Critical lessons from the mill debacle

Improving government

One serious problem facing Australians today is the declining quality of service from State governments. Many (or all) of these governments appear to have lost the ability to provide efficient and worthwhile services.

There are many reasons for this, but one of the core reasons is a loss of focus on what the taxpayers need, and a growing focus on what lobbyists argue for.

Our representative system is intended to represent taxpayers’ needs to decision makers so they can be considered, and hopefully included, in the decision process. First must come some dedication to actually considering and meeting taxpayer requirements. In Tasmania this is a serious problem as the state government seems to believe that it determines what’s in the taxpayers’ interests, rather taxpayers themselves.

Who is driving our bus?

Government’s rush to spend our tax monies has reached a new fever pitch with the Gunns pulp mill proposal. The “fast track” process threw out any semblance of fiscal or taxpayer responsibility by asking the pulp mill industry to “approve” its own pulp mill.

Of course pulp mill suppliers will approve a pulp mill. What would any normal person expect? Lennon paid around $500,000 for that!? What benefits could that same $500,000 have afforded our hospitals and schools?

The Finnish sales organisation for the mill, Jaakko Poyry, stands to make nearly $2 billion off the sale, plus huge on-going project management and trouble shooting payments for the 100-year life of the mill.

Yes … Gunns will be in debt over their heads for a while, and … yes, the taxpayers are likely to cop all of the impacts and risks and pay hefty subsidies for decades, and … yes, there’s all kinds of “collateral damage” not yet recognised, like the loss of our food farms to tree plantations and water catchments running dry. But none of those considerations means anything to Jaakko Poyry. Their job is to sell us a mill and rake in the income.

Due diligence

Normally the purchaser, their financiers or the government, would undertake some form of “due diligence” analysis to be sure that they weren’t making a huge mistake or being sold a “bill of goods”. This might take the form of independent studies of the proposal and its risks, coupled with a complete opportunity costing to assure that the idea was one of the better ways of using whatever resources it needed, and that it wouldn’t create huge problems for other people and businesses.

Even then, we cannot be certain that we’re protected but at least it’s a good first line of defence (see here). Due diligence was the role of the RPDC (Resource Planning and Development Commission) of course, until both Labor and Liberal decided taxpayers didn’t need all that protection because Gunns was in a hurry.

There has been no due diligence in the case of the pulp mill, or the federal 2020 Vision program that determined that Australia needed 3.3 million hectares of plantations. In the latter case, there was no checking of the potential downstream risks, like trees taking too much water and food farms disappearing.

Poyry is a huge pulp and paper mill supplier that has a consulting arm that pushes any activity that leads to the customer “needing” a pulp and paper mill. From the mid-90s onwards, Poyry has predictably been recommending that Australia grows more tree plantations.

They also recommended Tasmania as an ideal location for a “world scale” pulp mill, throwing out all kinds of job and economic carrots as they did so. It also seems that Poyry supplied the financial models that were used by Gunns consultant, Jonathon Stanford, to create their “economic” case. Poyry has done whatever it takes to get a sale.

The meetings were usually attended by other groups like Allens Consulting Group and members of Monash University’s Centre for Policy Studies, each of whom was rewarded with work from government and logging interests. Everyone present, except the government, had a pecuniary interest in going along with positive recommendations.

No one stood up for the public or for due diligence.

Remember Andersen Consulting?

Overall, the whole scenario is reminiscent of the Andersen Consulting debacle.

It turned out that, instead of independent consulting advice, Andersen acted more as a cheer squad for their paying clients thereby exposing their clients to unconsidered threats. Their clients used Andersen’s name and their glowing reports to justify share price and management salary increases. Everyone a winner, except the public duped into thinking everything was fine when it often was anything but.

When the one-sided and manipulative nature of Andersen’s activities become publicly known, a rapid and total collapse ensued.

In Tasmania we are facing the same kind of one sided cheer squad approach to large projects. A consulting arm for a sales outlet recommends their services/projects to government and to some private sector organisation. They offer economic models and benefit statements from other “happy” users, trips round the world and big dinners at the best restaurants. Taxpayers even paid for Gunns lobbyists to travel round the world with our MLCs to spruik the benefits of their proposal.

Taxpayers themselves were given no support, we just paid the bills.

Tasmanian Government (a kind alcoholic tabula rasa) went along with whatever their private sector mates said, on the basis that “it’s their money”. Sadly, with John Howard, we had a federal government that was totally compliant with big business so there were no waves from the Feds either. Anyone who raised an objection was tarred as Green, or anti-development, or just “misinformed”… and the circus continued.

Thus the state government not only failed totally in its public protection role, it actually took the side of the proponent and the multinational sales organisation and used taxpayers’ money to market their proposal.

We need to decide what government is there for, so that we can demand that we get value for our taxes.

Currently Tasmanians’ future is being written by a Finnish pulp mill supplier while our taxes are being used to help make the sale and no one checks the risks to industries and communities. This means that there are no plans to deal with any negative impacts because Gunns says there won’t be any. This is at odds with real experience with Poyry mill problems worldwide.

Perhaps to prove that “garbage in, garbage iut” still held true, Allens and Monash University produced economic models from financial information supplied by Poyry that “confirmed” the conclusions that they’d put into the computer in the first place.

The “consultants” stated “(We) have no expertise in property valuation, and therefore the assessment of the impact on housing prices was limited to existing research that had been undertaken by … Gunns.” Gunns later used the Monash model as confirmation that property prices would increase.

Meanwhile, the taxpayer was represented by no one except themselves, and at their own expense.

What needs to happen

Governments need to make certain that all proposals that use public monies, resources or assets, are thoroughly and independently reviewed in all cases. Federal Treasury has guidelines to that effect but they are only guidelines and thus, can be ignored without penalty.

While the idea of due diligence doesn’t sound very sexy, it’s methods present a vital protection for existing communities and industries, as well as helping protect large system buyers (like Gunns) from making egregious errors.

Everyone who can needs to demand that our governments represent taxpayers first and foremost, and acts to protect taxpayer interests before acting for large corporations. Until and unless we do, the likes of Paul Lennon and his band of mates can reset our sights downwards, charge everything to us and leave us to handle whatever problems come up.

Defining performance

If the government has got a job to do, we all need to know what that job is supposed to be, otherwise we cannot vote rationally on performance. If we don’t agree with the job description, we need to use whatever processes are available to change it. If the government is not doing its job, then we need to act at the ballot box.

Of course, none of this is possible when we don’t even know what the state government is supposed to be doing, when whoever is elected can arbitrarily re-invent their own roles and responsibilities.

It’s time that the federal government defined the state’s roles and responsibilities. Let’s hope Kevin Rudd can pull that off.