Licence to print money

James Boyce at the Launceston Casino

Tasmanian author and Wesley Hobart member James Boyce’s examination of the often cosy relationship between Tasmanian governments and gambling giant Federal Hotels over the last 50 years is certainly timely.

Mr Boyce’s latest book, Losing streak – How Tasmania was gamed by the gambling industry, investigates a litany of poorly conceived government decisions made over several decades, which seem to have benefitted no one except Federal Hotels.

The company was granted the first casino licence in Australia by the Reece Labor Government and opened the doors of Wrest Point Hotel Casino in the exclusive Hobart suburb of Sandy Bay in 1973. Federal won the licence for the state’s second casino – in Launceston – less than a decade later, a deal which also attracted controversy.

But key to Federal’s growth was monopoly control of all pokies in the state. That arrangement began in the early 1990s and was extended in 2003 – when it still had five years to run – without any attempt by the state Labor government to put the licences out to an open tender.

The deal can be terminated next year but with a five-year expiration period. With a state election due in 2018, the role of pokies in Tasmania is expected to be heavily debated in coming months.

james boyce bookBy 2002 Tasmania, the most socio-economically disadvantaged state in the nation, had one poker machine for every 84 people of gambling age compared with one-to-101 in Victoria.

The number of problem gamblers in Tasmania has swelled alarmingly since the arrival of the pokies.

While those who play the pokies have not been winning, neither has the government in the form of tax receipts. The only people pocketing big money, it seems, have been those behind the Federal Group, particularly the Farrell family.
In 1993, Federal made an annual profit of $596,000. By 2003-2004 that had risen to $29 million and increased by $11 million just in the five years between 1997 and 2002, thanks mainly to the control of the Tasmanian pokies market.

Tasmania is estimated to have lost between $400 million to $700 million in tax revenue due to the monopoly relationship with Federal Hotels.

Mr Boyce says in his book that if the ownership of all poker machines had been put out to tender in 2003, the government could have renegotiated a very different return, ensuring vital funds for Tasmania’s under-resourced schools, hospitals and other social services.

“The terms of the remarkably generous  pokies contract with Federal Hotels means that not even the harshest critic could claim the government’s gambling policy was driven by a commitment to maximise financial return,” Mr Boyce argues.

Mr Boyce, who has been short-listed for almost every major Australian literary award, is no Johnny-come-lately to the pokies debate. For more than two years he was the manager of social action and research at Anglicare, responsible for gaming investigation and advocacy.
He was then engaged in consultancy work on the poker machine issue for the next seven years.

His book raises many questions about government decisions which have helped the Farrells become one of Australia’s richest families.

Mr Boyce’s re-examination of the circumstances surrounding the fall of the Bethune Liberal Government in 1972 – and its replacement by a pro-Federal Reece Labor Government – has led to calls for Tasmania police to reopen a 1973 corruption investigation. Then-deputy premier Kevin Lyons resigned under a cloud of bribery and political corruption allegations.

Mr Lyons held the balance-of-power at the time and his resignation forced an election as Angus Bethune lost majority government support on the floor of the Lower House.

It is now known Mr Lyons:

  • Received a $1000 loan from Federal Hotels in the weeks before resigning
  • Was advanced $25,000 (about $150,000 in today’s money) by British Tobacco to write his memoirs, which were never published
  • His newly-established public relations company was engaged by Federal after he resigned although the nature of the work undertaken has never been made clear
  • Land Mr Lyons owned in Hobart was sold to a company linked to Tasmanian bookmakers.

“Subsequent revelations have confirmed that the police were never told the full truth about the moneys received by the (then) deputy premier,” Mr Boyce said.

Independent Tasmanian MLC Andrew Wilkie, who launched Mr Boyce’s book in Hobart, has written to Tasmania Police Commissioner Darren Hine calling for the police investigation to be reopened.

“Allegations remain that Federal Group’s monopoly casino licence is a result of wrongdoing, and unless the investigation is reopened a stench will (continue to) surround this whole affair,” Mr Wilkie said.

Mr Boyce argues that the pokies deal should not be renewed and Tasmania would be better off ditching the  ‘one-armed bandits’ altogether.

He said the government was only obligated to see the current deal through to expiration in 2023 (by giving the required five years’ notice in 2018) and did not have to give a reason for ending it.

Banning pokies would lead to only one big loser, Federal, as it holds the licence with only a few pubs and clubs not owned by Federal making money out of machines.

Mr Boyce said the government spent $5 million a year to collect $55 million in taxes and licence fees from Federal but only $10 million to secure the remaining $820 million in annual state taxes.

“Over the period from 1990-91 to 2012-13, while pokies proliferated across the island real gambling revenue to the Tasmanian government only increased from $65 million to $83 million, mainly because the introduction of the machines saw a directly associated decline in revenue from other forms of gambling,’’ Mr Boyce said.

Mr Boyce suggests a state lottery would provide as much revenue as hotel poker machines and pointed to the West Australian model as one which would provide a better return to the broader Tasmanian community.

“Per capita government revenue from all forms of gambling in Western Australia is actually $13 per person higher than in Tasmania, despite the state’s absence of high-intensity poker machines, mainly because of higher spending on lotteries,”  he said.

“In fact the WA system is effectively what Tasmania had in place before the 1993 Gaming Control Act allowed pokies in pubs and legalised the high-intensity machines.”

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