LABOR'S $392 million gold royalty hike has been killed off, with Liberal MPs voting to block the controversial measure in the Upper House of Parliament.

The move, which comes after hundreds of gold miners rallied at State Parliament this morning, will mean the State Government will be required to plug a near $400 million hole in the budget.

Opposition Leader Mike Nahan said the decision had been reached based on the concerns about job losses.

“It was our view that Mr McGowan did not seek or have a mandate to raise the gold royalty rate’l he said.

“It was a tough decision because we take our role very seriously.”

Dr Nahan said the fact that royalty increase did not reduce debt was also considered.

The decision comes as gold miners ramp up their campaign against the royalty hike, with a protest planned for the front steps of State Parliament ahead of the vote by Liberal MPs.

Camera Icon WA Liberals are set to block the McGowan Government’s gold royalty increase. Credit: PerthNow

Sources say up to six of the Liberals’ nine Upper House members were reluctant to block the impost, but most of the 13 Lower House MPs are strongly in favour of a challenge.

State Liberals are also understood to have come under pressure from their Federal colleagues to stop the tax because of fears the seat of O’Connor, which takes in the Goldfields, could be at risk unless the party makes a stand.

O’Connor is held by Liberal Rick Wilson on a 15 per cent margin but there are concerns the seat could fall to the Nationals, who won O’Connor in 2010 and are opposed to the gold royalty rise.

Under the Government’s changes, gold royalty rates will be lifted from 2.5 per cent to 3.75 per cent from January if the price of the precious metal is above $1200 an ounce.

The measure is forecast to raise $392 million over four years, sparking claims from the industry that it will cost jobs and vital exploration spending.

Liberals are torn between supporting the mining industry and being labelled Budget wreckers by a Government which was voted in partly because of the dire state of WA’s finances.

Last week, Liberal leader Mike Nahan backed away from claims the party was in no rush to settle its position on the matter when several MPs, including deputy leader Liza Harvey, vented frustration at the delay.

Yesterday, Dr Nahan maintained the Opposition would not be “railroaded” into a position by the Government while declaring a decision would be made at today’s meeting.

“If we require more time, we will stay for a longer meeting,” Dr Nahan said.

“This decision is not about whether we support the tax or not — I don’t think many people in the party room support an increase in the gold royalty. The issue is do we support an increase in the gold royalty in context of the Budget.

“That’s the major issue.”

Camera Icon Treasurer Ben Wyatt questioned how the Liberals could dare to reject a key Budget measure when the party was responsible for the blowout in the State’s finances. Credit: PerthNow

Treasurer Ben Wyatt questioned how the Liberals could dare to reject a key Budget measure when the party was responsible for the blowout in the State’s finances.

He said that with hardship increasing among electricity customers on the back of a big rise in power prices, it was imperative the Government spread the burden of Budget repair as widely and fairly as possible.

“They haven’t learnt their lesson from the election campaign, haven’t learnt from the fact they put the finances where they are, and now don’t want to be a part of the solution to it,” Mr Wyatt said.