Gutwein urged to explain why pokies industry proposal became Liberal policy

The Gutwein government is yet to explain why it disregarded advice on poker machine policy from Treasury and the Tasmanian Liquor and Gaming Commission and is planning changes nearly identical to those proposed by Federal Group and the hospitality industry.

Two years on from a state election in which it was backed by what has been described as a historic level of campaign support from the gaming industry, the government is preparing to introduce promised changes to the state’s poker machine laws. It released a consultation paper on the future gaming framework in February 2020 and had promised draft legislation in late April.

With the focus before the March 2018 election largely on the fight over Labor’s pledge to remove pokies from all pubs and clubs, gambling industry observers and analysts say the government’s planned changes have received relatively little scrutiny.

Under the government’s plan, pokies licences will be gifted to venues that currently host machines owned by Federal Group, the monopoly license-holder for 50 years. Federal Group will retain control over poker machines in casinos in Launceston and Hobart and the company’s 12 hotels.

While there have long been calls for Federal Group to lose its hold over the state’s nearly 3500 pokies, analysts say the government’s plan is likely to be worse than a properly managed monopoly for both problem gamblers and small, independent pubs and clubs.

Anti-pokies campaigners have estimated by giving the licences away, rather than holding a competitive tender as the government originally intended, the government could deny the state up to $250 million in revenue.

“This model is one of the poorest options the government could have chosen.”  – Peter Hoult, former head of the Tasmanian Liquor and Gaming Commission.

Those warning of flaws in the policy include Peter Hoult, a former chairman of the Tasmanian Liquor and Gaming Commission, the government body responsible for gaming regulation, and ex-secretary of the departments of health and justice.

In a submission to the government’s consultation paper, he said it was “problematic and ill thought-out”.

Hoult said evidence from other jurisdictions suggested a shift to venue owners being licensees would make it harder to limit the harm to at-risk gamblers as it introduced a “perverse incentive” for them to look for ways to boost poker machine revenue. They could include offering incentives to play, free transport from other venues and nursing homes, and allowing breaches of betting limits.

He also said it could also result in up to 50 small and regional pubs and clubs being pushed out of owning poker machines and ensure the dominance of large, corporate hotel chain owners, in part because independent operators would face significant charges for and service costs that they would have to pay to a network operator owned by Federal Group.

“This model is one of the poorest options the government could have chosen,” Hoult told Tasmanian Inquirer.

“The only certainty is this works for the big end of town. It’s a potential nightmare for the small pubs and clubs, which are the ones with the smallest margins to begin with. It is certain that they will not survive.”

Meg Webb, Legislative Council member for Nelson. Photo: Bob Burton

Meg Webb, the independent member for Nelson and a long-time advocate for limiting the social damage of poker machines, has introduced a motion into the Legislative Council calling on the government to undertake and release modelling on the social and economic impact of the policy.

She said the consultation paper released in February did not allow proper scrutiny as it made clear there would be not consideration of the government’s policy, only how it was applied.

She described the paper as a form of gaslighting, suggesting the government was withholding information or providing false information to make a reader doubt themself. “With no public examination and no evidence to say this is the right model, the Tasmanian people can have no confidence that this is the best option,” she said.

How the government’s policy changed

Until late 2017, the government under then-premier Will Hodgman said the right to operate pokies in hotels and clubs once current licences expire in 2023 would be “allocated and priced by a market-based mechanism, such as a tender”.

The point was emphasised by both Hodgman and his successor, Peter Gutwein, in evidence to the Select Committee on Future Gaming Markets, which examined the issue in 2017. But the government dropped this commitment and adopted proposals in a late, joint submission to the committee by the Tasmanian Hospitality Association (THA), led by former Labor adviser Steve Old, and Federal Group.

Changes included abandoning the commitment to seek a market-based price for licences and replacing it with a plan to give free licences to venues that already host poker machines.

The government’s new policy also:

• Adopted a tax rate for pokies in hotels and clubs – 45 per cent of machine revenue - proposed by the hospitality industry.
• Dropped a plan to set new tax rates and licence fees after an assessment of the full Australian market in favour of an industry suggestion that the new rates be benchmarked against those paid in northern Queensland only.
• Announced casino poker machine tax rates would differ to those in hotels, but deferred a decision on the rate until after the election. The industry proposed a cut in the casino tax rate from 25 per cent  to 10 per cent plus GST.

The THA and Federal Group said their joint model would improve returns for hotels and clubs while allowing them greater control over their businesses, give Federal Group certainty and stability, maintain returns to the government and provide a “strong player protection outcome”.

But the commission said it was concerned the industry proposal was not a result of a competitive market-based process, which had been the Hodgman government’s “clearly stated” position.

In a letter to the committee (also in Appendix D here), commission chair Jenny Cranston said a competitive process would give all potential operators, including new players, a chance to enter a commercially profitable market. She said this would allow the state to achieve a fair price and, more importantly from the commission’s point-of-view, test the market for the introduction of best-practice harm minimisation measures for gamblers.

“The proposed model does not provide any enhanced harm minimisation initiatives that would protect vulnerable people from (electronic gaming machine) use,” Cranston wrote on behalf of the commission.

“They are pretending to protect us, and the Tasmanian people deserve better than that.” – Meg Webb, independent MLC.

Both the gaming commission and Treasury advised that a single pokies licence put out to tender was the best way to maximise a return to the state and minimise social harm.

Tasmanian Inquirer asked Gutwein’s office why the government did not follow the advice from Treasury and the gaming commission, and whether it had received advice from anyone other than the THA and Federal Group that led to it changing its position.

Michael Ferguson, Minister for Finance. Photo: Bob Burton

The response came from Finance Minister Michael Ferguson. He did not answer directly.

He said the policy the government took to the last election was “widely canvassed, and aimed at facilitating a sustainable gaming industry that supports freedom of choice, minimises harm, backs jobs and provides increased returns to fund essential services, including health, education, public safety and infrastructure”.

Asked whether the government had undertaken modelling on the likely impact of its policy, Ferguson said modelling was not available because the government had not yet finalised the entire package of licence fees, tax rates and licence terms.

“The government has undertaken targeted consultation with industry and community organisations as part of this process,” he said.

Pretending or protecting?

Webb said Tamanians deserved to know why there was such a fundamental change of position, and what it would mean for the community.

In her submission to the consultation paper, she contrasts the government’s approach with Gutwein saying in 2016 that before licences were issued for beyond 2023 there needed to be a “fully transparent public consultation process” that allowed interested Tasmanians a say on the structure of the gaming sector. The then treasurer, now premier, said the government’s policy position should be the “starting point” of that consultation.

Webb said that was not the government’s current position. “Infact, interested Tasmanians have been specifically excluded from having their say on the government policy even in responding to this consultation paper,” she said.

On harm minimisation, Ferguson said gaming was a "lawful form of entertainment for Tasmanians delivering a positive economic and social benefit to the community. Nevertheless, the Tasmanian government recognises the need to protect and support people susceptible to problem gambling”.

He said it was already delivering a range of regulatory and public health initiatives to minimise harm.

The government has not committed to increase them, but Ferguson said the gaming commission would monitor poker machine operation and “act quickly to address any harm concerns”.

“Importantly, Tasmania’s harm minimisation framework is already widely recognised as national best practice, and that will not change. Our policy will maintain the strong harm minimisation framework, and will effectively double the funds available for harm minimisation in the community through the Community Support Levy,” he said.

Webb said the government had made a clear choice to prioritise industry super-profits over Tasmanian lives by refusing to take the advice of experts.

She said there was evidence that the harm from pokies could be reduced by introducing slower spin speeds, lower maximum bet limits and jackpots and the removal of near misses and losses disguised as wins, but the government did not plan to introduce any of them.

“All expert advice says this is the wrong model for our state and likely to cause more harm,” she said. “They are pretending to protect us, and the Tasmanian people deserve better than that.”

Debate of Webb’s motion is scheduled to continue on Tuesday March 24.

Here is the full list of questions Tasmanian Inquirer asked the government, and Ferguson’s answers.

On February 20, Tasmanian Inquirer asked:

1. In 2003, the Premier described it as “a scandal” when the Labor government negotiated and reached agreement in secret with Federal Group to extend its deal with the state. Last Friday, he said on ABC local radio that the government was negotiating with the company over the tax rate for poker machines at casinos. Given the Premier’s previous concerns, will the proposed details of any agreement with Federal Group be made public before a deal is finalised or signed?

2. The government said several times in the last term of parliament that it supported a market-based mechanism - a tender - for poker machine licences in pubs and clubs. That position changed close to the election. The change came after Federal Group and the Tasmanian Hotels Association (THA) made a submission to the Joint Select Committee on Future Gaming Markets that called for direct licensing and an increase in the state hotel poker machine tax rate from about 28% to 39%. The government’s new policy closely mirrored the submission by Federal Group and the THA with at least one notable exception (the tax rate on casino poker machines, which was to be determined later). Did the government have other advice that led to it changing its position other than that from Federal Group and the THA? If so, who gave the other advice and what did it say?

4. Why did the government not follow the advice from Treasury and the Tasmanian Liquor and Gaming Commission about poker machine licensing?

5. Federal Group has suggested that the state rate on casino poker machines should be cut from the current to 25% to 20% (GST inclusive), to bring it into line with that paid by regional casinos in north Queensland. Author James Boyce says this misrepresents the tax rate in Queensland, where the GST exclusive tax rate on casino machines is actually 20%. Does the government agree with this element of Boyce’s analysis?

6. Does the government agree with Federal Group that northern Queensland casinos are a relevant comparison point for Tasmanian casinos in determining tax rates? If so, why those casinos, in particular?

7. Poker machines at Wrest Point and the Country Club are lower cost to run than those in hotels due to economies of scale and regulatory exemptions. Does the government believe casino poker machines should be taxed at lower levels than those in hotels? If so, why?

8. The RMIT/ABC Fact Check unit found in July 2018 that a comment by the Premier during the election campaign (that “The impact of taking poker machines out of pubs and clubs would cost thousands of jobs, and the industry, as you know, have said that they estimate that around 5,000 jobs would be affected” ) was wrong. The unit found this was not a direct reflection of what the industry said, and the industry figure was not based on rigorous analysis and appeared inflated. What does the Premier say about that now?

Ferguson replied:

“The policy the Government took to the last election was widely canvassed, and aimed at facilitating a sustainable gaming industry that supports freedom of choice, minimises harm, backs jobs and provides increased returns to fund essential services, including health, education, public safety and infrastructure.

“Since the election, the Government has been working closely with Treasury, which has undertaken extensive analysis of gaming models in other jurisdictions, and the financial impacts of the proposed framework. Relevant stakeholders have been consulted as part of this process.

“Public consultation will begin soon, ahead of amending legislation, which will be introduced to Parliament later this year.

“New tax rates and licence fees for casinos, keno and high roller casinos are being worked through and will be announced closer to the introduction of legislation.

“Importantly, Tasmania’s harm minimisation framework is already widely recognised as national best practice, and that will not change. Our policy will maintain the strong harm minimisation framework, and will effectively double the funds available for harm minimisation in the community through the Community Support Levy.”

On 13 March, Tasmanian Inquirer asked:

1. The consultation paper released by the government describes its policy as "sustainable". Has the government undertaken any modelling to assess the likely impact of the policy?

2. Given the changes being proposed, is the government reviewing, analysing and modelling whether its existing harm minimisation approach is the best possible approach and what impact the changes would have?

3. Did the government consult clubs and hotels that do not have poker machines when deciding on and designing its policy? If so, which clubs and hotels?

4. Did the government consult local gambling support organisations and harm minimisation specialists when deciding on its policy? If so, which organisations and specialists?

5. Why is it proposed that there be a lower community support levy rate on casino poker machines than hotel poker machines?

6. Does the government expect that all licences agreed to under this policy and any new licences that are approved before 2043 will be up for renewal in 2043, or does it believe this will be the last time all licences in the state will be up on one date?

7. Did the government consider concerns raised about the Federal Group and THA proposed policy model, which closely resembles the policy the Government later adopted, by the Tasmanian Liquor and Gaming Commission? (Its response was included in Appendix D of the final report of the Joint Select Committee on Future Gaming Markets.) If so, what was the government's response?

Ferguson replied:

“The key features of the Government’s Future of Gaming in Tasmania policy were broadly canvassed during the 2018 State election. The Government has undertaken targeted consultation with industry and community organisations as it works to implement its policy.

“Treasury is continuing to undertake the significant and complex work associated with implementing the Government’s policy, including the development of licence fees, tax rates and licence terms. The Government has not yet finalised the entire package of licence fees, tax rates or licence term that will apply under the FGM policy and therefore modelling is not currently available. The Government has undertaken targeted consultation with industry and community organisations as part of this process.

“Gaming is a lawful form of entertainment for Tasmanians delivering a positive economic and social benefit to the community. Nevertheless, the Tasmanian Government recognises the need to protect and support people susceptible to problem gambling. The Government does this by delivering a range of regulatory and public health initiatives targeted at industry, the community and the individual. These measures are some of the strongest nationally and will continue to be so under the proposed new licensing model from 2023. Further information on the elements of Tasmania’s harm minimisation framework and past studies can be found here.

“Tasmania’s gambling regulatory framework is regularly reviewed by the Tasmanian Liquor and Gaming Commission, which is the independent body established under theGaming Control Act 1993. The Commission is responsible for the regulation and control of gambling in Tasmania and its functions include ensuring that gaming is conducted fairly, fostering responsible gambling and minimising harm from problem gambling.

“The Government and the Tasmanian Liquor and Gaming Commission (the Commission) will closely observe and monitor the operation of EGMs in Tasmania in the restructured gaming market and will act quickly to address any harm concerns.

“In the majority of states, EGM gaming revenues are subject to the highest tax rates in hotels, followed by clubs, and then by casinos. The introduction of the Community Support Levy to casino EGMs in Tasmania is consistent with this approach. Licences will be issued for a 20 year period, commencing 1 July 2023. It is expected that there will be some venues that will have changes to licences during this 20 year period and that new applications for licences will occur during that time.”