Aust g'ment handouts to big buisness unearthed

Rachel E grrrach at
Thu Dec 23 21:51:59 MST 1999

This postinh was put on the Cubasi list.
Its an article which was in the Sydney Herald: a Packer (?) (big media
cap'ist) owned paper...
Pretty iinteresting though

+ Government handouts to companies are large, open ended, and subject
to little scrutiny. Ian Verrender and Steve Burrell lift the lid on
corporate welfare Australia +

The marquee, nestled in the rugged mountain country near Tumut in
the State's south, was beautifully appointed. There was portable
parquetry flooring, and tables bathed in expensive linen and laden
with the finest food and wine, for an event blessed by azure skies
and a burst of spring warmth.

As the Federal Finance Minister, Mr Fahey, rose to present a $3
million cheque to Melbourne businessman Mr Richard Pratt, he made the
sort of off-the-cuff comment meant to raise a laugh from the host of
dignitaries, including the NSW Premier, Mr Carr, dining on such
delicacies as grain-fed Gundagai rabbit and apple terrine.

"'That should just about cover the cost of lunch," Mr Fahey quipped.

A Liberal Party stalwart, Mr Pratt is estimated to be worth $2.4
billion. As Australia's second richest man, he recently was named as
the world's 146th wealthiest individual by the American magazine

Last month's gift from taxpayers was the first instalment of a $40
million handout by Federal and NSW taxpayers to Mr Pratt's private
company, Visy Industries, during the next five years. The money will
help him build a $450 million pulp mill that, if successful, will
catapult him into a position of dominance in the Australian cardboard
box manufacturing industry and greatly add to his wealth. Taxpayers,
however, will receive no direct benefit.

Richard Pratt's $40 million gift is a drop in the government handout
ocean. Each year, Australian taxpayers hand over more than $6 billion
to selected parts of the corporate sector in direct outlays and tax
breaks, more than is spent on unemployment and sickness benefits
($5.8 billion). This figure does not include generally available
assistance such as the accelerated depreciation tax break.

The $60 billion that has been handed out in the past decade much of
it to some of the world's richest corporations - has been allocated
on an apparently ad hoc basis and often with no strings attached by
various Federal and State governments.

The justification is usually that the spending boosts employment. But
few recipients have been required to meet performance goals, those
that failed were not penalised, and governments rarely bothered to
analyse whether the money had been invested wisely.

A wide-ranging study by the Herald has found that most assistance to
the corporate sector during the past decade has been of little, if
any, benefit to the nation. Instead, the main beneficiaries have been
the shareholders of the recipient companies.

Despite the Howard Government's rhetoric on mutual obligation where
social welfare is concerned, no such constraints are placed on
corporate hand outs. Even worse, companies which receive grants
rarely are required to repay anything, even if the money is

This is in stark contrast to Coalition policy on the unemployed, or
in health and education, where recipients are obliged to work for or
repay grants. And while the Federal and State governments scramble to
offer ever more incentives to big business, social security is
increasingly difficult to obtain.

"It's time to call a spade a spade," says Mr Graeme Samuel, a
Melbourne businessman and president of the National Competition
Council. "It is time for us all to regard most business claims on the
public purse, and for other forms of sectoral assistance, not much
different from business fraud or so-called 'dole bludging'." In an
interview last week, Mr Samuel made a salient comparison to Federal
Government policy on education.

"Education of our young people arguably is one of the greatest
investments the country can make in its future," he says. "What we
say to students is that we'll lend you the money to get an education
and then when you graduate and start earning a profit from that
investment, you have to repay the loan. . " Why can't we do that for
business?" he asks. "What's wrong with a HECS-style scheme for
business? You have to ask, 'Where is the return on our investment?' "

Assistance to big business comes in many forms. Much of it is
difficult to trace and even harder to quantify. In addition to direct
cash handovers, benefits such as tax holidays, export incentive
schemes, free real estate or special rent deals, special government
services and the provision of roads and infrastructure are common.

Given that many other countries entice big business investment, there
may be some arguments for a federally co-ordinated incentive program
to attract business investment into Australia. If the playing field
is not level, and if everyone else is offering incentives,
politicians with a responsibility to the electorate to create jobs
find it difficult to resist enticing business investment with
incentive schemes.

But the logic evaporates when the level of incentives outweighs the
national benefits. And the arguments become ludicrous' when State
governments pit themselves against each other in a desperate attempt
to woo new investment from each other.

In a 1996 report, the Industry Commission argued that when it came
to offering incentives to attract new business, State rivalry may
leave the economy worse off.

"Gains from providing selective assistance are largely an illusion,"
it says.

Based on its research and experience in other countries, the
commission argues there is little evidence to suggest assistance did
anything to create jobs or boost the economy.

"Rivalry between jurisdictions for development and jobs at best
shuffles jobs between regions and at worst reduces overall activity,"
it adds.

Just last week, the Queensland and Tasmanian governments were falling
over each other to seduce the new national airline headquarters for
Virgin boss Mr Richard Branson. At this stage, most States still are
formulating assistance packages in an effort to work out how much it
will take to attract Mr Branson and trump each other.

Much of this business welfare, particularly that provided by the
States, is shrouded in secrecy, with only sketchy details provided to
the public. But there are plenty of examples from the past decade of
the outright failure of such schemes, where vast sums of money either
were squandered by the recipients or were spent in a futile attempt
to delay the inevitable

The car industry, the steel industry and the textile, clothing and
footwear industries have cost taxpayers upwards of $5 billion in
recent years. In many cases, vast amounts of money were doled out to
foreign corporations.

And the results? The Federal Government's investment in the steel
plan amounted to little more than a taxpayer-funded subsidy of inept
management at BHP. The company recently shut its Newcastle plant and
is rationalising its remaining steel operations.

Similarly, the car industry for decades has held a gun to the head
of successive Federal governments, arguing that as a major employer,
it was entitled to massive amounts of protection.

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