CHARLES LIVINGSTON. Victorian pokies “reforms” may impose big costs on population

Jul 12, 2017

The Victorian Government has announced that it will extend existing poker machine licences until 2042, freezing the total number of machines available in pubs and clubs at 27,342 (there are another 2,658 at Crown Casino). The Minister made much of this in her announcement, lauding this as a ‘harm minimisation’ measure. Yet these ‘reforms’ may impose significant opportunity costs on the Victorian population.

Licensing arrangements will change. Clubs and pubs are likely to enjoy significant new benefits from these arrangements. These may lead to a significantly increase in both pokie revenue (i.e., user losses – currently more than $2.6 billion p.a.) and associated harm.

The proposal is still sketchy but provides for new flexibility in allocating pokies between pubs and clubs – previously they were divided 50:50 between the two; now there’s to be flexibility in this arrangement, so pubs can get hold of ‘unused’ club entitlements. Since machines in pubs each make an average of almost twice as much as those in clubs, ($126,384 p.a. vs. $70,494 p.a.) this means pokie revenue will likely rise, and with it, harm.

Venues will be able to pitch for renewed entitlements up to their existing numbers as of 7 July 2017, with an ‘administrative process’ to be completed by late 2018. This is in lieu of the badly flawed auction that delivered modest returns to government and allowed big operators to buy entitlements cheaply in the run-up to the end of the Tabcorp-Tattersall’s duopoly in 2012.

Venue operators will buy 20-year entitlements via two ‘premium payments’ in 2022 and 2032. The value of these will be determined based on the revenue of the machines operating at the venue in question. How this will be calculated is unclear. Undoubtedly the government will seek to achieve the best price it can – which means it’s unlikely to impose any revenue-reducing harm minimisation measures anytime soon.

The pokie tax is also to be reformed to become more progressive. This may or may not be a good thing, depending on the nature of the reforms. Certainly, pokies in Victoria make far more on average per machine than anywhere else in Australia. There’s plenty of room for a progressive tax on super profits, such as those enjoyed by Woolworth’s subsidiary ALH Ltd, whose Keysborough Hotel venue made $18.3 million from pokies alone ($205,826 per poker machine) in 2015-16. ALH operates 78 venues with 5,495 pokies in Victoria alone.

The adoption of a more progressive pokie tax regime may also be a good outcome if it does indeed target super-profits. Doing so would provide a disincentive for the type of marketing promotion and fine-tuning that pokie operators undertake to achieve such massive revenue. But if it involves cutting base rates without increasing top rates, it will not provide a harm minimising effect. Quite the opposite.

In addition, clubs will now be allowed to operate up to 840 pokies, double the existing level. Venue level caps of 105 machines will remain in place. However, large operators such as Carlton Football Club could potentially expand to operate up to 8 clubs each with 105 machines, rivaling the likes of Sydney’s mega-clubs.

This is an important change, because it permits clubs to become very significant operators, with large financial resources and accompanying political muscle. In the absence of effective political donation disclosure laws in Victoria, the consequences could be alarming, creating a lobby group with so much clout that it can’t be effectively regulated.

Carlton Football Club, for example, made $17m from its 290 pokies last year (it has 300 now). The management must be cracking the bubbly in anticipation of what is to come. On the basis of current performance, a club with 840 pokies could expect revenue of at least $50m per year.

In NSW, the power of the mega clubs lead to the incoming Liberal Premier signing memoranda of understanding with ClubsNSW before each of the past two elections. These effectively delivered the clubs a bundle of concessions, in return for not very much – perhaps the absence of the sort of political activity that derailed the Gillard-Wilkie pokie reforms.

All of this comes at a cost. Pokies are still responsible for most of Australia’s gambling expenditure, and even more of the harm associated with gambling. This is not inconsiderable. A recent study funded by the Victorian Responsible Gambling Foundation revealed that gambling harm inflicts a greater burden on the community than major depressive illness, and is at the same order of magnitude as alcohol.

These harms are not trivial, and for every person directly and seriously harmed by gambling, we know that six others are affected. Families, children, spouses, colleagues, employers, and friends all suffer significantly. Gambling harm includes physical and psychological ill-health, family breakdown, separation and divorce, and increased crime, including increased rates of family violence, as well as mistreatment and neglect of children and financial ruin.

Allowing the operators to buy their licences for another 25 years means these harms will continue and become more entrenched. A uniform end-date for all pokie licences in Victoria could have been used to introduce serious and effective harm minimisation measures. These might include a uniform pre-commitment system, instead of the ineffective and little-used ‘voluntary’ system currently in place; reductions to maximum bets; and changes to the design standards to remove the design features that intensify the addictive characteristics of pokies. These features are currently the subject of a case before the Federal Court under Australian consumer law, seeking a declaration that the machines are misleading and deceptive.

The true cost of the Victorian ‘reforms’ will be measured in the harm that could have been avoided had a harm minimisation reform package been implemented. It’s not too late for this. The minister reportedly claimed that new harm minimisation measures were in the pipeline (on the same day the government released a statement about converting brown coal to hydrogen). Balancing all the tensions of competing interests is never easy for a government. Nonetheless, if the new harm minimisation measures are inadequate or don’t materialise, the government will have signaled that it regards the pokie lobby as a more significant constituency than the Victorians harmed by pokies every year.

Dr Charles Livingstone, is the Head – Gambling and Social Determinants Unit, School of Public Health and Preventive Medicine, Monash University

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