THE local government referendum has been dealt a potentially fatal blow with senior Coalition figures appearing to withdraw support for the "yes" campaign.
Manager of Opposition Business Christopher Pyne urged the Australian Local Government Association to call on new Prime Minister Kevin Rudd to "pull" the referendum, claiming it had been set up to fail.
Mr Pyne accused the government of creating the referendum as a "distraction" from Labor's internal woes.
"They haven't laid the groundwork for why the referendum needs to be passed," Mr Pyne said.
"My advice to the Australian Local Government Association is that they should ask the Prime Minister to pull the referendum because I believe it will be defeated under the current circumstances, and if it's defeated a third time no government will want to return to it again."
Mr Pyne's comments came after Opposition Leader Tony Abbott said he had "enormous reservations" about the government's "comprehensively mishandling" of the referendum, urging Australians to vote "no" if they had any doubt.
He again criticised the government's decision to provide $10 million to the "yes" campaign, while giving the "no" side just $500,000.
"I certainly think there is a case for ensuring that existing federal programs for local government can continue without constitutional doubt," Mr Abbott said.
"(But) I have enormous reservations about the way the government has done this and I say to the Australian people if you don't understand it, don't vote for it. If you're not fully persuaded, don't vote for it because our constitution is far too important to be trifled with."
The Coalition had been offering bipartisan support for the referendum, which is scheduled to be held in conjunction with the federal election, despite facing resistance from some within its ranks.
Coalition local government spokesman Barnaby Joyce revealed the extent of the internal unrest when he told the ALGA national assembly he was "burning up political capital" trying to get his colleagues on board.
The fate of the referendum could also hinge on whether Mr Rudd brings the federal election date forward from September 14.
September 14 is the first date the referendum can be held concurrently with the general election, meaning it would have to be held in its own right, or not at all, if Mr Rudd called an August election.
Deputy Prime Minister Anthony Albanese told APN Newsdesk on Monday the government remained committed to staging the referendum.
ALGA president Felicity-ann Lewis said she was "confident that the referendum will go ahead", although she conceded the chances of it proceeding would be affected if Mr Rudd called an early election.
"Despite some uncertainty about the date of the 2013 federal election, and therefore the date of a concurrent referendum to include local government in the Constitution, the local government sector remains focused on its campaign to convince Australians of the need to ensure the continuation of direct, federal funding for community infrastructure and services," Ms Lewis said.