With forest industry jobs being lost at a great rate and communities clearly suffering, there is little doubt that there will be yet another proposal for a Forest Industry Rescue Package for Tasmania before the federal election.
But how did we reach this parlous state when more than $650 million has been handed out of the pockets of the community to the forestry industry since 1997 on the basis of claims that it would protect jobs?
Were those claims false? Does the industry misunderstand global trends? Was the money wasted? Who decided where it should go and to whom? Who will now take responsibility for the “efficient and effective use of public money”?
Until these questions are answered, it is hard to see that another round of rescue packages based on business as usual, will do anything other than neutralise the issue for the federal election, buy some time and inject more false hope into an industry that has been awash with it since the mid 1990s.
It should have been clear to everyone at Forestry Tasmania and in both governments that there would be no market for native forest woodchips by the end of the 1990s as the wall of wood from plantations around the world hit the global market. By 1993 plantations had already overtaken native forests as a sawn timber resource. The writing was on the wall, but the ideologues at Forestry Tasmania and in the Tasmanian government persisted in their outdated approach.
Whether with personal finances or big business, you cannot recover from a financial disaster until you face the facts about the mess you are in. There is no point in making excuses, justifying for bad decisions, hiding the extent of the debt or trying to talk your way out of the complexity of the financial arrangements. There comes a time when either you sort it out or you seek help in doing so.
If you seek help then you can only be genuinely helped if all business dealings are on the table. If everything is smoothed over and you are just bailed out to make the same mistakes again then a lot of people suffer and good money is thrown after bad. The inevitable is just postponed.
That is where we are in Tasmania with the forest industry.
Government largesse has flowed to many companies large and small over decades but nobody has ever evaluated the veracity of claims made about jobs created or investment benefits that would flow as a result of taxpayer-funded bailouts. Until recently, neither the taxpayers nor people who made investment decisions based on Forestry Tasmania’s or Gunns’ or Forest Enterprises’ or the Department of Economic Development or the Department of Infrastructure and Resources claims ever held those bureaucrats and their Ministers, their CEOs and spin doctors to account.
Whereas John Gay, Robin Gray and the board of Gunns have been under public scrutiny since the pulp mill debacle resulting in a spectacular collapse in investor sentiment others have escaped the same degree of accountability.
It is time for Tasmanians to ask questions.
The role played by Jim Bacon, Paul Lennon, David Llewellyn and Brian Green is to some extent understood but much remains to be answered.
Why did Paul Lennon renew Mark Addis’s five year contract just before he resigned as Premier, resulting in a huge $320,000 payout from the taxpayers when the Bartlett government “let him go” after it was revealed that he had no office or job description?
Mark Addis was the CEO of Forest Industries of Tasmania, FIAT, in the Resource Security days of the Field government. He was head hunted by Jim Bacon to oversee the forests through DIER which he did from 1998 to 2008. He came to prominence during the Carter Royal Commission when it was revealed that on behalf of FIAT he had pledged Robin Gray $40,000 towards a second election campaign to prevent the Labor Green Accord coming to power. He then accompanied Jim Bacon and Ian Dickenson when that threesome famously visited Robin Gray when he was Leader of the Opposition asking him to protect Michael Field from No confidence motions long enough to get Resource Security legislation for the forest industry through the parliament. Gray obliged.
The Labor government, the forests and the jobs numbers all fell for the next decades thanks to this act.
None of the promises made about the jobs bonanza from Resource Security or the riches flowing to the state from the RFA or the Community Forest Agreement came to pass. Nor have the rescue packages worked. Yet no one is accountable – not the CFMEU; not Evan Rolley or Bob Gordon from Forestry Tasmania; not former Ministers Abetz, Llewellyn, Green or Giddings; not former Premiers Michael Field, Ray Groom, Tony Rundle, Jim Bacon, Paul Lennon; not bureaucrats like Tony Bartlett, Mark Addis, or Norm Mcilfatrick. When have FIAT or NAFI or Timber Communities Australia stood up and taken responsibility? Never. They have hidden behind a convenient “blame game”, continuing to argue that without the conservation campaigns of the past two decades everything would be fine. Now the world markets have demonstrated that their analysis was plain wrong.
It is now time for that to change. What is needed is some serious economic analysis and an end to the Felminghamesque apologists. Can anyone remember an occasion when Bruce Felmingham did anything other than wax lyrical about the positive employment outcomes that would result from more and more forestry operations? Isn’t it time for Dr Felmingham to publish a revised version of his papers and columns with an explanation as to why he failed to recognise the changing trends in world markets and its consequences for Tasmania?
But I digress.
Where did the money go and who oversaw the expenditure?
In 2005, the Tasmanian Community Forest Agreement was signed as a “joint commitment by the two (Federal and State) governments of more than $250 million to assist the timber industry and to preserve old growth forests”, according to the Commonwealth Auditor General’s performance report entitled: Tasmanian Forest Industry Development and Assistance Programs Audit Report No 26 2007-2008. You can download this report from www.anao.gov.au. It is a great read about sloppy process and reveals the extent to which the grants schemes effectively became a slush fund.
The money was disbursed as follows:
• $115 million to fund the establishment of additional plantations and productivity improvements in existing plantations and native forests;
• $11.4 million to support the special species and beekeeping industries;
• $4 million to build skills and training for employees of the Tasmanian forest industry
• $42 million for Tasmanian Forest Industry Development Program to “assist the Tasmanian hardwood industry to upgrade, add value to forest resources and to improve the efficiency and competitiveness of the industry”;
• $4 million for Tasmanian Country sawmills Assistance Program “to introduce new technologies, products and markets to increase the use of smaller regrowth and plantation logs”;
• $10 million for Tasmanian Softwood Industry “to assist the Tasmanian softwood industry to retool existing mills and to improve the efficiency and competitiveness of the industry”.
In addition, in the dying days of the Howard government on 16th October 2007, Minister Eric Abetz wrote to all the successful grant applicants advising that all the grants awarded under the programs (last three listed above) would be increased by 30% to assist applicants in offsetting the tax liability of the original grant. This additional $16.8 million was approved by Howard but no payments had been made before the election. Following the Rudd government’s election, it decided to pay the additional funds making the total funding for these three programs to $72.8 million.
All that still doesn’t add up to $250 million and I have been unable to find out where the rest went but I am still trying. I asked a series of questions based on the Audit Report through the Senate processes and that can be accessed HERE, HERE And, HERE.
I strongly recommend thoroughly perusing this table [CC 10 – Attachment A.doc Download, below] of where the grant money for the last three of the programs went. As you can see:
Forest Enterprises Australia was granted more than $7 million and that was in addition to an Aus Industry grant of $2.37 million. $10 million dollars later and what chance have the taxpayers of getting anything back? Why did the bureaucrats drawing up the Deeds of Arrangement for these grants vary the normal arrangements and does this mean that the taxpayers will have great difficulty getting anything back? (See Auditor General’s report) What is Forestry Tasmania’s exposure to this collapse? Exactly how much was owed and over what period of time had FT tolerated FEA’s non payment?
I asked about the deeds governing these grants at the latest Senate estimates and the transcript is here [http://christine-milne.greensmps.org.au/content/transcript/forestry-turning-point]. The Audit Report shows that the Auditor General was scathing in his assessment of the way the grants were overseen generally but the competence of the Tasmanian and Federal Department’s will be judged by the extent to which the Commonwealth can enforce the recovery provisions.
Ta Ann Tasmania Pty Ltd received $10.3 million to establish the veneer mill at Smithton.
Australian Paper received $1.27 million to purchase and install natural gas boilers and $281,947.83 for new winding equipment at Wesley Vale which has now closed. Will the tax payers be reimbursed from the sale of assets? What due diligence was done to establish the life of the plant before any grants were paid?
As to the rest, many grants were made to various contractors and businesses in the industry and all were required to report on how many jobs would be created or maintained because of the grants and what investment would be leveraged. In the majority of cases up to the date of the Audit report such documentation was not provided. Why were these breaches ignored and the grants paid anyway? Perhaps Tony Bartlett from DAFF or Norm Mcilfatrick, the Secretary of DED at the time can explain.
The Advisory Committee that made recommendations to the state and federal Ministers on which grants should be made was a five person Committee namely, Norm Mcilfatrick , Secretary of the Department of Economic Development in Tasmania, Tony Bartlett, the General Manager Forest Industries Branch of the Department of Agriculture, Fisheries and Forestry in Canberra, Mr Rob Woolley of FIAT, Mr Craig Taylor and Mr Graeme Gooding of VAFI who has since died.
Many of the grants were made on their say so alone after a cursory assessment by DAFF or DED. The potential for conflicts of interest was considerable especially since DED staff helped applicants fill out the applications and then was part of the decision making process: a case of being judge, jury and executioner at the same time. This group of five decided not to send many grant applications to the independent assessor and, in other cases, they decided to restrict the scope of the assessment conducted by the independent assessor so that financial viability or financial cost was excluded. The Advisory Committee also dispensed with the services of the Probity Officer after the first meeting without explanation.
Who takes responsibility?
The Auditor General’s report was for the period of June 2006 to May 2007 when the responsible Ministers were Minister Abetz for the Commonwealth and Minister Bryan Green for DED.
The federal and state Ministers who signed off on these grants over the whole period were, from the Commonwealth, Eric Abetz 2005 to Nov 2007 and Tony Burke Nov 2007 to date and, from Tasmania, Lara Giddings 22/3/04 to 5/4/06, Bryan Green 5/4/06 to 15/7/06, Paul Lennon 15/7/06/12/2/08, Paula Wriedt 12/2/08 to 12/9/08 and Michael Aird 12/9/08 to election 2010.
According to the Auditor General, the ministers were not advised where there was no assessment completed by the independent assessor or the scope of the assessment was restricted and there was no DED or DAFF involvement. The Ministers were not informed that there was no documentation to support the Advisory Committee’s assessment of the applications in many cases.
Ministers can say they didn’t know and were not told, so they can claim they are not responsible. So who is?
People will take advantage of government largesse if they can get away with it – as the insulation debacle has demonstrated – and it is the responsibility of those in government to design processes to prevent it happening. If there was ever an example of where these grants programmes just became a slush fund it is the grants for second hand machinery and equipment.
The Advisory Committee decided that second hand equipment was acceptable provided it represented an upgrade for the applicant and the equipment being purchased was not beyond its acceptable life. So far so good. But, up to the date of the Audit report for the period June 2006 to May 2007, applicants were not required to provide the year, model or condition of equipment being funded. There was no documented assessment by DAFF or DED or the independent assessor on the market value of the equipment being funded. DAFF relied on documentary evidence from the applicant, to establish the market value of the equipment as it did not have the capacity to do so itself. In addition many grants were for machines more than ten years old without a description of working order.
It was a case of name your price for a machine without a year, model, or condition description. Perhaps DAFF, DED or Rob Woolley or Craig Taylor can explain to the taxpayers how we can ever be sure that the machinery was in working order, or changed hands. Without year, model or condition, one machine in a yard is the same as another. How can it be ground truthed? Or as the Auditor General said:
“DAFF could have adopted a more structured approach to assessing the market value of the equipment to be funded, to provide greater assurances to the Ministers that the grants funded under the programs represented value for money.” Page 80.
Many harvesting contractors benefited from these grants schemes but after one disastrous case of a harvesting contractor going into liquidation not long after being paid a grant, a review of the forest contracting sector was conducted to understand the underlying viability of the contracting sector businesses to see if there were any factors that made it different from other contracting businesses. It did not identify any significant reasons why grants should not be made to contractors and Minister Eric Abetz agreed to recommence the assessment process for these applications.
So who let the contractors down? What responsibility do consultants take? Who takes responsibility for the recommendation to pay this grant when it is clear that no due diligence was carried out or if it was, it was completely wrong? Messrs Bartlett, Mcilfatrick, Woolley, and Taylor need to answer that.
From the taxpayers’ point of view, why didn’t the Ministers question the due diligence and assessment processes of the Advisory committee and the independent assessor when a recipient of a grant went into liquidation so soon after the cheque arrived?
Under the Financial Management and Accountability Act 1997 and accompanying regulations,
FMA Reg 9 an approver (be that a Minister, agency chief executive or authorised official) must not approve a spending proposal unless satisfied, after undertaking such inquiries as are reasonable, that the proposed expenditure is in accordance with the policies of the Commonwealth and will make efficient and effective use of public money.”
The test of efficient and effective use of public money must now be applied to the whole $250 million spent between 2005-2010. Has it achieved its objectives in terms of employment and investment? Has it led to the transition out of high conservation value forests? Has the money been spent on what it was granted to do? How much will be retrieved from those businesses that have been sold or are in liquidation?
The Commonwealth is currently undertaking an evaluation of three of the programs. It will be interesting to see who is now prepared to take responsibility for the efficient and effective use of public money.
In this UN Year of Biodiversity, leading into the 2011 UN Year of the Forests, there is an opportunity to solve the forest issue once and for all. But it will not happen unless all the cards are on the table and there is a genuine attempt at a new vision for the future. Business as usual needs to be binned where it belongs.
We can protect the native forests and make a huge contribution to species survival and carbon storage. That is the message the global markets are sending and the action the planet is demanding. Such action will create jobs in forests managed for conservation and carbon.
At the same time we can have a forest industry and its associated jobs based on our existing plantations, with changed management practices to address water quality and quantity, and changed markets and products.
That would be “an effective and efficient use of public money” as the law requires and it must be the basis of any new forest industry package.
Download, Forest Industry … Where has our money gone June 2010. Community Forest Agreement Program Expenditure Answer
