Royalties plan may deliver goods

National Party leader Brendon Grylls’ vote-winning royalties for regions scheme must be modified if it is to reach its full potential and make a long-term contribution to the development of regional Western Australia. 

 A key ingredient to increasing the effectiveness of the extra millions of dollars being poured into previously cash-starved parts of the state is missing. That is an integrated, co-ordinated government plan for the length and breadth of WA.

The issue has been identified as one of a number of significant proposed changes outlined in the first annual report of the high-powered Western Australian Regional Development Trust, which has the job of overseeing the allocation of more than $1 billion annually under the royalties program.

The trust, which is chaired by former Australian Democrats’ senator, Andrew Murray, notes there is general acceptance within the government that country WA be divided into nine separate regions, to assist in co-ordinated decision-making across government. 

But there is a catch.

 “The nine country regions are not, however, a standard organisational matrix and state agencies often organise themselves into different regional configurations (the Department of Education for instance has seven regions),” the report says.

“Strategic and operational plans are needed at each level, informed by a state planning framework, aggregating to a state-wide regional development plan, policy and strategy guiding investment.”

The 38-page report is the first critical analysis of the novel program which, when announced by Mr Grylls about five years ago while he was in opposition, was shunned by the major parties as a vote-winning stunt.

Stunt or not, it certainly caught the imagination of country voters at a time when the introduction of Labor’s one vote, one value electoral reform was meant to sound the death knell for the National Party. 

The party needed new policies to offset the disappearance of country vote weighting, which had served it splendidly for years and up popped royalties for regions. 

The fact that neither the Liberals nor Labor scored an absolute majority in then Labor premier Alan Carpenter’s snap 2008 election played into the Nationals’ hands. 

Liberal leader Colin Barnett had not been overly enthusiastic about the royalties plan during the election campaign, but he swallowed his pride in post-election negotiations with Mr Grylls and the scheme became a fact of life in the new-look Liberals-Nationals ‘alliance’. 

The major flaw with the policy is that it earmarks one quarter of the royalties revenue for regional projects, regardless of the health of the budget. 

This removes the flexibility a treasurer must have in framing the budget although, theoretically, modifications could occur in extraordinary circumstances. But any tinkering would be accompanied by inevitable political ramifications.

There have been teething problems. The value of some spending programs has been questioned, some local government bodies received their second cheque for projects before the first had been spent and some towns were allocated grants before they had decided how the money should be spent. 

But the view that the program would turn into a giant pork barrel for the Nationals is effectively challenged in the trust’s report, which notes that its job is not to get involved in the selection of specific projects to be funded under the scheme.

The trust wants greater rigour in the distribution of such big chunks of public money. Hence its support for upgraded regional planning.

“The matter of regional planning is of vital importance to regional development decision making,” the trust says.

Referring to the importance of co-ordination and integration in regional development, to maximise economic, social and environmental sustainability, it adds: “It is hard to see how this can effectively be achieved without the development of required regional outcomes and regional future-based plans. Decision making of a high order is made more difficult and less efficient without good planning systems.”

The trust also deals with the potentially sensitive issues of the 25 per cent limit on royalties, which can be credited to the royalties account annually and the $1 billion cap on the fund. It wants the cap lifted and a new strategic regional development fund introduced.

Conventional wisdom had it that the maximum that could be deposited in the royalties fund annually was $1 billion. Andrew Murray told WA Business News that was not the case. 

“The Act ensures 25 per cent of estimated royalties must accrue to Royalties for Regions annually,” he said. “Nothing can stop that flow, and there is no cap on the inflow.  

“The 25 per cent could be $2 billion and still flow in (it is paid into the royalties fund periodically – in practice, quarterly).  

“The cap means the unallocated and unexpended balance in the fund is not allowed to exceed $1 billion.  So what that cap does is encourage spending to keep the fund below the cap.”

The trust’s report notes that, even though projects are earmarked for spending under the royalties scheme, delays in getting the project under way could mean the money is not spent for a further six or 12 months.  

This could cause the fund to exceed $1 billion. And, if that carries through to a new financial year, royalties money could, theoretically, be lost to the program because of the $1 billion deposit limit.

For that reason, and the fact that other sources, such as the Commonwealth, might also be prepared to assist a particular project, means a new strategic fund free of any deposit cap, should be established. 

Mr Grylls has thrown his support behind the trust’s recommendations. But Mr Barnett has been guarded, noting proposed changes will have to be considered in line with the annual budget process. 

Mr Grylls is naturally keen to milk the positives from his innovative brainchild. He noted after the budget in May that the program would deliver improved social infrastructure in areas such as regional health, skills training, water and natural resource management, Aboriginal initiatives and the super towns plan.

“By 2015, royalties for regions will have allocated more than $1 billion towards health services and infrastructure in regional areas, including an investment of $538 million to strengthen medical care and services in rural communities in the southern part of the state,” Mr Grylls said.

“This is the greatest single investment in regional health care in WA’s history.”

You might be forgiven for expecting these sorts of sentiments to figure prominently in Mr Grylls’ National Party policy speech during the 2013 state election campaign. And who could blame him?

But even better if the money allocated from the royalties’ fund goes to priority projects based on the trust’s vision of a strategically targeted regional development program, under a co-ordinated state-wide plan. 

That would help ensure lasting benefits to WA. And it would not do the Nationals any harm either.