Breaking the heart of the heartland

.The proposal is yet more waste. The original Gonski model depended on a big increase in spending to deliver large funding increases to Government schools without negatively affecting the non-government sector. The reality is that bigger spending on schools has not delivered better results, and it is not clear why such extra resources are needed. Indeed the Catholic system, often with less resources, delivers better outcomes than the government system.

The latest proposal, despite another unaffordable increase in spending, will still result in funding cuts for many non-government schools.

A major blunder is the notion that a "needs-based" funding system, as recommended by Gonski, should only target the lowest achieving schools and students. What about our best and brightest and their needs? What about freedom of choice? Why penalise parents, who put their hands in their pockets to pay fees, by savagely reducing funding for their kids? The reality is that if the funding system gave better choice to parents and students, the government system in the cities would lose pupils in droves to the non-government system, and children from less affluent families might be able to afford to attend better schools.

In my own case we have one child still at a non-government (independent) secondary school, costing us about $17,000 annually in fees. The school gets about $6450 in government (all sectors) recurrent funding, and under Gonski Mk 2 the Commonwealth element is due to reduce by 6.3% from $4904 to $4593 by 2021. By contrast the government high school down the road (with 41% of students in the top SES quarter, 48% in the middle quarters, and much inferior academic achievements) gets about $15,000 in recurrent funding, with the parents and other private sources only contributing a paltry $700. That school (unlike the one my son attends) will get more Commonwealth funding under Gonski 2. By my estimation, for every dollar I contribute in school fees the Commonwealth reduces its funding by 49 cents, and it is set to get worse!

Then there is the bank tax (levied on the liabilities of five big banks at an annual rate of 0.06 per cent). The levy applies to their sources of funds but excludes deposits below $250,000, shareholders' equity and retained earnings. While nobody likes the banks (and there are issues of market power and lack of competition among the big banks that merit public scrutiny), there are three strong economic arguments against the tax.

In principle, all companies should face the same income tax scales. The new tax discriminates against the bigger banks, and seems to be justified only on the basis that the banks make a lot of money. It is no more than a money grab from bank shareholders and customers.

A second matter is that, in the past, financial institutions duty and bank account debits tax (both abolished as part of the GST package) were passed on to customers. The bank tax firstly seems to involve the Government reneging on the spirit of undertakings made when the GST was introduced. Also, since the bank tax increases the cost of funds to the banks, it does seem logical (despite public utterances to the contrary from the Treasurer) that the banks should be entitled to pass on this extra cost, provided the market permits.

Overall, conservative voters are now wondering whether the current Government actually represents their interests, and whether the high taxes they pay (and the growing debts raised in their names) are being well spent. I sense that there is now a strong feeling that PM Turnbull is a cuckoo in the liberal nest and that this is responsible for what many call a "Labor Budget". PM Turnbull has long struggled with voter dissatisfaction concerning the way he is doing his job, and Treasurer Morrison is now afflicted with collateral damage .

All this may well result in another leadership change before the next election. This time, however, I don't think the Libs will mimic Labor and go back to Abbott. No matter what now happens with the Liberal leadership, I don't fancy the Coalition's chances of re-election.