NO.080

MR RUDD’S TAKEOVER OF STATE HOSPITALS

After clawing back Specific Purpose Payments (SPPs) for Hospitals, a takeover of State hospitals by the Australian Government would cost the Commonwealth an additional amount of around $14.3 billion in 2005-06 dollars.

This is the amount States put into the Acute Care Institutions in 2005-06, the last year for which full reports have been made by States as reported by the Australian Bureau of Statistics.

This sum is about 40 per cent of GST revenue received by the States in that year.

If the States were to cede the management of hospitals to the Australian Government they would have to cede the equivalent of 40 per cent of GST revenue with it to make sure the hospitals were kept on their current financial footing at current levels of service.

Of course if this were done in 2010 both hospital funding and GST receipts will have risen but the proportion of GST required for State hospital funding would be roughly the same.  The amount of the clawback required would be approximately $20 billion.

The States are unlikely to voluntarily surrender $20 billion per annum or 40 per cent of GST.

To clawback this amount would require the Commonwealth to abolish all other SPPs in education, roads, disability and public housing. This too would be strongly resisted by the States.

Alternatively to raise a sum of this magnitude would require an increase in the GST from 10 per cent to 14 per cent.

MELBOURNE

27 August 2007

Contact: Renae Stoikos – 03 9650 0244

Financial Implications of Commonwealth Takeover of State Hospitals

* Latest year for which ABS Government Finance Statistics available