Foreseeable Futureye: could these banks have avoid the levy?

August 28 2017

Hugo Hodge

Consultant

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By Zach Green

Back in 2012, Futureye warned the Australian Bankers Association that unless the banks built a resilient social licence to operate, they were at risk of government regulation or a supertax.

Futureye prepared two reports for the ABA: The power of outrage, activists and politics and Banking: In the balance forecasting the bank tax which came into fruition this year.

Opinion polls over the last few years have shown increasing public distrust of the banks and a growing resentment of powerful business people’s large pay packets.

In the initial round of interviews with stakeholders for Futureye’s Banking: In the balance report the notion of a super profits tax for Australia’s Big Four was “often raised”.

Central to Futureye’s interviews and reports was the notion of ‘privilege’, and the banks role in society.

A journalist interviewed for the power of outrage, activists and politics described the banks as “the most protected species in Australia”.

From the view point of the average tax payer, the banks enjoyed an “industry privilege” which required a “social return” above and beyond taxes.

Above and beyond doesn’t necessarily mean the banks needed to pay more tax. It means the banks should have listened to the expectations of society. They should have asked questions and listened to the answers to inform and develop a plan to execute meaningful engagements designed with the customer in mind.

A move to increase access for those in need, even when it’s not profitable, would have been better received than the sponsoring of stadiums and sporting teams who play in them.

Aside debating the morality of the tax, or the technicalities, one thing is clear: the hardest hit will be the Australian people, be they shareholders, or customers, or both (as most people are through their superannuation funds, which often invest in banks).

A social licence to operate should be a cornerstone of any modern business. Without the acceptance of a host society, no business can function. When an industry is so tightly bound up in the affairs of society it comes under threat from that very same society, it is a sign that something is seriously wrong.

The question of whether the Big Four would run an ad campaign in a bid to defeat the tax proposition was in the air. While the ABA has stated that it has “no plans to run a mining tax style campaign”, Adele Ferguson of the AFR reported in late May that the ABA is hearing pitches for a tax campaign.

The AFR reported on August 30 that the ABA has recently engaged Ben Mitchell to run the ad campaign against the South Australian bank tax. Mitchell is a former John Howard staffer who ran the Minerals Council’s “Keep Mining Strong” campaign against Kevin Rudd’s mining tax in 2010.

Futureye has advised against an anti-mining tax style ad campaign because the two issues have different social maturity; the mining campaign was successfully in taking advantage of academia and the public’s limited understanding of mining super-cycles and the impact of the resources curse. On the other hand, the outrage aimed at the banks is borderline a social norm.

Around the world, it seems outrage mitigation is an increasingly needed strategy. Futureye hopes that the banks find a way to work with the community to avoid further damage to their reputation and business, and to avoid any damage to the Australian nation at large.

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