Labor backs Senate inquiry into bank levy as universities oppose cuts | Australia news

The proposed $6.2bn big bank levy is likely to face a Senate inquiry after Labor backed the former Treasury secretary Ken Henry’s call for greater scrutiny of the new tax.

Bill Shorten said on Tuesday an inquiry would examine protections for customers, while Senator Nick Xenophon said it should look at extending the levy to foreign banks and the Greens said they would support an inquiry as long as it wasn’t an opportunity for banks to “cry poor”.

Their comments came as university leaders met in Sydney to declare unanimous opposition to the government’s proposed 7.5% fee increase for students and the two-year 5% efficiency dividend for universities, budget measures worth $3.8bn over five years.

In submissions to the Treasury on Monday, the big banks said they could not absorb the cost of the $6.2bn tax on them proposed in the budget and called for it to be extended to foreign banks.

On Tuesday the NAB chairman, Ken Henry, called for an inquiry and accused the government of misleading voters by pretending bank customers and shareholders would not have to pay for the tax.

At a media conference, Shorten said Labor would not obstruct the tax but wanted a Senate inquiry “to make sure the belts and braces are there, to make sure the protections are there”.

The opposition leader said banks had “excessive economic power” and giving the competition watchdog $1m to inquire into banking competition was not a “serious safeguard” to protect customers and mortgage holders from having the cost passed on.

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The Greens’ banking spokesman, Senator Peter Whish-Wilson, said the party would “support a full and exhaustive legislation inquiry into the bank levy”.

“But we won’t be supporting Bill Shorten playing politics with this issue and giving bank CEOs extra opportunities to delay, cry poor and tear down the bank levy.”

Whish-Wilson said the Greens would unconditionally support an inquiry into the legislation. The Greens would also support a much broader inquiry if it looked at the financial and competitive advantage the banks get from government guarantees and the influence of political donations by banks.

Xenophon said he supported a Senate inquiry because it would help improve the legislation. He said extending the levy to foreign banks would raise hundreds of millions of dollars to help fund a last-resort compensation scheme.

Senator Jacqui Lambie backs both the inquiry and extending the tax to “all big banks” including foreign banks

On Tuesday morning, Malcolm Turnbull rejected Ken Henry’s suggestion the Australian Prudential Regulation Authority may not have been consulted on the bank tax, saying regulators had been consulted.

In an interview on FiveAA in Adelaide, Turnbull brushed off the call for an inquiry, saying that Henry “doesn’t want the [NAB] bank to have to pay the tax”. “But the tax will come into operation on the first of July there will be plenty of opportunity for the parliament to discuss it.”

On Tuesday the Treasury responded to the Australian Bankers Association’s call for the modelling behind the levy, saying it would provide explanatory material including a regulatory impact statement when legislation was introduced into parliament.

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In a statement, the Treasury said the levy had been developed in “normal budget processes”, rejecting the ABA’s view thatit was rushed and parliamentary processes were circumvented.

The bank levy is not the only budget measure facing scrutiny. At a meeting in Sydney on Tuesday vice-chancellors expressed opposition to the university cuts because they amounted to asking students to pay more for less and would harm those from disadvantaged backgrounds.

The university cuts and fee rises are supported by One Nation and Senator David Leyonhjelm but opposed by Labor, the Greens and Lambie, meaning the government will have to secure support from the Nick Xenophon Team to pass them. The university changes, too, will face a Senate inquiry.

The Universities Australia chairwoman, Margaret Gardner, said the package proposed a “double whammy” on students by both lifting fees and eroding funding for courses, student learning and student support.

“Students and graduates will be carrying higher levels of debt into an increasingly uncertain future,” she said.

Universities supported elements of the package including expanding the demand-driven system to associate degrees and legislative protection for the $592m higher education participation and partnership student equity program.

They are concerned that legislation, tabled in parliament on Thursday, also proposes moving to a voucher system for allocating postgraduate places and withholding performance funding at ministerial discretion.

The new policy of the education minister, Simon Birmingham, would make 7.5% of universities’ funding from the commonwealth grant scheme contingent on performance requirements for admissions and financial transparency from 2019.

Universities Australia said the government had not yet been clear what “problem” the contingent funding was designed to solve and the 5% efficiency dividend was a cut “in perpetuity” because funding would continue at the lower level.

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The universities’ peak body called on crossbench senators to block the bill, arguing cuts were not in Australia’s interests and harmed the viability of the university system.

On Tuesday the Guardian Essential poll found 66% of voters support the big bank tax. Last week’s poll found 56% of people disapprove of the plan to reduce funding to higher education and 60% disapprove of increasing student fees.

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