There is no end in sight to the impasse over Sydney's next rail link. At the weekend the federal Transport Minister, Anthony Albanese, again said the Commonwealth would provide $2.1 billion only for an Epping to Parramatta line. The state government is determined to use the federal funding to construct a north-west rail link from Epping to Rouse Hill.
The dispute is an example of Australia's federal system at its worst. Instead of the federal-state ''blame game'' having been eradicated, it continues to play a destructive role in a number of vital areas such as transport, the Murray-Darling Basin and education.
Neither the Gillard nor the O'Farrell government disputes the urgent need to expand Sydney's rail infrastructure. But their priorities are naturally affected not just by a hard-headed assessment of where the greatest need lies, but by their own political imperatives.
The federal government's funding for the Epping-Parramatta rail link was announced during last year's election campaign as an attempt to shore up votes in western Sydney, including in Maxine McKew's former marginal seat of Bennelong. The O'Farrell government, by contrast, was elected with a commitment to provide a rail line to its strong supporters in the growth centres of Sydney's north-west.
The NSW government would normally have responsibility for developing a public transport plan for Sydney. Public transport has long been the domain of the states. They have played the lead role in ensuring that transport infrastructure complements their policies in planning, and urban and regional development.
There is also a clear line of political responsibility to the states. When the trains, buses or ferries fail to run, it is the NSW minister for transport who fronts the media to explain and take the blame. Public transport is also a major part of state elections. By contrast, it rarely features in federal campaigns, except when a party sees an opportunity to woo voters in a marginal seat.
So why is Sydney's next rail link a federal issue? What business does a national government have in determining specific rail priorities in western and north-western Sydney?
The answer comes down to money. The NSW government may have the political responsibility, but it lacks the cash to realise its goals.
The most important change in the federal system since 1901 is the shift of taxpayer revenue from the states to the Commonwealth. The states lost control over income tax during World War II and more recent High Court decisions have stopped them raising taxes on goods, such as a GST.
The result is a system in which the states have primary responsibility for health, education and transport, but lack the funding to satisfy the most basic expectations. The states must go cap in hand to the Commonwealth.
This mismatch between responsibility and revenue-raising capacity, referred to in technical jargon as vertical fiscal imbalance, is one of the greatest problems facing our system of government. It produces a wide range of distortions that undermine the quality of services and produce inefficient and ineffective government.
The Commonwealth makes up the states' financial shortfall by granting them tens of billions of taxpayer dollars each year. But these grants often come with strings attached. In the case of transport, the federal government is seeking to impose a condition that its grant of $2.1 billion to NSW be spent only on an Epping-Parramatta rail line.
This is an example of the Commonwealth using its financial power to override the transport plans of the state government. Such opportunistic interventions are a persistent feature of Australia's broken federal system.
Another recent example was John Howard's announcement before the 2007 election that the Commonwealth would give extra support to the Mersey Hospital in Tasmania. The hospital was to be downgraded by the Tasmanian government, but it also just happened to be in a marginal federal seat.
I do not know whether Sydney's next rail line should run from Epping to Parramatta or from Epping to Rouse Hill. But I believe the final say should lie with the NSW government. It should receive the electoral benefit, or pay the electoral price, for the decision.
It is an unfortunate by-product of our dysfunctional federal system that the Commonwealth can impose conditions in this area. Such decisions should clearly rest with the NSW government so that it can develop an integrated transport and planning scheme for Sydney.
George Williams is the Anthony Mason Professor of law at the University of NSW.
Read more: http://www.smh.com.au/opinion/politics/money-has-driven-the-federal-system-right-off-the-rails-20111121-1nqzm.html#ixzz1eR3TVRaq
