Kevin Rudd stares down states on health funding

KEVIN Rudd is staring down the states over his plan to claw back 30pc of GST for health as last-ditch negotiations centre on a funding pool.

South Australian Premier Mike Rann, left, with his Victorian counterpart John Brumby as health reform talks continued in Canberra last night. Picture: Ray Strange

KEVIN Rudd is staring down the states over his plan to claw back 30 per cent of the GST for health as last-ditch negotiations centre on a federal-state funding pool in a bid to avoid the collapse of today's summit with the premiers.

Senior federal government sources last night remained uncertain about whether a deal could be reached at the Council of Australian Governments meeting today, describing it as a "huge feat". Some state officials were predicting talks would drag into a second day.

Victoria, NSW and Western Australia have opposed handing over 30 per cent of their GST to the commonwealth, which federal sources yesterday warned would be "close to a deal breaker".

But the funding pool arrangement has loomed as a possible compromise.

The negotiations are trying to reconcile the states' concern about maintaining control of 30 per cent of their GST revenue and the commonwealth's demand to have a direct and majority stake in public hospital funding arrangements.

Sources said there had been "fertile" discussions around the funding pool for public hospitals -- which both federal and state governments would pay into, quarantining the money for health expenditure -- and how that would be administered.

Last night, a meeting of all the state and territory leaders -- except WA Premier Colin Barnett -- agreed to demand more funding for mental health and emergency medical services, but broke without a united position on funding pools and Victorian Premier John Brumby's call for 50-50 state-federal funding of hospitals.

Another meeting is planned for this morning in a bid to take a united position to COAG.

The Prime Minister, speaking ahead of a dinner with the leaders at The Lodge last night, promised a "tough negotiation".

But NSW Premier Kristina Keneally urged Mr Rudd not to immediately proceed with his threat to hold a referendum on a health takeover if a full agreement were not reached today. She said there was agreement on the "substance of the reforms" with financial arrangements the remaining area of debate.

Mr Rudd said he was "absolutely determined" to achieve hospital reform. "I was elected to do that. I take that responsibility seriously. I intend to get on with it.

"And I think that's what the Australian people are saying they want, but to deliver better health and hospital services we need first to reform the system to get rid of duplication and waste, and then, secondly, grow the system by greater investment in beds, doctors and nurses.

"Now some of the premiers -- Mr Abbott too -- seem to be saying the current system is fine; just provide another blank cheque. I'm not prepared to do that," Mr Rudd said.

The biggest critic of the reform plan, Mr Brumby, appeared more conciliatory yesterday before leaving for Canberra, saying that he believed they were "making progress" in the talks. But senior Victorian officials were uncertain about whether a deal would be reached today.

Mr Brumby said Victoria had achieved "two big gains" that he had argued for -- progress on the pool funding arrangement and more money for treating patients immediately rather than in four years.

"More money on the table now, that's the biggest single impediment to reform in our system, and I am pleased that in recent days the Prime Minister has put more money on the table," Mr Brumby said.

"The best possible outcome for our state, for all of the states, would be for the commonwealth to agree to a road map, if you like, to a plan that gets back to 50-50 funding," he said.

"If we can do that, we are making some progress."

But Mr Brumby said Victoria "will not agree to hand back 30 per cent of the GST to Canberra" and there was still not enough money to meet elective surgery targets announced by Mr Rudd.

But Wayne Swan said Mr Brumby's 50-50 funding request would cost $38 billion, which amounted to a "smash and grab on the federal Treasury".

The Treasurer told the Nine Network there was not enough accountability in the system and the states had to agree to fundamental reform "so the Australian public and taxpayers can be confident the money that is dedicated to health is spent on health, and we absolutely want to ensure it goes straight through to those frontline services".

Asked about the funding pool, he said: "I'm not going to speculate about the all the administrative arrangements, but what is absolutely important for the commonwealth is to ensure the money goes directly to health."

The Treasurer said the states stood to receive a $13bn windfall over the next four years, with GST revenues higher than anticipated because the economy had weathered the global downturn.

Ms Keneally said NSW was willing to direct a third of the GST to health, but she was not willing to allow the commonwealth to keep a third of the state's GST.

"We certainly want to protect our GST revenue from further clawback," she said. "We signed an intergovernmental agreement 18 months ago, and we see that as fundamental to maintaining the integrity of our budget."

Queensland Premier Anna Bligh demanded an extra $400 million in the next four years for the state's health system and a guarantee of growth funding after 2014.

"Queensland wants to see the benefits for patients and hospitals start earlier than the Prime Minister's proposal, so we want to see some growth in the next financial year and the four years before the reforms kick in."

Ms Bligh said if the state's two demands were met she would sign the health agreement and support the yes case in a referendum.

Federal Health Minister Nicola Roxon said negotiations at the meeting were moving forward.

It was "a step in the right direction" that the states were prepared to ensure health money was "protected from expenditure elsewhere or from being skimmed off".