Former SA Liberal MP, turned Labor government minister, Martin Hamilton-Smith.

Former South Australian Liberal MP, turned Labor government minister, Martin Hamilton-Smith.

The defection of a state Liberal MP was not only a gross act of betrayal, but it also revealed that some politicians barely know the difference between Liberal and Labor.

If you can't see the difference between the parties, then it doesn't really matter if you join your opponents or not. South Australian defector Martin Hamilton-Smith was not just a lowly backbencher. He was a former Liberal leader in that state and carried the responsibility of his party’s values and policies. Obviously he can’t see the difference between the parties, so it’s not surprising that some voters think all MPs are as bad as each other.

Interaction between political parties is one thing, but there is no reason why there should be glaring differences, especially on economic issues, within the same party at state and federal levels.

It’s time for the states to embrace the end of the age of entitlement.

With a new federal Liberal government and mostly Liberal state governments, surely we can have more rational and consistent approaches to economic policy within the federation. The states should be looking at the new government with an eye to the possibilities.

The state premiers think that their tactical whinging over the budget was good local politics but many voters can see through grandstanding. Instead, the premiers would be doing their constituents a favour by taking a far more constructive approach.

I know the states have been walked over by the Commonwealth for years but to make progress the premiers will need to look like statesmen, not opportunists. The federation needs a new compact and hopefully the Abbott government’s proposed white paper will set out some steps to repair Commonwealth/state relations.

For starters, the states should reconsider some of their pet expenditures. The classic case this year was the absurd spectacle of the Victorian government giving $22 million to Coca-Cola Amatil for the SPC Ardmona plant in Shepparton while the federal government refused to waste more taxpayer’s money.

The Victorian Liberals should scrap the deals they have with the Nationals to sprinkle taxpayer monies around the state to buy votes. When the details of a very generous payout to an abattoir in western Victoria in the Premier’s electorate was revealed, the payout was justified because Labor had done the same thing. The fact that Labor wastes money is no reason for the Liberals to do the same. Likewise, the funding of Parmalat Australia with $25 million, Koallah Farm, Australian Lamb Colac and many others around the State are all just as bad as SPC.

Apart from the fact that it’s wrong to tax citizens to fund wealthy businesses, the scheme has big political risks as is obvious from the ICAC experience in NSW. Inevitably, Labor or Liberal or National parties will have funded some business beneficiaries and the same business person will be caught as also being a financial supporter of the government dispenser.

All the states run corporate welfare schemes; its time they cut the waste. Handouts are bad enough but many of the states are also keen on quasi bribes. Take one example last week when it was announced Victoria had lost an auction with Tasmania for a Qantas call centre. Tasmania won the contest. The Victorians had offered $7 million to Qantas.

The federal Liberals are not perfect as we saw with the funds promised to Tasmania for Cadbury in the lead up to last year's election. But at least the federal government is now trying to kick the habit. State Liberals should follow suit.

Not only should states stop wasting taxpayers' money, the federal government should make it clear to companies like Qantas and Coca-Cola that they frown on companies trying to buy off the states.

Peter Reith was a Howard government minister and is a Fairfax columnist.