The Australian Local Government Association, of which we are the member representing Victoria, is leading a campaign for local government to be recognised in the Australian constitution.

The Australian Government has committed itself to holding a referendum to recognise local government and Indigenous people in the constitution at the next federal election, likely to be held in 2013.

Our State Council passed a resolution in May 2011 that a referendum be held at the next federal election to amend the Australian constitution to expressly recognise local government to propose that:

• a new power be added to the constitution to expressly empower the Australian Government to fund local government
• the existence of local government be reflected in the constitution and provide for the right of people to democratically elect their council

The need for change

The 2009 High Court case of Pape v Commissioner of Taxation found that the Australian Government can only spend money where it has a specific power under the constitution. Currently, it does not have the power to provide direct funding to local government.

This decision casts doubt over important programs such as Roads to Recovery, whereby the Australian Government provides direct funding to councils to fix local roads. In Victoria this amount is $365 million over four years.

Funding from the Australian Government occurs in one of two ways:

• direct payments to councils
• specific purpose grants which are distributed to councils through state governments

The constitutional validity of the Australian Government funding councils through specific purpose grants is irrefutable.

Despite making direct payments to local government for many years, the Australian Government may lack the constitutional power to do so. In the event of a successful constitutional challenge, all subsequent funding to councils would have to be processed as specific purpose payments.

It is also possible, but improbable, that councils will be required to repay funds previously received as direct payments.

A reference to local government in section 96 of the Australian Constitution would create a specific head of power for direct payments to occur.

Panel on constitutional recognition recommendations

A panel made up of parliamentarians and others with an interest in local government was set up by the Australian Government to consult stakeholder groups, identify options for changing the constitution to recognise local government and gauge the level of support in the community for change.

The panel's final report calls on the government to financially recognise local government. This would allow the Australian Government to directly fund local government.

We support this recommendation for constitutional recognition.