PREMIERS of rich and poor states have clashed sharply at the Council of Australian Governments meeting, as the bigger states flagged a co-ordinated campaign to slash the $4.25 billion a year subsidy taken from them for the smaller states and territories.
Northern Territory Chief Minister Paul Henderson accused Western Australian Premier Colin Barnett of ''an unprincipled attack on the smaller states'' by proposing that 60 per cent of future GST money be allocated on a per capita basis.
GST revenue is collected by the Commonwealth on behalf of the states, but allocated entirely on a needs basis, as assessed by the Commonwealth Grants Commission. Those assessments differ so much that this year the Northern Territory will receive almost as much GST money as WA, which has 10 times more people.
The premiers of the four donor states - WA, Victoria, New South Wales and Queensland - met to consider a common position to demand that only part of the GST be allocated on a needs basis, and part as per capita entitlements.
Mr Barnett's plan for a 40/60 split, if implemented this year, would save WA $1.4 billion, Victoria almost $600 million, NSW $450 million and Queensland $86 million. But it would be a zero-sum game, with the small states losing just as much. The Northern Territory would lose $1.4 billion, close to a third of its revenue. South Australia would lose $637.5 million, Tasmania $400 million and the Australian Capital Territory $90 million.
Mr Barnett said the four largest states are close to a common position, advocating that most of the GST poll be allocated on a per capita basis, and the rest according to needs.
''The system is broken,'' he said. ''It isn't serving the Australian economy well, and tinkering with it will not solve the problem.''
But Mr Henderson and South Australian Premier Jay Weatherill hit back. Mr Henderson called the proposal ''an unprincipled grab for cash [that] goes against all the fundamentals that this Commonwealth is meant to be about''.
Mr Weatherill said such a shift in funding would have ''dramatic effects on the smaller states'' and break the principle that ''where ever you are based … as a citizen, you receive the same level of services''.
Prime Minister Julia Gillard sided with her Labor colleagues. ''We do have an expectation about what it means to be an Australian citizen,'' she said. Australians would not agree if ''impoverished places were not getting assistance because [their] part of the nation didn't have revenue-raising capacity''.
Her government has set up an inquiry into the GST distribution, expected to submit its final report by September.