House of Representatives
9 March 1927

10^th Parliament · 1^st Session

QUESTION
- DISPOSALOF H.M.A.S. SYDNEY
QUESTION
- CANBERRA
SITTINGS OF THE HOUSE
QUESTION
- WINE BOUNTY
QUESTION
- EAST-WEST AERIAL MAIL SERVICE
QUESTION
- IMPORTATIONS OF TIMBER
QUESTION
- BUTTER EXPORT
QUESTION
- AUSTRALIAN WAR MEMORIAL AT PORT SAID
QUESTION
- TRANSFERRED TAXATION OFFICERS
QUESTION
- INTERNATIONAL ECONOMIC CONFERENCE
COMMONWEALTH RAILWAYS
- Condition of Cattle Trucks
QUESTION
- PRESERVATIVES IN BUTTER
QUESTION
- DEFENCE EXPENDITURE
QUESTION
- NORFOLK ISLAND
QUESTION
- INSPECTION OF EXPORTED PRODUCTS
QUESTION
- SURVEY WORK IN PAPUA
PAPERS
STATES GRANTS BILL
- Second Reading

Mr. Speaker (Hon. Sir Littleton E. Groom) took the chair at 2.30 p.m., and read prayers.

page 196

QUESTION

DISPOSALOF H.M.A.S. SYDNEY

Mr MARKS:
WENTWORTH, NEW SOUTH WALES

– I noticed in thepress to-day varying statements as to the decision arrived at regarding the disposal of H.M.A.S. Sydney. Is the Minister re presenting the Minister for Defence in a position to reply to the question I asked last week regarding this matter?

Mr MARR:
Honorary Minister · PARKES, NEW SOUTH WALES · NAT

– The matter is still under consideration. A reply will be furnished to the honorable members question as soon as possible.

page 196

QUESTION

CANBERRA

Accommodation fob Workmen - Sale of Liquor - Offer of Messrs. doulton and cot.

Mr CHARLTON:
HUNTER, NEW SOUTH WALES

– I wish to ask the Minister for Home and Territories the. question arising out of a resolution recently carried by workmen employed at Canberra. They complain of the poor camping accommodation provided for workmen, the majority of whom have to live in 6 feet x 8 feet tents and bag humpies. They also call attention to the fact that a man who became ill at Redhill Camp, a distance of 2½ miles from the hospital, was charged 14s. for transport by the Canberra Commission ambulance. Will the Minister look into the complaints, and see if anything can be done to remedy them?

Mr MARR:
NAT

– If the honorable gentleman will give me particulars of the complaints made, I shall have them inquired into, and furnish him with a reply at an early date.

Mr R GREEN:
RICHMOND, NEW SOUTH WALES · CP

– In view of the fact that the Canberra Commission has practically reported that liquor regulation at Canberra is a farce, when will the referendum of the residents of the Federal Territory be taken on the question of the sale of liquor there; and can the Prime Minister give the House any idea as to who will be considered permanent residents of the Territory?

Mr BRUCE:
Minister for External Affairs · FLINDERS, VICTORIA · NAT

– I recall to the honorable member’s mind the fact that when this matter was dealt with in this Parliament the determination come to was that the local option poll for the Federal Territory area should be taken at such a time and upon such conditions and terms as the Parliament might determine after the transfer of the Seat of Government to Canberra.

Mr BOWDEN:
PARRAMATTA, NEW SOUTH WALES

– Has the Cabinet yet come to any decision regarding the offer of Messrs. Doulton and Coy. of a panel for the Federal Capital?

Mr BRUCE:

– The very generous offer made by Messrs. Doulton and Coy. has been considered by the Cabinet. It is believed that the panel offered might very suitably be incorporated in the war memorial to be erected at Canberra. The offer of the panel has been referred to the War Memorial Committee, but its reply has not yet been received.

page 197

SITTINGS OF THE HOUSE

Mr.BOWDEN.- Has the Prime Minister yet come to a decision as to whether the House will be called upon to meet next week on Monday? Honorable members are anxious to be in a position to make necessary arrangements, and the right honorable gentleman said that possibly he would be able to make a statement on the subject to-day.

Mr BRUCE:
NAT

– I propose to speak to the Leader of the Opposition on this matter. The meeting of the House next Monday depends upon whether the States Grants Bill is passed this week, because it must be sent to another place on Tuesday next.

Mr Riley:

– Suppose it does not get through here at all?

Mr BRUCE:

– I cannot consider impossible suggestions. If the measure is passed by this Blouse on Friday it will be unnecessary for us to meet on Monday, but if it is not passed on Friday, it will be necessary for the House to meet on Monday in order that the measure may be sent to another place on Tuesday.

page 197

QUESTION

WINE BOUNTY

Mr GREGORY:
SWAN, WESTERN AUSTRALIA

– Yesterday I asked a question of the Minister for Markets and Migration concerning a promise he made some time ago that the wine bounty would be continued. I was referred to the Minister for Trade and Customs, and as the season is getting on, I now ask that honorable gentleman whether he has any information to give the House on the subject?

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– The matter is being considered, but is not quite finalized. Until its consideration is completed, no definite reply can be made to the honorable member’s question.

page 197

QUESTION

EAST-WEST AERIAL MAIL SERVICE

Mr MARKS:

– I ask the Minister representing the Minister for Defence if ho can say when tenders will be called for the East- West aerial mail service?

Mr MARR:
NAT

– The Government hopes to be in a position to call for tenders in the very near future. The conditions to be imposed are still under consideration.

page 197

QUESTION

IMPORTATIONS OF TIMBER

Mr PERKINS:
EDEN-MONARO, NEW SOUTH WALES

– Is the Minister for Trade and Customs aware that big timber industries, and particularly milling industries, are suffering by reason of the large importation of timber from overseas? What steps is the honorable gentleman’s department taking to see that the timber industry of Australia is given a chance of continued existence?

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– It is alleged that the timber industry in Australia is suffering very acutely from importations of timber from abroad. An inquiry extending over a very long time has been made into the conditions of the industry, and I understand that the inquiry was closed only yesterday. Many hundreds of sheets of evidence taken during the inquiry have to be considered. They will be considered as soon as possible by the Tariff Board, and the board’s report will then be brought under the attention of the Government.

page 197

QUESTION

BUTTER EXPORT

Prohibition of Preservatives

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– Will the Minister for Markets and Migration lay on the table of the House, for the information of honorable members, a copy of the British regulation dealing with the prohibition of the use of preservatives in export butter?

Mr PATERSON:
Minister for Markets and Migration · GIPPSLAND, VICTORIA · CP

– I shall have a copy of the British regulation laid on the table of the Library.

page 197

QUESTION

AUSTRALIAN WAR MEMORIAL AT PORT SAID

Mr MANNING:
MACQUARIE, NEW SOUTH WALES

– Recently, when at Port Said, I was shown by officers connected with the War Graves Commission the site selected for the Australian war memorial there. I was told that the work of erecting it had been delayed because the plans had not been received from Australia. I ask the Minister representing the Minister for Defence whether the plans for the Australian war memorial at Port Said have yet been forwarded to that place, and, if not, will the honorable gentleman take steps to see that they are completed and forwarded at the earliest possible date?

Mr MARR:
NAT

– I have not yet seen the plans referred to. I shall make inquiries, and let the honorable member know the position.

page 198

QUESTION

TRANSFERRED TAXATION OFFICERS

Mr MARKS:

asked the Treasurer, upon notice- 1.Is it a fact that the services of several Federal Taxation officials who were transferred to the New South Wales Department of Taxation consequent on the amalgamation of the Federal and State Taxation offices are to be dispensed with ?

Does provision exist under the Income Tax Collection Act 1923 whereby these officers may receive compensation?
Should such provision not exist, is it intended that such Act be amended in order that similar compensation be made to these officers as was given to officers previously retired under similar circumstances?
What principle willbe observed, in the event of Federal Taxation officials now attached to the State Department being transferred to the Federal Service, in regard to their status and salary?

Dr EARLE PAGE:
Treasurer · COWPER, NEW SOUTH WALES · CP

– I hope to be in a position to furnish this information within the next few clays.

page 198

QUESTION

INTERNATIONAL ECONOMIC CONFERENCE

Commonwealth Representation

Mr MANN:
PERTH, WESTERN AUSTRALIA

asked the Prime Minister, upon notice -

Is the Commonwealth to be directly represented at the International Economic Conference to be held under the auspices of the League of Nations at Geneva on the 4th of May next?
Will the Commonwealth have the full number of five representatives provided for under the conditions arranged by the Council of the League?
Who are the chosen representatives of the Commonwealth.

Mr BRUCE:
NAT

– The replies to the honorable member’s questions are as follow : -

Yes.
It is the present intention of the Government to have three representatives.
The only representative who has yet been selected is Sir David Gordon, of Adelaide.

page 198

COMMONWEALTH RAILWAYS

Condition of Cattle Trucks

Mr LACEY:
GREY, SOUTH AUSTRALIA

asked the Minister for

Works and Railways, upon notice -

Whether, in view of the complaints that have been made in connexion with the cattle trucks used on the Commonwealth railways in South Australia, he will consider such complaints with a view to the construction of trucks so designed that they will prevent cattle being damaged.
Is it a fact that recently seventeen cattle died out of one consignment of 44 vans?
Will he obtain the opinions of pastoralists as to the ventilation and design required, with the view of giving satisfaction and preventing the cruelty and losses that are alleged to be taking place?

Mr HILL:
Minister for Works and Railways · ECHUCA, VICTORIA · CP

– The replies to the honorable member’s questions are as follow : -

Every consideration has been given to complaints made in regard to Commonwealth railways cattle trucks used on the Oodnadatta railway. This type of truck was designed so that cattle could ‘be carried over long distances in a hot climate with the least possible damage. A similar type of truck is in use on the TransAustralian railway and in the railway systems of Western Australia, Queensland, and the Northern Territory, and millions of cattle have been carried over long distances in this type of truck for freezing and other purposes. Apparently the truckers on the Oodnadatta railway, being accustomed to the South Australian truck, have not yet realized the advantages of the Commonwealth design, which is new to them.
No. Our records show that no more deaths occur in the Commonwealth than in the old design of State truck.
The advice of experienced pastoralists was obtained before the design was brought into use, and it has given satisfaction elsewhere for a number of years. No cruelty or loss is in any way due to the design of the truck. However, so that no efforts might be spared to satisfy the users of the trucks, an experiment is being made by removing the side boards on some of the trucks so as to provide additional ventilation.

page 198

QUESTION

PRESERVATIVES IN BUTTER

Dr MALONEY:
MELBOURNE, VICTORIA · ALP; FLP from 1931; ALP from 1936

asked the Minister for Health, upon notice -

Is it a fact that three nurses in Chicago have admitted that they gave live babies a solution of boric acid, which was meant for bathing eyes, to drink instead of distilled water, and that all of the children died?
Is boric acid used as a preservative for butter?
Is it one of the preservatives concerning which the British Government are considering the question of making it a penal offence to use in butter imported into Great Britain?
Are anybutters in Victoria made free of all chemical preservatives; if so, what are the names and addresses of the factories?

Dr EARLE PAGE:
CP

– The replies to the honorable member’s questions are as follow : -

No information as to this incident is available.
Yes.
Yes.
As the Commonwealth deals only with butters for export, information necessary to answer this question is not available.

page 199

QUESTION

DEFENCE EXPENDITURE

Wealth Conscription for Military Purposes

Mr LAZZARINI:
WERRIWA, NEW SOUTH WALES

asked the Treasurer, upon notice -

Whether he will, before budgeting for Defence expenditure for the next financial year, consider the new French policy of wealth conscription for military purposes so as to guarantee that any future war in which Australia may be engaged will be profitless to the wealthy and big financiers?

Dr EARLE PAGE:
CP

– The Government policy in regard to the financing of Defence expenditure will be disclosed in the budget.

page 199

QUESTION

NORFOLK ISLAND

Recommendations of Royal Commission

Mr THOMPSON:
NEW ENGLAND, NEW SOUTH WALES

asked the Prime Minister, upon notice -

Can he inform the House as to the action taken by the Government to carry out the recommendations of the royal commissioner on the affairs of Norfolk Island, particularly in regard to the system of local government, mail services, land settlement difficulties, encouragement of local industries, and provision of an efficient system of magisterial jurisdiction?

Mr BRUCE:
NAT

– The majority of the suggestions made by the royal commissioner on Norfolk Island affairs have been given effect to. It was considered desirable that, before arriving at a decision in regard to the more important suggestions, such as those relating to the system of local government, land settlement difficulties, the administration of justice, the functions of the Executive Council, and the Public Service, the

Acting Administrator, Mr. M. V. Murphy, who has had extensive experience of Norfolk Island, and the new Administrator, Colonel Sellheim, should be given an opportunity of submitting their views on the proposals. Immediately the views of these officers come to hand the suggestions will be dealt with.

page 199

QUESTION

INSPECTION OF EXPORTED PRODUCTS

Mr COOK:
INDI, VICTORIA

asked the Minister for Markets and Migration, upon notice -

What is the number of inspectors engaged on the inspection of primary products for export?
What is the total amount of salaries and travelling expenses paid annually to such inspectors ?
What is the total of the inspection fees paid for examining primary products exported?
What are the respective amounts paid for inspecting dairy produce, canned fruits, dried fruits, and meats exported?

Mr PATERSON:
CP

– The information is being obtained.

page 199

QUESTION

SURVEY WORK IN PAPUA

Mr MARR:
NAT

– On the 2nd of March the honorable member for Swan (Mr. Gregory) asked, inter alia, the following questions : -

Are the authorities permitting survey work to be performed in Papuaby men not gazetted as prescribed?
Has the Government of Papua power to issue licences to persons to perform survey work dealing with the alienation and subdivision of land who have not passed the examination of the Federated Board of Surveyors of Australia and New Zealand?

The following answers to these questions have been received from the Government of Papua: -

The authorities only permit survey work to be performed by men gazetted as prescribed by the Real Property Ordinance 1913-1914.
Section 131 of theReal Property Ordinance 1913-1914, which is similar to section 118 of the Queensland Real Property Act 1861, provides that upon the application of any person producing a certificate of competency signed by the Chief Government Surveyor or other officer who may be appointed for that purpose by the Lieutenant-Governor, the Registrar shall licence such person as a surveyor for the purposes of the Ordinance. StaffSurveyor A. E. Pratt, who was fully qualified in New South Wales and had been Acting Chief Government Surveyor of Papua, was appointed to issue certificates of competency, and he issued such certificates to two officers of the Lands Department, to whom licences were thereupon granted.

page 200

PAPERS

The following papers were presented : -

Commonwealth Film Censorship- Report for year 1926.

Ordered to be printed.

Air Force Act and Defence Act- Regulations Amended- Statutory Rules 1927, No. 20.

Canned Fruits Export Charges Act-Canned Fruits Export Charges Regulations- Statutory Rules 1927, No. 14.

Canned Fruits Export Control Act-

Canned Fruits Export Control (Fees and Expenses) Regulations - Statutory Rules 1927. No. 15.

Canned Fruits Export Control (Poll and Election of Board) Regulations - Statutory Rules 1926, No. 156.

Canned Fruits Export Control (Preparation of Rolls) Regulations - Statutory Rules 1926, No. 134.

Canned Fruits Export Control (Licences) Regulations- Statutory Rules 1927, No. 16.

Customs Act and Commerce (Trade Descriptions) Act -

Commerce (Export Dairy) Regulations - Statutory Rules 1926, No. 182.- Regulations Amended -

Statutory Rules 1926, No. 176.

Statutory Rules 1927, No. 11.

Dairy Produce Export Charges Act - Regu lations Amended - Statutory Rules 1926, No. 118.

Dairy Produce Export Control Act - Regulations Amended - Statutory Rules 1926, No. 99.

Dried Fruits Advances Act - Dried Fruits Advances (Repayment) Regulations - Statutory Rules 1926, No. 96.

Dried Fruits Export Control Act -

Dried Fruits Export Control Regulations -Statutory Rules 1926, No. 55.

Regulations Amended -

Statutory Rules 1926, Nos. 107, 149.

Statutory Rules 1927, Nos. 2, 10.

Export Guarantee Act - Ohanez Grapes Assistance Regulations - Statutory Rules 1926, No. 169.

Land Tax Assessment Act - Applications for relief from Taxation during the year 1925-26.

Quarantine Act - Quarantine RegulationsStatutory Rules 1927, No. 8.

page 200

STATES GRANTS BILL

Second Reading

Debate resumed from 8th March (vide page 195), 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.”

Mr LEY:
Barton

.- Last night we all enjoyed the forceful and eloquent utterance of the right honorable member for Balaclava (Mr. Watt), who was good enough to prescribe a test to apply to the proposals of the Treasurer (Dr. Earle Page), and also incidentally reminded us of two very great historical facts which he considered should be taken into consideration in the course of this debate. He suggested that the test to be applied to the bill was whether it proposed a fair arrangement between the Commonwealth and the States; but I should say that the real test should be whether the proposal is fair to the people of the Commonwealth; because the aim and end of all governments, whether State or Federal, should be the welfare and happiness of their citizens. Accepting the test which the right honorable gentleman, has suggested, I propose to apply it first to some of the arguments that have been offered by the Opposition; next, to the alternative suggested by the right honorable member for Balaclava; and, finally, to the proposals of the Treasurer. Let me take, first of all, the contention that the further, consideration of this matter should be deferred to a constitutional session to be held at some unmentioned date in the dim and distant future. I can understand such a suggestion “from the Labour party; but while it is the kind of bait that may catch political youngsters, I doubt whether it will catch grown men. The success of their effort to have postponed an item of government policy that ought to be carried into immediate effect would make the hearts of honorable members opposite rejoice. One could easily imagine them chuckling, and picture perspiring Labour orators on the platform telling their hearers that the delay in putting such an important proposal into operation was due not to any suggestion on their part that a constitutional session should be held, but solely to the incapacity of the Government to carry out its own programme. There is a more important reason why Labour members are endeavouring to prevent the passage of this bill. For some time the Government has been engaged in the formulation of schemes for housing and national insurance, which are now nearing completion. Moreover, the

– It was at least contemplated that at some time the arrangement would be term iiia tod. It is immaterial to my argument what the period is; I am assuming that, because the people said, that the arrangement was not to be permanent, they contemplated that at some time it should cease. If that bc so, at: what time should it cease? The opponents of this measure would have ns believe that; the revenue from. Customs and excise is not intended to be the primary fund for meeting the needs of the Commonwealth. I cannot understand any honorable member suggesting such a thing. Undoubtedly that fund was looked upon from the commencement as being the fund out of which, if possible, the needs of the Commonwealth should be met; but unforeseen emergencies, some of them extremely unfortunate, prevented that idea from being carried out. If it is the primary fund out of which the needs of the Commonwealth should be met, and if it is millions of pounds less than is necessary to meet the needs of the Commonwealth, then it is an exhausted fund, and there is no excess to hand over to the States. How, then, can honorable members justify the maintenance at the public expense of a large, elaborate, and costly bookkeeping system to divide between seven governments a fund that is not sufficient for one of them? Such a proposal is like the peace that “passeth all understanding.” There is no chance of bringing about a reduction of taxation, which is the reform most desired by the people, if we maintain departments merely for the purpose of solemnly dividing among seven governments funds that are not sufficient for one of them. If the Customs and excise revenue is millions of pounds short of what is necessary for the needs of the Commonwealth, common sense dictates that wc should cease dividing the fund. If an honorable member does not take the unusual view that 25s. out of that fund has n peculiar value not attached to any similar amount, I cannot understand why he wishes, at great expense to the Commonwealth and the States, to divide the Customs revenue. If that revenue should be millions short, the Commonwealth could take the whole of it, thereby saving the taxpayers all the expense of maintaining the costly bookkeeping system now in operation. That is one saving that could be effected, and, because of the advantage that the public would derive from it, I support this bill. Any person who clamours for a reduction in taxation, and calls upon the Government to do something to remedy the financial aftermath of the war, and yet declines to support the bill, displays a lack of business acumen. At the 1923 Conference between Federal and State mini- sters there was no difference of opinion between the State Premiers about handing over the Customs and excise revenue to the Commonwealth. The conference carried a motion agreeing to the adoption of that course on the condition that the Commonwealth withdrew from the field of income taxation. I remind honorable members opposite that although I was not present at that conference, I was kept well informed of its proceedings. I have had considerable parliamentary and ministerial experience, and at that time I was a member of the New South Wales Government. The Premiers at that time saw the effect of the Commonwealth continuing to divide the Customs revenue between seven authorities at considerable expense and without benefit to anybody, and realized that the States could raise the same amount of money from other sources. But they wanted to drive the Commonwealth out of the field of income taxation, and that was the cause of the dispute which is still in progress.

Honorable Members. - Hear, hear!

Mr LEY:

– I ask honorable members who are cheering me so helpfully to tell the House later whether they approve of the Commonwealth quitting altogether the field of income taxation.

Mr Foster:

– Taxation of the incomes of individuals, certainly. I am prepared to take that platform to-morrow.

Mr LEY:

Mr COLEMAN:

– The Commonwealth has no constitutional power to itself undertake the construction of roads. If it attempted to do so the States could challenge the validity of its action. In his work, TheCommonwealth of Australia Constitution, Professor Harrison Moore says -

In the Commonwealth the proceeds of taxation are not the unqualified property of the Commonwealth Government; they are subject to the provision of the Constitution whereby “ surplus revenue “ belongs to the several States, and, in fact, a considerable part of chapter IV. of the Constitution is devoted to the adjustment of the financial relations of the Commonwealth and the States. This right of the States at once suggests a limitation upon’ the objects of appropriation, and gives the States a locus standi for challenging appropriations which may appear ultra vires. The power of the Commonwealth to appropriate money is no exception to the rule that the Commonwealth Government is one of specific and not general powers. Section 90, authorizing financial assistance to any State, and section 105, providing for taking over the public debts of the States, may be accounted for independently, but at least point in the same direction.

There was a specific direction in the Constitution that the Commonwealth should take over State debts at the commencement of federation. The people of Australia, at a referendum which was held in 1910, amended that provision by agreeing to the deletion of the words, “ at the comencement of federation,” andthus reaffirmed and emphasized this constitutional provision. That is the only important referendum’ proposalthathas been agreed to since the establishment of the Commonwealth. It was carried by an overwhelming majority, the voting being as follows : -

That was a clear mandate to the Commonwealth Government to deal with this vexed question. Instead of devoting its time to vote-catching devices, and adopting the role of a government of magnificence and political philanthropy, this Government would be better advised if it gave its attention to the problem of the constantly increasing burden of State debts. When the Treasurer is faced with these questions, his answerinvariably is that they are contingent upon his having a surplus. It is surprising that, when an election is in progress, the honorable gentleman can always claim to have shown a surplus in his management of the finances of the Commonwealth. If the receipts and expenditure of the Commonwealth were properly dealt with, and the money which is now spent on housing, wire netting and roads were not disbursed, a tremendous surplus could always be obtained, and the Commonwealth would be constitutionally compelled to return it to the States under the direction which is contained in section 94, and reads -

After five years from the imposition of uniform duties of Customs, the Parliament may provide, on such basis as it deems fair, for the monthly payment to the several States of all surplus revenue of the Commonwealth.

The Commonwealth has been enabled to evade that legal claim because each successive Treasurer has so arranged his accounts that there has hot been any surplus revenue. Clearly the financial clauses of the ‘Constitution contain a legal direction to the (Government to grapple with the problem of States’ debts. I shall not deal further with that matter. Why does the Government not proceed with urgent legislative work, such as the tariff items that were tabled in this House last year? A number of industries are being slowly strangled, and are beseeching this Parliament to succour and assist them. Child endowment, also, is a burning question, and occupied a foremost place in the platform of the Government at the last election. Where are those proposals ? Where are the other fulsome and flowery promises that were made by the Prime Minister during the last election campaign ? Actually we have had Parliament closed down for six months to enable the right honorable gentleman to go abroad and emulate his great exemplar, Don Quixote, by tilting at windmills in Great Britain, America, and elsewhere, and coming back from a conference with nothing accomplished other than a number of pious resolutions that mean nothing. The people of Australia arc losing patience with this Government because of its dilatoriness in dealing with some of the social problems with which it is confronted. There is no justification in pre-election pledges for this measure.

– The honorable member for Barton said that the money could be obtained from the land.

Mr PERKINS:

– Yes, and Mr. Lang evidently thinks so, too. The founders of federation, who were undoubtedly able and far-seeing statesmen, predicted that the Commonwealth would cost the people not more than 2s. 6d. per head, “the fee for the registration of a dog.” In the light of later events, we know that those statesmen could not see so very far ahead. In any case, the Australian people are not bound for all time by what was done by the founders of the federation in the light of the knowledge they then possessed. We hear much talk of the spirit of federation. But, during the ordinary natural growth of Australia, conditions have altered. Apart from that, the great war upset all old bases of calculation. The present Commonwealth Government has been very forebearing in regard to the matter now under discussion. Twelve months ago this proposal was brought before Parliament, and I believe that had it been proceeded with then very little outcry would have been raised, even in Victoria, but as the days go by opposition to it seems to increase, and to-day it is viewed with alarm by many people. I am unable to understand the opposition of the Labour party to the bill. When we find honorable members opposite defending State rights we have reason to be suspicious. More difficult to understand is the antagonism of the Melbourne press. Any government that is persistently attacked by the press must eventually fall, and I warn the newspapers of Victoria that they are paving the way for Labour control of the Commonwealth treasury bench. That happened in New South Wales politics. The newspapers attacked the Nationalist Government continuously until the eve of the general election, when they had to eat their words, and say to the electors, “ Vote for the Nationalists; do not vote for Labour.” But for three years they had been working for the Labour party by poisoning the minds of the electors, and the eleventh hour antidote was too late. Prior to the recent by-election in the electorate of Dalley, one Sydney newspaper was constantly attacking the Bruce Government, but when the extraordinary vacancy occurred, and an election was imminent, that journal had to return to its Nationalist colours in order to oppose the Labour candidate, and once more the present Prime Minister became, for the time being, a boro. This dangerous inconsistency is a feature of the Melbourne newspapers also. The attitude of the Morning Post surprises me, but it seems to have been able to summarize under twelve headings all that could be said in this House in a fortnight against this bill. That journal’s objections were: -

lt is a contravention of Hie spirit of Federation.

That objection has been well answered by the honorable members for Balaclava and Barton.

It is a denial of the State’s moral rights. The supporters of the bill have denied that, but an opponent of it, the right honorable member for Balaclava, stated emphatically that the States have no moral right to the continuance of the per capita payments.
It dishonours the basic agreement made when essential services were transferred.

There may be something in that contention, but my opinion is that all agreements made in regard to the transfer of essential services have been honorably observed by the Commonwealth.

It contradicts the 19.22 Brisbane speech of Mr. Bruce as Treasurer.

I do not know what the right honorable gentleman said in Brisbane in 1922, but since that time a general election has been held, much water has run under the political bridge, and the circumstances to-day are entirely different from those that obtained then.

It was not included in the policy speech at the last Federal elections.

That may be a fair argument as coming from the Morning Post, but I am not prepared to accept it as an argument from members of the Opposition, who support a government that abolished the Upper House in Queensland in defiance of the voice of the people. For years past in Queensland and New South Wales the will of the people has been flouted.

It is not a financial necessity.
It does not provide an equitable recompense to the States.

I remember seeing in a Sydney newspaper a picture of a number of sucking pigs enjoying themselves. Some of the larger ones had more fighting strength than the smaller ones, and were thus able to obtain more than their fair share of nourishment. Those pigs were supposed to represent the States of this country, and although it was not a pretty picture, it was to some extent true. When the Braddon clause was included in the Constitution it was necessary that the wants of the infant States should be satisfied; but when it was deleted, and the payment to the States was reduced to 25s. per head, a weaning process was started. Now that the States have reached manhood, they should be weaned entirely, and allowed to conduct their own affairs. It is proposed to give them the right to govern themselves. They have said that the Federal Government is stealing their rights, but, as a matter of fact, it is trying to give their rights back to them, to give them the right to raise all their taxation instead of only part of it, and to make them more autonomous.

It will deprive Victoria of £2.150,000 per annum.

It will not deprive Victoria of £2,150,000. It might similarly be said that it will deprive New South Wales of £3,000,000 per annum, and South Australia of about £1,000,000 per annum. Those States will merely be deprived of the opportunity of obtaining the money from us, and will be given the opportunity of collecting it themselves.

It will place the State Government in the odious position of having to raise this amount by taxation.

If, for all their schemes, the States had to collect money directly from the people, half the experimental legislation now indulged in would not be attempted, and half the mistakes now made would be avoided.

Mr Maxwell:

– Would it not be well to have the same check upon the Federal Government ?

Mr PERKINS:

– Probably so, but that is not now under consideration. The Treasurer showed last June that the people of Victoria would benefit under this proposal to the amount of from £80,000 to £100,000. The Commonwealth proposes to abandon more in taxation than the States will have to collect. Naturally the State Treasurers want as much easy money as they can get. There is no doubt as to what would be the result of taking a vote on this question in the Queensland, New South Wales, or Victorian Parliament. In the Victorian Parliament the Labour members and Nationalists have unanimously declared that they do not want this measure; but I have no doubt that the people, if we took a plebiscite, would not range themselves behind the politicians, who have an axe to grind. The man in the street is not worrying about this issue. I have had a chat with a few citizens of Victoria, and find that they honestly admit that they do not know anything about it. One man said that he did not know “what was wrong with the Melbourne press. “ We have,” he added, “ a Victorian Prime Minister and five Victorians in the Ministry and I do not see why this State should be dissatisfied.” He said he was prepared to trust Bruce, and did not want any dictation from the press. I spoke to half a dozen men who do not know anything about the measure, and are not interested in it, but are prepared to follow the Prime Minister. The higher one goes in political circles, the more opposition one finds to the bill. State Premiers and Treasurers regard the proposal as serious; but it is not serious.

It will probably force the State Government to resort to indirect taxation.

There is no doubt about that, and it will also force the Commonwealth Government to abandon a certain amount of taxation- and the man in the street will be as well off as he was before. It looks to me like tweedledum and tweedledee.

It does not win the unanimous sympathy of the Federal Government.

That may be so. It has not the unanimous sympathy of members of this House, In fact, few bills brought down by the Government are unanimously supported by this House.

It is a measure so far-reaching that it should be referred to the people.

I fail to agree with that. It does not matter to the taxpayer whether he pays taxes out of his right-hand or his lefthand pocket, whether he pays them to the Federal Treasurer or to a State Treasurer, or whether ho pays them in the form of income tax or in some other less direct way. The people can stand only a certain amount of taxation, in whatever form it is levied. The people of the States will take more interest in politics when they know which Government is pinching them; they will become more alive to their own interests, and on election day will vote accordingly. I congratulate the editor of the Morning Post on being able to compress into a nutshell the speeches that have taken four or five days to deliver in this chamber. Another Melbourne newspaper is very strong in its opinions. Yesterday, four or five good speeches were delivered by honorable members. The honorable member for Henty (Mr. Gullett) was reported in black type, and after him “ the Minister also spoke,” although the Minister’s speech was equally worthy of publication. One argument that has been used is that the road-making grant is similar in principle to the per capita payment, and that if one is abolished the other should be abolished also. I do not regard them as similar. The Government is building a railway in northern New South Wales, and is subsidizing the State of New South Wales in the carrying out of that great national work. In South Australia the Government is building the great NorthSouth line, and to that extent is subsidizing the Government of South Australia. Later I hope the Commonwealth will come to the assistance of the States in the work of unifying the railway gauges. We cannot expect Victoria, although it is a prosperous and comparatively thickly populated State, to tear up its railway lines and convert them at its own expense to a 4-ft. 8½-in. gauge. The roads of this country are a national asset, and belong to the nation as awhole, rather than to the separate States. That is why this Government provides money for roads. Even if the States come to an agreement with the Commonwealth as to the taxes that the Commonwealth should abandon, special provision will still have to be made to assist Western Australia and Tasmania. It is impossible to link together the money to be spent on roads and the taxation that the Commonwealth proposes to abandon.I congratulate the Treasurer on this proposal; and if the States administer their affairs honestly and straightforwardly, the result will be beneficial to them.

Mr YATES:
Adelaide

.- We have heard some good speeches on this bill, but those in opposition to the proposals of the Government contain the better logic. The proposal to terminate the per capita payments has been well heralded, and I am not one of those who say that the Commonwealth has not given the States notice that something of the kind must be done. The change must be made, but whether it is proposed in the right form is the question that is agitating the minds of the community. It has been stated by some of those who have opposed the scheme, that it is “ unification by strangulation.” I do not know whether that idea dominates the mind of the Treasurer; he did not say so much, but, personally, I am sorry that the strangulation did not take place at birth. The result would then have been more in consonance with the vote given for federation. If a vote of the people were taken to-day, on the value of unification, they would vote for unification rather than for what we know as federation.

Mr Cook:

– Does the honorable member favour unification?

Mr YATES:

Mr E RILEY:
SOUTH SYDNEY, NEW SOUTH WALES · ALP

– They have not yetattained government through one Parliament.

Mr YATES:

– No, although that was evidently their desire prior to the union. The honorable member for Dalley (Mr. Theodore), at least, did something as Premier of Queensland in the direction of meeting the public demand for a reduction in the number of parliaments and administrations. He gave tangible evidence of a desire to manage public affairs in the interests of the taxpayers. The right honorable member for Balaclava (Mr. Watt) clearly traversed the history of federation, and if there was anything to be gleaned from his argument, it was that the States had a moral right - even an actual right - to the per capita payment. From the inception of federation it was made clear that the States could not subsist on thin air. But the limitation was placed in the Constitution that the payment to thom of three-fourths of the Customs revenue should be made for a period of ten years only. The honorable member for Henty (Mr. Gullett), and the right honorable member for Balaclava, have asserted that it was the ascendancy of the Labour party and the decline of the Liberal party that was responsible for what happened in 1910; but I do not hold that view. I had then begun to take an active part in Labour politics, and our argument at that time was that the

– I am dealing with direct taxation, which, as I have said, was imposed in the first place for the purpose of prosecuting the war, and, I submit, is germane to the question before the House. It has been said that honorable members on this side of the chamber, while freely criticizing the policy of the Government on this and other questions, do not submit alternative proposals. In this instance,I suggest, as an alternative, that the time is ripe for going to the people with a sane scheme of unification. Surely we can dispense with the six State Parliaments and six Governors, and be governed by one Australian Parliament, thus abolishing a good deal of the duplication of effort and unnecessary expendi ture which at present exists. The right honorable member for North Sydney (Mr. Hughes) knows that direct taxation was imposed solely for the purpose of meeting our war commitments, and it is unreasonable to propose that we should forgo our rights in that respect.

Mr.Scullin. - Some have suggested that we should repudiate our responsibility in the matter of war loans.

Mr YATES:

– The time is coming when, as suggested by the right honorable member for Balaclava, we shall have to curtail our borrowing activities, and settle our war debts, as is being done in some other countries. The time is approaching when some readjustment of the financial relations between the Commonwealth and the States must be made; but the present proposal is not fair to the States. Any Commonwealth Government going’ to the country on a proposal for continuing to impose direct taxation would be returned with a large majority. It is easy to imagine the position arising in which, our commitments having been deliberately made so heavy that a surplus would not be available, other methods of raising taxation would have to bo employed. If this proposal is carried, and the Commonwealth vacates the field of direct taxation, it will be found that the power of the Liberal or Nationalist partyhas declined, and that of the Labour party, which put the finances of the Commonwealth on a proper basis in 1910 in spite of the policies then enunciated, has increased. At that time the Labour party, which strongly opposed the purchasing of a Dreadnought with borrowed money, was returned to power, and did such good work that it left behind it a record that has never been approached. The Government should not attempt to strangle the States in this way; but, to use the metaphor of the right honorable member for Balaclava, should invite them into the operating-room, feel their pulses, and see if their hearts are strong enough to stand the operation. This is not an ordinary operation, but one which may make the States sterile for many years to come. If the Government carries its proposals in this instance, the people will shortly demand a proper system of unification, so that, with the assistance of certain subsidiary agencies, we can proceed as a united body in the interest of the whole Commonwealth. I oppose the bill.

Mr THOMPSON:
New England

– After listening to the speech of the honorable member for Adelaide (Mr. Yates), I must say that, with the exception of one definite utterance, he left me in doubt as to whether he was supporting or opposing the bill. For a time I felt that at least one member of the Labour party was supporting the Government. But the honorable gentleman qualified his statement by saying that he wished the bill to be withdrawn. Apparently he approves of it in general terms, but thinks that the time is not ripe. That suggestion has been made by other speakers in opposition to the bill. If it were adopted, and if the bill were withdrawn, there would be a shout of derision from one end of Australia to the other. The Federal Government would be the laughing-stock, not only of its opponents, but also of its friends, and the State Premiers and State Treasurers, who are raising all this outcry about the per capita payments, would chuckle and say, “ Once more Ave have bluffed the Commonwealth Government.” These State Ministers have been pursuing this policy of bluff for a long time. My own opinion of them is that, whilst they are very estimable gentlemen who are trying to discharge their State obligations, they are not the kind of people who, so far as this Parliament is concerned, are worth losing a great deal of sleep over. Their general attitude towards Commonwealth Ministers -has always been one of more or less discourteous hostility. The allegation that, in the negotiations between the Commonwealth and the States, all the hostility comes from the Commonwealth Ministers cannot be sustained. Those who study the reports of the numerous conferences that have been held, and the negotiations that arc continually being carried on between the Commonwealth and the States, must come to the conclusion that all the forbearance and all the courtesy are on the side of the Commonwealth leaders, irrespective of party, and that all the cantankerousness and hostility emanate from the State Ministers. Only the other day the Premier of New South South Wales, the famous Mr. Lang, accused the Treasurer (Dr. Earle Page) of being a weakling. Other political opponents take the contrary view; they declare that he is too strong. The Treasurer’s action in persisting with this bill, notwithstanding all the abuse and misrepresentation to which he has been subjected by the Premiers and Treasurers of the States, demonstrates conclusively that, whatever other faults ho may have, at all events he is not a weakling. As the Leader of the party to which I belong, I feel that the Treasurer deserves much stronger support in this House than he is receiving from honorable members on this side of the chamber. It is largely for that reason that, as a member of the Country party, I feel it my duty to dispel the notion that has been carefully disseminated by a section of the press in Melbourne, that not only are the Nationalist supporters of the Government hopelessly split over this issue, but that the Country party also is only being kept in its place by the stern discipline of the party whip. With two exceptions, the Country party is solidly behind the Government on this issue. Because of its attitude towards this proposal, I think it may be claimed for the Country party that it is more national in spirit than many of those who criticize it. Opposition to the bill from Government supporters boils down to two gentlemen belonging to the Country party who are known as. “ State righters,” pure and simple, and the conservative “ rump “ of the Nationalist party. In every big political party there is a certain conservative dross which, rising to the surface, causes a good deal of trouble until it is skimmed off and thrown away. I believe that, so far as this measure is concerned, this political dross to which I refer, will not be in evidence much longer. We have heard a good deal about the intentions of the framers of the Constitution. The same cry has been raised on every previous occasion, when any measure has been brought forward to grant additional powers to the Commonwealth. We have always been told that it was against the intentions of the framers of the Constitution. Actually no honorable member can say definitely what were the intentions of those who moulded the Constitution. Those who have studied the Constitution and have gone to the trouble of reading the debates of the Federal conventions, and, therefore, may be regarded as authorities as to the intentions of the framers of the Constitution, are themselves at sixes and sevens. There is no accepted authority in Australia as to the real intentions of the founders of the Constitution upon a number .of controversial issues. This issue was very prominently before the people in 1910, when the Federal Labour party was rising to its great triumph. Mr. Andrew Fisher, the then leader of the party, raised the effective cry that the Commonwealth should not be bound by the dead hand of the past. Mr. Fisher’s party was in favour of the per capita payments, but was against having the principle embodied in the Constitution. The State Premiers also were hostile. Sir Charles Wade, then Premier of New South Wales, was absolutely opposed to per capita payments at all. He wanted a continuation of the previous system. The Premier of one other State said it was an insult to offer the people of Australia so much per head. That was the opinion ten years after Federation. Mr. Fisher, as I have shown, did not wish to be influenced by the dead hand of the past. Federation then was only a matter of yesterday. It is now 27 years since Federation was inaugurated, and seventeen years since Mr. Fisher raised that cry, .and still we hear the same objections to-day. When some authority can definitely inform us as to what were the intentions of the framers of the Constitution, we shall have some reason, for accepting their interpretation of the Constitution.

Mr Maxwell:

– There is no reason why we should be bound by their interpretation.

– I cannot see that it does.

Mr Gregory:

– By the tariff.

Mr THOMPSON:

Hesupportedthe claim of the States for a continuance ofthe per capita payments, and foresaw what has since become one. of the principal arguments used by all of them - the difficulty of getting,by additional local taxation, an a mount suficient to compensate for the loss of the revenue received from the Commonwealth.

An extract from the speech, as reported in the Daily Mail, reads as follows: -

The pay men t to the. States amounted to £7.022.500. As matters were in Australia, this could not be done away with.Possibly, the future helda different form of government in store for Australia. Certainly, we had many Governments, tothe point ofbeing overgoverned; but, until there came some changes in the basis of government in the Australian States, the payment must be continued.

I pass on to the conference of Commonwealth and State Ministers, held in May,. 1923. The Prime Minister met that conference in a spirit, not of conciliation, but of arrogance, which did not make for harmony. Even then, the proposal he submitted was not that the per capita payments should be abolished, but that they should be suspended for five years. The honorable member for Herbert (Dr. Nott), thought fit to challenge the consistency of the honorable member for Dalley (Mr. Theodore) on this issue. He stated that the honorable member for Dalley adopted an attitude at the Premiers’ Conference in 1923 which is entirely different from that which he now takes. The honorable member for Herbert was not generous enough to tell us that the conduct of the honorable member for Dalley in 1923 was governed by the adamant stand taken by the Prime Minister, who insisted upon the suspension of the per capita payments. It was in that circumstance that the Premiers’ alternative proposal was submitted, always having in mind that if it did not prove to be a satisfactory solution of the difficulty the per capita payments would be resorted to at the end of five years. The position of the honorable member for Dalley to-day is quite consistent with that which he took in 1923. The 1923 conference failed to reach an agreement because the ex-Treasurer of New South Wales (Sir Arthur Cocks) was so incensed by the uncompromising attitude that the Commonwealth assumed that he would not consider either the proposal or the alternative. I know that a conference was held last year between the Commonwealth and State authorities with the object of reviewing financial relations, and that it was disbanded because the State representatives held that they had a moral right to the pen capita payment. Without discussing the merits of that position, I assert that the failure of last year’s conference is nojustification for the adoption of the coercive methods which the Commonwealth is now pursuing. The States should not be compelled to agree to what they consider to be an inequitable arrangement; and this Parliament should not be placed in the position of forcing the States, under duress, to accept unjust treatment. The Treasurer (Dr. Earle Page), during the course of this debate, has said, by interjection, that the State Governments have now agreed to the Commonwealth main roads proposals.

Dr Earle Page:

– The agreements are actually prepared.

Mr FOSTER:
WAKEFIELD, SOUTH AUSTRALIA · ANTI-SOC; LP from 1910; NAT from 1917; LP from 1922; NAT from 1925

– The States have been forced by special circumstances to agree to the Commonwealth proposals.

Mr MAKIN:

– No honorable member would like such terms as those of the Commonwealth roads agreements with the States to govern his private concerns. As a matter of fact, the Commonwealth roads policy was pirated from the South Australian Labour Government, with an apology of a kind.

Dr Earle Page:

– The only thing wrong with that statement is that the Prime Minister made his declaration before the South Australian Premier made his.

Mr SPEAKER (Hon Sir Littleton Groom:
DARLING DOWNS, QUEENSLAND

– The merits of the main roads agreements may not be discussed under this bill.

Mr MAKIN:
HINDMARSH, SOUTH AUSTRALIA · ALP; FLP from 1931; ALP from 1936

– At the 1923 conference the following statement, which appears on page 35 of the report, was made by the Prime Minister: -

I ought to point out that the suggestion is, it this thing is done by agreement, to suspend the per capita payments for five years. If it is not done by agreement, that is another matter, and action in some other direction would have to be taken.

Silting suspended from 6.30 to8 p.m.

Mr MAKIN:

– The impression conveyed to the Premiers who attended the 1923 conference was that the per capita payment was to be suspended and not abolished. The Treasurer (Dr. Earle Page) expressed surprise at the feeling of uncertainty displayed by the State Premiers towards his proposals on that occasion, and showed indignation because they were not prepared to readily concede to him the right to dictateto themterms concerningthe financial relationship between the Commonwealth and the States. When we remember that the figures submitted by him to the 1923 conference were grossly misleading, there is every justification for the disinclination of the State

Premiers to accept any proposal made by him.

New South “Wales Hansard, of the 16th October, 1923, Sir Arthur Cocks is reported as having said -

Some time ago the Federal Government endeavoured to get all the States into tine to forgo- the 25s. per capita annual payment, and to transfer a certain proportion of the income tax now collected by the Federal authorities to the various States. The peculiar needs of each State and the difference in regard to the taxation of companies in the various States made it impossible for any Government having a due regard for the welfare of New South Wales to accept either of these proposals. It is established beyond all doubt that in connexion with the first offer, whereby the Federal Government was to relinquish collecting income tax on all incomes under £2,000, the figures placed before the public were inaccurate, so far as New South Wales was concerned, to the extent of nearly £000.000; and, in respect to the second proposal, whereby the Federal Government was to take over taxation upon the companies and restrict the State to a limited taxation thereon, the figures submitted for our consideration ultimately disclosed a discrepancy of over fil.000,000 of money.

– I shall deal with the honorable member presently. Sir Arthur Cocks went on to say -

If the State had fallen into line with the proposal as put forward, a course that was strongly urged upon us, the additional amount of taxation which would have been necessary to put upon the people of New South Wale’s would have been of an overwhelming and disastrous character.

That is what an ex-Treasurer of New South Wales had to say concerning the taxation that would have to be imposed in that State in order to recoup it for the loss of the ner ca?nia payment. Sir Arthur Cocks further stated - 1 wish to state deliberately that if, in the near future, any attempt be made by the Federal Government to reopen the question of the cessation of the per capita payments, it can only be looked upon by this Government as an act of political treachery. On the other hand, if the Federal Government attempt to force an exchange of taxation upon the various States, and retain for their own purposes for all time the revenue that they receive from the Customs and the excise, a permanent and intolerable burden will be placed upon the* people of New South Wales. It must be borne in mind that the proposals which suit the sister State of Victoria in regard to company taxation would be disastrous if applied to New South Wales, by reason of the fact that we would lose £1,250,000 of taxation that we now receive from companies. This would force upon any Government, irrespective of party, the necessity of entirely revising their income tax basis and increasing the individual contributions to such an extent as to add heavy additional burdens upon the great bulk of those who are paying income tax on small and moderate incomes to-day.

– It is easy for the Treasurer, across the table, to deny the accuracy of what I am saying. I should be obliged if the honorable gentleman would quote his authority for that statement. My informant is the Deputy Commissioner for Taxation in South Australia. It is only right that, in these matters, we should know exactly where we stand. I want, not figures which the Treasurer himself may have manufactured, but information from some reliable outside authority whose statementmay be accepted without reservation. The aggregation of incomes has been mentioned during the debate. It has been stated that the States have power to tax the aggregate incomes of their citizens, and that it would be lawful, as well as expedient, for the States to adopt the principle. Let me tell honorable members what the right honorable the Prime Minister (Mr. Bruce) had to say on this subject a.t the Premiers’ conference in 1923. This statement by Mir.

Bruce is to be found on page 32 of the report of that gathering -

There is only one other proposition - that the Commonwealth should take over the whole of the income taxation, because it is the only body which can tax aggregate incomes.

I thought it my duty to quote that statement of the Prime Minister, so as to give the right honorable gentleman an opportunity to reconcile, if he can, his declaration of to-day with his statement at the conference in 1923. In view of the Government’s declaration that its policy is to protect Australian industries, I am astounded that it should propose to withdraw from the field of direct taxation.

Mr Watkins:

– That is the point.

Mr MAKIN:

– If the Government intends to meet all its obligations, including commitments arising out of the war, from Customs and excise revenue, then it is clear that instead of the tariff being protective in its incidence it is merely a revenue-producing tariff, and as such cannot effectively protect Australian industries.

Mr West:

– A revenue tariff is the most pernicious system of taxation.

Mr MAKIN:

– It is poor consolation to those who have invested capital in Australian industries, and are employed in the secondary industries, to know that the Government proposes to look to its Customs and excise revenue for all the money necessary to carry on Commonwealth activities. If we had an effective tariff, one which was truly protective in its incidence, instead of revenue from this source increasing in volume from year to year, it would steadily decrease, and consequently the Government would be obliged to look elsewhere for its income. Ministers must answer to the people for their stand upon this vital issue. The Government’s proposal will enable the wealthiest sections of the community to evade their taxation obligations, with the result that these burdens will fall on the shoulders of those least able to bear them. The field of direct taxation proposed to be vacated was entered by the Commonwealth in order to meet its war obligations. No one will dare to say that those obligations have disappeared. As a matter of fact, we find that in some respects they have been added to, so there is no justification whatever for this proposal to relinquish that source of revenue. The Government’s proposal to meet those obligations from Customs and excise revenue is really tantamount to a proposal to remit taxation of those who can best afford to pay it, and to place it upon the shoulders of those least able to pay. The bill will make the position of the people increasingly difficult and irksome. Both the Treasurer and the Prima Minister have shifted their ground from time to time in regard to this proposal. I am reminded of the logic of Walt Whitman’s lines -

Do I contradict myself ? Well, I contradict myself.

Am I inconsistent? Then I am inconsistent.

The Treasurer would do well to take those words to heart, for they very aptly fit his position and that of his political chief. Time will prove the futility and the injustice of the proposals which the Government has submitted in this bill. The measure will not make for the peace, progress, and prosperity of the Commonwealth. On the contrary, it will prove unduly burdensome and irksome, and I feel sure that those honorable members who support it will have good reason to regret their action. The Government is guilty of a misuse of power in submitting this bill, which is wrong in principle and unfair in its incidence, and will be injurious to the people of the Commonwealth.

Mr HUGHES:
North Sydney

– Before I deal with the arguments that have been advanced for and against the bill, I propose to say a few words about the principles that underlie the Constitution and the Federal pact upon which it is based. In its very nature a federation involves a division of rights and powers. I agree with the statement that the test of a measure is its probable effect upon the people. That is the supreme test. The people of the Commonwealth have, in their wisdom, appointed as their servants two instrumentalities, giving to the one authority in certain specified matters over a sphere as wide as the continent itself, and to the other authority, within the boundaries of each State, over many matters which concern the people more intimately. Ours is the majesty, the pomp, and the glory of authority. We exercise functions, many of them remote from the daily lives of the people, yet necessary and most appropriate to the nature of the federal instrumentality created by the Constitution. The State Parliaments, on the other hand, are concerned more with the every-day affairs of the people. The right honorable member for Balaclava (Mr. Watt) dwelt last night at considerable length on the extent and variety of the functions of the States. We have to bear in mind that the present distribution of powers has existed for 27 years with the authority and approval of the people, who have resisted every effort to amend it. Assuming that the people know what is best for themselves, and applying that test to this measure, we must assume, therefore, that they wish things to continue as they are. But all of us do not hold that view. Speeches have been made during this debate in disparagement of both antifederalists and unificationists. For my own part, I have always been in favour of the extension of the powers of the Commonwealth. To that end I led every light prior to the last one for the amendment of the Constitution. But not even my bitterest enemy has ever said I am a unificationist. I speak, therefore, as one having authority and knowledge of this matter.

We have to remember that the present constitutional position was deliberately created by the people, who have given to the States certain definite functions, and vested in them certain powers, thus creating moral, and, if you like, legal rights to sufficient revenue to discharge the duties entrusted to them. It would be absurd to suppose that the people vested the States with power to control education, police, land, railways, and the hundred and one things which fall with,r their purview, and yet denied them the means with which to exercise these powers. Wo must assume, therefore that the distribution of powers gave authority, explicit or otherwise, to raise revenue sufficient for their exercise. The honorable member for Barton (Mr. Ley) stated that Mr. Fisher, who was responsible for the Surplus Revenue Act of 1910, was opposed to the continuance of the per capita payments. That emphatically is not true. I was Attor ney-General in his Cabinet, and am able to speak with assurance on that point. We were opposed to inserting in the Constitution the per capita agreement, which had been made by representatives of the States and of the Commonwealth. We had already found by experience that in some respects the Constitution was not sufficiently elastic to meet the requirements of a progressive community and, therefore, we did not consider it proper for the Parliament of that day to legislate for posterity. Accordingly the arrangement for the payments to the States was embodied in a statute, but we always regarded it as an agreement. It was an agreement d,:liberately entered into without duress of any ‘lort. Upon the provisions of that agreement the country was unanimous, the only difference between the two political parties being as to whether or not the arrangement should be placed in the Constitution. The electors endorsed the agreement, but preferred that it should be enshrined in a statute rather than be embodied in the Constitution. Statutory authority was given to it. At the expiration of ten years it- had come to be regarded as an integral part of the financial machinery of the Federation. It has now been in force for seventeen years, and I emphasize the point that, until the Treasurer introduced this measure some months ago, no one had suggested the revocation of that agreement or understanding by force majeure. Certainly an alteration ormodification of the arrangement had been suggested, but only suggested. There was no gesture of defiance; there vas nothing in the nature of an order issued by a superior to an inferior. In he light of all that has come and gone, we are entitled to ask why this measure is being forced down our throats. What new set of circumstances has arisen to create a position so entirely foreign to that to which we have been accustomed for the last 27 years? Why should this Parliament be seeking to force an arrangement down the throats of the State Parliaments, which are equally under the protection of the Constitution which created the Federation. Whatever the States were originally, they are now sheltered by the Constitution. Their powers are limited by its provisions and, being limited, are clarified, strengthened, and sanctioned by it.

It has been said that the justification for the Government action is the mandate of the people. I cannot accept that view. We all recollect very well the circumstances under which the last general election was held. I have the extract read by the honorable mem-‘ s ber for Herbert (Dr. Nott), from the Prime Minister’s policy speech, embodying all that is material to this claim that there was a mandate from the people for the discontinuance of the per capita payments. I shall not read it, because it is too long - the Treasurer may do so later - but I am confident that of the 6,000,000 people in Australia, not 100 read that speech through. I do not admit for a moment that, it supports the contention that, the Government has a mandate to abolish per capita payments by force. The issue was not before the people. Not one honorable member can say that, during the last general election, he was asked a definite question in regard to this proposal. Certainly no one asked me a question concerning anything except the danger that was staring us in the face - the issue upon which the election turned, and but for which the composition of this Parliament would be very different from what it is. Having been returned on the crest «f that gigantic flood of public opinion, how can anybody say that the presence of a tiny paragraph in the Prime Minister’s speech regarding the financial arrangements - a tiny globule in a great body of foaming waters - is a mandate from the people ? There could not be a mandate unless the proposal was presented to and understood by those who are supposed to have said, “You must, or you may do this thing.” The people knew nothing of this proposal. There was no mandate to do anything, except to take such steps as were necessary to prevent a recurrence of that unhappy state of affairs which disturbed the country at that time. That we have a mandate to do that is undeniable, and perhaps it would have been well if we had attended to that business. No one will say that, at this moment, the public is better protected against a recrudescence of the evil than on the day when the election was held. That was the vital issue at the polls. Whatever view honorable members opposite may take of it, no one will deny that it went to the very root of our national and economic well-being. Certainly they will not deny that it was the great, nay, the only, issue before the people. There was not a whisper during the campaign that the continuation of the per capita payments would create financial, industrial, or commercial disturbance. The system had gone on its way serenely for many years. I do not say for one moment that a government is not entitled to legislate on matters not mentioned at an election. The first business of a government is to govern; but when it legislates without such authority, it should do so only in matters that are urgent, and were unforeseen when it appealed to the people. This matter was not urgent; neither was it unforeseen. The system had been going on for many years, and many conferences had been held in regard to it. The right honorable gentleman who is at the head of this Government had expressed a very definite opinion, which has been quoted by the honorable member for Hindmarsh (Mr. Makin), in which he ranged himself in unambiguous terms with those who believed that the per capita payments should continue, no matter what could be said against them, until a re-distribution of the powers of the Commonwealth and the States had placed their relations on a different basis. To that no exception can be taken. But when we remember that in 1910 this was a people’s question, :t gives us reason to pause and think. Much has been said about this being a people’s question, and about the effect the proposal will have upon them. Then let us ask the people about it. They are able to say whether it is good or evil. When, but a little while ago, the right honorable the Prime Minister led us into a hastily conceived campaign to amend the Constitution, which, he declared, placed us in an intolerable position, leaving us without power to deal with a matter upon which we had a distinct mandate, he aimed a blow, so the State righters said, at the heart of the States. What did the people say ? Why, they smote him hip and thigh ! There never was in the history of the Common- wealth such a debacle. I have led three referendums, but the proposals I submitted never received such . a stinging rejection as those so strongly recommended by the right honorable gentleman. In the face of this verdict of the people in favour of the States and against the Commonwealth, how can it be said that the people have given this Government authority to remove from the statute-book this provision safeguarding the State’s finances, which has now been with us for seventeen years?

It is said that the per capita provision embodies a “ vicious “ principle, and that it is inequitable. Let us consider those two statements. I am not going to say whether the principle is vicious or not, because in relation to the per capita agreement such a word means nothing. But if by “ vicious “ honorable members mean that it is wrong, my reply is that whether it is wrong, or not, this principle received the approval of the founders of the Constitution. The Braddon clause embodied it. It was endorsed, after ten years’ experience, by a new party that had risen up, the members of which were, to a very large extent, opposed, as I was, to the Federal bill. I, at any rate, was one of the leaders of the anti-bill movement. Yet this party, which has always stood for wider powers for the Commonwealth, supported the per capita agreement. There is yet another reason why we must reject the argument that this principle is “ vicious,” and it is that the right honorable gentleman himself or his Government has adopted it. He has calmly imposed a tax on petrol, and has handed over the proceeds to such of the States as have bent the knee to Baal and signed his agreement. To those who have not signed he has not given a penny. In New South Wales this principle, whether it is vicious or not, so operates that every motorist in the country pays 2d. a gallon to the Commonwealth Treasury, and the State gets no road0 and no twopence. But I must get off this question of roads because on it I am a fanatic.

The right honorable gentleman finds himself in a most awkward position. I am not a mind-reader - T am merely a member of -Parliament - but if in 1922 I had said what he said, that I was a firm sup porter of the principle of per capita payments, and had later found myself associated with a man who had determined to wipe them out by force, I should be hard put to it to find reasons for my action. Politics, like adversity, make us acquainted with strange bedfellows. Now, although I sympathize with the right honorable gentleman, I cannot accept, as a reason why we should agree to this measure, his statement that the per capita system of payments is inequitable, in that it gives to those who least deserve it. But whether it does or does not is not material. The bill leaves the inequality, if there be any, untouched. The right honorable gentleman knows that perfectly well. The argument to which he probably attached the greatest weight was that, as time went on, and impish fate turned a jaundiced eye upon him, there might come into power another government bitten with a desire to put into force some great scheme of reform. This is probable enough. One never knows what may happen in this world. And so the right honorable gentleman feels that, in order to prevent these wellmeaning but misguided men from doing these things, he must remove temptation from their path by getting rid of the loot. In support of this laudable enterprise he suggests that we should support this measure. The intentions of the Prime. Minister are honorable, but utterly futile. I know my honorable friends on> the other side perfectly well, and weall know human nature. If Labour in . the future should occupy these benches, does the right honorable gentleman think that anything he can do, or that all of us can do, will stop them, when they have a majority behind them, from giving effect to a programme which the people have elected them to put into force? The right honorable gentleman might as well attempt to tie up a Bengal tiger with Coates’ cotton, as endeavour to arrest the progress of the Labour party when it has a majority.

The honorable member for Barton (Mr. Ley) said this afternoon that we had to choose between two evils, and that in his opinion the suggestions made by the right honorable member for Balaclava (Mr. Watt) were not so good as those of the Treasurer. The honorable member entirely missed the point of the argument. The right honorable member for Balaclava, who put forward certain proposals in 1919, discussed those proposals with the Premiers. And that is all he did do. I have never suggested that there is anything sacrosauet about the per capita payments; but I do say that there is an agreement to pay them, that this agreement was solemnly entered into by the States and Commonwealth, endorsed by the people, and given statutory authority, and that the per capita payments can properly be abrogated only by agreement, or by the direct authority of the people. If the servants of the people cannot agree among themselves as to how they shall carry out the will of their masters, then they should appeal to the people. The people, and they alone, should direct them. No one else has the right or authority to do so. The right honorable member for Balaclava in 1919 put forward certain proposals. Whether they were good or bad is not to the point, but whereas the right honorable member for Balaclava submitted his proposals to the Premiers, and accepted their refusal, the present Treasurer forces his down the throats of the Premiers, and they are expected to submit whether they like it or not. The difference between the two methods is the difference between civilization and barbarism, between peace and war. The States and the Commonwealth are equally the servants of the people. We discuss matters with our equals; we give orders to our inferiors; wo fight our enemies. We, who are partners in this Federal pact, ought not, merely because we have a majority in this Parliament, to treat the other parties to the pact as if they were enemies or inferiors. It is true that we have a majority; but this majority did not come here authorized by its masters to do this thing. That is the point.

The Premiers rejected the proposal of the right honorable member for Balaclava, and there the matter ended. It need not have ended there, because the right honorable gentleman was a member of the strongest Government that has ever held office in this Parliament. It was not a composite Government made up of factions, but a united party of 50 members, and as everyone knows who remem bers the circumstances of that time, it was only necessary to hold up one’s hand in this place and any legislation one wished would have been passed. I remind my honorable friend, however, that although we had the power, we did not abuse it. The honorable the Treasurer has, by a turn of the wheel, come into office, and because the Premiers have not accepted his proposal, he is seeking to coerce them. I admit freely that the Premiers can be very irritating. At times they are extremely difficult to got on with, but I have never attempted to force things down their throats. The honorable gentleman has. To that we strongly object. The honorable member for Barton said that he preferred the Treasurer’s proposal because it was sudden death with an , anaesthetic, whereas the other was slow torture. It is evident that running in the honorable gentleman’s mind were the lines -

If it were done. . . Thentwere well

It were done quickly.

I can imagine the Prime Minister, a little reluctant, being addressed by his coadjutor the Treasurer -

. . Infirm of purpose!

Give me the daggers.

The Government has no authority from the people to abolish per capita payments. No circumstances have arisen to change the situation that existed at the time of the election. Since then, there has been a direct reference to the people in regard to a readjustment of the powers of the States and the Commonwealth. On that occasion the people showed unmistakably that they were supporters of the States’ attitude, and not of that of the Commonwealth. Many of us are very sorry that the people rejected the referenda proposals; but, in the face of that rebuff, I venture to say that the proper course for the Treasurer and for the Government to adopt is to submit this matter to the people, either by way of another referendum, or by the time-honored method, which has much to recommend it, of another election. It must not be thought that in anything I have said I have suggested that the Government is not actuated by the best motives; but, we are told that the road to hell itself is paved with good intentions. I can well understand the attitude of the Treasurer: Ho has become tired of continued rebuffs, ho has put forward very many perfectly good schemes, which have been rejected again and again. He is annoyed; he is angry. He has a majority, and what is the use of having a majority unless one uses it? That being the principle upon which he is working, be brings down this bill, and is determined to pass it. Although it is clear that if anything is of a non-party character this bill ought to be, we are told that it is to be made a party matter. That is quite wrong. But the reason why it has been made a party measure is obvious. If it were not, the bill would not stand one chance in 50 of being carried. I shall say a word or two on that aspect later. For the present, what I have said may sink in a little.

We are told that the bill has been brought forward to put an end to a condition of affairs that the Commonwealth has long outgrown; that the war created an entirely different set of circumstances, and placed upon the Commonwealth huge obligations. That is true, but as the honorable member for Henty (Mr. Gullett) pointed out last night, it is also obvious that the war is, financially at, any rate, still with us, imposing upon us and on generations yet to come very great burdens. Those burdens ought to be fairly apportioned among all sections of society. We have to ask ourselves what would be the effect of this measure upon the taxpayers of this country. It is suggested that the bill would make for economy. Some people have a passionate desire to reform others, and their lectures on economy are worth going miles to hear. For years in this Parliament we heard the honorable the Treasurer, as a private member, speaking of the virtues of economy. Now that he is placed in a position of authority, he still continues his noble work, and never tires in his efforts to reform the spendthrifts in the States! He is the more determined to do this at the present time because, -by an unhappy chance, in five of the States Ave have Labour Governments. In this way Ave are to kill two birds Avith the one stone. The Treasurer gets the credit of preaching economy, and at the same time puts a dagger under the fifth rib of our brothers, the Labour Premiers, We embarrass them. Wo compel them to shoulder the unpopular taxes; we denounce their profligate expenditure; we create a very awkward situation for them ; and, in short, enjoy ourselves thoroughly. As for ourselves, we spend money left and right, and seek every day for some new thing upon which avc can lavish millions.

I come back again to the poor taxpayer. From his stand-point it does not matter very much whether he pays taxes to the State or the Commonwealth. Both are instrumentalities through which the people govern themselves. Some day the people may devise better or different instruments. But, at the back of the States and the Commonwealth are the people. What effect is this bill going to have upon their pockets? Are they going to pay less? Are they going to get better value for their money? The Treasurer said that the field of taxation he is willing to hand over to them would yield a larger sum than they receive under the per capita agreement. Assuming this will be so. where would the additional money come from. It would come out of the pockets of the people; but not from the same people. Customs and excise taxation is the most ingenious method ever devised for taking money from the people. The confidence trick and the thimble and pea arc fools to it. A virtuous person can avoid going to such haunts of vice as the racecourse, and, if he does go, can avoid being victimized by the thimble and pea trick. But nobody can escape paying Customs and excise duties, and what is more, the people do not realize that they are paying them. This is the kind of thing that appeals to the Treasurer. If and when he has palmed off the unpopular flaxes upon the States he will be able to go through the country on his tours, and the people will say, “ Lo, here comes a man after our own heart.” He gets rid of the entertainments tax, and all the little children say, ‘’ God bless Dr. Page.” He gets rid of the land tax, and not the little children, but a few wealthy people, bless him. There are a few people who would benefit by the change, but those few, at present, contribute a good deal. Under the Treasurer’s proposal they would pay less. As my friend, the honorable member for Henty (Mr. Gullett) pointed out last night, nature, and especially a nature like that of the Treasurer, abhors a vacuum, and so this los3 which has to be made up will be made up by taxing the many instead of the few. There is no other way. So far as the land tax is concerned, what this proposal means in plain English is that, instead of estates of moderate size escaping with small payments, they would have to pay an added sum sufficient to make up for the loss on the great estates, that could not be taxed by the States individually. As I pointed out in this House when speaking on the proposed grant of wider powers to the Commonwealth, there are some things that the States cannot do. lt is evident, on the Treasurer’s own showing, that this bill will not result in a saving to the taxpayers, lt may be Jones who will pay instead of Smith, but the Jones who will have to pay will be Jones, the man on the basic wage, or the small land-owner. lt is very curious that the Treasurer who, when he first entered this House, advocated, with considerable force and earnestness, lower duties, should deliberately seek to divest himself of aH forms of taxation except the hated revenue taxes, which increase the cost of living to the man on the land. It is also most curious that since the honorable gentleman has been in office, the revenue from Customs and excise has grown out of all knowledge. He asks the people to accept this proposal because it will make for economy. But it will not save the taxpayer’s money. Let hi- 1 show where’ the taxpayers by and large - the whole country - will not have to pay the same amount of money as before. The honorable member for Barton (Mr. Ley), who was hard put to it in coming to the defence of this bill rather hurriedly, was naturally a little at a loss to know what to say. He spoke of what would be saved by abolishing the bureaucratic staffs that now exist in the Federal Taxation Department. I point out, however, that if some were abolished, others would have to be created by the States, and in the aggregate the co<!t. of collection would be greater There can be no doubt about that. The Government is on the horns of a dilemma. Either the States will get the same amount of money - the Treasurer says they will get more - or they will get less, in which case there will be chaos in regard to some of the State instrumentalities. If there is not sufficient money to carry on the business of the .country the people will suffer. In place of progress there will be stagnation and unemployment. When there is disturbance of the financial equilibrium it reacts upon the whole community, and saps that feeling of confidence in the future, upon which, to a large extent, prosperity depends. Here is a financial edifice that has endured for 27 years. The people have never for a moment indicated that they desire to change radically the design of the building; but the Treasurer proposes to pull down one of its main pillars. At best, that will disturb the financial equilibrium of the States. It will embarrass and hamper them, and do good to nobody except the honorable gentleman himself.

I do not say that there is no other way of meeting the need of the States except that of the per capita payments, but I do contend that none of the arguments put forward during the debate will justify any honorable member in voting for the bill. It will not benefit the people. We hear from some quarters about the demand by the wage-earner for ah increase in the basic wage. This will not lessen that t demand. The demand for increased wages is caused by the increase in the cost of living, the Treasurer, depending, as he will, upon high Customs revenue to make both ends meet, is not likely to do anything to reduce that cost. Why should we pass this bill? It does not go to the root of the trouble of public finance. It will not reduce public borrowing. It will not lessen public expenditure. The right honorable member for Balaclava (Mr. Watt) told us something last night which should be blazoned from one end of the land to the other. He said that, in the last six years-

Mr Watt:

– Since 1921.

Mr HUGHES:

– We had borrowed £176,000,000. Are we to go on borrowing at this rate? It is a condition of affairs that cannot continue, and still leave the body politic normal. Whether Labour,

Nationalist, or Composite Government is in power, this cannot go on. Yet this bill does nothing to remedy the evil. It will not reduce borrowing. It does not set up a council to control borrowing. It leaves these vital things just as they are. It is a proposal which does nothing except, perhaps, for the Treasurer of the Commonwealth. Possibly it simplifies matters for him. At any rate, the Treasurer has set his mind upon it, and has determined to force it down the throats of the State Treasurers. But it will not help the people. If it would do something to reduce or regulate borrowing; if it would put the State debts upon a proper footing, or, as the right honorable member for Balaclava said last night, create a sinking fund that would really do something to provide for the redemption of debts as time went on it would stabilize our credit and improve it. If it would put an end to competition in borrowing as between State and State, by forming a loan council to control borrowing, it would be worth while. But it does none of these things. It simply transfers to the States some taxes now collected by the Commonwealth, and retains to the Commonwealth the whole of the Customs and excise taxation from which 25s. per head, or about £8,000,000 per annum, now goes to the States. And that is all it does. If we pass it, it must throw the finances of the States into confusion, and increase the amount of taxation which the great bulk of the people have to pay. It will lift considerable taxation from a few, the very rich, and place it on the shoulders of the rest of the community.

As I have said, the Treasurer has a passionate desire to reform others. He, the Prime Minister, and, in fact, all of us, deplore the condition of the State finances. All seem to be on the borders of bankruptcy. And yet no one takes much notice, which is perhaps the most serious symptom of all. It has become well-nigh the normal condition of things, and is so regarded. What the people want is good government, and a reduction in taxation. Briefly, they want the best possible government at the least possible price. The Treasurer points to the extravagance of the States. He preaches economy, but he does not. practise it. Since this Government - I speak with particular reference to the Treasurer, of course - has been in power, we have had large increases in taxation. I used to sit in the Prime Minister’s chair, and listen to the present Treasurer speaking, as a private member, from the Country party corner about the virtues of economy. I very well remember sitting there with the honorable member for Warringah (Sir Granville Eyrie) when we had to submit to a reduction of £500,000 in our Defence estimates which the present Treasurer compelled us to accept. Last night, the Minister for Markets and Migration gave as one reason why this bill should be passed the fact that the Defence expenditure, without including the amount for naval construction, totalled £5,500,000, or thereabouts. I do not know what the estimate was when the honorable member for Warringah was in charge of the Defence Department’s Estimates in this House.

Sir Granville Ryrie:

– It was not enough.

Mr HUGHES:

– I cannot get the reply that I want from my honorable friend, but at least I have this, that although the amount proposed by the then Government was really not enough, it was cut down on the motion of the present Treasurer. Now, when these very people are in office they come forward and plead with tears in their eyes for more money in order that they may provide for adequate defence. And this is advanced as one reason why we should repeal the per capita payment to the States.

It was in his advocacy of reduced taxation that the present Treasurer shone most brilliantly when he was a private member. But what is his record ? When my Government went out of office the Commonwealth taxation per capita totalled £8 17s. Id. annually. Last year it was £9 ls. 6d. It is in this way, of course, that economy shows itself most effectively ! The net increase from 1922-3 to 1925-6 was 4s. 5d. per head of the population. We must add to this the petrol tax, which averages 6s. 8d. per head, and makes the increased taxation per capita no less than 12s. Id. as the result of four years’ administration by this most economical Treasurer ! It is from such a rostrum as this, and from the mouth of a champion economist like the Treasurer, that sermons are preached to the offending State Premiers in respect of their extravagance. When Satan reproves sin in this fashion it is difficult for Christians to know what to do.

This measure will probably occupy our attention for the best part of a fortnight, yet no one is able to say why it should have been introduced at- this, or, in fact, an any juncture. We know that it is not urgent, because it was brought before us six months ago and dropped. While the Prime Minister was in England upholding the banner of Australia, the Treasurer travelled about the country reiterating ad nauseam that he proposed to go on with it. His right honorable leader was no doubt staggered to hear this when he returned to Australia. I have said that this bill will engage our attention for a fortnight, and we can ill spare so much time. I ask honorable gentlemen do they remember that this Parliament was elected in December, 1925 ? Do they realize that seventeen months have elapsed ? Do they remember that we were returned to give effect to a great programme ? Do they know that, among other things, we were pledged to carry out big reforms in the industrial sphere which are impossible without great constitutional reforms 1 This was to have been a constitutional session. We were told last August it was essential that the Constitution should be so amended, or the Commonwealth would topple. All this has been put aside. We have heard no more of it. Instead, this little bauble has been brought forward, and now fills the centre of the stage. This session must necessarily be very brief. His Royal Highness, the Duke of York, is coming to Australia, and we cannot carry on business while he is here. We must rise very soon, and nobody knows when we shall again be able to deal with serious business. We are told that we must transfer to Canberra by the 9th of May. Whatever we shall do after that I do not know. It is certain, however, that another six months must elapse before we can say one useful word about these many pressing problems which, at election time, we were told must be dealt with without delay. The constitutional session should be held now, if we are going to do anything useful in the way of amending our Constitution.

I wish to say a word now about an entirely different aspect of the question. This measure creates a most invidious position for honorable members of the Nationalist party. This is a composite government, and members of the Nationalist party support it. Many of those members who are now listening to me will be compelled most reluctantly, when the division bells ring, to vote for this bill. The Government has made a party measure of a matter which the Nationalist organizations in some, if not all, States have denounced. I venture to say that it would be impossible to get 25 per cent, of the members of the Victorian Nationalist organization to vote in favour of the bill. What an unfortunate position for the members of the party to occupy! They are told by this composite Government that they must support the bill, but they look around and see the organization to which they owe their positions denouncing it. Honorable members may vote for the bill, but oven if it passes that will not be the end of it. This bird will fly high, yet surely come back to roost, when honorable members least desire it. The Government proposes to hold this sword of Damocles over the heads of its supporters until 1928, so that this measure will come into force about six months before the next general election. Any good that is in it will not be seen before the election, but the evil in it certainly will. This measure will antagonize the States. It is going to make them still more bitter against the Government and those who support it. It is going to make it impossible for use to carry any amendments of the Constitution. It is going to weld the Labour forces into a solid phalanx against us. They will vote solidly against the bill, and will pose, and properly too, as the friends of the States. What are my friends here going to pose as?

The consequences of this measure will grow and develop and reach their acute bursting point just about the time that we shall have to appeal to the peopleOn whose side shall we range ourselves? The question was not before the people at the last election, but it will be at the next. We shall then be asked to give au account of our stewardship. What are we going to say? I intend to say that I am against this attempt to force the States to their knees, that I deplore the association of the right honorable the Prime Minister with the Treasurer, to whom, this measure is due. The organization of which I am a member is opposed to this bill; so also are the vast majority of the people. The State Governments, whether they be Labour, Liberal, or National administrations, are opposed to it. There is no mandate for it. There is no reason for it. It will benefit none ex.ent, perhaps, a few very wealthy land-owners. Perhaps it ls to secure their support that it is brought forward, or perhaps it is to benefit those little children concerning whom I spoke earlier. Whatever may be the reason for its introduction, it is not brought forward to benefit the people or in response to any public demand. It is not brought forward because of anynew set of circumstances, but merely because the Treasurer has determined that it shall be brought forward. I am not going to condemn him, for his action. If he believes in the bill let him push on with it ; but as for me, I am going to oppose it and do all I can to make it impossible for him to give effect to it. I remind the honorable gentleman that fifteen months must elapse before the measure can become operative. He may think what he likes. He has here, perhaps, the numbers to give effect to it, but I do not believe that it will ever become law. If it does, and becomes operative, then I venture to say that on an appeal to the country some party will say, “Return us, and wc will repeal it.” Such a promise will appeal to a great many. What position we as a party will be able to take up I do not know. Those honorable gentlemen who can evolve a reason why we should do in 1927 what was wrong and unthinkable in 1922 will, perhaps, supply the answer.

Mr LATHAM:
Attorney-General · AttorneyGeneralKooyong · NAT

– The measure before the House has been submitted to Parliament in accordance with the definitely declared policy of the Government at the last election.

Mr Gregory:

– That is not so.

Mr LATHAM:

– There is no room for doubt upon that question in the mind of any one who refreshes his memory by reading the relevant portions of the Prime Minister’s policy speech, which I propose to quote. The right honorable member for North Sydney (Mr. Hughes) asserted that there was only one issue at the last election, that nothing else was before the people. Later, he was good enough to say that the Prime Minister had placed before the country a great programme which contained several items to the postponement of which he objected. Either statement may be correct, but both cannot be right. In the Prime Minister’s policy speech this subject was referred to in unmistakable terms. I shall read the relevant portions of that speech, After referring to the fact that there had been now more than 25 years’ experience of federation, the Prime Minister, speaking at Dandenong, went on to Bay-

The ideal which the framers of the Constitution had before them was to weld Australia into one great nation, while preserving to the States their rights of selfgovernment. The greatest problem that had to be faced in the realization of this ideal was the question of Commonwealth and State finance. This question was dealt with by the States surrendering to the Commonwealth sources of revenue far in excess of the requirements of the Commonwealth. Of this revenue for the first ten years three-quarters was handed back to the States, and since the expiration of that period a per capita grant of 25s. has been made by the Commonwealth to the States. The whole basis of these arrangements, however, was destroyed by the Great War.

Having briefly enlarged upon that subject, he said -

The result of these fundamental changes is that the Commonwealth to-day is raising revenues in order to provide the per capita payments to the States. This is contrary to the basic principle of national finance that every government shall have the responsibility of raising the revenue which it is expending.

He further said that for the purpose of discussing this subject-

Mr Hughes:

– Why not read it all?

Mr LATHAM:

– I understood the right honorable gentleman to say that he was prepared to make up his mind on the policy speech without reading it through, and had not read it.

Mr Foster:

– The Minister should continue.

Mr LATHAM:

– I am prepared to read more if honorable members so desire. The payment of a population grant was, he said -

Contrary to the basic principle of national finance that every government should have the responsibility of raising the revenue it expended.

Is not that the issue we have been discussing in this House? Is not that the proposition upon which this bill rests? Is not that the proposal to which the Prime Minister was referring when he plainly stated that the continuance of the capitation grant was inconsistent with a basic principle of national finance? The Prime Minister went on to speak of the special position of Western Australia and Tasmania, and concluded this portion of his speech by saying -

The Government is giving careful consideration to the questions raised as a result of the investigations of the Western Australian royal commission, and proposes in the near future to invite the States to attend a conference for the purpose of reconsidering the financial relations between the Commonwealth and the States and dealing with the disabilities suffered by certain States with a view to laying down a basis for our national development in which the Commonwealth and the States will co-operate. At this conference an opportunity will be afforded to consider all questions affecting the relations of the Commonwealth and the States, including the question of new states.

That conference was held in 1926, in accordance with the Prime Minister’s promise to representatives of the States, who were doubtless entitled, from their own point of view, to adopt the position, with respect to Commonwealth and State finances, that there was only one possible solution of the problem, and that was the continuance of the payments. The States were adamant and would not make any agreement involving their surrender. The Prime Minister made it perfectly plain that the existing system upon which the financial relations of the Commonwealth and States was based was, in the opinion of the Government, unsound, that it could not be allowed to continue, and that he proposed to ask the representatives of the States to attend the conference for the purpose of evolving an alternative system. When that conference was held, the States, as they were fully entitled to do, said that they insisted upon the continuance of the present system, and would not consider anything else. In view of that attitude, we are now asked to accept the position that any alteration of the financial relations be-, tween the Commonwealth and the States should be preceded by some agreement. That means that so long as any State or a substantial number of States, withhold agreement, nothing can be done, and matters must remain as they are. I submit that an earnest attempt has been made to arrive at an agreement upon this matter, that the States have deliberately refused to enter upon any discussion of an alternative to the per capita payments, and that the responsibility, therefore, devolves upon this House of considering whether the payments shall be allowed to continue. Appeals have been made to the Government - the last was by the right honorable member for North Sydney - to approach this subject in a kindly and friendly manner, with a view to securing State co-operation. The right honorable gentleman has at all times been so distinguished for the mildness and gentleness of his own methods that it is difficult to resist the appeal. I suggest, however, that every effort to arrive at an agreement upon this subject with the representatives “of the States has failed. They have taken up a position which prevents discussion, and the matter must therefore be determined by Parliament. That has been the view, T think, of all representatives of the Commonwealth who have had the responsibility of dealing with this subject, which has been under consideration on many occasions.

A conference on this subject was held in 1909, legislation was introduced in 1910, and, in 1919, when the right honorable member for Balaclava (Mr. Watt) was Treasurer, another conference was held. There were further conferencss in 1920, 1923, and in 1926. It cannot, therefore, be said that this subject is being sprung upon the people, or that it is in any way being rushed. At the conference in 1920 the then Prime Minister (Mr. Hughes) dealt with this matter, and in plainly expressing his views, said -

Mr Hughes:

– What is the honorable gentleman quoting?

Mr LATHAM:

– 1 arn about to quote from the official report of the conference, and I think it is only proper to say that the right honorable gentleman in expressing the view of his Government was asking the States to attend a convention to discuss the matter. The right honorable gentleman on that occasion said -

In all the circumstances-

He was referring tq the war - since the money conies out of the pocket of the taxpayer, whether in State or Commonwealth, I cannot see my way to say that the per capita payment shall continue. We shall hear all you have to say, hut the position we take up now is, in view of what has been said, and the attitude of the States in regard to the referendum, and in regard to the expenditure of public money, and the offer by the Commonwealth to commit itself to an expenditure of very many millions - £4,800,000 for the railway gauge, and onequarter of the increased expenditure on the Murray waters scheme, or not less than £8,000.000 - that we cannot continue the per capita payment. Notwithstanding the offer of the Commonwealth to engage in the expenditure alluded to, we can arrive at no sort of agreement. In all the circumstances, we must ask you to adjust your finances upon the assumption that the per capita payment will be reduced as set out by Mr. Watt.

Mr Hughes:

– Was any attempt made to take it from the States?

Mr LATHAM:

– That was the policy, as stated by the right honorable gentleman at that conference. I presume it was the considered policy of the then Commonwealth Government. It is true that it was not persevered with by them.

Mr Hughes:

– Quite right; that is exactly what I said.

Mr LATHAM:

– The position is apparently fairly summarized in a question which the right honorable gentleman put at the same conference. Mr. Fihelly, who represented Queensland at that gathering, asked whether the Prime Minister (Mr. Hughes) had any sense of equity, and said -

Either it is a fair thing to continue the subsidy to the States, or it is a fair thing to take it away from them.

To that Mr. Hughes replied -

Do you want equity or do you want the per capita grant ?

Mr Maxwell:

– What is the date of the conference?

Mr LATHAM:

– I am quoting from the report of the Premier’s conference held in May, 1920. Honorable members will, I hope, remember that I have said that, allied to the declared policy of the then Commonwealth Government, was a proposal for a convention; I do not wish to be misunderstood on the point.

– Yes: the point I am making is that they place entirely within the powers of this Parliament the power to determine the matter They have been discussed and determined by the people, and there is no doubt as to the powers of this Parliament to deal with the per capita payments as now proposed. It is obviously important, however, that the States should be consulted. That has been done already, and it is proposed to consult them again. As far as the strict legal position is concerned, however, this Parliament has full power to act. The question which arises under section 94 is with respect to payment to the several States ofall surplus revenue to the Commonwealth. That section states -

After five years from the imposition of uniform duties of Customs, the Parliament may provide, on such basis as it deems fair, for the monthly payment to the several States of all surplus revenue of the Commonwealth.

If there is surplus revenue, it should be distributed to the States. This matter has been litigated in the High Court, and it was laid down by that tribunal, in an action brought against the Commonwealth by one of the States, that the responsibility of determining whether or not revenue was surplus rests with this Parliament. That is to say, the matter is entirely in the hands of this Parliament. The real question which arises on the present occasion is this : Is the Commonwealth bound to raise surplus revenue in order to be in a position to pay over surplus revenue to the States? That, I suggest, is not the only question but one of the real questions to which we should direct our attention.

As long as the States receive money from the Commonwealth, it is clear that they are dependent on the will of this Parliament. I put it that, speaking generally, it is a sound principle that Parliaments should be responsible for raising the revenues which they spend. I say, speaking generally, because, in some cases, it is impossible to apply that principle, and it should not be operated unwisely. The Constitution provides for the giving of financial assistance to the States on certain terms and conditions; but the essence, of the Federal system is that there shall be separate sovereignty in the Commonwealth and the States; that the Commonwealth and the States shall have full powers within their respective domains. The essence of sovereignty is independence of external control. Comparisons have been made between the grants made by the Commonwealth Parliament to the States on the one hand, and grants made by State Parliaments to municipal councils on the other hand. The position is entirely different. Municipal councils are the creation of State Parliaments, whereas the States and their Parliaments are in no sense a creation of the Federal Parliament. They are independent entities not deriving their existence or power from the Commonwealth, and the principle of federation is that within their spheres each shall be independent, and as sovereign as circumstances permit. The existing provision does not satisfy that Federal criterion, because the States arc entirely dependent for a large proportion of their revenue upon the will of the Commonwealth- Parliament, which will may be changed at any moment. Disguise tho position as we may, the States are in a position of absolute financial insecurity, because this Parliament is able, by merely repealing a statute, to deprive them of a large proportion of their revenue. I propose to show how the Government’s proposal will improve their position. There is, and should be, no j ricans of binding this Parliament in respect of the exercise of its legislative powers, l t must retain the right to legisla!>. under all its powers at any time, as it thinks proper. But, if the proposed scheme be adopted, tho State? will, from a practical point of view, be in a more secure position than they occupy to-day. If some scheme can be devised at the proposed conference, under which liabilities of the States will be assumed by the Commonwealth, to that extent the States will be in a secure position, so far as they can be secure without an absolute abrogation of Commonwealth powers. Accordingly, this bill and the proposed conference offer to the States a degree of financial security which is not obtainable by any means other than an amendment of the Constitution, which nobody has yet suggested.

The fundamental financial provision of the Constitution, upon which this bill is based, is that the Commonwealth has exclusive power in relation to the imposition of duties of Customs and excise. In all other fields of taxation, the powers of the Common wealth are concurrent with those of the States, but if there are to be duties of Customs and excise, as there must be, they must be imposed by the Commonwealth, which must receive the revenue. The Federal authority need not, as a constitutional matter, raise any other revenue ; that is a matter of policy to be determined by this Parliament. But Customs and excise revenue is the primary source of Commonwealth finance, because that revenue, at least, the Commonwealth must receive. A policy of Customs and excise duties is devised for the protection of industries or the taxation of luxuries, and not for the raising of money to be handed back to the States. It is difficult to conceive of any Parliament framing a Customs and “excise policy in accordance with protectionist principles or for the taxation of luxuries, and then saying, “That will produce a certain amount, but we shall have to find some more money to hand back to the States, and, therefore, we shall increase the duties.” It is impossible to devise any coherent policy of Customs and excise duties which, within its own limits, would provide for the payment of moneys to the States, and there is no obligation upon this Parliament to attempt to frame such a policy. Certain Commonwealth charges and expenses are inescapable, notwithstanding the derision with which I have heard that word received during this debate. It is all very well to say that statutes can bc repealed, but can we repudiate the interest on our war loans, or the obligations in respect of war and oldage pensions? Certainly not. These inescapable charges absorb the whole of the Customs and excise revenue, aud the. Commonwealth is imposing direct taxation to the amount of about £7,600,000 merely in order to raise money to hand over to the States. If the Customs and excise revenue exactly equalled the expenses of the Commonwealth, would it be suggested that the States were still entitled to a share in that revenue? If the primary fund upon which the Commonwealth has to depend is completely exhausted by undoubtedly legitimate and inescapable charges, how Cnn it be suggested that, there is any surplus in which the States are entitled to share? The claim of the States to a share in that revenue is not only unjustified by any provision in the Constitution - which is the only expression of the will of the people - but is also futile and unintelligible when the financial position is closely examined.

I come now te the proposal which the Commonwealth submitted to the States, and which they, up to the present, have rejected It has been criticized from many points of view, and particularly by the honorable member for Henty (Mr. Gullett), upon the ground that it involves an abandonment of direct taxation by the Commonwealth. I remind the honorable member that 60 per cent of the Commonwealth income taxation will remain, and that represents a very substantial sum indeed. The ‘honorable member appeared to assume that direct taxation, once lifted, will never be reimposed. It is of the essence of the Government’s scheme that the States, which are confined by the Constitution to direct taxation, are to raise their own revenues to make good what they lose through the discontinuance of the per capita payments. Therefore, the picture which the honorable member for Henty drew, of the results of the abandonment of direct taxation, does not truly represent the effects of the adoption of the Government’s proposals.

Mr Theodore:

– But the States may be driven to impose higher railway freights, for instance.

Mr LATHAM:

– That is a different point. The honorable member for Henty submitted a most interesting argument based on the assumption that all Commonwealth direct taxation would be abolished, and that therefore direct taxation would be largely reduced in Australia. The reply to that argument is, first, that the Commonwealth would keep in operation no less than 60 per cent, of the income tax, and, secondly, that the States would, by their own legislation, raise an amount approximately equal to the amount now paid in per capita grants. The honorable member for Henty (Mr. Gullett) objects to the Commonwealth reducing direct taxation; but the honorable member for Dalley (Mr. Theodore), at the last Premier’s conference which he attended, urged and besought the Commonwealth to go out of the field of direct taxation entirely. Accordingly those who are opposing this measure are doing so for diametrically opposite reasons.

The proposals of the Commonwealth involve not absolute and final remission of direct taxation, but a redistribution of taxation. The position at present is that, where a taxpayer pays, say, £100 under certain heads to the Commonwealth and the States - let us suppose £70 to the Commonwealth and £30 to the States - he shall pay, say, £50 to the Commonwealth and £50 to the States. So far as the taxpayer is concerned, the change will make very little or no difference.

With much surprise, I have heard repeated in this chamber what has been said again and again outside, that Customs revenue is easy money, and that money raised by direct taxation is hard money, the raising of which exposes a government to criticism. It has become almost a commonplace among opponents of these proposals, to be accepted as a matter of course, that a government raising money by indirect taxation receives no criticism, whereas one raising money by direct taxation is exposed to the concentrated fire of public opinion. But what do we find? I think I may apply, not unfairly, my experience in this House. I have never heard any attacks made upon the Government for maintaining the land tax, the entertainments tax, the probate duties, or the income tax; but the honorable member for Wimmera (Mr. Stewart), the honorable member for Swan (Mr. Gregory), the honorable member for Forrest (Mr. Prowse), and the honorable member for Perth (Mr. Mann) criticize the imposition of indirect taxation. If one may assume that these honorable members are representative of their constituents, as we all deem them to be, may we not fairly say that our experience in this House shows that indirect taxation is criticized much more than direct taxation? Is not that our experience from day to day, and from week to week, and does not every honorable member know it? The suggestion that it is easy to raise money through the Customs, .and that a government is immune from criticism in so far as it derives its revenue from that source, is very far from the fact. A government is open to criticism however it raises its revenue; but in the Commonwealth sphere the criticism is against indirect rather than direct taxation.

There has, apparently, developed suddenly a general admiration of the present system of Commonwealth taxation, and we have learned that the system is not to be touched; that it is sacrosanct; that it is almost perfect; and that it must not be altered, because abandonment of any of the taxes is in some way wrong in principle. Certain of our taxes represent policy. The tariff and excise duties, for example, represent a definite policy. The land tax represents a policy which, I understand, when it was imposed aimed at breaking up large estates in the country, but which raises a large amount of revenue from valuable properties in the cities. Until recent years, however, that tax had a distinct effect in breaking up estates in the country. The rest of our taxation has been imposed simply to raise money, and for no other purpose, and taxation imposed simply to raise money is not based upon any wonderful principle with which it is improper to interfere.

– I have no doubt that it will examine them. At the conference in 1926 the States’ representatives refused to examine them, and since then they have not pointed out to the Commonwealth Government any error in them. One of the recent acts of the Commonwealth Government was to offer a royal commission, with one member appointed by the States, for the purpose of examining the figures; but the States refused to agree to the appointment of it. The Government has done everything possible to show the accuracy of the figures by stating their sources, and by giving the States an opportunity of examining them, and, if they could do so, of demonstrating where they were wrong.

I wish to deal with one point on the subject of aggregation. Several honorable members have said that it is beyond the power of the States to aggregate, for the purpose of taxation, any property, whether in the form of land or not, under the land tax or estate duty acts, or incomes under the income tax acts. That statement 4 has been made by several honorable members, but none has cited any authority for it except the honorable member for Dalley (Mr. Theodore), who referred to a case decided in the High Court, in which it was determined that certain legislation of the State of Queensland was invalid. That was a case in which I appeared for the State of Queensland, and, unfortunately for my client, failed to convince the High Court that T was right. The point decided was that a Commonwealth statute having declared that interest from Commonwealth loans should be exempt from State taxation, a Queensland act which brought exempt income into account for the purpose of determining the rate of tax was invalid. It is the first ease reported in volume 29 of the Commonwealth Law lie-ports. The reason for the decision was that the Queensland legislation was inconsistent with a Commonwealth statute providing that no State hurden should be placed upon a taxpayer by reason of his receiving interest upon Commonwealth loans. That decision has no application to the subject of aggregation. No authority has been cited in support of the proposition that the States cannot legally aggregate, and although I have examined the matter I am not aware of the existence of any such authority. But for many years, as honorable members know, the existence of double taxation has caused much trouble. Two countries sometimes tax the same individual. A person resident in one country may be subject to taxation in respect of income derived from another country. This occurs when a resident of Great Britain draws his income, or part of it, from a dominion. For many years the British Government has taxed persons who reside for more than six months of the year in Great Britain, upon profits and gains from any business, wherever carried on, from any profession wherever* practised, and from property wherever situated. That principle of aggregation has for many years been a well-recognized principle of income taxation in Great Britain. “No lawyer, so far as I am aware, has yet suggested that it is illegal. The Parliament of the Commonwealth has as full a power to impose income taxation as the Parliament of Great Britain, and that power has been exercised by it. The Commonwealth tax on absentees whose property is situated in Australia is analogous to the British practice. If we wished, we could amend section 10 of our Income Tax Assessment Act, and impose a tax on income derived from any source whatever, and not merely from sources in Australia, as is done in Great Britain. An actual example was referred to, I think, by the honorable member for Brisbane (Mr. D. Cameron), which shows what the States have been doing for many years. In 1892 a Succession and Probate Duties Act was passed in Queensland, and it was provided in it that for determining the rate of succession duty there should be aggregated, so as to form one estate, the value of all the property passing under the will, whether situated within or outside Queensland. That measure remained in operation and was re-enacted in 1918, when, I think, the honorable member for Dalley had something to do with the government of that State, Appeals have gone to the Privy Council; but I have never found that the act has been challenged on this point. Many thousands of pounds must have been paid in duty under it, and one would have thought that there would have been some lawyer in Queensland who would have tested its validity had its validity been questionable. I am not aware that the act has ever been impeached, or that any suggestion has been made that it is impeachable on the ground of unconstitutionality. I have dealt only with the legal possibility of aggregation. As that has been challenged without any authority being cited in support of the proposition that in some way it is unconstitutional, I have thought it kroner to place before honorable members the material upon which I founded my view - that there is nothing unconstitutional in this proposal.

Mr Maxwell:

– Does that mean that each State has the right to tax, at the aggregate rate, a citizen who may have property in six States.

Mr LATHAM:

– Yes ; each State would be able to tax such an individual on the aggregate of all his property, if its Parliament thought proper, or determine the rate of his assets according to his aggregate income, which would probably be a more reasonable thing to do. But the legal right does not depend on the extent to which the State Parliament may authorize the aggregation. The Queensland law uses aggregation of property only for the purpose of determining the rate of taxation upon property in Queensland. If a similar principle were applied by all the States, each would collect at the aggregate rate that it had determined for itself upon the property or the income within that State. It would, of course, be highly unpopular for a State to venture further than that, but the propriety of doing so would be a matter for the parliament of the State to determine.

Mr Coleman:

– Does section 117 of the Constitution affect the taxing power of the States?

Mr LATHAM:

– I do not, as at present advised, regard that section as standing in the way, because, for example, a New South Wales act, saying that all persons subject to the law of that State deriving income from other States should pay in n certain way, would apply to them whether they resided in New South Wales or not, just as absentees who derive income from Australia have to pay the Commonwealth income tax.

It has been said that the States could not raise from the fields of taxation which are proposed to be abandoned the money needed to compensate them for the cessation of the per capita payments. May I again invite attention to the figures and the footnotes which have been circulated ? These figures show the actual proceeds of tho existing Commonwealth taxation. A footnote indicates that land tax was reduced by 20 per cent, in 1922-2?!. The entertainment tax has also been reduced, it formerly applied to every ticket of more than 6d. in value, but now it only applies to tickets valued at 2s. 6d. or more. The proceeds from that tax have fallen from £675,000 to £320,000 ; and this has been by reason of the reduction in the rate of tax, and not by reason of any falling-off in the productive field. Income taxation produced £1.6,790,000 in 1921-22, and it is now producing only about £11,000,000. The rate of tax has been reduced three times recently by 10 per cent., 10 per cent., and 12£ per cent, respectively. Seeing that much larger sums have been raised in these fields of taxation than they are at present yielding, except in the case of estate duties, which have not been altered, how can it be suggested that there is no taxable field from which the States could raise the money which the Commonwealth is now raising if it were necessary for them to do so? If the States wished to obtain a larger revenue than that which they at present receive from the per capita payments, all they would have to do would be to readjust their rates of taxation. Obviously there is a large margin in the three fields which I have mentioned.

Among the critics of this proposal there appear to bc some people who are honestly unaware that the Government is proposing to reduce Commonwealth taxation to the extent of the amount paid to the States in capitation grant. This subject has been looked at far too much as if it were merely the abolition of the capitation grant. It is really the abolition of the per capita grant and a reduction of Commonwealth taxation to an amount, at least equivalent, and on the figures more than equivalent, to that which is now paid to the States. Let me take the case of my own State of Victoria for a moment. If the Commonwealth proposal were adopted there would be a saving to the Victorian taxpayers of more than £125,000 upon tba only figures which have yet been submitted to the public. The Victorian Treasurer (Sir Alexander Peacock) denies that this is so, but he has given no details to support his denial, nor has he challenged a single figure i,n the Commonwealth statement. This statement shows from whence every figure is derived. Sir Alexander Peacock gave an interview to the press yesterday on this subject, and as a Victorian I ask the forbearance of honorable members whilst I deal briefly with the eight points which he submits for the consideration of the Victorian people. The first point is as follows : -

The Federal Government neither asked for nor obtained a mandate from the people at the general election.

I have already read that part of the policy speech of the Prime Minister which dealt with the capitation grant. It stated quite definitely that the Government considered that the present scheme was based on unsound financial principles, and expressly declared that the matter should be re-examined.

Mr Stewart:

– The word “ abolition *’ does not appear at all.

Mr LATHAM:

– The part of the speech dealing with the per capita payments reads as follows: -

The whole basis of these arrangements, however, was destroyed by the Great War. . . The result of these fundamental changes is that the Commonwealth to-day ls raising revenues in order to provide the p»r capita payments to the States. This is contrary to the basic principle of national finance that every government shall have the responsibility of raising tho revenue which it is expending.

Mr Gregory:

– I read the report of the speech in. the Argus, and I do not remember reading that.

Mr LATHAM:

– I assure the honorable member that it appeared in the Argus. I had some difficulty in securing the copy of the speech from which I have just quoted, and I obtained a copy of the Argus and found that those precise words appeared in it.

Some honorable members apparently wish to frighten the Government by referring to supposed decisions of government supporters outside of Parliament, and by references- to the general elections. The Government regards this as a matter of principle of the greatest urgency and importance, alike to the Commonwealth, the States, and the people of Australia as a whole. Any honorable member is entitled to the opinion that this is wrong. But it is surely not suggested that, though the Government sincerely believes that a proposal, important on the ground of principle, and affecting the whole future of the Commonwealth, should be introduced to Parliament, it should be abandoned because some of its supporters outside of Parliament are opposed to it. The Government is not prepared to abandon this proposal. Sir Alexander Peacock’s second point was -

The majority against the federal referen- dum proposals last September was increased because the people were incensed against the Federal Government for a proposed tyrannical misuse of power in respect to the abolition of the payment of 25s. a head of population annually to the States.

Mr Scullin:

– “Will the AttorneyGeneral say that there was anything definite in the policy speech declaring that the Government intended to abolish the per capita payment?

Mr LATHAM:

– Yes ; the Government stated that, in its opinion, the per capita payments were founded upon an unsound principle, and that the whole question would have to be re-examined. That is quite plainly stated. It can hardly be said that the second point made by Sir Alexander Peacock is a reason against these proposals. Is the Government never to attempt to give effect to its policy? Is there no responsibility upon it at all? Is it, simply because there is opposition from some of its supporters, to abandon any proposal that it may make? The third point made by Sir Alexander Peacock was stated as follows: -

There would have been no federation (he spoke as a member of the Constitutional Convention) without a financial partnership between the Commonwealth and the States regarding tho distribution of Customs and excise revenue.

The history of the matter shows that the partnership was limited for ten years. It was that change in the federation scheme, and the Federal Capital proposals, that caused New South “Wales to agree to federate. The partnership lasted for ten years and was then terminated in accordance with the Constitution. The fourth point made by Sir Alexander Peacock is stated as follows : -

It wa3 impossible for Victoria to incorporate in its taxation system the direct taxation the Federal Government proposed to relinquish, and it would be forced to throw the income tax system now in force into the melting pot and mould a new scheme with a distribution over a much larger area than at present. The alternative was to cut down services now considered essential.

It is obvious that if the Victorian Parliament is prepared to increase its probate, land, and income taxes, it will be able to recoup itself for the loss of the per capita payments. Amended taxation laws may be necessary; but are we to accept it as a principle that the States are not to amend their taxation legislation? The fifth point is -

It was fair for all classes of the community to contribute to the upkeep of social services to fulfil the primary functions of government, and that this contribution was secured by receiving a share of Customs and excise revenue. The members of the State Parliament, who were closer to the people by reason of greater numbers and smaller constituencies, had voted unanimously against the abolition of per capita payments, and the press had voiced similar protest.

Mr Fenton:

– What was the honorable gentleman’s own attitude at the last election ?

Mr LATHAM:

– I said on the platform that I was in favour of the finances of the Commonwealth and the States being separated, so that each should assume responsibility for raising the money it expended, and that, if I were returned, I would do all I could to bring about a more sensible system of finance than existed in the capitation grant. I have already submitted that this is a question affecting not the levying of direct taxation, but the redistribution of direct taxation between the Commonwealth and the States. The sixth point reads -

It was as unfair for the Federal Government to put special grants for Western Australia and Tasmania in the same bill as the abolition of per capita payments as it would be to tack a tariff bill on to an appropriation bill.

That point has not been taken, in this House, and is rather a matter for honorable members, who, up to the present, have not found it embarrassing, or, if they have, delicately refrain from mentioning it. The seventh point reads -

Victorian members of the Federal Parliament, whether members of the House of Representatives or senators, would be unmindful of the interests of Victoria if they voted for the abolition of per capita payments, and would take a decided step towards reducing the status of the State whose interests they should guard.

I have endeavoured to give reasons why the adoption of this policy would be financially advantageous, particularly to Victoria, and would improve its status. I have also endeavoured to show that it is in accord with approved Federal principles. The eighth and last point reads -

The injury Victoria would receive if the Federal bill were carried would be intensified by the knowledge that it had provided a majority of the salaries of members of tho Ministry which had submitted the bill.

Whatever our views may be upon the bill, it is unnecessary for me to answer a statement of such a character in this House.

Mr SPEAKER:

– Order ! The Minister’s time has expired.

Mr MAXWELL:
Fawkner

.- As I am usually a supporter of the Government, and intend to vote against this bill, I do not wish to record a silent vote. I propose, therefore, to discuss briefly some of the considerations that will determine my vote. The question that the House is asked to decide is whether the per capita payment to the States, which has been in existence for the last seventeen years, is to be discontinued. For the first ten years of the Commonwealth’s history, the governments of the

States were entitled to the return of three-fourths of the Customs revenue. Then, by agreement with the States, the Federal Parliament determined upon a. per capita payment of 25s. I emphasize that that was done after consultation with the States, and by agreement with them. That arrangement still exists, but this Parliament is now asked to put an end to it. Why should that be done? That is the simple question which I, as a representative of the people, have to ask myself. We are told by the Government that under the Constitution it rests with the Federal Parliament to say whether this arrangement is to continue. It is true that the Surplus Revenue Act provides that the arrangement shall continue until Parliament otherwise provides, and no one suggests that the Federal Parliament has not the right to terminate the per capita payment if it so desires. But would that be a fair thing to do? That is the whole question. I agree that the State Governments have no constitutional or legal right to the continuance of the arrangement made_in 1910, and it may be said that they have no moral right. But the States have a moral right to fair treatment at the hands of the Federal Government, which is all they ask. I suppose we mav assume that the Parliaments of the respective States represent the opinion of the people of those States, and, if that is so, the opinion of the people as expressed through the State Parliaments is that the payments should continue.

Mr SCULLIN:

– That is the unanimous opinion of the State Parliaments.

Mr MAXWELL:

– Yes. Five of the State Parliaments are controlled by Labour Governments; but I remind the Government that the sixth parliament is controlled by a composite government in which the National and Country parties are represented as they are in the Commonwealth Government. The composite Government of Victoria is in agreement with the Labour Governments of the other States in demanding that the payments be continued. We have been asked to say that the measure should be treated as a non-party question. I say that it should be treated as a party question, and if it were, it would certainly be defeated, because it is a plank in the platform- of every party represented in this House that the per capita payments shall continue. If the members of this House are true to the platforms of the parties to which they belong, they will vote against this bill. The Labour party, as we know, is pledged to the continuance of the per capita payments. As for the Country party I have, within the past day or two, had placed in my hands the constitution and platform of the State and Federal Country party, which is represented in the present Government. Three of the Ministers in this House are members of the Victorian Farmers’ Union, which is the organization behind the Country party in the State of Victoria. There is no suggestion in the rules and platform of the Victorian Farmers’ Union or the Country party in Victoria that it favours the withdrawal of the per capita payments, which we are now told represent a vicious principle of finance. I turn now to the platform of the National party, to which I am proud to belong. The National Federation is the organization behind that party in Victoria, and, indeed, throughout Australia. One plank in its platform reads -

The maintenance of the 25s. per capita payment to the States until such time as a satisfactory alternative is agreed to.

That is the position in which we, as members of that organization, find ourselves. So far as the Victorian members are concerned - I do not know so much about the Nationalist members in the other States - that organization is behind all Nationalists, and assists them in their candidature. The Prime Minister himself was selected by the National Federation to contest the Flinders division iu 1918, and I am sure that subsequent events have proved that the Federation was amply justified in its selection. Among those present at the annual conference of that organization, a few months ago, were the Attorney-General for Victoria (Mr. Eggleston) and Senator Pearce, as representing the Commonwealth Government. After hearing those two gentlemen the Conference resolved that until full consultation had taken place between the Commonwealth and the States no action should be taken in respect of the per capita payments. Thus members of the party to which I belong are practically pledged to the continuance of these payments. Let us consider for a moment what we are now asked to do. The honorable the Attorney-General (Mr. Latham), who has just resumed his seat, solemnly maintained that we had a mandate from the people to discontinue the per capita payments and that the bill now before the House was in accordance with the declared policy of the Nationalist party as outlined by the Prime Minister during the last election campaign. I absolutely deny the correctness of that statement. The Attorney-General told us that in the opinion of the Government these per capita payments, representing the collection by the Commonwealth of money which the States were to spend, were a violation of a fundamental principle of finance, and that it was the intention of the Government to call the States into consultation to consider - I think these are the very words he used - ‘‘the problems arising out of the existing financial relations between the Commonwealth and the States.” The Prime Minister in his policy speech went on to say, and this was the gist of his argument, that the existing conditions in Australia rendered necessary “ a re-examination of the financial relations between the Commonwealth and the States.” This policy is in accordance with the platform of the organization behind the Prime Minister, an organization which, I think he will admit, rendered valuable service in the last election ia returning this party in the strength in which it finds itself to-day. I have read carefully the GovernorGeneral’s speech, which is supposed to foreshadow the legislation proposed to be brought down by the Government, and I cannot find in it any reference whatever to a proposal of the character of the bill now under discussion. Honorable members may recall that the GovernorGeneral’s speech emphasized that the financial position of the Commonwealth was sound and reflected the general prosperity of the people. That was all that was said about the financial outlook, and, curiously enough, following almost immediately on that passage in the speech came this statement-

The election has shown that the people of Australia are determined to maintain law and order.

In other words, the Government, through the Governor-General, said - “ We recognize that the real meaning of the state of parties as the result of the recent election is a declaration ou the part of the people that they are in favour of the maintenance of law and order, and will support the Government in dealing with certain sinister influences that have been at work in the community hitherto.” That, I submit, was the mandate. Die Attorney-General stated that on the public platform during his election campaign he gave utterence to the sentiments he expressed to-night. No doubt he did, but how many of the hundreds of thousands of electors heard him? Besides, he was not speaking on behalf of the Government: he was expressing the opinion of an individual who in no way bound tho Government. The Attorney-General twitted the right honorable member for North Sydney (Mr. Hughes’) with the fact that he and his Treasurer (Mr. Watt), in 1920, had foreshadowed the withdrawal of the pot capita payments. Last night the right honorable member for Balaclava explained very ably and fully what induced the then Government to make that suggestion. It is an extraordinary fact that the right honorable gentleman, who with his Treasurer in 1920 made that proposal, should in 1922, have had as Treasurer the proBent Prune Minister, who in the course of a speech before the National Democratic Council at Brisbane dealt with federal finance, and, particularly, the special appropriations. The slogan of his speech was “ Stable Government and Sound Finance.” Up to that time the finances of the Commonwealth had included the per capita payments to the States, and the right honorable gentleman, in referring to the special appropriations said :

As mutters now stand in Australia, the per capita payments cannot be done away with. Possibly tho future may hold in store for Australia a different form of government. Certainly we have many Governments in Australia, possibly to the extent of being over-governed. But until there has been a change in the basis of the forms of governments of thu States these payments must be continued.

That was his opinion as Treasurer in the Hughes Government in 1922.

So far as I know there has been no change in the basis of the form of government of the States, and the right honorable gentleman, who then said that until that change occurred the per capita payment must continue, to-day says, although that basis has not been changed the payments must cease. One naturally seeks the reason for this change of policy. As the right honorable member for Sydney said to-night in tho course of a witty and able speech, there is no urgency about this proposal: the present arrangement has been working satisfactorily for seventeen years, lt has been suggested that the man responsible for the bill now before us is the present Treasurer. Whether or not that is so I do not know. But a prominent member of -the Victorian Farmers’ Union a few days ago in conversation expressed tho view that the present Federal Treasurer was, especially in financial matters, a superman. I did not consult the dictionary as to the meaning of “ superman, “ but I suppose it meant in thi3 instance a man who occasionally lauds himself and those who follow him in the. soup. If this be tho meaning of the term, I think the Treasurer may have some claim to the soubriquet. We have been told by the Government that although the States are totally opposed t» this scheme, it will benefit them. The Federal Treasurer and those associated with him may be greater financiers than the men connected with the State Governments. If that is so, the latter are surely entitled to more considerate treatment. They are charged with grave responsibilities in the administration of their respective States. The speech of the right honorable member for Balaclava last’ night helped me to realize the extent, variety, and importance of the functions discharged by the State Governments, and the financial burdens they involve. The leaders of the State Parliaments deserve consideration, and they declare that this proposal, if accepted by this Parliament, will dislocate their finances. Like the right honorable member for North Sydney, I am unable to understand how the Treasurer reconciles his statements to the States that under his scheme they will get more money, and to the taxpayers that they will pay less

One reason given by the Federal Government for forcing this arrangement on the States is that the State Governments, being human, are not likely to entertain a proposal which means the surrender of money that hitherto has been easily obtained. My experience is that there is just as much human nature in Federal as in State governments. The Federal government is as eager to acquire as the State governments are loth to relinquish money that comes to them comparatively easily. After all, it is a matter for amicable arrangement between the States and the Commonwealth as to how the money shall be allocated. We are told, and it has been emphasized over and over again by the Federal Government, that this is a matter peculiarly for this Parliament; that it is for this Parliament to say whether the payments shall continue. Surely it is for the people to say, through, I admit, this Parliament. This Parliament is the instrument through which the popular will, in regard to this and other matters, must be expressed ; but I say we have no right to discuss and decide a matter like this which has never been before the people of Australia. We ought to hold our hands. The Government should say, “ In view of the oxpress opinions of the State governments, the State Parliaments, the people, and a very large section of the Federal Parliament, we shall stay our hands. We shall call the States into consultation, as was foreshadowed in the policy speech, for the purpose of considering the whole financial relations between the Commonwealth and the States.”

Mr Cook:

– They have done that.

Mr MAXWELL:

– They have not done it as I say it should be done. Each side should go into consultation uncommitted to any view. Let the problems be discussed on their merits. If the Government has a scheme, let it place it before the States, and if after it has been discussed by them and, in the press, and by thepublic, the States refuse to accept it, let the Federal Government say to the people at the next election, “ We have consulted the States, we have threshed the matter out, thoroughly, and we think that in the interests of the Commonwealth the scheme we have propounded ought to be accepted. If we are returned to power the first thing we shall do will be to put it into execution.” The Government could then come down and say, with perfect truth, that it had a mandate from the people. This bill is going to a division in the House, and in that connexion I wish to make an appeal to honorable members. Admittedly it is a matter of great importance, both to the people of Australia and to the States, and it ought to be decided on its merits. It would be a calamity if any vote cast in this House on a question, which will have such far-reaching and important effect upon the various interests of the Commonwealth, were dictated by any other feeling than that, of conviction. Some honorable members might be tempted, out of a feeling of mistaken loyalty to the Government, to cast a vote in favour of the bill because they think not that it ought to be oassed, but that the Government ought to be saved. The Constitution provides for the continuance of the arrangement until the Parliament otherwise provides, but not, as has already been pointed out, until some government that happens to be in power so determines. Therefore, every vote ought to be cast strictly on the merits of the question, and it is because I consider the course I have outlined the proper one to pursue, that if the Government insists upon forcing the matter to a division, I shall vote without hesitation and without misgiving against it.

Debate (on motion by Mr. Jackson) adjourned.

House adjourned at 11.17 p.m.

Cite as: Australia, House of Representatives, Debates, 9 March 1927, viewed 22 October 2017, <http://historichansard.net/hofreps/1927/19270309_reps_10_115/>.

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House of Representatives 9 March 1927

QUESTION

DISPOSALOF H.M.A.S. SYDNEY

Mr MARKS:WENTWORTH, NEW SOUTH WALES

Mr MARR:Honorary Minister · PARKES, NEW SOUTH WALES · NAT

QUESTION

CANBERRA

Mr CHARLTON:HUNTER, NEW SOUTH WALES

Mr MARR:NAT

Mr R GREEN:RICHMOND, NEW SOUTH WALES · CP

Mr BRUCE:Minister for External Affairs · FLINDERS, VICTORIA · NAT

Mr BOWDEN:PARRAMATTA, NEW SOUTH WALES

Mr BRUCE:

SITTINGS OF THE HOUSE

Mr BRUCE:NAT

Mr Riley:

Mr BRUCE:

QUESTION

WINE BOUNTY

Mr GREGORY:SWAN, WESTERN AUSTRALIA

Mr PRATTEN:MARTIN, NEW SOUTH WALES · NAT

QUESTION

EAST-WEST AERIAL MAIL SERVICE

Mr MARKS:

Mr MARR:NAT

QUESTION

IMPORTATIONS OF TIMBER

Mr PERKINS:EDEN-MONARO, NEW SOUTH WALES

Mr PRATTEN:MARTIN, NEW SOUTH WALES · NAT

QUESTION

BUTTER EXPORT

Mr RODGERS:WANNON, VICTORIA · LP; NAT from 1917

Mr PATERSON:Minister for Markets and Migration · GIPPSLAND, VICTORIA · CP

QUESTION

AUSTRALIAN WAR MEMORIAL AT PORT SAID

Mr MANNING:MACQUARIE, NEW SOUTH WALES

Mr MARR:NAT

QUESTION

TRANSFERRED TAXATION OFFICERS

Mr MARKS:

Dr EARLE PAGE:Treasurer · COWPER, NEW SOUTH WALES · CP

QUESTION

INTERNATIONAL ECONOMIC CONFERENCE

Mr MANN:PERTH, WESTERN AUSTRALIA

Mr BRUCE:NAT

COMMONWEALTH RAILWAYS

Condition of Cattle Trucks

Mr LACEY:GREY, SOUTH AUSTRALIA

Mr HILL:Minister for Works and Railways · ECHUCA, VICTORIA · CP

QUESTION

PRESERVATIVES IN BUTTER

Dr MALONEY:MELBOURNE, VICTORIA · ALP; FLP from 1931; ALP from 1936

Dr EARLE PAGE:CP

QUESTION

DEFENCE EXPENDITURE

Mr LAZZARINI:WERRIWA, NEW SOUTH WALES

Dr EARLE PAGE:CP

QUESTION

NORFOLK ISLAND

Mr THOMPSON:NEW ENGLAND, NEW SOUTH WALES

Mr BRUCE:NAT

QUESTION

INSPECTION OF EXPORTED PRODUCTS

Mr COOK:INDI, VICTORIA

Mr PATERSON:CP

QUESTION

SURVEY WORK IN PAPUA

Mr MARR:NAT

PAPERS

STATES GRANTS BILL

Second Reading

Mr LEY:Barton

Mr Scullin:

Mr LEY:

Mr Scullin:

Mr LEY:

Mr Gregory:

Mr LEY:

Mr Hughes:

Mr LEY:

House of Representatives
9 March 1927

Mr MARKS:
WENTWORTH, NEW SOUTH WALES

Mr MARR:
Honorary Minister · PARKES, NEW SOUTH WALES · NAT

Mr CHARLTON:
HUNTER, NEW SOUTH WALES

Mr MARR:
NAT

Mr R GREEN:
RICHMOND, NEW SOUTH WALES · CP

Mr BRUCE:
Minister for External Affairs · FLINDERS, VICTORIA · NAT

Mr BOWDEN:
PARRAMATTA, NEW SOUTH WALES

Mr BRUCE:
NAT

Mr GREGORY:
SWAN, WESTERN AUSTRALIA

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

Mr MARR:
NAT

Mr PERKINS:
EDEN-MONARO, NEW SOUTH WALES

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

Mr PATERSON:
Minister for Markets and Migration · GIPPSLAND, VICTORIA · CP

Mr MANNING:
MACQUARIE, NEW SOUTH WALES

Mr MARR:
NAT

Dr EARLE PAGE:
Treasurer · COWPER, NEW SOUTH WALES · CP

Mr MANN:
PERTH, WESTERN AUSTRALIA

Mr BRUCE:
NAT

Mr LACEY:
GREY, SOUTH AUSTRALIA

Mr HILL:
Minister for Works and Railways · ECHUCA, VICTORIA · CP

Dr MALONEY:
MELBOURNE, VICTORIA · ALP; FLP from 1931; ALP from 1936

Dr EARLE PAGE:
CP

Mr LAZZARINI:
WERRIWA, NEW SOUTH WALES

Dr EARLE PAGE:
CP

Mr THOMPSON:
NEW ENGLAND, NEW SOUTH WALES

Mr BRUCE:
NAT

Mr COOK:
INDI, VICTORIA

Mr PATERSON:
CP

Mr MARR:
NAT

Mr LEY:
Barton

Mr COLEMAN:
Reid

Mr E RILEY:
SOUTH SYDNEY, NEW SOUTH WALES · ALP

Mr PERKINS:
Monaro · Eden

Mr E RILEY:
SOUTH SYDNEY, NEW SOUTH WALES · ALP

Mr YATES:
Adelaide

Mr E RILEY:
SOUTH SYDNEY, NEW SOUTH WALES · ALP

Mr DEPUTY SPEAKER (Mr Bay ley:
BARTON, NEW SOUTH WALES

Mr THOMPSON:
New England