Detention centre scandal. They used to pride themselves over in the Federal Finance Department of being the ever vigilant tough guys and gals who ruthlessly examine the budgets of other departments to stamp out mismanagement and waste. I say “used to pride themselves” deliberately, for the reputation of Finance as the disciplined custodian of the public purse has just been shattered. The department has just been given a right royal bollocking by the parliamentary public works committee in a report that also exposes just how desperate the Government of John Howard was to make it look like it was doing something to house boat people on Christmas Island.

Labor Senator Mark Bishop gave the flavour of this scandalous affair when commenting yesterday on the tabling of the Update report: the Christmas Island Immigration Detention Centre project.

In summary, we have a project demanded by the previous government, motivated by political reasons. We have a set of constraints due to location, remoteness, weather patterns and isolation. We have two major departments responsible either for the construction involved in the project or, in the case of Finance, for the oversighting of the huge cost blowouts, budget overruns and time delays. We have a Commonwealth department at no stage having sufficient nous to do a risk analysis or inspection of the most critical piece of infrastructure used on the project. As a result of this incompetence, sheer negligence, lack of planning and poor oversight, the Commonwealth — or, really, taxpayers — are stuck with a bill for an extra $120 million.

Then, to add insult to injury, we have a key Commonwealth department, the department of finance, either participating in or approving commercial-in-confidence clauses totalling tens of millions of dollars being paid to the relevant construction companies. There was no care, no oversight, no responsibility and no explanation by a key Commonwealth department, the department of finance, whose primary function is the oversight of Commonwealth spending. In this project, the taxpayer was failed from beginning to end.

The department is supposed to catch the sinner, not to be the lead sinner. Finance regularly advises other departments as to the protocols, guidelines and codes of practice for the raising and spending of Commonwealth funds. This project was a financial disgrace from beginning to end, and I know that the new minister will start to insist on some financial discipline within his own department. In that way, going into the future, hundreds of millions of dollars, we hope, will not be wasted on similarly difficult projects. Finally, it would be very useful to have the ANAO report on this project come down in due course so that some relevant practices might be established and imposed on the Department of Finance and Deregulation in its oversighting role on projects into the future.

If you think the Howard Government was embarrassed about the way in which a project initially costs at $276 million ended up at $396 million you would be right. It went to considerable lengths to ensure that the truth did not come out before the last election lest it tarnish the reputation of those sound financial managers. First there was the commercial-in-confidence settlement with the contractor Senator Bishop referred to. Then came the delay in meeting the obligations to report the cost over runs to the parliamentary public works committee. The committee report notes that the Government approved the final project cost increase in August 2006, yet it was not until January 2008, some eighteen months later, that Finance wrote to the Committee to seek its concurrence for the cost increase.

Maybe it is the fault of those damnable Democrats! An intriguing aspect of the world’s financial problem has to be how it actually came to pass that the big shots of Wall Street got the idea in the first place that they could make a motzah out of providing loans to people who could not afford to repay them. Well the answer, it seems, is that the Bill Clinton team are to blame.

One of my diligent readers with an inquiring mind went searching for clues and sent me the link to this story from the New York Times of 30 September 1999:

The story even foretold the risk of disastrous consequences. “In moving, even tentatively, into this new area of lending,” the author wrote, “Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s. ‘From the perspective of many people, including me, this is another thrift industry growing up around us,’ said Peter Wallison a resident fellow at the American Enterprise Institute. ‘If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.’ “

Seeing the light at Tabcorp. They have clearly seen the light at Tabcorp and perhaps that’s why they named their new bookmaking business Luxbet in the first place. Having first announced that bookmaking operations would “operate from an office at Fannie Bay racecourse in Darwin, employing up to 30 people in the Northern Territory”, the company is now said to be fitting out offices in the Sydney suburb of Rosebery. The Darwin office when betting begins next month will be nothing more than the home of a computer server to maintain the legal fiction that bets are being taken under the jurisdiction of the Northern Territory Government. Rosebery is where the phones will be answered and the decisions made about who can have a bet of how much on what.

It really does show how absurd gambling law, and especially gambling taxation, has become in Australia. The tax rate charged by the NT government is lower than what the NSW and Victorian Governments demand so naturally that is where the corporate bookmakers want to be. But Sportingbet, Centrebet and International All Sports long ago found that attracting good staff to Darwin and then keeping them there was a difficult management task. Legal advice was taken about where a bet actually takes place and operations were structured in a way that arguably says that having someone in Sydney answering the phone and entering a punter’s bets into a computer terminal connected to the server in Darwin means that the bet is being taken in Darwin. Tabcorp with its Luxbet is taking the same view as its bookmaking competitors.

It all seems a bit risky to me because if it is acceptable to operate in this fashion it will surely not be long before someone else purports to be a bookmaker from some Pacific Island where the turnover tax is even lower than in Darwin while enjoying all the comforts of living in Sydney or Melbourne. As a Pacific Island bookmaker it would not be necessary to pay any government in Australia anything. My guess is that State Governments will end up putting a stop to the sham either by all having the same tax rate for bookmakers as the Territory or by using a new version of Beck’s raiders to declare that operations like Luxbet at Rosebery are just evil SP bookmakers.

*Richard Farmer started an internet bookmaking company in Canberra that moved to the UK when the federal government tried to declare all internet gambling illegal