10th Parliament · 1st Session
The Deputy President (Senator Plain) took the chair at 3 p.m., and read prayers.
asked the Minister representing the Minister for Trade and’ Customs, upon notice -
– The honorable the Minister for Trade and Customs supplies the following answers: -
asked the Leader of the Government in the Senate, upon notice -
– The replies to the honorable senator’s questions are as follow: - 1 and 2. The Government is advised that interest is not payable. 3. £7,847 15s.
LEAVE to Attend AGRICULTURAL Shows.
asked the Leader of the Government in the Senate, upon notice -
– The information is being obtained.
asked the Minister for Home and Territories, upon notice -
Senator Sir WILLIAM GLASGOW.The replies to the honorable senator’squestions are as follow: -
Debate resumed from . 16th March (vide page 495), on motion by Senator Pearce) -
That the bill be now read a second time.
– It appears to me, from some observations that have been made during the debate on this bill, that it. would be as well to say a few words as to the reasons which have actuated the Government in persevering with it. Although repetition of the history concerning the origin of section 87 of the Constitution may be a little tiresome, I venture to think that remarks which I propose to make upon it will be, at least, instructive. The provisions of section 87 were ‘ a bone of contention with the framers of the Constitution. A perusal of the debates leave.? one in no doubt whatever as to the manner in which they regarded this problem. Unquestionably, they regarded as absolutely unsound the principle embodied in section 87, which we desire now to abolish by the passage of this measure. To the late Sir Edward Braddon, the great Tasmanian statesman, is attributed the parentage of- section 87 ; but, having been intimately associated with some of those who assisted to bring this great Constitution into being, it is within my personal knowledge that, it was the fertile brain of the late Sir Frederick Holder that was responsible for the provision to get over what was regarded as an insuperable difficulty in connexion with the financial relations of the Commonwealth and the States. In subsequent references to that principle, he seemed to be displeased that it had been received so coldly by the delegates at the various conferences. I notice the following comments concerning those financial provisions, in Quick and Garran’s Annotated Constitution: -
The basis of distribution provided by the Adelaide sliding scale ha? not found favour. As Mr. Holder said, it v. as “a child of misfortune - misfortune in that it was laid before the convention and accepted (in Adelaide) on the faith of those who recommended it; never discussed, never explained - thrown into a cold world without anybody to be the father to it.”
It may have been a child of misfortune, but I think it could be more accurately described as the child of expediency out of ambition. Without some such provision it is doubtful if .federation would have been consummated, and the people would have been compelled to continue under the various d inabilities that existed regarding the larger questions with which this Parliament concerns itself.
– It was the indispensable necessity of the hour.
– It was a necessity, but as an expedient to meet p. difficult financial situation it was unsound in principle. With an astuteness that characterized them, the leading public men of that time foresaw the difficulties that might arise through its application. It became known as the Braddon “blot,” principally because of the unsoundness of the principle that one legislature should levy tribute upon the people and hand it over to another legislature elected by the same people to spend as and how it wished. It is within my own personal knowledge that one of the root objections to the Braddon section was that it was an application of a vicious and unsound principle. We have been told that this is merely an academic question that has no real, practical significance, and that the Government ought to drop it.
– It has taken 25 years to find out that the present system ought to be abolished.
– That is not so. From the day that the Braddon provision expired, until last May, a perpetual pressure has been exerted by the Commonwealth to bring about an alteration of the system.
– But it has been, resisted by the people of the States.
– It has not.
– It has always been understood that if the existing system were abolished, another would be substituted for it.
– We are not to-day considering what shall be substituted for it.
– Move’s the pity.
– The Government in this matter is placing itself in the hands of Parliament. If it cannot bring down proposals which Parliament considers are just and reasonable, it can be dealt with by Parliament.
– The Government wants Parliament to sign a blank cheque.
– That suggestion was made yesterday, and I promptly interjected, “You can stop payment.” I have stated the real position, and it is of no use for honorable senators to represent it differently. These proposals are absolutely essential and vital to the future welfare of not only the Commonwealth, but also the component States. It is all very well to talk in a political atmosphere of tactics and so forth. That which governed me as a private member, and continues to govern me as a member of the Government, is the fact that the proposal to abolish the per capita payments has right on its side. No other consideration weighs with me in the slightest degree. I venture the assertion that that is the proper angle from which to view- this question. The Government does not desire to tie the hands of either this Parliament or the Parliaments of the States. A perusal of the bill will show to honorable senators that the quantum will not be varied in any way until June, 1928, but that, on the contrary, the per capita payments will continue to be made in another form. The States will not be inconvenienced or incommoded. They will have until the 30th June, 1928, to decide the form that the future financial relations of the Commonwealth and the States .shall take.
– What will happen after that date?
– Before that date, this Parliament will have had an opportunity of saying whether the measure of justice that the Government i3 meting out to the States is or is not sufficient.
– Let us do that now.
– I can see no reason why we should quarrel with the States over this matter.
– Why cannot the whole matter be settled before June, 1928?
– There is nothing to prevent a settlement from being arrived at before that date. This enlargement of time will deprive the States of the argument that we have heard so often, that the Commonwealth is forcing this matter. What I have said with regard to section 87 applies with equal force to the provisions of the Surplus Revenue Act of 1910. The system is vicious in principle, and, as was to be expected, the expediency which was resorted to in 1910 has worked in an extraordinary fashion. It is manifest that a change was considered desirable in 1910, and again in 1919, when the Right Honorable Mr. Watt, as Treasurer in an administration led by Mr. Hughes - of which, I believe, my friend Senator Greene was a distinguished member - submitted his proposals to the States. Mr. Watt, in 1919, and the Prime Minister (Mr. Bruce), in 1923 - when the matter approached very close to a settlement - and again’ in 1926, did not call together the Premiers of the States to discuss a matter of merely academic interest. What has the Commonwealth been doing during the last sixteen or seventeen years t It has been raising certain sums of money anc! handing; them over to the States to spend as they please.
– That is what the Government intends to do in the future.
– I do not know that it is. The future must take care of itself. Our proposals have been, and will be, based not on the present principle, but on one that will obviate the necessity to hand over moneys without exercising any control whatever over them.
– So that in the future it is intended that the Commonwealth shall say how they are to be spent ?
– We shall not say how they shall be spent; but we shall say that the Parliaments of the States must levy taxation to obtain the money that they spend. I shall show presently that such a system will be economically beneficial, not to the men who constitute the Parliaments of the States, but to the States themselves, to the “ toad beneath the harrow,” to the man who cares not whether the tax be paid to the Federal Taxation Commissioner or the Taxation Commissioners of the States. By continuing the present system we are violating one of the best principles of government, the principle of home rule in relation to the financial affairs of the States. If the States are compelled to leA’y their own taxation they will keep a closer watch “upon their expenditure than if they receive what has been called “ easy money.”
– Who is raising the petrol tax?
– That question differs from this as greatly as black does from white. The petrol tax is imposed upon road users for the purpose of raising money that may be handed by the Commonwealth to the States to be expended under Federal control. It has to be applied to the specific purpose for which it is advanced ; it cannot be used to assist State canneries, Chillagoe mines, or anything of that sort. It is to be employed for the specific purpose for which it has been gathered. It is to be handed over to the States under an agreement and expended subject to the control of the States; but we know that it will be put to the purpose for which it has been raised because we bind the States to apply it to that purpose.
– How does that affect this vicious principle to which the honorable senator has referred?
– I do not know that it affects it iu any way, but I was dragged aside into these remarks by the interjection of the Leader of the Opposition (Senator Needham). A few days ago an interesting return was furnished to honorable senators showing the amount paid to the various States under the per capita grant from 1916-17 to 1925-26. The total amounts paid to the respective States are as follow: -
– Victoria has not received enough.
– What does (he honorable senator consider enough? When we examine the details given in the return, we find that while New South Wales and Victoria have each year received payment upon a gradually ascending scale, the amounts paid to South Australia, Western Australia, and Tasmania, have not increased in anything like the same proportion. For a considerable time past, I have been struck by the amounts shown to have been expended by the various States on enterprises upon which they have embarked. In this respect, I have very little to complain about what Victoria has done, but I shall give some remarkable figures relating to other States.
– Will the Minister also mention the Commonwealth enterprises ?
– The present Government is not responsible for them.
– But the same taxpayers have to find the money for them.
– Yes; and no one has done more than I have done to oppose entry into enterprises of a non-paying character. But if the Commonwealth is wrong, the. States are equally wrong in using the easy money they are getting without the control of their taxpayers for the purposes which I am about to mention. They have lost millions of pounds on enterprises which one could have foretold would result in failure and bring financial embarrassment upon them. In New South Wales, we find accumulated losses of £71,000 in respect of State saw-mills, £320.000 on timber-yards, £23,000 on a power station; or a total loss of about £415,000. It is fair to say that some of the works have shown a profit.
– Why not quote the New South Wales brickworks?
– In Western Australia, the State brickworks have made a profit of £5,000, but the State meatworks at Wyndham have shown a loss of £587,493. Then I come to Queensland. The accumulated losses on the State cattle stations of Queensland had already amounted to £830,000 when these figures were compiled. In that State, also, there are accumulated losses of £94,000 on the State cannery, £42,000 on the State fish supply, and £23,000 on other enterprises, excluding refreshment-rooms.
– How many thousands of pounds have been granted by the Commonwealth as bonuses for non - paying industries in Australia?
– That is a matter for the Parliament to decide. I am endeavouring to point out that the continuance of the per capita payments is a direct inducement to the States to continue their enterprises; it is placing a premium on the continuance of a practice which, in the financial circumstances of the Commonwealth, should no longer be tolerated.
– Are we to understand that if the per capita payments are abolished, and further consideration is given to the States by a new financial agreement, the Federal Government will lay down the conditions under which the States shall spend the grants?
– No; it is not the province of the Federal Government to do so. If these millions that have been thrown away in Queensland had been taken from the Queensland taxpayer, by direct taxation - that is to say, if the taxing authority had been also the spending authority - there would have been another story to tell. It is inescapable logic that the method at present provided in our Surplus Revenue Act does offer a premium to the squandering of money by the States. If. when the taxpayers of the States saw money being squandered or given away - in many instances that is all we can say of it - they were made to realize that it meant’ fresh or additional income taxation in the following year, or an increased land tax, or an increase in the succession duties, there would be such an outcry that no
Government would dare to continue wasting money, or throwing it away on these enterprises.
– Therefore the Commonwealth should have all the easy money. Is that the honorable senator’s argument?
– What percentage of Queensland’s revenue is represented by the per capita payment?
– I am not concerned with that.
– Then the honorable senator’s argument is silly.
– It may be silly, but it is not immoral. The basis of the per capita payment is unsound. If the States had not got the money in this easy fashion they would not have embarked on enterprises which have been condemned by the press all over Australia. If we are to listen to the press on one matter, we ought to listen to it on other matters. The need for an alteration is quite apparent. The States concerned in the squandering of this money have not been obliged to raise taxation to meet it.
– Does the honorable senator contend that the money is safer in the hands of the Commonwealth than in the hands of the States ?
– That does not follow; but if my honorable friend would apply his mind as he did in 1923 to these great issues he would recognize, as he did then, that the principle which I am now denouncing is wrong, and he would admit that it has had the direct effect of bringing about the losses to which I have referred.
– I do not see how the honorable senator connects the two things.
– They are directly connected, because the easy money obtained by the States from the Commonwealth is an absolute inducement to them to embark upon such undertakings as I have described.
– What of the Australian Commonwealth Shipping Line?
– This Government was not responsible for the acquisition of the Commonwealth Line of
Steamers, neither was it responsible for the failure to dispose of the Line when a suitable opportunity occurred.
– Your “ bosses “ would not allow you to sell it.
– Its disposal can be considered should the occasion arise. If a mistake were made in acquiring or continuing a line of steamers it does not follow that we should not do what is necessary to ensure the solvency and financial stability of the States. A trust is practically reposed in this Parliament to see that those who pay taxation shall know what they are paying and what they are really paying it for. A few days ago the position in Queensland was strongly emphasized by an Adelaide newspaper, in a sub-leader - following a leading article on the per capita payments - in these words : -
The devotees of the fetish of state ownership of industries would read themselves a salutary lesson, supposing they were willing to be taught, were they to study the history of the Government trading enterprises in Queensland. The reports of the State Auditor-General show that up to 30th June, 1024, the State was involved in a loss of £2,083,110 as the upshot of trading enterprises covering a period of nine years, and on which £7,053,804 was expended. The greater part of the loss, amounting to £1,590,703, was incurred in respect of cattle stations, the blunders in the purchase and administration of which, as the Melbourne Aye points out, are tacitly acknowledged in the steps which the Government are taking to dispose of them by auction.
– Are we to take it that the Government is bringing about this change in the financial relationship between the Commonwealth and the States, in order to stop State enterprises?
– No. I am merely giving facts, and showing how this vicious principle, which we are now attacking, is closely associated with, and responsible for, the losses incurred on various “ wild cat “ schemes which have been undertaken in the different States.
– Including Victoria.
– Victoria has not been a sinner in that respect.
– The Yallourn scheme is the largest State enterprise in the world.
– That is a great public utility, just as the State railways are. The principle of the
Braddon clause, which I regard as vicious, was embodied in the Surplus Revenue Act of 1910, as the people declined to embody it in the Constitution. At the various conferences that have been held between 1919 and 1923, it was recognized that the principle was wrong, but unanimity on the part of the States as to what should be substituted was found to be impossible. The conference of 1923 was the only occasion when the proposals submitted were in any way acceptable, but the negotiations which have been continued since then have proved abortive. Later it was admitted by a certain section that the per capita payments should be abolished, and suggestions were made as to the manner in which the States could be compensated. The State Premiers and State Treasurers of the day, including Sir William McPherson, who is regarded as being exceedingly cautious in financial matters, met in conference in 1923, and Sir William McPherson said -
– When was that statement made?
– I am reading from page 7 of the report of the proceedings of the 1923 conference. The honorable member for Dalley (Mr. Theodore), who was then Premier of Queensland, in discussing these proposals, said -
Personally, I believe that the Commonwealth will have to take on fresh functions which will involve greater expenditure than the Government is now committed to. In that event, they must tap sources of revenue which the States now claim as their sole right. I think the Commonwealth Government ought to consider the question of adopting the suggestion of the States that they should retire from the field of income taxation, and enter into an agreement with the States for them to recoup, or partially recoup, the Commonwealth for the loss of revenue from that source.
Sir Henry Barwell, who was representing South Australia, said -
We concede that the Commonwealth was quite justified in coming into the field of direct taxation and imposing both land and income tax; but, now that the war is over, we feel that the time has arrived when we should take a step towards getting back to first principles. We contend that this can only be done by the Commonwealth going right out of one particular sphere of taxation. What would justify any alteration at all? I say the only tiling which would justify an alteration would be the consideration of economy and the providing of relief to the taxpayers. “The toad beneath the harrow” was then being considered. Further on, when proposals involving the payment by the Commonwealth of a sufficient sum to recoup the States were being considered, Senator J. B. Hayes, who was then representing Tasmania, said -
Mr. Bruce has made it clear that he will welcome any scheme which will enable the Commonwealth to get out of the field of direct taxation altogether. As this question of taxation is essentially one for discussion by the State Treasurers, I suggest that those Treasurers who are not also Premiers should be afforded the opportunity of expressing their views.
An opportunity was afforded and the proposals to which I have just referred were brought forward. Later the Prime Minister, in submitting a counter proposal, said -
It seems to me that we are not such a tremendous distance apart as might be thought. The States want the Commonwealth to go right out of the field of direct taxation. . . .
One of the objects of our proposal is to get rid of the arrangement under which the Commonwealth Government is collecting revenue which is expended by the States. We arenot prepared to perpetuate a system of that sort by allowing the States to make payments to the Commonwealth, or raise revenue for it to expend.
A counter proposal which was modified was then submitted, and after considerable discussion, Sir William McPherson, representing Victoria, said -
So long as you do not make the prohibition of the taxation of companies part of the agreement, Victoria is prepared to fall in with the arrangement suggested.
Senator Barwell said that it could be done. Here are his words : -
I am certain that if we can readjust our rates, and do what the Treasurer of Victoria suggests - that is to say, revise the whole field of taxation - we shall be in a position to raise the money we lose under this arrangement without inflicting any hardship on the taxpayers of the State.
That was in 1923. Since then there has been no marked change in the principle underlying the States system of taxation. Senator Barwell at that conference summed up the position when he said -
There is an insistent demand by the taxpayers of Australia for relief from the burden of duplication. Thu Commonwealth recognizes that demand, and is going to meet it, if possible in agreement with the States; but if it cannot arrive at an agreement it will do it on its own. In that case, the States must accept the position as laid down by the Commonwealth Government.
Had it not been for Sir Arthur Cocks, who represented New South Wales, the conference would probably have arrived at a fresh arrangement. In 1926, a further conference was held. It has been said that the Prime Minister was brusque in his declaration on the eve of that conference, that he endeavoured to bludgeon the States, and really refused to meet them in conference. The real position is that the State Treasurers, driven from one argument to another, in the dying hours of that conference, raised the plea of moral rights. That waa done at the instance of Mr. McKell, the Minister for Justice in New South Wales, who was supported by an equally astute Minister from Queensland in the person of Mr. McCormack. Seeing their defences broken down, they raised the new plea. Mr. McCormack retired from the conference, hurling, as it were, the verbal brick of moral rights. The State Premiers, finding no other argument open to them, claimed the continuance of the, per capita payment as a moral right. That argument, as admitted by their friends in another place, is entirely indefensible. Until the Commonwealth Parliament takes this matter in hand and terminates the per capita payments, as is proposed in this measure, conferences will be unavailing. Where one party claims a moral right to these payments, it is futile to hold such conferences. Many Premiers’ conferences have been held to discuss a variety of subjects, but from most of them very little has emerged. With the exception of the 1923 conference, there has been no serious attempt on the part of the State Treasurers to settle the financial relations of the Commonwealth and the States. They agree with Mr. Allan, the Premier of Victoria, who, with a candour that is one of his characteristics, referred to the per capita payments as easy money. Naturally, the State Treasurers do not like the odium of imposing extra taxation; but I remind honorable senators that that responsibility . would have been theirs had the Commonwealth not embarked on this wrong principle. The Government’s proposal does not mean that the Commonwealth will devour or strangle the States. To do so would be to injure our own creators - a part of ourselves. The Commonwealth and the States are so interwoven that when we speak of a State or the Commonwealth we speak of the same thing.
– Yet the Prime Minister says that the States must “ toe the line.”
– At neither the 1919 nor the 1923 conference was the question of moral rights raised; but, in 1926, the State Treasurers, driven from pillar to post by the eloquence of Mr. Watt and the persuasiveness of Mr. Bruce as to the necessity for something being done, passed a vote of thanks to. Mr. Bruce for his courtesy. That was about all £hat emerged from the conference. It was all that we might have expected. I think it was Sir Alexander Peacock who said that ‘it would be difficult for the States to levy additional taxation, and that, if they did so. they would be “ damned unpopular.” That, no doubt, is the view of the State Governments. The Commonwealth is not seeking to bludgeon the States. As a private member, I recognized last year that the figures then submitted should have been discussed in the light of expert knowledge. In that direction, South Australia has rendered a service to the Commonwealth by the anpointment of a commission to inquire into the disabilities caused by federation. Personally, I cannot regard the personnel of that commission as entirely unbiased. It consists of Mr. L. L. Hill, the Premier of the State; Mr. R. L. Butler, the Leader of the Opposition, who will probably be Premier shortly : Mr. E. H. Cornish, the Commissioner of Taxes; Mr. R. R. Stuckey, the UnderTreasurer and one independent gentleman, Mr. J. Entwistle.
– Although the committee has taken evidence, it has not yet submitted any report.
– The first witness called by the commission was Frank Botham Lee, an. officer of the State Treasury, whose evidence was exactly what we would expect from a State officer. Much as I deplore it, I cannot help feeling that there is a modicum of hostility between State and Commonwealth officers. I do not know why that should be so; but that it exists is beyond doubt.
– That is a very serious reflection.
– Not at all. I do not say that the State officials who gave evidence did not express their honest opinions. Mr. Cornish, the Commissioner of Taxes in South Australia, told me that he considered that some of the calculations submitted last session were not entirely accurate as to the incidence of taxation. His statement seemed to breathe the suggestion that he welcomed this easy money from the Commonwealth. That is only natural. Were I a State Minister, f should (probably hold the same view. But when independent testimony was given by professors and lecturers at the University, views in support of the Government’s proposal were presented. Mr.MacKay, who was mentioned by Senator Barwell last night, during his evidence before the commission said -
The question of policy should he settled cither by a convention or a committee representing the States and the Federal Government; but I think technical advice should be tendered to that convention, and not advice of a political or other character.
The trouble is not between the States and the people, so much as between those who hold high positions in the Federal and State political spheres. They come to these conferences, the Commonwealth desiring to rid itself of this false principle and the States wishing to hang on to it. Up to the present, the representatives of the States have displayed an unwillingness to face the position.
– They are willing enough, but they fear they will get nothing.
– There is no good ground for such a fear. Is it suggested that the Commonwealth Government will deal with them less generously than it proposed to act in 1923, or at the conference of 1926? So long as the Surplus Revenue Act of 1910 remains on the statute-book, we shall never make any progress in the financial negotiations with the States. The Government’s sole purpose is to bring about a conference between the representatives of the States and the Commonwealth, with a reasonable assurance of accomplishing something. The nearest approach to an agreement was in 192*3, but last year, the States escaped in the smoke of the “ moral right “ claim. In- the consideration of these matters, as Mr. MacKay has pointed out, we should have the assistance and advice of experts. He went on to say -
The advice should be tendered by economic experts, and so on. That evidence being of an impartial nature, the convention would be sufficiently informed to take up the question. I have a feeling that if the economists in the other States went into the question they would have no doubt in their minds as to what the position was. As trained economic experts, they would see quite clearly what the effect of the tariff is.
At a later stage, Mr. MacKay said that the only way in which this could be settled, was by a convention or a conference between the Commonwealth and the States, guided by the advice of experts. When the Prime Minister returned recently from his visit to Great Britain, he expressed his willingness to appoint a royal commission, composed of independent persons, to examine carefully the figures dealing with the proposed financial arrangement between the Commonwealth and the States. That offer, as we know, was rejected for the simple reason that the States did not wish to face the position; they desired a continuance of this “ easy money “ which comes from imposts levied by another Government. I say without hesitation, that the people wish the Commonwealth to get out of the field of direct taxation at the earliest possible moment. The Constitution .clearly intends that, except to meet a great emergency, the Commonwealth should not embark upon a policy of direct taxation at all. That emergency did arise, and the Commonwealth, as was its duty in order to meet its obligations, levied direct taxation, which, broadly speaking, up till then, had been the special privilege of the States. I wish it were possible for the Commonwealth to retire altogether from all avenues of direct taxation, but, since we cannot, the Prime Minister recently made a gesture to the States that he was prepared to go a certain distance along that road, on the definite understanding that the States would not be worse off than they are at present. As a matter of fact, they will be better off if this bill is adopted. The Prime Minister’s offer to appoint a royal commission, composed of economic experts, to examine the figures was, with the exception of Tasmania, rejected by the States. A suggestion has been made that this vexed problem should be submitted to the people in the form of a referendum. Obviously, that is not a proper solution of the difficulty. If the representatives of the Commonwealth and the States face the position in a truly Australian spirit, rather than with the object of securing political advantage, it should be possible to arrive at an agreement satisfactory to all parties. When this bill passes, as I am confident it will, I believe that the States will quickly realize the obligation laid upon them to put their houses in order. They can rest assured that the Prime Minister will deal with them generously. Mr. MacKay went on to state -
Having been right through the controversy which took place in the various conferences, I know how very great are the difficulties and how easy it is to get worked up on these financial questions.
We have had some experience of that during the past day or two. I have no doubt that what has been said will prove to be in the interests of the Commonwealth and the States. Mr. Browne, the chairman of the Taxpayers’ Association of South Australia, in his evidence before the South Australian commission, urged that pressure should be brought to bear on the Federal Government to get out of the arena of direct taxation. He also suggested that the financial relations of the Commonwealth and the States should be settled in conference, acting on the advice of the best economic experts that could be obtained. How are wo to attain that end? This bill is brought down for that purpose. When it is carried, we should be able to make some headway in our negotiations with the States. It has been urged that the Government in seeking to pass this bill to abolish the per capita payments, and then calling a conference to discuss the financial arrangements of the Commonwealth and the States, is not acting in a sportsmanlike way. On that point I submit that experice has shown that if the provision relating to the per capita payments is not repealed, the States will continue, as heretofore, to do nothing. It has also been said that people of the States are opposed to the course mapped out by this Government. I contend that if the people knew what was going on, and if they understood the application of the vicious principle embodied in the present arrangements, they would say, “ End it immediately.” The one cry throughout Australia is that the Commonwealth should get out of the field of direct taxation. Whether or not that is possible will be determined by the conference to be convened after the passage of this bill. We know that, unless wo impose undue hardships upon the people, no further taxation can be levied. The Government’s proposal will lead to economy in administration. It will prevent overlapping and duplication of taxation services. The States have been asked time and again to define their attitude. They have declined to do anything, except to hurl at the head of the Prime Minister this verbal brick of “ a moral right “ to a share of the Customs revenue. This is no academic question. It is more essential that it should be settled now than it was in 1923, and the only way to bring the controversy to a head is to pass the bill now before the Senate.
– The passage of the bill certainly will bring the trouble to a head.
– -It has been said that the Government is seeking to disarm the States prior to the conference. Does anyone propose that the Commonwealth should go to that conference disarmed? We know only too’ well that so long as the 1910 provision remains on the statute-book, we shall make no progress in our negotiations with the States in this matter.
– Does not the Minister see that he is turning his own argument upside down?
– My honorable friend spoke for two hours yesterday, and I hope to have an opportunity, before I resume my seat, to deal with some of his arguments which, although eloquent, were utterly illogical. The Government desires to simplify and straighten out what is now a chaotic condition of affairs. Personal antagonisms and political animosities should not be introduced in the debate on an issue of this nature, because we are considering a problem that vitally affects the people of Australia. The electors of the States and the electors of the Commonwealth are one and the same people. Upon the Commonwealth devolves the duty, in the event of trouble arising in any particular State, of protecting it financially and otherwise. It has been said that in the passage of this measure the Government is desirous of strangling the States. Any action of that kind, I put it to honorable senators, would have a boomerang effect upon the Commonwealth. Therefore it is not likely that the Government would lightly embark upon such a course of action. The argument that the Government is endeavouring to strangle the States, or do them some great injustice, is utterly unfounded. The duty imposed upon the Commonwealth under the Constitution is to protect the States. No State could go under without the Commonwealth as a whole being affected. I ask honorable senators to dismiss that suggestion from their minds, because it is an unworthy one. The Government desires to have the opportunity of negotiating with the States. It has demonstrated that fact time and again. The States have nothing to fear. Whatever fear is felt has been engendered by gentlemen in State politics who are anxious to get this easy money without having to levy the necessary taxation. [ Extension of time granted.] Yesterday we were told that this measure would promote hostility and enmity and that the Commonwealth Government would proceed to demolish and devour the States. That is contrary to fact. The attitude of the Government throughout has been one of friendship, even of tolerance, towards the States. At the eleventh hour before the introduction of the bill in another place an effort was made to induce the States to meet the Commonwealth at the conference table and to show wherein the Commonwealth’s figures were wrong.
– That is hardly correct.
– Why was the appointment of a royal commission offered to the States? Was it not to give them an opportunity to submit their case? Every gesture by the Commonwealth has been a friendly one. It has been said that the Government is out to smash the States. Nothing could be further from its intentions. It is composed of federalists, who are intent upon preserving the federal system. I believe that these proposals will place the financial relation of the Commonwealth and the States in a state of order that has not hitherto prevailed. Certain of the arguments to which I listened yesterday do not appeal to me. I have always believed that the per capita system is wrong in principle, and I am buttressed in that belief by the action which was taken in 1919, 1923, and 1926,. to secure its abolition. If this is a right thing, we should do it and place the matter on a sounder, a safer, and a more scientific basis, regardless of party consequences.
– But if it is wrong?
– If it is wrong the Government should suffer. I am convinced of the rectitude of the Government; and, in view of the attitudethat it has adopted and that I am sureit will adopt towards the States, I have no fears for the future. I go forward, not in any craven spirit induced by the possibility that our opponents may make political capital out of the matter, but with the knowledge that Ave are doing the right thing in the interests of the people of Australia. Senator Greene said, yesterday, that since the present Government was formed the annual collection of taxation per head had -increased by 12s. Id. The honorable senator evidently adopted the figure which Avas mentioned by the right honorable Mr. Hughes in another place when he said: -
When my Government went out of office the Commonwealth taxation per capita totalled £8 17s. Id. annually. Last year it was £0 ls. 6d. . . . The nett increase from 1922-23 to 1925-26 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.
I regret having to correct . such a distinguished mathematician and politician as the right honorable gentleman; but, if honorable senators will study the figures, they will see that an arithmetical mistake has been made. The addition of 4s. 5d. and 6s. 8d. gives lis. Id., not 12s. Id.
– My calculation covered the whole of the period during which the present Government has been in power.
– As a matter of fact, the direct taxation has dropped considerably under the regime of the present Government.
– The point that I made was that the total taxation per head of the population had increased.
– The detail of the figures quoted by the Right Honorable Mr. Hughes are -
If the imports for the financial year 1926-27 are the same iis those in the financial year just closed, the extra 2d. per gallon on petrol will produce an additional revenue of £983,000.
Subsequently, the proposed duties on tires and chassis were abandoned, and only the petrol duty was imposed by Parliament. Mr. Hughes is, therefore, wrong in putting down 6s. 8d. per head as the amount of the petrol tax.] Based on the figure quoted by the Minister for Trade and Customs, that tax would be equivalent to 3s. 2d. per head. Allowing for the discrepancies that I have pointed out, the increase quoted by Mr. Hughes should be varied thus -
We are not considering now the question of whether taxation has been increased. We are not dealing with our budget, or any taxation proposals other than those that are embodied’ in the bill. One of the provisions of the bill has been graphically described as “ a bunch of carrots.” I assure honorable senators that before this measure was drafted the Government was committed to the making of special grants to Tasmania and Western Australia. That was embodied in the proposals which were circulated to the Premiers of the States as far back as the beginning of 1926.
– Why include them in this measure ?
– They are included in this measure simply because they are provided for in the Surplus Revenue Act. I deplore the sinister nature of the suggestion which was made yesterday.
– Will the Government now bring forward a separate bill dealing with those grants?
– I should not care if the provision were inserted in half a dozen bills. I have a great respect for the mentality and the uprightness of the honorable senator who gave utterance to that sentiment ; but it is not fair to the Government. It is hitting a little below the belt to suggest that a government which stands on the plane that is occupied by this Governmentwould be guilty of such conduct. Had 1 been a private member, I should probably have allowed the suggestion to pass without comment ; but I feel that it is a reflection upon the Government of which I am a member.
– The Minister knows that a deputation was advised that the special grants to the States were contingent upon the passing of this bill in its entirety.
– That may be so. In placing matters before the State Premiers in 1926, the Commonwealth Government referred to the Western Australian Disabilities Commission, and to the investigations conducted by Sir Nicholas Lockyer in Tasmania, and set out clearly what it intended to do for those States. The portion dealing with Western Australia was separated under two heads, and the Government went on to say: -
The Commonwealth Government believes that if Western Australia were relieved of this burden for a period, the State finances could be readily and permanently stabilized. The Commonwealth Government accordingly offers to take over, for a period of five years, the liability of payment of interest and sinking fund on a fixed amount ot £5,000,000. Under this proposal Western Australia will be relieved of an annual charge of approximately £300,000 for a period of five years. At the end of that period the position will be reviewed.
If this bill is rejected, Western Australia and Tasmania will still be entitled to their grants. There is nothing of the “ bunch of carrots “ in these proposals.
– I did not say that there was.
– No, but it has been said about the Government’s proposal. It is rather an unfortunate remark about a Government, whose integrity, and political cleanliness should commend it to the people. I have already dealt with the suggestion that the passing of this bill will mean that the Commonwealth Government will be given a blank cheque. Let me state the position briefly. Although this bill repeals the per capita grants, the States will be absolutely secure until the 30th June, 1928. And in the meantime, if they do nothing - there are indications that they will do something, Mr. Allan, the Premier of Victoria, and others having intimated that something will be done - if we are faced with the ordeal of having to do the best we can with out knowledge of the States’ taxation systems, and with the guidance of the experts to which Mr. McKay referred, we shall have to bring some proposal to Parliament for its acceptance or rejection. This Parliament will see that no injustice is done to the States. The principle of “ Trust the Commonwealth Parliament “ that influenced a number of the representatives of the Colonies who took part in the Federal Convention should guide honorable senators to-day. The Government is not anxious to do anything that might be the resort of a cracksman. It has no desire to bludgeon the States into submission. Its sole purpose is to induce them to confer with us to make their position clear to us and point out where our figures are wrong, if they be wrong. It may be that they will ask us to take over some of their debts, hut I do not want to enter upon that question now.
– It will be open to them to do so.
– As Senator Pearce said in moving the second reading, the whole field will be open for discussion. All that we say now is, “We want that discussion; we want the best information we caa get; we want experts to declare what is fair as between the States and the Commonwealth.” For whatever result may be achieved, the Government will be responsible to this Parliament. I cannot, therefore, understand the suggestion that the passing of thi3 bill will give a blank cheque to the Commonwealth Government. The whole crux of the question appears to be the need to bring about a conference by some means.
– Fair means or foul.
– My friend may like to put the matter that way, but no fairer means could have been adopted than the offers made by the Commonwealth, in 1919, 1923, and 192C, or the offer of a royal commission of independent expert economists to inquire into the equity or otherwise of the present financial arrangement. It is the bounden duty of honorable senators to represent, not tho State Parliaments, but the people of the States, and to look at the whole matter broadly. The Government is not imposing any burden on the people of tho
States, nor is it driving the Governments of the States to do anything except confer with us. It is for honorable senators ro criticize the proposals which the Government will ultimately ask the Parliament to adopt as being fair to the States.
– The States will maintain their moral right to the per capita payments.
– They cannot maintain it any longer. If they persist in that attitude the task of evolving something to take the place of the per capita payments will rest on the Government; and, when its proposals are submitted to Parliament, honorable senators will be in a position to analyse them and examine them in the light of all tho information that in the meantime the States can provide. No friendlier attitude could have been taken up towards the States. We take away the per capita payments as from 30th June next, but continue the States in the same position for another twelve months to enable them to function pending the drawing-up of a new agreement. If no agreement is reached before effect is given to the scheme as outlined in tho memorandum of 1926, this Parliament will be consulted. There is thus no cause for complaint on the part of the States. As has already been said, they are not concerned in the question. The only persons really concerned are the taxpayers, those who bear the burden. With the financial position of the world such as it is, it behoves us to take steps to put our own financial house in order, and see that the system of the Commonwealth levying taxation on behalf of the States and handing it over to them terminates, leaving to them the responsibility for raising their own taxation. That having been done we, perhaps, will have to come to some understanding in regard to State debts. That is a more difficult question. Unless we get the whole of the States agreeing to the Loan Council, or whatever body is formed to carry out the policy of liquidating the State debts, there will be lack of that unanimity which is necessary. That would mean building up the credit of the States who stood out, enabling them to exploit the money markets of the old world. An honorable member of another place who opposed this bill has stated that, during the last six years, the States of the Commonwealth have borrowed £176,000,000. We cannot go on at that rate. The States arc realizing it themselves. Their responsible statesmen are beginning to take notice of the situation. It is about time we bad financial order instead of the chaos which has characterized the payments to the States under the system that has obtained in the past.
.- I am pleased that we have had a Minister offering some defence against the charges levelled at the Government. This is probably one of the most important measures that the Senate has had to deal with since I have been a member of this chamber, and it certainly should not be dealt with hurriedly. I regret that the Government is pressing rather too hastily for the passage of the bill. We should approach the matter in a fair-minded and logical manner. I certainly cannot be accused of being actuated by political motives. I owe allegiance to no political party, so that the observations I make are based on honest convictions, and are not forced by party political considerations. Unfortunately, this has been made a party question, and the party whips have been cracked. Political pressure has been brought to bear.
– How can the honorable senator say that when there has been so much diversity of opinion upon the Government side?
– The whip has cracked over the honorable senator, and he knows it. We have heard rumours that if this measure is defeated the Government will resign, and there will be a general election. Such statements are circulated in order to scare timid members who are afraid to meet the electors, but I do not think that they will have much effect. I regret that the Government has thought fit to place two proposals in one bill. Senator McLachlau has attempted to justify this, saying that it has not been done with any intention of embarrassing honorable senators or Parliament; but the fact remains that it places in an unfair position honorable senators representing two States, who are expecting and who have been promised financial assistance. I cannot understand why the Government has persisted in thi? attitude. I was glad to have an assurance from the Honorary Minister (Senator McLachlan) that even if this bill is defeated Western Australia and Tasmania will receive the special grants for which it provides. We have not had such an assurance before. As the Government has never informed the Tasmanian Government that the grant to Tasmania will be paid even if this measure is defeated, the Tasmanian people have been in a state of fear and doubt. That is a most unfair position in which to place us. Although the Premier of Tasmania informed me the other day that if this measure were defeated, and Tasmania in consequence were deprived of the special grant, those who opposed it would have to take the responsibility, I intend to vote against it, because I believe that the Government will honour its obligations no matter what the result of the division may be. The Government has now shifted its ground. When the measure was submitted last session we were told the per capita, payments would be discontinued and that the States were to be given the right to operate in the field of income taxation payable by individuals to the extent of 40 per cent., as well as take over the land tax, the amusement tax, and estate duties. Apart from the straightout abolition of the per capita payments, that was the only proposal put before us. The Government, I repeat, has shifted its ground. It says that that is only a tentative proposal, and that if the per capita payments are abolished some other alternative may be substituted. The Honorary Minister (Senator McLachlan) let the cat out of the bag this afternoon when he said that the taking oyer of the State debts was indeed a difficult proposition. Personally, I am not opposed to the abolition of the per capita payment provided a suitable alternative is substituted; but before it is discontinued I want some guarantee of permanency regarding the future financial arrangements between the Commonwealth and the States. I want a written bargain, sanction or bond for the State which I represent. I am not prepared to take the word of a. government or a minister as to what may be done to enable the States to carry out- their duties and obligations. We are told that the responsibilities of the Commonwealth have largely increased as a result of the war. That cannot be denied; but if it be true of the Commonwealth it is equally true that the responsibilities and obligations of the States have also increased. The States have had to accept the responsibility of a great proportion of the expense of soldier settlement, which is really a Federal obligation.
– Who found the money ?
– Who pays the interest ?
– The Commonwealth had not the land on which to settle soldiers, and consequently the States had to provide it.
– The Federal Government provided the money, but the States are meeting the interest bill, and also the losses incurred.
– That is incorrect. I’he Commonwealth shares in the interest and loss, and has already written off over £5,000,000.
– I admit that the Commonwealth has written, off a small proportion of the interest, and has granted loans over a number of years at low rates of interest ; but the States have really to carry the whole of the financial burden of these loans. If it is true that Federal obligations have increased as a result of the war, it is also undeniable that the obligations of the States have doubled through the same cause. “
– Not to anything . like the same extent.
– In the same ratio. What are the functions and duties of the States? It is the duty of this Parliament to see that the States are able to carry on necessary developmental work, because the future prosperity of this great confederacy depends upon the solvency and prosperity of the States. As Senator Greene pointed out yesterday, the State functions are in many respects more important than those of the Commonwealth. The States have to develop the land resources.
– Because they have the land.
– Upon the successful development of our land to a large extent the future well-being of the Commonwealth depends. The States control education, the maintenance of law and order, the police force, the development of timber and mineral resources, as well as many other functions. No agreement or financial arrangement should be made under which the States will be absolutely dependent upon the Federal Treasurer for the means whereby to carry out these functions.
It is not my intention to go into the early history of the federation, but I should like to remind honorable senators that the two principal subjects which dominated the very important discussions at the convention were finance, and the representation of the States in the Senate. In the absence of a settlement of these two subjects, federation would have been impossible. In the first place, it was considered necessary that the States should have sufficient revenue to function, and some special protection to preserve State rights and State interests. Consequently a compromise was reached whereby the Senate was constituted so that the States should have equal representation, and senators should be elected by the whole of the people in each State. These questions were unsolved at the first referendum taken in June, 1898, and which was defeated as a direct result of the imperfections of these two provisions. The Honorary Minister (Senator McLachlan) said that section 87 of the Constitution was only a tentative arrangement and the objection to it was based upon the fact that one government was spending the revenue which another raised. Such a consideration was never mentioned. The first referendum was taken in 1898, and was defeated by the vote of New South Wales owing to the arbitrary majority which the late Sir George Reid insisted should be obtained in that State before the measure could be carried. The main objection was m regard to the financial provisions. The New South Wales Parliament considered that the Braddon clause, which gave the Commonwealth only one-fourth of the Customs and excise revenue, and required the balance to be handed to the States, would mean that New South Wales, which was then supposed to be a freetrade State, would have to raise too much revenue through the Customs to meet its obligations. There was no limitation on that provision when it was originally passed by the convention, and it was only after the failure of the first referendum that the limitation of 10 years was provided. Later the proposal was submitted to the people - after giving New South Wales some of the spoils in the nature of the Federal Capital - and the bill was carried on a simple majority as agreed to by New South Wales, when it was re-submitted in 1899. I base my objections to these financial proposals of the Federal Government on two grounds : First, that the proposal is temporary and uncertain, and secondly that insufficient provision is made for the smaller States to properly carry out their duties and obligations. There is another reason, which I shall refer to later, and which has to do with the constitutional aspect, which entails upon this Senate a very serious responsibility. If we are to base our calculations upon the proposals submitted last year, the States are to receive 40 per cent, of the income tax payable by individuals. The States will not be able to raise the same amount of money from that source as is now collected bv the Commonwealth.
– The States will not be able to tax Federal securities, neither will they be able to aggregate incomes.
– Cannot the States increase the rate per pound 1
– If that were done the honorable senator would be one of the first to squeal. The two points I have mentioned are sufficient to justify my objections to the bill. Yesterday the Leader of the Opposition (Senator Needham) read a long document showing that the objections which apply in regard to income taxation apply also to land taxation. What is likely to happen when the Labour party is returned to power, as it will be some day, and will want money for its various projects? When that time arrives the honorable member for Dalley (Mr. Theodore) will probably be Prime Minister, and I think honorable senators will admit that he knows how to spend money. He will be seeking sources of revenue apart from Customs and excise duties, and will probably invade the field of direct taxation. The Government is offering a premium to extravagance. It wants complete control of revenue from Customs and excise for some future extravagant government to spend, and when it has control of this source of revenue, it will impose further direct taxation. The effect will not be to prevent extravagant expenditure upon hair-brained schemes. It will be the opposite of that. Many people, including myself, are of the opinion that the present Federal Government is not altogether guiltless of extravagance. It has an enormous surplus each year; ‘indee(d, its difficulty is to appropriate its surpluses in a way that will defeat the object of the Constitution. For that reason the Commonwealth has indulged in many fanciful schemes. It has subsidized cotton mills, and granted bonuses on canned fruits. Most of those grants will go into the pockets of the canners, and not of those who grow the fruit.
– Twenty-five thousand pounds was advanced to Tasmanian apple-growers.
– That may be so; hut no advance has been made to those engaged in the dried-fruit industry in Tasmania. I do not propose, however, to draw distinctions. The Commonwealth Government has also embarked on a housing scheme which will cost many millions of pounds, notwithstanding that every State has in operation its own housing scheme, which is carried out more efficiently and at less cost than the Commonwealth scheme will be. Not only can the Commonwealth Government be charged with having been extravagant in the past; it is in this measure opening the door to further extravagance in the future. The Prime Minister has stated that his Government is prepared to do almost anything to meet the wishes of the States so long as thev agree to the discontinuance of the per capita payments. I shall not give my vote to abolish those payments until I see the written bond, and the financial arrangements which are to. be made. We are told that the Premiers had an opportunity to submit their own proposals ; but the only question before them at last year’s conference was the abolition of the per capita payments.
– They were asked for alternative suggestions.
– They were informed that only one question was to be discussed.
– They were told that compensation was to be made in other directions.
– No other proposal was submitted.
– The Commonwealth agreed to vacate certain fields of taxation.
– That offer was made subsequently.
– It was made at the same time.
– So far as I remember, the proposal that the Commonwealth should vacate certain fields of taxation was made subsequently. In any case, the State Premiers were of the opinion that the fields of taxation which would be opened to them would not yield them the same revenue as that derived from the Commonwealth by means of the per capita payments.
– They would not discuss the question.
– It was not a subject for them to discuss, but for a properly constituted convention of financial experts.
– The Premiers had their financial advisers with them.
– The report of the conference shows that the proposals were all made at the same time.
– I now see that that was so. The States, however, objected to the abolition of the. per capita payments, and later they submitted figures showing that they, would not be able to raise from the same sources as much revenue as* they would derive from the continuation of the per capita grant. They, therefore, submitted no alternative proposal. But there is in. this bill a more important issue than that of the financial stability of the States. This Senate must decide whether effect should be given to the intention of the framers of the Constitution or whether this House is to be a mere echo of another place. Before the strict regimentation of parties this chamber carried out the functions for which it was constituted, it was a house of revision and review. Unfortunately, it has lost those splendid attributes and become a mere recording place for the House of Representatives.
– The Senate has its chance now.
– Yes. Four years ago, when I entered this chamber, I vainly imagined that I should be free to speak and vote as I thought right, and that others would be in the same position. But I am sorry to say that during the whole of those four years the Senate has never succeeded in making one real amendment to a bill, nor has it insisted on any of its suggestions being adopted by another place. In the old days the Senate had some glory and prestige, but that has now departed.
– The honorable senator has only to call to mind what happened yesterday to see that the Senate has made amendments.
– In times past honorable senators could speak and vote according to their convictions. In this matter I refer to no particular party, for all parties are equally guilty.
– The honorable senator is claiming to be the only one in this chamber with pure motives.
– No; but I entered it pledged to maintain my independence and to make the Senate a non-party house. The Senate was never intended to be a party house. I regret that it has drifted from the old position and no longer follows the example of the great men who at one time occupied this chamber. The Constitution provided that the several States should have equal representation in the Senate in order that it should be a house of revision and review, and that the rights and interests o’f the States should be preserved. The first proposal was to call it “ The States Council,” but instead, the old Roman term, “ Senate,” was adopted. In order to strengthen the Senate, to give it a sense of independence, and to ensure that it would thoroughly represent the States, and not any one section of the people, the Constitution also provided that the representatives of each State in the Senate should be elected by the whole of the people of the State. Has the Senate dm ing; the last four years carried out the functions and duties assigned to it by the conventions and the .Constitution? Indeed, has it done ‘any useful work during that period? I doubt it. The Senate is now being tested. If it agrees to this measure which has been condemned by the Parliaments, the Cabinets and the people of all the States, its death knell will almost bo sounded.
To show the intent of the framers of the Constitution, I propose to make one or two quotations from the debates at the various conventions. During the 1891 convention, Sir Henry Parkes, rightly said : -
What I mean is an upper chamber - call it what you may - which will have within itself the only conservatism possible in a democracy - that of maturity of judgment, distinction of service, length of experience, and weight of character, which are the only qualities we can expect to collect and bring into one body in a community young and inexperienced as Australia.
I endorse Sir Henry Parkes’ reference to the need for a little conservatism. From the manual which Sir Richard Baker framed for the guidance of the 3891 convention, 1 quote the following extract : -
If there be some outward and visible sign of State rights, how can it be better effected than by equal representation in the Senate? A Federal Senate, a second House which represents State unity, has this advantage; it embodies a feeling - a feeling which is older than complicated politics; which is stronger a thousand times than political feeling; the local feeling, “My shirt” says the Swiss patriot, “ is nearer to me than my coat.” An elected Senate, in which each State is equally represented, is a guarantee that no law will be passed, not only without the consent of the people, but also without the consent of a majority of the States.
– In those days there were no political organizations.
– No. There was then no regimentation of parties and, in such circumstances the Senate would do some useful work. I say, unhesitatingly, that the Senate. is now on its trial. If it fails on this occasion to fulfill its proper function - the protection of the interests of the States - its end will be in sight, and I shall do my best to urge that some alteration be made.
– All that would happen would bo that we should be turned out and others would take our place.
– I do not mind if that is so.
– The honorable senator is like the new recruit who considered that the rest of the regiment was out of step.
– The Senate has drifted from its early position. It is already an unpopular chamber; it has forfeited a great deal of respect. If it fails on this occasion its prestige will have departed altogether.
– Because it does not agree with the honorable senator.
– My argument is based upon the constitution of the Senate.
– On the honorable senator’s interpretation of the Constitution.
– My interpretation is correct.
This question has been considered by the various State Parliaments and State Ministers. They have all condemned it. So far as I have been able to find out, the only people in favour of it are Government supporters, and another section which hopes to benefit by reduced land and income taxation. Large landholders know very well that the Legislative Councils of the several State Parliaments will protect their interests, and that State Governments will find it extremely difficult to pass land tax legislation, to make good any loss sustained through the abolition of the payments. Similarly large income tax payers having financial interests in more than one State naturally favour the Government proposals, because if they are accepted, they will be able to evade a considerable portion of taxation which at present is levied upon them. But I am chiefly concerned about the financial position of the States, and I say that under this bill it will be impossible for the Government of the smaller States to function satisfactorily. I know very well that it is a waste of breath to attempt to sway those honorable senators who favour the measure; heads have been counted already, and the numbers are up. The Government is assured of its majority. We know exactly to one head what the division lists will show. The fate of the bill has been decided outside this chamber. That is my objection to the introduction of party politics in the Senate. All legislative proposals should be -decided on the floor of this chamber, and not be considered secretly in a room outside, then brought in and thrown on the table. Any discussion, in such circumstances, is a farce. I am opposing the bill because I believe it will seriously embarrass the States, and because there is no guarantee that in the future those fields of taxation, which the Government proposes to abandon, will not be re-invaded with results disastrous to the people, especially of the smaller
States. I represent one of those unfortunate States, which has to come to the doorstep of the Federal Treasury pleading for assistance. Not long ago, when Tasmania made application for a grant the Treasurer told the Premier of that State that he would have to go back and impose further taxation on the people before he dare ask for further financial aid from the Commonwealth. Notwithstanding that direct taxation in Tasmania was then higher than in any other State, based upon the capacity of the people to pay it, the State Government was obliged to increase income taxation by 25 per cent., and further penalize its people in order to get a financial grant from the Commonwealth. In my State we always have to look for this assistance. It is humiliating to me to know this, because I desire the finances of every State to be on a sound basis, so that its Government may function without continually appealing to the Federal Government. We are told that we should trust the Government to do justice to the States.
– No; trust the Parliament.
– We are asked to trust the Government to do what is right and fair to the States. I do not propose to do that. Therefore I shall vote against the bill. The. Senate will forfeit for all time every atom of respect and confidence of the people if it neglects the sacred duty confided to it under the Constitution to safeguard the interests of the States. I have no more to say because I believe that the fate of this bill has been already decided. The Government should not come down with a cut and dried proposal like this, and ask the Senate to pass a bill to abolish the per capita payments without providing a substitute for those revenues which the States will lose.
– During the discussion which took place on the budget I defined my attitude with regard to the principle of the per capita payments, and stated also my position concerning the Government’s proposals which were then before the Senate. Quoting from the report of the Premiers’ Conference in 1923, I showed that the finance committee of the conference had estimated that duplication of taxation in Australia was costing not less than £600,000 a year, and I stated that I would go a long way to avoid this huge waste of the taxpayers’ money. I further stated that I would support the proposals put forward, which would eliminate some of that costly duplication if it could be shown that every State would benefit to the extent of ?50,000, as stated by the Government. Direct taxation in 1921-22 yielded ?22,048,483, made up as follows :-
The collection of that amount of direct taxation, I remind the Senate, cost Australia ?600,000. Wherever one goes, one finds the man in the street and the man on the farm complaining about the evils of duplication in taxation. It is surprising that this public demand for its elimination is not made a feature by the daily press now that we have a chance to eliminate it. Doubt has been expressed as to the accuracy of the figures submitted by the Commonwealth Government. On that point, Mr. Gunn, then Premier of South Australia, stated recently -
The Commonwealth Government claimed that the income tax figures were based on the actual assessments for 1924-25, but mention was not made of the fact that during the year under review many assessments had been made which were rightly attributable to the previous year. That position arose through the delay consequent upon the amalgamation of the Taxation Department. Figures available in the Taxation Department of this State showed that tax, totalling between ?300,000 and ?400,000, added to the tax for the year 1924-25, rightly belonged to the previous year and represented a carry-over of tax assessed but not collected, f.nd tax on assessments not made until after the close of the financial year to which they belonged, namely, 1923-24.
I refer to that statement because this scheme, which was placed before us previously will doubtless be considered later, and I want to make my attitude clear. Mr. Gunn further stated, after reviewing the position: -
Those factors were of paramount importance in determining the adjusting grant to the State of South Australia under the new proposals. In the tabulations circulated it was shown that the proposed grant would be ?23,000; but a careful analysis of the position disclosed that South Australia should receive a further ?110.000 as representing the difference between the Commonwealth Government figures on the inflated basis and the calculated figures arrived at by the latest analysis.
Mr. Gunn contended that the Commonwealth Government’s figures were wrong. The following is an extract from the report of the Premiers’ Conference in 1926:-
We know the figures in South Australia, ns we collect the income tax for the Commonwealth. … I am probably right in assuming that similar mistakes in calculation have been made in regard to other States.
Dr. EARLE PAGE The figures which form the basis of our memorandum were supplied by the Deputy Commissioners in the different States.
Mr. ALLAN. Our officers say practically the same us Mr. Gunn is saying.
Mr. GUNN. I would like to see the questions which Dr. Earle Page submitted to the Deputy Commissioner of Taxes in South Australia. He is with mc to-day, and has supplied me with the figures.
Dr. EARLE PAGE. We asked for the total assessment for the financial year 1924 25.
Mr. GUNN. Evidently you were at cross purposes, because, according to the officers who collected your taxes, your figures were all wrong.
That argument applies not only to South Australia but also to all the’ States which receive a special grant. According to the Treasurer, the taxation in South Australia proposed to be abandoned by the Commonwealth Government, but which may be reimposed by the States amounts to ?728,966, made up as follows: -
The Commonwealth proposes to withhold from the State of South Australia the per capita grant of ?700,849 and to withdraw from taxation to the extent of ?725,966, the State to reimpose that taxation and thus be ?28,117 to the good. The Commonwealth is to pay an adjusting grant of ?23,000, so that the State shall be not less than ?50,000 better off. If the figures of the South Australian Government are correct and those of the Commonwealth wron?, South Australia should have an additional adjusting grant of ?110,000. That grant should be made not for one year only but for as long as the State would have received the per capita payment. It should not be necessary for Parliament to pass legislation every year; the adjusting grant should be made on the same terms and conditions as those under which the States are at present receiving the per capita payment - that is, until Parliament otherwise provides.
– Every State Treasurer made a similar statement ; but when we asked them to appoint an independent commission to examine the figures they would not accept the offer.
– I shall deal with that point. On the 11th February, the Prime Minister, in announcing the decision of the Government, said -
An independent commission will be appointed, and if it finds that the States will be placed in a disadvantageous position under the new proposals, the Commonwealth will undertake to increase the amounts payable.
– And the States were to have equal rights with the Commonwealth in the appointment of that commission .
– The Government of South Australia said that it would not accept any responsibility in regard to the appointment of a commission, but stood upon its moral right to receive the per capita payment. That placed the Commonwealth Government in a most unenviable position, and it decided to proceed with its proposals.
An important function of the Senate is to protect the rights and the interests of the States. The position in this chamber has been greatly misrepresented. It has been said that we shall sacrifice the Tights of the States if we agree to the bill. Such statements are absolutely unjustified, and they ought not to be made. It has also been asserted that the whips have been cracked with the idea of forcing honorable senators to support the Go ern.ment. No whip has been cracked over me; and the division which took place in the other House showed that those honorable members of the Government party who voted against the bill had not had the whip cracked over them.
– They defied tho whip.
– What is the good of saying that the whip has been cracked to ‘bring followers of the Government to heel? Such statements are unfair and unwarranted. A majority of honorable senators will agree that the per capita payment is inequitable. New South Wales and Victoria are the great est gainers from Australia’s policy of protection, because the increase in their population during the last few years has enabled them to draw a considerably augmented per capita payment, whereas other States have remained practically stationary. There has always been a large body of opinion in opposition to the invasion of the field of direct taxation, except in very extreme circumstances, by the Commonwealth Government. At the Premiers’ Conference which was held in 1923, Sir William MacPherson, putting the case for the States, said -
I think that, if we could accomplish something like that, we would really be getting back to first principles; because, while we realize that you have the power to collect direct and indirect taxation, when we federated it was generally assumed that you were going to stand out of the field of direct taxation. Of course, the war came along, and you exercised your right, very properly, and came into the field of direct taxation.
Sir Henry Barwell represented South Australia on that occasion, and said -
We want to get back to the principle that the Commonwealth should operate entirely and exclusively within a certain sphere, and that the States should operate entirely and exclusively within another sphere. The first principle is that the States should have control of direct taxation, and that the Commonwealth Government should rely upon Customs and excise revenue.
That was a. direct and definite expression of opinion. The framers of the Constitution also took a very strong stand in relation to the imposition of direct taxation by the Commonwealth Government. I have gone through the debates, and I am satisfied that, although a difference of opinion existed in regard to the financial proposals, every member of the convention held strongly the view that the Commonwealth should have the field of Customs and excise duties, and dreaded its invasion of the field of direct taxation. At the Federal Convention which was held in Melbourne in 189S, Mr. (afterwards Sir George) Reid said -
I point out that this will make a peculiarity in the position of the Treasurer of the Commonwealth, which needs only to be stated to be seen at once. The Treasurer of the Commonwealth, when he is constructing his fabric of ways and means, will have the strongest possible temptation to look on Customs and excise as an unsatisfactory method of raising revenue, because he only gets 5s. out of every £1 raised in that way, whereas, from other forms of taxation, he gets the full £1 raised. Now, I must say, it is scarcely a scientific piece of legislation to put that temptation in the way of the Treasurer to make him discriminate as to methods of taxation.
Mr. Barton. You may make him impose direct taxation.
– We may. If, for example, I had anything to do with the Commonwealth finances, and I found myself in a difficulty, should I go to a source of revenue which would only return to me 25 per cent, of the produce? No; I should go to a source which gave me the whole ?1. I only put this view as one objection to this proposal, because it makes the position of the Commonwealth in a peculiar state, inasmuch as one form of taxation will give the Treasurer 100 per cent, of the taxes raised, and the other only 25 per cent. We know what may be the consequences of anything of that sort. l t is evident that those men dreaded that the Commonwealth might invade the field of direct taxation.
I come now to the provision in the Constitution that the Commonwealth should retain not more than one quarter of the Customs revenue for a period of ten years after the establishment of the Commonwealth and thereafter until Parliament otherwise provided. At the expiration of that period it became necessary for Parliament, in whose hands the responsibility was placed, to make a new arrangement. A fresh defence policy was contemplated, and the Australian Navy was established. It was also considered that the Commonwealth should undertake the payment of old-age and invalid pensions. These additional responsibilities altered the whole prospect of Federal finance, and reduced very considerably the amount of revenue which could be returned to the States. As honorable senators are aware, provision was then made whereby the States were to receive 25s. per head of the population for a period of ten years, or until Parliament otherwise provided. The responsibility having been placed in the hands of this Parliament, it should be shouldered. 1 can see no reason for the submission of the question to a referendum of the people. If the time has arrived for abolishing the per capita payment, it is the duty of this Parliament to deal with the matter. A possibility which was foreseen at the time of the Federal Convention, was the war, which altered the whole financial position of the Commonwealth and .increased its liabilities tremendously. This year, the interest on our war debt amounts to no less than ?20,700,000, and we have also to provide ?7,400,000 for war pensions and ?1,120,000 for repatriation. In addition to our war liabilities, we have also to make provision this year for ?2,000,000 for road grants to the States, and ?9,000,000 for invalid and old-age pensions. The total expenditure of the. Commonwealth this year is ?53,066,000. Of this amount we receive revenue totalling ?4,000,000 from sundry sources, excluding direct and indirect taxation, leaving ?48,768,000 to be met from other sources. As our Customs and. excise duties will not yield more than ?42,000,000, if will be necessary for us to get ?6,768,000 by direct taxation. In these circumstances, it is clearly impossible for the Commonwealth Government to abandon all direct taxation.
It has been said by Senator Barwell and Senator Greene, that, by passing this bill, we shall be signing a blank cheque. I do not see it. The proposals put forward are definite enough. The Government asks Parliament to pass this bill, providing for the abolition of the per capita payments, and it proposes to call a conference at which the whole question of the financial relations between the Commonwealth and the States can be looked at from every angle. It is prepared to consider any method which may be suggested, and if it is thought that there is a mistake in the figures on which its calculations are based it is prepared to appoint a royal commission of independent experts to examine them. It will not limit the discussion to any particular matter - the whole field of taxation may be reviewed and proposals for the establishment of a sinking fund for the liquidation of the State debts, or for the assumption by the Commonwealth of some portion of the State debts, will be considered. In fact, the Government has intimated plainly that it is willing to consider any proposal or suggestion brought forward by the States. Are we to bludgeon something through this Parliament without the approval of the States, or are we to meet them in conference and make an arrangement with them before legislation is introduced here? The subjects suggested for discussion at the proposed conference are of two classes. One class related to schemes anon as for taking over the States debts or for the establishment of a sinking fund for the liquidation of those debts. Those schemes cannot be put into operation unless they have the approval of all the States. One State standing out, could wreck such proposals. If all the States agreed to it, would honorable senators oppose a bill to carry it into effect? It is not a case of signing a blank cheque when we make it possible to set in operation a scheme which can only be adopted with the unanimous consent of all the States. The other class is a scheme which can be put into operation by this Parliament without consulting the States, ar.ci the only proposals which nave been suggested in this direction are those which were previously before Parliament. The action taken is the only step the Government can take to bring about a conference with the States at which the whole question of the financial relationship of the two authorities may be fully discussed, and the result brought before this Parliament, which has the final say. Surely that proposal is definite enough. At any rate, we know what we are doing in passing this bill. It is often said that the position of the States will not be secure if this measure becomes law. It will be much more secure than it is to-day, because now any Government can como forward with a proposal to wipe out the per capita payments to the States, without compensation, in order to provide it with money to embark upon some fancy scheme.
– A few months anterior to the last Federal elections the compo-combination Ministry was damned and doomed. Defeat was staring it in the face, and Ministers and a majority of their supporters had almost reconciled themselves to their impending fate. But as the election drew near, in sheer desperation, they deliberately faked an issue. They whooped and screeched from innumerable platforms that the mighty hosts were advancing and that the enemy was within the gate. They alarmed and they scared the community into the belief that a revolution was coming upon them, and they asked all sections opposed to ‘Labour to unite and fight Labour. They said that there was but one issue before the people, and that it was the most vital that had ever been raised in the history of the Commonwealth. The Federal Treasurer, in his policy speech, declared -
The issue is whether those things which stand for civilization, order, and progress are to remain, or whether we are to lapse into savagery and revert to the rule of violence, force, and might.
That was the issue at the last general election. It was a false issue, yet all other matters were subordinated to it. Victory, which was assured to Labour anterior to the election, was turned into defeat. Had Labour been victorious we should not have had this legislation before ns, because Labour is pledged to a continuance of the per capita payments. Tlie Federal land tax and the Federal income tax would have remained. There would have been no instability in the States, no irritation, and none of the uneasiness that now exists. We should have established closer and more harmonious relations with the States. In short, we should have worked in co-operation with, and not, as this Government is doing, in opposition to, the States. I heard some one say in this chamber that the people of Victoria were not interested in this question. My reply is that every candidate at present seeking election in Victoria is opposed to the Commonwealth Government’s action. I doubt whether any candidate would bc successful if he pledged himself to sup port the provisions of this bill. It is said that as the Commonwealth Government now in office is Protectionist, the fiscal policy of Australia is safe. Again it is said that the present combination is dominated by Free Traders. I do not share that opinion. I say that there is not a Free Trader in the Cabinet, and I supplement that statement by declaring that there is not a genuine Protectionist in it. The Commonwealth is now controlled by an administration composed of men who are essentially revenue tariffists. At any rate, the revenue tariffists are the dominating force in the present Cabinet. Senator Pearce owes his seat here to the pledge that he gave before he was accepted as a candidate on behalf of a certain party in Western Australia. That pledge was -
That, as the present high fair j ft’ is inimical to the best interests of Western Australia, the full strength of the two associations shall be devoted to securing a substantial reduction in the existing tariff.
That as a reduction can only bc secured through our .parliamentary representatives, neither party shall give its endorsement to any candidate not in agreement with this policy. That, subject to the abovementioned conditions of policy being accepted as the basis of an appeal to the electors, the Primary Producers’ Association is willing to co-operate with the united party of Western Australia in running a joint team consisting of two representatives of the united party and one representative of the Country party for the forthcoming Senate elections. The team so selected shall receive the endorsement and support of both associations and no other candidate shall be nominated, endorsed, or supported by either association.
That compact, which an honorable member in another place said was immoral, was entered into by the Leader of thd Government in the Senate. Senator Pearce would not have had the slightest chance of being returned at the last election if he had not pledged himself to this organization to do all he could to bring about reduced Customs and excise duties. Reference has been made to the real reason for the introduction of this bill. Senator Greene said that Mr. Bruxner, of the New South “Wales Country party, had given the show away. I do not think we need go to that gentleman to ascertain the reason for its introduction. The Treasurer (Dr. Earle Page) informed certain Sydney manufacturers a few months ago that the Government intended to abolish the per capita payment so that the public would know whom to blame for taxation and its incidence. That is the reason. Cannot any protectionist see the dominating influence exercised by the Country party in this administration? The members of that party are pledged to bring about a reduction in duties. For what purpose? To swell the Customs revenue which, towards the end of the present financial year, will amount to approximately £44,000,000. If this dominating influence in the Cabinet continues it is likely that’ we shall have further revenue duties, and thus make more money available to the Treasurer, who then will be able to satisfy the section which he represents in this Parliament that he is faithfully carrying out its promises. These members are not concerned with real protection, but are seriously concerned with the effort to obtain additional Customs revenue. When these members go to the country they will say, “ Have not we made your pathway easier by reducing certain duties, by vacating the field of direct taxation and thus removing a burden from your shoulders for some time at least? They are endeavouring to shift the responsibility on to the shoulders of the States, so that they will not be associated with direct taxation to which they are opposed.
When the Government say it is extremely anxious to arrive at a permanent solution of the position with which it is confronted and which it says is difficult, I am surprised. It is not a difficult problem. This bill is mischievious, muddlesome, and meddling. The Government has muddled in this matter from beginning to end. Many unsuccessful conferences have been held, and in order to permanently solve the problem, a further conference is proposed. The Treasurer says, “ Pass the bill and we shall then hold another conference.” With whom and for what purpose? With the States with whom the Government says it cannot bargain, and who we have been told have been receiving revenue unconstitutionally, illegally, and immorally.
– Who said that?
– The Prime Minister said that the States have ho legal, moral, or constitutional right to the per capita payment.
– At present, they have not.
– That was the statement of the Prime Minister.
– It does not apply to the period to which the honorable senator is referring.
– Was it constitutionally, legally, and morally right?
– Yes, at one stage.
– For two decades.
– For ten years.
– And how long afterwards 1
– For another ten years.
– Is that not two decades? According to the new Minister who makes the “ big four “ on the Government benches, for twenty years at least the States have been receiving money unconstitutionally, illegally, and immorally.
– The Government now awakens and says that this system must not continue. The States nave been informed so. After informing the representatives of the States on more than one occasion that the Government cannot agree to their suggestions, it now says that it is prepared to meet them again when the whole matter will be discussed. When that time arrives I presume the government representatives will withdraw what they have previously said. If the representatives of the States prove to the gentlemen representing the Commonwealth that its proposals are unsound and unscientific the Government will bow to the inevitable and say, “ Yon were right and we were wrong.”
– There is nothing wrong in that.
– If the present system is wrong, as the Government say it is, how can they change their front and admit later that it is right? The Treasurer has said the conference will be convened to consider the best method of altering the existing financial arrangements between the Commonwealth and the States in order to place them on a permanent basis. How can a conference do that ? Governments come and governments go, and the decisions reached will not have a binding effect upon future governments. The proposals adopted at that gathering will be submitted to Parliament and, as the Treasurer 6aid, Parliament may, perhaps in a year’s time, reverse its decision.
In giving reasons why this bill should be passed, the Honorary Minister (Senator McLachlan) said this afternoon that, in Queensland, at least, State enterprises had been embarked upon to such an extent that the State had been involved in serious financial losses. He gave that as one of the reasons why the -per capita payment would not be continued. The Government sets itself up as both judge and a jury. It is saying that the States should not receive financial assistance from the Commonwealth if they persist in launching State enterprises. There is no such thing as an individualistic state in any part of the world. In every State there are socialistic enterprises. If socialistic enterprises must be discontinued because they are unprofitable, in what way are we to deal with our postal, telegraphic and telephonic services? What is to become of our Commonwealth railway system, the Australian Commonwealth Shipping Line, and many other enterprises established and carried on by governments, Labour and anti-Labour, in the Commonwealth? If the losses sustained by these enterprises had to be made up by the taxpayers, the Honorary Minister said, the electors would not support members who favoured them. For many years the electors in Queensland have returned a Labour government.
– On a minority vote.
– I have heard that before. If the Labour party is unsuccessful at the forthcoming elections in this State the Nationalist party will be returned on a minority vote. The Honorary Minister referred particularly to the losses incurred in connexion with the Queensland cattle stations and butchers’ shops. It is true there have been losses on these undertakings, but it must be remembered that during the same period others engaged in similar activities lost hundreds of thousands of pounds. That loss was not peculiar to State enterprise; it was general. But what the Queensland Government lost on its stations, it made up in other directions. The Trade Commissioner for Queensland, in his report three years ago, said that the stations and State butchers’ shops in different parts of Queensland had saved the consuming public at least £3,000,000. That was three years ago. The probabilities are that the saving to the consuming public by this time is between £4,000,000 and £5,000,000. The Honorary Minister did not mention that. Nor did he refer to one of the successful State enterprises engaged in by the Queensland Government - I refer to the State Fire, Life, and Accident Insurance Department.
– That is a monopoly.
– In every other State, fire, life, and accident insurance is a monopoly in the hands of private enterprise, which exploits the people by charging them unduly high rates. The State institution in Queensland, in a measure, broke up the private monopoly by lowering rates; yet it made a profit of over £2,000,000 in ten years. Notwithstanding that, the Minister argues that we should pass this bill in order to prevent the States from embarking on such enterprises. While he was speaking, I interjected that in Victoria the Government had embarked upon one of the biggest socialistic schemes in the world. I referred to the Yallourn electricity scheme, to which all parties in Victoria are pledged. On this undertaking, so far, there has been a considerable loss. Does Senator McLachlan seriously suggest that because of this result the per capita grant should be taken away from Victoria ? Honorable senators opposite have delved deeply into ancient history to bring to light the attitude of the Labour party in years gone by in respect of the per capita grant. I. listened with interest to quotations from my speeches which Senator Pearce read. All that he could say about me was that at that time I was not opposed to the per capita grant, but that I was opposed to the Constitution being altered to embody a provision for the continuance of the payment. The Labour party has never been opposed to the granting of money to the States. The question which is uppermost is whether federation would have been possible had not certain conditions been first agreed to as to the adjustment of the finances of the Commonwealth and the States. We know that anterior to federation every State had its Customs House, from which it obtained a substantial portion of its revenue.
– The Customs House was the main source of the revenue of the States.
– The States were not likely to agree to give up that source of revenue unless they received some guarantee that they would not suffer in consequence. From time to time, since federation, they have received this money. Indeed, they have relied upon it, believing that they were justly entitled to it. When Senator McLachlan mentioned the amount of the per capita grant which had been paid to Victoria I interjected that it was not enough. The Minister replied that he wondered what amount I should consider sufficient. Since 1910, the States have been paid by the Commonwealth 25s. per head of population. I remind honorable senators that that rate was fixed prior to the war, and that the purchasing power of the sovereign to-day is much less than it was in 1910. If it” was right to pay 25s. per head to the States in 1910, in justice to them, the rate should now be much higher. The proposal to discontinue the per capita grant has caused alarm throughout the Commonwealth. The Government’s proposals include the abandonment of the Federal land tax. If there is one measure of direct taxation with which I feel proud to have been associated, it is that tax. It was imposed in 1910, by the Fisher Government of which I was a member. That measure gave intense satisfaction to the advocates of land taxation throughout Australia, and was a source of gratification to many Australians who had been eagerly awaiting the subdivision of big estates. It had a two-fold object - the subdivision of huge estates, many of which had never changed their virgin state, and the raising of additional revenue. Those objectives have been achieved. Innumerable estates have been subdivided, with the result that where a few years ago a few sheep and cattle roamed, there are to-day thousands of men, women and children permanently settled, and apparently, doing well.
– An additional area of millions of acres was placed under cultivation.
– That is so. Production increased, and for a time there was little or no unemployment. More people came to Australia during the Fisher administration than can be induced to come here now, despite the thousands of pounds spent in the establishment of agencies, and in advertising. In those days, they came unsolicited and unaided, because they knew that they could obtain land or secure employment. That legislation also stimulated activity in the capital cities. Land on which dilapidated shacks and old tenements were erected had greatly increased in value by reason of the development of surrounding areas. The imposition of the Federal land tax caused those lands also to be developed, because it did not pay their owners to keep them idle or unreproductive. The tax was first imposed in 1910-11, during which year it produced £1,370,345. The amount received during last financial year from the same source was £2,521,910. Since the tax was first imposed it has added a total of £31,901,135 to the coffers of the Commonwealth. Yet it is proposed by this Government to forgo that source of revenue. It must be remembered that if the Commonwealth vacates that field, the States will be unable to obtain by the imposition of a land tax anything like so great a revenue. The States have not the power to aggregate estates. The Government desires no longer to impose land taxation, because it wants to relieve the wealthy land-owners of Australia from the necessity of paying their just proportion of taxation. If this proposal is agreed to, the wealthy land-owners of Australia will rejoice.
– We have heard no rejoicing so far.
– Even if the Government does decide to vacate that field of taxation, there is no guarantee that a future Government will not re-impose the land tax. Surely the Government does not anticipate remaining in office for any length of time. The clear indication is that it will not. There is a rift in the lute. In another place, some of the Government’s erstwhile supporters had strong things to say about this bill.
At one time Senator Pearce was an ardent advocate of land taxation. He has been many things during his political career. I remember when he, like myself, was an avowed socialist. I am still a socialist.
– Some people will never learn.
– Later, he became a Labour man, and then a Liberal. Subsequently, he became a Conservative. At another time he was an advocate of single tax. More recently he’ changed to a moderate protectionist ; then, he became a comprehensive protectionist. To-day he is a revenue tariffist.
– He is a man of many parts.
– In truth, it may be said that he has boxed the political compass. At one time he was an ardent advocate of the Federal land tax; now he is just as anxious as any other opponent of that principle that the Commonwealth should drop it. What chance would there be of passing a land tax through the State Parliament of Victoria ? As it is constituted at present, we cannot get one vote one value in this State ; consequently we do not enjoy majority rule. And, since it will be well nigh impossible to pass that class of legislation through the Victorian Parliament, how will the State Government make up the deficiency in revenue, assuming the per capita payments cease, unless it increases income taxation upon the working classes? We may safely assume that, if this bill passes, the income tax exemption in Victoria will be lowered considerably, and heavy burdens imposed on the people of this State.
– The honorable senator does not believe that.
– I do. The war indebtedness of the Commonwealth is a heavy responsibility; yet, according to this Government’s new proposal, it has to be met through the Customs House. So long as I am a member of this chamber I shall raise my voice in protest against any attempt to place the burden of that titanic struggle upon the shoulders of the people of Australia in that way.
– The honorable senator has never protested hitherto.
– I have always consistently advocated protection. Unfortunately, we have not a protectionist policy in Australia yet, and I am satisfied that we never shall have it under the present administration. I venture to say - it is not a party secret, as Senator Greene said yesterday - that if some honorable senators supporting the Government on’ this bill voted in accordance with their pledges to the people, it would be rejected.
– Who gave a pledge ?
– Is it not a fact that members of the National party are pledged against the abolition of the per capita payments? We have a similar plank in our platform, and we have consistently supported it. We stand by our pledges.- If honorable senators of the National party are as conscientious in the observance of their pledges as are the members of the Labour party, they will vote against this measure. I hope that I am not appealing in vain to the protectionist members of this chamber when I urge them to reject the bill, because, in my judgment, it will seriously menace the fiscal policy of the Commonwealth. Up to the present, we have had only a modicum of protection. If we had a truly protectionist tariff, we should have little or no Customs and excise revenue, and we should not hear anything about this proposal to abolish the per capita payments to the States. It is all very well to be generous with easy money from Customs and excise duties which the present Government has enjoyed in large measures since it has been in office. Ministers talk about the indebtedness of the Commonwealth and its obligations. Apparently they did not consider that matter when they made advances to the different States for wire netting or for roads, or when they promised £20,000,000 for a Commonwealth housing scheme. For the reasons which I have advanced, I hope that those honorable senators who are not shackled and tongue-tied in connexion with this allimportant question will make their voices heard in this debate. If they are free to vote in accordance with their personal convictions, the bill is doomed. Possibly the present administration will then be so weakened that it will make way for a new Government that will be worthy of the confidence of the people.
– This proposal is not exactly a stranger to honorable senators. We have had it before us, in different forms, on several occasions during the last seventeen years. Many proposals and counter proposals have been made from time to time and have appeared in the daily press of the several States. We now have the scheme before us in concrete form. Briefly, the bill proposes to repeal the capitation payments embodied in the Surplus Revenue Act of 1910. I agree with previous speakers that this is one of tho most important subjects that has ever come before the Senate. I feel, therefore, that we should approach the discussion of it with due regard to its effect upon the people; that we should discard all personal prejudices and consider it with an open mind and in a manner that will reflect credit upon this chamber.
Sitting suspended from 6.30 to 8 p.m.
– When the Senate adjourned, I was directing attention to the importance of this measure. This is the second attempt which has been made in 27 years to divide the public revenues between the Commonwealth, on the one hand, and the States, on the other, and from all appearances this is likely to be the final attempt. Of course, finance ‘ is not a simple matter with governments, any more than with individuals; and when the task is essayed of making a fair division it necessarily follows that the parties are watchful of the outcome. Knowing that the Commonwealth and the States have not, except on rare occasions, been what might be called a happy family during the last 27 years, one can understand the negotiations being embarrassed on the present occasion by considerations that ought not to have been allowed to intrude. The manner in which this question was handled in 1910 is altogether dissimilar from that which has been in evidence on the present occasion. At that time the whole of the States co-operated with the Commonwealth in an endeavour to arrive at a solution of the problem. Happily they succeeeded in doing so, and, more happily, the result was embodied in an act of the Commonwealth Parliament which has operated for the last seventeen years.
– That is not the agreement which was arrived at by the conference ; the agreement was that it should be embodied in the Constitution.
– That is so; but up to the stage of deciding upon a fair division there was unanimity between the States and the Commonwealth. The sole difference of opinion was as to whether the provision then made should be guaranteed to the States for all time, or whether it should be left to the will of this Parliament to maintain the payment at 25s. per head for a certain period only and then increase, decrease, or abolish it. The difference between the situation seventeen years ago and that of to-day is that the Federal authority now occupies a position of almost isolated grandeur. It has adopted the attitude, “ This much only will I give to thee,” and the States have no option but’ to accept holus bolus what is offered to them or place their case before a higher authority. This is likely to be the last occasion on which this subject will be reviewed by the Commonwealth Parliament. Such being the case, honorable senators should approach the matter as free agents, with absolutely open minds, and - as the Constitution intended - as the guardians and custodians of the States which they represent. I go further, and say that the Senate should collectively act in such a way as to do itself not only present, but also future, credit. The first requisite is that the Senate should not prejudge the case; but I am very much afraid that that is being done. The case for the Commonwealth Government is placed before us in the bill that we are now considering ; but we have not yet had the opportunity to find out what are the wishes of the States, and how far they are prepared to assist in the making of a bargain that will be mutually acceptable.
I have been told that the Government has offered a royal commission. What was to be the nature and the terms of that commission? It was to be an independent body of men, before whom witnesses could be called. As is the case with all commissions, it was to be carefully and jealously circumscribed. In the interests of the States? No ! In the interests of the Commonwealth ? Yes ! The ambit of its authority, and the area of its research, should have been so fixed that the case for both the States and the Commonwealth could have been examined without any limitation whatsoever. Let us recall the terms upon which it was to be appointed. It was to inquire into and report upon whether the figure £7,600,000 put forward by the Commonwealth was correct or not. Such an inquiry could be carried out by any body of accountants. The question could bo settled by an examination of the books of the Treasury. Then the commission was to say whether or not the States could, by legislation, obtain the amounts which they would be called upon to raise in lieu of the capitation grant. That is not a very extensive authority. The question is a simple one, and could be answered by a competent legal authority. It is significant that one line of inquiry was excluded from the terms of the commission : Whether or not the States have an inherent constitutional right to the payment which the Government proposes to withhold from them. The Government is the best judge of why such a line of inquiry was not to be pursued. The absence of that all-important provision completely nullified the value of the commission. If it were desired that the position should be investigated, why could the commission not inquire into everything relating to the status of the two authorities? Seeing that their case would not be adequately represented, the States said: “We cannot agree to this commission because circumstances make it a one-sided, partisan body, from which we can expect no good “ ; and they rejected the offer of the Commonwealth.
I congratulate Senator McLachlan upon his elevation, but I am sorry that during, his speech he was either hazy or non-committal in respect to vital points that were raised by previous speakers. The Government has been asked, “ Wherein is your mandate or authority for doing this -thing?” The Minister did not reply to that, so I shall endeavour to fill the blank caused by his want of thought or good generalship. At the last elections in Western Australia I travelled with Senator Pearce, who enunciated the policy of the Government; and I distinctly remember that there was only one reference to finance in that campaign. It was, that a conference would be called during the life of the ensuing Parliament for the purpose of dealing with the finances of the States and the Commonwealth. In nearly every policy speech during the last seventeen years either that sentence, or something similar to it, has appeared. The question was not ventilated. Throughout the length and breadth of Western Australia it was urged that the matter of outstanding importance was to see that established law and order should prevail over disorder. Therefore, so far as the people in that State are concerned, no warrant exists for the introduction of this bill. The Minister (Senator McLachlan) was also asked to consider the position of the States subsequent to the withdrawal of the per capita payment, and to say whether they would find themselves better or worse off, richer or poorer, their status improved or lowered. T am not aware that he addressed himself to that matter; so, in my humble view, I propose to make good the deficiency. I remind the honorable senator that we are living in a curious age. I remember the time when the party of which the present Government is largely the lineal descendant was very pronounced upon this particular question. Where did it stand? The majority of its members left no doubt in the minds of any person that the rights of the States vere to be jealously preserved. They would not. allow anybody to suggest, or to even hint, that they were in the least degree inclined to make an incursion upon the preserves of the States. The descendants of that party have wedded themselves to a policy which shows a considerable declension from that of their forefathers. It is the very opposite of that which the progenitors of this party once propounded. The fathers of the Constitution, who were to a great extent the forerunners of this party, placed section 87 in the Constitution, and at a later date in altered circumstances sought to insert in it another provision equally jealously guarding the interests of the States. But the present party, the relict of the earlier party, is saying, ‘ ‘ No matter what our forebears did, we stand to-day to rob the States of everything then given to them.” This criticism applies equally to the party opposite, on whose banner is to be found the one word “Unification.” Strange to say, in the whirligig of politics #nd interchange of opportunities we now find that instead of being the unificationists they want the electors to believe they are, they are stout defenders of State interests, and will not budge a single inch from that position. In the circumstances, seeing that party policies and party opinions are so much in the melting pot, it is our duty to find out exactly where we stand to-day.
Just as the fathers of the federation recognized this duty, so to-day we are called upon to see wherein lies the well-being of the citizen apart from parties and governments, and to ascertain how he will be affected by this bill. 1 propose to direct brief attention to what has been said by previous speakers as to the respective spheres and functions of the State and Federal Governments. Before doing so, let me say that I shall never subscribe to a doctrine that would have the effect of lowering the prestige of the National Government. Just as we outgrew our adolescence 27 years ago, and as a leading parliamentarian said, put on the toga of manhood, so in the natural order of things we shall grow to a lustier manhood. We need, therefore, to have, on all occasions, a. central or national government strongly and securely entrenched, and able to defend the citizens of this country from attack from within or without. But side by side with that declaration I stand stoutly for the maintenance of the States, rotating on their own axes, and performing the functions which the founders of the Constitution knew they would be called upon to perform, without being harassed or handicapped as I contend they would be if we pass this bill.
I want now to picture the position of the average workaday citizen, the man, so to speak, whose head is down to his work from early morn to late at night, and who takes little interest in politics. I refer to the man, who, once he has elected his representatives to Parliament, has sense enough, and sometimes overconfidence enough, to think that they will act fairly towards him. We may imagine him setting out for the interior from any big centre of population. How will he fare ? On what authority will he depend for his progress on the road of life? If he makes up his mind, as, unfortunately, not too many are inclined to do, to turn his back on the crowded city, and lead a pioneering life by engaging in that class of work which is the basis of all our prosperity, he will take a railway train. Thus he will have to depend on the State Government for the first necessity. When he goes out he has again to come in contact with another State activity to get the land that he will spy out after some trouble. Having got the land and applied his scanty capital to its development, to whom does he go in order to supplement his earnings or reinforce his credit facilities? On whom will he rely to furnish him with the wherewithal to till the land ? Naturally he must apply to the State authority. And if, when he has brought the land under subjection and to a point of productivity, either by raising crops or feeding animals, a pest assails his crop or his stock, to whom will he look with all confidence for aid in hia unequal struggle? Again he must look to the State authority. If in the course of his operations, he is short of water - that vital necessity in our semi-arid interior - again he looks to the aid of the State authority. If he wants pustice from his neighbour, to whom does he apply for that justice which is so necessary in every civilized community?
He applies to a State authority. “When he seeks to get his children educated, or when he is stricken by the wayside and needs attention in a hospital or some other similar institution, the State authority once more comes to his aid. When lastly and finally, he brings his produce to market, sometimes to sell it below cost, on whom does he depend again ? Upon the State authority.’ In these ten instances the average Australian citizen, who turns his back on the city and goes into the interior, has to depend upon the State Government for the wherewithal to live and try to prosper. What does he expect from the Commonwealth Government? It assists him when he posts a letter or gives him facilities to telephone to his nearest neighbour. That is all.
How will that man fare in the future ? We know that the State Governments, not being possessed of the philosopher’s stone, which will turn wood into gold, will have to find money, but we also know that there is a very pro.nounced limit to that which can be gained by taxation in any community. We know that, in Australia, the two authorities, State and Commonwealth, have been roaming over and fossicking almost the entire area of tax production in Australia. Of course, the Commonwealth now says that it will surrender a portion of its direct taxation, but that brings us back to the point that has been stated so often : Is there any guarantee that the States will be given a charter of immunity from any invasion by the Commonwealth of that field of taxation which can be derived by taxing the surplus earnings of the people? We all know that, at any time it chooses, the central Government can claim its share of the surplus earnings of the citizens of the country and that the local authorities are thrust into the position of having to depend upon the scraps that fall from the table of the higher authority. In the natural order of things the minor authority always gets the worst of the deal, and the National Parliament the best. In the meantime, what is the effect upon the citizen ? What will his progress be ? Am I to be told that the man who uses the State Government almost as a prop for at least ten operations during the course of his activities will have his position in life enhanced or made more attractive by the Commonwealth Government stepping in as it is at liberty to do and levying direct taxation upon him? We must view this question from his stand-point, because, unless he is fairly treated, he will rise in his outraged might and hurl from office any party in power that would behave so callously towards him. It is, ‘therefore, time to see what is fair between man and man and authority and authority.
The national authority has done fairly well since it was established 26 years ago. My information on the point is somewhat cramped, because the bulk of the material available has been transferred to Canberra, and I am dependent on fragments. But, even with their help, I find that, whereas at the outset of federation the personnel of all the departments transferred and newly created did not exceed 11,000 persons, with a payroll amounting to £1,500,000 per annum, the number has since increased to 26,000 persons and the pay-roll is over £7,000,000. I postulate that the rate of progress by the Federal Government will not be outpaced by that of the State Governments. In the first year of our federation, the revenue of the Commonwealth was between £7,000,000 and £8,000,000. To-day, after 26 years, it is £75,000,000. In the light of these figures, is there any need to bolster u)> the Federal authority or to say that the Federal spirit needs reinvigorating t Is there any need for a bill such as this to solidify the financial and moral position of the central Government?
The central Government is now raising taxation by means of Customs duties, which Senator McLachlan describes as easy money, and also by a invasion of fields of taxation which are more irksome, thorny, and distasteful than indirect taxation, The income tax collector is regarded as a villain, but indirect taxation in the form of Customs and excise duties are paid without complaint. The form of collection is easy. The States are now to be placed in a different position, and are to shoulder the responsibility of collecting practically the whole of the direct taxation, which is always unpopular. The States are to be deprived of certain revenue to which they are constitutionally entitled, and which, but for the fallacious arguments adduced, they would still continue to receive. I could quote from niv own declaration in Western Australia when I was chided by the State Treasurer at that time for opposing ti’”, inclusion of an amendment in the bill guaranteeing 25s. per capita to the States for all time, because, as I said, an occasion might arise when the States would be entitled to receive a larger amount. I instanced at the time the possibility of the discovery of mineral wealth in the far interior of Western Australia, which would considerably increase the revenue-producing capacity of the State. I said that it would be manifestly unjust if the State could not rightly claim a greater share of Commonwealth revenue than that which it was then receiving. The position has now changed, and the Government says that the States are no longer entitled to a portion of the Customs and excise revenue. The Minister in charge of the bill (Senator Pearce) expressed his views at the same time, and the Deputy Leader of the Opposition (Senator Needham) quoted the right honorable gentleman as saying that the per capita payment should be continued until at least the year 1935. Senator Pearce is now associated with a Government which proposes to abolish them altogether. I expressed my individual opinion at that time, not as a Western Australian representative, but as one who thought that the State might be entitled to a greater share of revenue on the basis I have given. Something might have happened that would have increased that State’s revenue capacity up to a point which would enable it to obtain a greater share instead of the central government receiving the largest portion.
The Honorary Minister (Senator McLachlan) stated this afternoon that the present system permitted the States to indulge in a lavish form of expenditure, and to adopt a policy of squander. Whilst, of course, I am somewhat in sympathy with that declaration, I think the Minister went too far, since, in effect, he suggested an indirect interference with the internal policy of the States, which have sovereign rights. The States are in the same position as the Federal authority, and are as firmly established as even the Imperial Government itself is to-day. They have a direct line of communication between their governments and the Imperial Government, and their rights and prerogatives are clearly established. The Imperial Government, when it gives a charter to any crown colony or to a territory under the control of a responsible officer, does not impose limitations as to any form of political development. They are not told how to spend their revenue, but this Government is saying, “ We will not assist you if you persist in spending unwisely on State enterprises revenue which we collect.” The British Government has never imposed upon any sovereign state conditions such as this Government proposes.
– But the Commonwealth provides them with money.
– I am coming to that point and have something to say, which 1 wish the Minister to follow. We have been told that owing to the tremendous financial responsibility which the Commonwealth Government has to shoulder in the form of war expenditure there is a warrant for this fundamental change in the financial relationship between the Commonwealth and the States. I deny that absolutely. I shall show, by figures that I shall quote that there is no warrant for the action of the Government, even in a modified form. According to the last budget our net war debt is approximately £304,000,000, of which amount £89,000,000 was funded by the Imperial Government under an arrangement successfully carried out by the late Senator Millen. There is an amount of £16,000,000 which is a recoverable portion of the debt due, and the interest on the cost of settling soldiers on the land and providing them with homes so that the net war debt of the Australian people is, roundly, £290,000,000. We have, as honorable senators are aware, a sinking fund, and also means of raising taxation to pay interest on our war debt to the extent of 20s. in the £1. That I hope we shall always do so that we shall be able like the village blacksmith to “ Look the whole world in the face “ and owe not any man. A contribution of one half per cent, to a sinking fund, as the law provides, on £290,000,000 is £1,500,000, which would liquidate that debt at the end of 50 years. Interest at the rate of 5 per cent, or 6 per cent. - the rate of course varies - amounts to something like £15,000,000, and if we add these two sums together, one for paying interest while the debt remains, and the other for liquidating the debt in 50 years we find that only about £17,000,000 is required yearly to wipe out Australia’s war debt. That is what we are called upon to bear. The revenue received from one department alone - that from which the Government wishes to still enjoy the revenue -is approximately £44,000,000. If we deduct £17,000,000 from the revenue received from Customs and excise, which as I have said is £44,000,000 we have a balance of £27,000,000.
– The honorable senator has not included repatriation.
– It is included.
– Not in the £17,000,000.
– Yes. I checked these figures with a responsible officer, and I intend to stand by them. So far as I can remember the total revenue of the Commonwealth last year was about £75,000,000, and it is a simple matter to ascertain the proportion of £17,000,000 to £75,000,000. It is a trifle over 20 per cent. It must be borne in mind, however, that the £17,000,000 I have already mentioned is the maximum, and by the time we reached the fiftieth year the amount would, in comparison, be hardly perceptible. Are we, therefore, to change a fundamental principle by reason of a transient cause. The Government’s case must be based on something more secure than the shifting sand of some transient consideration.
The Minister referred to the deadening effect of this easy money upon State authorities; but for his information I may say that the amount received by the States from the Commonwealth is equal to only Ti per cent, of their total revenue. Surely such a small percentage cannot have such a baneful influence upon State electors as has been suggested. The amount received by the States is insignificant and should not be responsible for demoralizing the electors when selecting their representatives. It has been said by previous speakers that the authorities spending the money should be responsible for raising it, but that is only a pious aspiration. The practice objected to is followed in many other countries. In this connexion I am reminded of the sage who said, “ If you tried to prove the right angle of a triangle you would never succeed.” Let me tell the Government something that it already knows : that other Governments also resort to this practice. When the Canadian Federation received its Constitution in 1867, this question was considered, and it was decided that the Provinces should receive a certain sum for all time.
– What was the amount? Was it not only £40,000?
– The Minister will be sorry that he asked that question. Canada was granted a constitution in 1867. By section 118 of that constitution, the various Provinces received grants as follows: - Ontario, $80,000; Quebec, $70,000; Nova Scotia, $60,000; New Brunswick,- $50,000; and, in addition, every province received 80 cents, per head of the population. That represents an average of $65,000 for each Province. That was at the commencement. As the years passed, the people of the several provinces showed unmistakable displeasure because of the smallness of the amounts they received from the central Government. As a result of the growing popular feeling, legislation was passed in 1907 to provide that where the population was under 150,000 persons, the grant should be $100,000; where the population was over 150,000, but not exceeding 200,000 persons, $150,000; where it was between 200,000 and 400,000 persons, $180,000; between 400,000 and 800,000 persons, $190,000; and where the population exceeded 800,000, but was less than 1,500,000, the grant should be $220,000 per annum. Where the population exceeded 1,500,000 persons, the grant was fixed at $240,000. By studying those figures, honorable senators will be’ able to calculate the amount paid by way of per capita grants in Canada. It must be remembered that the payment of 80 cents per head of population was also retained. Of the big increased expenditure which took place under the 1907 act, Senator Pearce, apparently, has no knowledge.
– In my secondreading speech, I not only gave the figures, but I also gave the basis on which they were calculated. I showed that some of the payments were not on a per capita basis.
– Did the honorable senator mention that, in addition to the increased annual grant, the 80 cents per head was maintained?
– I pointed out in my speech that the payment varied from 80 cents to 4 dollars 80 cents in the case of Prince Edward Island.
– I think that I have successfully refuted the Minister’s argument that the amount was£40,000.
– On the per capita basis. The rest was done in the same way that we make our road grants.
– I shall now deal with the position in South Africa.
– There is no per capita grant there.
– Section 118 of the South African constitution reads - . . . there shall be paid annually out of the Consolidated Revenue Fund to the administrator of each province -
In that we see nothing of the so-called sacred principle that the authority which raises revenue should spend it. That principle has never operated in Canada or South Africa, nor is there any intention of introducing it there. In the Mother Country this principle finds no place. On page 25, volume 1, of Round Table Studies, we find that the amount raised as rates by the local authorities increased from £25,000,000 in 1884 to £33,000,000 in 1894, and to £59,000,000 in 1907. It is true that the Exchequer grants have increased more than proportionately, and that in 1907-8 they reached a total of £20,000,000. That amount was given by the Imperial Exchequer to the local authorities in Great Britain. Again, I ask where is the observance of the socalled sacred principle that the authority which raises revenue should spend it?
None of these Governments havethought it necessary to follow that principle : and they have had experience extending, in the case of the Mother Country, over many centuries. In the face of those facts, the Government should bring forward better arguments in support its proposals than the limp, halting, onelegged reasonsso far presented. [Extension of time gr anted.]
Let me refer briefly to the moral aspect of this question. The word “ moral “ needs to be defined. In my opinion a moral right is the greatest right that exists. If a person is given his moral right he is given all that is his due; no other right that he may possess can exceed his moral right. When we say that we give a man his legal right, suspicion is at once aroused. Thereare other rights, such as inherent rights, mutual rights, and so on, but I shall confine my remarks to the moral right. It will be conceded - the Honorary Minister himself admitted it - that at one time the States did have a moral right to receive a portion of the revenue derived from Customs and excise. So universal was that belief that a successful effort was made to include the principle in the Constitution. I remind honorable senators that the provision in the Constitution requiring three-fourths of the revenue from Customs and excise to be paid to the States, was inserted at the instance of the State Premiers, and not at the suggestion of the selected representatives of the States. The limitation of ten years was imposed by them because the people of New South Wales thought that, without it, the presence in the Constitution of such a provision would commit the Commonwealth to a policy of protection. It was thought that if the Commonwealth were limited for all time to one-fourth of the revenue derived from Customs and excise duties the tendency would be to increase those duties so that the Commonwealth’s revenue would be greater. New South Wales was then regarded as a freetrade State. When I first took my place in this chamber I saw before me six senators from New South Wales, all of whom were opposed to the policy of protection. I refer to Senators Sir Albert Gould, Neild, Pulsford, E. D. Millen, Walker, and Gray. It was almost dangerous to mention protection in the presence of those men. Then a change came over the spirit of the dream. Now, instead of six stalwarts from that State upholding the banner of freetrade, we have strong protectionists in the persons of my honorable friends, Senator Greene, Senator Duncan, and others.
– Including Senator Thomas ?
– No. I shall not make any reflections upon Senator Thomas. We know where he stands. But for the then fiscal policy of New South Wales, that provision which was described as the ‘ ‘ Braddon blot ‘ ‘ would be in the Constitution still. The ground for calling it a “blot” and limiting its operation to ten years was the accident of a freetrade Government in New South Wales.
This attempt to belittle the claim of the States on moral grounds-to a share of the Customs and excise revenue has a most shadowy foundation. As a matter of fact, the claim rests on granite, and, as I have shown, the provision would be in the Constitution still but for the fiscal tendency of the hour in one State. Now, in some quarters, at all events, this banner of the moral right is as torn and tattered as the red flag is on the Yarra bank. Other important amendments were inserted in the Constitution Bill at the instance of the Premiers in conference. There was, for instance, the provision with regard to the deadlock between the two Houses, and that other clause to safeguard the principle of majority Tule in the case of deadlocks between the two houses. Following on the vital amendment agreed to by the Premiers to take away the constitutional ‘and moral right which the States then had, and still have in my opinion, to a major share of the Customs and excise revenue, there was the clause to empower the Federal Government to come to the assistance of necessitous States. It was realized that the financial arrangements were such that something might have to be done to assist financially certain of the States.
Let me now examine the position in Western Australia. I am in duty bound to give that aspect of the proposal weighty consideration, since the electors of that State have sent me to this Chamber as one of their representatives. If in the course of my remarks under this head I tell other honorable senators what they should do, I remind them that this Chamber is essentially and for all time a States House. It was created to safeguard the rights of the States whenever an onslaught might be made upon them from either within or without. Recent happenings suggest that in some quarters, at all events, party considerations have a stronger claim on the suffrages of certain members of this Parliament than the intertsts of the States which sent them here.
– That is quite certain.
– All I can say is that if party considerations are paramount here, then I misconceive the purpose and aim of this Chamber. For my part, I can say that whenever the interests of my State clash with the interests of my party, I am in duty bound to place the interests of the State in the forefront so as to safeguard the wellbeing of the people who sent me here. Therefore, when I see before me a measure which strikes at the root of the prosperity of my State, and indeed the prosperity of all the States, I feel that there is a solemn obligation upon me to maintain the charge given to me by the people who elected me to this Parliament. What am I going to do now? Vote for the Government? If I did that, I should be deliberately assisting to cripple the financial stability and destroy the prosperity of my State.
Figures supplied by the Under-Treasurer of Western Australia and by the State Commissioner of Taxation relating to this Government’s proposal tell a sorry story. The Commonwealth Treasurer estimates that the evacuation by the Commonwealth of land taxation will surrender £87,000 to Western Australia; but according to the State Commissioner of Taxation the amount will be only £65,000. Similarly, according to the Commissioner, the amounts to be surrendered by way of estate duties and income tax have been over-estimated by the Commonwealth Treasurer, with the result, according to figures based upon the over-estimate of those two fields, that the State will suffer to the extent of £100,000 in the four departments proposed to be abandoned by the Commonwealth. In these circumstances can I accept the Government’s proposals? If the Ministry has treated the States in the same way that it has treated its own followers, the States will be able to complain of lack of courtesy or cordiality. I remember on one occasion, when I was upstairs in the party room the only chance I had of summing up the result of the deliberations was by looking at a blackboard ! In this important issue, affecting so vitally as it does the interests of my own State, I should be false to the trust reposed in me - false to the pledges I gave - if I did not reject the bill contemptuously, because it will vitally undermine the financial solvency of my State.
Turning now to the special grant made to Western Australia, I am reminded that the Government appointed its own commission to inquire into the grievances and disabilities suffered by that State under federation. Honorable senators will recall that the majority report stated that in order to make good the loss sustained by Western Australia a3 the result of federation, that State should receive £450,000 a year until such time as it regained control of its own Customs and exoise revenue. Even the minority report, which was not so favorable, recommended the payment of £300,000 a year. What did this Government do ? It paid £450,000 for one year, with allowance for a diminishing portion of the £250,000 granted in 1910. What is happening now? Everything is in the air. As a representative of Western Australia I do not know where I stand. Do honorable senators think that I am going blindly to accept this proposal at the dictation of the Leader of the Senate ? I repeat that I should be false to my trust, and false to my solemn word to the people who sent me here, if I did otherwise than vote against the bill. What do the people of Western Australia think of my colleague, Senator Pearce in connexion with this matter ? During the last election campaign he spoke with me at Kalgoorlie. These are the words he used, according to the report in the Kalgoorlie Miner of the 16th October, 1925 -
During the next financial year it was proposed to have a conference with the States in order to place the financial arrangements of the Commonwealth and the States on a proper basis. The Commonwealth Government having appointed a Western Australian Disabilities Commission, felt bound to give effect to the commission’s recommendation, and no matter what arrangement was proposed by the conference as to the basis of future finance, it would be made clear that Western Australia needed, and must receive, this £450,000 a year outside any other arrangements between the Commonwealth and the States.
That studied pronouncement was made by Senator Pearce, -on behalf of the Govern- ment, in Western Australia on the eve of the last election. Clearly the electors of that State were led to believe, from the utterances of the principal mouthpiece of the Government, that they would receive indefinitely the full amount recommended by the Disabilities Commission. That amount, as I have stated, was paid for one year, and now it is to be cancelled, with no guarantee. in the bill that it will be resurrected. That, I say, is repudiation of the promise made by Senator Pearce at Kalgoorlie. The measure suggests that the people of Western Australia are about to be fooled, because they were led to believe they would get the full amount recommended by the commission. How can I support the Government? Let Senator Pearce and his Government honour the platform pledges which he gave in Kalgoorlie, and then I will reconsider my position. Whilst the financial stability of Western Australia is trembling in the balance I should bo false to my trust, and be a first rate traitor to the interests of that State if I supported the bill. I intend to stand where I stood in 1910, and also when I supported federation. I want the two authorities to exhibit a spirit of mutual co-operation. I have no desire that one should endeavour unduly and unwisely to acquire for itself a swollen prosperity at the expense of the other. If financial and executive power is taken from the States that have done so much for the workers of Australia, what will be the result? There is no need for this measure. If it is passed, it will impose untold misery upon the States, under whose fostering care so many people are making a decent livelihood. The late Honorable Alfred Deakin said on one occasion -
You can heap power upon power, until such time as the central organ of the nation, the great heart of the nation, will be overweighted and overstrained.
When that happens, there follows a process of devolution, the taking off of powers that have been heaped on, and a just division of the finances. But look at the injury and misery that has been caused in the meantime ! What have the States done to be treated in this fashion? Upon what basis do they rest? Their foundation is as secure and as democratic as that which we enjoy. The importance of their functions is equal to, if not greater than, that of the National Government. With the postulation that the States, as such, shall occupy a subordinate, but sovereign, position, it has to be conceded that they must be given the wherewithal to live. It is not our province, either as citizens or senators, to impinge upon or impair the rights of the States. Where is the necessity for this action of the Government? Is the Commonwealth short of money? No! Are its finances disarranged? No! Will it be injured by the maintenance of the status quo? No! Let us apply those questions to the States. Will these proposals have the effect of disorganizing their finances? Yes! Will they make the States short of money? Yes! Will they reduce their status? Yes! Will they impair their usefulness as articulate agents for the fostering and advancement of the interests of this country? A thousand times, yes! Such being the case, until I see that there is a warrant for this measure, I shall not support it. So that further time may be allowed foran interchange of views and an interplay of thought, I move as an amendment -
That the word “now,” he left out, with a view to insert in lieu thereof the words “this day six months.”
Question - That the word “now” be left out - put. The Senate divided.
Majority . . . .7
Question so resolved in the negative.
– It is unfortunate that I, a comparatively inexperienced speaker, should be called upon to follow so brilliant an orator as Senator Lynch. He is, in many ways, a hard man to follow. We cannot follow him in his argument or in his figures, which, on this matter, are incorrect. I should not have spoken but that the people, who are our masters, will expect us - and rightly so - to state our reasons for the attitude that we adopt towards the bill. As. we all know, this measure provides for the abolition of the per capita payment that is now made to the States. The existing system is a clumsy, temporary expedient, which was introduced when federation was established. Time has shown that it has fed the rich and starved the poor. The great bulk of the money is given to highly-developed States like New South Wales and Victoria. Had the per capita system been strictly adhered to, it would have led to the starvation of States with large areas but small populations, such as that which Senator Lynch so ably represents. The area of Western Australia is onethird of the total area of Australia. It has a sparse population, and its developmental needs are great. No other portion of Australia lends itself so readily to development, or possesses greater potentialities. It is not the intention of the Government to in any way cripple or belittle the States. The idea is to devise a better and a sounder financial basis than that which at present obtains, and to avoid the unnecessary duplication of departments that have grown up under the present system. Unfortunately, a spirit of antagonism has been displayed towards the Commonwealth Government, and the flame has been fanned by men in public, semi-public, andwould-be public positions who ought to know better. Many of them have not even bothered to acquaint themselves with the proposals of the Government. A number of those who are opposing these proposals are not giving the Prime Minister a fair deal. That right honorable gentleman has time and again assured us that injury will not be done to the States either financially or in any other way. In the eyes of some of his opponents the greatest crime which Mr. Bruce has committed is that he has been a brilliant success as Prime Minister of Australia. He was acknowledged to be the outstanding figure at the Imperial Conference. One wonders at this bitter hostility that is being shown towards him. I do not insinuate that any honorable senator is actuated by a desire to see a reshuffling of portfolios, or by any other selfish motive; but there are some persons to whom personal spite and ambition are of more importance than the readjustment of the financial relationships of the Commonwealth and the States. The other night, in the ultra-aristocratic suburb of Toorak, a gentleman who has made himself conspicuous of late used the threat that, if those honorable senators who represent Victoria did not oppose the Government on this matter, they themselves would be opposed by the National Federation and the Australian Women’s National League at the next elections. That gentleman had no mandate from the National Federation or the Women’s National League to make such a statement, but he evidently thought that he could intimidate the Victorian senators and induce them to obey the dictation of an outside organization rather than their own consciences. I know that none of the Victorian senators will pay the slightest heed to any outside threat. We shall vote according to our consciences, and in the best interests of Australia. As a matter of fact, a,t the last annual conference of the National Federation, a motion that the per capita payments should not be discontinued was defeated by an overwhelming majority. In the circumstances, how can this gentleman who was speaking at Toorak, or any member of tho Federal Parliament, or any public man, say that the Federal Government is acting contrary to the wishes of the National Federation? Honorable senators are determined to do what is right rather than have an eye to the next election. It is, we realize, perfectly true that at the present time the proposal to abolish the per capita grant is unpopular; but that is possibly due to the fact that the public has been ill-informed as to the intentions of the Commonwealth Government. It is for the States to accept the invitation of the Government which has been extended te them from time to time - and which will be extended to them again after the bill goes through - to meet it in conference to state their requirements. We are assured by Mr. Bruce, by Senator Pearce, by other Ministers, and by the supporters of the Government that thev will receive most generous consideration and treatment. There is another great safeguard which has not been stressed sufficiently. When the Commonwealth and State Governments meet, and formulate and agree upon a basis by which the States may be recompensed for the abolition of this blundering, uneconomic, stupid old system of per capita payments, the agreement so arrived at must be ratified or rejected by this Parliament. Therefore, in our paramount position, we shall have an opportunity to discuss m detail the suggestions put forward, and to decide what it is right and just to do. It is only then that honorable senators will need to be on the qui vine to see that justice is done to the States, and, if necessary, to fight in their interests. But until this bill is passed we know perfectly well the States will refuse to make any suggestions. Already they have slammed the door in the face of the Commonwealth Ministry. They have “not offered suggestions, or put forward any compromise. One wonders why there is so much fuss; why honorable senators flare up into such oratorical displays of fireworks, such as we have just had from Senator Lynch, whose brilliance is almost sufficient to outshine the sun. The honorable senator is entertaining, and also brilliant, although perhaps, somewhat illogical. After listening to so much bitter opposition, and witnessing so much play-acting in some quarters, when one knows the facts one is inclined to think that there is a good deal in the leading article of the Sydney Daily Telegraph of the 10th March, which reads -
Three and a half years ago the State Premiers were agreeable to forgo their share of Customs and excise in consideration of the Commonwealth Government giving up income tax. Mr. Watt, who has tried to tear the Government’s bill to ribbons, was probably the first Federal Minister to suggest the abolition of the per capita payments. . . .
This journal goes on to say -
There is a strong suggestion in the per capita crisis that the discontented Nationalists of the House of Representatives are more concerned with re-constructing the Cabinet than they are with a division of the Commonwealth and State revenues.
I am glad to say that I think differently of some members of Par- liament -who are opposing the bill, and of all honorable senators. The changed attitude of the Labour party is most remarkable, when one compares speeches made at conferences and on earlier occasions in Parliament with those which have been delivered upon this bill. Senator Pearce has already referred to this phase of the matter, but I should like to draw attention to the utterances of the right honorable William Morris Hughes. Speaking in 1910, and dealing with the proposal to embody in the Constitution the payment of 25s. per head, he said -
There arc two objections to the agreement, both of which are fatal. One is that the payment is too high, and the other that the arrangement is to be permanent.
He went on to say that “ the Commonwealth had at its disposal the entire situation, and was in a position to dictate reasonable terms, and have those terms accepted by the States.” He said further -
After ten years of a burden which, as time went on, became almost intolerable, does any one think that the Common wealth is justified in neglecting an opportunity to come into its heritage ?
That was the opinion of the gentleman who last week so mercilessly attacked the Government and this bill in another place. He also said -
The interests of the States consist in sidetracking, delaying, and hampering the Commonwealth in every conceivable way. . . . I oppose the proposed agreement, because I consider the contribution per head too high. I oppose it because it is to be permanent, and because of its underlying recognition of our dependence on the States.
At the Premiers’ conference in 1919, Mr. Watt said -
Sine- the Surplus Revenue Act, 1910, the Commonwealth is saddled with an increasing liability for interest on war loan, repatriation loan, war pensions, and invalid and old-age pensions. . . . For these reasons I propose to ask that the Commonwealth Parliament shall bc asked to diminish the payments progressively by 2s. 6d. per head of the population in each year until the total payment to the States is 10s. *per capita. That payment will continue definitely for five years subject to alteration at the end of that period as Parliament determines.
Sooner or later the States may have to do without any help whatever from the Commonwealth.
Mr. Watt has been most merciless in his attack upon a bill which has been brought in to carry into effect something which he advocated in 1919. Senator Findley, speaking in 1910, said -
I have no objection to State Treasurers receiving a per capita grant from the Commonwealth, but I decidedly object to embodying the proposed agreement in our Constitution, because I arn satisfied that, owing to the newspaper influence which will he brought to bear in favour of its retention, it would never have been taken out of it.
As I have already said, the per capita system is a very clumsy method of giving the States the revenue considered necessary for them. It is a system that has fed the rich States and starved the poor. Take Western Australia, that huge and wonderful State, with its great opportunities for development. Take also South Australia and Tasmania. Those three States need special consideration. A per capita payment of 25s. is useless to them. That has been proved by actual experience. The actual grants to the States by the Commonwealth Government work out as follows. - New South Wales, £1 10s. 8d. per head ; Victoria, £1 9s. 6d. per head ; Queensland, £1 18s. 2d. per head ; South Australia, £1 14s. 8d. per head; Western Australia, £3 14s. per head; and Tasmania, £3 8s. lid. per head. The average payment to all the States has been £1 15s. 8d. per head.
– Do those figures include special grants?
– Yes. They are the actual payments made to the States by the Commonwealth Government. The per capita payment was merely a temporary arrangement. In 1910 the people at a referendum rejected a suggestion to embody that agreement in the Constitution. They refused to make the method permanent, and it was continued for another ten years, but really lapsed seven years ago. Senator Pearce has shown that no other country in the world adopts the per capita basis for payments to States. We all realize that money has to be found somewhere for the development, defence, and administration of our great Commonwealth. But whether the money be collected by the Federal authorities or by the State authorities the same people in all instances provide it. To me it seems a’ very unwise policy for the Commonwealth to collect a tax and then hand the money to more or less irresponsible States to spend and squander. Much , has been said of the Commonwealth’s affluence and extravagance; but practically every one will realize that it has been extraordinarily economical in comparison with socialstic States such as Queensland which have absolutely scattered and wasted millions of the taxpayers’ money on all sorts of socialistic enterprises that from the very start never had a chance of making good. The Queensland Government has butted into things about which it knows nothing, using the money provided by the people in the purchase and management of such enterprises as State cattle stations. The result has been that these concerns have been so badly manaegd that they have involved the taxpayers in a loss of nearly £1,000,000.” The Queensland Government now sees the error of its ways, and its stations are up for sale on the 9th April next. I hope that some one will buy them, but the properties have not vet been written down to the value that is likely to be fixed upon them by purchasers. When one socialistic enterprise in Queensland can show a loss of nearly £1,000,000, why should the Common, wealth Government tax the people and raise money to hand it over to five of the State Governments of Australia to squander on all sorts of socialistic enterprises. To do so is unsound.
Several opponents of the bill have spoken of the affluence . of the Commonwealth Government. Let us examine the facts. Very few of them have dealt fairly with the Government’s huge war and other commitments, which including repatriation, war pensions, invalid and old-age pensions, and maternity allowance, amount to £50,000,000 per annum. These are statutory obligations. The ratio of the financial requirements of the Commonwealth and of the States has entirely altered in consequence of the war. Senator Lynch said that the Commonwealth Government required only £17,000,000 a year to meet its obligations. I challenge many of the. honorable senator’s statements, and practically all his figures, and say without fear of contradiction that they are incorrect. The honorable senator certainly said that ho was speaking from memory, owing to the absence of records which have been transferred to Canberra; but clearly stated that the annual commitments of the Commonwealth did not exceed £17,000.000. According to the last budget the commitments of the Commonwealth are as follows: -
The latter is a commitment which no one wishes to escape; I do not think any honorable senator wishes to see the amount of pension reduced in any way. The list continues -
In a sparsely populated country with an undefended coastline of 12,000 miles, and a population of two persons to the square mile, the Government is justified in incurring the expenditure mentioned on defence. Does any one suggest that the amount should be reduced ? There is also -
The loss on our railways is due largely to the policy of constructing desert lines to places like Alice Springs. We have also the east-west railway, which Senator Lynch is glad to use when travelling to his home. Further obligations include -
These commitments amount to £53,066,000.
– Why not quote the revenue received?
– Although there are some honorable senators who speak of the affluence and extravagance of the Commonwealth, there is no surplus for disposal. The expenditure of the Commonwealth is greater than the revenue from Customs and excise duties to the extent of £7,000,000 a year. We cannot always expect to have increasing revenue from this source, which I understand this year will be £44,000,000. We must see where we stand financially and consider what would be our position if the quantity of our great primary products, wool and wheat, seriously declined, or their value decreased, either or both of which are quite possible. There would then be a heavy shrinkage in importations and consequently a reduction in Customs revenue. For the last ten years wool, which is our staple product, has been responsible for £40,000,000 per annum coming into Australia, and last year 80,000 wool growers, owning 80,000 flocks, produced 2,400,000 bales, which will return £50,000,000 to Australia. If prices remain satisfactory the wheat crop will return nearly £40,000,000. The Commonwealth and the States as well as individuals are living too extravagantly, as the value of our im ports exceeds that of our exports.
– What can the honorable senator expect when the Government is taking an exorbitant amount from the taxpayers by means of an iniquitous tariff 1
– If it were not lor the tariff under which everyone contributes something, I am afraid the honorable senator would find that his income tax would be higher than it is. The Commonwealth must obtain its revenue somewhere. Although we expect to collect £44,000,000 this year in Customs and excise duties, every form of activity, practically every secondary industry in the Commonwealth, is experiencing great prosperity, thanks principally to the sensible protective tariff now in operation. For some years the value of our imports has exceeded thai of our exports, and the ledger has to be squared by borowing abroad. It would be unwise to assume that we shall always receive Customs and excise revenue amounting’ to £40,000,000, because seasonal conditions may affect our primary industries, or markets may decline. -If our exports decrease our imports must decrease to a corresponding extent, otherwise we should be bankrupt. 1 wish it were possible for the Commonwealth to entirely vacate the field of direct taxation, but as that is not yet possible, it may be desirable for it to retain the income tax and to gradually absorb the State debts. Considerable bitterness has been shown towards this proposal, but I direct the attention of the so-called supporters who have turned against the Government in this instance to what the Prime Minister said.
– They have not turned against the Government.
– They have, for reasons best known to themselves. I do not wish to impute motives to honorable senators, but I do to some opponents of the bill who are more concerned about a reconstruction of the Cabinet. We have in the present Prime Minister a leader of whom we are proud. We have never had a better Prime Minister. I should like to read to honorable senators the assurance given by the right honorable gentleman, for whom I have the greatest respect. His word is his bond, and is accepted throughout the world. In speaking on this measure my leader, who was also the leader of some honorable senators in our party until a few days ago, said -
– The honorable senator should not say that.
– I shall reply to the honorable senator.
– I wish to read what the Prime Minister, who was the leader of some honorable senators until a few days ago-
– I resent that statement.
– And so do I.
– He was the leader of some honorable senators, but in this instance he is not.
– He is still my leader.
– I shall reply to the honorable senator’s statement.
– The Prime Minister said -
We must so conduct ourselves that no charge of unfairness to the States can be made against us, and that we cannot rightly be accused of wishing to invade the realm of State authority. We must make it clear that we are not’ endeavouring, because of the power that accrues to the central Government by reason of its ever-increasing resources, to dictate financially to the States, or to place them in an unfair or invidious position. I recognize that today there is a considerable body of opinion iti this country to the effect that the present Government desires to aggrandize the Commonwealth at the expense of the States, that we wish to bring the States into some form of financial tutelage, and desire to invade realms that legitimately and properly belong to them, t give my assurance to the House and to the people of Australia that Ministers have no suck desire. It is our desire not merely, to give the States absolute justice, but, so far aB lies in our power, to deal with them generously, and we do not wish to invade fields in * which the State authorities alone should function. This Parliament will not permit injustice to be done to them, and that the purpose of the measure is to give them fair and equitable treatment in a financial readjustment, which is essential in the interests of the whole of the people, and particularly of the State authorities themselves.
– Where was that statement made?
– That definite assurance was given by the Prime Minister when speaking on the bill in another place a few days ago. The proposals are submitted to Parliament for our consideration. The Minister in charge of the bill (Senator Pearce), who handled this question very ably, said -
The present system is, and must remain, a disturbing factor in the relationship between the Commonwealth and the States. We have now an opportunity to end it, and Parliament has also the opportunity to see that the Commonwealth Government acts with justice and even generosity to the States, in. making a new financial arrangement with them. On the assurance that the Government will approach the question in that spirit, and do its utmost to bring about a fair and equitable arrangement with the States, I ask the Senate to agree to the second reading of the bill.
With such a definite assurance from the Prime Minister and the Leader of the Government in the Senate, those who are supporting the bill cannot with justice be accused of neglecting the interests of the States. I intend to support the measure, because I believe it is in the best interests of the States and this great Commonwealth to which I am proud to belong.
– I had hoped that the debate in this chamber upon this most important bill would be conducted on a higher plane than marked its passage through another place. Unfortunately, Senator Guthrie, who has just resumed his seat, dragged it in the gutter.
– What about the speeches of Senators Greene and Barwell yesterday?
– Their speeches were not in a similar strain to that of Senator Guthrie, who, having put out his poisoned gas, has, as we expected, run away. He will not face the music.
– Did not the honorable senator support this proposal when it was first mentioned by the ‘Prime Minister?
– I should be glad to see Senator Cox rise and speak to this measure; but he is not likely to do so, because he would only reveal how little he knows about this, or, indeed, any subject.
– -I know that the honorable senator supported this proposal when it was first put forward by the Government.
– That is not a fact. At no time have I supported it.
– It is a fact.
– It is not. I submit that, under the Standing Orders, the honorable senator is bound to take my word. Unfortunately, I have not with me now the means of proving what I say. However, the onus of proof does not rest upon me, but upon Senator Cox. If he is an honorable gentleman, he will accept my word, or bring proof that I am not speaking the truth.
– The honorable senator was one of three -
The DEPUTY PRESIDENT (Senator Plain) . - Order ! These interjections must cease.
– I claim to be a supporter of the Government. When a fight is on, I am generally in the forefront. Recently, there was a by-election in the Dalley electorate. I gave a good deal of my time in support of the Nationalist candidate. Where was Senator Cox? He did not address a meeting. Probably he was at home sleeping, as he sleeps in this chamber.
– Senator Cox votes in the right way.
– And where was Senator Thompson during that fight?.
– I do not come fi om New South Wales; why should I have been there?
– I am prepared at all times to support the Government when I think that it is in the right; but. apparently, some honorable senators expect me to support the Government whatever it does. I had intended to preface my remarks on the bill itself by expressing my regret that, on this occasion, I find myself in the unfortunate position of having to oppose the Government. The stand I am taking, however, is that which every honorable senator who sits behind the Government is entitled to take. We claim to be, and are, free agents. We are bound, it is true, by our pledges and promises to the electors; but that is the only way in which we are bound. If the Government fails to honour its election pledges, nothing remains for any one who values his pledges but to oppose the Government in every possible way. By introducing this measure, the Government is not honouring its promises to the people. On the contrary, it is doing something diametrically opposed to every promise that it gave to them. Yet, because I oppose this measure, I am accused of doing something wrong. In opposing it, I am not only standing by my pledges to the electors; I am also acting in accordance with the platform of the organization which put me here. The platform of the party to which I belong provides that that which the Government now proposes shall not be done. Yet, because I stand by that platform and my pledges, I am accused of doing wrong. If that is wrong, then I am prepared to do the same wrong time after time. I am not here as a time server, or merely as a Government supporter. Honorable senators were not elected to this Senate for that purpose. We are here to represent the States to which we belong, and we ought to feel honoured in having been chosen as their representatives.
– Does the honorable senator mean that those who support the Government are not so honorable as he is?
– I make no reflection on any one. If Senator Reid’s conscience pricks him, that is a matter for him alone. I have said nothing at all about the attitude of others; I have merely stated where I stand in this matter. Senator Guthrie said that those who oppose this measure do so because they are opposed to the Government.
– That is true.
– It is said that we have some sinister object in view. When I look at some honorable senators who are supporting the Government, and compare the work they have done for the Government with what I have done, I feel - and I do not want to be egotistical - that their efforts fall far short of mine, and of what they ought to have done, though nut so far short perhaps of that of which they are capable. I am prepared to continue in the same way ; but as a representative of New South Wales I claim the right to take my stand on behalf of that State. I am not obliged to regard the action of the Government purely from the point of view of party. The Senate is not the place in which party politics should be considered. Ministers are not made or unmade in this chamber. We have nothing whatever to do with the creation or the maintenance in office of any Government. If the Senate declares against this measure the position of the Government will not be affected ; the Government will not be turned out of office. At various times Government supporters have voted against the Government. I see behind the Government - indeed, I see Ministers who, when a previous Government which they supported was in office, did not hesitate upon occasions to oppose Government measures. Senator Thompson, who has been interjecting during my speech, at times waxed indignant when discussing the Government’s tariff proposals. He has not hesitated to oppose the Government.
– We had a free hand with regard to the tariff.
– Does the honorable senator suggest that we have not a free hand now ?
– Does he mean that we are caucus bound? le that the admission that he wants to make in the presence of members of the Labour party? I tell him that he is entirely wrong ; we are absolutely free, and can do as we please; and I, for one, am going to do so.
– Do not get excited.
– I am not excited, but some of the contentions of honorable senators supporting the Government, and some of the charges hurled by them at those who are opposing this measure because they think that it should be opposed, make me indignant. I have not laid any charge against any honorable senator. I have not suggested any reason why Senator Thompson or any other honorable senator is supporting the Government on this occasion. I give them credit for supporting this bill, because they believe that the principle underlying it is right. I am prepared to be more generous than they are. I repeat that I had hoped that this matter would be’ debated in this chamber in the proper spirit. Party divisions should not be in evidence here. We should consider this proposal from the point of view of its effect upon the States, whose interests we are pledged to conserve.
– The honorable senator has not reached the plane-
– I know that Senator Crawford thinks that I should get on with my address; but he has not got on to anything yet,’ and I shall be surprised if he does. I remember a speech made by his colleague-
– Senator Crawford said that, so far, the honorable senator had not reached that high plane which he desired should characterize this debate.
– I deprecate the charges which have been levelled against those who oppose this measure. 1 am not desirous of indulging in any personalities during this debate.
– What did the honorable senator do at the commencement of his speech ?
– I commenced by deploring the turn the debate had taken.
– The honorable senator has a short memory.
– I listened with a great deal of respect, and a certain amount of pleasure, to the speech of the right honorable gentleman who introduced this measure. I compliment him on that speech. I differ from him in certain essential points; but his speech was well tempered, reasonable, and, in some respects, conciliatory. Had other speakers - I am not referring only to Government supporters - followed his example, it would have been better.
– Senator Barwell described as “ party hacks “ those who supported the Government in this instance. Are we “party hacks?”
– I do not endorse that remark. I was commending Senator Pearce for the speech that he made when introducing this measure; but other honorable senators supporting the Government spoke in a different strain. The magnificent speech of Senator Greene, and the speeches of other honorable sena tors who spoke in opposition to this bill, so riddled the Government’s case that there hardly remained one thread or tatter. The Honorary Minister (Senator McLachlan) then stepped into the breach.
– The honorable senators who opposed the bill did not convert Senator Cox.
– Senator Cox is impervious to anything. The Honorary Minister saw how things were going, that the attacks against the bill were having effect. He rushed in to show that the Government was right, and that those opposed to it were wrong. He commenced by saying that he would reply to the arguments put forward by Senators Green, Barwell, and others, but he did not reply to one argument that had been advanced. Perhaps he forgot to do so. He continually reminded us that he had only another five or ten minutes in which to speak, and then he passed on to something else. The Honorary Minister is a lawyer, and he knows that when he has a weak case, the best thing to do is to cover it up as carefully as possible and divert attention from its weak points. He spoke of all sorts of things, and read long extracts from the speeches of various wellmeaning gentlemen, many of whom have been dead for years. He gave us long extracts from the convention debates, but he made no attempt whatever to reply to the criticisms levelled against the bill.
– Seeing the effect of some of the speeches on the honorable senator, it did not seem necessary for me to make any further reply.
– I find it as difficult to see the point of the honorable senator’s interjection as to discover any sense in many of the remarks he made. It is true that the Government has the numbers, and that it does not matter what is said in opposition to this measure. The weight of evidence against the bill will avail no thing.
– Is the weight of evidence against the bill?
– Certainly it is. The whole of the argument throughout the debate has been against the bill. Up to the present we have not heard very much from those honorable senators who are now interjecting so freely. Senator Reid, for one, has not had much to say.
Apparently he is prepared to vote for the measure without bothering to give his reasons. It is much easier for him to refrain from giving reasons, because if later the electors wish to know why this mistake was made, he will be in a much better position than one who has declared himself publicly in the Senate. I shall oppose the bill because I believe that it is not in the best interests of the people. The case against it has been strongly put by Senators Greene, Barwell, Lynch, and other honorable senators who have spoken before me in opposition to it. Their arguments are unanswerable.
– What does the honorable senator think of the 21 senators who voted with the Government in the division a few moments ago ? Are they not intelligent?
– I recognize that some honorable members think their first duty is to the Government, irrespective of the character of the bill under consideration, provided the Ministry is to some extent representative of the party to which they belong. My conception cf my duty as a member of this chamber is altogether different.
– Do not shuffle.
– It is obvious, Mr. Deputy President, that this “ cuff and collar king,” who has just interjected, wishes again to indulge in personalities. I have no desire to follow him. If Senator Cox will restrain himself, I shall be obliged, and perhaps a little later we shall have an opportunity to hear him.
– Let the honorable senator get on with his speech and cease shuffling.
– Apparently it is impossible for Senator Cox to remain quiet whilst seated; but usually, when he is on his feet, he has very little to say. I invite him now to follow me, and give the reasons that actuate him in supporting the Government on this bill.
– The honorable senator is making heavy weather of it. I advise him to sit down. I will then have something to say.
– I shall be glad indeed to hear the honorable senator define his attitude to the bill. I do not wish to detain the Senate, but I felt it was necessary to explain why I am opposed to the bill. It has come to us from another place where its provisions were discussed until the arguments became threadbare, with the result that now it is almost impossible to find anything new to say about it. I am opposed to it because, as I have said, I believe it is not in the best interests of the people, and because .also it is in conflict with certain pledges that were given by myself individually, and, I believe, by the organization supporting the Government. So far as it goes it certainly is not in accord with the policy speech delivered by the Prime Minister (Mr. Bruce) at Dandenong. Itis true that the Prime Minister hinted that it might be necessary to do something to re-adjust the financial relations of the Commonwealth and the States. I agree that action in that direction is necessary. I am not an out-and-out champion of the States, because in my judgment the States are not entirely blameless for the position that has arisen. If the State Premiers had been in a more reasonable frame of mind, and if they had consented to meet the representatives of the Commonwealth in a proper spirit, it is possible that some solution of the present difficulty would have been agreed upon. The fact that they acted unwisely is no excuse for high-handed action on the part of this Government.
– Would the honorable senator postpone a settlement of the financial arrangement indefinitely?
– No ; but I think even now it is not too late to show a more reasonable spirit. I believe that if the States were approached, and if it were made absolutely clear to them - and I think it must be clear to them by this time - that this Parliament wishes to have a re-adjustment of the financial arrangements between the Commonwealth and the States1, they would accept the invitation and possibly a satisfactory agreement would be arrived at.
– They were invited to do so quite recently.
– Yes, but there is something to be said for the motto “ Try, try, try again.” I feel sure that if the Government approached the States again they would meet the representatives of the Commonwealth in conference and engage in an amicable discussion on this all-important subject.
– They will have thai opportunity.
– Yes, but only after the passage of this bill, which will make it almost impossible for the States to get anything except that which it pleases the Commonwealth Government to give them, since the carrying of the bill will wipe out the existing financial arrangements between the Commonwealth and the States. The Government has expressed its desire to deal liberally with the States. I do not distrust the Ministry, but it is possible that even if the Government is animated by a most earnest desire to act generously, it will not give the States anything approaching what they think they should get. It is clear that there is a distinct difference of opinion as to how the States should be treated. Some people favour treating them with the utmost liberality, whilst others would not give the States one penny piece of Commonwealth revenue. Instead of fighting them to a finish, an effort should be made to come to an amicable arrangement. We cannot afford to antagonize the States. Our whole effort should be to secure their cooperation in every possible way.
– Is it not a fact that all the antagonism has come from the States?
– No; I do not believe that. There have been faults on both sides. . Had the situation been handled more diplomatically, it is probable that many of the existing difficulties would have been smoothed away. Unfortunately, the Government now appears to be attempting to coerce the States into a conference. The Honorary Minister (Senator McLachIan) said to-day that the passage of this measure would, in effect, bludgeon the States, and compel them to come to an agreement. If that is the underlying purpose of the bill, is it not likely that the States will deeply resent the action of the Government and fight the Commonwealth over the financial arrangement as far as possible ? I admit that if the bill passes they will not be able to do much, because the representatives of this Government will go to the conference in complete possession of the resources of the Commonwealth, and will be able to say to the States, “We will give you this much; you can take it or leave it.” I am not suggesting, of course, that the Government will take that stand.
– Would not the honorable senator trust the Prime Minister?
– Yes; I have every confidence in the right honorable gentleman; but unfortunately he is only one of a number of Ministers in a composite Government, the other members of which may not share his view. It is conceivable that Cabinet may impose upon the Prime Minister some line of action which personally he does not wish to take. In most matters, I am prepared to trust the Government ; but in connexion with this issue I should like to have some evidence of a more conciliatory spirit. I shall vote against the second reading of the bill, not because I agree entirely with the principle of per capita payments to the States, and not because I do not believe that there should be a financial readjustment of the existing relations ; but because I feel that the Government is not approaching the problem in the right spirit. If the measure is defeated, the Senate, as the Chamber representing the interests of the States, will be acting up to its obligations under the Constitution to maintain the rights of the States. The rejection of the bill will not harm the Government, nor will the Senate be acting in opposition to the platform of the National party or the policy of the Commonwealth in general. On the contrary, it will add considerably to its prestige, because it will show that, instead of being the moribund Chamber that some people seem to imagine it to be, it is prepared to do its duty fearlessly in the interests of the people whenever the occasion arises.
– This measure was explained clearly and exhaustively to a combined meeting of the Country party and the National party before it was introduced in another place. Three members of the party opposed it, but Senator Duncan was not one of them.
– Did I support it?
– The honorable senator did.
– I did not.
– The honorable senator was not one of the three who opposed it.
– That is true; but I did not support it.
– If Senators Duncan, Barwell, and Greene had opposed the measure when they were asked to express an opinion, it would never have come before the Senate.
– Does the honorable senator say that I was present at that meeting ?
– If the honorable senator was not, he had a right to be.
– I was not present, I had not that right to be, because I was not, strictly speaking, a member of the Commonwealth Parliament at the time.
– The matter was placed before tho members of the party in an honorable way, and clearly and definitely explained. They all understood what it meant. Thev gave the Government a mandate to carry on, and now they are “ ratting “ on it.
– That is what we have always said about the honorable senator’s party
– The honorable senator has “ rats “ in his own party.
– The honorable senator should not give away caucus secrets.
– I am not. But I believe in men being honest towards one another. Those members of our party who are opposing this bill went to the country under the wing of the Prime Minister. They swore allegiance to him, and promised to support him. They induced him to go to their various States to assist them to secure the positions they now hold.
– Would the honorable senator trust the Prime Minister with the destinies of the State which he represents ?
– I would trust the Prime Minister and his Government anywhere. It is composed of young Australians. They may not know the tricks of the political trade, like some of the older politicians, such as Senator Findley, Senator Greene, and one or two others.
– What about Senator Lynch?
– Senator Lynch is a man for whom I have the greatest respect. He is one of the most honorable men in this Parliament. We have with us men who almost went on their knees to the Prime Minister to get him to visit their States and plead with the people to elect them. Now, because they think he is in a hole, they are “ratting” on him. Look at the unholy alliance that has been formed by the crowd who are “ ratting “ on him ! Each one is a “would be if he could be.” They would sell their own father or mother if they thought that it would help them to get into power.
– Tell us some more about the unholy alliance.
– It is the most unholy alliance that has been witnessed in the world’s history. Men who were cutting one another’s throats a few months ago are now cuddling each other. It will be a poor look out for Australia if they get into power. I am informed that they intend to join up with the Labour party, and ask some of the members of that party to accept portfolios in a new Government.
– What about Senator Needham and Senator Findley?
– They would make good cook’s off-siders
– What about the bill ?
– My friend, Senator Kingsmill, says “ What about the bill?”
The DEPUTY PRESIDENT (Senator Plain). - The honorable senator must address his remarks to the question before the Chair.
– This bill was placed before a combined meeting of the two parties supporting the Government. It was thoroughly explained, and there were only three dissentients to it.
– Who were they?-
– That is not the business of the honorable senator. If the party had held together, as it professed that it would, the bill would have passed without any of the squealing that we have heard from some of the old time-servers.
– I join with those who deplore the introduction of personalities into this debate. Senator ‘Guthrie quoted from the policy speech of the Prime Minister, and claimed that that right honorable gentleman had stated what the Government was prepared to give to the States in lieu of the present per capita payments. The honorable senator then charged those who are opposing the bill with having “ratted” on the Prime Minister. I shall not join in his condemnation of those who! are opposing the bill; they are answerable for their actions to their constituents. But I resent the remarks of the honorable senator if he includes me amongst those who, he says, are “ ratting “ on the Prime Minister. This- is the first time, during my four years in the Senate, that I have heard such a remark made by an honorable senator on this side, when a supporter of the Government has spoken in opposition to a Government measure. Whatever may be our attitude on questions such as this, it should not be said of us that we are false to the Government. This is a question on which every individual should be given credit for an honesty of purpose, and a desire to do that which he considers to be in the best interests of those who elected him. I am not aware of when Senator Guthrie arrived at a” decision on these proposals, but, so far as I know, his first declaration upon it was made only a few days ago. I was opposed to the proposals long before they were embodied in the bill. In justice to the Government I must say that if opposition had been shown to the measure when the opportunity was afforded before its introduction, we should not be considering it today. In introducing this bill the Government has not shown that there is any need for it. It seems to me to be late in the day for it to advance as a reason for the measure the claim that the principle under which these payments are made to the States is unsound - that it is a wrong principle for one authority to collect revenue and hand it over to another to spend. Ever since the establishment of federation that practice, whether it be sound or unsound, has been followed. It was provided in the Constitution that for the first ten years a share of the Customs revenue .should be paid to the States. The same principle was adopted by legislation for the next ten years, and has continued ever since, no effort having been made until now to repeal it or alter the system. It seems to me extraordinary that, after 26 years of federation, it is only now discovered that the principle underlining these payments is unsound.
– That was said four years ago*
– But why was not action taken then to bring about this change?
– Because the States backed out.
– The Commonwealth Government is not justified in depriving the States of their only reliable permanent source of revenue. Other State revenues fluctuate according to the prosperity of the people; but the per capita payment from the Commonwealth is the one reliable source of income on which State Treasurers can always budget with certainty. If the Senate agrees to this bill it means the severance of the last connecting financial link between the States and the Commonwealth.
– But would there be a severance if the Commonwealth offered the States an equivalent?
– It depends on the nature of the equivalent. The Government has given us no idea what it would be.
– That has yet to be disclosed.
– We are depriving the States of one of their reliable sources of revenue arid are offering them nothing in its place. I do not say that the attitude taken up by the States - that of not meeting the Commonwealth Government “tn conference - is correct, but if conferences have failed when the State Treasurers could rely on receiving a proportion of the Commonwealth Customs revenue, how can we expect them to come to an amicable arrangement in regard to some other form of financial assistance after this bill is passed ? I think that the Government should first have exhausted every means of getting the States to come to some arrangement.
– What other steps does the honorable senator suggest should have been taken by the Government?
– If the royal commission which the Government proposed to appoint to inquire into the figures which are in dispute .had been given a wider scope to enable it to go into the whole question, it would have been something.
– Would the States have accepted that?
– I am not in a position to say.
– Of course they would not.
– I have just as much reason to believe that they would have done so as the right honorable gentleman has to say the opposite.
– If they themselves would not confer with us, would they allow any one else to confer for them?
– I think so. Even without the approval of the States, if the Commonwealth Government had appointed a royal commission to go into the whole question, the States could have been called together when the report of the commission was available.
– The States have declared that they will not meet us under those circumstances.
– If that be the case, has the Minister any reason to believe that this legislation will not so Antagonize thom that they will refuse to meet the Commonwealth Government in conference, with the result that the latter will have thrust upon it the onus of having to present to this Parliament its own scheme for giving financial assistance to the States? If the Government is correctly representing the attitude of the States then, side by side, with its present proposal, it should have submitted if* suggestions for making good to the States what they will undoubtedly lose by being deprived of payments which have been made to thom regularly since federation. In dealing with this question the Honorary Minister (Senator McLachlan) said that the system of raising money for tho States to expend encouraged extravagance. I believe that there is extravagance in many of the States; but does the Honorary Minister say that in this respect the Commonwealth shines as a beacon-light showing the States how economy ought to be practised ? As a matter of fact, the rebuke comes ill from this Parliament, because of our own expenditure on unprofitable undertakings. Can any Commonwealth Government stand out as an example to others in economical administration 1
– The Commonwealth Governments have lived within their incomes, whereas the others have not done so.
– The main source of income of the States has been underrained since federation. Prior to federation the Customs and excise revenue was the main source of income for each colony. Is it not a fact that the fate of the Constitution referendum hinged on the question, of the finances, not of the Commonwealth, but of the States, which formed the Commonwealth, and which had been deprived of their main source of revenue. I do not wish to repeat the strong arguments adduced on that aspect of the question; but it is clear, from the reports of the Federal Convention, that finance was one of the most important considerations. The representatives of the States on the convention were elected in an atmosphere totally different from that of tb.e present day. There were no strong political organizations. The State representatives were elected because of their outstanding ability and extensive knowledge of finance. The ever-increasing revenue from Customs and excise which the Commonwealth collects, and which this year will amount to £44,000,000, is paid by the whole of the people; and since the States have been deprived of that revenue, they have to depend upon revenue from direct taxation imposed on a comparatively small section of the people. As has been frequently stated during the debate, the Senate was constituted the guardian of State rights. Although Tasmania has a population of only some 200,000, and Kew South Wales a population of about 2,000,000, all the States have equal representation in this chamber. As a representative of a State, I have a duty to perform to those who elected me.
– And so have others.
– I realize that. It is true that some honorable senators are in this instance out of step with the Government, and have been taunted for opposing the bill.
– The honorable senator has not been taunted in any way.
– Yes, by Senator Guthrie ; but I have made no charge against other honorable senators.
– The honorable senator has been consistent.
– Yes; and I have not charged any other honorable senator with inconsistency. It is regrettable that, on occasions such as this, when we act as our conscience dictates, we should be charged with inconsistency. We have to consider the financial responsibilities of the Commonwealth, and also those of the States. Tasmania has nothing to gain and everything to lose under this proposal. If it is adopted, it will be compelled to appeal to the Government, as it has had to do before, under section 96 of the Constitution, for financial assistance. Whatever our difficulties have been in the past, in making our expenditure and revenue balance, we will, if this measure becomes law, be confronted with oven greater difficulties. Wealthy States, such as Victoria and New South Wales, may not be embarrassed; but I have no hesitation in saying that Tasmania will be at a great disadvantage. The more I consider this question, the more am I convinced that it is my duty to vote against the bill ; and J am sure my action will be justified by the results which follow. Such a drastic alteration in the financial arrangements between the Commonwealth and the States has not been sought by any section of the community, and it is difficult to understand why the bill has been introduced. The States, undoubtedly, have a moral right to the per capita payment.
– “Moral” is a good word.
– It is. The right of the States to a portion of the Customs revenue has been recognized since Federation. The state of the Commonwealth’s finances cannot be used in justification of the bill. If this legislation is passed and given effect, the Government must take the responsibility. Senator Guthrie has said that honorable senators of the Nationalist party who oppose the bill are going back on the Government, but I am prepared to accept the responsibility of my action. If the Government repudiates mo in consequence of my vote I shall have no quarrel with it. Under the Nationalist platform I believe that on this measure I am free to vote according to my convictions. This legislation is not in the best interests of Tasmania. There has been no demand for it, and its passage will only antagonize the States. We have evidence of that on every hand. The question of the separation of Federal and State finances has nothing at all to do with the bill, and certainly is no justification for this Government discontinuing line per capita payments. I intend to oppose the second reading of the bill.
Debate (on motion by Senator Abbott) adjourned.
The following paper was presented : -
Immigration Act - Regulations - Statutory Rules 1026, No. 186.
Senate adjourned at 11.15 p.m.
Cite as: Australia, Senate, Debates, 17 March 1927, viewed 22 October 2017, <http://historichansard.net/senate/1927/19270317_senate_10_115/>.