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TREASURER Kevin Foley declared yesterday he was prepared to hand over the state's health system to the Commonwealth as spiralling costs put further pressure on the state finances.

Mr Foley warned that Australia faced health problems of "nightmarish proportions" over the next 30 years because of the ageing population.

He predicted South Australia would be spending $7.5 billion a year, in today's dollars, on health care within that timeframe.

Unless the Commonwealth provided significant extra funding "I am prepared to hand it back as it would be beyond any state's capacity to pay".

Mr Foley said that while he doubted a handover would happen in the short-term, "from where I sit, part of the solution will have to be the Commonwealth taking over hospitals".

Health spending takes up more than $2 billion a year from the State Budget.

"It's a significant battle," Mr Foley said about finding the necessary health funding to maintain health services.

"Make no mistake, the ageing of our population is the single biggest threat confronting this nation economically."

Mr Foley's comments were made during a wide-ranging interview with The Advertiser about future federal-state financial arrangements.

They followed a call this week by New South Wales Treasurer Michael Costa for a summit, involving all states, on Australia's taxation system.

Mr Costa wants a new tax-sharing agreement hammered out between the states and the Commonwealth and he has also flagged handing over the NSW public health system.

"I would be more than supportive of the Commonwealth taking over health," Mr Foley said.

"That can be the only logical structural reform of part of the package of dealing with the ageing of our population.

"Until Canberra has the sharp political pressure of hospital waiting lists and it is no longer able to hide behind state governments, it then might make decisions about how it allocates its resources." Mr Foley also said:

IN exchange for handing over the health system he would be prepared to take on a greater responsibility for education costs.

ANY tax summit had to look at a new funding arrangement but warned NSW and Victoria were trying to hijack the issue in order to get more of a share of GST revenue.

HE was focused on maintaining a Budget surplus for the coming financial year and maintaining the state's AAA credit rating.

Mr Foley said that while the state was now paying about $2 billion a year in health costs, that could be closer to $7.5 billion in 30 years' time.

"And there will be less taxpayers because of the ageing population," he said.

"The numbers don't compute.

"At some point, structural reform will be either forced upon us or someone else will have to take the initiative."

Mr Foley said SA had balanced Budgets and "we have huge challenges ahead of us".

"That's part of the reason I am delaying the state Budget until September and going through the process now of giving the State Government the capacity to meet the health demands being driven by an ageing population," he said.

"But in the decades to come it is going to be a problem of nightmarish proportions for state and federal governments."

Mr Foley said the Commonwealth was not providing anywhere near sufficient funding to the states for health and were well behind what the states were putting in themselves.

"Probably the problem is almost here with us now but my guess is this will be in the too-hard basket for a long time to come," he said. "But at some point, someone is going to have to do something about it.

"From what I can see, it is happening now.

"We have the ability to manage it for the foreseeable future, the next 10-plus years.

"But that is only provided we are prepared to do the hard work I am doing now."
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