Democracy Gamed: how Tasmania was sold to a pokies family from interstate

by | Mar 4, 2019 | Government

“I don’t know of any Australian election since the democratic reforms of the late nineteenth century, that was so directly, so openly, so brazenly influenced by large corporate interests”. This is the transcript of a brilliant speech made over the weekend by author James Boyce to the Tasmanian Election Inquiry.

In 2018 we all bore witness to an extraordinary event in Tasmania’s political history.

If it so happens that in future years, historians must try and understand how it came to be that Australians lost faith in democracy in the early decades of the twenty first century, how it happened that our process of public policy became so captured by corporate interests that no one except its direct beneficiaries even tried to defend it, and how safeguards and conventions developed and fought for centuries to protect democratic rights were so rapidly thrown away, it is likely that the case study they will use to highlight want went wrong is the 2018 Tasmanian election.

While there have been worse cases of political corruption, I don’t know of any Australian election since the democratic reforms of the late nineteenth century, that was so directly, so openly, so brazenly influenced by large corporate interests expecting to see, once they successfully determined its outcome, a massive return on their investment.

If what happened in the 2018 election in our state is allowed to be normalised, democracy is dead.

That is why I assume you are here. Because you care about our democracy, and know that if we are to have any hope of dealing responsibly with the many issues impacting on our island that involve vested interests and public licences – be they in relation to gun laws, salmon farming, forestry, wilderness management, health care reform, housing, let alone climate change and the other social, economic and environmental challenges of the twenty first century, we cannot just give up on this system of government.

We must take the opportunity afforded by the paradoxical transparency of what happened last year – the in-our-face, no-expense-spared attempt to buy an election outcome – to reform democratic government to ensure it can deliver public policy for the public good.

But to do this we must first understand what went on in 2018 in relation to the Liberals chief corporate partners, the poker machine industry. And you wont be surprised to hear me say that to do this, a short history lesson is necessary to do so.

But don’t worry, in this instance, it will have to be very short.

Tasmania was the last jurisdiction, except for WA which never did so, to bring pokies to pubs. The Groom Government was clear that the decision was made in an attempt to decrease high levels of government debt – the debt inherited from the populist and big spending majority Liberal and Labor governments of the 1960s, 70s and 80s.

The recommendations of both the inquiry processes set up to look into the matter –was that, if Tasmania was to have pokies, the best model for the state was a single poker machine licence that could be put out to tender. This would maximise revenue and also presented the best chance of effective regulation in our small and decentralised state.

The possibility of giving this licence away for free was never considered by anyone. The point of having a single licence was to maximise public revenue. Why on earth would you give it away for free?

So what happened? For over a year, Federal Hotels ran a well funded public campaign to protect their gambling monopoly. They did not just argue that competition from pokies in pubs would harm the casino, they said it would threaten the casinos very existence.

By August 1993, the campaign against bringing poker machines into the state was on the verge of victory. A range of community groups were involved. Labor was benefiting from the issue. With polls showing 85 per cent opposition to the government plan, the numbers were not secure in the upper house, and even the Liberals were fracturing.

The Government never caved in to this community pressure to keep poker machines out of our community. But they did cave into Federal Hotels. Without any modelling or policy advice, the ownership of every single poker machine in Tasmania was handed over for free at a tax rate that had been earlier recommended by the company itself in a submission it made to Parliament.

Equally shocking, was that parliamentary opposition, then seemed to collapse. Labor was accused of hypocrisy because of this. But in fact their gaming spokesperson, Paul Lennon, has been totally consistent on this issue for nearly three decades – he has always supported the position of Federal Hotels.

If the new casino pokies that came in with the December 1993 Gaming Control Act are included, it is likely that over a billion dollars of rightful public revenue has been transferred to Federal Hotels since 1 January 1994 as a result of the licence give away.

Larger still has been the wealth transfer from mainly low income Tasmanians to one of the wealthiest families in the nation. With Federal Hotels pocketing nearly 70 cents of every dollar lost on a pokie in the state, it was not surprising that by early this century the Farrell family, who own all the company had, according to the BRW Rich List, become one of the 20 richest families in Australia.

The suffering of addicts, that provide nearly 50 per cent of this revenue, and their families has been immeasurable.
To call this crony capitalism is misleading. Comparisons with feudalism are more apt.

Fast forward to 2003 when five years before this licence was due to expire, but very soon after an election where the possibility of a licence extension was never mentioned, still against Treasury advice and with still no modelling on the licence value and only a token increase in tax, the licence was extended by the Bacon Labor Government until 2018 – with a five year rolling clause added that means theoretically it could go on forever.

There was then another decade dominated by funding of the major parties, gifts to individual candidates, free or cheap venues for party and candidate fundraising, conferences and so on, of peak bodies failing to speak out in their member interests against their major donor, of the company buying up a dozen of the largest pokie pubs without any regulation to stop them deciding where pokies would go, which of their competitors would survive and which be wiped out, of buying already established businesses and claiming these as the states investment dividend etc.

Only once in this period did a major party publicly differ with the company. The now Federal Group took out full page ads in every newspaper when the young opposition leader, Will Hodgman, dared to ask in parliament whether the terms of the poker machine contract in relation to a promised 180 job hotel on the east coast had been honoured.

The company pronounced he was not fit to be premier. Mr Hodgman’s subsequent subservience shows that he learnt his lesson as no doubt the company assumes Rebecca White has now.

But there is no more time to linger in the good old days. Roll on to September 2015 and Treasurer, Peter Gutwein, was ready to sign off on yet another pokies licence extension with Federal Hotels.

But as most of you will recall, this was stymied, when the excuse being used for a licence extension, the desire of David Walsh to build a high roller pokies free casino at MONA, was publicly exposed by Walsh himself.

What followed was what the Federal Group has always sought to avoid – open public debate.

In this context, the half dozen poker machine hotel chains that own most of the pokie pubs not owned by the Farrells directly saw their opportunity to grab a larger share of the pokies pie. They wanted to remove the middle man, the Federal Group, and be given their own licences for free!

In the context of a tourism boom, the Federal Groups old lines about not going ahead with developments and leaving the state if their public subsidy didn’t continue, looked increasingly ludicrous. For the first time, they were also facing the real risk of having to pay the market price for their licence in an open tender. To avoid this, their paid lobbyist , Paul Lennon, sorted out a deal with the hotel chains.

The terms of this deal were helpfully set out in a late joint submission to the parliamentary inquiry set up to consider this issue. The reunited poker machine industry recommended that every existing venue be granted a new pokies licence for free, that Federal Group be compensated for the reduction in its revenue through lowering state casino pokie taxes to just 10 cents, and the state be compensated for this loss through increasing hotel pokie taxes to 38 cents.

Call it coincidence, when the Liberal election policy was released it prove to be a carbon copy of the industry plan.
The Libs now supported direct licensing, with a tax rate just one cent different from the industry proposal (for the record, the Libs tax was the lower one!)

The only significant difference between the Liberal election policy and the industry proposal was on casino pokie taxes. The Libs didn’t commit to reducing tax, but said they would decide this after the election

The Government says no deal has been done on casino pokie taxes. I don’t believe them. When you consider that casino pokie taxes should probably be higher than hotel pokie taxes given they are lower cost due to economics of scale and are less regulated, there can be no possible justification for having lower taxes in the casinos except honouring the terms of an understanding that has already been reached.

And in this busy potted history, we must not forget to include an extraordinary moment of hope. That historic day when the ALP, announced its plan to let the pokies licence expire.

This was the first time since 1972 (and that’s another story…) that a major party had developed a gambling policy that substantially differed from the wishes of Federal Hotels.

It was because the people had finally been given a real choice, that we had Love Your Local. That we had a seemingly unlimited topping up of Liberal campaign budget. Blanket advertising from Boxing Day – well before the election had even been called. Money to Liberal candidates flowing so freely that the country side became a sea of blue.

We don’t know exactly how much was spent but it seems clear that because of the limits on the quantity of advertising space that was available in Tasmania, it would have been extremely difficult to spend any more.

But for all the millions spent to elect a pokies friendly government, this was just a fraction of the return expected by those who provided the money. On the industry’s own figures, presented in the joint submission to the parliamentary committee, as soon as the Liberals policy is passed , each and every pokie hotel will be worth an extra $1.5 million on average – the large ones of course much more.

And if casino pokie taxes are set at 10 cents instead of matching the 38 cent hotel rate, that will be over 19 million a year lost to the budget, each year and every year, until 2043. That is almost the same cost as the extra half a per cent rise for public servants that the Premier and Treasurer say a will have dire budgetary consequences.

It is also buys a lot of surgeries, a lot of public housing. Whatever you think of poker machines per se, we all pay the price when our democracy is sold.

Commentators often say change is impossible on this issue because state governments are addicted to revenue. But in Tasmania there is one reason and one reason only why we have the public policy outcome we do. It is because our democracy has been bought. The Liberal party has sold out to its patrons.

Hope is not yet lost. The question that remains to be decided is what Members of the Tasmanian Parliament will do when the Government legislation is presented to them.

Will MPs listen to the independent regulator who has stated that a move to direct licensing will increase social harm by encouraging competition between venues and making regulation even more difficult?

Will MPs listen to Treasury who, like everyone else involved in this policy area for the past two decades, have always maintained that if we are to have pokies, a well regulated single licence put to tender is the best model for Tasmania?

Above all, will MPs listen to the majority of the Tasmanian people who as the gambling industry own polls showed didn’t want pokies to come into community venues, and have for ever since wanted them gone.

Or will our elected representatives bow not just to the benefits of having gambling industry support, but succumb to the fear of having gambling industry opposition.

The 2018 election was meant not just to deliver a big return on investment to the pokie barons but send a clear message to any party or MP tempted to ever again put the public good first.

It is understandable that many in the Labor Party are scared of voting down the Libs dirty deal when it comes before parliament. That would mean the people having another choice in 2022, and the possibility of a replay of 2018.

But if we can reform and reclaim our democracy, and move from worst in the nation on disclosure and donation laws to the best, we can make sure that 2018 can never be repeated.

And if Labor or any other MPs decide how they will vote on the basis of the fear of being targeted by the poker machine industry, they should not be surprised if people grow even more cynical about politicians. If ultimately they give up on democracy

And if democracy dies, it is not only pokie addicts and the Tasmanian budget that suffers. We are all are in deep trouble.
Our democracy does not belong to the pokie barons or any other corporate or vested interest. It does not even belong to MPs belongs to US.


This is the transcript of a speech made by James Boyce to the Tasmanian Election Inquiry forum at Hobart Town Hall on Sunday 3 March 2019.

James Boyce is the multi-award-winning author of Born Bad, 1835, Van Diemen’s Land and Losing Streak: How Tasmania Was Gamed by the Gambling Industry.

James Boyce

1835 won the Age Book of the Year Award and was shortlisted for the Prime Minister’s Literary Award, the Western Australian Premier’s Book Award, the Adelaide Festival Award for Literature, and the Victorian Premier’s Literary Award.

Dr Boyce is a research associate at the University of Tasmania. More information here.

Pokies: the Rise of the Machines

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Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences.

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