Local government has welcomed the High Court decision to reject a constitutional challenge to the Federal Government’s stimulus package payments which would have jeopardised direct federal funding to councils.

The challenge was brought to the High Court by University of New England law lecturer and former National party officer, Bryan Pape, who argued that payments delivered through the Rudd Government’s Nation Building and Jobs Plan were unconstitutional because the monetary ‘gifts’ were not covered by tax law.

Australian Local Government Association (ALGA) president Cr Geoff Lake said the case had the potential to “radically recast the funding arrangements between the three levels of government” and invalidate more than $6 billion in funding to local government.

“It would have been un-contemplatable damage if councils were required to pay back in the order of $6 billion worth of funding that has flowed to local government over the last few years,” Cr Lake told GovernmentNews.

“We welcome the decision today, but we are still waiting to have a look at the judgement, which won’t be available for a couple of months, to see what the implications for councils might be.”

He said although the High Court ruling was a relief for councils, uncertainty still remains over the “intergovernmental structures” between the three spheres of government.

“The Constitution doesn’t provide for the explicit power of the Federal Government to fund local government,” Cr Lake said.

“We think that the uncertainty that this case created has the potential to arise again and indeed a differently composed High Court in the future could well decide these sorts of matters in a different way.

“We think that in the 21st Century it is an unnecessary and unacceptable situation and we want to clean it up.”

He said the issue would not be resolved until the Constitution was amended to include an explicit power for Federal Government to directly fund local government.

Constitutional law expert Professor George Williams, from the University of New South Wales, said the case was likely to boost local government’s campaign for constitutional recognition.

“This case illustrates the flaw in the Constitution that by not referring to local government and by not providing clear funding the current arrangements can be thrown into uncertainty,” he said.

“We do need clear recognition of local government in the Constitution and a clear understanding of its role.”

Professor Williams is currently developing a technical paper on the drafting required to achieve constitutional recognition.

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