The Commonwealth budget appears to be using deep cuts to health and education funding to push for a renegotiation of federal responsibilities. “Arguing that the states run schools and hospitals and should therefore have full autonomy, the budget says the cuts will ‘generate momentum’ for funding reforms in health and education, which will be devised by the white papers the government has commissioned into tax reform and federation.” The Victorian and NSW governments have indicated their opposition to the changes. In an interview on 7.30, Treasurer Joe Hockey was asked, “Are you starving the states so they beg you, effectively, to raise the GST?” He replied, “That’s up to them, they are responsible for schools and hospitals.” Under current arrangements, revenue raised by the GST is provided to the States as untied funding, to address vertical fiscal imbalance. The recent Commission of Audit recommended significant changes to the federal structure, including the restoration of States’ income taxing power, which was effectively removed by inconsistent Commonwealth legislation during World War II.
A podcast about law and legal issues