Andrew Leigh

On ABC Canberra 666 Breakfast this morning, the Liberals Peter's Hendy and I discussed the High Court's decision on the Commonwealth funded national school chaplains program and the Abbott Government's anti-consumer changes that water down parts of the future of financial advice (FoFA) laws. Philip Clark was in the middle asking the questions.

TRANSCRIPT, RADIO INTERVIEW

ABC CANBERRA 666 BREAKFAST

FRIDAY 20 JUNE 2014

SUBJECT / S: High Court chaplaincy decision; FOFA; Inequality.

PHILIP CLARK: Welcome to our political panel this morning. Labor member for Fraser Andrew Leigh is here in the studio this morning. Morning Andrew.

SHADOW ASSISTANT TREASURER, ANDREW LEIGH: Good morning Philip.

CLARK: And joining us on the line is, he'd love to be here but he can't because he's on important business elsewhere, Liberal Member for Eden Monaro, Peter Hendy. He's in Melbourne for the House of Representatives standing committee on economics. He joins us on the telephone this morning. Morning Peter.

PETER HENDY: Morning Philip. Morning Andrew.

LEIGH: G'day Peter.

CLARK: Yes, that's coming through loud and clear. The Williams case this week, an important case in the High Court on federal funding, suggests that if the Federal government wants to fund things like school chaplains or local roads or grants to surf clubs or a whole range of other things, they'll have to pass legislation through the parliament. Fair enough? What do you think Peter?

HENDY: Well, it's an important High Court of course. I think that the Attorney has said that they're going to look carefully at this. He's not quite as frantic as some commentators are about the implications. It's a constitutional case. Specifically on the issue of school chaplaincy, people are saying it might strike down 400 different pieces of legislation. I'm not sure about that. But the Attorney and cabinet will be working through the implications of it, and we'll see what they say once they've got their legal advice.

CLARK: But the argument simply is if you want to do this, you should get some parliamentary approval to do it. Is that fair enough?

HENDY: Well, I think, I'm happy for the -  look, I'm not a lawyer. I just don't know.

CLARK: But you're a bush lawyer, because you're in Parliament.

HENDY: I help make laws, I suppose. The point is this is a constitutional case regarding heads of power under the Constitution. The fact is that this particular bill has been, with respect to school chaplaincy, has been struck down. The important thing to say is that some $150 million has been distributed with regards to this program. That has created, because of the High Court decision, a debt. The Federal Minister for Finance, Matthias Cormann, has said that we will have waive that debts, so no one has to repay that money and we will look at ways to continue with the program. They'll ensure I hope that it is paid under the Constitution in the most appropriate way.

CLARK: Andrew Leigh, is that fair enough? After all, it was a problem for your side of politics, as well as the current one.

LEIGH: Indeed Phillip. I worked at the High Court for a while so I've nothing but respect for the decisions made by the Court. Previously the view had been that Section 51(xxiiiA) of the Constitution supported this kind of grant. It's clear as a result of this decision that doesn't hold, and that legislative change would be required in order to support the program. Labor's view is that we ought to make that legislative change so the Commonwealth has power to make these kind of grants. But at the same time there's this broader issue as to whether we should only fund people in schools who are from religious institutions, or whether we should be prepared to fund non-religious workers such as well-trained psychologists.

CLARK: What's the Commonwealth doing supporting just one side of the argument in the religious area anyway Peter, because it's overwhelmingly a Christian program. Ought to this chaplaincy program be secular?

HENDY: Well, a short history lesson. There are already other programs with respect to non-religious, non-chaplaincy programs. There are a lot. They are paid for by state governments. This a program which was indeed initiated by the Howard Government but it was supported all through the Rudd-Gillard Government years. Indeed, when this issue came up in 2012 and again subject to High Court disapproval, the last government, Gillard Government, actually legislated. It was this subsequent legislation, the Gillard legislation that was struck down yesterday. Look, I understand that it's a bipartisan position by both sides of parliament, that there should be a chaplaincy program. And it provides a valuable counselling services to students and schools. I think it should process, that's the Government's position and I understand, the relevant Shadow Minister, Brendan O'Connor, gave his bipartisan support to try and make this work.

CLARK: Alright - can we move on to the financial advice laws, financial planning laws. The government has been proposing some changes in this area. This is to try and regulate this very vexed industry which is, in the eyes of many people, hopelessly conflicted, where institutions that lend you money, i.e. banks, also give you advice about financial - about your own financial situation. That advice almost always tending to suggest that you should buy products from them, which would be more advantageous for your financial future than purely disinterested advice. And, of course, they're encouraged to do this because their employees get commissions and trailing commissions for doing so. It is, isn't it Andrew Leigh, a hopelessly conflicted area?

LEIGH: It's been a real problem area in past years, Philip. We've had the Storm Financial collapse, in which we saw people lose their life savings, the Timbercorp collapse, in which people not only lost everything but were left with debts at the end. And so it was in that background that Labor legislated to make sure that consumers were better protected, and now we've got the Coalition trying to wind back those protections. One of the estimates by Industry Super is that'll cost consumers around half a billion dollars a year, and you've got organisations like Choice and National Seniors very firmly saying to the Government that they need to be on the side of consumers rather than being on the side of financiers. Obviously if we remove these protections then remuneration in the financial industry will go up. Let's face it, after a generation of rising inequality, one thing that we need is protections for vulnerable Australians, not laws that allow those that have the most to take more.

CLARK: Peter Hendy, what do you think about this? I mean we ought to be on the side of the consumer in this argument, shouldn't we?

HENDY: Well indeed we are. And that's actually what we're saying. There is a conflict between us and Labor on the detail but the overall message is exactly the same, which is that we need to protect consumers. And in fact we will ensure in the legislation that we will be introducing down the track that conflicted remuneration, that exactly what the conflict that you were talking about, is actually not allowed. 

We however think that when the changes were made by Labor at the end of the last government they just went a little bit too far. There was a catch-all clause in part of their regulatory framework which basically makes it very very difficult for financial advisors to provide advice without an incredible amount of red tape. And that's the issue. So we're not saying we don't want to protect consumers - we absolutely do -

CLARK: The thing that makes me - 

HENDY: We just want to reduce - 

CLARK: No, the thing that - 

HENDY: Red tape -

CLARK: The thing that makes us suspicious about it though is that these changes are being urged by the banks, by the industry. They're not being urged by consumers, they're being urged by that side of the equation. So it makes you suspicious that in fact maybe the regulations are working.

HENDY: Well, actually it's been urged by a lot of small business people who are saying that they're being priced out of the market because of the red tape burden that particularly falls onto small business financial advisors. That's actually what we're focused on, and we're trying to ensure that that small business competitive component of the market puts pressure on the bigger institutions that also provide services.

LEIGH: The thing is, Philip, this just sits with so much of what the government is doing. They keep on saying, ‘We're only going a little bit in terms of assisting the big end of town, and taking away from the bottom. We're only cutting your pensions a little bit by indexing them to prices rather than wages. We're only taking away a little bit by taking the student welfare workers out of ACT schools. We're only taking a little bit by taking 3000 workers out of the tax office. We're only taking away a little bit by forcing twenty-something job seekers to spend six months without unemployment benefits.’ But that cumulative effect of all of these things is to redistribute from the most vulnerable to the most affluent in the Australian community, after a generation of rising inequality. The reason that this budget is the most unpopular in living memory is not just that it breaks promises, it's not just that it increases the deficit. But it's fundamentally that it breaks the Australian social contract - that egalitarian notion of the 'fair go' in Australia, which I think is so fundamental to who we are as a nation. And the financial advice changes are just one of those many changes.

CLARK: One brief final word from you Peter Hendy?

HENDY: Well that's a huge swipe. Look if you want to be fair, you need to address the $25,000 per man, woman and child that these guys are loading up in debt. We need to fix that problem, and Andrew's part of the front bench team of the Opposition - they've got to tell us what they're going to do to get back to surplus, which is actually their stated policy.

CLARK: Alright we've got to leave it there gentlemen because we are running out of time. I do appreciate your time. Down in Melbourne, Peter Hendy, Liberal Member for Eden-Monaro. Thanks Peter. And in Canberra here, Andrew Leigh, Labor Member for Fraser.

LEIGH: Thanks Philip. Thanks Peter.

CLARK: Have a good weekend to both of you, and you have a great weekend as well. Enjoy it, spend some time with your family. Talk Monday.

ENDS