The tensions and dilemmas of intergovernmental financial relations have been highlighted at a number of points in this book. The states' vision of competitive, arm's-length federalism highlighted the need for wholesale reform to financial relations so as to guarantee the future viability of state governments as partners in the federation. The states called for a realignment of roles and responsibilities so as to reverse the incursion by the Commonwealth into state jurisdiction. They particularly wished to see a marked reduction in special-purpose payments (amounting to about 50 per cent of all transfers) and the absorption of these payments into general revenue-sharing arrangements. To them, the problem of duplication and overlap comprised the unnecessary involvement of the Commonwealth, through its financial muscle, in detailed program administration in areas of service delivery already adequately covered by state jurisdiction. The solution was disentanglement, through Commonwealth disengagement from major service sectors, conversion of special-purpose payments to block grants, or to untied revenue payments, and a ‘clean lines’ division of functions. They sought to reverse and unravel an already existing set of arrangements that had built up over many years around the plethora of specialpurpose payment programs.

The Commonwealth had a different perspective. So long as the Commonwealth retained political interests in directly shaping education, housing, health, transport and other programs, it needed to retain the financial capacity to assert those interests. Essentially, the Commonwealth's purpose in addressing the reform of roles and responsibilities was to achieve greater value for its financial and political investments in these programs.