Andrew Wilkie described Clubs Australia’s proposal to start offering childcare services as a “sick joke”. Well ha ha, here’s the punchline: their proposal won’t just put childcare a stone’s throw away from the pokies, but will do something much sicker, which is to use the provision of critical social services like child care and aged care as collateral against future attempts at poker machine reform.

Now that’s a rib tickler! And the funniest part is how little current arrangements would need to change in order for it to become reality.

The Clubs Australia submission to the productivity commission’s childcare inquiry urged the commissioners to check out a report by the Labor-aligned McKell Institute, a thinktank that produces research in concert with industry groups.

The report, Meeting the Shortfall, was produced in conjunction with ClubsNSW, and the gist of its argument is this: childcare and aged care are growth industries, because of the need to increase female workforce participation and an ageing population; governments are increasingly reluctant to fund social services because of a shrinking tax base; and clubs are the only non-state organisation big enough, wealthy enough and with enough experience for widespread service delivery.

Already you can see that this isn’t about whether problem gamblers need professional child minding while they blow their pay packet on Queen of the Nile. What we’re talking about is clubs pushing for the right to deliver branded, privatised social services in the community. As the report puts it, “the clubs industry would significantly benefit from creating a ‘cradle-to-the-grave’ level of involvement with their communities”.

Here’s the clubs’ plan: obviously their main source of revenue is “EGM revenue” – electronic gaming machine profits, or as ordinary people describe it, the blood money we extract from problem gamblers.



That source of revenue “remains heavily exposed to taxation and regulatory frameworks” – in other words, political reform of poker machines will hit the clubs’ bottom line. The last time that happened was in 2007, when the ban on smoking in clubs cut NSW gaming machine revenue by 10.6% in the first year.

That revenue may go down further as real household incomes decline. The McKell report notes quite tartly that the result will be “a concurrent reduction in spending on discretionary activities, such as gaming”. Luckily, “it is unlikely that [households] will be able to outright ignore their need for essential services like child care and aged care ... giving low cost [not for profit] service providers a competitive edge”.



If they were to provide childcare, clubs would get an extra revenue stream that isn’t at risk from attempts to limit the amount punters can put through the pokies. More importantly, the McKell report recommends a couple of clever “reforms” that will lock service provision into a funding scheme dependent on clubs being able to maintain their poker machine funding at respectable levels.

Currently, a minimum of 0.4% of a club’s pokies profits over $1m automatically go into the ClubGRANTS Fund, a NSW government-administered pool of cash that pays out yearly out into community projects. The McKell report recommends the scheme be “enhanced” so that a club can instead directly invest in aged care or childcare centres they run themselves, and offset the costs against their 0.4% ClubGRANTS liability.

In essence, clubs want to be the recipients of their own non-negotiable charitable contributions to the scheme, and to plough that money into the upfront capital costs of building childcare or aged care centres on their own property. Doing so would turn the ClubGRANTS scheme from a source of one-off funding for sports facilities and walking tracks, to a perverse subsidy that would in all likelihood feed back into their existing hospitality and pokies revenue streams.

Remember, clubs also already have tax-free status and huge land holdings, many of which which are on $1-a-year “peppercorn” leases. On top of this, the report also recommends a whole series of tweaks to the existing tax regime, stamp duty, regulation and the like to encourage clubs to move into the sector. It also says volunteers should staff the clubs’ aged and child care centres in exchange for a stipend that would offset their university HECS debt.

This will all be done through amalgamating struggling clubs and smoothing the transfer of poker machine entitlements. The NSW Coalition government has a memorandum of understanding with the industry to support this process. Poker machine reform in NSW has already saved clubs $200m since 2011. And tweaking ClubGRANTS wouldn’t be a Herculean labour.

In essence, the more clubs make from pokies, the more revenue is captured by that 0.4% tax liability, which clubs want to be able to claim against to fund services. This turns kids and the elderly into insurance against poker machine reform. You can see the lines now: “clubs support the community, and any change to poker machines will threaten our ability to keep thousands of childcare and aged care places open...”



When I asked the McKell Institute’s executive director, Sam Crosby, whether funding such a scheme through tax concessions would entrench clubs’ ability to collect poker machine revenue, he told me that “poker machine revenue is entrenched. Nobody has been able to do anything about it, so why don’t we use it to do something good?”

It’s hard to agree, given that Crosby’s colleague at the McKell Institute, Tara Moriarty, who will launch the report next month, is a senior vice president of NSW Labor and high-profile opponent of Andrew Wilkie’s push for pokies reform under the Gillard government. If the political environment around poker machine reform is unchangeable, it’s because Labor has been the political beneficiary of gambling donations, and in the ACT, rakes in cash from its affiliated clubs.

The report is being launched by Moriarty and the NSW treasurer next month. The idea of handing over essential services to pokie palaces is likely to enjoy broad support in the political class. It’s easy to see why: the sector has been chronically underfunded, and is caught between the proposition of stricter means testing for high-income earners and United Voice’s Big Steps campaign, which would see childcare workers paid professional wages in a sector-wide transformation to “early childhood education”. That will likely involve expensive wage subsidies; without them, low-income families will be priced out of childcare altogether. Neither prospect is politically easy.

This is what happens when essential services aren’t funded properly by government: bizarre ideas like this suddenly become credible, and before you know it, they get implemented. How many more reminders do we need?