David Farrar: Deals that are good for NZ

Prime Minister John Key. Photo / File

The Government's potential agreement with Sky City over a new convention centre has been the centre of attention this week, despite the negotiations having been announced in June 2011. At the heart of the issue is whether a Government should ever negotiate policy in return for investment.

In the early 2000s the film industry was saying there wasn't an adequate incentive to invest in New Zealand. In June 2003 the then Labour Government announced a Large Budget Screen Production Grant scheme which would provide a rebate to major film and television productions of 12.5 per cent of their New Zealand based expenditure.

They implemented this new policy, presumably because they thought that that there would be an overall net benefit to New Zealand, just as presumably the current National Government thinks here would be with the proposed convention centre agreement. In neither case is there any personal gain for the Government or its Ministers. Michael Cullen and Jim Anderton didn't gain anything from the film industry agreement (except maybe getting tickets to the odd premiere), and John Key and Steven Joyce don't get to personally gain anything from there being an international convention centre in Auckland.

What motivated both sets of Ministers, is making deals which they think would be good for New Zealand. People may disagree on whether a particular deal is good or not, and whether or not they think the process is good, but that is normal in politics.

Now some may argue that there is a difference between subsidies for the film industry, and gambling policy, as gambling is harmful for some people. And they are correct - there are some downsides to gambling. Most people enjoy gambling as a form of entertainment. But for some, it is an addiction that can cause significant harm.

Now successive Governments have not moved to ban gambling, judging that overall the benefits of allowing people to legally gamble, outweigh any associated harms. In fact Tourism Minister Mark Burton in 2004 proudly opened the the Skycity Auckland Convention Centre.

Not all forms of gambling are equal though, and most gambling experts do say that harm from pokie machines are greater than say Lotto - despite what the Sky City CEO claimed this week.

I suspect the political acceptability of any agreement will come down to how many extra machines are agreed to. If for example, the agreement was for 10 extra machines, no one would get too worked up. As no agreement has yet been reached we don't know what number will be agreed upon. The Opposition claim it could be up to 500.

While 500 sounds a lot, it would increase the number of pokies in NZ by just 2.8 per cent, from 18000 to 18,500. The total number of pokies would still be 6,720 less than the peak of 25,221 in June 2003.

In National's first term the number of pokie machines declined from 19,739 to 18,001 - a decline of 1,738. An increase of 500 at Sky City would still see the total level significantly lower than in 2008.

The number of pokie machines over time can be viewed at this webpage of the Department of Internal Affairs.

So one can make an argument that even an increase of 500 pokie machines is insignificant, considering around that many are disappearing every year anyway. But politics is about perception as much as reality. The average voter doesn't get into arguments of whether a 3 per cent increase in pokie machines is a good exchange for an international convention centre and its associated jobs.

Most voters react on instinct. They react to whether or not they think Sky City is a good or a bad company. Hence why opposition politicians are now accusing it of everything from money laundering to causing child abuse. If Sky City is successfully portrayed as a "bad" company, then any agreement with it on a convention centre will politically damage the Government.

Ironically the greater the political pressure on the Government, the stronger their negotiating strength with Sky City is. They can point to all the criticism of the proposed agreement, and use that to negotiate the numbers downwards. If at the end of the day, the agreed number of extra pokie machines is quite modest, then the Opposition will deserve some of the credit.