Ireland today is broke. And one of the major reasons for its pitiful economic state is because it spent taxpayers’ money on wooing multinational companies to locate their call centres in Ireland. Could someone please tell Tasmanian Labor Premier David Bartlett. Mr Bartlett, facing diving opinion polls and a general election early next year, has decided to hand over a whopping $3.5 million of Tasmanian taxpayers’ money to the highly profitable Vodafone so that it retains its 400-worker call centre south of Hobart.
Mr Bartlett’s pledge, announced last Thursday, amounts to an annual subsidy of $1000 a worker at the call centre. Vodafone executives will be high-fiving each other this morning at their success in duping another politically desperate, short-term oriented government. Having sat in such meetings as political staffer, what’s the bet Vodafone marched in to see Bartlett and gravely told him they were thinking of closing the call centre?
Bartlett would have panicked immediately, told his public servants to give Vodafone what it wanted, and to tell nay saying Treasury officials, concerned about the fact that Tasmania is rapidly moving back into debt again, to sod off.
Handing over government money to companies that run call centres is a mug’s game. Just ask the Irish. They spent billions of dollars in tax breaks and direct subsidies over the past 15 years attracting call centre operations, and now many have either fully closed or substantially reduced their operations. Why? One reason is because many of the deals were struck in the 1990s and gave reduced corporate tax rates until 2010. And because the work can be done much cheaper in Asia.
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Take Conduit, for example. It used to employ more than 1000 people in its Dublin call centre — a directory-assistance operation. But now there are fewer than 300, and in April this year Conduit sent more of its jobs to Manila, where it pays workers a fraction of the hourly rate earned by its Irish employees.
This is not an isolated case, and it is not only in Ireland that call centres are scaling back or closing down as government subsidies run out. In Newfoundland, Canada, governments have played the same game as Bartlett over the years in seeking to reduce unemployment by attracting call centres. This year alone, two major centres have announced they are closing down in that province.
Corporate welfare has long been a way of life in Tasmania and Mr Bartlett’s hero, Jim Bacon, Premier from 1998-2004, was an unabashed admirer of not only Ireland but also that other great beacon of economic strength, Iceland! Today, business leaders in Tasmania, with the notable and welcome exception of Andrew Scobie, the head of the Tasmanian Chamber of Commerce and Industry, are welcoming Mr Bartlett’s decision.
As well they might be because they know they can blackmail a politically desperate government driven by a bankrupt economic interventionist ideology, into handing out taxpayer-coated candy to help their bottom line as well.
Meanwhile Tasmania slides further into budget disaster territory, making a credit rating reduction all the more likely.
Greg Barns was senior adviser to Tasmanian Premier Ray Groom from 1994-1996.