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Description:
"In the public administration tradition, to structure government rationally is to (among other things) maximize clear lines of accountability and responsibility. In other words, to be rational was to seek `good government' - transparent, accountable, efficient and honest.

"In political science today the concept of rationality is rightly and invariably seen in a more tough-minded, unsentimental light… the core executive of the modern state has a much stronger interest in perceptions of good government than the reality of it… Core actors can reshape the state (especially in unitary, majoritarian systems) and mould perceptions of the resulting new order, all to their benefit."

Local Government and Public Sector Reform in Australia

Analysis of public sector change in Australia has tended to converge on some closely-related themes associated with such terms as globalisation, economic rationalism, public choice, agency theory, managerialism, new public management, contractualism, privatisation, deregulation, to name just a few. Local government has tended to be regarded as part of this bigger picture of public sector transformation. There is general agreement that the impact has been significant, privileging the operation of market forces over other long-held public values. Often the analysis has also been critical, drawing attention, for example, to the destructive consequences of what Rhodes described as `hollowing out the state'.

As Michael Pusey also warned some time ago, these consequences go beyond the state to reshape the character of society itself:

"At the level of public policy, the rationalisations may have brought needed gains in efficiency in many areas of state action and this may indeed continue - there can be no quarrel with the notion of efficiency as such. The inherent problem lies instead at another level - with the criteria that define what count as costs and benefits; with the loss of social intelligence; and with the number and range of potentially constructive discourses that have been suppressed."

Pusey's critique is particularly pertinent in Victoria, not least in the changes that have occurred in local government at the hands of the Kennett government.

As is increasingly acknowledged all over the developed world, local government is an arena of considerable and growing importance. Because of its usually manageable and comprehensible scale and closeness to its constituency, it has been seen to have a significant role to play in shaping, at the grassroots, communities which are more civil, equitable, culturally sensitive, environmentally sustainable and democratic. Even in Australia, notwithstanding the fact that local government is not protected by the Commonwealth constitution nor the subject of profound analysis, there has been general acceptance that it is a legitimate part of the country's democratic system of governance.

This has meant that when state governments have exercised their legislative powers towards local government, for both pragmatic and philosophical reasons, they have been inclined to tread with some circumspection. Local government in Australia, therefore, still varies significantly from state to state, reflecting thereby not only historical differences but also varying relationships between state and local governments. In the matter of the pursuit of either managerialist or market-privileging changes, therefore, state governments have generally sought to proceed cooperatively rather than directively. This has meant that, by and large, local government in states other than Victoria has been able to exercise some choice about the extent to which it has implemented change. It has been possible, for example, to make decisions about amalgamations, organisational reform and opportunities for market-testing without losing sight of the governance role of local government. In other words, the danger of suppressing `alternative discourses' has thus far been averted.

In Victoria the story has been more sinister. From the outset, the Kennett government has implemented its agenda, including towards local government, without regard for alternative values or points of view. In so doing, as is argued in this chapter, it has not only turned local government into local administration but it has acted in a way which provides a salutary lesson about both its agenda and some of the consequences of the methods it has used. Most troubling of all has been the substitution of bluster and rhetoric for truth and accountability and the related attack on local democracy and democratic practice per se. Out of this has come every appearance of what Hindess has described as the `institutionalisation of arbitrary power'.

The Kennett Government and Local Government in Victoria

For the past six years, Victorian local government has been in the throes of massive changes initiated by the state government. Sweeping amalgamations (only the Borough of Queenscliffe was left untouched) have reduced 210 municipalities to 78. Compulsory competitive tendering (CCT) to at least 50% of council expenditures has led to the contracting in or out of every type of service within the ambit of council responsibilities. Because all councils created various in-house units to compete for contracts, CCT has also forced previously unitary organisational structures to operate along some form of purchaser /provider divide. The financial and planning capacities of councils have been reduced by a range of measures including continuing intervention and intensive direction and oversight by the state government, the operation of a rate cap and enhancement of the role of Chief Executive Officers who are now solely responsible for council administration and, though employed on contracts, cannot be sacked without the Minister's approval.

This saga begins with the state elections at the end of 1992, when, in his opening speech of the campaign, the Hon. Jeffrey Kennett, leader of the Liberal party and of a Liberal-National Coalition, promised Victorians `fair, open, honest and accountable government'. Many believed him and swept him into office with a huge majority giving him control of both houses of parliament. Disappearing in an avalanche of condemnation of the financial and other management inadequacies of Labor, local government was not an election issue. In any case, when the Labor government sought to bring about local government amalgamations in 1985/86, prominent Coalition members, including the Premier, the Deputy Premier and the Minister for Local Government had fought for local government's right to self-determination. Mr. Kennett publicly congratulated those who had resisted amalgamations and declared that the Liberal party would continue to defend their right to be administered by the local government system of their choice.

The Coalition's Local Government low-key and, in the event, deceptive policy statement also contributed to the absence of public scrutiny. The initiatives outlined were underpinned by two important general principles: recognition of `the importance of Local Government as the arm of representative government closest to the people' and the belief that `municipalities should be given the autonomy they need to carry out their functions efficiently and effectively, in conjunction with measures to ensure accountability to the local community'.

Compulsory competitive tendering (CCT) and boundary changes, in particular, were treated in ways which appeared consistent with these principles. The former was presented as an efficiency measure in the context of tendering for major projects and services and alongside other measures such as cooperative activities and resource sharing between municipalities and other bodies. As well, the Coalition accepted that there were

"many features of local government's role and functions which cannot be accurately defined for the purposes of a contract, and CCT would be inappropriate in these circumstances."

Boundary change would need to be `driven by the local community'. The primary role of the state government was to establish the framework in which its objectives were to be pursued and to work cooperatively with councils to that end. A newly established Board, including representatives from major local government organisations, would replace both the Local Government Commission and the Office of Local Government. Amongst its many tasks, it would `provide assistance to Councils investigating boundary issues where the support of the community has been demonstrated'. The central point was that:

"if boundary change is to work it must be driven by the community. In addition, it cannot be assumed that improved efficiency is automatically gained from any increase in scale. Indeed, if efficiency is the ultimate objective, there are many policy initiatives which can be taken … CCT being an important example."

The programme outlined, therefore, was unexceptionable. While carrying the hallmarks of the economic rationalist and managerialist agenda through its focus on efficiency and exposure to the market, there was nevertheless a tone of respect for local government and its constituency.

The events which occurred after the elections bore only superficial resemblance to the policy platform. They have happened in two stages, the first during the first Kennett government, the second after the 1996 elections. The stages were also marked by a change of ministers - from the Hon. Roger Hallam, National party Legislative Council member for Western Province to the Hon. Robert Maclellan, Liberal party Legislative Assembly member for Pakenham. The first stage set the scene for the second, providing the structural features. Its chief characteristic was misinformation, while pursuing a radical agenda which included the destruction of local government and establishment of central control of local administration. The second stage, which still continues, has consisted of consolidation of central direction by a variety of other means. These include threats, scornful comments and out and out contempt for elected local government representatives. During this latter phase, ad hoc interventions by the minister, especially in the area of planning, have also been typical, adding to the turbulence and unease which occurred initially as a product of the restructuring process.

Phase I: 1993-1996

First, the process embarked on by the government was very different from that implied in the policy platform. Secondly, the language in which the `reforms' were explained shifted from one which gave voice to ideas of local worth and democracy to one which placed business and economic interests at its core. Thirdly, there was absolutely no compunction about dismissing councils nor about installing appointees to run local administrations. Finally, both the speed and drastic character of the changes denied any effective public participation or even understanding of what was happening. Disregarding the importance of local government to the nurturing of local democracy and to active citizenship, there was absolutely no allowance for public education. This was a coup not a reform.

From the time the Local Government (General Amendment) Bill received its second reading on 29 April 1993, there was scant regard, if not outright contempt, for parliament, for the electorate, for legal rights and for local government. The Bill made no provisions for the Local Government Board to include representation from local government organisations; it allowed the Governor in Council to make orders in relation to any boundary changes, removing entirely the provisions for local initiative; it removed rights, previously guaranteed under the Constitution Act 1975, to appeal to the Supreme Court against the board or the minister in respect of any review, proceedings or act incidental to the conduct of such a review. In debating the Bill, protests by opposition members that local government had not been properly consulted and would be denied the capacity to participate effectively in any restructuring process, were met by government members with statements that the government had no intention of embarking upon wholesale restructuring in Victoria and that communities which wished to continue as they were would be allowed to do so. While the Local Government Commission was abolished, the Office of Local Government was not.

Even while the Bill was being debated, and on the strength of a report from the accounting firm KPMG Peat Marwick, the process of restructuring had begun, with the creation of the City of Greater Geelong. And, shortly afterwards, when in August 1993, the Local Government Board, consisting of a full-time chair (Ms Leonie Burke, a former councillor and since 1996 a Liberal MLA) and six part-time members, was set up, it was immediately given its brief to review the structure of local government. Moreover, using powers derived from amending the Constitution Act, the most extreme approach to restructuring was set on foot: all elected councillors were dismissed and their place taken by commissioners chosen and appointed by the government.

Although the Kennett government has been vigorous in condemning what it considers interest groups, it is clear that its post-election local government policies were influenced strongly by one particular set of interests represented by Project Victoria, a consortium of businesses supported by the Institute of Public Affairs (now the Institute for Private Enterprise) and the Tasman Institute. Captured by the content of Project Victoria reports advocating drastic public sector dismantling, contractualisation and privatisation and making use of claims that Victoria's finances were in dire straits, the government put aside notions about the rights of local communities to self-determination. Past reservations about economies of scale and about the appropriateness of competitive tendering to the range of council services gave way to the claimed needs of business and, ipso facto, the economy. Using arguments presented by Des Moore in the Project Victoria paper on local government, the minister claimed that:

"Municipal reform is important not only because this is a major industry - with a turnover of more than $3 billion in Victoria alone but also because local government has a major impact on other parts of the economy.

"Aggregate local government expenditure in Victoria is 23 per cent above the average for all States. Expenditure per capita is 20% higher. Victorian councils exact 12 per cent more rates, fees and fines than other councils around the nation. Only part of this picture can be explained by the fact that Victorian councils provide more in the way of human services than councils interstate.

"Business in Victoria is hampered both by these cost structures and by the vagaries of a planning approvals system that might deliver a decision in one week or ten, depending on which side of some municipal frontier the applicant happens to be on.

"Previous attempts to lift the performance of Victoria's councils were stymied by legislative inadequacies and the willingness of vested interests to squander vast sums of public money to frustrate reform."

Thus was restructuring explained. Later, in the same document, the minister proudly went on to list and describe the government's and the board's achievements. Unashamedly misrepresenting what had happened, he praised the board for having stressed opportunities for public input in its municipal restructuring review and also for having (simultaneously), engaged in extensive consultation regarding CCT. This was being said just fifteen months after the Local Government Board had begun its process of review. In that time, not only had all of Victoria been reviewed but recommendations had been made to the government which, in turn, had made its determinations, dismissed all the councils, selected and appointed commissioners and identified interim Chief Executive Officers to assist them. Meanwhile, the board had also consulted (sic) about CCT, made its recommendations and, as a result, new municipalities, still in the first throes of amalgamation, would have to submit 20% of their total expenditure to competitive tendering by the end of the 1994/95 financial year, followed by 30% in 1995/96 and 50% by 96/97.

The pattern of, at best, half truths, of speed and unrelenting pursuit of an agenda drawn up at least in part by a think-tank operating on behalf of business interests, and without public debate, guaranteed that there would be no resistance. Lulled by the government into a false sense of security about their boundary reform intentions, the community and its local government representatives, many predisposed towards some reform of local government, were kept utterly reactive or watching from the sidelines. Community discussion was virtually non-existent and council submissions, constrained by the board's timelines and by fears of municipalities being completely dismembered, were cobbled together on the run to try to construct arguments which they hoped conformed to the very general guidelines issued by the board. Suddenly, council staff from top to bottom were uncertain of their future. Equally suddenly, communities wondered what would happen to their municipal assets and services. Municipal administration became totally inwardly-focussed and public processes fell by the wayside. There was neither time nor understanding.

The advent of commissioners to oversee the local processes involved in implementing the government's agenda, compounded the problems. The common pattern was to appoint people who did not live in the communities they presided over. Interim CEO's, appointed by the government from those in the system, were transferred from their `home' territory to other areas. Having been municipal officers, they were now effectively instruments of the government and, like the commissioners, charged with implementing the government's directions. The central objective was not the reconstruction of local government on a new and better basis but the achievement of a 20% reduction in expenditure. This was the directive given to commissioners and regarded as the measure of success.

Although some commissioners instituted community meetings and occasionally found themselves confronted by angry residents when their decisions were blatantly detrimental, the most common reaction was confusion and its regular companion, apathy. While it is likely that many accepted the need for change, the fact that communities were generally excluded from the process seriously weakened any nexus that may have existed between them and the new local administrations being constructed. Without effective leadership from a still-demoralised Labor opposition, public scrutiny of the changes taking place failed to occur. The Municipal Association of Victoria (MAV) was similarly silenced, having become the forum and voice of commissioners instead of local government. Reporting systems, a basic form of public accountability which result in Victorian local government finance statistics being published by the Australian Bureau of Statistics, broke down completely.

The introduction of CCT on top of amalgamations was an utterly ruthless step, disdainful of both council employees and local communities, especially those in already-struggling rural areas. The combination of having to amalgamate administrations, reduce staff numbers, decide which assets to sell and begin the process of contracting out, was both turbulent and chaotic. As in the other Australian states, it would have been possible to introduce competitive practice at the local level in a more open way, allowing citizens and local communities to weigh up its costs and benefits. In Victoria, however, compulsory competitive tendering anticipated the national competition policy, used it as a restrospective justification and, to this day, remains a particularly extreme and crude model. Driven by arbitrary targets and commissioners (and, more recently, by performance indicators and customer surveys of little value) no service was automatically quarantined. Targets were also set without it being understood that under the Australian Accounting Standards (AAS27) interest and depreciation were included, requiring, in some cases, the tendering of virtually all services to meet the targets. Nevertheless, having legislated the targets and presumably confident that local government could be forced to deliver, the government quickly adopted the objective of having all services market tested. Only because the Commonwealth supported a study into the detrimental consequences in rural municipalities, did the Victorian government finally concede a review which resulted in a slight easing of the burden by altering the formula (removing interest and depreciation) and permitting rural councils not to put out to tender contracts under $50,000.

Stage II: 1996-

In 1996, the first step was taken to allow the rebirth of local government. Elections took place in 21 metropolitan and regional municipalities, bringing to 23 the number of elected councils; the rest of the state (except the Shire of Melton which chose to remain under commissioner control) was to regain elected councils only in 1997. One might have assumed that, with the government having taken this course, a new and better era was about to begin.

Instead, two months after the 1996 elections, which also happened to coincide with a state election at which the Kennett government was returned comfortably, the new Minister for Planning and Local Government, the Hon. Robert Maclellan, without prior warning or discussion, announced a rate cap and legislative amendments to make his rate-pegging power permanent. With this one stroke, the taxing power of local government, on which its albeit always circumscribed autonomy depends, was effectively removed. Although the rate controls have eased since the initial absolute capping, there is now an ad hoc system applied in which councils may approach the minister to make a case for a rate rise; the arbiter of what is or is not appropriate remains not the council or the community but the minister. As well, the minister has the power to appoint municipal inspectors to review councils, a right which serves as a deterrent to councils contemplating activities not endorsed by the government.

These arbitrary and autocratic powers are wielded with enthusiasm by the minister. It is fair to say that there has also been a climate of fear. The power to sack councils is never far from the surface. Darebin council, for example, was dismissed by the minister despite the fact that the person appointed by him to review the problems of this Labor council, found no evidence of any corruption or illegality. Having subsequently given permission to hold new elections, at which five of the dismissed councillors were returned, the minister has already issued further threats. Since then, Nillumbik council has also been suspended and a Bill prepared to have it dismissed, again without any evidence of either illegal or corrupt actions by the councillors. A strong case has been made that the minister and government were simply annoyed by the council's environmentally-driven stance against various development proposals. The premier has since suggested that new elections might be held soon, as long as the suspended/dismissed councillors agree not to stand again. Such travesties of democracy and justice no longer surprise Victorians. Meanwhile, the major development of the Docklands in Melbourne is to proceed outside the control of the Melbourne City Council under the purview of a government-appointed authority with municipal entitlements.

This ad hoc process of dismissals, reproofs and threatened reviews maintains an atmosphere in which councillors are treated as children to be disciplined by the minister and his appointees or even by the premier. Even CEOs have complained that their capacity to do their job is undermined by the many demands of the minister and the Office of Local Government. While there is general acceptance by councils of the requirement that municipalities fall within the audit responsibilities of the Auditor-General, there seems little justification in the government's never-ending desire to oversee municipal policies and processes, not only through inspectors but also through reporting requirements such as corporate and business plans, and centrally-conceived customer satisfaction surveys and performance measurement data. Neither the surveys nor the performance data seem to be designed to be really useful for individual municipalities, serving instead to offer the government opportunities for ill-founded comparative judgements. Local accountability, therefore, is not to the local community but to the state government.

At a personal level, too, the minister does not resist opportunities to demean councils and councillors. One council, Moreland, which has a strong communitarian ethos, has long been dubbed the people's republic of Moreland; the Borough of Queenscliffe, because it was never amalgamated, has been described as `a municipal theme park'; addressing a gathering of estate agents, the minister described the City of Yarra, which has had a woman mayor and has a female CEO and several other women in senior positions, as the `feminist collective - they're good on renovations', while the City of Bayside was referred to as a place `that would benefit from global warming'. Councillors have also been called wimps and accused of trying to get away with murder for blaming him for problems with inferior housing developments.

The 1997 council elections were another occasion for cutting councillors down to size. One week before the elections for 54 new councils, the minister summoned all Chief Executive Officers to a meeting, and told them that after the council elections he would be introducing more new legislation affecting local government. To make sure that councillors would steer rather than row, and as part of a concern to keep CEOs `at arms length from political interference' and from `strong emotional and political pressure at the local level', CEOs were to be made exclusively responsible for municipal administration, including the power to hire and fire staff. As well, even more extraordinarily, any council `wishing to take action' against its CEO, that is, intending to terminate his or her contract, would first have to advise and explain their intention to the Minister for Local Government. These changes were incorporated in legislation in April 1997.

At the same meeting, the minister also threatened to make CEOs the Responsible Authority for local planning should councillors `insist on meddling in the approvals process'. This threat has not been acted upon, quite possibly because in his more senior role of Minister for Planning, Mr. Maclellan has presided over a state planning regime in which local planning has been in such disarray that he has been able to guarantee a period of minimally regulated property development. This has been the direct result of the privatisation of the building control system alongside a drastic overhaul of the state planning system. Indeed, in this second stage of the unfolding of the local government `reforms', it has been in his role as Minister for Planning that this minister has been most dismissive of local government.

As a result of the partial privatisation of building regulation, a new centralised regulatory apparatus consisting of a Building Control Commission (BCC), a Building Practitioners Registration Board (BPB) and a Building Appeals Board (BAB) has been created. Under this apparatus, private surveyors have authority to issue permits for buildings and for demolitions. The right to issue planning permits continues to reside with municipalities which can also issue building and demolition permits. The BCC and councils have concurrent enforcement powers; it appears that councils may be liable for the actions of private surveyors and, finally, there is a regulatory gap which allows surveyors to issue permits for buildings which are inconsistent with planning permits. Surveyors in one municipality can issue permits for work in another municipality. In sum, there are serious jurisdictional problems, resulting, on the one hand, in demolition of valuable heritage buildings and, on the other, building of structures which contravene planning permits, cause distress to neighbourhoods and diminish the quality of the built and living environment.

These problems have been aggravated by the simultaneous development of a new state `policy framework' with a reduced number of statewide zones, new definitions and controls and a new format for planning schemes. Urban consolidation objectives have also been given as the justification for introducing The Good Design Guide for Medium Density Housing . As a result, councils have been forced to draw up new municipal strategic statements to try to shape the new requirements to meet local needs and aspirations. Meanwhile, they have not had real control of local planning. The Design Guide, used by developers to promote developments which meet only minimum standards, has compounded the problems of building regulation so that poor planning and poor building have been the result. Various system failures have caused further deterioration. The Administrative Appeals Tribunal, which hears planning appeals, is said to be unable to cope with the increasing workload, the Heritage Council, having been critical of the minister, has had its personnel changed, and the National Trust has admitted that it does not have the resources to defend heritage buildings against wealthy developers.

It is quite apparent that there have been beneficiaries of this lengthy and still continuing story. There have been cases of unlicensed demolition operators who have prospered by knocking down buildings. Property developers, estate agents, investors and building surveyors who have made use of the large gaps in the building and planning system have also done very well. Most troubling has been the evidence regarding the minister's use of his right to call in planning matters. The result has been vigorous intervention without accountability. Amongst other questionable decisions, he has waived building height controls, which he has described as `silly rules', which has provided, for example, a generous profit of $4 mill. to Hudson-Conway, a company connected with Mr. Ron Walker, Treasurer of the Liberal party. As well, he has approved a subdivision in an environmentally sensitive area for a Liberal party branch president because only a person with `a heart of stone' would have rejected it and he has provided legislation which allowed one particular gaming venue operator (also an acquaintance of the premier) to install gaming machines in a property which otherwise would have been denied them.

As part of its program of rhetoric and bombast, the Kennett government continues to state that huge savings have resulted from its remaking of the municipal map. Savings of up to $400mill. have been claimed. While it is very difficult to be conclusive, analysis of ABS figures suggests that these claims are wildly inaccurate. If we compare Victorian local government operational expenditures of $2,452,066,000 in 1991/92, the last complete financial year before the Kennett government was elected, with those of $2,859,031,000 for 1996/97, the latest figures available, and then inflate the 91/92 figure to 1997 values, giving a figure of $2,746,862, it would seem that the operating costs have actually increased. Rates have gone down considerably, a benefit to major property-owners, in particular, but so has capital expenditure which means that `savings' have only been made by failing to maintain infrastructure. On matters of the financial and efficiency costs and benefits of the Kennett government's changes to local government, there is still a need for much more research and analysis. Nevertheless, there are strong grounds for stating that local communities have not made any sustainable economic gains.

On the other hand, it is quite clear that local government has been not only weakened but comprehensively undermined. There has been an effective transfer of authority out of the hands of councillors into those of senior managers but, even more clearly, into the hands of the state government and, particularly, the Minister for Planning and Local Government. This movement towards an increasingly autocratic mode has not been confined to the arena of local government. Nonetheless, because of the importance of local government to the achievement of democratic governance, which must begin at the grassroots if it is to have any capacity to survive, it is arguable that it is in this arena that the damage may have the most serious consequences.

Happily, however, the story is not yet over. The package in which Victoria's local government changes has been delivered, has been an ugly and dangerous one. While the majority of Victorians have continued to be blinded by the rhetoric of leadership and economic benefit, the tide has been turning. The planning arena has seen community discontent crystallise into a network of local action groups calling themselves Save Our Suburbs. Recently the Treasurer has been in dispute with the Minister for Planning about a planning problem in his constituency. Local government is also slowly regaining some control over local administration. Councillors in many municipalities, many of their staff (including senior managers and CEOs), local government organisations, such as the Municipal Association of Victoria (MAV) and the Victorian Local Governance Association (VLGA), people in communities throughout Victoria, as well as journalists and academics, are well aware of the fragility of local democracy. Perhaps for the first time, serious thought is being focussed on constructing strong units of democratic local governance which cannot be treated with contempt in the future. Such units certainly need to be efficient and effective but, drawing on and shaping their communities, they will be able to rearticulate values of fair, honest, open and accountable government, values which they will be in a position to demand of other spheres of government.