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An $80 billion cut to federal grants for schools and hospitals over the next decade has sparked a near rebellion from the states, which suspect Canberra is trying to "starve them out" in a bid to force them to seek an increase to the 10 per cent goods and services tax.
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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.
The premiers, almost all of whom are Coalition members, are incensed at the move, outlined in the Coalition's first budget, to slash health and education grants in coming years and force them to make up any shortfall.
They are demanding an immediate special meeting of the Council of Australian Governments after attending a COAG meeting in Canberra just a fortnight ago in which there had been no mention of the massive cuts coming their way.
They say Prime Minister Tony Abbott placated them with assurances of an orderly process of two white papers, one on taxation including the GST and another on improving the functioning of the federation that would also look at the role of the GST because it is a purely state-directed revenue stream.
The intergovernmental anger is in stark contrast to the mood of harmony at the conclusion of the COAG meeting this month.
WA Premier Colin Barnett left open the possibility of supporting a rise in GST or broadening its base – so long as his state received a fairer share of the revenue distributed.
He said he was willing for his state to contribute up to 25 per cent of its GST take to other states "but we're not willing to contribute 65 per cent of our GST".
Voters too are angry at the tough-love austerity measures contained in the budget, many of which represent broken promises.
A Roy Morgan consumer pulse SMS poll conducted on Wednesday found high levels of disapproval among voters on all sides with 76 per cent of Liberal supporters saying the budget did not advantage them or their families compared to just 24 per cent who thought it did.
Among ALP supporters, 96 per cent believed they were worse off as a result of the decisions.
But where premiers are largely united in their call for a special meeting, most want the political cost of any debate about increasing the GST to be carried by the Commonwealth.
NSW Liberal Premier Mike Baird described the move in Tuesday’s federal budget as “a kick in the guts”.
South Australia’s Jay Weatherill, the only Labor premier, branded it the “cruel political hoax” at the core of a budget he said was based on deception and lies. Mr Weatherill has backed a push to force the COAG meeting, but there is no sign of Mr Abbott giving ground.
Queensland’s LNP Premier Campbell Newman said “we’re all in agreement that what the government is doing in relation to health and education is not acceptable”.
Adding to the concerns of premiers is the likelihood of cost-shifting from the Commonwealth when a new $7 co-payment to visit a doctor pushes more patients into hospital emergency departments instead of GP surgeries.
That measure alone is expected to result in as many as a million fewer GP visits in its first year as Australians decide not to seek medical help on some occasions.
Figures show that Canberra is banking on a first-off reduction in GP visits of 1 per cent in the first year and around half that in the subsequent year. In 2012-13 there were just over 115 million standard GP visits.
Just over 93.5 million of these were bulk-billed. One per cent of that is 935,000.
Treasurer Joe Hockey and Mr Abbott put the onus firmly on state governments to mount a case for changes to the GST on Wednesday to make up the coming funding shortfall, with Mr Abbott pointing to coming white papers that will examine the tax system and the federation.
Mr Hockey said that as states receive every dollar of the GST, they would "have to run the argument. They want to increase funding in their areas of responsibility, then they’ve got to run the argument on the GST".
"The states don’t want to be associated with the pain of raising taxes to pay for the increased expenditure in their areas of responsibility,'' he said.
Mr Newman said he had spoken to state colleagues including Mr Baird, Victoria’s Denis Napthine, Mr Weatherill and Northern Territory Chief Minister Adam Giles.
"We want to get together first to confer on these matters, we're calling on the PM to hold an urgent or emergency COAG meeting,'' he said.
"This whole thing seems like a wedge to get the states to ask for the GST to be raised ... 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 Baird, who has previously advocated reform of the GST, predicted on Wednesday the cuts to health and education would bring forward debate about a potential rise in the GST to secure extra revenue for the states.
Asked if he believed Mr Hockey was seeking to "wedge" the states on the issue of an increase to the GST by requiring them to find a way to fund extra health and education services, Mr Baird said he remained a supporter of Mr Abbott's pre-election promise to have a "mature debate about tax reform".
"That should take place," Mr Baird said. "What we saw with events last night, that has brought that forward.
''Dr Napthine backed Mr Newman's call for an emergency COAG meeting but, as a state election looms, the Victorian Premier said his state had "no intention of arguing for an increase in the GST".