Veterans relieved as Labor backs down on plan to limit health payments

Labor has dumped controversial plans for a $5,000 cap on veterans' allied health payments as part of its "solemn obligation" to ex-serving personnel.

Following sustained criticism and campaigning from advocates, Veterans' Affairs Minister Matt Keogh announced on Thursday the government had backed down on the measure.

In a bid to improve the budget's bottom line, the government introduced a $5,000 annual limit on allied health services for veterans which was originally set to come into effect from July 2027.

This would have resulted in cutting more than $779 million over the next four years from the portfolio.

The proposal attracted widespread condemnation, with the coalition, Greens and crossbench all calling for Labor to dump the cap.

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Keogh said the government took its "solemn obligation" to veterans very seriously.

"We brought forward a package of measures to improve access to allied health, improving the fees paid to allied health practitioners, so that they would provide better service to our veteran community," he told parliament.

"And as part of that, we also committed and did engage with the ex-service organisations, with veterans, with families ... and we committed to listen, and we did, and we heard, and we have responded."

Keogh has faced calls in recent weeks to resign after he initially declined to meet with advocates over the cap.

The government was criticised after the parents of Cameron Baird, who was killed in 2013 during a deployment to Afghanistan, were told their travel allowance would be cut.

Fair Care for Veterans spokesman John Armfield, a former Navy clearance diver, thanked Mr Keogh for dumping the cap.

"This is what happens when a government listens to veterans," he said.

"The minister says he wants to keep talking to veterans and providers. We welcome that, and we'll be there.