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Common(wealth) Knowledge #62: Andrews government flags local government reform in Victoria

Australia’s federalist system will allow Victoria to limit local governments after IBAC corruption report.

Victorian Premier Daniel Andrews has responded to the Independent Broad-based Anti-Corruption Commission’s investigation into corrupt conduct in the City of Casey by pledging to reduce the powers of local governments.


IBAC’s 5-year investigation into corruption within the City of Casey, code-named Operation Sandon, was tabled in Parliament on Thursday. It found that there were “corruption vulnerabilities in planning and council decisions.”


The investigation initially focused on corruption allegations that councillors in the City of Casey local government had been accepting bribes from local developer John Woodman, and failed to disclose their conflict of interest. Overall, Woodman spent $1.2 million in bribes and donations to receive planning approval for his development projects, including rezoning parts of the local government area.


The report also found that Woodman had attempted to influence the Victorian government too, with mixed results, including making major donations to several MPs.


IBAC recommended creating an Implementation Interdepartmental Taskforce with broad oversight powers, to encourage accountability and transparency at the state and local levels of government.


In his response to the report, Premier Andrews highlighted his government’s existing reforms to Victorian political donations laws, which were implemented after the investigation began, and promised that “the role of local councils in significant planning decisions should be reduced.”


Neither IBAC’s report nor the Premier’s response mentioned the Commonwealth government, with reforms to be taken wholly by the state government, which has nearly complete legislative power over local governments. To understand why this power exists, and why the Commonwealth government has little regulatory power over local governments, it is necessary to consider how federalism protects state governments.


Section 109 of the Australian Constitution is one of the better-known provisions in the Australian Constitution, and allows Commonwealth legislation to override State legislation when the two conflict, “to the extent of any inconsistency.” This is often portrayed to give the Commonwealth government broad legislative powers, and, taken on its own, would appear to allow the Commonwealth to override any State laws.


However, the scope of Section 109 is limited by constitutional limitations on the power of the Commonwealth government.


Legislative powers under the Australian federal system are divided into three categories. These are the exclusive powers of the Commonwealth government, like those found in Section 52; concurrent powers exercised by both Commonwealth and State governments, mostly found in Section 51; and the residual powers of the States, namely any power not listed under the first two categories.


The protection for these residual powers is found in Sections 106-108, known as the ‘savings clauses,’ which uphold, except where limited by the Australian Constitution, State constitutions, State Parliaments any existing and future State laws.


But what does this have to do with local governments?


Federalism, the division of power between different levels of government, is fundamental to the Australian system of government. Federalism complements the separation of powers, as both seek to promote accountability and responsible government, ensuring that no part of the government has overwhelming power over the others. This dual separation could be envisioned as horizontal separation, the separation of powers within one level of government, and vertical separation, federalism separating powers between multiple levels of government.


Indeed, Justice of Appeal Davis in LGA of Queensland (Inc) v Queensland (2001) said that “the Constitution is predicated upon the continued separate existence of the Commonwealth and States and bodies politics,” echoing the sentiment of Justices Dawson, Toohey and Gaudron of the High Court in Re Residential Tenancies Tribunal (NSW) (1997).


Local governments, like the Prime Minister, are not mentioned in the Constitution. But, like the Prime Minister, they are a key part of the government. In their case, they are protected by the savings clauses.


Local governments, like state governments, existed before Federation, under the domain of the then-colonial governments. As Davis JA said, the Constitution wanted to preserve the vertical separation of federalism, so the savings clauses allowed state governments to retain full control over local governments.


This gives Victoria nearly complete control over local governments’ powers. States can delegate any powers they retain under the savings clauses to local governments at any time, and can take them away at any time.


Outside of certain financial agreements, the only influence the Commonwealth has over local governments is through exercising its exclusive powers or using Section 109 to overrule State governments on matters covered by the concurrent, or shared, powers. These laws are binding on local governments because they are binding on State governments, who control local governments.


However, when state governments pass laws regarding local governments, they must be careful to make sure that the laws they are passing only deal with powers left to them as residual powers.


In the Queensland case of LGA of Queensland (Inc) v Queensland (2001) that was mentioned earlier, the Local Government Authority of Queensland, on behalf of the local governments, challenged Queensland laws that sought to discourage councillors from running in federal elections.


Sections 10 and 31 of the Constitution state that the “laws in force in each State” for electoral processes would apply until federal laws were made. This was done by the Commonwealth Electoral Act 1918 (Cth). The Queensland Court of Appeal said that once the Commonwealth passed that legislation, electoral laws regarding federal elections became an exclusive power. Thus, Section 109 invalidated the Queensland legislation for intruding on an area under Commonwealth authority.


Australia’s federalist model means that although local governments aren’t mentioned in the Constitution, Commonwealth legislation can still be binding on local governments, and local governments can use the Constitution as a shield against overbearing State governments.


Saying that federalism is simply about splitting powers between Commonwealth and State governments is an oversimplification. It is important to remember that local governments exist to deal with issues on a local level, which the other levels of government aren’t equipped to handle without becoming bloated and overwhelmed.


Although any potential changes to Victorian planning laws would be unlikely to clash with the Commonwealth government’s powers, and would therefore be lawful, any politician who wants to regulate the powers of local governments should keep in mind that local governments, although subject to State authority, aren’t entirely defenceless.


The next local government elections in Victoria will be held in October 2024.


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