Taxpayers stump up for logging policy failures

As $45 million of your taxes is about to be divvied up for broke loggers, a worrying precedent has come to light that raises serious questions about this bailout of a struggling industry.  

Attempts by successive federal governments to pay businesses out of the native forest industry in Tasmania have failed to meet basic benchmarks for proper government funding, let alone meet the goal of making the industry more sustainable.

Instead, largesse for new equipment in one program was followed by a more costly exit package to some of the same businesses in the next program.

These failures, by both the Howard and now Labor governments, are being pursued through Senate committees and questions by Greens senator Christine Milne. They are recorded in the dry accounting language of an Ernst & Young investigation into a $54 million Howard government program run by the Federal Department of Agriculture, Fisheries and Forestry.

There’s no question that the island’s native timber industry is in a dire state.  ANU researcher Dr Jacki Schirmer found in a 2010 study for the Forestry CRC that one-third of Tasmania’s forest workers had lost their jobs in the previous two years.  The burdens of the high dollar, global market shifts to certified plantation timber, and environmental campaigns were largely to blame.

When the crisis was gaining pace five years ago, the Howard government established the $54 million Tasmanian Community Forest Agreement Industry Development Program. It handed out 108 grants ranging from $6000 to $10.5 million, mainly to buy new logging machinery or upgrade existing timber plant with the aim of keeping pace with market shifts.

In a pre-election boost from the then forests minister Eric Abetz, the grant winners even gained an extra 30 per cent to compensate for tax.

But in 2008 the federal Auditor-General cast a very cold eye over this program, saying it failed taxpayers, and the department asked Ernst & Young to investigate in 2010.

The Ernst & Young study said department files were so deficient that in 60 cases it could not find the grantees’ own audited income and expenditure statements in support of their applications. That means the files lacked the basic proof that the grantees actually needed a grant. It said that in 29 cases, money was handed over before funding deed requirements were met.

In 26 cases, either there was no confirmation the claim was for an approved purchase, they were given more money than agreed, or there was no tax invoice on file.

This was your money, gone.

After these grants were given out, Tasmania’s native forest industry crashed. To meet this fresh crisis, another $17 million was made available by the Labor government in a department exit assistance program in late 2010.

Comparison of grant awardees in the two programs show that at least five contractors given grants of up to $410,000 for big new logging machines in the 2007-9 program later won up to $825,000 to leave the Tasmanian industry in 2010-11. They had won money to stay, followed by money to go.

A Victorian sawmiller was given $175,000 to build a sawmill in remote Roger River, Tasmania, but only partially completed it, according to the report. The big manufacturer Australian Paper, given $1.48 million for new boilers and paper-winding equipment at its Wesley Vale mill, shut the plant in March 2010.

Following public complaints, the department conducted an investigation into alleged fraud into the 2010-11 program, but did not refer any matters to the AFP.

Now the department is considering applications for the third, $45 million, tranche of aid to the loggers, the Contractors’ Voluntary Exit Grants Program.

There have been 98 applications, and most appear to be treating the taxpayer in time-honoured fashion. According to the department, almost 75 per cent of applications lack enough information for the department to make a final decision.

It says an advisory panel has sought independent financial assessment of applications, which could be finalised ”early in the new year”.

With the lesson of history on her side, Senator Milne doubts the money will be properly spent. ”To that end I’m calling for an overhaul of DAFF’s internal audit committee so a majority is independent, and secondly, that it is mandatory to apply international auditing standards,” Senator Milne said.

A department spokeswoman said it had fully agreed to all of the recommendations made in Ernst & Young’s  report.

But as bailouts go, the lesson here is to watch closely.

Andrew Darby is Age and Sydney Morning Herald Hobart correspondent.

Originally Published at

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