The government’s proposed $7 Medicare co-payment, and the $20bn medical research fund to be funded from it, may never happen.

The federal health minister, Peter Dutton, has said the government is not prepared to negotiate on the plan, and Labor, the Greens, the Palmer United party and crossbench senators have all said they will not vote for it as it stands.



“People should understand that if they don't want to put money into medical research then they can go down the obstructionist path of Labor and the Greens," Dutton told the ABC.



Asked whether he was open to negotiation, he said: “Well, we're not and the reason is that we looked at the $15 [co-payment] that was recommended by the Commission of Audit and we believe that $7 provides a balance. I don't think it's an option to be honest and I think we need to be realistic."



The prime minister went on the attack on Friday, accusing Labor of being in “deep denial” about the budget “disaster” they had left behind, after Bill Shorten vowed to block billions of dollars worth of budget measures, including pension changes, restrictions on the dole for under 30s, fuel tax indexation and stripping benefits from some single-income families.



Abbott said Labor had a contradictory position on the co-payment, due to begin next July.



“How can it be alright to have a PBS (pharmaceutical benefit scheme) co-payment and not alright to pay a few dollars when you visit the GP? How can it be unconscionable for this Coalition government to propose a co-payment and not unconscionable for the Hawke government?” Abbott asked. (Bob Hawke introduced a co-payment in 1991, but the policy was axed the next year after Paul Keating took over the Labor leadership.)



Asked why he didn’t take the plan to establish a medical research fund from a co-payment to the last election, Abbott replied: “Sometimes you don’t have all your good ideas at once.”



The states remain deeply angered at the surprise $80bn cut to forecast federal grants for schools and hospitals, unveiled in the budget. The federal government says it will be up to the states to be “grown up” administrations that figure out how to raise revenue to cover their own expenses.



The states say the federal budget cuts are designed to force them to make the unpopular public case for a rise, or a broader application, of the goods and services tax (GST). With the premiers due to meet in Sydney on Sunday, Queensland premier Campbell Newman said he would be arguing that the federal government should just hand over a proportion of income taxes, with no strings attached – a plan that effectively passes the problem of a revenue shortfall back to the commonwealth.



“I will be arguing … on Sunday [that] the states should receive a share of the income tax that people in the states and territories actually pay in their day-to-day tax in the Australian Tax Office. I want to be crystal clear about this. I am not arguing for an increase in taxes. I’m arguing for a certain amount, a certain percentage, if you’d like, of the money that is collected from taxpayers in their normal working lives, to go back directly to the states. Without conditions, without constraints, without federal interference, but it should go directly back to the states so that we can properly run our budgets,” Newman said.



He ruled out arguing for a higher GST.



“I’m not playing that game. If the prime minister and the treasurer expect this state to go and ask for an increase in the GST, he’s mistaken. We’re not going to do that. We’ve said that before. But what we should be doing is saying the money that has been paid by Queensland mums and dads already, to Canberra, that is then put through the Canberra bureaucracy mixmaster and sent back out to the states, that should come directly to the state via the ATO. That’s the fair and appropriate way to do it.”



Victorian premier Denis Napthine said he wanted to get an immediate solution to deal with federal funding that has been withdrawn from July this year. But NSW premier Mike Baird, who on Thursday said the budget was like a “kick in the guts” for his state, was on Friday sharing a podium with Tony Abbott.



“Like any family you can have disagreements and come back together on the things you agree on,” Baird said, without backing down on his stand against the budget cuts.

