Labor is hurting under Jacinta Allan. It had to do something about hospitals

In her efforts to end months of protracted political pain over hospitals – of her own government’s making – Premier Jacinta Allan has exposed other problems she might not be able to fix so easily.

Victoria has been pondering amalgamations since a review into the health system was handed over in April, but in the past four months the government has lost control of the narrative.

Premier Jacinta Allan has announced a softened reform plan of health services.Credit: Simon Schluter

Post-budget negotiations about reining in COVID-era spending prompted hospitals to warn of staff freezes and delays to planned surgeries. Although these conversations were separate to the health service revamp, communities began to associate mergers with loss of services more strongly than they did before.

Because of this, the Allan government will spend $1.5 billion this year to make its fight with hospitals go away, despite telling them top-up money wasn’t coming. It has softened its reforms, rejecting the key recommendation that the state’s 76 health services be amalgamated.

It is hard to deny there is a political element at play. Polls in The Age and in the Herald Sun show a plummeting primary vote for Labor in Victoria and that health service cuts are a concern for the public. Internally, regional MPs reported negative feedback.

The backdown has exposed how difficult it will be for Allan to fix the state’s budget problems and added to a perception that her government is reactive rather than controlling the narrative.

No government can ever win a public feud with hospitals. A backdown might have been avoided if the funding issue was cauterised early, providing the government with clear air to prosecute the case for amalgamations months earlier.

Announcing her revised plan on Thursday, Allan invoked the ghost of Jeff Kennett’s premiership, whose losses in regional Victoria in 1999 led to her first being elected in Bendigo and kicked off two decades of dominance for Labor in the state.

“They [Victorian Liberals] tried to go down that path … I’m not prepared to do the same,” Allan said.

It was a telling pivot from Health Minister Mary-Anne Thomas’ comments in May when amalgamation was still on the table. She said Victoria had more health services than the rest of Australia combined – and they were competing against one another.

This argument comes through in the expert report the government commissioned. It found difficulties finding specialist care in other hospitals can be life-threatening and sometimes delay transfers by more than 50 hours.

Beds in local services were on average used 40 per cent of the time, while larger busy ones were over capacity.

These problems will hopefully be addressed through the government’s vision for Local Health Service Networks, but the authors of the report made a case for change that now cannot be reopened.

Insiders also expect the $1.5 billion figure may have been smaller if the savings to come from mergers could have been factored in.

Whether coincidentally or by design, Victoria’s long-awaited budget surplus in 2025-26 is also $1.5 billion.

On Thursday Allan, committed to this surplus, putting pressure on Treasurer Tim Pallas to find some imaginative savings without further fights over spending cuts.

There is always an element of creative tension between premiers and treasurers. However, MPs say their longstanding good relationship has been under some strain after a budget that was touted as “sensible and disciplined”.

Under a new premier, the 2024-25 budget became an opportunity to address some long-term issues inherited from the Andrews government, including net debt headed towards $187.8 billion.

But in the face of political peril, Allan has had to reverse these positions and add to the perception the government has become reactive, responding to crises rather than setting the tone with its own narrative.

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