Turkeys Don't Vote for Christmas? An Analysis of Horizontal Fiscal Equalisation Experiences In Australia and The United Kingdom

The UK and Australia are currently in the throes of debates about the same issue,namely horizontal fiscal equalization (HFE). Interestingly, however, the argumentsseem to centre upon effectively adopting each other’s system. In the UK many areproposing a system (to replace the existing per-capita based “Bamett formula”) whichtakes need explicitly into account (Morgan, 2001), looking at the Australian model as apotential alternative (see Pickernell and McGovern, 2002). Conversely in Australia, themost recent review of Commonwealth and State hnding (Gamaut and FitzGerald,2002) suggests essentially replacing the Commonwealth Grants Commission’s (CGC’s)sophisticated (and often complicated) calculations with a much simpler per capita basedsystem, one which bears an uncanny resemblance to the Bamett formula.