Wednesday, August 3, 2011

A Pokie in the Eye

I try not to rant too much on this blog.

There are already plenty blogs out there where you can read shamelessly partisan, bile-driven blogs on politics.  Frankly, for the most part, they hold little interest to me.

Today, however, I've found it hard to write without, well, getting angry.

Why? This:

Full story from the Tele
As the report quite neatly puts it, these cuts fly in the face of the "horror budget" and "budget black-hole" we've been hearing about since the Coalition was elected.

According to Mike Baird, the Treasurer, the budget is "utterly out of control".  

He was quoted in the Tele as saying "It is the medicine that this state has needed for a decade, and no one has wanted to administer it because it's tough".

I've already written about the cuts to the Prison system.  This report says that there will be big cuts to DOCS.

The entire basis for the proposed IR changes is that the state's wage bill is out of control. Whether you agree with that statement or not, the clear implication from the Coalition is that the state cannot afford the wage bill and that it needs to be contained.

So why ON EARTH are we gifting a massive tax cut to the clubs?  

I'll tell you why - the completely disproportionate lobbying power wielded by the club lobby in NSW. Its power in this state is somewhat similar to the National Rifle Association in the States - and the government's response is not dissimilar.  Snivelling subservience.

O'Farrell has used the "budget black-hole" to justify all manner of cuts and changes.  Why has this disproportionate and unnecessary tax cut been spared - a tax cut that will be fromally announced at the same time as any number of budget cuts to rescue the state's "disastrous finances"?

It's disgusting.

I'm not going to write about the social harm that gambling causes - if you're interested google will tell you all you need about that.  But I would also commend @cyenne40's excellent blog to you.

What I would like to do is look at is the budget implication of this change.

First of all, what is the annual tax payable at present?

Note that this is clear profit - it's is not a portion of each bet.  It is a proportion of the amount of cash that is pulled out of each machine every morning,

The precise calculations are complicated, so I've not replicated them here, but if you're interested you can find the details here and here.

We all know who the majority of this cash comes from.  It's the people least able to afford it.

Despite what the clubs would have you believe, pokies cause an incredible amount of misery and suffering, which makes it all the more horrifying to see the power the clubs command over the government.

The total value of the proposed cuts is approximately $75 million per year.

John Robertson was quoted as saying that the funds would pay for "2250 police officers or 3030 nurses," which appears to the standard yardstick for budget cuts these days.

If you look at the budget papers, you can see that the revenue from  "Club Gaming Devices" is approximately $700 million - meaning that the tax revenue from poker machines in clubs is to decrease by approximately 10%.  

Total Tax Revenue is approximately $20 billion and total revenue is approximately $55 billion.

The change is only 0.1% of the total revenue of the state, so the net effect to the bottom line is minimal.

One thing that I learnt from examining the budget papers to prepare this post is this: we are so often told that the reason that the government will never outlaw pokies is that they rely on the gambling revenue.

This is not borne out by the budget figures.

Total revenue is, as I have said, approximately $55 billion.  Total poker machine revenue is $1.1 billion.  That's about 2%.

There can be no doubt that the government could find other sources for that revenue. $1 billion is one sixth what we collect in payroll tax, is equal to 4% of what we receive in commonwealth grants, or just over twice what the state collects in fines every year.

The most laughable part of these changes are the extra "community grants" that the clubs are "required to make".

The present CDSE guidelines state:

What does this mean? The clubs get a "deduction" for every dollar they donate to these programs!  

As a deduction, the pokie machine revenue is reduced by the same amount as the community contribution. So, if the club is on the highest tax bracket, then their pokie machine tax is reduced by approximately $0.30 for every $1 donated.

Let me put that another way.  The government chips in three out of every 10 dollars.  So, to say that the clubs donate a certain amount is downright deceptive - they do donate the money, but the government refunds up to 30% of the donation!

I will wait with interest to see whether the payments will continue to be offset against the poker machine tax, but it is difficult to imagine they will not be.

In any event, it is shameful to suggest that the deal is good for NSW.  The value of the tax cut vastly exceeds the increase in the community payments - so why on earth not simply axe the tax cut and commit to donate $75 million per year to community projects?

Look, clubs are great in theory.  I visit clubs - heck, I'm a member of my local club.  I go there for a meal, sometimes a show - I've even enjoyed the odd game of bingo.  Occasionally I may even put $5 through a pokie.

They do provide a community service, and I appreciate that a lot of good is done.

But there is no way that the good that is done outweighs the enormous and often irreparable harm that is done to the community as vulnerable, hopelessly addicted people pour their paychecks, their savings and heaven knows what else into a poker machine.

Perhaps some clubs can't survive without their poker machine revenue.  Perhaps some would have to close.  

On the other hand, imagine if the money that the government saved as the problem gambling diminshed was used to fund community clubs.

Imagine if we forced clubs to find a way to survive other than ripping cash from the pockets of the addicted.

Imagine if we had a government that was determined to finally wean NSW from her disgusting gambling habit.

Instead, we can see that the snivelling subservience that we got so used to with the Labor party looks likely to continue.

Hang your head in shame.  Barry.  The lot of you standing with him too.  I hope one of the no doubt many gambling addicts in your electorates contacts you and tells you about the havoc that gambling has wrought in their lives.

Maybe then you'll reflect on what you've done here.  And weep.


  1. Of course it could be instructive to find out exactly what counts as "community development and support". In Victoria, it counts if clubs spend it on themselves (e.g. upgrade their dining room, buy a new minibus) because they are community service organisations.

  2. @darkdirk - that's very interesting - I wasn't aware of that. I've had a closer look at a copy of the NSW CDSE guidelines (, and as I read them the rules appear to be tighter. But I have no idea how firmly they are enforced or how closely they are audited...