my proposal; it was the admirable suggestion of the honorable member for Dalley.
– The honorable member for Yarra mentioned it, and I think I can refresh his memory by reminding him that in that connexion he said that, in his opinion, the atmosphere of the conference would be clear, as it would not be befogged by the withdrawal of the per capita payment. He will also remember saying that if the bill were carried there would be nothing left for the conference to discuss. The honorable member should have said that when the per capita payment is withdrawn the atmosphere would be clear. During previous conferences between Commonwealth and State members the atmosphere has been befogged, owing to the existence of the per capita payment, and instead of conferences considering a better basis for the financial arrangements between the Commonwealth and States they have devoted their attention to the so-called moral rights of the States. It ap Dears to me that, so long as the present arrangement exists, the atmosphere at such conferences is likely to remain befogged. Only by abandoning an obsolete and inefficient method of distributing uniform payments to the States can the atmosphere become suffixciently clear to deal with the question of the best manner in which to replace that system. The honorable member for
Yarra said there would be nothing left for a conference to discuss. The whole field would be open for discussion with the sole exception of the present uniform per capita payments. There would be for instance, the proposals embodied in this bill, under which the Commonwealth would discontinue collecting land tax, estate duties, .entertainment tax, and 40 per cent, of the income tax. The amounts derived from these taxes are increasing more rapidly than are the per capita payments, so that, by accepting this proposition, the States would become increasingly better off than if the present arrangement were to continue. There is also the proposal submitted by Mr. Warren Kerr, which differs slightly from that now under consideration. He proposes that the Commonwealth should discontinue collecting land tax, entertainments tax, and estate duties, and relinquish only 20 per cent, instead of 40 per cent, of income taxation, and also provide a sinking fund of $ per cent, on all State debts. That proposal is, undoubtedly, worthy of careful consideration by the conference, if for no other reason than the fact that a large part, perhaps one half, of such a sinking fund of ^ per cent, .would be met by the indirect saving effected on any loans raised by a government providing such a° fund. Loans required by a government can be obtained on easier terms when it is known that provision is made for a satisfactory sinking fund. It is no exaggeration to say that, by providing a sinking fund of per cent, on any loans raised, a government could expect to save J per cent, in interest. The suggestion that the Commonwealth should assume additional responsibilities, . and also the proposal submitted- in 1923, or some modification thereof, which waa practically agreed to by five of the six States, could be considered. It is interesting to compare some of the press comments on that occasion with those which are appearing to-day. A popular Melbourne evening newspaper published, in 1923, a leading article on the proposal to do away with individual income taxation. It headed its article, “ Bruce’s remarkable surrender; Triumph for the parochialists ; States supreme in power.” A paragraph from the article read as follows : -
The agreement is superficially attractive, because it relieves all individual taxpayers of the necessity to fill up two forms - ‘State and Federal - and because, ‘by the heavy reduction of the staff of the Federal Income Tax Department, it effects an annual saving which may even reach £400,000.
It is, on the other hand, a bad arrangement, because it makes what all true Federalists will regard aa a fatal surrender of primary power to the States. The agreement is a triumph for the “ State-ri stoters,” and a knockout blow to those who take the larger national view. To those who think in States, it is an admir- able scheme; to those who take the big, comprehensive, all-Australian view, it is sheer tragedy.
The article went on to describe the arrangement almost arrived at on that occasion as “ a two-handed grab “ by the States. Contrast with that the opinion that the same newspaper has expressed recently on the present proposal. The specific article to which I shall refer is headed, “The real meaning of per capita abolition; States might as well be wiped out; Proposal would make overlords of rulers at Canberra.” The present proposal admits of a solution very similar to that almost agreed to in 1923, a solution which this newspaper described as giving all power to tha States, and now declares will have the effect of wiping them out. As the present proposal practically includes the proposal that was made three years ago, or something very much like it, it is extraordinary that it should now be referred to as a. scheme for making “ over-lords of rulers at Canberra.” The honorable member for Yarra said that if the present proposal to abolish the per capita payments were agreed to, there would be nothing left for a conference of State Premiers to consider; but I am quite sure that if the honorable member were a State Treasurer, instead of a member of this Parliament, he would find a good deal of pleasure in browsing in this ample field open for discussion by the proposed conference. He would find ample scope for exercising his mathematical mind. I pay him the compliment of believing that he would have no difficulty at all in finding a better financial arrangement than that which exists at present. The honorable member mentioned the odium which he said would attach to State governments which might find themselves in the position of having to impose increased taxation to recoup themselves for the lost per capita payments.
– I was quoting the Treasurer.
– In view of the fact that States would have ample time in which to introduce legislation to provide for whatever taxation may be necessary in the event of the Commonwealth evacuating the fields proposed, I can see no reason why the change over should not be made so smoothly that the general taxpayer would hardly notice it. I do not for a moment believe that a man who pays £10 in Federal taxation, and £10 in State taxation annually would be in the least degree aggrieved if he were to receive a bill for £20 from -his State Government, and no bill from the Commonwealth Government. in fact, he would- be pleased that unnecesary duplication of returns had been abolished. If by reason of this better arrangement his total taxation bill were £19 instead of £20, he would have real grounds for rejoicing. If there is anything in the suggestion that odium will attach to governments which may be concerned iu the proposed change in taxation methods, I am quite certain that the Commonwealth government will have its full share passed on to it. It seems to me to be extremely likely that if any State Government found it necessary to impose taxation relinquished by the Commonwealth, it would take care that the Commonwealth Government received full blame for it. I regard this proposal as a genuine attempt to diminish duplication. The scheme is not only just but generous to the States. In one of the first speeches I had the honour to deliver in this House - I refer to the occasion nearly four years ago when I seconded the motion for the adoption of the Address-in-reply - I dealt with the undesirableness of duplication in taxation as between the Commonwealth and States. I do not propose to read the whole of my speech on that occasion, but I quote the following paragraph : -
One important matter in His Excellency’s speech, to which 1 should like to refer, is the statement that the Government intend to take steps for the abolition of dual income taxation. At the present time, the Commonwealth collects taxation indirectly through the Customs, and directly from the individual by levying, as do the States, a graduated income tax. With the right hand the Commonwealth takes toll from the individual, while with the left it pays back some of that toll in the shape of per ca-pita grant to the States. The public, no doubt, is fully conscious of any extortion that is practised by the right hand, but it is equally forgetful of any benefit handed out by the left. One is reminded that the Government in the past has at least been carrying out the scriptural injunction, “ Let not thy left hand know what thy right hand doeth.” The -Commonwealth Government has been incurring the odium of collecting a certain amount of revenue which the State Governments have had the privilege of expending. By the abolition of dual taxation, we shall adhere to the principle that the Government which collects taxation should spend it - that any money spent by a Government must be collected by that Government. The duplication of taxation is indefensible.
I am happy to champion the same cause to-day. lt appears that in this controversy the ordinary public has not participated to any extent. The most important individual concerned - the general taxpayer - appears to have been overlooked. We should consider not whether an arrangement beneficial alike to the States and the Commonwealth can be arrived at, but whether we can benefit the general taxpayer, who, it must be remembered, pays both State and Federal taxes. If we agree that the abolition of costly duplication would benefit the taxpayer, we should abolish it; otherwise we fail in our duty. Personally, I am glad to be a member of a Government which follows the path that it believes to be in the best interests of the taxpayers, is not intimidated by misrepresentation, but is confident that when the facts are known and understood, its actions will receive general support. I hope that the . proposed conference will take place, and that it will result in an arrangement being made which, if not absolutely satisfactory to every State, will at least achieve a saving to the general taxpayer.
.- To all who have studied this question it is clear that the Government’s proposal is contrary to the spirit which was the genesis of federation. It should be evident to the Government that throughout Australia there is a considerable section of the public opposed to this measure. The opposition to it comes from all political parties. The leading newspapers in every State, whatever their political views, have supported the State Governments and taxation experts in condemning the “ stand and deliver” attitude adopted by the Federal Government, which has resulted in bad feeling between the Commonwealth and State authorities. The Minister compared the proposal to an operation, which he said was better done at one time than piecemeal. It could more fittingly be compared to a bottle of medicine, which, if all given to a patient at one time would bring about his death, whereas, if taken in small closes, might do him good. There is no doubt that the Government’s proposals, if adopted, will have a disturbing effect on the finances of the States. As far back as 1923 strong exception to the dogmatic attitude adopted by the Prime Minister in relation to this matter was taken by the Nationalist Premiers assembled at a Premiers’ Conference. Sir Henry Bar.well who represented South Australia at that conference, referring to the attitude adopted by Mr Bruce, said -
I think it is a pity, Mr. Chairman, that you should suggest that the debate should be closed down before the arguments of the various States have been heard and considered. While you have considered this matter from your own point of view, and have come to the conclusion that our proposal is impracticable and intolerable, the States, together, have also considered it very carefully and have decided that their proposal represents the only basis on which the problem can be solved satisfactorily as between the Commonwealth and the States.
On that occasion the Prime Minister introduced a scheme for the abolition of the per capita payments ; but he was not prepared to listen to the views of the States. He said that unless the States accepted his scheme, it would be useless to discuss the subject. Because the State representatives, under duress, accepted that scheme, and proceeded to formulate an alternative proposal, we are now told that at one time they unanimously accepted the principle embodied in the abolition of the per capita payments. That is not so. The Treasurer (Dr. Earle Page), when introducing this measure nearly twelve months ago, regarded it as so urgent that he gave the States only one month to make other arrangements to raise the revenue which would be lost to them when those payments ceased. The strong protests of honorable members, together with the representations made by the States, forced the Treasurer to reconsider the matter. Nothing more was heard of the proposal until the Prime Minister recently informed us that the Government still intended to abolish the per capita payments, and then to call a conference. Before abolishing the payments, a conference should be held to discuss the whole quest-ion, which could then be approached in a much better spirit than will be the case if the Government proposal is adopted. The present proposal will certainly not tend towards harmony or effective work at the conference.
The Prime Minister’s attitude is dogmatic and arrogant, and I shall be greatly surprised if, when the vote is taken, honorable members on the other side ore found supporting the Government. I had hoped that the Treasurer himself, instead of the Minister for Markets and Migration (Mr. Paterson), would have attempted to reply to the honorable member for Yarra (Mr. Seullin), and other honorable members who have criticized this measure.
– Had I done so, the debate would have closed.
– I hope that we shall yet hear the Treasurer’s reply to criticisms of the Government’s proposals. To most honorable members it is evident that the State Governments have good reasons for protesting strongly against this measure. The whole mutter should be deferred until the proposed constitutional session, which will probably result in a remodelling of the Constitution and a readjustment of the powers of the States and the Commonwealth. If the Commonwealth is to be clothed with greater power and thus relieve the States of some financial responsibilities if it is to undertake a national childhood endowment scheme and national insurance generally, in addition to other social reforms, there may be some justification for a review of the per capita payment. But evidently the Government does not intend to deal with this matter along the lines suggested at the recent Federal election. The Government has no mandate from the electors for its present unreasonable attitude. The section of the Constitution which is known as the “ Braddon blot “ provided that, for a period of ten years, threefourths of the revenues derived by the Commonwealth from Customs and excise duties should be returned to the States. In 1910, that section ceased to operate, and it was provided that the States should receive from the Commonwealth 25s. per head of population for a period of ten years, and thereafter until a different, arrangement was made by the Federal Parliament. Statements which were made by some of those who took a leading part in the Federation movement, and other prominent men who sat in this Parliament in 1910, show clearly the opinions which were held in regard to payments to the States in pre-Federation days, and also at the time when the Surplus Revenue Act was passed by the Commonwealth Parliament. Lord Forrest, one of the leading spirits in the Federation movement, speaking on the Surplus . Revenue Bill in this House in 1910, said : -
At the Federal Convention of 1897-8 the division of this revenue presented one of the most difficult problems to be solved, and it was termed, “ The lion in the path.” Eventually an arrangement was come to for a perpetual - that is, so far as we could make perpetual anything under the Constitution, every section of which is subject to the will of the people - payment to the States of three-fourths of the revenue, the Commonwealth retaining one.fourth
Federation would not have been agreed to had a majority of the people suspected that the payments to the States would be abolished under the circumstances which condition the proposal that is now being made by this Government. That it was never intended that those payments should cease is clear from the following letter which was written by Sir George Reid to the Premier of Victoria: -
I am more responsible than any man for the termination of the Braddon clause, but I never wished to allow the States less than a fair share of the Customs and excise revenue from the masses of their inhabitants. The object of this letter is to moke that sure for all time.
That should answer effectively the suggestion of both the Treasurer (Dr. Earle Page) and the Prime Minister (Mr. Bruce) that the States have no moral right to the per capita payment. It is clear that the view which was held by those who made provision for that payment was that the States had a just claim, and therefore a moral right, to it. The Treasurer and the Prime Minister now urge that this is a vicious principle which must be ended if calamity is to be averted, overlooking the fact that it has been in operation for 26 years, without adverse effect on either the States or the Commonwealth. The Minister for Markets and Migration (Mr. Paterson) used extravagant language when he said that it was useless and ineffective. It has been proved to be an effective and a useful compensation to the States for what they lost when they entered the federation. To me there is nothing vicious in the principle, and that view must be held also by those honorable members who have an open mind, and .whose, hands are not tied. Such an opinion is buttressed by the assertions of those who took a prominent part in the establishment of federation, and in the substitution of the per capita payments for the Braddon provision in the Constitution in 1910. Nobody can argue that a constitutional right exists, and I do not intend to do so; but there can be no doubt that the States possessed a legal right up to the date of the repeal of the Surplus Revenue Act. The Prime Minister and the Treasurer have changed their ground on this matter during the last five or six years. Speaking at the Wool Exchange, Brisbane, on the 18tt May, 1922, when he was Treasurer in the Hughes Government, tha present Prime Minister clearly expressed his opinion in the following words : -
Until some alteration is made in the basis of our whole national life, the per capita payments to the States must continue.
What meaning can be attached to that statement ?
– Something fundamental and far-reaching. But since that time a new Government lias come into power, the Nationalist party having joined forces with the Country party. That is h fundamental and far-reaching alteration.
– The pernicious influence of the Country party must be corrupting the ideals of the Nationalist party. It is evident to me that the right honorable gentleman at that time believed that a constitutional session would be hold to consider the remodelling of the Constitution, probably in the direction of making the central parliament the sovereign authority and creating a number of subordinate legislatures, which would be clothed with certain powers by that Parliament.
– And the creation of new states.
– Probably the right honorable gentleman had in mind, also, the creation of new states. Instead of proceeding in this ill-considered way, the Treasurer might have waited until his pot scheme for the creation of new states had been given an airing at a constitutional session. It is quite possible that, when the Constitution is altered to facilitate -the creation of new states, it will bc necessary to overhaul nil the arrangements between the States and the Commonwealth. There is ample evidence that in 1922 the Prime Minister, who was then Treasurer of the Commonwealth, recognized that the States had a just claim to the per capita, payments, and that they must be continued until there was a fundamental alteration of the basis of. pur national life. I find that Sir George Reid had a very clear conception of the true relationship between the States and the Commonwealth. Speaking in 1909, he said -
I think that the States should receive a fair share of the Commonwealth revenue, and that that share should be on a per capun basis, increasing automatically with the growth of revenue and population, or at least with the population growth.
It is clear to every one that the per capita payment is not worth to-day to the States what it was worth when first made. The purchasing power of the payment has very much decreased. What was worth 25s. in 1910-11 is now worth 15s. 7½d. Although the population of the States has increased considerably, and, consequently, the per capita payment aggregates a much greater sum, its purchasing power is very much less than it was when the payment was first made. The Prime Minister, in his effort to discover a reason for the proposed abolition of the per. capita payment, said that it was inequitable, because under it the States with the largest populations received the biggest amounts. I failed, to hear the Prime Minister, the Treasurer, or the Minister for Markets and Migration give any explanation of the fact that, under the Government scheme now proposed, the eastern States with large populations will be placed in a very much better position than the smaller States to raise revenue from the field of taxation which the Commonwealth Government proposes to evacuate. Victoria, or New South Wales, with twice as many people as Queensland, will be in a position to draw from that field of taxation a very much larger sum than the latter State, and considerably more than Western Australia, South Australia or Tasmania. It is clear, therefore, that the objection which the Prime Minister urged against the per capita, payment on the ground that under it the more thickly populated States receive a greater amount of money than the smaller States, applies with equal force to the scheme which the Government has now put forward.
– “Under it the objection urged will be accentuated.
– That is so. The Prime Minister told us that special adjustments are to be proposed, so that each State will gain £50,000 in revenue. It is presumed that each State will be able to raise from the field of taxation evacuated by the Commonwealth an amount equal to that now raised from that field by the Commonwealth. That is very doubtful.
– We were told also that the special arrangement would continue for a year.
– It is very important, that wc should know what the Government proposes to do after the first year of the operation of its scheme. T wish to make Queensland’s position in this matter quite clear. That State has just passed through one of the biggest droughts in its history. During the drought Queensland lost 7,000,000 live sheep and 2,000,C00 of natural increase,, a total loss of 9,000,000 sheep, estimated at £10,000,000 at least. The State also lost 2,500,000 cattle, and, in round figures, the recent drought was responsible for a loss of stock valued at over £20,000.000 to Queensland. We can readily imagine the effect that that loss of ‘.stock will have on the taxation returns of the Queensland Government, not only at the end of this financial year, but at the close of the next financial year. The pastoralists will require three or four years to build up their herds and flocks sufficiently to be able to pay State taxation equal to what they have been paying in the past.
– They will then be only in the same position as they were in before the drought.
– That is so. The Commonwealth authority levying its taxation throughout Australia, may find that while there is a drought in one State there may bc good seasons in three or four other States, and so the loss in one is compensated by the gain in others. I say unhesitatingly that Queensland will bc in a very bad way financially if the Government persists in its ill-considered and ungenerous proposals. We are told that each State under the Government proposals is to gain at least £50,000 per annum; but it is assumed that each State will raise the same amount of revenue as. .has been raised by the Com monwealth from the field of taxation evacuated by the Commonwealth. It is very doubtful whether the States will be be able to do that. Then we have to consider aggregate incomes. The Commonwealth Government has a constitutional right to levy taxation on such incomes, but it is said_ on good authority that it would be quite unconstitutional for a State to tax a citizen on his income earned in another State. We have been told that in Queensland estates are aggregated for probate purposes. That is quite a different thing. What is done in Queensland is that the State compels a big pastoral company, for example, on the death of one of its shareholders to submit a return showing the number, of shares held by the deceased in the company in another State and the total interests of the company in Queensland, so as to arrive at their relation to the total number of shares held by the company. It is only on the percentage of shares held in Queensland that probate is charged. The dependants of a deceased person are not taxed for probate purposes in Queensland on estates he may have held in other States. We are told that under the per capita payment South Australia receives considerably less than New South Wales, but, under the Government’s scheme, South Australia is to gain £51,000 and New South Wales £459,000. It is inevitable under any scheme of this kind that the more populous State must receive the larger amount of revenue. The Prime Minister said that if the State authorities do not accept the present Commonwealth proposals, some future Government of the Commonwealth may decide to abolish the per capita payment without any compensation whatever to the States. That will not go down with the State authorities. No Commonwealth Government would dare to do that. The Prime Minister was merely raising a bogy in an effort to scare the State Governments into accepting his iniquitous proposal. He cannot give any guarantee to the States that future governments of the Commonwealth will not completely alter the proposals he now makes, or will not find it necessary to again invade the spheres of taxation he proposes to evacuate. Honorable members are aware that the party on this side stands for a much more effective protectionist tariff than does the party opposite. If Labour is returned to power it will increase Customs duties in many cases to such an extent that they will be prohibitive. Our woollen and cotton mills, and secondary industries generally, will flourish to such an extent that they will be able to manufacture Australia’s requirements. The inevitable result will be a general falling off in the Customs revenue. That may mean that the Commonwealth Government will have to invade again spheres of taxation to be evacuated under the present proposals. I make that point to show that there can be no guarantee given to the State Governments that the Commonwealth Government will never impose taxation in the spheres to be evacuated._
– Is it the policy of the party opposite to increase the tariff to such an extent?
– Our policy is to make the tariff effective as a protectionist tariff.
– The honorable member said the party opposite would make the tariff prohibitive.
– It would make it practically prohibitive in many cases. At present it allows foreign manufacturers to dump their goods into Australia. As a consequence, we have an inflated Customs revenue, and the Treasurer’s receipts are swollen by indirect taxation.
– Under such a tariff as the honorable member suggests, the Commonwealth would not be able to finance itself.
– The Commonwealth will have other sources of revenue. There will always be a certain amount of revenue from Customs duties. There are many articles which cannot be manufactured in Australia. These will - continue to be imported, but ,in connexion with secondary industries, in which it has been proved that Australians can turn out a decent article at a reasonable price a Federal Labour Government would increase the Tariff so as to prevent importation, and so give a clear field to the Australian manufacturer. The result must be a falling ofl in the Customs revenue, and the Commonwealth Government would then have to invade the field of taxation which the Prime Minister would lead us to believe will, under his proposal, be open in future to the State Governments only. The Prime Minister and the Treasurer gave us to understand that they are greatly perturbed by the principle of the ad practice of one government finding money for another to spend. I should like to- remind them that they are themselves the greatest offenders in that regard. If they considered such a practice a violation of a great principle, why did they on the eve of the last Federal elections say that they would find £20,000,000 for roads for the States to spend and £20,000,000 for a housing scheme for the people of Australia ? Those were electioneering promises. The Government was invading a sphere generally recognized as belonging to the State authorities. They found the Treasury overflowing. They had money they wanted to get rid of. Why all the haste displayed to abolish the per capita payment? Is the Commonwealth short of money ? It certainly is not. Are the State Governments in such a fortunate position that their Treasuries are overflowing, and they do not know what to do with the money they have, and this, therefore, is an opportune time to abolish the per capita payment? We know that that is not the case. The Government cannot defend its proposals from any stand-point, and’ Ministers have themselves proposed to give to the State authorities to spend money collected by the Commonwealth It is very evident from the speech of the Minister for Markets and Migration (Mr. Paterson) that the Government is anxious to be able, on the eve of the next election, to say “ We have reduced taxation by so much per head, whereas the Labour-governed States have increased taxation. We brought about the amalgamation of the Federal and State Taxation Departments. We found £20,000,000 for roads and £20,000,000 for houses.” But Ministers will not admit that in the case of roads it was brought about by an agreement between the Commonwealth and the States. They will not give any credit to the States. The States through the Main Roads Boards are building the roads. The latter cannot be blamed for accepting money for roads, or houses, if it is offered to them, but undoubtedly the Commonwealth Government is finding money for another authority to spend. It is true, no doubt, that the States supply the Commonwealth with plans and specifications of roads to be built; but that is merely a matter of form. The responsibility for saying where the money is to be spent rests with the Main Roads Boards of the various States. In a speech he made in Sydney on the 21st June, 1926, the Treasurer (Dr. Earle Page) made clear wb,at is at the back of his mind in the step he proposes to take to abolish the per capita payment. He said -
The principle underlying the action of the Government in connexion with the abolition of the per capita payment waa that the public would know whom to blame for the effects of taxation und its incidence.
Was that a tactful attitude for him to adopt ? No government likes to apply direct taxation. It is in a far happier position when it cm derive the bulk of its revenue from indirect taxation. Iti the last financial year 68 per cent, of the expenditure of the Commonwealth was from indirect taxation and 32 per cent, from direct taxation. When the Government’s present proposal comes into operation, 85 per cent, of the expenditure will be from indirect taxation and only 15 per cent, from direct taxation. At present approximately one-fourth of the revenue of the States comes from the indirect taxation of the Commonwealth, and we can readily understand how hostile State Governments are to a proposal which will force them to raise that fourth by means of direct taxation. The effect will be that in a State like Queensland, which has not the facilities for aggregating incomes that the Commonwealth possesses, a considerable number of people will be called upon to pay an excessively high tax. If the facilities the Commonwealth possesses for aggregating incomes are still utilized, it will mean a continuance of that duplication to which reference was made by the Minister for Markets and Migration (Mr. Paterson). The Treasurer has stated that . the special adjustment of payments to the States would be made for one year. I want to clear up that matter, because the fears of the States would be greatly allayed if they knew the period for which these payments were to be made. The tax to be surrendered by the Commonwealth will amount to £7,787,852, whereas the per capita payments to be withdrawn amount to £7,687,500, leaving a difference of £99,852 in favour of the States, and when special adjustments amounting to £600,000, and the special grants to Western Australia and Tasmania, amounting to £828,000, are added it makes a total alleged gain to the States of £1,527,852. I agree with an honorable member that it is most unfair for the Federal Government to include m the present proposal the special grants to Tasmania and Western Australia. They have no relation whatever to the proposed abolition of the per capita payment. If the present method of paying the per capita grant were continued these special grants would still be paid. Apparently, they are included in the above calculation to throw dust in the eyes of the people of the two States concerned, and to secure support for the other proposals, unacceptable as they may be. Even after the abolition of the per capita payment, the Federal and State finances will still be interwoven. Apart from the special adjustments amounting to £600,000, and the special grants to Western Australia and ‘Tasmania, amounting to £828,000, the need for Federal taxation machinery will still remain. If the present system is not continued, the smaller men will bo obliged to pay higher taxes. Proposals put forward by a State Government for higher taxation on the wealthier classes will, assuredly be rejected by the Legislative Councils, where those bodies exist. Consequently, State Treasurers will be seriously embarrassed, and in their efforts to balance the ledger, they must resort to indirect taxation. Farmers and people living in remote parts will be called upon to pay higher freights and fares on railways in order to make up for the revenue which the Legislative Councils will refuse to collect from the wealthier people. The Royal Commission on Taxation was of opinion that, on account of the aggregation principle being restricted by State boundaries, the yield of any tax at the same rate would be greater in the hands of the Commonwealth than in the hands of the States. I mention this, because we are told by the Treasurer that a State will be able to collect income tax from its citizens on their earnings in other States, although it is said by legal authorities that it will be unconstitutional to do so’. The Commonwealth alone has the machinery to aggregate incomes for taxation purposes, instead of going on with the present proposals, to cut off the heads of the States, so to speak, and afterwards consult them as to their position, the Government would be well advised to defer this matter until after a conference with the State Premiers, or until after the proposed constitutional session has been held. At such a session, proposals to readjust the respective powers of tue Commonwealth and the states could be considered and adopted, and amendments for remodelling the Constitution, put forward to the people. Such a conference would afford urn pie opportunity for a readjustment of the financial relationships of tha Commonwealth and the States, and the postponement, I suggest, would obviate the financial embarrassment which is bound to come upon the States as a result of the reckless, arrogant, and illconsidered proposals of the present Government.
Mr. D. CAMERON (Brisbane) 5. 15]. - I have listened to the debate on the amended measure before the House with the keenest interest. There is no. doubt that the opposition to the bill as originally brought down by the Treasurer last year was in no small degree due to a lack of complete knowledge of the Government’s intentions, and also to a growing fear that this legislation, if enacted, would result in increased taxation. There was also a growing feeling that the Commonwealth was not dealing fairly with the States. There were certain features of the bill, as originally brought down, regarding which the Commonwealth, unfortunately, was not sufficiently explicit, giving the States real cause for their objections to the proposed legislation. The bill provided for the discontinuance of the per capita payment, and also for the evacuation by the Commonwealth of certain fields of direct taxation, to enable the States to recoup themselves for the loss of the per capita payment. 1 1 was claimed by the Commonwealth that the fields evacuated would permit the States to collect taxation equal to tho per capita payments, with a margin to their financial advantage. In some of the States, Queensland for instance, what was proposed to be discontinued, yielded less than the per capita payment. Such shortages the Commonwealth Government proposed to make up by a system of adjusting grants so arranged that each State would receive a favorable margin of over £50,000 in the first year. The Treasurer claimed that the proposal would not adversely affect State finances, and need not result in increased taxation to the people, but, unfortunately, the Government could never give any assurance as to payment of the adjusting grant after the first year, thus providing the States with a serious objection to the Commonwealth proposal. The adjusting grant to be paid to Queensland for the first year amounted to £289,000, and it is interesting to note the position of Queensland during subsequent years, as estimated by the Treasury officials under the proposed arrangements. The estimate of the values of taxation fields surrendered is on a basis of an annual growth of 6 per cent, in all such fields, and the estimated capitation payments are based on the assumption that the Surplus Revenue Act 1910 will still be in operation. Tho comparison is as follows: -
The margin of difference is steadily decreased but still is a considerable item. That the Government could not give an assurance as to what action it would take in subsequent years was, it can easily be understood, one of the strongest reasons which Queensland had for objecting to the proposal as originally laid down. Of course, that objection could also be advanced by several of the other States. I listened with interest to the speech of the Treasurer (Dr. Earle Page) when he introduced the bill. In reply to a recent communication that I addressed to him on the subject, he said -
You afk whether the Government has denitely decided to continue each year to pay an adjusting grant to the State oi Queensland until such time as it is no longer necessary. This pointhas not definitely come up for the decision by the Government.
In the course of a speech made by me in Brisbane on the 8th of September last, I made the following statement : - “ It is proposed, however, that the question of adjusting giants in later years shall be considered in the light of the best information available when the time for considering the matter arrives.
The Commonwealth desires that the States should not suffer under the rearrangement.
To give effect to this aspiration it appears that an adjusting grant on a diminishing scale will still be necessary in the case of Queensland after the first year.”
Unfortunately, no assurance was ever given, if, indeed, it were possible to give one, and the States concerned had that most definite ground for objection to the proposal. It must be admitted that there was some ground for concern in the minds of the people as to what would happen, after the first year, and whether it would be necessary for the States to ask the Commonwealth Government for assistance from year to year. The question of aggregation has already been referred to during the course of this debate. The honorable member for Dalley (Mr. Theodore) made a very interesting and dignified speech on this subject. He said that the States could not possibly aggregate incomes, and that the Queensland Government had taken the matter to the High Court, and lost its case. I am sure that the honorable member will be the first to admit that the Queensland proposal was entirely different from the present proposal respecting tho aggregation of incomes. As I remember, the Quecnslnind Government said to the taxpayers, “ You are in receipt of a taxable income of, say, £1,000; in addition you are in receipt of, say, £300 derived from interest on Commonwealth bonds, which are free from State taxation; we will aggregate the total in order to arrive at the rate of your State taxation.” The High Court ruled otherwise. That was the case for aggregation as far as Queensland was concerned. It is also interesting to note that the Queensland Government, in 191S, when the honorable member for Dalley was a member of the Cabinet, amended the Succession Duties Act, section 12 of which reads - (2.) For determining the rate of succession duty so payable, there shall be aggregated so as to form one estate the value of all property, whether situated within or outside Queensland (after deducting therefrom all debts and liabilities).
The honorable member for Capricornia (Mr. Forde) said that under Queensland legislation property was not included in the aggregation.I would point out to him that the act plainly includes all property whether situated within or outside Queensland. I also sought to obtain an assurance from the Treasurer regarding the legal powers of the States to aggregate. In reply, the Treasurer said: -
I am convinced that there is nothing to prevent a State requiring a taxpayer to return the amount of income received in another State, and to take the aggregate income into account in arriving at the rate of tax to be levied on tho income produced locally. Some of the States are already doing this in some respects in connexion with probate duties.
I may add that the question of aggregation was discussed at the conference with the States held in May last. Doubt was expressed by the New South Wales representative as to whether the States had the legal power to aggregate. On this point the Prime Minister said : - “ As to their legal power to aggregate, I do not wish to appear to be taking up a didactic attitude; but it cannot be open to question that a State has power to levy taxation upon its people in any way that it may deem fit. There is nothing to prevent it.”
Unfortunately the States have not had the assurance that they would have the legal power to aggregate under the original proposals. Unless the States have the power to aggregate, injustice will be done, because the wealthy person will be relieved of a portion of his income tax, thus placing a heavier burden upon the person in receipt of a moderate income. This, of course, would be just cause for complaint.
– Does the honorable member think that the matter of aggregation has been satisfactory settled?
– I think it would bc better for all concerned if the Prime Minister made a definite statement respecting tho power of the States to aggregate.
– The AttorneyGeneral (Mr. Latham) settled that point by interjection when the honorable member for Dalley was speaking.
– I understand that the Attorney-General stated that under the Government’s proposal the
States would have the power to aggregate. The amended measure, as outlined by the Prime Minister, is based on the principle that the per capita payments should cease. Personally, I am convinced that the majority of the people are not greatly concerned about the matter. As a matter of fact, within the last week or. two a Melbourne barrister and a Melbourne accountant have asked me what were the per capita payments, about which the members of Parliament and the press were making a tumult. Few persons are aware that for years the Commonwealth has made per capita payments to the States. The general public, however. view with the most grave concern any suggestion that the Commonwealth Government contemplates legislation that would result in unfair or unjust treatment of the States. The citizens of the Commonwealth are the citizens of the States. The measure provides for the termination of the per capita payments on the 30th June next, and the Prime Minister has clearly indicated that the Government is prepared to meet the States in conference and discuss any proposals they may wish to bring forward in order to arrive at some equitable arrangement whereby the States may be duly compensated for the loss of the per capita payments, and not suffer financial loss. A number of proposals have already been made. To-day the obligations of the Commonwealth absorb the entire Customs revenue. Our war obligations, including interest on war loans, interest on sinking fund, war pensions and repatriation, amount to approximately £30,000,000; the old-age and invalid pensions and maternity allowance amount this year to £9,000,000 : and Defence to over £5,000,000. These obligations total over £44,000,000. Customs revenue is not likely to exceed £42,000,000. There are other Commonwealth obligations not previously referred to. For instance, there is £1,150,000 for interest and sinking fund on money borrowed for public works. Then there is £2,750,000 for the maintenance of Commonwealth departments. Whether they are extravagantly conducted or otherwise, they must be maintained. The suggestion has been made that the States in conference with the Commonwealth might agree to the assumption by the Commonwealth of some part of the State debts. Such a proposal appeals to me personally. If the Commonwealth were to undertake the payment of a portion of the interest on the State debts amounting to a sum equivalent to the annual per capita payments, that would, of course, necessitate some arrangement for future borrowing. Under such an arrangement !.he Commonwealth should, I consider, ce prepared to increase its payments of interest upon behalf of the States for a term of years, on the basis of increase in per capita which would occur if no alteration took place. The latest figures show that the annual payment by the States as interest on loans is approximately £31,000,000. In 1919, when the period of ten years during which the per capita payments were to be made was about to expire, the Commonwealth Government brought before the States a proposal to reduce the payment by 2s. 6d. in each year, so that during a period of six years the payment would be gradually reduced from 25s. to 10s. The then Acting Prime Minister (Mr. Watt) pointed out that the great obligation imposed by the war, and also the increasing burden of the invalid and old-age pensions, had moved the Government to make the suggestion. However, it was not acceptable to the States. Again, in 1923, further proposals were made to the States, and accepted in principle by four States. New South Wales dissented, and Tasmania was not present when the proposals were considered. Under the accepted proposals the Commonwealth was to discontinue making payments to the States under the Surplus Revenue Act of 1910, and in exchange to evacuate certain fields of taxation. Queensland was the first State to accept these proposals. The honorable member for Dalley, who attended the 1923 Conference as Premier for Queensland, stated, when speaking in this House last week, that after accepting the proposals it was ascertained that the figures submitted by the Commonwealth were incorrect to the extent of £2,000,000. If that were the case, the States were of course justified in ultimately refusing to accept the 1923 proposals. The Treasurer will, I hope, be able to refute the statement of the honorable member for Dalley. Recently, there appeared in the Economic Record - a copy of this magazine is in the Library - an article on federation and finance, which greatly interested .me, and in it some very sound views have been expressed. I commend this publication to those honorable members who have not read it. Whatever our individual views may be regarding ohe merits of the measure before the Souse, we can agree that a genuine effort to solve one of the outstanding problems of our federation is to be commended. The equitable adjustment of financial relations between the States which form the federation and the central Government has always proved a problem most difficult of solution. The United States of America found this out, and so did Canada. In Australia, during the last 25 years, it has been the subject of constant debate, and so far no satisfactory solution has been found. What, after all, should be the financial relations between the central Government and its component parts? We cannot ignore the fact that upon this relationship the federation depends. The principal financial provisions of our constitution give to the central Government exclusive powers in respect of Customs and excise duties. In addition, the Commonwealth shares with the States certain powers in relation to other taxation. There is the important proviso that preference may not be given to any one State in matters of taxation, trade, and commerce. The Commonwealth Government has also other exclusive sources of revenue, although they are not large. For instance, revenue could be obtained by the inflation of the currency, a step which might be taken to meet a great emergency; but that need not be taken into consideration now as a source of revenue. The post office could also be made a revenue-producing department if the Government so decided. It may not be generally known that for the first ten years of federation the power of the Commonwealth in respect of excise and Customs duties was limited. There is no doubt that when the people accepted federation they expected that the States would receive from the Commonwealth a share of the revenue derived from Customs and excise, even after 1910, although possibly a smaller share. Speaking last year in connexion with the per capita payments, the right honorable member for Balaclava (Mr. Watt) asked honorable members to note that the best financial minds at the convention which drafted the constitution, reported that for a period of seven years following the inauguration of federation, the revenue from Customs would not exceed £6,000,000, and that the total expenditure of the Commonwealth would not ordinarily be more than £300,000, although in an emergency an additional £1,000,000 might be required. None of those great minds imagined that within twenty years the central Government would be called upon to meet an annual expenditure of £30,000,000. They did not dream of thu great World War and its financial obligations. When, in 1909, the electors refused to agree to a referendum authorizing an alteration of the constitution to provide for per capita payments to the States by the Commonwealth, they confirmed the principle that the Commonwealth had complete power over excise and Customs taxation, while enjoying concurrent powers with the States in relation to other fields of taxation. The publication to which I have already referred points out that financial difficulties very nearly broke up the Canadian federation, and that in the United States of America the position was much the same. When the per capita basis for the distribution of surplus revenue was adopted in 1910 the Commonwealth had not indulged in direct taxation to any great extent, although a land tax on estates valued at more than £5,000 had been imposed. In 1914 Australia was engaged in the great war. In my opinion the per capita payments should have ceased during the early years of that conflict, and certainly not later than 1916. There was then no longer any surplus revenue; on the contrary, in order to continue to make those payments, the Commonwealth imposed direct taxation. The principle underlying the per capita payments no longer existed, and the payments should not have been continued. Nevertheless, the Commonwealth continued to collect revenue by means of various forms of direct taxation, some of which it returned to the States. At that time Victoria contributed twice as much per head of population as did a sister State; yet both received the same payment in return. Tasmania, whose contribution was only 15s. per head of population, received 25s. per head,* whereas Queensland and
Western Australia, although receiving the same amount as Tasmania, for some time paid 30s. per head of population. I hope that the House will pass this Bill, and that the States will agree to meet the Commonwealth in conference to discuss the various means whereby the financial relations of the States and the Commonwealth may be solved in an equitable manner.
– I am opposed to this Bill in its amended form as I was to the measure as originally introduced. Before discussing the bill itself, I desire to express regret at the decision of the Government to regard this as a vital party question. It is not a question of party; nor is it an issue between liberalism and socialism. The divisions to which we are accustomed in connexion with measures which come before this House do not apply to this bill. I am particularly surprised at the apparent half-heartedness and indecision of the Government in relation to the per capita payments. In this amended bill the Government stands upon ground entirely different from that on which it stood when the original bill was introduced. We were then told that the per capita payments must go without the States receiving any compensation other than that the Commonwealth would vacate certain fields of direct taxation which it then shared with them. Now we are told that although the per capita payments as such are to be abolished, the £8,000,000 now returned to the States will continue to be paid to them, not as per capita payments, but as interest on some of their debts. In other words, the Commonwealth now tells the States that they can have the money only so long as it is used as the Commonwealth dictates. That is the greatest step towards unification that has yet been attempted. Against such an attempt to dictate to the States I strongly protest. If we take anything from the States we should do so by the constitutional means open to us; we must not, by bludgeoning, deprive the States of those rights which were granted to them under the Constitution, and should be regarded as sacred. So long as the Federal Parliament engages, or attempts to engage, in illegitimate trespass of this nature, so long will the electors of Australia give a negative vote when referendums which l.ave for their object the granting of greater powers to the Commonwealth are submitted to them. Actions of this kind must defer constitutional amendment indefinitely.
I should like briefly to refer to some of the main arguments adduced in support of the bill. First, there is the extraordinary bogy raised by the Prime Minister that if we do not abolish the per capita payments now, some future government may not only abolish them without giving the States any compensation, but may spend the equiva-lent of those payments in various fanciful socialistic experiments. In my opinion, that is precisely what the Government is providing for in this bill. It proposes to abolish the per capita payments, but it does not intend to vacate the field of direct taxation. Under the Government’s proposal, if no agreement is arrived at with the States by the 30th June, 1928, the Commonwealth will retain the £8,000,000 now paid to the States. Doubtless, the Government is of the opinion that the States will enter into an agreement with the Commonwealth, providing that some of their debts will be taken over and a sinking fund established. In that event, the per capita payments now made to the States will be absorbed. If the States fail to come to an arrangement with the Commonwealth, the Government intends, no doubt, to vacate the field of direct taxation. But the actual position is that, in the event of a change of government in the Federal sphere before the 30th June, 1928, the new Government would, in the absence of an agreement with the States, be able to do what it liked with the £8,000,000. Thus, the very danger of which the Prime Minister has warned us, would be present in an aggravated form under his proposal ; but should a future Government desire to enter upon fanciful and extravagant socialistic schemes requiring a great deal of money, it could obtain that money with less loss of popularity from other sources, should direct federal taxation be abandoned. For instance, it would be easy to impose a tax on all incomes exceeding £1,000 per annum, from which source the sum of £8,000,000 was obtained in. 1921, from less than 30,000 taxpayers.
– There can be no guarantee of a permanent evacuation of the field of direct taxation.
– That is admitted. The power to impose direct taxation at any time that the Commonwealth Government may think fit will continue. I do not propose to discuss whether the States have a right to the per capita payment; but I should like to comment, in passing, upon the emphatic declaration by the advocates of the bill that the States have not a constitutional, a legal or a moral right to it. That is what we were told when the first bill was before us last year, and the statement has been repeated in the debate upon this measure. In spite of that assertion, the Government proposes that, if the States will meet them in conference and fall into line with their wishes, they can have for other purposes an amount of money equal to the per capita payment; if they will make themselves dependent upon the Commonwealth Government they will continue to receive the money now paid to them, but if they will not surrender their independence it will be withheld from them.
There are two ways in which it is suggested that the money might be made available - one is the taking over of State debts, and the other the establishment of a sinking fund for the redemption of State loans. Judging by the speeches that have been made by ministers and others who support the bill, one would assume that it was an easy matter to make an arrangement with the States whereby this Parliament would take over a portion of their indebtedness. I remind the House that the rock upon which all past endeavours to effect a transfer of State debts to the Commonwealth have been wrecked stands in the way to-day; that is, it has not been deemed practicable for the Commonwealth to take over the State debts without imposing a limitation upon future State borrowing. I should hesitate a long time before advising the States to hand over to this Parliament the right to say whether they should issue fresh loans, and to dictate the terms upon which a loan should be raised. The Loan Council works successfully because it does not possess arbitrary powers. If the Commonwealth were to assume responsibility for State debts amounting to hundreds of millions sterling, it would need to exercise a stronger control upon future borrowing by the States than is provided by the Loan Council. Even if the proposed conference is held, success is not assured along the lines suggested by the Prime Minister (Mr. Bruce).
It is proposed as an alternative that a sinking fund might be established for the redemption of State debts. From that proposal also very grave economic and financial difficulties are to be apprehended. I believe that every honorable member subscribes to the view that both State and Commonwealth debts ought to be reduced. I remind them, however, that it is possible to go too far in that direction. In the last twelve or thirteen years the people have, through the Commonwealth Government, paid by taxation more than £250,000,000 towards defraying the cost of the war. In addition, a sinking fund has been established for the liquidation of our war debts. Remembering those facts, and realizing the crushing load of taxation that is being borne by Australians to-day, can it not De said that, financially and in every other way, the present generation has sweated and suffered sufficiently on account of the war, and that a great deal of the existing debt should be provided for by posterity ? Again and again it has been urged that the spending authority should be the taxing authority; that it is utterly wrong in principle and demoralizing for the States to spend money that is raised by the Commonwealth. What proportion of their revenue do the States obtain from the Commonwealth? I believe that it amounts to only 16^ per cent. The remainder is raised by taxation of various kinds, for the imposition of which the States are solely responsible.
– Has the honorable member taken into account the railway revenue ?
– Yes. Interest has to be paid upon money that is expended in railway undertakings. Can any one say that the States are led into extravagance or incompetence because they receive in a relatively easy manner 16$ per cent, of their revenue from the Commonwealth? Does that have a demoralizing effect upon the financial behaviour of the States? I deny it. Turning to other countries, one finds that the majority of the Canadian provinces receive 30 per cent, of their revenue from the central Government. British local government, taken as a whole, receives 15 per cent, of its revenue from the Government of Great Britain. The German Republic imposes practically the whole of the taxation levied in Germany, and hands the revenue over to the component States. I mention these examples to show that many points are by the Government magnified, and made to appear to be principles when in reality they are not principles at all. Another argument is that taxation should be separated at the source; that the Commonwealth should work in its fields, the States in theirs, and the municipalities in theirs. I have no hesitation in saying that that is a fallacy. These complex multiple forms of government are everywhere in existence to-day. In every country in the world there is duplication of taxation over the same field. Even if it were considered desirable and possible to separate the Federal and State fields of direct taxation, very slight relief would be afforded to the taxpayers of Australia. My position as a taxpayer and ratepayer is, no doubt, similar to that of other honorable members. On the same land and house I pay rates separately to a municipality, to the Melbourne and Metropolitan Board of Works, and to the State Commissioner for land tax. But payment to three authorities in the one field causes me very little inconvenience, though I may begrudge the amount I have to pay. The Government is magnifying into a first class principle what is a practice common in all parts of the world, and not a principle at all. It is argued that the Commonwealth should evacuate the field of direct taxation. My strongest objection to the bill is that it contains that proposal. In the financial year 1915-16 it was decided, after mature deliberation, that as a matter of emergency the Commonwealth should impose direct taxation. I remind the House that, on the war, our total expenditure out of revenue in that year was about £4,000,000. In a financial sense the war is still with us, but to an added degree. This year our expenditure from revenue for war purposes will be approximately £30,000,000. If there were any justification for the imposition of direct taxation in 1915-16, there is more than seven times that justification to-day. In that connexion there appears to have been remarkably loose thinking by the advocates of the bill.
I shall now set out the main reasons for my intention to vote against the measure. I object to it, in the first place, because it violates, if not the letter, certainly the spirit of the Constitution, and cuts right across the intentions of its framers. Being a layman I shall not dogmatize about constitutional law; but it is patent that the framers ‘of the Constitution left this financial question open. I freely admit that we are competent to do as we think fit in this matter. One might say that the Constitution is silent regarding the financial relations between the Commonwealth and the States. But the dominating note everywhere in that instrument is its federal spirit; it is a federal Constitution. From end to end of that great charter of ours, the sovereignty of the States and their dignity and independence are insisted upon. Although the financial power was left in our hands, it was surely never intended by the framers of the Constitution that the power should be used to destroy its main characteristic. By so exercising our power we should violate the. spirit of the Constitution and cut right across the intention of its framers. 1 cannot believe that the House will sanction this dramatic and politically unprincipled attack upon the position of the States.
If when federation was proposed, it had been thought by the people of the six colonies that, within 27 years, the Commonwealth Parliament would totally deprive the States of the Customs and excise revenue, beyond all question there would have been no federation, and we should not be here to-day. The Treasurer will tell us that the federation was established in the distant past, 27 years ago, but I submit that, in the life of a nation like ours 27 years is but a brief period, that we have as yet no true federation, and that as a nation in reality we are still at the threshhold of our career. It is very wrong to speak now of 27 years ago as a distant period, and to ignore what waa then thought and acted upon. It » is remarkable that, whilst some honorable members have been almost contemptuous of what was believed and intended 27 years ago, they are extremely respectful regarding the referendum which took place seventeen years ago. That is quite another story, and apparently there is all the difference in the world between seventeen and 27 years ago.
As the 1910 referendum has been mentioned, I should like to ask what, after all, was the reason for the popular vote which refused to allow the per capita payment to be made permanent. It did not stop it, but refused to allow it to be made permanent in the constitution. What was the majority at the referendum? It was only 25,000 out of a poll of 1,300,000 votes. A negative vote at that referendum was recorded simply because the fortunes of Mr. Deakin, who advocated permanency, were, then at zero. The tide of the fortune of the party led by Mr. Fisher was then at its flood, and the proposal was lost because of the overwhelming defeat of Mr. Deakin and his party. That statement is beyond all question, and so the less said at the present time about the 1910 mandate the better for the Government.
I look upon this measure as an unjustifiable, unprovoked, and even unsporting and mean attack upon the States. After all, what is wrong with the existing position? I have listened attentively to every speech made by ministers and other advocates of this bill, but so far no attempt has been made by those who support it to show what is wrong with the existing position. They talk of principle. I do not say that the per capita system is perfect. No one contends that; but I say that it is a good working arrangement, successfully tiding us over in a time of unprecedented financial strain. What is proposed by the Government is a change which I say will upset the whole incidence of taxation in this country. It will lower the exemptions from direct taxation, will relieve the very rich of taxation, and will increase the weight of the load upon all humble incomes in Australia. It is proposed at a time when we are all suffering from the common heritage of the war, I mean in an economic sense. To-day every governing body in Australia, the State governments, muncipal councils, trustees and guardians of our public utilities, with the sole exception of the Federal Government, are embarrassed, as never before, for revenue. They are embarrassed by increases in the price of money, labour costs, and costs of material.
– And by the fiscal policy of the Commonwealth Government.
– I am coming to that. I shall endeavour to show the House why all these things have become so expensive. At a time of unprecedented embarrassment to every State treasurer, town clerk, or other responsible local government officer, and when the Commonwealth Government is opulent beyond its dreams, ifr chooses to make this dramatic and devastating change, without, so far as the House has been informed, reasonable justification. We should consider the position of the States. Their debts to-day considerably exceed that of the Commonwealth. They amount to approximately £600,000,000, as against the Commonwealth debt of £460,000,000. This shows the effect of the war upon the States, and that it is quite a mistake to suppose thai the Federal Government alone is the financial victim of the war. All governing bodies in this country are equally its victims. The revenue which the States have been obliged to raise has advanced from £7,000,000 in 1915 to £23,000,000 to-day. I am aware that some of my honorable friends on this side will say that that is due to State extravagance. I find that whilst the increase is more in some States than in others, an increase is common to them all, irrespective of the political party of the government enjoyed, or suffered, by any particular State.
What is ‘ it that the Commonwealth Government proposes to-day? We have two sources of revenue - direct and indirect taxation, hard money and easy money; the money which the Treasurer can secure in tens of millions sterling by merely whistling up the Minister for Trade and Customs, and other revenue which the State Treasurers are obliged to hammer out of their taxpayers. The Commonwealth Government proposes to take all the easy money and leave to the States all the hard money. It proposes to take the fat and the lean of the rich taxation carcass, leaving to the States only the hide and hair and bones. I am sorry to bave to say it, but I do say frankly that, if the Government sought deliberately to embarrass and belittle the State governments, they could not have contrived a more successful weapon for their purpose than this bill.
I urge that the bill deserves to bc defeated, first of all on constitutional ^rounds, because it cuts across the spirit of the Constitution, and, further, because it is a powerful but illegitimate machine which will operate towards unification, because it will bring chaos upon the State, But I object to it, also, on purely taxation grounds. If the State authorities arc willing to come into line and the full intention of the Commonwealth Government is carried out, and the Commonwealth made dependent for revenue solely upon indirect taxation, we shall be outraging every canon of modern scientific taxation. If we confine the Commonwealth solely to Customs and excise taxation for its revenue, and violate the principle of progressive taxation based upon ability to pay, this House will be guilty of having passed the greatest piece of class legislation ever passed in its history. I would remind honorable members of the economic development in the practice of taxation since the war. . For something like 200 years many of the greatest statesmen in the world have, grappled with the problem of equitable taxation, until there was evolved the great principle of taxation based upon ability to pay, with the features of progression, exemption, deduction and differentiation. Although this principle of modern taxation was before the war recognized all over thu world, it was not until we received the financial blow dealt by the war that the opportunity and necessity came for it to be put generally into operation. I am not for a moment urging that all taxation in the country should be raised on that basis. There must well be direct and indirect taxation levied at the same time. Tn all the most enlightened countries today we have found since the war a very great increase in the relative proportion of direct taxation, and a very great decrease in the relative proportion of indirect taxation. It may come as a surprise to honorable members who have not looked at the figures to learn that in the United
States of America, a great protectionist country, indirect taxation is responsible * for only 30 per cent, of the revenue. In Great Britain indirect taxation provides only 40 per cent., in New Zealand only 44 per cent., and in Canada 45 per cent. We find that in the three great protectionist countries - Canada, the United States of America, and New Zealand, there is a swing towards the principle of direct taxation based upon ability to pay. The Commonwealth Government will make a tragic economic blunder if it goes out of the field of direct taxation based upon ability to pay, and falls back for its total revenue upon Customs and excise. I subscribe as fully I think as almost any other honorable member to the policy of protection, and I do not wish this Parliament to interfere with duties for the protection of proved and efficient industries; but it would be disastrous for us to increase our Customs and excise duties to replace revenue which is now derived from direct taxation. In 1921, when our income taxation was at its peak and we were showing some disposition to follow the example of other countries afflicted as we also were by the war, we received from that source £14,000,000. In that year the proportion of indirect taxation in Australia was reduced to 45 per cent., that, from direct taxation being 55 per cent. Later - in one year we reduced the income tax by £5,000,000 - the direct and indirect taxation of Australia were about equal; but if the Commonwealth goes right out of the field of direct taxation the proportions will be 60 per cent, indirect taxation and 40 per cent, direct taxation–
– Is the honorable member including the States’ taxation in those figures ?
– Yes. What is our industrial and economic position? With the exception, broadly speaking, of wool, wheat, and some base metals, we are practically producing nothing at a cost at which we can place it on the export market unless we subsidize it in some shape or form. That remark applies to both primary and secondary industries. And the position is growing worse. Day after day we hear proposals for duties on butter and bacon and other primary produce. The cost of living is in the clouds, and that is mainly due to excessive indirect taxation. We are taxing the seed instead of the harvest, taxing necessaries instead of profits. When the Treasurer proposes that the Commonwealth should get out of all direct taxation with the exception of 60 per cent, of income tax, and hints that the balance will go when the Customs and .excise revenue will permit it, he, who, to put it mildly, is a moderate tariffist must have it in his mind to allow the Customs and excise duties to swell and swell until they provide the Commonwealth with a revenue of £60,000,000 a year.
To my mind, the main root cause of industrial trouble in this country and the chief cause of the excessive cost of primary and secondary production, is our indirect taxation. I am not speaking of protective duties. The task of a Federal Treasurer to-day, looking at the matter from the view-point of equitable taxation, is to hang on to direct taxation based on ability to pay, while hammering down excise imposts and rooting out every conceivable form of revenue duty in the Customs tariff. If this Parliament were committed indefinitely to the imposition of excessive excise duties, and every other form of revenue duty as well as protective duties for every industry, no matter what the merits of its claims might be, then I say we would be bringing about the economic strangulation of all industry in Australia.
Take the position of the working man of this country. Between 1911 and L925 the nominal average wage of the adult has increased from 51s. to 9ls. 6d. a week; but in the same period the effective wage only increased by 3.3 per cent., or ls. 8d. a week. Thus as the result of sixteen or seventeen years of ceaseless strife and squabbling, the 51s. of 1911 has been increased effectively by ls. Sd., and if the cost of living figures arrived at by M.r. Wickens included all excisable goods, and amusements and little luxuries to which the workers are entitled equally with others, the working man would find that he is worse off to-day than he was in 1911. Why? Becauseof this pernicious system of taxing everything at the source, taxing necessaries instead of profits. Our taxation system must and should be balanced. Let us consider what it would mean to a Treasurer if he were to attempt to draw a near-cost budget when budgeting solely on anything so elastic and uncertain as Customs and excise revenue. We know already how embarrassing the Commonwealth Treasurer has found the position. During the last five years, including the last year in which the right honorable the Prime Minister was Treasurer, the Customs and excise receipts have far exceeded the estimates. At the end of June next the Treasurer will have drawn from the taxpayers in Customs revenue alone £17,000,000 in excess of his estimates. In the circumstances a near cost or businesslike budget is impossible, and the Treasurer, for safety’s sake, must calculate on taking millions more than he has a right to take. Out of such a system arises sloppy administration and extravagance.
Sitting suspended from 6.S0 to 8 p.m.
– It should not and cannot be urged that there is any parallel between the pre-war financial position and the position to-day. It is true that, at that time, the Commonwealth was dependent almost solely upon- indirect taxation, but surely the importance of the equitableness of taxation grows with the weight of the load to be carried. We were taxed very lightly in the years before the war, and it mattered little what form that taxation took; but to-day it is surely of the greatest importance that the system of taxation adopted by this Parliament to enable us to give industry the utmost freedom, and to be fair between individual and individual and between class and class, should be decided upon only after the most profound consideration. The importance of the increase of the load I can illustrate in this way. A boundary rider getting about the station, riding light in an ordinary stock saddle, may have a heavy water bag fastened on one side of it, and no great harm will be done, because he may subconsciously balance the additional weight with pressure upon the opposite stirrup iron ; but in the Palestine campaign, where it was common for our horses to carry from 18 to 22 stone, the exact packing and the balance of the load meant the difference between the horse continuing its work and being evacuated disabled. So with the load of taxation.
I insist that the solemn duty of this House is to adopt a system of taxation which is as far as practicable complete within itself. We should not depend, as we probably should under this bill, solely upon indirect taxation for revenue for Commonwealth services, and trust to the good will or the wisdom of the States to adjust their finances by the application of direct taxation. Our system should, so far as our perseverance and ingenuity can contrive - subject to disabilities due to our federal system of government - be as complete and equitable as possible.
Although I am a strong believer in the application of direct taxation, I should not like it to be thought that I was in any sense making war on the rich people of this country and singling them out for victimization under any process of taxation. I am not. I believe that the excessive use of indirect taxation is bad for every class of person in the Commonwealth. If the Commonwealth abandons the field of direct taxation, if it forgoes federal aggregation upon a Progressive basis, it may seem to a great many that a considerable number’ of wealthy people and great companies in Australia, whose incomes are spread over more than one State, will escape a considerable portion of their obligations. They will do so for the time being, but inasmuch as the excessive application of indirect taxation - the tax on necessaries - inevitably leads to increased cost of production and to reduced consuming power, reduced output and lower turnover, so it reacts in reducing the profits of the capitalists. In that way the escape of the wealthy is open to some question. The system would fall most unfairly upon one particular class in Australia, running into many hundreds of thousands of persons. A recognized principle is that we cannot tax subsistence wages. We can tax necessaries and carry to extremes the burden placed upon the worker through Customs and excise, but in no way can we tax subsistence wages without undermining the stamina and morale of the people. In Australia wages are based, not upon production, but upon cost of living; and any attempt to tax the subsistence wage must fail; the tax is passed on. We know that the auto- matic increases in wages are due to the increase in the cost of living; but there i& one class in Australia for whom there is no escape from excessive taxation; I refer to that great class on a fixed salary of from, say, £5 to £10 or £12 a week, and to our farmers as a whole. Those persons cannot pass taxation on to the other fellow, and in consequence they “are the main sufferers from indirect taxation if it is carried to extremes and imposed beyond the point which is necessary for the maintenance of a proper and approved system of protection. What I am making war upon is excessive excise duties and anything and everything in the nature of greater revenue duties. I am opposed to the abandonment of direct taxation. Our load of debt incurred by the war is surely a national obligation. The war was fought for Australia as a nation and as a whole, and any system of taxation devised to meet that expenditure should surely be on a national all-Australian basis. We must have federal progressive taxation based on ability to pay; in other words2 a purely national tax to meet, in part, this truly national burden.
A good deal has been said on the question whether the States can aggregate, as the Commonwealth does. I say, without hesitation, that the States cannot aggregate. I have no concern with the legal aspect, whether the States have the legal power to aggregate or not. We can give the States all the legal power we like, but they cannot aggregate unless they have uniform taxation laws. They cannot aggregate on six different land laws, six different inheritance taxation laws, or on six different income tax laws. That position needs no argument. Any taxing authority in this country or in the world would tell us that aggregation between States whose laws substantially differ is impracticable. It would be so exceedingly slow and expensive that it could not be done. It may be said, “ Let the States adopt uniform laws.” I would point out that the differences between these laws are not due merely to the fact that different legislatures are working a few hundred miles apart. The, differences are due, very often, to different social conditions, or different ideals and objectives on the part of the framers of those laws. I have no hesitation in saying that not in five or ten years could we bring the different direct taxation laws of the States into a uniformity upon which aggregation could be based.
I wish to protest strongly against the removal of the land tax. This Government has not a semblance of mandate for the abolition of that tax. It was imposed, it is true, by a Labour government, and, at the time, was opposed by the Liberal party; but it has since been endorsed, approved, and accepted at election after election by Liberal and Nationalist leaders. I venture to say that if thb abolition of the progressive land tax had been mentioned at the last election, the opposition to it would have been strong indeed. The progressive land tax is an almost ideal tax with which to raise revenue to meet our war liabilities. I know of no tax which so clearly supports the axiom that an old tax is a good tax. The progressive land tax yields upwards of £2,000,000 a year without any protest or trouble. The truth is that it has been largely capitalized, as have been most of the old taxes on property. The owners of most of the land bought and sold since the act was passed are not in reality paying the tax at all, because it was allowed for on the purchase of the land. The greater part of the tax is collected from metropolitan properties. Would any one familiar with real estate transactions in recent years say that this tax is a burden upon city properties? As city properties have doubled and redoubled in value, how could any one say that the tax is excessive and should be shifted?
This bill is open to the charge of being a class measure. The abolition of the land tax will afford an excellent opportunity for the escape of the taxpayer at the top if direct taxation is abandoned by the Commonwealth. To-day a great part of this tax is paid by wealthy individuals and large companies who own land in more than one State, and whose rate of assessment is based on the aggregation of all their properties. That applies to dozens of large companies, like banks, insurance companies, importers and shippers who own exceedingly valuable land in all the State capitals. These pay tax to-day at a rate arrived at on the aggregation of their properties. But, as I have said, the tax in most cases has been capitalized, and it would be a rank injustice to do away with it. Take, for example, the case of a man who pays to-day progressive land tax to the Commonwealth on £25,000 worth of land, unimproved value, spread over three States. Say that he has two properties worth £10,000 and another property worth £5,000. He benefits by one exemption of £5,000, and pays on £20;000 at the rate for that amount. If the collection of the tax were handed over to the States, there would be three exemptions of £5,000 each, which would reduce the taxable amount by £15,000. In other words this person would then pay tax only on £10,000 worth of property - £5,000 being taxable in each of two States, and in each of them the rate would be assesed on £5,000 instead of on £20,000 as at present. To-day, such a taxpayer would have to pay £243 per annum as land tax; but on the State basis, with three exemptions, he would pay only £52 7s. 9d., thus escaping the payment of about £190 per annum.
– In making that calculation, the honorable member must have assumed certain rates of tax.
– I have assumed the official rates. As that £190 would have to be made up somehow by the State Treasurers, the burden would to a great extent fall upon the farming friends of the honorable member for Cowper (Dr. Earle Page), for the exemption would have to be reduced below £5,000 to enable the same amount of revenue to be collected. So far as direct taxation is concerned, I repeat that the States cannot aggregate, and that- the abolition of those taxes, which would result from the passing of this bill, would change the whole incidence of taxation, causing it to fall more heavily than it does to-day upon the relatively humble man. I, therefore, appeal to the Government, even at this late hour, to drop the bill. I maintain that it is not’ a party measure, and should not be regarded as such. If the party whip were not being applied, the bill would be overwhelmingly defeated. The Government has gone a long way in its latest amendment. To drop the measure entirely and to substitute a proposal to take over the whole of the debts of the States on terms to be arranged, would be easy. If that were done, the Government could not be charged with having abandoned any principle.
– I compliment the honorable member for Henty (Mr. Gullett) upon his able, although, to honorable members on the other side of the chamber possibly distressing, defence of the land tax, as well as upon the eloquent appeal which he addressed to the members of the Government, even at this late hour, to save their faces by withdrawing the bill. Though of a somewhat emotional temperament, I shed no tears over the position in which the Government finds itself in respect of this bill. On a nice day, when one’s digestion is good, one does not like to see even one’s enemies suffer. But as the discussion of this measure has been carried on in the high, ethical atmosphere of moral right, T think it not only permissible, but also my duty to hope and to pray that moral right may eventually triumph, and that the Government, if necessary, may stew in its own juice. On the 4th June, 1926, the Prime Minister, then in fine fighting vein, unleashed the Treasurer with a commission to stun the State Governments so that he might the more easily go through them. Instead of stunning them - per capita - the Treasurer merely stuck pins into the most sensitive portions of their anatomy, with the result that, instead of being stunned, they have been bounding about ever since like kangaroos on a hillside, or extending the simile to things generis cjusdem, grasshoppers in a potato patch. One ex-Premier, who in the past was greatly interested in this subject, has taken two significant jumps. First, he leaped from Brisbane to Dalley, and then from Dalley into this Chamber, with the result that the Treasurer found himself confronted by an apparition which he must have regarded as Hamlet regarded the ghost of his royal father. I can almost hear the Treasurer muttering in his beard those lines written by a distinguished classic poet, whose name I, for the moment forget -
T thought I’d slain this monster, but the brute
Arises and to me puts in the boot.
This measure, ‘ known as the States Grants Bill 1926, is designed to amend the Surplus Revenue Act 1910, which in turn supplanted that provision in the Constitution ungenerously associated with the late Sir Edward Braddon, and known as the Braddon “ blot.” I say “ ungenerously “ because, whatever else may be said about section 87 of the Constitution, it should be remembered in favour of its proposer that it was the only acceptable solution of a most difficult and delicate matter, and also because Sir Frederick Holder, not Sir Edward Braddon, was mainly responsible for the proposal in its original form. The financial relations of the Commonwealth and the States have always been matters of the utmost delicacy and difficulty, yet apparently the Treasurer and other members of the Government imagine that they can settle them by shock tactics, and on party lines. Both the Braddon “blot” and the continuing sections of the Surplus Revenue Act, it is true, contain the words “ until the Parliament otherwise provides.” Remembering the section to which I have referred, and realizing that the present proposal is to alter in a radical manner what may be called the status quo, I say definitely that Parliament should not “ otherwise provide,” at least not along the lines now suggested, without a clear mandate from the electors. Some apologists for the Prime Minister have stated that he foreshadowed this measure in his policy speech. He may have made some reference in general terms to a discussion of this matter with a view to taking some action, the nature and extent of which were not foreshadowed, but, even so, that cannot be fairly regarded as justification for such a drastic measure as that now before us, which it is proposed to force through this chamber against the wishes of the representatives of the States. I remind honorable members that, from a thousand platforms during the last election campaign, speakers were adjured and the public exhorted to stick to one issue, namely, communism, coupled with the names of Jacob Johannsen and Thomas Walsh, and that a booklet was issued recommending public speakers supporting the Government not to deal with things which possibly they did hot understand, but to confine themselves entirely and with ferocity to something which they understood less.
– Constitutional government versus mob rule.
– Perhaps the honorable member’s interjection is a more graceful manner of expressing the issue than the words chosen by me, although lacking in the element of truth. I do not think that the reference made to this subject in ithe Prime Minister’s policy speech can be regarded as a deliberate declaration to the electors before the last election that the Government proposed to retain all the indirect revenue derived from Customs and excise, and to leave the States to forage for themselves by the difficult and unpopular process of levying direct taxation. The Prime Minister’s majority might have been considerably less had he stated the real issue. Still, truth is mighty; and it should begin to prevail at the earliest possible moment. As the right honorable gentleman stands for the upholding of truth and justice, and as he is constantly moving in the higher atmosphere of genuine patriotism, he should forcibly have directed the attention of the electors to the action which he proposed to take in regard to the financial arrangements between the Commonwealth and the States. The Government was successful at the general election, but that was the last success which it achieved. There followed the abortive deportation proposals, the disastrous referendum proposals, the calamitous capitation proposals, the questionable State aid proposals, and others which stand as milestones - or, rather, tombstones - in the downward path of the present Government, with the result that the whip, in his counting of heads, has been reduced to a state of intense anxiety. The Government apparently imagined that it could do as it pleased with the majority that it won at the election ; that the Prime Minister had merely to make an oleaginous speech, and the whip to announce that a division was pending. I am certain that the right honorable gentleman is due for a rude awakening. At the last election the Government neither asked for nor received a mandate to pass this measure. Even if general approval had been given to the suggestion that there should be a new understanding of this difficult problem, it would not afford any excuse for forcing a settlement through this House in the teeth of the clearly expressed opposition of a large number of honorable members and of a big body of opinion outside this Chamber. The trouble out of which the present difficulty has arisen has been inherent in the Constitution from the beginning of Federation. It is a difficulty which, in the convention and elsewhere, was clearly seen and boldly faced; but it has never been overcome, because it is fundamental to the scheme of federation which the people of Australia elected to adopt. Instead of having a united nation speaking, in the last resort - as a nation must - with one voice, we have a number of competitive, clamant sovereignties speaking with many and often discordant voices, and lacking an absolute head to declare and to enforce the policy of the Australian people. Therefore, the relation of the Commonwealth and the States in this delicate financial matter is one of education rather than of legislation. When our people become educated to the absurdity of having seven parliaments for fewer than 7,000,000 people, with seven representatives of the Sovereign, and an army of legislators and executive and administrative officers, in a country which claims to be a nation in a commonwealth of nations, they will, perhaps, begin to consider fundamental alterations in our Constitution. In his after-dinner expansiveness, the Prime Minister, in other countries, spoke of “Australia, a nation.” He does not appear to consider that his own loquacity was an unimportant factor in directing the destinies of nations. But I remind him that no people can justly lay claim to nationhood except on a minimum of three conditions. The first is that they accept responsibility for their own defence; the second is that they insist upon the right to independent action in foreign affairs; and the third is that they speak with one voice, and that the nation has somewhere within it a final, absolute power resting upon a popular mandate. Despite what the Prime Minister and his predecessor have done to raise the status of Australia among the nations of the world, I am not quite certain that they are prepared to secure, for Australia, one of those essential conditions. The Government. does not accept my view upon constitutional policy. I am bound to admit, also, that that view has not hitherto proved acceptable to the electors. But I declare that the inter-relationship of the Commonwealth and the States in the matter of finance has not been placed upon a permanent basis that is acceptable to the people of Australia, and that is a strong reason why this matter should not now be settled by ar act passed by a majority of honorable members of this Parliament. It should be remitted to the people for their consideration in the manner provided by the constitution. I may be told that last year’s experience was not very encouraging. I admit that it was not. I was vastly disappointed at the result of the last referendum. It failed, either because of or in spite of my support. I still believe not only in the meagre measure of constitutional reform that was submitted to the electors by the Government last year, but also in a much wider measure along similar lines. Our .experience last year illustrates the difficulty of weaning men from the fetish of State rights and State sovereignties. I am sorry to have to confess that men who are broad federalists and wide-minded Australians forget their Australian outlook when they become invested with power in a State Government, and begin to regard their local parliament as the potential saviour of the nation. That is merely an illustration of my point that this is a matter of education rather than of legislation. As a believer in the preeminence of the Australian Parliament, I acknowledge the ultimate responsibility to rest with that Parliament. Those representatives of the States who, in their patriotism, founded the Commonwealth, entrusted its future direction to the Parliament which they created, and we are bound to accept the trust which has been reposed in us. The Commonwealth constitution, defective as it is, is sacrosanct from any alteration except by means of legislation initiated in this, the nation’s Parliament. I am an upholder of that principle. As everybody who is interested knows perfectly well, I believe that the Commonwealth Parliament should have greater, not less power than it has at the present time. We have heard a great deal regarding the moral rights of
Mr. Brennan. the States to the money which, since 1910, they have been drawing at so much per caput, following a principle, which was adopted in a different form, at the establishment of federation. If the States claim to have any prescriptive right, or any right which is independent of the present equities of the case, or which is in any sense vested or secured by time, I absolutely repudiate it. Whatever claim they may have rests upon the present equities of the situation, and the needs of the two instrumentalities of government - the Parliaments of the States and the Parliament of the Commonwealth.
– The time is not ripe.
– I thought the honorable member said “ Might is not right.” I cannot help thinking that both the Prime Minister and the Treasurer are confusing two different things - “ power “ and “ right “ - in this connexion. Undoubtedly the Commonwealth has the legal power to do what the Government proposes. The Prime Minister was little more than absurd when he drew satisfaction from the fact that the State Governments had not challenged his action in the court. Needless to say, they have clearly no right to do so. But that is not the question. The question is what, in the circumstances, is a fair thing as between these two instrumentalities of government. Having mentioned the referendum, may I suggest to the Prime Minister that he ought to have taken a lesson from the bitter experience of last, year. Having made a proposition for constitutional reform which, in my opinion, as I have already indicated, was, so far as it went, wise and desirable, he ought to have realized that that proposition was lost largely because it was hastily and inconsiderately introduced here, and was clumsily handled. It having been lost largely for those reasons, the right honorable gentleman should not have endangered a useful measure of constitutional reform by repeating in 1927 the blunder he made in 1926. My contention is that this also is subject-matter for a clearly considered constitutional reform, and not for a legislative measure such as that now proposed. I am perfectly certain that this bill will do much to foment bitterness, and will further delay constitutional reform, and for that reason its introduction is to be immensely regretted The Government promises to vacate the field of direct taxation. Something ha? been said about that by other speakers; and may I ask of the Government when its members became such luminous prophets of the future that they can declare that at any moment next year or the year after they will not be compelled by circumstances to revert to direct or any other kind of taxation. They may be so compelled. In the past, when the federation was initiated, direct taxation by the Commonwealth was not visualized for ten years from the time the Constitution was launched. I think it was the Labour party that first started out on the uncharted seas of direct taxation, and I am proud to say that both the end and the means have been justified. Perhaps the special wisdom of the present Government will, if it lasts long enough, induce it, in spite of its present intentions, to follow that example and adopt a policy of direct taxation. As the honorable member for Maribyrnong (Mr. Fenton) pointed out during the debate, no Parliament can bind the next. Each Parliament speaks for its own day and generation,- and sometimes a very short day and generation at that. I hope we may never have another war, and I believe that we will not, in our time, in spite of this Government and its friends elsewhere. But the policy of protection may become suddenly effective. The honorable member for Maribyrnong hopes that it will. If it does, the Government or its successor may wake up one morning to find that the nation’s income has been reduced by £35.000,000 or £40,000,000 a year, and T hesitate to think just in what way the loss will be made up. It may be that we will apply direct taxation to those who have benefited from our protectionist policy and by a kind of poetic justice take back again from them what they have received. By that time, I have it on the authority of the honorable member for Forrest (Mr. Prowse) that primary production will be a lost art, and it may be that we shall have to solve our financial problems as the hungry dog met a similar difficulty by biting his own tail. At all events, I am not required to draw upon my reserves of statesmanship to solve the problems that may arise when we have to make up £35,000,000 a year by direct taxation. I only know that the Government has shown itself adept in keeping expenditure treading close upon the heels of its mammoth revenue. Like one of Mr. Galsworthy’s characters, I content myself by saying “ I do not like it. I do hot like it.” The Prime Minister in his speech afforded no real evidence of a desire to conciliate those who are opposed to this measure, although he spoke in terms of conciliation. He referred to a deplorable spirit of antagonism. He used the words “ intense opposition.” He admits in his speech that this intense opposition and deplorable antagonism are disastrous to Australia. So do I. But is it not perfectly obvious that they are neither more nor less than the expressed hostility to the proposal which he is now endeavouring to force through this chamber? What else do they mean ? There is no new antagonism between the Federation and the States. The only hostility that there can be is that engendered, fomented, and maintained by the proposal the Prime Minister is now endeavouring to carry. I invite him, therefore, to mark the signs of the times. I could forgive the right honorable gentleman for being disingenuous if he had not also tried to be humorous. That is a part for which he is entirely unfitted. He was concerned to show that Codlin is the friend and not Short. He says that the States must recognize that at any time the whole or a portion of the moneys that they are now receiving from the Commonwealth may be withdrawn by some perfectly sincere Federal Government that believes that nothing should stand in the way of certain schemes of social reform to which the whole resources of the Commonwealth should be applied. It does not require much intelligence to see that this was an appeal to the Government’s political friends on the opposite side and in the country, to beware of incoming Labour.
– The Prime Minister said “ a perfectly sincere Federal Government.”
– And thus indicated a Labour Government.
– The Prime Minister said “ a perfectly sincere Federal Government,” but he also meant an entirely misguided Government. He expressed one thing and left the other to be understood. He was speaking in a tone and temper m which it was utterly impossible for him to make an openly party speech, so he expressed his views in an ingenious and covert manner and spoke, apparently, more in sorrow than in anger, lt is true that a Commonwealth Government might do what has been suggested,, in a parliament that had run mad. That has been the staple argument always used against extending the power of the nation’s Parliament. The State Parliaments, except for a short time under Labour rule, have always appeared to us to be more or less insane. Yet we do not refer to them as being entirely demented. They have absolute power within their own domain. But as soon as one speaks of extending the powers of the Commonwealth, we have the State warning against a parliament gone mad, and doing utterly absurd and extravagant things to the great injury of the States, which means to the people which returned that parliament to power. It is perfectly obvious that this Parliament may change its policy with regard to taxation, or a succeeding parliament may change that policy, but there is always remaining the fundamental restraint of the electors. If that is not sufficient, there is still some semblance of honesty and patriotism among representative men. Thus there is nothing to be afraid of in that. For these reasons, I oppose the acceptance of the second reading of this bill. I should like to remind the Prime Minister that when last year he presented a proposal to this Parliament which some of the party of which I am a member believed to be non-party in character and Australian in outlook, and seemed to go some distance upon the road which Labour would go fearlessly and freely, the leader of the party on this side, and every one of his followers, with one exception who is no longer of this Chamber, unitedly supported the proposal. I would not like the Prime Minister to suppose that on a big question of this kind, which is worthy to be approached with an open mind by all honest Australians, I have risen to make a merely carping party speech, because I am a member of the Opposition. I have said and believe that this proposal, if persisted in, will make the difficulties of constitutional amendment much more acute and probably insoluble.
I, for one, do not desire that that should be done. I hope, at an early date, to see this Parliament bending its mind to the solution of these great constitutional difficulties, so as to remove the fetters from this, the nation’s, Parliament, aud to give it free scope to act for the people’s good. If the Prime Minister leads in such a proposal in this Parliament or out of it, I, for one, shall throw aside all party considerations and, so far as conscience allows me, the policy proposed being sound, will follow him or any other Australian in an effort to provide a sound and workable constitution. I believe this measure is ill conceived, that it will create ill will, that it has already done so, and as the days go by will do so in increasing measure. It will be a bad thing for the Government itself if this bill is passed. To say that a conference is to follow the passage of the measure is equivalent to the Prime Minister saying to the State Premiers, “ We are to occupy these apartments. I shall take my place by the fireside with slippered feet, and shall discuss with you the adjustment terms, while you stop in the cold, bleak east wind outside.” That is the condition of compromise which the right honorable the Prime Minister now suggests as between himself and the States. He proposes to strip them of their revenues, and out of their necessities to force them to come to him, or among themselves to make such an arrangement as will render it possible for them to carry on the numerous and intricate functions - and they are numerous and very intricate - of State Government. I hope to see the day- when a new scheme of government will be evolved, with local governments for local purposes; never an unworkable unification which would transfer the whole governmental machine to one centre in Australia, but a diffusion of power or a radiation of it from a national head; the abolition of absurd competitive sovereignties and the creation of a united Australia having one absolute voice. Then throughout the Commonwealth contented authorities would discharge their local functions successfully and within their own orbits without any of the absurd jealousies so pronounced to-day. Let us approach the solution of these questions quietly as they must be approached with deliberation and time devoted to them. Let them be accepted by the whole people in an unmistakable way, and then let us give effect to them as wholehearted Australians.
.- Like so many of the honorable members who have addressed themselves to this bill, I disapprove of the policy embedded in it, and I regret the tactics and procedure associated with its introduction. At the same time I am bound to acknowledge, as one who has followed this problem through its earliest, middle, and latest stages, that the measure affords the rarest _ opportunity I have yet seen in legislative life for the expression of widely differing opinions. Now that it is before us, [ think it is our duty to endeavour to harmonize our views either by suasion, if that be possible, or if not, by the counting Si heads; but whether it is to be by reconciliation or majority voting, our determination should be based upon an appreciation of the correct facts past and present that bear upon the measure, and also upon an appreciation of the considerations that should surround the discussion of a measure of this character. The different opinions to which I have referred arise clearly from the existence of two schools of thought concerning Commonwealth and State powers. One school is satisfied with the alignment of functions provided in our Constitution; the other school is not, but seeks the enlargement of the central control. In my earlier days - I am speaking now with a personal note foi which I trust I may be forgiven - [ belonged to the former party, f thought that the Constitution, framed on the American plan, had arrived at a true balance of functions between the national and the provincial legislatures. I admit now that the experience of a quarter of a century, and more particularly that of the last ten or twelve years, has convinced me that the Commonwealth Parliament is insufficiently authorized for the discharge of its important national work. I have had no hesitation therefore on the last two occasions when opportunity offered, and when I thought the procedure right, in trying for an enlargement of the power of this Parlia ment. But like two other speakers tonight, the honorable member for Henty (Mr. Gullett) and the honorable member for Batman (Mr. Brennan), I believe that, however strong our view may be in favour of an extension of the powers of the National Parliament, we should at all costs arrive at that by legitimate means - by constitutional change and not by considered financial pressure. You cannot build a nation on duress. Friendship and co-operation are killed, not helped, by coercion. Notwithstanding all we have heard from the Government, including the latest apologia of the right honorable the Prime Minister, I have no hesitation in saying that during the last three years, the attitude of the Commonwealth Government towards the States has been menacing and overbearing. The Prime Minister may deplore, on his return to service here after his triumphs in other parts of the world, what he regards as the rising antagonism to the Commonwealth, but that is not the fault of the States. I say emphatically that during these last few years if there has been a recrudescence of that antagonism it has been caused by the minatory utterances and attitude of Commonwealth Ministers, including the Prime Minister at conferences with State Ministers, and the Treasurer at the same conferences and on the platform throughout Australia. I leave this phase of the subject for the present, but I propose to touch upon it again if time permits. In order to properly understand this matter, it is perhaps more necessary than in many others with which we have to deal, that we should know its history. Various references have been made by honorable members on both sides of the chamber to certain antecedent facts, but no attempt has been made chronologically to enumerate, the essential facts that have led up to the present situation. I may be pardoned, therefore, if I make a brief historical survey of the case, with a few comments which may perhaps be helpful to honorable members. Let us start with the convention that assembled in Adelaide, sat in Sydney, finished in Melbourne, and prepared the deed of partnership upon which the people of Australia voted on two occasions. There was then attempted, with the aid of the best brains and parliamentary experience Australia has ever possessed, a union of the people and the States. That attempt finds expression in the preamble of our bond of union : the two entities were to be represented in their respective Houses of Parliament; it was to be a union of the people and of the States. Those who watched the deliberations of that convention, or have since read them, know well that the representatives of the colonies gathered with two fears in their minds, however strongly national or federal in purpose the individual delegations may have been. The first fear found expression from the lips of the representatives of what were then known as the smaller colonies - those that were the least populous. They were frightened of being merged in the more populous colonies of New SouthWales and Victoria. They feared the invasion or surrender of their sovereignty and independence; they feared absorption, and they openly voiced that fear. The American system was immediately proposed to calm their fears. Equal representation of the States in the Senate was offered to and accepted by them as a safeguard. Whether that was a cure, a guerdon or a safeguard, yet remains to be seen. So far, I take leave to doubt, whether it is of any value to the smaller States; but, at any rate, it soothed the anxieties of their representatives, and so with the representatives of the eastern colonies they got to the business of making a Constitution. The other fear, which was general, and felt by all the colonies, was the fear of financial loss or impotence consequent upon federal union. As the honorable member for Batman has rightly and eloquently said, it was the knottiest problem of all those the Convention discussed. It puzzled the brains of our best representatives during the three sittings of the Convention. This was not unnatural. The same experience was seen in the life of the United States of America on their foundation of union ; it was also seen in Canada, although the people of the Dominion adopted a looser form, a confederation rather than a federation. It has not been seen in South Africa in the same way, but still it is visible. As the honorable member for Batman has appropriately observed, it is due to the circumstance that the federal form of government under which we live is a compromise government - a government that seeks to reconcile the two mutually destructive, or, at any rate, contending principles of nationality and localism, and seeks to establish a balance between them. The hardest thing to build is the bridge over which their finance passes to and fro. The representatives of all the colonies showed clearly in the debates of the Convention that their chief source of revenue was the Customs and excise duties. I speak now of revenue pure and simple, leaving out of consideration that derived from public works, and services like the railways and the Post Office. They said. “ How can we live if we unite ? A Customs union is essential to the federation, but if we surrender to another parliament, without some guarantee of return, the whole of our Customs and excise receipts, how can we continue to exist?” These men very properly, as trustees for the people of the colonies, could not, and would not enter into the partnership it was sought to establish. Thus there came the final stage in the discussion, for which Sir Edward Braddon, then Premier of Tasmania, gets credit. As a matter of fact, section 87 of the Constitution was originated by Mr. Alfred Deakin, propounded by Sir Frederick Holder, and eventually proposed to the Convention by the leader of the delegation of the smallest colony, Sir Edward Braddon. It provided for the return of three-fourths cf the Customs and excise duty to the States, leaving to the Commonwealth the right to retain one-fourth. I should like honorable members to remember that that was the basis of the partnership assented to by the most representative gathering that had ever assembled in Australia, and the arrangement was made interminable. It was on the basis of its permanence, so far as human arrangements can be so, that the people of the colonies were recommended to adopt the Constitution, and when the bill went to a referendum, of the four colonies who voted on it all voted in favour of it, two of them by a majority of five to one. The colony that gave the smallest relative majority, but not what her legislature had determined should be the statutory majority, was New South Wales. In 1898, when the Constitution was first put to the people, the voting was as follows: - New South
Wales, 71,000 affirmative, as against 66,000 negative; Victoria, 100,000, as against 22,000; Tasmania, 11,000, as against 2,000; and South Australia, 35,000, as against 17,000. The people of Queensland did not vote, and Western Australia was not then ready to vote. Then a deadlock occurred. After all this concatenation of talent and discussion, of constitutional education in all the capital cities of Australia, the bill failed of acceptance through default in New South Wales. The Premiers of the two principal colonies, Sir George Reid and Sir George Turner, then met in conference to see whether they could solve the difficulty. They took the responsibility, not of resummoning the conference which had been disbanded, but of bringing before their respective legislatures the Constitution which the Convention had drawn up, with two or three amendments. The two chief amendments were - the guarantee of the capital to New South Wales with certain limitations as to distance, and the limitation of the Braddon section to ten years’ duration or until Parliament otherwise provided. Then arose, for the first time, the cry, “ Trust the Federal Parliament “ and the colonies did so. Notwithstanding these alterations, falsifying tho recommendations of Convention, they said, “Rather than lose the possibilities of nationhood we will trust the Federal Parliament.” The Constitution was adopted, and for ten years the return to the States of three-quarters of the Customs revenue was a constitutional and legal practice. It was not the Commonwealth that altered it. There were signs that Commonwealth needs were growing, that the ambitions of ten years had fruited, and that 5s. in the £1 of the Customs revenue would no longer prove sufficient for the Commonwealth’s obligations. The States themselves debated month after month - I was connected with the discussion and I know all about it - a substitute scheme which would supersede the Braddon provision and be permanently embodied in the Constitution. The original exponent of the fixed per capita was the Honorable William Kidston, then Premier of Queensland, and one of the ablest men that I have ever met in conference, and it was left to two of us to draft a compromise and submit it to the Federal Government, then led by Mr. Alfred Deakin. An agree ment embodying a permanent arrangement on a per capita basis was drawn up. So that on two occasions when minds had played in sustained effort upon the financial relations of the Commonwealth and the States, agreements have embodied all the elements of permanency that human documents can observe. The matter went to a referendum of the people and I agree with the honorable member for Henty (Mr. Gullett) that the proposal was not defeated on its merits, but because of a political accident. The star of the Labour party was in the ascendant, and the star of the Liberal party, then led by Mr. Alfred Deakin, was on the decline. Because the agreement was drawn up by the Liberal party, the Labour party opposed the permanency it introduced into the Constitution, and it was defeated by a very narrow majority.
– That was not the reason.
– It was largely the reason. I was in that campaign from start to finish, and I am confident that had it not been for the fact that Labour was due for a win, and was wisely and skilfully led, that agreement would have been embodied permanently in the Constitution.
– Our opposition was not because the agreement had been drawn up by the Liberal party, but because we did not believe in fettering the Commonwealth.
– I know that that was the argument that influenced the people. Again the cry was “ Trust the Federal Parliament.” The States, having no option, tremblingly acquiesced. All through the States have battled for a security, however small, upon which to rear their great activities, which are so intensely interesting and useful to the people. As to whether at this stage, in view of the brief history that I have given, this Parliament has power to act, I think, although I speak with a State voice, that there can be no argument at all. There is unquestionable and unchallengeable power, and I think right, residing in this Parliament to abolish the per capita payments, or to alter or reduce them. I am not impressed with the arguments put forward to sustain the moral rights of the States, notwithstanding the history that I have ventured to recite. I think that it is impossible to fix’ an ethical basis for a proposition of this kind. I know that the moral rights of the States were never raised during the time when the actual fight for the basis of the -per capita payments was being vigorously contested by the States. This is a new and, I submit, a futile thought.
– Have not the States a moral right until the electors have been consulted !
– That is a question of mandate. This Parliament has ample power, and if it likes to exercise it, and to chance ratification by the people, it has a perfect right to do so. It may not be wise constitutional or legal practice, but the Commonwealth has the power.
– The honorable member has implied a moral right.
– No. I dismiss altogether the question of constitutional or legal power as the honorable member for Batman (Mr. Brennan) has done. I dismiss the question of a moral right. The matter rests on a totally different basis. The real basis is whether a reasonable and fair arrangement is proposed, having in mind the responsibilities and resources of the respective authorities. It is a question of a fair, square, family deal, recollecting our constitutional obligations, and also remembering that the State and Federal parliaments serve and live upon the same people. That is the whole story. It is not a question into which moral rights should be dragged. It is a business question, pure and simple, and the difficulty, of course, is to decide upon a fair working agreement. The different schools of thought will lead their disciples and apostles in different directions, but the question of our financial obligations is a business arrangement. There are many men in this Parliament, and I say this with great respect, who have not had intimate touch with the working of State institutions, and I think that that is their misfortune. The effect is that they are too inclined to undervalue the operations and activities of the States, and correspondingly and oppositely to overvalue ours. I venture this suggestion as one who has worked in both spheres, and has endeavoured - I do do not know whether successfully or not - to appraise truly the necessity and usefulness of both these great sets of activities to the people of Australia. I think that while the tasks of the Commonwealth are great but few, the tasks of the States are multitudinous and burdensome. That is what those of us in the Federal arena who are versed only in Federal affairs are too apt to forget. When in contrast with our own duties we list the reserved powers which rightly or wrongly repose in the States, we are impressed with their immense variety and magnitude. I ask honorable members to note that with few exceptions the enterprises over which the States preside are suckers and not feeders of the public treasury. I shall take the opportunity of recapitulating anew some of the businesses to which the States are inevitably and progressively committed by the Constitution under which they and we live. Every year they are obviously becoming less political and more dominant as economic forces in the community. They are responsible for practically the whole of the internal transportation of this country, the most empty continent in the world. They operate 25,000 miles of railway. The capital debt of that enterprise is £300,000,000, and the revenue is £50,000,000. When I say railways, I include tramways, which are either operated by departments of the State or by subordinate or subsidiary bodies. The States operate a great system of savings banks, excluding the Commonwealth Savings Bank, which is the responsibility of this Parliament. The deposits in those State institutions amount to £188,000,000, and they are guaranteed by the State Governments under Acts of Parliament. In addition to that guarantee, which stands as a great and possibly menacing obligation upon these heavily-laden Governments, they are responsible for activities of great social services to this country, such as the housing of the people under the Credit Foncier finance system, which has been availed of by the working and small shopkeeping classes in a way that perhaps few of us have any knowledge of. Then they care for the education of the youth of this country. That looks a simple job, but in the State schools of Australia, apart from the universities, they house and teach 900,000 children every day, employ 29,000 teachers, and expend on schools, universities, and researchwork associated with education £10,000,000 a year for which they get no financial return. They control local government, and there are in Australia 1,075 local governing bodies, whose revenues amount to over £20,000,000, and whose loan liability is £35,000,000. For each of those four main developmental activities the States are primarily and definitely responsible. In addition, they operate activities which are, perhaps, more familiar to honorable members - the administration and settlement of land, agriculture, mines, and water conservation, involving an expenditure of millions of pounds. They control all ports and harbours and territorial and other obligations of development associated with them. They administer all charitable and benevolent institutions, and also the pure food and health laws. They administer justice, and police the whole territory of the Commonwealth. Surely it must be admitted that these are heavy and ever-increasing burdens, and that any solution of our financial relationships with the States that takes no account of the obligations from which they cannot sunder themselves, will be incomplete. The best brains and the greatest resources of this country will be needed to keep those activities unimpaired, as a result of any arrangement decided upon by this or any other Parliament. This Government is determined, apparently with a full sense or responsibility, to discontinue the conditions of the per capita payments. Their arguments have to some extent been voiced and answered, but some of them have not been sufficiently covered in this debate. The Government’s argument that those who spend money should raise it appeals to me. It is a sound academic principle which, if . it can be amicably applied, locates responsibility: it should certainly bc applied to the raising and disbursing of the people’s money. But, if in the establishment and operation of that principle friction or disruption occurs, we may pay too much for the observance of an academic principle. Our exuberant and youthful Treasurer, however, tosses his cap over the moon and rushes in where, I may be pardoned for saying, angels fear to tread. I think that he is the unfortunate victim of his professional training. In seeking this financial divorce of the Federation from the States, he believes in attaining his objective by a surgical operation. His experience is that the surgeon himself does not suffer. The operation, from his point of view, is probably interesting work, and rather good fun. He forgets how the poor patient, or victim - it does not matter which term is used - feels about it. In this instance, the operation is to be performed without an anaesthetic. If, instead of so much reform, some chloroform had been used, the States might have been rendered sufficiently insensible or acquiescent.
– The Prime Minister tried to chloroform them first.
Mr.Watkins. - Is it not proposed to hold a conference with a corpse?
– I have heard various allusions to a decapitation. It would appear that an operation is to be performed, after which an inquiry will be made to ascertain whether there are restoratives which will bring the patient back to consciousness. If the Treasurer were properly guided by his professional training, he would not put the cart before the horse, but would prepare for the operation. Not only would he have the anaesthetic ready, and the necessary instruments and preparations
– And the consent of the patient obtained.
– Yes. Before commencing the operation, he would inquire whether the necessary appliances were ready to prevent the unfortunate patient from bleeding to death. In this instance, however, he proposes to perform the operation notwithstanding that many of the necessary appliances have been left at home; he will chance whether the patient is restored or bleeds to death. That is all wrong. On other occasions I have advocated a different scheme from that now proposed. As Treasurer of a former government, with the consent of
Cabinet, and I believe also of the party, I made a proposal for a gradual reduction of the per capita payments after several years’ notice had been given to the States, in order to enable them to make adjustments to meet the altered conditions. To those proposals the Prime Minister, in his two speeches, offered two objections. First, he said that a gradual shrinkage in the annual payments would lead to recurring recriminations. That showed that the right honorable gentleman had not studied the scheme, which was that in conference with the States, an agreement should be drawn up providing for a gradual reduction of the payments now made by 2s. 6d. per head per annum. Parliament would legislate to that effect, and the annual reduction would become automatic. The subject would not be reopened from time to time, so that there would be no recurring recriminations or arguments after the scheme had been adopted. The other objection urged by the Prime Minister is equally groundless. He said that there were no taxation surrenders offered at that time. That is correct, for in 1918-19 the full weight of the war and demobilization was upon us. During that year our war expenditure was about £130,000,000, which is far greater than the comparatively paltry amount we are now spending. At that time there was no possibility of a surrender of taxation. Moreover, the Customs revenue was then very different from what it is now. Those objections are advanced by men who have not studied the subject. If given time, the States could make the necessary ad justments. To give them a ramp to slide down would be better than hurling them from the Tarpeian Rock, as this bill proposes. The States possess the growing assets of the Commonwealth. Victoria’s revenue from railways in 1914 was approximately £5,500,000; to-day, it is £11,500,000. I know that railway charges have advanced almost correspondingly; but these assets, which the States with great wisdom and courage have scattered broadcast - railways, water supply schemes, and roads - will fructify. As the population of the States increases, the return from these undertakings will become greater. Probably, in ten or fifteen years’ time, the States which have wisely provided these utilities will be able to pay their way without any subsidy from the Commonwealth. But the dislocation of their finances caused by this measure will mean disaster to some of them. Another ingenuous argument which has been used to- justify the Government’s proposals is that the per capita payments are inequitable. That is an entirely new doctrine. The per capita grant was urged by the States themselves for reasons of safety. They had huge commitments when the Commonwealth had practically none. At. that ‘ time they were bearing the burden of a debt of approximately £300,000,000. As, in 1898, they asked for some of the Customs revenue, so in 1910 they asked for a fixed payment based upon their population. To that the Commonwealth consented. It was recognized that the scheme was arbitrary, in that it did not take into account factors other than population. The experience of governments is that increased population means increased expenditure. I was surprised and alarmed to notice the Prime Minister’s statement that the States with the greatest population are faced with the fewest problems. That is true in so far as it applies to problems of a certain kind - problem’s associated with roads, railways, and postal services - but in many other respects the greater the population the greater the number of the problems which have to be faced. Where an arbitrary standard is adopted, that based on population is probably the most satisfactory. I challenge any one to find a scientific basis which is free from all the objections which the Treasurer has urged against the per capita payment.
– The same arguments may be used against the Treasurer’s road proposals.
– Yes. Another argument used by the Prime Minister in 1923, and by the Treasurer at successive conferences, is that in view of the commitments of the Commonwealth, both on account of the war and otherwise, we cannot continue to make these payments; that we cannot afford to do so. In 1909-10 when the basis of 25s. per head was fixed, the revenue derived from the Customs and excise amounted to £11,500,000. At that time the whole of the Treasurers of Australia, together with the Under-Treasurers and their expert staffs made an estimate of the probable revenue which would be derived from Customs and excise for a period of ten years.
– Was it based on the rates then in force?
– It was based on their estimate of the population and the possible tariffs. They agreed that for the ensuing ten or fifteen years the Commonwealth might reasonably expect to average £15,000,000 per annum from the sources mentioned. When in 1918-19, I submitted my proposals for the shrinkage of the per capita payments, the revenue derived from Customs and excise had risen to £17,500,000, a gain of £6,000,000 in nine years. That was our position when confronted with the immediate post-war problems. The Treasurer may dispute my figures, but for the year 1926-27 it appears that the revenue from the source mentioned will be about £44,500,000, a further increase of £27,000,000 per annum in eight years, or £33,000,000 in seventeen years. The interest on our war debt is between £29,000,000 and £30,000,000 per annum. There is still a margin of about £3,000,000 even if that be so. The Treasurer cannot plead poverty when those figures are staring him in the face as plainly as the writing on the wall appeared to Belshazzar. Nor can he plead poverty as justification for the withdrawal of these subsidies, when the Government is offering largesse to the States in the shape of road grants and huge sums for housing. The two things do not fit. With great respect, but nevertheless with force, I protest against such contradictions.
– The Government has not pleaded poverty; it has only said that the Customs revenue would not always cover inescapable obligations.
– It is very easy to apply the word “inescapable” to the expenditure of money. To most of its expenditure the Government is committed by legislative enactment. Those commitments and, possibly, certain payments to our returned soldiers in order to fulfil our promises to them, are in the nature of contracts, as are also our interest bill, and the salaries of our judges. Otherwise our financial legislation is capable of alteration, as are any other laws passed by this parliament; so what is the use of saying that expenditure is inescapable? Words do not alter facts. Only a young and inexperienced man would use such an argument. So long as he uses arguments of that kind I shall feel that the Treasurer is seeking a shelter from reality. The facts are as plain as they can be. There should be no sophistry on the part of the States or the Commonwealth; but facts should be stated clearly and faced frankly. Let me refer for a moment to the probable effect upon the States of the withdrawal of these payments. Victoria alone will lose £2,000,000. It, I suppose, is the most easily governed State of the union, because it has a greater number of people to the acre than has any other State, lt is well supplied with railways and fairly well traversed by roads. As one who was its Treasurer for a number of years, I-believe that, with the governmental and legislative machinery which it possesses, it would be impossible to im pose taxation that would increase the revenue by £2,000,000, and preserve the solvency of the State. It is not unembarrassed to-day ; it has a yawning deficit. Its Treasurer has estimated a substantial deficit for this financial year. Those who are in charge of its affairs are doing the best of which they are capable, and at least equally as well as the Governments in the other .States. If that be true of Victoria, which numerically per acre is the richest of the States, it is truer of a majority of the others. Wa must expect a wild cry to go up to the heavens if, in this hasty and illconsidered fashion, injustice is inflicted not on those who are endeavouring to serve the people, but on the people themselves, who are our constituents as well as theirs. I do not think we can expect to build a great nation unless we have strong States, whilst our constitution remains in its present form. We could not do worse than, by intimidation or purchase or - as the honorable member for Henty (Mr. Gullett) suggested - by financial strangulation, make of the States petty, weak, cringing bodies, that could not do the work which the people desired to have done. The surrendered taxes might be picked up to some extent, but not altogether. I agree with what has been said by honorable members who have denounced the principle of State aggregation. There is no court, in the realm that would allow aggregation by States in laud taxation, income taxation, or probate duties to anything approaching its incidence that is adopted by the Commonwealth. Therefore, substantial amounts of income tax, land tax, and probate duties will be lost. I agree that the rich men will receive the greatest benefit. If the States find themselves unable to build higher their mountain of graduated taxation on incomes or land, that taxation will have to be spread over a wider area or a larger population, thus embracing a greater number of people and reaching down well nigh to the subsistence level which was referred to so powerfully by the honorable member for Henty. It is unpracticable to suggest that the political mechanism of the States will immediately change its habits and practices. I have had a great deal of experience of Upper Houses. I» remember on one occasion referring to the Victorian Legislative Council as the Legislative Abattoirs, and there were other references to crimson cushions and slaughtered innocents. All over Australia we have witnessed the resistance of Upper Houses to the imposition of new. taxation ; although, when they have become accustomed to the change, they have begun to think that they must have acted wrongly in opposing it. In former years the Upper House in Victoria would not agree to a graduated land tax. It would not even give the present Premier or his predecessor an opportunity to place the affairs of the State on a sound basis by passing increased taxation. Therefore, facing facts, those of us who have watched the proceedings in State institutions know that the governments of the States will not be able to derive from the area that the Commonwealth proposes to surrender the sums that they are asked to forgo, in time to preserve the credit, the solvency, and the sovereignty of the territories over which they preside. I do not acquit the States of all blame in this matter. They have not offered to the Commonwealth any real alternative. In 1910 we who were in the State sphere did not wait for the Commonwealth to produce its axe; we prepared an alternative scheme, setting out what we thought we needed, and attached our reasons. “We secured the acquiescence of the Commonwealth. That course ought to have been followed by the States on this occasion. Instead of having done so, since 1918-19 they have left themselves open to attack by one
Government after another, taking shelter in a negative position. They must change that attitude. The honorable member for Henty has suggested that the bill should be withdrawn until a conference has been held between the Commonwealth and the State authorities. Obviously, there is no urgency in thematter, because the existing arrangement is to continue until June, 1928. If tho States are not prepared to accept tho Commonwealth’s proposal, they ought to put forward an alternative, or be answerable to the tribunal of the people of Australia. The responsibility which rests upon them is as great as that which rests upon the Commonwealth. Some unfortunate remarks have been dropped in this debate. I do not think that we shall encourage harmony if we challenge the bona fides of the States. They are doing their duty to the best of their ability, and their work ranks equal in importance with ours. The honorable member for Kennedy (Mr. G. Francis) suggested that there was no guarantee that State Ministers could speak for their people, and said that we in this Parliament possessed as great a right as they to express the views of the Australian people. There may be something in that contention, but it was rather imprudent and perhaps a little indelicate of the honorable member for Kennedy to advance it. On the question of representation, let us be quite fair. Let us not throw stones at one another; but if any are to be thrown, let him whois without sin cast the first. We have been told that we must pass this bill in the hope that a conference which is to be held during this or next year will find some solution of the wearying and worrying problem of the States. With several honorable members, I believe that this is not urgent, but that there is an urgent outstanding matter that the Government ought to tackle. I refer to Australia^ debt, which, compared with this question is as a mountain to a molehill. The State debts to-day are in the region of £650,000,000. In 1921 they amounted to £474,000,000. In the last six years,, therefore, the increase has been £176,000,000. No control is exercised over them; they are ever-mounting. I do not lay the blame at the door of any party. Liberal and Labour Governments have the same break-neck and ruinous propensity. A day of reckoning must come, when the weight will have to be adjusted to the back, or the, back will snap. The Treasurer (Dr. Earle Page) has done his utmost in having established the Loan Council, to which he has invited all of the States, and into which have come five of the six. But that will not provide a cure for the existing evil. Nor will the establishment of a sinking fund. The sinkingfund fiction must be plain to everybody. However sincere and earnest you may be in ear-marking and hypothecating a portion of your revenue, if your borrowing continues at the same or a faster rate than your savings, a sinking fund cannot be of real value.
– The Treasurer’s argument is that loans can be raised at a cheaper rate if sinking funds are established in connexion with them.
– It is generally truo that, if a man is provident and sets aside a portion of his revenue for the repayment of his borrowing, a lender feels a little more kindly towards him. That is the utmost that can be said in favour of the sinking fund, either here or in London. It is not a solution of the debt problem. The Treasurer is not justified in saying to the States, “ I shall not give you this £8,500,000 as a subsidy, because I cannot afford to do so, but I shall put it into a sinking fund for you.” That is merely playing with the matter. It would be futile to provide a sinking fund unless definite control was exercised over the whole of the national borrowing, both Federal and State. There I join issue with the honorable member for Henty (Mr. Gullett). If the section of our Constitution which relates to the transfer of debts were real instead of being merely a fiction, the Commonwealth could assume control of State debts. If, as they fell due, a loan council, constituted by the authority of the Commonwealth, assumed control of all loans as they fell clue and was responsible for their conversion, and gradually established either interminable or terminable Commonwealth consols, no individual State could approach the London market for money unless it was prepared to pay ruinous rates of interest for it. There would be an automatic refusal of loan money to the States once the Commonwealth had assumed control. But the powers that are conferred by the existing section are fictitious. All that the Commonwealth can do at the present time is to assume responsibility for a trusteeship. It cannot take either assets or revenue. What is wanted is the power to assume control in the fullest possible way by taking over assets that are hypothecated against loans, and revenue also; If the Commonwealth boldly put forward such a proposal at a constitutional session and later at a referendum, it would have the support of tho best thought in this country, even in defiance of State authorities, because the more intelligent people in Australia are becoming alarmed at the tremendous borrowing that is being indulged in and the mountain of debt that is piling up until it threatensto obscure the sky. That problem, properly tackled, would redound to the everlasting credit of the government or the individual Minister responsible for it. I have spoken hastily, and in a desultory way. I urge the Treasurer to realize that I, and many other honorable members who sit on this side, have no desire to baulk his projects in any fractious spirit. I feel it to bo my solemn responsibility to endeavour, by any means within my power, to arrest the passage of this mistaken and misbegotten bill. From my experience in both State and Federal politics, I feel sure that it will work havoc with the finest instrumentalities in this country. I urge the honorable gentleman to withdraw the bill, to refer it to a select committee, or to postpone its consideration until a conference has shown whether agreement is possible. Thus, by amicability and concord, we might reach a settlement of what to-day is Australia’s most difficult problem.
Debate (on motion by Mr. Ley) adjourned.
.- I move-
That the House donow adjourn.
A congress of actuaries and statisticians is to be held in England in the last days of June of the present year, and the Government has decided to send Mr. Wickens, the Commonwealth Statistician, to attend on behalf of the Commonwealth. There is a great number of actuarial and statistical questions of great concern to the Commonwealth at the present time, and honorable members will, no doubt, agree that it would greatly assist us in their consideration if Mr. Wickens, who is doing valuable work in Australia, has this opportunity of meeting the leading actuaries of other countries. The last congress of the kind was held in 1909 in Geneva, and on that occasion Sir George Knibbs, then Commonwealth Statistician, attended as the representative of the Commonwealth.
– Has the Prime Minister definitely made arrangements as to the sittings of the House next week ? Honorable members want to know whether the sittings next week will commence on Monday or Tuesday.
– I am not at present in a position to tell the honorable member whether it will bc necessary for the House to sit on Monday of next week; but I shall try to let the House know to-morrow, so that honorable members may be able to make their arrangements accordingly.
Question resolved in the affirmative.
House adjourned at 10.3 p.m.
Cite as: Australia, House of Representatives, Debates, 8 March 1927, viewed 22 October 2017, <http://historichansard.net/hofreps/1927/19270308_reps_10_115/>.