Nationals want Commonwealth money to go straight to councils in federation reform

Councils only exist under state and territory legislation, which means money often must flow through them, even if it comes from the Commonwealth.

Nationals leader David Littleproud said local councils "get it" and knew how to best spend money, but were hamstrung by layers of bureaucracy.

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"Wouldn't it be more efficient to provide them with the money directly rather than passing it through the state governments to clip the ticket?" Mr Littleproud said.

"They're on the ground, they know their communities and want tax payer dollars go even further. Local mayors see this as an opportunity to empower their communities."

"Whether it be in Charleville or Dubbo, local government gets it," said Mr Littleproud.

Regional Capitals Australia chair and Ballarat City Council mayor Daniel Moloney said larger councils provided up to 80 services, ranging from childcare centres and libraries to child vaccinations and aquatic centres.

"We do that on a pretty small budget, only about three to four cents of every tax dollar goes to councils," Cr Moloney said.

"If we could get more money straight from the federal government, we could strip out much of the bureaucracy and be more efficient."

The application for federal funding is often a "cumbersome" time-consuming process that puts a strain on the limited resources of councils.

"We've suggested councils submit an expression of interest, and if that's deemed worthy, then we do a more detailed business case," Cr Moloney said.

Although Mr Littleproud suggested constitutional recognition for councils was the best path forward, Cr Moloney said there was nothing stopping the federal government from giving money directly to councils, it just required policy and legislative tweaks.

He pointed to existing programs, such as the Building Better Roads program that went straight to councils based on their population size.

Mr Littleproud said the pandemic brought the need for Federation reform to a head and had written to the Prime Minister, asking him to help lead a national conversation.

"In designing our Federation our forefathers enshrined certain functionality to our states - fast-forward 122 years and I suspect they would be saddened to see the evolution of federation," Mr Littleproud said.

"But today the states and territories business model is to just blame Canberra and ask for more money. It has become lazy, unproductive and frankly we can do better.

"Our Federation was at its best when competitive federalism was at its core, when states competed against one another for both population and capital investment."