The widening gap between city and country people throughout Australia is unhealthy and is most undesirable in any society. The growth of cities at the expense of rural areas is a world wide trend. In most other countries, however, it is the need to increase agricultural production by more efficient methods that is displacing huge numbers of people from rural areas. It should be cause for alarm that, in Australia where there is already a very high level of efficiency in agricultural production, the trend is increasing rather than diminishing.

While it may be a fact that cities around the world treat their hinterland unfairly because they have the numerical strength to impose their concepts of justice upon the statistically weaker areas, in Australia the process is taken to new heights.

Within Australia, the real reasons why country towns are unable to counteract the attractions of the cities are ignored or glossed over. The perception is cultivated that country people look for generous handouts from governments instead of knuckling down and helping themselves. While the process applies at both National and State level, the State of Victoria must surely lead the way in featherbedding its Capital City. It is probably also occurring in other States.

Government expenditure in country areas is publicised to the full, giving the impression that there is a constant stream of money being poured into the country. Often this is nothing more than the normal routine expenditure, part of the process of government, that is taken as a matter of course in the city. It is also true that, even though the allocation is, in the eyes of the government, for the benefit of the country, it is not unusual for the bulk of the money to be actually spent in the city. An example is an economic or environmental assessment of some proposal that is inevitably handed over to a city based consultant.

When discussing "globalisation", economists refer to "comparative advantage". It is seen as legitimate for a multinational company to have its headquarters in one country with well developed information technology, and its workforce in another where labour is cheap. This is using the "comparative advantage" of each country. In this country, however, governments have destroyed the comparative advantage of country towns by the use of subsidies that, according to those same economists, lead to mis-allocation of resources.

Frequently, the blame for the lack of rural development is directed at Local Government with the inference that all that is needed is "leadership". This criticism, at times comes from country people because they are not informed of all the relevant facts. The problem is not the money that is spent in the country - it is the money that is spent in the city.

The Report of the Victorian Auditor General into Ministerial Portfolios for the year 2000 shows that the cost to the Victorian government of subsidising metropolitan public transport amounted to $1.4 billion. This is a subsidy of approx. $424.00 per head for every person in metropolitan Melbourne, to provide public transport at less than half its cost. One of the largest single items in the Victorian Budget, it rarely receives any mention in the Budget speech.

By way of contrast, the New Zealand government subsidises public transport in Auckland by approx. $18.00 per head and the Government of Ontario subsidises Toronto's system by $24.00. London Underground recovers 137% of its operating costs.

To put the size of this subsidy into perspective, it amounts to about $500,000 more than the revenue from rates in the entire metropolitan Melbourne area.

If country municipalities received an equivalent subsidy, it would more than match the revenue each raises from rates. If metropolitan people want that amount spent on public transport, country people should be entitled to have a similar sum spent on the facilities and amenities that they want. City bureaucrats or politicians should not decide what form it takes.

One of the fundamental tenets of National Competition Policy rejects subsidies on the grounds that they lead to misallocation of resources. Where there is a Community Service Obligation to provide a service, the amount must be clearly stated and justified to the community.

The enormous subsidy to metropolitan transport, along with other fiscal policies that are not direct payments but nevertheless put more money in the pockets of city people, destroys the ability of country businesses to compete on even terms with city based competitors. At times, they are unable to compete in their home towns because of the advantage their metropolitan competitors have as a direct result of government subsidies. Agricultural industries are expected to compete both in exports and the home market with produce from countries that do not provide subsidies of this kind. The Commonwealth Government expects other nations to remove hidden subsidies and calls for a "level playing field" in international trade but subsidises unfair competition at home.

School teachers and public servants based in the country get no higher pay, nor do pensioners get any more than their counterparts in the city but they get no public transport and pay highrt taxes on their fuel. They pay higher rates, or higher rents if they do not buy their own home because they have to help pay for "local’ roads that may be hundreds of kilometres away. There is a very substantial and direct financial penalty imposed by governments on people living outside the cities.

This is only one of many ways that wealth is being diverted to the city. Most of this happens in the normal course of events. Banks, insurance companies and many other enterprises with substantial country business are largely based in the cities, employing large numbers of people and investing in development. Little is retained in country towns. Chain stores and supermarkets have overwhelmed many small businesses in country towns and profits that were previously retained locally are now lost to rural communities.

In addition, governments rent vast amounts of office space and provide a great number of jobs in the city, further boosting property values. Almost all the top paid public servants, judges, barristers and other highly paid professionals are city based. Country people understand that this is largely inevitable. Plain common sense suggests even if justice doesn't that governments should counter this trend, not compound it.

An alarming consequence is that the economic power of the city is augmented by the political power generated by the growth of its population. Many young people are forced by these same policies to move to the city and their votes are then lost to the country. While political leaders lament the "brain drain" to overseas countries, they actively pursue policies that take young people away from the country. Any political gerrymander that allegedly favoured the country in the past pales into insignificance compared with the economic gerrymander that will destroy this country.

The city has become an economic "black hole", absorbing an ever-increasing share of the wealth of the Nation and an ever-growing political dominance. It has reached the point where equity, justice and a "fair go" have been replaced by sheer, unbridled, urban greed, fueled by "pork barreling" by the political parties. .

On the rare occasions that the enormous subsidy for the city's public transport is acknowledged, it is justified on the basis that if the system operated under full cost recovery, it would force more people on to the roads, further increasing the demand for very expensive freeways. That argument only has validity because taxpayers pay the full cost of the freeways. This is not the practice in Auckland or Toronto, where, like the public transport system, the bulk of the road costs are recouped through rates. Where they are part of a highway system serving the whole country, a relatively small taxpayer contribution is made.

While city people deplore exploitation of the disadvantaged and vulnerable by powerful interests, they have no problem with handing themselves this enormous financial benefit with no better justification than that they have the political power to enforce it.

Road Funding.

Statistics on road funding show that there is a disproportionate burden placed on citizens in various parts of the State, specifically as between metropolitan and country ratepayers. On Jan 20, 2000, a table was published giving the average amount paid in rates in every municipality in the State. At about the same time, the Municipal Association of Victoria published comprehensive statistics for Victorian municipalities, giving population, mean household income and other information for each municipality. The Victoria Grants Commission has provided details of the expenditure on roads from rate revenue of each municipality.

An analysis of these figures show that there is an enormous difference between city and country municipalities in the percentage of their rate revenue spent on roads. This varies from nearly 90% in the Shire of Yarriambiack to less than 5% in the City of Greater Dandenong. Yet the mean household income in the Shire is little more than 60% of that of the City.

It is obvious from the analysis of these figures that the municipalities with the lowest mean household income pay the highest level of rates and spend the highest percentage on lower standard roads.

This is a direct reversal of principles used in most other forms of taxation, which impose the higher rates on the wealthy (rates are a tax on property).

The fact that the Commonwealth and State governments are now planning to build the Scorseby bypass is an outrageous abuse of power. The three municipalities that spend the least per capita on roads will be the chief beneficiaries of this freeway. There is not the slightest doubt that the cost of the Scorseby Bypass can be paid for by ratepayers whose property values will be enhanced by its construction without increasing rates to the level being paid at present by many country ratepayers for greatly inferior facilities.

Claims are made of the vast amount of money this road will save but all the savings will go into the pockets of city people. Not one cent will be added to the value of properties in the highest rated municipalities. It is more likely to reduce the value. On the other hand, property values in South Vermont, overlooking the route are the fastest growing in the metropolitan area, no doubt influenced in part at least by the prospect of this road.

Property values throughout the metropolitan area have increased as a result of billions of dollars of taxpayers money (which includes fuel taxes) being spent on freeways as well as billions being spent on public transport, without requiring a contribution from the ratepayers who are receiving benefit from these services. The right to untimed local telephone calls over the entire metropolitan area is based on economies of scale. But when it comes to the diseconomies of scale, such as traffic congestion, taxpayers over the whole of Australia are forced to help.

It must also be remembered that most metropolitan councils collect very large sums of money from parking fees, in the case of the Melbourne City Council, about ten times the amount it spends on roads.

Freeways are needed because of one fact only - there are too many people crowded into too small an area.

The brake that was removed decades ago was to ensure that ratepayers whose property values are enhanced by publicly provided facilities should contribute substantially to the cost of those facilities through the ratepayer funded Melbourne and Metropolitan Board of Works and the Metropolitan Tramways Board. This is a principle that is applied to water and sewerage services in country towns and to irrigation schemes. In fact, they pay a substantial "dividend" to the State.

Roads like the Scorseby bypass are considered to be 'regional' roads in other cities like Auckland and Toronto and are funded accordingly. Its declaration as a Road of National Importance is blatant "pork barreling". There is no Community Service component involved. It will be of little use to the needy who generally use public transport.

If the substance of this argument is challenged, it will be on the basis that the country is subsidised in other ways. Those who use this ploy should be challenged to state a case. They should be required to name the form it takes and the amount it costs. Then it can be discussed on the issue of whether there is a Community Service Obligation involved.

City people must understand that they, too, live in a big country and need to share the costs associated with that fact. It makes a mockery of the "Knowledge Nation" or any variation of it, for city people to believe they can live in isolation from the issues of rural and regional Australia. Yet they expect rural Australia bear the costs associated with distance and share the costs of the folly of over development, and to earn foreign exchange through international trade.

While the ACCC makes headlines over a dollar on the price of a pair of knickers, it ignores the abuse of power as reflected in these figures. The case for the metropolitan area to bear its own infrastructure costs is based entirely on a policy agreed to by every government in Australia - National Competition Policy - as summarised below.

The NCP Public Interest Test

Under clause 1(3) of the Competition Principles Agreement, governments take into account the following factors when assessing the merits of reforms in relation to competitive neutrality, anti-competitive legislation and the structure of public monopolies:

government legislation and policies relating to ecologically sustainable development;

social welfare and equity considerations, including community service obligations;

government legislation and policies relating to matters such as occupational health and safety, industrial relations and access and

economic and regional development, including employment and investment growth;

the interests of consumers generally or of a class of consumers;

the competitiveness of Australian businesses; and

the efficient allocation of resources.

The list is open-ended, meaning that any other relevant matter should also be considered when assessing the case for a competition reform.

While National Competition Policy may not appear to have any relevance to the construction of the Scorseby bypass, the principles enumerated above are nothing more than empty rhetoric if they are not applied to the way it is funded. Unless those who benefit pay for it, the road will only aggravate all the conditions that are now used to justify its construction, thus creating pressure for further "solutions" to the problems of congestion, to be paid for by the taxpayer.

This is not a "farmers" argument. The people who are most affected are the teachers and shop assistants, the pensioners and retirees and others who live in country towns. They live in the most efficient communities because they can get to work, to shopping, to doctors and hospitals, clubs and pubs within minutes, even from twenty to thirty kilometres, without sitting in mind numbing traffic. They have the benefit of caring friends and neighbours. If their town is big enough, it can support most of the amenities that can be found in suburbia. They don’t get heavily sudsidised public transport or the bulk of their roads paid for by the taxpayer but their rates may be used to maintain "local" roads up to 200 kilometres away.

The Victorian government has complained for decades about the share of fuel tax revenue returned to this State. The Commonwealth government has long since rejected any relationship between that source of tax revenue and the allocation of road funding. The fuel tax is, therefor, simply another form of taxation and motorists have no special claim on it.

The decision of the Commonwealth government to declare a non-existent road as being a Road of National Importance can be seen as a blatant vote catching exercise, using taxpayers' money to win votes. Such political leverage can never be produced in the country. The fact that the Department concerned is headed by the Leader of the political party that claims to be the champion of rights of country people is ominous for the future of rural Australia.

Conclusion.

The theory that subsidies result in misdirection of resources is clearly demonstrated by the Victorian system. Public transport in both Auckland and Toronto recover in excess of 80% of their operating costs from users. It is probable that a major reason for this is that the ratepayers have to pick up the tab for most of the losses incurred and therefor have a greater interest in seeing that it is properly run. These cities demonstrate that there is no logical reason why Melbourne should be so heavily subsidised.

These subsidies do not make Melbourne a better place in which to live. Despite the harsh winter climate and intense competition from other large cities in close proximity, Toronto is a thriving city without the need to sponge on its rural hinterland.

The wealth generated by the subsidies is obviously going into the pockets of land owners and developers in the inner city while the old, the infirm and the handicapped are denied adequate funding.

Road funding should be revisited to reduce the enormous gap between the burden of metropolitan and rural ratepayers in funding local roads. Country people are entitled to some semblance of equity between what they pay for their roads compared with their city cousins. Obviously the formula used is grossly inequitable to country people and it destroys all the advantages of living in small towns. To provide a facility or service that adds value to property without requiring some form of contribution is just as much a subsidy as a direct payment. The value added to any private land by a publicly funded facility should be assessed together with any Community Service Obligation component and the body paying for the facility should recoup the difference.

The statistics from which the figures above were calculated are available can be accessed here.