Too little too late: Commonwealth funding announced for NT remote housing

The Treasurer and Minister for Indigenous Affairs have announced that the Commonwealth will provide $110m per annum for five years to the NT partially matching the NT Government’s commitment to spend $1.1bn over the next 10 years. The Government’s media release is here. Here is the ABC news report (link here).

The Government also announced a package of other measures, including unspecified additional funding to funding of public hospitals, just under $100m over five years to extend the National Housing and Homelessness Agreement for five years, and a one off top up of GST revenues to the NT of $259.6m. While the Commonwealth has indicated that the purpose of the one off grant is

To help the Northern Territory Government deliver essential services, including to remote communities, the Turnbull Government will provide financial assistance of $259.6 million

it is not yet clear whether the funding agreement will specify where these funds will be spent, and what proportion will go to remote communities. Of course, because they are topping up the NT share of GST revenues which are entirely fungible, there is no effective mechanism by which the Commonwealth can quarantine these funds to particular purposes.

In relation to the remote housing funding the Commonwealth Ministers stated:

The Turnbull Government and Gunner Government have also reached agreement on remote housing and public hospital funding, providing certainty for essential services in the Territory.

To help address the housing needs of Aboriginal and Torres Strait Islander people in remote communities, the Turnbull Government has committed $550 million for five years to support remote housing in the Territory. This funding will commence in 2018-19 and will be matched by Northern Territory Government contributions, with the Northern Territory Government retaining responsibility for sub-leasing arrangements in these remote communities for the five-year period.

Minister for Indigenous Affairs Nigel Scullion said this new investment will help address severe overcrowding in remote communities.

"This $550 million funding commitment comes on top of the $1.7 billion investment into remote housing in the Territory since 2008.''

"Our focus will be ensuring Aboriginal community control is at the heart of our investment, from decision-making to employment and business procurement to ensure we deliver long term sustainable change in remote communities.''

So what does this mean for remote communities in the NT?

On the positive side of the ledger, the decision will maintain substantial spending on remote housing construction and management, which is unequivocally a good outcome. The Commonwealth investment effectively locks in the NT Government commitment of $110m per year, at least for five years. While it represents a net reduction of $50m per year in Commonwealth funding for remote housing in the NT (which has averaged $170m per year for the last ten years), the combined spend represents a net increase of around $50m in combined NT/Commonwealth expenditure.

On the negative side of the ledger, the arrangements announced today reduce the period of guaranteed funding commitments by half, down for the ten years agreed by COAG in 2008 to five years now. This is short-sighted.

Second, the funding committed by the Commonwealth may not reflect ‘new monies’ because it effectively allows the Commonwealth to avoid having to take over a large (but unspecified) number of housing assets which are on leases which would otherwise revert to the Commonwealth over coming years, and thus represent Commonwealth liabilities. This potential legal liability appears to be a primary driver of this selective investment by the Commonwealth.

Third, the funding announced is for the NT only, which represents roughly half the outstanding remote housing need across the nation. While addressing half is better than none, the situation of remote residents in SA, WA and Qld will only worsen without ongoing investment in remote community housing assets.

Fourth, there are clear indications (link here) that the outstanding need in the NT is both large and growing, and while the new investment will probably prevent the remote housing situation substantively worsening in the NT over the next few years, it will not guarantee any substantive improvements in overcrowding levels and the ongoing state of the housing asset base. This investment thill thus not do much to ‘close the gap’ in overall disadvantage between Indigenous and non-Indigenous Australians.

Finally the five year time frame, and as yet largely unspecified management and decision making arrangements for the Commonwealth funding are potentially problematic. In particular, while the Government asserts its objective is to ‘deliver long term sustainable change in remote communities’, the delay in delivering certainty regarding ongoing funding, the limited five year investment horizon, and the uncertainty over the management arrangements will significantly increase the risk of program failure and/or sub-optimal outcomes going forward.  For example, if future housing allocations are essentially ad hoc and one-off, there will be limited incentives for relevant businesses and community organisations to invest in training apprentices over a sustained period. The Government’s rhetoric is fine, but implementation capability will be crucial to maximising benefits for Indigenous communities and people, and at present there is little information to hand on how the program will be managed to minimise these risks.

If we get up in the grandstand, this funding announcement needs to be welcomed as it provides tangible assurance for NT remote residents that housing conditions will not substantially worsen overall. But it is inadequate to significantly reduce housing disadvantage in the NT, and implicitly provides political cover for the Commonwealth to walk away from remote housing funding in the three states which have substantial remote Indigenous populations.

In my view, the management of the potential renewal of the remote housing strategy has been both disastrous and appalling.  The Government has effectively dismantled a program which was making a huge difference to people’s lives in remote Australia. The announcements today go some small way to backtracking on those mistakes, but will not address the structural challenges which if left unaddressed will lead to major negative consequences for both governments and remote indigenous residents over the coming decade.

I have previously estimated (link here) the funding requirement in this area as approaching $9bn over ten years. Today’s announcement, dealing with a jurisdiction which represents around half the outstanding need, commits just over $1bn in combined NT and Commonwealth funding over five years, or less than 15 percent of this estimated outstanding need over the coming decade.

In these circumstances, the Senate should look to establish a Parliamentary Inquiry into the housing needs of remote Australia over the coming decade.

Some thoughts on the implications of the coming Federal Budget for Indigenous Australians

Budgets used to be important for Indigenous Australians. Governments would hold back major funding announcements for the year ahead, and there was a much closer link between announced policy and budget decisions than we see today.

Now, governments make funding announcements through the year, and processes such as MYEFO facilitate parliamentary approvals of appropriations between annual budgets. Importantly, the forward estimates process is used by governments both to disguise the ongoing impact of past budget decisions, and to hide the cessation of programs. The majority of budget decisions involve allocations over multiple years and the gap between the decision to allocate resources and the program cessation can seem like an eternity, often with different ministers responsible, different portfolios arrangements oversighting the programs and different national political priorities in play.

In addition, the shift in the modus operandi of governments, particularly in the delivery of services away from direct government provision and towards outsourcing and commissioning of deliverables by third parties further diffuses the links between decisions and outcomes. All these processes mean that it has become virtually impossible even for engaged and interested citizens to discern and identify the link between the decisions announced in any one year in the budget and the impact of those decisions on the ground.

Nevertheless, governments continue to see the need to target key interests and garner political kudos in return for funding and policy favours of various kinds, but this occurs largely in the shadows. Individual groups know and are advised of the funding they receive, but overall summaries and metrics on program and sub-program funding levels and distributions are nowhere to be found. One-off media releases are issued to herald particular funding initiatives, social media used to celebrate the accessibility and generosity of ministers and governments, while key internal metrics for public servants managing programs relate to the preferences of ministers, the location of particular organisations and in particular the electorates in which the funded organisations operate.

Of course, the annual budget process continues to be important, particularly in terms of setting and managing the macro-parameters for the economy and for national financial management: public expenditure, tax (including tax expenditures) and revenue, and public sector borrowings. And also for controlling the operations of portfolios and the departments which dominate each portfolio.

However, for Indigenous citizens, the annual budget is not what it used to be. Indigenous specific programs are progressively becoming less significant in Indigenous citizens’ lives than mainstream programs and policy settings. Indigenous citizens are over-represented within the most disadvantaged segments of the Australian population, and thus are over-represented as clients within the mainstream programs which are directed towards disadvantaged citizens. To take one example, the gap between expenditures on aged and other pension payments and unemployed benefits (Newstart) has widened over the past twenty years (link here). Indigenous citizens under-represented amongst pensioners (due to their shorter lifespans) and over-represented within the unemployed.

 

In remote Australia (where 20 percent of the Indigenous population reside, but less than 2 percent of non-Indigenous Australians), disadvantage is deeper. The Community Development Program replaces Newstart in remote Australia, and 80 percent of its clients are Indigenous. It has higher participation requirements, involves staggering levels of breaches, and is largely income managed in the NT and selected other locations (link here). Hypothetically, any budget decisions to change the rate of Newstart (and thus CDP) benefits beyond current automatic indexing would not necessarily change the actual impact of the program on most Indigenous citizens as the program design features are not level with other Australian citizens. 

Or to take another example, the Commonwealth provides huge subsidies to homeowners and its largest budget program for disadvantaged housing is Commonwealth Rent Assistance (CRA) (link here), but in remote Australia Indigenous people have extremely limited access to home ownership and there is virtually no private rental market which means that Indigenous people are reliant on social housing (which is funded by the Commonwealth and the states jointly). The Federal Government is in the process of exiting its support for remote Indigenous housing leaving the most disadvantaged Australians bereft of federal financial support even though the Commonwealth is the dominant national funder of disadvantaged housing through CRA.

The introductory comments above are a long winded way of saying that budget decisions are by their nature incremental and operate at the margin to influence, for good or bad, more fundamental underlying structures. Indigenous citizens across the nation continue to face structural disadvantages which will not be remedied merely by a single set of budget allocations, but which will require more fundamental reform. Over time, sustained investments in strengthening Indigenous capability, education, health, housing and community development will all make a positive difference.

Unfortunately, our political system operates on the basis of governments allocating substantial resources to their primary constituencies (think corporate tax cuts link here) and allocating lesser amounts designed to give the appearance of policy action and initiative to excessive forestall criticism while progressively constraining expenditures directed to interests which are not part of the government’s core constituencies.

I have little doubt that the forthcoming budget will accord with these longstanding practices.

To finish up, I propose to do two things. First, set out a list (not necessarily comprehensive or complete) of potential but in practice unlikely budget initiatives which would make a substantive, as opposed to rhetorical, contribution to addressing Indigenous disadvantage and to beginning the process of removing structural disadvantage. And second, to make some intuitive guesses about the likely Indigenous related budget decisions and in particular the type of initiatives the Government will actually fund in the budget.

Potential Budget Initiatives to address Indigenous disadvantage:

Here are ten potential and sorely needed budget decisions which would start the process of removing Indigenous structural disadvantage:

·         A series of multi-year allocations directed specifically at the Closing the Gap targets. The absence of any direct linkage between the COAG endorsed Closing the Gap targets and funding via well designed programs is a major flaw in the Closing the Gap system (link here). A major program or programs directed to closing the gap targets would encompass health and preventative health, education including early childhood education, and employment. In remote Australia, given the almost complete absence of employment opportunities, consideration would need to be given to funding a major direct employment program, redolent of the ‘New Deal’ programs of the 1930s in the US.

·         A multi-year program directed at prevention and treatment of sexually transmitted infections across remote Australia (link here).

·         A policy change with related funding to implement the Productivity Commission’s recent recommendation to expand access to Commonwealth Rent Assistance to all social housing tenants along with a shift to market based rents (link here).

·         A decision to renew the current National Partnership on Remote Housing which expires in March this year and has involved an average allocation of $540m per annum for the last ten years (link here).

·         A decision to establish and fund a major program with the states to address the over-representation of Indigenous citizens in prisons, with a particular focus on youth incarceration (link here).

·         A decision to invest say $200m per annum for ten years in expanding the Indigenous Land Account (shortly to be renamed the Aboriginal and Torres Strait Island Land and Sea Future fund) (link here).

·         A decision to increase the base rate of Newstart, and to address the discriminatory treatment of Community Development Program recipients in remote Australia vis a vis Newstart recipients elsewhere in Australia.

·         A policy and resourcing decision to direct Infrastructure Australia to give greater attention to Indigenous specific infrastructure needs across Australia and to ensure that the current Northern Australia Infrastructure Facility is refocussed to remove the current blind spot in addressing Indigenous related infrastructure shortfalls across northern Australia (link here).

·         A decision direct the Grants Commission to reconsider its current methodology for addressing Indigenous disadvantage in its overall formula for distribution of GST revenues to the states (link here).

·         A decision to commit to complete transparency of public sector funding decisions directed to addressing Indigenous disadvantage in an accessible and continuously updated public web-site.

Likely Budget Focus for Indigenous Citizens

My intuition tells me that the forthcoming Budget will fall well short of the benchmarks laid out above.

It seems clear that the Federal Government has made a decision not to renew the Remote Housing National Partnership Agreement, and instead has decided to replace it with a series of lesser ad hoc and short term payments to some states. We are probably looking at a net reduction against previous expenditure levels of at least around $300m per annum from this decision alone.

There will likely be an investment to address the epidemic of STIs in remote Australia given the political heat recently generated, but it will likely be in the region of only $50m to $100m over four years.

There will likely be a swathe of business related budget initiatives, emanating from the release of the Indigenous Business Sector Strategy (link here) in February this year, and which included a $27m Indigenous Entrepreneurs Capital Scheme funded at $27m over four years. There may also be extra funds for Indigenous business (or jobs) hubs, and possibly for IBA directed to increasing their Indigenous business support in northern Australia. The forthcoming meeting of the Ministerial Forum for Northern Development may mean that the Government is focussed more than usual on northern Australia as a site for budget related initiatives, potentially with a focus on water infrastructure and support for native title landowner groups (known as PBCs) to engage in business.

Finally, the Government may feel obliged to make some modest contribution to addressing the recommendations of the Royal Commission into Youth Detention in the NT (link here) which was established at the initiative of the Prime Minister.

All in all, I would be surprised if the Government allocated funding much in excess of $200m over four years towards addressing Indigenous disadvantage in this year’s budget. But I would be happy to be proved wrong.

Conclusion

What is absent from this analysis is a detailed examination of the actions of key Indigenous advocacy groups such as NACCHO, the National Congress of Australia’s First Peoples, and the National Native Title Council, to name a few. Any advocacy they undertake is not necessarily in the public domain. My strong sense however is that their efforts pale in comparison to the efforts of larger mainstream advocacy outfits such as the BCA, the Minerals Council and the National Farmers Federation. The area of policy advocacy, particularly in mainstream areas relevant to Indigenous concerns, is in my view an area where Indigenous interests need to do much more if they are to successfully resist the sorts of arbitrary decisions which appear to have occurred in relation to remote housing, in an environment where government tax revenues have been rising faster than expected (link here).

In the world of realpolitik, budget policy making at its core is not an exercise in discerning the national interest, or even discerning substantive need. It is fundamentally an exercise governments undertake as part of their ceaseless odyssey to maintain a politically dominant coalition of support within the community. Such a process will always involve winners and losers, and any objective assessment would have to conclude that Indigenous interests are still ‘bogged to the axels’ on the losing side of the ledger. The forthcoming federal budget will reflect this reality for Indigenous interests.

The devil in the detail: the Government’s proposed Indigenous Land Fund legislation

The spirit that I have seen
 May be the devil: and the devil hath power
 To assume a pleasing shape.

Hamlet Act 2, scene 2

On 12 February this year, as part of the Close the Gap statement to Parliament, the Prime Minister announced (link here) a series of changes to legislation relating to the Indigenous Land Corporation and the Aboriginal and Torres Strait Islander Land Account which provides the Indigenous Land Corporation’s annual funding. Prime Minister Turnbull stated:

A new Aboriginal and Torres Strait Islander Land and Sea Future Fund represents a significant reform in the land rights journey of our country, as the $2 billion land acquisition fund set up following the Mabo (No 2) decision has been plagued with poor returns, meaning lost opportunities for the Indigenous Estate. Our reform will see the fund transferred to the Future Fund, delivering a $1.5 billion benefit over 20 years.

These additional funds will also mean that the Indigenous Land Corporation (ILC), the Commonwealth agency that acquires land on behalf of Aboriginal and Torres Strait Islander Australians can now have its remit expanded to include sea country.

The Government has now introduced three Bills into the Parliament to implement the changes previously announced. Minister Scullion announced the introduction with a media release (link here) where he announced further details of the proposed changes: a name change for the Indigenous Land Corporation to the “indigenous Land and Sea Corporation’, accompanied by an extension of its statutory remit to allow it to acquire and provide management assistance to Indigenous owners of sea and freshwater country, including offshore. The second Bill establishes a new Land and Sea Future Fund to replace the Land Account which will be managed by the Future Fund Board of Guardians. Minister Scullion emphasised:

Proposed reforms have been co-designed with communities following significant consultations with Aboriginal and Torres Strait Islander Australians across the country.

A third Bill (link here) deals with consequential amendments and is largely technical.

A summary of the consultation process and final recommendations, which was led by the Indigenous Land Corporation, has been published on the ILC website (link here). This is good practice and the ILC and Government are to be commended for laying this out so clearly.

The latest meeting communique (dated 25-26 October 2017) of the Prime Ministers Advisory Council on Indigenous Affairs (link here) notes the conclusion of the consultations, but does not appear to have offered any substantive advice on the proposals. Their communique states:

Indigenous Land Corporation: welcomed the consultations on possible reforms to the Aboriginal and Torres Strait Islander Act 2005 (ATSI Act) regarding water related activities and the financial sustainability of the Land Account have concluded and the findings and recommendations are now being considered by Government (sic).

In relation to the outcomes of the consultations with respect to the financial sustainability of the Land Account, the ILC consultation report notes, inter alia:

During discussions on the potential for [Future Fund] management, the issue of Indigenous control and oversight of the investment framework was raised across the sessions. This was seen as an important aspect of managing the Land Account into the future, and needing to be included in any legislative changes. ILC representatives were able to discuss the Expert Panel’s recommendations on a proposed strengthening of the current Consultative Forum on the Investment Policy of the Land Account to a Land Account Investment Committee comprised of Indigenous representation and investment expertise.

In what appears to be an addendum to the Report, a section headed ‘Current ILC  Board position in relation to governance of Land Account investments’ states:

The consultation process revealed some complexity in regard to the proposed management and governance arrangements of the Land Account. Feedback from the Department of Finance and The Treasury is that the proposed Land Account Investment Committee is incompatible with the structure and operations of the Future Fund Management Agency, if the FFMA were to be responsible for the Land Account.

After further consideration, the ILC Board’s preferred option is to see the Land Account invested by the FFMA to achieve the desired rates of return on investment while managing risk. It is advocating that the current Land Account Consultative Forum (established by s193G, ATSI Act) be retained in an enhanced form as the conduit for information to the ILC Board on investments of the Land Account. At present the Forum receives six-monthly reports; these would double in frequency as the FFMA provides quarterly updates, giving the Forum more current information. The Forum would maintain a ‘watching brief’ on investments made by the FFMA.

The Proposed Legislative Changes

So what do the Government’s Bills actually do?

The first Bill (link here), dealing with the name and remit of the Indigenous Land Corporation is largely uncontroversial, apart from the fact that the name change will involve numerous changes to documentation, and runs the risk of raising expectations which will not be fulfilled. The same substantive effect could have been achieved with a simple change to the definition of ‘land’ in the ILC’s establishing legislation to include ‘seas and freshwater country’. These substantive changes are uncontroversial and have merit, so I do not propose to spend time analysing this Bill.

The second Bill, the ‘Future Fund Bill’ (link here), is designed to establish a new Fund to provide annual funding to the ILC managed by the Future Fund, and thus accessing a much broader range of financial assets than previously available. The broadening of the potential investment pool for the Land Fund is a desirable change, and the use of the Future Fund to manage those investments is also positive insofar as it utilises a source of investment advice and management of undoubted expertise, and one which operates within the public sector and thus in accordance with established governance principles.

That said, there are serious criticisms to be directed at the approach adopted by the Government to achieve these aims, and in particular, in relation to the governance framework which surrounds the Land Fund. In my view, not only is there devil in the detail, but the issues are so fundamental that they raise questions regarding the desirability of enacting the Bill in its current form.

I don’t propose to address the third Bill (link here) which deals with consequential amendments.

The first major issue with the Future Fund Bill is that it fails to formally acknowledge the underlying purpose of the land fund. While some of the background documentation available (the ILC consultation summary and the ILC media release of 13 February 2018 – link here) do acknowledge this history, it is important that the formal legislative provisions do so. The Second Reading speech delivered by Minister Wyatt missed the opportunity to lay out this background, merely noting that:

The existing Aboriginal and Torres Strait Islander Land Account was established to provide ongoing funding to the Indigenous Land Corporation to assist Indigenous Australians to acquire and manage assets.

While this formulation mirrors the objects of the Fund in the current 2005 legislation, in fact, a persuasive argument might be made for the reverse, namely that the ILC was established to implement and operationalise the objectives of the Land Fund, objectives which over the past 25 years have been progressively erased from the statutory record.

Indeed, the Land Account was canvassed in the Native Title Act, and the Preamble to that Act still includes the following text:

It is also important to recognise that many Aboriginal peoples and Torres Strait Islanders, because they have been dispossessed of their traditional lands, will be unable to assert native title rights and interests and that a special fund needs to be established to assist them to acquire land.

The original ILC was established as a separate Part of the ATSIC legislation which also had a Preamble to contextualise the aims and objectives of establishing the Commission and its ancillary institutions. With the reconstitution of the legislation following ATSIC’s demise, and now the proposed establishment of the Land and Sea Fund in separate legislation, those contextual provisions have disappeared entirely. This is not merely a symbolic matter, but means that any future judicial consideration of the operation of the Fund will be done without the benefit of any contextual framing which can be taken into account by the courts. This needs to be rectified.

The second major issue is that the Bill is replete with provisions which make absolutely clear that the Fund is to be treated as merely another special account under the PGPA Act (link here) and thus within the Government’s standard financial architecture. Thus for example, the Bill provides a range of mechanisms for consultation and provision of advice and information between Ministers, and between the Future Fund and the Minister for Finance, but there is no requirement for information to be provided to the ILC Board, and indeed the current statutory Consultative Forum on the Investment Policy of the Land Account (refer s193G of the Aboriginal and Torres Strait Islander Act 2005) which provided Indigenous interests with a guaranteed mechanism for monitoring the operations of the Fund disappears. In the Explanatory Memorandum (link here), which is admirably clear and useful, the Government makes clear that it considers the Fund to be a creature of the Government’s financial architecture. In the introductory section on ‘Context’, it states:  

The Bill gives effect to the Government’s decision to establish a dedicated financial asset fund – the ATSILSFF – to support the making of annual and discretionary additional payments to the ILC….

…The Government wishes to invest in financial assets with the aim of achieving investment returns to support the ILC financially. (emphasis added).

Or in the section on clause 13, which establishes a mechanism for the crediting of extra amounts to the Fund, the Memorandum notes that the provision is ‘a tool for the Government to manage its financial arrangements’. In other words, it is all about administrative convenience.

This may seem like quibbling, and I suspect it is the product of historical ignorance rather than malevolent intention, but it creates a context in which the Fund which was established with a clear intent of going some small way to addressing the dispossession of Indigenous peoples from their lands is itself being progressively removed from their influence and / or control, thus reinforcing the original physical dispossession with institutional dispossession. The bureaucratic consequence is that anything to do with the Fund is seen as ‘government’ in nature, and design issues (both now and importantly into the future) will be determined on the basis of administrative convenience.

It is important to note that this trend towards separating the Fund from its formal origins is a continuation of a process which first emerged in the 2005 amendments which coincided with the legislative amendments necessitated by the abolition of ATSIC. In particular, in 2005, the Land Fund was renamed the Land Account, reinforcing its status as a special account within the government financial system rather than a ‘fund’ directed to Indigenous purposes. The reversion to the terminology of Land Fund in the current Bill is welcome, but is offset entirely by the substantive provisions which reinforce the Fund’s legal status as a government special account, and with an overarching preoccupation of making the Fund work in total alignment with the prerogatives of government financial priorities and systems rather than Indigenous priorities or concerns.

The third set of concerns relate to the design of the proposed arrangements, and the potential risks which emanate from the design features chosen. The issues involved are technically complex, and I propose to simplify in many respects.

The current relationship between the Land Account (ie the Fund) and the ILC can be summarised as follows. The Land Account, which is managed by the Department of Prime Minister and Cabinet, has a current balance of around $2bn. It is invested primarily in bank term deposits because the constituting legislation from its inception (and now the PGPA Act) provided that the Fund must only invest in bank deposits or government bonds. The ILC Board has consistently over the past ten or so years sought to have these investment parameters broadened.

Originally, investment returns from the Fund were prioritised first to sustaining the Fund, and above a certain threshold were passed on to the ILC, however this led to difficult to manage variations in annual revenue for the ILC. In 2010, the arrangements were amended to provide for the Fund to provide the ILC with a guaranteed amount of $45m (indexed to the CPI) with any surplus returns to go to the ILC. While this effectively resolved the issue of revenue variability of the ILC, it also meant that the Fund would never grow in real terms (as surplus returns went to the ILC) and if in any years returns were negative, then the Fund’s capital would be progressively diminished. This issue needs to be fixed.

The proposed design structure in the Future Fund Bill continues the $45m indexed provision, but adds a provision for an annual discretionary payment to be made by Ministers. The Bill requires the Finance Minister and Treasurer (the ‘responsible ministers’) to issue an investment mandate to the Future Fund so as to provide a ‘mechanism for articulating’ the Government’s expectations and for providing ‘strategic guidance’ (refer para. 95 of the EM). This approach is consistent with the approach adopted with other funds invested by the Future Fund Board, but again provides no input for Indigenous interests. The Bill also requires the Future Fund Board to utilise an investment manager, an approach which is already being utilised by PMC albeit under much narrower investment parameters.

The shift to Future Fund management under wider investment options increases the likelihood that the basic payment to the ILC will be available, and the Bill provides that in deciding whether to make an additional annual payment the Finance and Indigenous Affairs ministers must seek formal advice from the Future Fund Board and have regard to the impact of any payment on the sustainability of the Land and Sea Future Fund. The crucial variable will be the annual returns obtained by the Future Fund from its investments, but it seems clear that over the medium to longer term, the likelihood will be that investment returns will exceed the current bank deposit arrangements.

The Bill establishes a much more complex design architecture of the Fund than at present, which has the unfortunate result of making the operations of the Fund even more opaque to Indigenous interests. Instead of simple payments from the PMC managed Land Account to the ILC, the Bill establishes a series of special accounts. The Future Fund Board owns and manages the Fund’s assets. It transfers funds from its asset/investment fund to the Aboriginal and Torres Strait Islander Land and Sea Future Fund Special Account as required. This account, which the Explanatory Memorandum makes clear is owned by the Government (refer para. 95) is used to pay any internal expenses of operating the fund, but also to transfer funds to ILC Funding Special Account which is controlled by PMC and which in turn is used to make annual payments to the ILC and any discretionary additional payments.

What this complexity disguises is that the proposed legislation not only broadens the investment parameters available in managing the fund, but it also significantly increases the control of ministers in controlling the flow of resources to the ILC. Two implications are worth drawing out.

First, over time, the gap between the guaranteed amount available for the ILC and the potential discretionary funding available which would not threaten the sustainability of the Land and Sea Fund will grow larger. This will likely have the effect of making the annual discretionary payment a routine event, to the point that the financial independence (as opposed to its statutory independence) of the ILC which was a deliberate feature of its original design, will disappear.

The second implication relates to the structural tensions which will inevitably exist between the short term interests of the ILC Board and Ministers and the longer term interests of the wider and more diffuse Indigenous interests who would wish to see a Land Fund exist in perpetuity. While the architects of the current Land Fund/ILC arrangements were aiming at a perpetual fund, the current proposals set up a structure which could allow Ministers to progressively reduce the capital base of the Fund through the use of additional payments to the ILC.

While the Bills do include checks and balances to constrain such behaviour, there is no statutory impediment to a Minister (perhaps in conjunction with an ILC Board which after all he or she appoints) allocating significant sums to the ILC for projects within its statutory remit. And in response to those who might scoff and argue that such behaviour in our system would be unthinkable, I merely point to the actions of a previous ILC Board which purchased (with apparent political support from a government in waiting) a major asset it could not afford (link here), and which has necessitated (without any comprehensive review of the circumstances) a subsequent government bail out to finance the acquisition (link here). Had the proposed Bill been in effect in 2013, the outstanding acquisition liabilities might have been funded by the simple expedient of drawing down the necessary funds from the Land Fund, and justifying the course of action on the basis that it creates Indigenous employment.

The Future Fund Bill includes a number of other minor matters worth commenting on briefly.

Clause 55 provides for a review of the Act to be commissioned by the responsible ministers (ie the Treasure and the Finance Minister) before the tenth anniversary of the Acts commencement. This appears to be a rather cursory nod towards good governance, and provides no assurance of Indigenous involvement in the process nor any assurance that the review will be made public and/or acted upon. The fact that the responsible ministers do not include the Indigenous affairs minister reinforces the technocratic blindness towards potential Indigenous concerns which suffuses this Bill.

The Statement of Compatibility with Human Rights prepared by the Department (appended to the Explanatory Memorandum) is in my view flawed insofar as it merely asserts that because the Bill ‘will enhance the Commonwealth’s ability to make payments to the ILC, and as a consequence will enhance the ILC’s ability to pursue its statutory purposes…the Bill indirectly engages the right to self-determination, rights to equality, and non-discrimination…’.  In my view, the more fundamental issue is whether the Bill will enhance the capacity of the Commonwealth to sustainably address (in an admittedly limited fashion) issues of ongoing dispossession. For the reasons outlined above, the answer to this question is far from straightforward.

Potential Improvements to the Bill

The following suggestions are not meant to be comprehensive, but emerge from the analysis of the Bill outlined above.

The Bill ought to be revised to incorporate an appropriate Preamble and potentially other substantive provisions to reinstitute the primacy of the objective of addressing dispossession which has been progressively stripped out of the legislation.

The Bill ought to be revised to substantially strengthen Indigenous engagement at all levels. This should extend to considering placing the Bill within the current legislation dealing with the ILC and Land Account; giving the Minister for Indigenous Affairs a stronger oversight role; and establishing an independent policy oversight advisory committee which monitors the operations of both the Land Fund and the ILC with a mandate to focus on issues which may place the long term sustainability of both institutions at risk. Such a body would provide statutory acknowledgment that both institutions are part of a single policy initiative to acknowledge and partially address the ongoing impacts of dispossession of Australia’s First Peoples.

The Bill ought to be expanded to include a provision which makes clear that whatever the internal administrative requirements, the Fund is established and operated by the Commonwealth on the basis of a fiduciary obligation to sustain the Land and Sea Fund in perpetuity and thus maximise the impact of the Fund (and ILC) operations in addressing the impact of dispossession on the nation’s First Peoples.

Consideration might also be given to adopting a much simpler approach where the current legislative provisions stipulating narrow investment options are broadened, and allowing the Department of Prime Minister and Cabinet to decide whether to make an arrangement with the Future Fund or continue to utilise a contracted investment manager.

Finally, if we are to take the Prime Minister’s claims seriously that these amendments represent a ‘significant reform in the land rights journey of our country’, shouldn’t we expect to see increased funds allocated by government to accelerate the accretion of the Fund’s capital base? The original Keating Land Fund legislation was based on the statutory appropriation over ten years of $140m per annum, which built the fund to $1.4bn. Investment returns over twenty years have taken it to $2bn today. A persuasive case can be made that the funds allocated were paltry compared to the value of the land that was taken without compensation form Indigenous peoples (let alone the economic, social and cultural losses that also were involved). A further contribution of say $200m per annum over ten years would go some way to acknowledging that fact, and to rectifying the notional losses to the Fund arising from the fact that government has, for the past decade, not been prepared to treat the Land Account in the same way that it treats the superannuation funds of its public servants (to make appoint first made by Noel Pearson). Such a provision would serve to give a modicum of credibility to the Prime Minister’s claims of ‘significant reform’; its absence merely serves to confirm the government is more concerned with rhetoric than substance in this area as in so many others.

Some policy ruminations

It strikes me that the appearance of these Bills says much more about the current state of Indigenous public policy than is covered in the proposed legislation (important as that is).

The Government has stretched beyond breaking point its rhetoric on consultation and co-design, with a close comparison of the consultation outcomes and the final Bill making clear that there is a huge gap between what Indigenous interests said they wanted and what is proposed. Moreover, the Government conveniently fails to mention earlier calls of the previous Dawn Casey led ILC Board for these reforms (among others); matters which were taken up by the Greens in a Bill introduced in the Senate, but which failed to find major party support. The gap between rhetoric on consultation and reality is not a one-off occurrence in the Indigenous policy domain.

The way in which the Prime Ministers Advisory Council appears to have ‘ticked and flicked’ this agenda item raises important issues around what Indigenous interests might expect, and in fact are getting from this peak appointed Indigenous advisory body. The way in which the ILC Board’s position on its proposed investment consultative committee was first overturned, and then ignored, also says something about the respect accorded by the Government to its own appointed statutory officeholders.

The intricate technical complexity of the legislative process, and the ways in which the bureaucracy can slowly over time shift the way key Indigenous demands and principles are interpreted or even applied are under-appreciated dynamic in the Indigenous policy domain. Proposed changes to Indigenous legislation will always benefit from the inclusion of historical perspective within the policy process. Governments increasingly assume that policy development is a-historical and the only context which is important is the current political objectives of the Government. This is ultimately short-sighted and counterproductive to the national interest, and both governments to actively support the retention of staff with deep background knowledge and requires Indigenous interests to step up and strengthen their advocacy capabilities as a counter-weight to the bureaucracy’s structural short-comings.

All legislation is invariably complex. Because it is a primary mechanism for effecting institutional change, its impacts are long lasting. The process of legislative degradation – for that is what it has been – over the past twenty five years in relation to the Land Fund has gone on under the radar. It seems technical, it is not necessarily controversial, the consequences of legislative change can take decades to emerge and have a tangible impact. The Land Fund was provided for in the Native Title Act and yet was progressively transformed from a social justice initiative into one of a myriad ‘special accounts’ within the byzantine Commonwealth financial architecture.

That this occurred, and could well continue to occur, is perhaps one of the strongest reasons for establishing the Indigenous Voice proposed in the Uluru Statement from the Heart.

The devil in legislation is in the detail. But without strong Indigenous oversight of this and other crucial Indigenous institutions, the detail can be used to hide the devil at work.  

Declaration of Interest:

Michael Dillon is a former public servant and currently a Visiting Fellow at the ANU Centre for Aboriginal Economic Policy Research. He worked on the Keating Land Fund legislation in 1995, and is a former Chief Executive Officer of the ILC.