Public subsidy for private profit

Iain Stewart

Public subsidy for private profit

MELBOURNE — The cost of staging a Formula One Grand Prix is substantial and is increased when the event is staged at a temporary circuit such as Albert Park. In addition to capital outlay on the track and franchise fees, there are substantial costs associated with setting up and striking the temporary grandstands, infrastructure and other facilities. In the case of Albert Park, it is estimated that Victorian taxpayers will outlay a minimum of $250 million over the proposed 10-year contract.
According to the government, the event will be an unqualified success: thousands of international tourists with bulging wallets will descend on Melbourne, and hundreds of millions of others will be exposed to Melbourne through television coverage, some of whom will find their way here in due course.
Ignoring the political, environmental, legal and social issues that have caused such angst, the proposal sounds too good to be true. It is impossible to understand why every city in the world is not clamouring for its very own GP. According to its supporters it is almost a licence to print money.
Why, then, does the event require such massive taxpayer subsidies? Where are the profit-driven entrepreneurs? A recent article by two Queensland academics in the September edition of Australian Accountant posed this question in relation to that state's own Indy car grand prix, and concluded, "If business considered that the 1994 Indy would be profitable, it would have taken the opportunity to fund it ... The fact that they did not indicates that, in aggregate, private firms did not consider that the Indy generates net benefits."
The authors state, "Government should not be involved in business. When government becomes involved in the business of operating and funding special events such as the Indy, incentives exist for groups to lobby for taxpayers to fund events which benefit these groups but which in aggregate reduce the wealth of Australia. If governments left such events entirely to private firms, these events would take place only if these firms could earn a profit after incurring all of the costs."
Is it any wonder that more than 50% of Victorians were opposed to the GP, irrespective of location, if they were going to subsidise it?
Some may recall that the Victorian Liberal Party is one of the world's greatest advocates of the free market, one free of intervention or regulation. The terms "competition" and "world's best practice" have been used to justify the reduction in the public sector and essential community services. When it suits, however, limitless sums of money are available on the off chance that certain members of the private sector may benefit.
Apart from its sheer obscenity, this is a frightening portent. In whose interests are Kennett and Walker acting? Not yours, not mine.
There are no sensible grounds for holding the proposed GP; it and its protagonists must be opposed.
[See Meetings ... Parties ... Anything ... for information on actions against the GP. Iain Stewart is the convener of the Save Albert Park Group.]