Image for Pokies: Bullying has done its job

MANY Tasmanian Times Readers will recall the extraordinary response to the moderate questioning by Liberal Leader, Will Hodgman, in early 2008 on aspects of the state governments pokies contract.  The beneficiary of the public contract, Federal Hotels, questioned whether the Liberals were “capable of governing Tasmania”, and the company proceeded to place advertisements in all three daily newspapers “to set the record straight” and counter the “blatant misrepresentations” that had been put forward “in an irresponsible and highly offensive manner”. 

The bullying seems to have done its job.  The Liberals, presumably to show that they are ready for government in Tasmania after all, have said nothing since.  And the inquiry by the Tasmanian Parliament’s Public Accounts Committee, which was charged with taking another look at the contract, has entered a long hibernation which now looks like it might extend until after the next state election.  This is despite the fact that submissions closed on 1 September last year (over 14 months ago), there were few submissions to review, and the information they need is readily on hand.

There is a lot of public money at stake here.  If Parliament has been misled, the argument that the contract should, at the very least, be amended so that a proper market price for the pokies licence is achieved, will become overwhelming.  Consistent and proper public policy has always demanded that the pokies tax rate be increased to achieve a full market return, and end the massive public subsidies now flowing to the Federal Group (estimated by gaming industry analysts at Citigroup and ABN Amro to amount to over $100 million).  However both major parties, while never disputing that there is a large public subsidy involved, have refused to amend the contract, citing sovereign risk and broader damage to investor confidence.  In relation to such a unique, risk-free recession-proof licence to print money, this has always been a faulty argument (it was used by the pokie licence holders in Victoria also, but when the Government went ahead and increased taxes anyway the rest of the business community applauded), but all its logic will collapse once it is shown that Federal directly misled Parliament before the current contract became law.

My concern is that the delay in the PAC report, and the Liberals strange silence about this, reflects the fact that there has actually never been any doubt that Federals’ owner (with his siblings) and boss, Greg Farrell, misled the Tasmanian Parliament in 2003.  This is an easily verifiable matter which any MP or citizen can soon establish for themselves. Mr Farrell told the original PAC inquiry into the pokies contract on 16 July 2003 that if the Upper House passed the necessary legislation without amendment his company would proceed with a particular development at Coles Bay that would generate approximately 180 direct jobs. His evidence to the PAC can be viewed HERE:

Mr Farrell further informed the PAC that if the contract granting his company a monopoly pokies licence was amended or blocked a considerably smaller Coles Bay project would be developed.  Yet, despite the legislation being passed in full, the promised project was subsequently abandoned and a smaller one replaced it. 

If the employment-intensive investment promised by Mr Farrell to Parliament in return for passing the generous pokies deal was never to be fulfilled, even more concerning was his baseless threats.  In a strategy that was to be played out again in the pulp mill bill debate, and which is all too familiar in Tasmanian history, MPs were warned of dire consequences unless the Bill was passed quickly and without amendment.  Mr Farrell specifically told MPs that he would have no option but to flood the state with another 1500 poker machines if the Deed was not passed.  This threat ignored the obvious point that he would soon have no legal right to operate any machines, and that his logic depended on the assumption that his licence would be automatically renewed once the previous one expired.  Such assumptions were later ridiculed by the National Competition Council, the only outside body to examine the pokies contract, who in their 2004 Progress Report pointed out that “expansion of machine numbers would be a strategy of doubtful merit, as it would result in the company owning a large number of near new gaming machines without certainty about the right to operate them in future.”

Mr Hodgman’s mild questions did not go to most of these matters, let alone the even more serious ones raised by the secret process leading to the signing of the 2003 contract,  but nevertheless they represented a first from either major party. However it now seems that he too has been brought into line, and that the only hope for public debate, or even the PAC finishing its report before the next state election, will be renewed public pressure.

The simple points raised in a publicly funded advertisement placed in the Mercury ( HERE ) in response to the incorrect claims by Federal Hotels are as true today as they were in March 2008:

The licence to operate poker machines in clubs and hotels is the most valuable public licence available in Tasmania.

The Federal Group paid nothing to receive this licence.

The financial aspects of the pokies deal have received virtually no Parliamentary scrutiny.  The PAC concluded that it was “unable to determine from the submissions whether or not… the renegotiated Deed meets the test of quality.”

The reason for this was because the Government and Company submissions did not provide the necessary information.

The Secretary of Treasury, Mr Challen, informed the PAC that the Government had sought no modeling on the market value of the licence.  Nor had the Government sought data on how the proposed taxation levels compared with other Australian states and territories.

Gaming analysts at Citigroup, ABN Amro and elsewhere have variously estimated the amount of public revenue foregone as a result of this policy decision at between $100 million and $200 million.

The foregone revenue amounts to a financial subsidy from the Tasmanian Government to the Federal Group and has caused a gross distortion in the tourism and hospitality markets.

The Federal group provides funding to all the bodies that have attacked Members of Parliament who have recently asked questions about the contract.

None of these bodies have ever asked their members what they think of the pokies contract or how it is impacting on their business.

On a per capita basis Tasmania has one of the highest concentrations of poker machines in Australia, and indeed the world.  The only outside body to review the pokies contract, the National Competition Council, described the number of machines permitted as at “saturation point”.

I do, however, agree with Federal Hotels on one point.  Mr Hodgman’s response to this issue raises serious questions about whether he and the Liberal Party are ready to govern Tasmania.  A continuing and convenient silence on the pokies contract and the dormant PAC Inquiry until March 2010 will strongly suggest that Mr Hodgman is no more able or willing than Mr Bartlett to confront the powerful vested interests which currently so distort decent public policy formation in this state.