Treasurers jostle over funding

Federal Treasurer Peter Costello today said no states or territories would be worse off after federal funding was distributed this year, despite protests by state treasurers.

The protests developed into physical jostling today when NSW Treasurer Michael Egan walked from a doorstop he was giving to confront Mr Costello about a $166 million funding cut to the states.

"Hello Peter, how are you? Why did you break the GST agreement with the states?

"We were told, indeed we signed up to a solemn agreement ... don't be condescending," Mr Egan said as Mr Costello pushed his way in front of the cameras to take over the doorstop.

"Every last dollar of GST revenue will go to the states, with increases this year of between something like seven per cent and 11 per cent in the amounts which are going to be distributed to the states," he told reporters.

"We're not breaking any agreement, let me make that clear."

He said the end of fuel excise indexation meant no extra excise was being collected for the states or the commonwealth.

State and territory treasurers have accused Mr Costello of ambushing them when he wrote to them to say they would miss out on $166 million in funding because of the federal government's decision 12 months ago to end fuel excise indexation.

The states said they were being made to pay for a federal government promise.

Victorian Treasurer John Brumby accused Mr Costello of ripping up the financial inter-governmental agreement with the states.

He said Victoria may have to reintroduce the financial institutions duty (FID) - one of the state taxes abolished in return for receiving GST revenue - to make up a shortfall in funding.

"We're furious, this is a total breach of the inter-governmental agreement," Mr Brumby told reporters.

"The jaws dropped, people literally fell off the back of their chair, and what is being proposed here is absolutely contrary, not just to the spirit, but to the law of the inter-governmental agreement.

"It's a cheap trick which will cost the states hundreds of millions of dollars."

Mr Costello called Mr Brumby's threat to reintroduce FID irresponsible and said any money raised from a tax states agreed to abolish would be deducted from their federal funding.

"If Victoria wants to get into the business of reintroducing FID, the commonwealth will not pay it for its abolition, so it won't be better off," he said.

"The states are all better off under the GST revenues, under the first home owners scheme, under all of the revenue replacement.

"Every state is better off now, today, than it would have been under a simple FAGs (Federal Assistance Grants) system."

"The intention of the IGA (inter-governmental agreement) has nothing at all to do with federal government tax arrangements," he said.

"It is illegal, if this was a company you'd take them to court and you'd injunct them.

"This is about building up Peter Costello's Budget bottom line to the tune of three quarters of a billion (dollars) or more and who's going to pay for it? The states."

West Australian Treasurer Eric Ripper, who believes his state is set to lose $18.3 million, said the federal government had ratted on a deal.

"We're going into a pretty angry meeting this morning," he said.

"What Peter Costello has done is to welsh on a solemn agreement signed with the states in 1999.

"He's got a budget problem, he's trying to fix it at the expense of services.

"If Peter Costello can rat on this aspect of the agreement, what's to stop him ratting on other aspects of the agreement such as the GST rate?"


	Government News Index site index HOME Treasurers jostle over funding March 22 2002 Federal Treasurer Peter Costello today said no states or territories would be worse off after federal funding was distributed this year, despite protests by state treasurers. The protests developed into physical jostling today when NSW Treasurer Michael Egan walked from a doorstop he was giving to confront Mr Costello about a $166 million funding cut to the states. "Hello Peter, how are you? Why did you break the GST agreement with the states? "We were told, indeed we signed up to a solemn agreement ... don't be condescending," Mr Egan said as Mr Costello pushed his way in front of the cameras to take over the doorstop. Mr Costello said no agreement was broken. "Every last dollar of GST revenue will go to the states, with increases this year of between something like seven per cent and 11 per cent in the amounts which are going to be distributed to the states," he told reporters. "We're not breaking any agreement, let me make that clear." He said the end of fuel excise indexation meant no extra excise was being collected for the states or the commonwealth. State and territory treasurers have accused Mr Costello of ambushing them when he wrote to them to say they would miss out on $166 million in funding because of the federal government's decision 12 months ago to end fuel excise indexation. The states said they were being made to pay for a federal government promise. Victorian Treasurer John Brumby accused Mr Costello of ripping up the financial inter-governmental agreement with the states. He said Victoria may have to reintroduce the financial institutions duty (FID) - one of the state taxes abolished in return for receiving GST revenue - to make up a shortfall in funding. "We're furious, this is a total breach of the inter-governmental agreement," Mr Brumby told reporters. "The jaws dropped, people literally fell off the back of their chair, and what is being proposed here is absolutely contrary, not just to the spirit, but to the law of the inter-governmental agreement. "It's a cheap trick which will cost the states hundreds of millions of dollars." Mr Costello called Mr Brumby's threat to reintroduce FID irresponsible and said any money raised from a tax states agreed to abolish would be deducted from their federal funding. "If Victoria wants to get into the business of reintroducing FID, the commonwealth will not pay it for its abolition, so it won't be better off," he said. "The states are all better off under the GST revenues, under the first home owners scheme, under all of the revenue replacement. "Every state is better off now, today, than it would have been under a simple FAGs (Federal Assistance Grants) system." But Mr Brumby said the states had been robbed. "The intention of the IGA (inter-governmental agreement) has nothing at all to do with federal government tax arrangements," he said. "It is illegal, if this was a company you'd take them to court and you'd injunct them. "This is about building up Peter Costello's Budget bottom line to the tune of three quarters of a billion (dollars) or more and who's going to pay for it? The states." West Australian Treasurer Eric Ripper, who believes his state is set to lose $18.3 million, said the federal government had ratted on a deal. "We're going into a pretty angry meeting this morning," he said. "What Peter Costello has done is to welsh on a solemn agreement signed with the states in 1999. "He's got a budget problem, he's trying to fix it at the expense of services. "If Peter Costello can rat on this aspect of the agreement, what's to stop him ratting on other aspects of the agreement such as the GST rate?" AAP the Age Index