Treasurer Joe Hockey’s indication the budget may be revamped after a Senate blockage has triggered a debate over which areas might be targeted.

The Abbott government is looking at new spending cuts and tweaking proposed policies to get around the Senate’s blocking of many key measures in the May budget.

But as Treasurer Joe Hockey revealed his rethink, Prime Minister Tony Abbott responded to a Labor “scare campaign” by outlining some areas that will be quarantined from cuts.

“If the Senate chooses to block savings initiatives, we need to look at other savings initiatives that may not require legislation,” Mr Hockey said on Wednesday.

There were some savings that would not require laws, such as foreign aid spending – one of the largest cuts in the May budget.

Mr Hockey said Labor and the Greens would be dealing themselves out of influencing public policy if they continued to block the budget.

Labor seized on the comments in parliament.

Opposition Leader Bill Shorten said Mr Hockey had previously stated there was “no alternative” to his budget measures, but had now reversed his position.

“The Australian people want to know who is running the country: is it the prime minister, is it the treasurer or is it the absent Clive Palmer?”

Mr Abbott said the government had to deal with Labor’s debt and deficit disaster.

Under questioning, the prime minister said the family home would not be included in the pension asset test despite a recommendation by the government’s commission of audit.

And he said the government was talking to the medical profession about changes to the way the GP co-payment was rolled out, including whether it would apply to services provided in nursing home.

“The once great Labor party is reduced to this pathetic spectacle of scare after scare,” Mr Abbott said.

The debate came as the carbon tax repeal – the coalition’s key election promise – remains bogged down in the Senate.

It is expected to pass on Thursday with crossbench support.

Backroom talks were progressing on other bills to come before the Senate after the carbon tax repeal passes.

The Palmer United Party is seeking the mining tax repeal bill be split into two, vowing to vote for abolition of the tax but supporting retention of the schoolkids bonus and two low-income support measures.

Another bill set to pass with Labor support will allow Qantas to be 49 per cent owned by a foreign company or airline.

A new fund enabling money raised from state asset sales to be topped up by commonwealth funding and put into roads, rail and port projects is also expected to pass with amendments.

The Senate, which was due to rise for a five-week break on Thursday, has been asked to sit for as long as it takes to pass the bills.

Mr Hockey reiterated the government’s pledge that average households would benefit to the tune of $550 a year once the carbon tax was axed.

Social Services Minister Kevin Andrews said the government would be keeping the energy supplement – which provides a top-up for age and disability pensioners and welfare recipients – after the carbon tax’s abolition.

Answering a question from Mr Palmer, the treasurer said he would like to get rid of provisional tax paid by companies but such reform could only occur once the budget returned to surplus.