States prepare for battle over budget cuts to schools, hospitals

WA’s Premier says the budget plan to shift school and hospital funding to the states might be a tactic to push for GST changes.

WEST Australian Premier Colin Barnett says the federal government’s plan to shift more responsibility to the states for education and health funding might be a ploy to get them to push for changes to the GST.

Angry Queensland and Victorian premiers are demanding an emergency meeting with Tony Abbott in the wake of the federal government’s budget funding move.

Mr Barnett also played down criticism of the funding changes, saying they were four to five years away and “brave” measures that had to be taken to reduce the national deficit.

“No sense of panic is required but the states will need to come to some sort of agreement with the Commonwealth,” Mr Barnett told reporters on Wednesday.

He said the planned changes “may have” been a tactic by the federal government to make the states push for GST reform.

“But you require the agreement of all states and territories to change the rate of tax of GST or to change exemptions - for example, should food be allowed.

“But it is the Commonwealth that determines the distribution of GST so that can be addressed.” Mr Barnett indicated he would be a tough negotiator for WA, which was getting less from the GST carve-up.

He said he didn’t support West Australians paying more of the tax but changes should be “seriously” looked at.

Regarding Queensland Premier Campbell Newman’s call for an emergency Council of Australian Governments (COAG) meeting, Mr Barnett said a meeting would be held in the second half of the year and that was soon enough.

The changes hadn’t been raised at the previous COAG meeting, he said.

Mr Newman accused the Abbott government of trying to “wedge’’ the premiers into forcing a GST hike after the last night’s federal budget announced “unacceptable cuts’’ to the states.

Mr Newman — who is also grappling with spiralling state debt and a state budget to be delivered next month — said he had spoken to his state counterparts and they were all angry about the lack of consultation.

“We’re all in agreement ... this is not acceptable,’’ Mr Newman said this morning.

Mr Newman said the cuts – which will cut up to $80 billion in Commonwealth funding — were not flagged at the recent COAG meeting.

Mr Newman has told reporters the cuts to health and education funding appeared to be a wedge aimed at forcing the states to push for a hike in the GST rate.

“We’re calling on the prime minister to hold an emergency COAG meeting because these cuts are not acceptable the way they are presented,” he said.

“Frankly I am disappointed that these sorts of moves were not discussed.

“We’re prepared to take responsibility, full responsibility, for health and education, but we need proper secure revenue streams so that our populations, states and territories, can actually get the services they deserve.” Mr Newman said the Abbott government was not playing fair.

“This is not the way to do it. It is not fair, it is not reasonable and it is not in the spirit of a reforming federation that prime minister has talked about.”

Victorian premier Denis Napthine has already publicly endorsed the call for a COAG meeting, and NSW premier Mike Baird has also slammed the budget cuts.

Dr Napthine said Victoria was missing out to the tune of $1.5 billion in the distribution of GST funds.

“We are being robbed and dudded under the current distribution of GST,” Dr Napthine told reporters on Wednesday.

“It is not fair that NSW get a higher return for every dollar they put in than Victoria. That is simply unfair.

“Victoria seemingly is being penalised for being good managers of the economy.” Dr Napthine said he supported Queensland Premier Campbell Newman’s call for an emergency COAG meeting and insisted it be held as soon as possible.

Victorian Treasurer Michael O’Brien said the suggestion of an $80 billion reduction in federal expenditure over the next decade was a worrying sign of cost-shifting to the states which Victoria — the only state with predicted budget surpluses over the next four years — would fight.

“When we handed down the Victorian budget last Tuesday we put extra money into Victorian hospitals, extra money into Victorian schools,” he said.

“We didn’t put that extra money in so that the federal government could take money out.

“We’re not doing it to improve the federal budget’s bottom line.

“That is something which we don’t think is fair or sustainable and we’ll certainly be continuing to make or have urgent discussions I believe with the federal government to see how they actually propose these sorts of funding reductions could function.”

Mr O’Brien declined to explicitly say the Abbott government had broken promises, but suggested there was a conflict between last night’s budget and the federal Coalition’s pre-election pledges.

“I don’t know there were particular promises made to the states ... but we are concerned if the federal government is withdrawing from the sort of funding of schools and hospitals that they have been previously saying they were going to do,” he said.

“That’s a matter for the federal government to explain what they’ve said and what they’re doing.”

Mr O’Brien dismissed suggestions the states would rally together to call for an increase in the GST rate, instead repeating his previous call for a fairer reallocation of revenue for services as intended when the Commonwealth took over the bulk of revenue raising from the states.

“What we see now is it appears the federal government is significantly stepping back from that without handing back the revenue that it took from the states all those years ago,” he said.

“Now that’s something that needs to be resolved.”

Treasurer Joe Hockey said it was up to the states to argue the case for raising the GST.

Mr Hockey this morning told ABC Radio: “If they want to maintain that level of funding for their schools and their hospitals, which is well in excess of what the base funding has been over previous times, then they have to get it from the taxpayer, as we would have to get it from the very same taxpayer.

“They raise taxes like we raise taxes and, I want to emphasise, it’s the same taxpayer.”

Mr Hockey, when asked about changing distribution of the GST, said: “We said that the only way there would be changes to the GST would be if we took it to an election. Now the states get every dollar, every single dollar, from the GST. It’s up to them to argue the case for changing the GST.”

Speaking at a post-budget breakfast attended by former prime minister John Howard, Queensland Treasurer Tim Nicholls said he would fight the federal government’s changes to health and education spending.

Mr Nicholls, preparing his third budget to be delivered on June 3, has overseen massive cuts to government programs and the sacking of 14,000 public servants since winning office March, 2012.

The Newman government has also flagged the possible sale of government assets – including in the electricity sector – to be announced on June 3 and taken to the next state election, due in early 2015.

Last year, Mr Nicholls and health minister Lawrence Springborg forced a backdown from the then Rudd government over planned federal government cuts to health funding in Queensland.

Mr Nicholls said the changes to health spending, a plan to charge patients a $7 GP co-payment, and reducing funding to the Better Schools Plan are deeply disappointing.

“The revisions are nothing more than an unjustified attack on the state’s delivery of health and education services,” he said.

“We will use the time between now and the implementation of these measures to take the fight to Canberra.

“These changes will significantly increase the pressure on the state’s budget, as we believe the shifting of expenditure to the state’s budget is unsustainable.”

Mr Nicholls has also raised concerns about the budget’s freeze of indexation payments to local governments.

“The state is not in a position to assist, given our own budget repair task, so this reduction in funding is going to increase the strain on local governments,” Mr Nicholls said.

NSW Premier said the state’s residents had been hit hard by the federal budget.

“We have deep concerns on what has been revealed, particularly in relation to health and education,” Mr Baird told ABC Radio on Wednesday.

Mr Baird said it is not up to the state to solve these problems. “We clearly haven’t got the financial capacity to meet the challenge being provided by the commonwealth, and we need to address it,” he said.

Despite being a Liberal ally, Mr Baird said he will be heading to Canberra to have discussions with the government.

“We will be standing up for this state, make no bones about it.” As NSW prepares to unveil its budget on June 17, Mr Baird said the state won’t be backing away from its commitments to health and education.

“We have made commitments we will keep.

“But what we’ve seen from Canberra overnight is a challenge for the state.” Mr Baird said one of the outcomes of Tuesday’s budget is that there has to be a mature debate about tax reform.

“What I’ll be saying to Canberra is that `you have a responsibility in this, it’s not just a problem for states to sort out.

“You have handed across the biggest expenditure with the highest growth rates going forward in terms of health, well, we need to find a way to fund it.” Mr Baird said he has to look at the impact of a $7 co-payment to visit a GP announced by Mr Hockey.

“What we have to understand if there is a co-payment that comes on at a GP, what is the knock-on impact to the rest of the health system, particular into emergency departments,” he said.

“If it leads to long queues at emergency departments, well, that’s not sustainable,” he said.

NSW Treasurer Andrew Constance said the government’s claim was unreasonable, given the states had much weaker taxation powers than the federal government.

“That’s nice, Joe, but address vertical fiscal imbalance. Let’s address the mismatch between the ability of the commonwealth to collect the tax and address the core expenditure requirements we have in terms of particularly health and education,” he told ABC Radio.

Mr Constance said the NSW government “can’t now afford to wait” for the government’s taxation and federation white papers to deliver greater certainty.

Meanwhile Mr Baird welcomed the federal government’s “huge boost” of $1.5 billion for infrastructure spending.

“It’s a transformation opportunity particularly for Western Sydney, the WestConnex project, the federal government has committed funds that are significant.” He said there is increased funding for roads in Sydney’s west, the second airport for Sydney and the Pacific Highway.

“It will transform this state.”

And there was some good news for Queensland in the budget, with more than $9 billion to be spent on projects including the Bruce Highway, the Melbourne to Brisbane inland railway, a second Toowoomba Range crossing, venues for the Gold Coast Commonwealth Games in 2018.

Opposition education spokeswoman Kate Ellis said: “Every Australian school will be worse off because the Government last night announcing inadequate new indexation arrangements which will see future funding stripped from every school across the nation.”

Tony Abbott said state governments must be “sovereign in their own sphere” and consider raising further revenue to cover any short fall in funding.

“We make no apologies for wanting the states to be grown up adult governments that take responsibility for the programs that are theirs,” he told ABC Radio.

Mr Constance and Victorian Treasurer Michael O’Brien were both concerned that the $7 co-payment for Medicare-funded GP visits would add to pressure on state hospitals.

“Hospital emergency departments are not for people with stubbed toes, they’re not for people who are presenting with things that really should be dealt with by a general practitioner,” Mr O’Brien said.

“If this co-payment has the effect of sending people to hospital emergency departments that is just a form of cost-shifting that we can’t bear.”