Does 'Abbott's Army' know why it's marching?

While many commentators think the Abbott government has totally mishandled the politics of its first budget, it’s beginning to look, to turn an old saying on its head, more like a conspiracy than a cock-up.

The cock-up view, which has been widely argued, is that by stripping $80 billion in education and health funding from the states over 10 years, Prime Minister Abbott and Treasurer Hockey were trying to force the states into demanding a GST hike to cover the appalling funding shortfall.

The state premiers have told Abbott very clearly that they won’t do that, and are embarked on a course of ‘not accepting’ the change – though what exactly that means is yet to be seen. Chaining themselves to a railing in Canberra perhaps?

However, the lessons of history give some clues as to why a conspiracy may be a much better explanation – in this case, to radically change the federation.

To see why, we have to go back more than 120 years to the early phases of the federation movement in colonial Australia.

Federation was always a good idea for the stout, top-hat-sporting men who ruled from the colonial cities. There were huge economic and defence efficiencies to be had, and to the top-hat brigade the idea of not becoming a federation meant denying what banker Henry Gyles Turner called “the progress of Australia towards a position of power and prominence in the world's history”.

But while the politicians thought federation an excellent wheeze, the people camped by the billabongs just didn't care much either way – a campaign was needed to convince settlers to vote in their colonies to join the federation.

Initially, the favoured tactic was fear. As historian Brian de Garis noted during the republican debate of the 1990s:

“... for most of the nineteenth century federation was little more than a subject for after‑dinner rhetoric at intercolonial meetings. In the 1880s it became a more pressing issue for a time, largely in the context of unwelcome German and French activities in the Pacific region and the unwillingness of the British government to intervene as many colonists wished.

“... [later] fear of the yellow peril and general insecurity about Australia's isolated position at the bottom of the world were never far below the surface.”

But these threats abated or receded in the public imagination, and the politicians were forced to become more devious. Consent for their grand project would have to be manufactured.

To do this, they went out to the billabongs – well, to the Murray River that served as the highly regulated border between the colonies of New South Wales and Victoria – and set up bodies such as the pro-federation leagues that eventually spread from the Murray River towns to every colony on the continent.

Why was that devious? Because there was really very little will amongst the 'people' to join a federation, but it had to be 'the people' who floated the idea rather than politicians.

As de Garis notes: “What was new was the strategy of seeking to develop grass‑roots support and to keep federation at arm's length from party politics. As William McMillan wrote to Sir Henry Parkes in June 1893: ‘I have seen Mr Barton and I have urged the necessity of making this movement a citizens' movement. With an executive from which members of parliament are to be excluded. It seems to be quite impossible to construct it on any other lines during the present period of our political struggles.’”

Now let’s apply this model to the current storm of protest over the Abbott health and education cuts.

Over the weekend, tens of thousands of 'people' marched in the capital cities. Some organising was done by unionists, but much of it was done by the ‘March in May’ protest group – a group that evolved from the ‘March in March’ phenomenon that grew out of five independent activists marshalling protestors via Twitter.

All that outrage has scared the hell out of the Premiers, which is why they don’t want to go back to their capitals asking their voters to cop an increase in the GST.

But what if the GST was a red herring? Although raising and broadening that tax makes good sense in economic terms, selling the change could be as politically difficult (in the present climate) as its creation back in 2000. Much harder, in fact, than another major tax change floated in recent weeks.

That’s right -- the Commission of Audit’s suggestion out of left-field that states be given back a collossal amount of income tax revenue.

As I wrote from the Commission of Audit lock-up three weeks ago (at that point still unaware of the scale of the health and education cuts to follow in the budget):

"The most extraordinary of the report’s recommendations is for a dramatic rebalancing of federal-state affairs. In essence, the commissioners want to give the states back tax powers that were surrendered (by agreement rather than in a constitutional sense) during the Second World War.

"Specifically, the report argues that large chunks of income tax be given back to the states, starting with a 10 per cent ‘state surcharge’ -- possibly increasing if the states wish to do so" (A plan of grand ambition, not austerity, May 1).”

The reason that looked so “extraordinary” at that time, was that nobody foresaw the scale of the cuts to come.

Now, the ‘people’ are on the march, demanding that their state Premiers ‘do something’ to prevent hospital beds vanishing, and their kids’ literacy and numeracy going backwards.

Cue Abbott’s strategists picking up the phone to the Premiers and suggesting: “How about we all agree to turn Australia back into a real federation?”

There are strong arguments in favour of returning much public service provision to the states and creating 'competitive federalism'. 

For instance, because the proposed hand-back would be on a strict pro-rata basis, a booming state would raise more income tax, get more money back, and be able to fund infrastructure to service the boom. Had these arrangements been in place for WA five years ago, it would have had extra funds to build roads, airports, ports, and housing infrastructure to service the mining boom. 

Moreover, the urge to devolve power in this way is core to the neo-liberal agenda being pursued by Abbott, just as it was in Thatcher's Britain, and was a clear ambition recorded in Abbott's 2009 book 'Battlelines'. 

Any Premier that said ‘no’ to an income-tax hand-back would be arguing against genuine outrage from the ‘people’ – people who were provoked by a Coalition leadership team that knows there is no other way to effect such dramatic reform.

Like Edmund Barton and Alfred Deakin, who did so much to whip up a frenzy of ‘popular’ support for federation, the Coalition may have consciously created ‘Abbott’s Army’ to shift some power back the other way.

Footnote: I have not mentioned welfare cuts and tax increases above, because the way they have been handled was certainly a cock-up.