Tax deal dropped, hospitals get lifeline

State premiers have left Canberra with $2.

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9 billion in their pockets for hospitals, but no long-term funding deal for health and schools.

Prime Minister Malcolm Turnbull has also been left without a tax reform plan, after the premiers rejected the idea of them levying their own income tax.

Instead the states will look at taking a share of the income tax revenue pool, while at the same time losing some tied federal grants.

The premiers were pleased with the offer of an extra $2.9 billion in funding from July 2017 to June 2020, despite it not fully covering the $7 billion cut in Tony Abbott’s 2014 federal budget.

But there was disappointment over a lack of commitment to schools funding, with a deal still to be struck by early 2017 and no guarantee that the former Labor government’s Gonski deal will be honoured.

“We are not wedded to … the ‘full Gonski’,” Mr Turnbull said.

Labor leader Bill Shorten described the COAG outcome as “pathetic”.

“The Liberals have taken our hospitals to the brink and this is nothing more than a band-aid on a bullet hole,” Mr Shorten said.

“It’s staggering that Mr Turnbull talks so much about innovation, yet is planning to cut every single commonwealth dollar from public education.”

Mr Turnbull said the new income tax arrangement would mean fewer conditions on the money provided to the states and greater incentive for them to spend the money more wisely.

But the commonwealth would not be raising the overall tax burden, he said.

“We have to live within our means,” Mr Turnbull said.

The prime minister’s closest state ally, NSW Premier Mike Baird, was still confident the federal government had “left open the option” of extending the Gonski funding beyond 2018.

However, his WA counterpart Colin Barnett said it had always been a false promise by the Gillard government and never had any real funding attached to it.

Mr Baird said the premiers had not given up on tax reform.

“I don’t want anyone to think that there has been any white flags raised in relation to tax reform … because funding that gap, ensuring the economy is growing, remains a challenge.”

The COAG agenda was not all about economics.

The meeting confirmed a deal to bring in new laws which would allow terrorists to remain in detention beyond their jail sentences.

And there was agreement on a domestic violence summit in Brisbane in October.