“Since when did a conservative government become more socialist than the ALP? What does a conservative government stand for if it wants to regulate the employment conditions of leaders in the private sector? I am desperately confused. Is all this for short-term political interests? This action certainly does not represent the values on which the Liberal Party was founded.”
Jeff Kennett said that on Wednesday about the Turnbull government’s proposed “Banking Executive Accountability Regime [BEAR]”. He’s right of course.
It appears some Liberals MPs are similarly confused as to whether a Liberal government should enact legislation giving unprecedented power to regulators to become a de facto board of directors for the banks. As Kennett said “many bureaucrats have never employed anyone, never paid payroll tax, never had to make a commercial decision”.
As reported in this newspaper, three Liberal MPs – Sarah Henderson, Russell Broadbent and Tim Wilson – spoke at this week’s Liberal party room meeting against what the government wants to do. “Mr Broadbent said the intervention into what was the role of bank boards contravened Liberal Party philosophy and was ‘opposite of everything we stand for’.” He’s right of course.
However, the ship might already have sailed on the relationship between Liberal philosophy and what Liberals do when they get into government.
Liberal MPs would be in a stronger position to oppose measures such as the “BEAR” if they’d stood up to Tony Abbott when he increased income taxes and abolished the debt ceiling – or if they’d stood up to Malcolm Turnbull when he too increased income taxes, introduced the bank tax, and broke the the party’s promise not to change the taxation of superannuation. Still, it’s better late than never that some Liberals have started voicing their concerns.
‘Tip of the iceberg’
Apparently Liberal MPs fear the new banking laws are “just the tip of the iceberg”. But they should worry less about sighting the tip of the interventionist iceberg and worry more about when to board the life rafts of a ship that’s collided with the iceberg and is sinking.
Leaving aside the question of why the Liberal Party is trying to prove it hates banks even more than the Labor Party does, there’s serious questions about the legislation and the rule of law.
According to Section 37C (c) of the draft “BEAR” legislation a bank must “take reasonable steps in conducting its business to prevent matters from arising that would adversely affect the ADI’s [authorised deposit-taking institutions, ie banks] prudential standing or reputation”. The same requirement is imposed on bank executives.
A fundamental principle of the rule of law is that a law must be clear so a person can know what they must do, or not do, to comply with that law.
The requirement that a bank and its executives must protect the bank’s “reputation” is ambiguous, vague and open to abuse by regulators. Reputation is entirely in the eye of the beholder. It’s not known if the government intends a bank’s reputation to be judged according to the standards of a bank shareholder, a left-wing activist group, a libertarian economist or an over-zealous publicity-hungry government official. There can’t be a “reasonable person” test for a bank’s reputation because the question is simply too controversial. If the law passes no bank executive can ever be confident they’ve complied with the law.
Section 37C (b) also breaches the rule of law – and worse. It requires banks to “deal with APRA [Australian Prudential Regulation Authority] in an open, constructive and co-operative way”, with the same requirement imposed on bank executives. Such words can mean almost anything. And there’s an even more fundamental objection to the provision. In a free country, any citizen and any organisation is entitled to be as argumentative, as difficult, and as obstreperous as they please in their dealings with the government. You’d expect a law like this to be enacted by Erich Honecker in East Germany in the 1970s – not a Coalition government in Australia in 2017.
More than half of Malcolm Turnbull’s cabinet of 21 ministers have legal qualifications. But on the evidence of the Banking Executive Accountability Regime it’s not obvious the rule of law has been a topic of conversation around his cabinet table.