Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

by leave—I move:

That the Senate take note of the report.

Even though the bill has just been introduced by the senator representing the government, I am convinced it will never be debated in this chamber. Over the last week we have seen Prime Minister Julia Gillard laying the groundwork for a massive backdown when it comes to this ill-considered proposal to take one-third of the GST away from the states and territories. We are in the very unusual circumstance where the government senators on this committee are recommending that this legislation be passed when the Prime Minister is actually preparing for the legislation to be canned. All the while Minister Roxon is out there today saying how important it is for the states and territories to hand over a third of their GST when it is well understood that this was an ill-considered proposal right from the word go. Let us remind ourselves of how this all started.

In the lead-up to the 2007 election, then Leader of the Opposition, Kevin Rudd, promised that he had a plan to fix public hospitals and that he was going to implement that plan in government, and that by the middle of 2009 if he had not made enough progress he was going to take over the running of all our public hospitals. What happened after that? Instead of a plan there was an 18-month inquiry. We thought he had a plan. Of course, after that inquiry reported, we had a review into the review. People will remember then Prime Minister Rudd and Minister Roxon travelling around all the hospitals, and the images of them in surgeon’s uniforms with their glasses on looking like they were very concerned about our hospitals. They were ‘consulting’. But they still did not have a plan. As we got closer and closer to the next election there was a debate about health reform at the National Press Club with the Leader of the Opposition, Tony Abbott. The Prime Minister needed something—he needed to pull a rabbit out of the hat. What did he do? After having argued for cooperative federalism, after having argued for ending the blame game, he came up with the good, old-fashioned answer: pick a fight with the states and make it look like you are doing something. ‘Let’s pick a fight with the states. Let’s say we’re going to take away a third of their GST revenue and try to make it look as if we are proposing genuine health reform.’

Coalition senators are just aghast at how a proposal to take $200 billion worth of GST revenue away from the states over a 10-year period to 2020, in return for handing $15.6 billion back to the states and territories by 2020, could be seen as health reform. Professor John Deeble, the father of Medicare, an advisor to the Hawke and Whitlam governments about Medibank and Medicare, and hardly an apologist for the coalition, pointed out that the $15.6 billion put on the table by the Rudd and Gillard governments towards state and territory health and hospital funding is, from his point of view, not more than what the federal government would have been expected to pay as part of normal growth patterns. Here we have a government that is trying to sell a revenue shift as health reform without putting any additional money on the table and trying to do a deal that offers less to the states than what they would have expected from the federal government in the absence of this deal.

As we went through this inquiry it was extraordinary how many problems and issues became apparent. First of all, the Treasurer, Wayne Swan, sought to press this legislation through the parliament without having unanimous agreement from all states and territories. When the GST was introduced back in 2000, after having been agreed to by the then Prime Minister, the state premiers and the territory chief ministers back in 1999, there was a very important safeguard: you could not make any changes to GST arrangements without unanimous agreement.

Of course, Treasurer Swan knew this because in the incoming government brief from Treasury it was drawn to his attention. He was told that he did not have unanimous agreement, that he may well have to find alternative ways of funding these so-called health reforms and that it would be preferable if he could resolve these issues before reintroducing the legislation. He did not resolve these issues. He reintroduced the legislation and thought he could get away with it.

This is where the job of the Senate is so important. Through this committee we were able to ask a series of questions of Treasury and to the Department of Health and Ageing. The more questions we asked the more concerned we became. I commend the report by coalition senators to the Senate. There are large variations in the share of GST transfers, for example. The government will tell you, ‘We’ve always recognised that there will be some variation.’ ‘Some variation’, alright! The variation goes from a requirement for the Northern Territory to hand over 14 to 16 per cent of its GST, to the requirement for Queensland to hand over 40 to 44 per cent of its GST, to the requirement for the ACT to hand over 50 to 51 per cent of its GST, and all the way over to the requirement for the state of Western Australia—if Western Australia had agreed to it—to hand over 60 to 63 per cent of the remaining share of its GST. How is that fair and equitable?

Do you know the reason for these big variations? After promising to take over the whole public health system and not quite getting there, Kevin Rudd came up with this arbitrary figure: ‘We are going to become the dominant funder. We are going to fund 60 per cent of a whole series of services.’ So he decided that in each state he wanted to bring that benchmark up to 60 per cent. As it happens, some states invest more in their health and hospital services and do a better job than others. Under these reforms, if a state on average invests more of their own money into their health and hospital services, and if the federal government invests on average less in these health and hospital services in that state, that state would have to hand over a larger share of their GST. They would actually get penalised for doing the right thing.

The second reason for these big variations is that those states that are doing less well through the Commonwealth Grants Commission process—the processes of horizontal fiscal equalisation—have to hand over a larger share of their remaining GST. That is just the way it works. How is that fair?

The real concern here is that states, by the look of it, would actually be worse off. We asked a whole series of questions to the government to explain to us where the additional funding between 2014-15 and 2019-20 was going to come from, other than the $15.6 billion, because according to work done by the Parliamentary Library, over the last three healthcare agreements—over a period of 15 years—federal funding on average increased by about 8.9 per cent per annum. If you project that to what federal expenditure would have been for health and hospitals in the period from 2014-15 to 2018-19—just to look at five years—that would have been $103.2 billion, or an increase of $38.8 billion compared to the previous healthcare agreement. The government’s offer is $20 billion less than what would have been the case if past growth trends had continued—that is, it is a cut.

We thought we must have been getting this wrong, that there must have been something we were missing. So we asked the government to lay out for us in detail whether there was anything else on the table they could quantify for us, any other committed and quantifiable increases in federal funding for health and hospitals over that period. The answer during the inquiry was:

Not under that period, no.

We found that unbelievable. How can it be that a federal government could take $200 billion away from the states over a 10-year period, give $15.6 billion back to the states from 2014-15 onwards, over six years, and actually give them less than what they could have expected if growth trends over the past 15 years had continued? That remains an unresolved issue.

There are many other issues in this bill, which I strongly recommend the Senate have a very close look at. As I have mentioned, I do not think this bill will ever see the light of day because clearly the Prime Minister is cutting her losses. She realises that the then Prime Minister Kevin Rudd and the Treasurer Wayne Swan, who is still the Treasurer, did not do their homework. They did not get the support of the states and territories. Not a single state or territory government has signed up to the GST handover. No state or territory Labor government has signed up to this. Of course the state governments in Western Australia and Victoria have already made it clear that they are not in favour of the GST handover. This is an important issue. We need health reform and not just another grab for cash, which is what this legislation would have been.