Lower levels of government usually favour the devolutionist principle of ‘subsidiarity’ – the concept that decisions should be taken as close as possible to the citizens by the lowest-level competent authority. Some established definitions of subsidiarity have already been supplied in this volume (see Brown, Podger this volume). As a principle, subsidiarity is widely invoked and supported, but in practice it is highly contested and could be used to justify a variety of practical outcomes in different circumstances. In principle, subsidiarity would entail that a central (or higher) level of government would perform only those essential tasks that (for reasons of scale, capacity or need for exclusive power) cannot be effectively undertaken at lower levels of administrative decision-making. In practice, subsidiarity has not supplanted power-politics in which the devolution of tasks is seen as a contractual arrangement between principal and agent.

In Australia, the principle of subsidiarity has attracted widespread support but without leading to long-term political and institutional changes. It has been invoked, firstly, by the States against the Federal Government; and secondly, but more recently, by local and regional entities against the State level. This sequence of acceptance is significant because, taking the second case first, the situation of local authorities can be quite parlous, with many being close to financial incapacity. The states have not seriously tried to devolve either revenue-raising powers or well-funded new functions to local government. Some cost-shifting has occurred and that has worsened the position of local authorities, even though, as already noted, such practices have recently been addressed by an intergovernmental agreement. The states have generally been content for local authorities to have a narrow role, and have not supported proposals for the recognition of local government in the Australian constitution. The states have taken some interest in regionalisation of their administrative arrangements for the delivery of services, but their links with local government remain problematic in most program areas.

However, the States have endorsed the principle of subsidiarity as a weapon in their ongoing arguments with the Federal Government aimed at reducing the States’ financial dependency on the Commonwealth. This argument has been tightly interwoven with the long-running debate about how to reduce duplication and overlap of roles in the federation. Australia seems to have rejected traditional ideas about rational allocation of service functions to particular levels of government, since there are about ninety program areas in which the Commonwealth makes specific-purpose payments (SPPs) to other levels of government. Attempts to reduce duplication of roles during the Special Premiers Conferences of 1990-91 and in Council of Australian Governments (COAG) debates since 1992 have not led to clearer separation of roles. There is also no reduction in the political impetus, at federal level, for continuing expansion of SPP agreements.

While noting the lack of progress in implementing subsidiarity, it may be suggested that this principle could provide a useful benchmark for assessing, and for reforming, program design and funding arrangements. One approach, as recommended by the Victorian Government (ACG 2006), would entail the following elements:

This approach essentially attempts to marry a strategic partnership approach – for setting objectives and for coordination – together with ensuring major opportunities for innovation, diversity and competition at lower levels of service delivery to reflect different circumstances.

This approach requires the Commonwealth to ‘let go’ some of its detailed controls. However, this remains difficult to achieve at the political level, where the incentives are for the Commonwealth decision-makers to retain all their power and control. The Commonwealth retains the key role in the design, funding and governance arrangements for future patterns of service delivery in many program areas. However, the Commonwealth has gradually abandoned the traditional administrative model of direct control of service delivery through a large federal workforce. In most policy fields, the Commonwealth now prefers to work through other providers and mechanisms (Head 2005). The pattern of recent decades has been to gain control through agreements, standards, and accountabilities leveraged by tied funding. There has been a strong trend towards greater use of contractual controls, linked to a variety of service providers:

Contract-based service delivery is not, however, a robust model for developing partnerships based on shared thinking and devolution of authority and resources.