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Tuesday, October 28, 2014

Crowned. Neither Napthine nor Andrews wants to govern

Daniel Andrews and Denis Napthine are competing for glory without power. Neither really wants to govern.

Napthine signed away his right to make laws that tackled gambling and smoking in an extraordinary deal waved through Parliament days before the election campaign. The law not only restricts the actions of the Napthine government should it get back, but the actions of every future Victorian government for the next 36 years.

Should a future government decide to impose a $1 betting limit on poker machines (as recommended by the Productivity Commission); should it decide to enforce the use of precommitment technology on poker machines; or should it require automatic teller machines to be further away from poker machines, it'll be up for a $200 million payment to Crown. The size of the penalty will climb with inflation. By the time the provision expires in 2050 the penalty will be $480 million.

In the (entirely likely) event that community attitudes to smoking harden in the decades ahead, the government will be unable to remove the exemption permitting smoking inside Crown's VIP rooms no matter how necessary it thinks it is. The legislation says the only way through would be to pay Crown millions for "loss and damage", the exact amount to be determined by a panel of "experts" appointed from independent, internationally recognised chartered accounting firms or investment banks.

It's a right not normally available to firms hurt by government decisions. The government was able to ban smoking inside pubs and restaurants without compensating those firms for "loss and damage". It was able to ban drink driving without compensating alcohol retailers, it was able to ban ATMs within 50 metres of poker machines without compensating either the owners of the machines or the banks. Governments are normally allowed to govern. If most of us suffer "loss and damage" when they put up taxes or hurt our businesses we just have to bear it, or vote them out at the next election...

The restrictions on what future Victorian governments can do are set down in excruciating detail in schedule 11 of the legislation. The only exceptions apply in cases where all of Australia's state and territory governments act together, a get-out clause that further underlines the impotence of the Victorian government we are about to elect.

In return for binding future governments this one gets an upfront payment of $250 million. (The government is spinning it as a payment of $910 million, but it's nothing like that much.  It gets the first $250 million immediately. It gets another cheque for $250 million in July 2033, but assuming a discount rate of 4 per cent, that is only worth a payment which is worth $115 million in today's terms. It also gets plus the right to contingent payments if Crown's gambling revenue exceeds certain targets.)

Put starkly Crown gets the right to impose fines of $200 million per government any time a new government comes in and changes the law to Crown's disadvantage, for the next 36 years.  in return for the government gets an immediate payment of $250 million plus a few lesser payments later.

It's an extraordinary deal for Crown. In addition to "regulatory certainty" denied other businesses it gets an extension of its licence from 2033 to 2050, the right to install another 40 gaming tables, the right to buy another 128 poker machines and the right to continue using the site for the peppercorn rent of $1 per year.

And Labor under Andrews? It voted for it. Andrews was silent during the debate. His treasury spokesman Tim Pallas spoke of the importance of "certainty" for Crown, apparently forgetting its status as a specialist in gambling. Crown employs 8800 people.

Aware that he was voting for a "regulatory time bomb" he said Victoria's hotels and clubs would demand similar assurances in the future. He failed to acknowledge that all sorts of Victorian businesses will demand similar assurances and that Victoria has set a precedent for businesses in other states to demand those assurances similar deals.

The Commonwealth government refuses to allow its hands to be tied. Told that its plain packaging legislation would infringe on the rights of Philip Morris under the terms of an obscure Australia Hong Kong investment treaty it took on Philip Morris in an international arbitration tribunal.

Where it can, it refuses to include so-called investor-state dispute settlement procedures in international agreements.

Overseas they are used to winding back the ability of sovereign governments to legislate in ways that hurt pharmaceutical companies, pesticide manufacturers and mining companies.

Labor rejected them outright. John Howard's government was the only one in the world to successfully resist having them  in its free trade agreement with the United States. This The Abbott government assesses them on a case-by-case basis, including them in its agreement with them with Korea but excluding them from its agreement with Japan.  

Over the weekend ministers from 12 pacific nations have been meeting in Sydney to thrash out the details of the proposed Trans-Pacific Partnership. The US is holding out for investor-state dispute settlement clauses. If the other 11 succumb and sign up Australia's biggest investors and customers will be granted the right to sue our governments in international tribunals for attempting to do what they are elected to do.

Perhaps unwittingly, Napthine (and Andrews) have made it clear that they really don't mind. Elections matter because we are able to elect decision makers to take decisions on our behalf. If we can't, there's no point.

In The Age and Sydney Morning Herald