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The LNP’s latest strategy: Make it Somebody Else’s Problem

Australian Prime Minister Malcolm Turnbull and Treasurer Scott Morrison were out in force today, continuing to ridicule Labor’s plan for a Royal Commission into the Banking and Financial Services Sector and announcing further details of their own plan – to restore the funding previously cut from ASIC by the LNP through a ‘user-pays’ model. More significantly, Turnbull and Morrison are proposing that the banks and other financial services providers take on full responsibility for funding ASIC within the next few years, at an estimated cost of around $330 million a year.

This effectively puts what philosopher Douglas Adams referred to as an ‘S.E.P. field‘ (or Somebody Else’s Problem field) around the issue – transferring the problem of funding the policing of the Banking and Financial services sector from the Government to the sector itself.

Further, according to Scott Morrison, the LNP’s model is not only the answer to protecting Australian consumers, but we – the Australian public – will not pay a cent for it:

“Industry funding ensures that the costs of regulation are borne by those entities that have created the need for it, rather than the Australian public.”
(Scott Morrison, Press Release, 21 April 2016)

Morrison specifically contrasted the LNP approach to Labor’s proposed Royal Commission, saying today at a press conference:

“Bill Shorten wants to spend your money to fund his political exercise…What we’re saying is that we’ll be having the banks pay.”
(Scott Morrison, Press Conference on 21 April 2016)

This claim – that we, the Australian tax payer – will not pay for the proposed LNP approach to this issue is at best dubious, and at worst an outright lie. Here’s a few reasons why….

A cost doesn’t have to be passed on directly to consumers to be passed on

A number of banks have come out today to say that they aren’t going to pass on the costs of funding ASIC to customers. However they haven’t been entirely clear what they mean by this.

Certainly the fact that banks won’t immediately apply a specific charge to customers or increase interest rates in response to the ASIC fee doesn’t mean that the cost of funding ASIC will not be passed on. Presumably it will be considered a cost of doing business and just like all costs of doing business, be factored into the way they price their products and services in the future. Banks don’t typically levy a specific charge for any of their running costs – like rent, salaries, stationary, Christmas parties – but it doesn’t mean that customers (aka the Australian public) – don’t pay for them as part of their fees and charges.

The costs of running ASIC will presumably be tax deductible for the banks

If ASIC fees are treated as running costs, then they will presumably be tax deductible for banks. If this is the case – then the total amount of tax payable by them to government coffers will be reduced as a result of them directly funding ASIC.

In fact, if all banks paid tax at the top company tax rate of 30% – which they don’t, but for the purposes of this exercise I will assume that they do – that’s around $100 Million less in tax revenue into the government coffers every year. And since you could argue that Government revenue belongs to the Australian public – that’s $100 million less we would receive every year.

This would mean that we – the Australian public – would effectively contribute $100 million towards the $330 million the banks will be paying to fund ASIC.

ScotMoCrossSMH

Scott Morrison (Image from www.smh.com.au)

Pay up or . . . ScoMo will get REALLY cross

This is the real clincher. The government isn’t actually putting anything in place to force the banks not to pass on the costs of funding ASIC to the Australian public – although doing so would undoubtedly be a difficult challenge.

So if the banks do decide to pass the costs of funding ASIC onto us, whether directly or indirectly – and as I’ve written above, that seems highly likely – there isn’t a lot Scott Morrison can do about it.

In fact, when questioned about this, Morrison said that if this did happen, he would get very cross. Furious even.

That’s it. No fines. No court cases. Just a wag of ScoMo’s finger.

Gee. I bet the banks are shaking in their boots…..as they laugh their way to – well – the bank.

The LNP Solution: Make it somebody else’s problem

The reality is, any increased policing or review of the Banking and Financial Services Sector will need to be funded from somewhere – whether it’s a Royal Commission or increased funding to ASIC. The LNP solution to this issue is to make funding the solution an SEP (somebody else’s problem) – in this case the banks.

At first glance, this may seem like a good idea. However this trend by the Turnbull government to try and transfer responsibility for funding government programs to someone other than themselves – first with the State Governments and now with ASIC – will not save us, the Australian public, any money in the long run. And in the end, it could actually cost us more.

Turnbull and Morrison’s claim that the LNP’s solution will magically be free to the Australian public is just not true. All they have done is to handball responsibility for solving the problem to someone else and washed their hands of it – a strategy they seem to be trying to deploy all too often lately.

This article was first published on ProgressiveConversation.

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21 comments

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  1. Carol Taylor

    So the banks and other financial institutions are going to fund ASIC. Firstly, I would ask..how? Of course many warning bells should be sounding on this such as what impact would ASIC being beholden to the banks for its funding have on its impartiality. It sounds to me akin to the lions being responsible for the zoo keeper’s wages.

  2. Möbius Ecko

    As I posted in another thread via an image what Turnbull and Morrison are asking ASIC to do is investigate their past failures. If anyone thinks they will openly and honestly do that they must be hugely optimistic.

  3. Kate M

    Carol – I had this discussion with NAB this afternoon via Twitter. For some reason they tweeted me to tell me they wouldn’t be passing on costs to customers. I tweeted back asking them whether staff or shareholders would be paying then – they confirmed that they wouldn’t be. I suggested then that in the absence of a Genie to materialise the money, customers would be paying for ASIC fees.

    Re the conflict of interest – agree. There’s an interesting article in the Guardian on that actually.

  4. kerri

    Thank you so much for clearing this up Kate M. It’s a bit like Direct Action isn’t it? Let the industry regulate itself and pay them out of our pockets to do so!

  5. wam

    presumably the banks/share holders will be able to claim a deduction of 3.3333 times the cost so the tax payer pays?
    Or part of the cost will be down to user pays and the rest deductions?

  6. Backyard Bob

    Ok, here’s a challenge to the professional whingers and sanctimonious hoards of nothing-better-to-do commentators to political blogs: list ten people on the left that have social status and therefore political sway and mount a campaign of action with them at the forefront.

    Ten. Just ten.

  7. Lindsay Stafford

    I am reminded of a truism that applies to much of the “free” product available over the internet.
    “If you do not pay for the product then you are the product”

  8. Keith

    It is not as though Banks have just began to perform dodgy deals; so why had ASIC not investigated them when ASIC had been better funded.

  9. Robert

    If they are proposing that the banks fund ASIC then it will they, the banks, who will determine what is examined. Great plan!!

  10. Angry Old Man

    This is the sort of complete bollocks that turned me into an angry old man in the first place. Thanks, Kate M, another good article. Keep ’em coming. It helps to maintain the rage.

  11. Terry2

    So, according to Scott Morrison, the next time the coalition hold a Royal Commission into,say, the unions – we have one every couple of years – the unions will actually pay for it themselves.

    This is a little bit like Donald Trump saying that he will build a wall between Mexico and the US……………..and the Mexicans will pay for it.

    Morrison loves this magic pudding approach to economics, I can’t wait for the budget !

  12. Kaye Lee

    I know….we can ask gays to pay the $160 million for the marriage equality plebiscite.

  13. Kate M

    Kaye – I think you’re on to something. In fact the more I think about it, why don’t we just get the banks to pay back our entire debt. That’s what banks do after all – deal with the payment of debt. Excellent idea!

  14. Michael Taylor

    You could be on a winner, Kaye. But why stop there? We could have Indigenous Australians fund Indigenous services. School kids could pay for their own education, out of their pocket money, perhaps.

    Hmm. I’m sure the government has already thought of that.

  15. Kate M

    Kaye/Michael – and let’s get criminals to fund the police! Why not? It could double as a way to catch them. Anyone who actually sends in money to pay for the police could be immediately arrested. The brilliance of this program is beyond question.

  16. Kaye Lee

    Speaking of which….the proceeds of crime used to go to crime prevention programs. This government stopped that so technically, they are profiting from the proceeds of crime and their assets should be frozen.

    “The Abbott government has backed away from distributing millions of dollars in grants promised to dozens of charities, community groups and local councils under Labor’s national crime prevention program.

    But Father Riley hit out at the Coalition’s decision, pointing out that national crime prevention grants were funded through the proceeds of crime rather than general revenue and were not election promises.

    ”I don’t understand this, the proceeds of crime is not taxpayer money,” Father Riley said.

    Justice Minister Michael Keenan said: ”The government is currently working through the arrangements required to implement our election commitments.

    ”In the meantime, we are in the process of advising organisations who were promised funding under the national crime prevention fund not to make any financial commitments on the basis of commitments made by the former government.”

    http://www.smh.com.au/federal-politics/political-news/hit-and-run-on-crime-prevention-likely-20131012-2vf25.html#ixzz46V3OwNR9

  17. Stephen

    On that thread we could ask oil companies to fund climate change research, oops sorry that’s already happened and look how well that worked out…Exxon Mobile anyone?

  18. Kaye Lee

    Instead of increasing the excise that smokers pay, how about we levy the tobacco companies for the damage they cause and make them promise not to pass on the cost.

    We could also impose a carbon price on coal-powered electricity generation and make THEM promise not to pass on the cost.

  19. Kronomex

    “…saying is that we’ll be having the banks pay.”” Morrison is an cretin if he believes that the banks won’t pass the costs along to their customers. They will find some way to sneak fee rises and costs into their banking models and get their bicycle stands in government to change the rules of ASIC.

  20. Kaye Lee

    I see a sub-plot….under the free trade agreements, multinationals can sue governments for laws or actions that negatively impact on their profits….

  21. Geoff Andrews

    The banks will pretend that the dividend paid to its “mums & dads” shareholders will be reduced by the bank’s obligation to ASIC …. before announcing a slightly increased dividend compared with last year. With a bit of luck, they’ll have their annual reports prepared & presented on the 1st July just to keep in Scotty’s good books.

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