Howe held private discussions with the Prime Minister and the Treasurer and with other influential Cabinet Ministers (such as Hon. John Button MP) to gain support for his proposals.

Howe personally persuaded the Prime Minister that the Government needed to invest in the nation’s development through capital programs, in the major cities for example, and that a program could be devised that addressed major issues emerging in Australian cities. This program should be an important aspect of Hawke’s New Federalism agenda.

Because of the sensitivity of the proposals and the desire to move quickly, Tom Brennan and I prepared a Cabinet Submission, but one not intended for circulation among other agencies of government. Howe had the agreement of his colleagues that the submission would not be circulated prior to Cabinet, but, rather, tabled at the Cabinet meeting.

The submission was supported in Cabinet, with final financial allocations to be decided in the Budget ‘round-up’, but an ‘in principle’ allocation to the initiative of $800 million in capital (which later became officially $816.4 million when the Department of Finance properly constructed the $800 million number).

The allocation of the funds as capital raised an interesting challenge. Practice was that capital was normally provided to States (where there was capital involved in Commonwealth-State funding) as general purpose funds, with no conditions attached. In order to be able to have States use the funds in ways that met the Commonwealth’s objectives, we would need to utilise a different approach.

Tom Brennan took on this task with the Treasurer’s Office and it was agreed that the Loan Council arrangements for General Purpose Capital Grants would provide a suitable vehicle, provided we could reach agreement with the States that, while the funds were untied capital, the States would use them for proposals agreed with the Commonwealth. This was to prove to be a major challenge, but one that was, in due course, fully met.

The final financial arrangements are explained in more detail in documentation cited from the Australian National Audit Office

The 1991-92 Commonwealth Budget Papers therefore showed an allocation of $816.4 million to the Building Better Cities program, allocated across States and Territories in accordance with population — an outcome of Department of Finance instructions about how to allocate General Purpose Capital Grants.

 

Source: Australian National Audit Office, Audit Report No. 9 1996-97