More Dirt On Gillard & Swan’s Dirty Deal

MacroBusiness.com.au reader and commenter “Mav” draws our attention to journalist Paul Cleary’s book, “Too Much Luck”.

In it, we find more dirt on Gillard and Swan’s dirty deal with the multinational miners.  Cleary’s tome sheds new light on the collusion between ALParatchiks such as then ALP national secretary Karl Bitar and BHP Billiton, the foreign-owned miner leading the anti mining tax campaign, in overthrowing a popularly-elected prime minister:

As soon as Rudd sprang the new tax on the industry, the big three companies decided they had to kill this plan – and they decided to play dirty. When London-based Rio Tinto, Melbourne-based and London-listed BHP Billiton and Swiss-based Xstrata put their collective weight together, they are a formidable combination. Their total combined value on global sharemarkets is $450 billion, 86% of which is in foreign hands. The three companies are worth more than the size of Australia’s federal budget, about one-third the size of the entire Australian economy. Together they embarked on a savage lobbying effort to bring down the proposed tax by attacking the government and its prime minister. They began this extraordinary campaign before the proposal had even been put into legislation, and before the parliament had had the opportunity to review it.

BHP led the offensive, establishing a ‘war room’ inside its Melbourne head office. Run by senior financial executive Gerard Bond, along with senior staffers and external consultants, this team worked on the project for about seven weeks. BHP commissioned its own focus-group research, which was used to drive a $22 million TV and print-media blitz and a targeted lobbying campaign that included Geoff Walsh, a former national secretary of the ALP and former staffer to prime ministers Bob Hawke and Paul Keating. BHP spared no expense on the campaign, which reported directly to CEO Marius Kloppers.  External talent included the market-research specialist Tony Mitchelmore and the corporate strategist John Connolly. Mitchelmore had been plucked from obscurity by Labor to work on the Kevin07 campaign and had stayed on doing qualitative research before working for BHP on this campaign. He organised an intensive round of sixteen focus-group sessions, which revealed that many participants believed Rudd’s proposal had come out of left field and was likely to derail the one industry that was keeping Australia’s head above water. Realising that they had a good chance of killing the tax, the miners adopted a ‘whatever it takes’ approach…

The miners’ efforts were spectacularly successful. Seven weeks and four days after unveiling the preliminary plan, Prime Minister Kevin Rudd was deposed and so was his tax… Big Dirt, as the three companies were now known, executed regime change two months before the voters exercised their democratic rights at the ballot box. Having subverted a functioning democracy [TBI: aided and abetted by Gillard & Swan], mining executives were celebrating in airport lounges around the country…

Immediately after becoming prime minister on 24 June, Julia Gillard turned her attention to thrashing out a deal with the three multinational miners. Eight days later, she announced a breakthrough that cut the marginal tax rate from 40% to 22.5%, restricted its scope to coal and iron ore, and added some creative accounting concessions for the big miners… A raft of emails released under FOI shows that BHP was very much running the show. Its executives drafted the heads of agreement before emailing it to Wayne Swan’s office for approval.

Repeating her ‘moving forward’ mantra, Gillard announced the compromise like this: ‘It moves things forward whether you’re a coal miner in the Bowen basin, a contractor in Karratha, an opal miner in Coober Pedy or a young worker in Sydney’. In fact, the MRRT deal made life worse for smaller Australian-based miners by removing the resource exploration rebate and by awarding big miners a significantly lower tax rate. For iron-ore miners with mature projects, which means the big companies, their projects would be taxed at 36.4 per cent – close to or even below current levels – whereas small or medium-sized projects would pay an average rate of 48.9 per cent, according to modelling produced by Treasury and released under FOI. The big miners benefited from a concession that allows them to calculate deductions for tax purposes using the market value rather than the purchase price (or ‘book value’) of their assets, providing huge depreciation allowances. The small and medium Australian players were not represented in the negotiating room, and the new deal actually reversed the central and laudable aim of the RSPT – that is, reducing the tax burden on start-up operations, which are penalised by the state royalties because the impost is paid when production starts, rather than after the company actually begins to make a profit. The success of the multinational miners in securing these concessions, and in beating voters to the punch, reveals the perverse world order in which we live: an advanced country can possess enormous riches but lack the capacity to do what is clearly in its own long-term interest…

Not only did the miners change the prime minister and change government policy, they went on to brag about how their coup had stopped similar schemes from spreading around the world…

Exactly one week after Gillard announced the compromise, Rio Tinto’s American chief executive, Tom Albanese, told a group of mining executives in London that the Australian experience should send a salutary message to governments around the world. Governments should ‘learn a lesson’ from the episode, he declared. A few months later, Xstrata’s chief executive, Peter Freyberg, was still bragging…

BHP’s executives managed to avoid bragging, although this company did more than any other to bring down the tax and Kevin Rudd. The total cost of the campaign was $22 million. The Minerals Council of Australia, which is largely funded by the big three companies, spent $17.2 million, while BHP spent $4.2 million on its own and Rio $537,000. Cabinet ministers in the Gillard government say that Geoff Walsh delivered the Mitchelmore research directly to the then ALP national secretary, Karl Bitar. These claims are strenuously denied by Walsh. But the BHP research is understood to have panicked the Labor heavyweights, prompting them to move against Rudd even though he still had a commanding 4 percentage point lead in the national newspoll.

If it is true that former ALP national secretary Karl Bitar, in cahoots with Gillard and Swan, acted to overthrow a prime minister on the basis of private research data provided directly to him by BHP, a foreign-owned company demonstrably seeking to change government policy, then this is more evidence of treason on the part of key figures in the ALP.

Gillard, Swan, and Bitar should be in jail.

UPDATE:

Peter Martin has more, in the Age today:

Gathered on one side of the cabinet table were the newly-installed Prime Minister Julia Gillard, her Treasurer Wayne Swan and her Resources Minister Martin Ferguson. On the other were the heads of Australia’s three big mining companies: BHP Billiton, Rio Tinto and Xstrata.

Absent were the key people from the Treasury – the ones who really understood the tax being discussed.

As the then Treasury head Ken Henry later told a Senate committee: “We were not involved in the negotiations, other than in respect of crunching the numbers if you like and in providing due diligence on design parameters that the mining companies themselves came up with.”

Gillard and Swan consciously chose not only to exclude the locally-owned miners from the negotiations. They also chose to exclude Treasury officials – folks who just might have more of a clue than a dodgy lawyer and a career political hack with an arts degree – as well.

Conclusion? Gillard and Swan did not want any intelligent outside scrutiny of the BHP-drafted deal.

Hence their persistent “commercial-in-confidence” response cited ever since, in attempted justification of their refusal to let the details come out.

Tags: ALP, BHP, Karl Bitar, MRRT, Paul Cleary, rio tinto, RSPT, Tony Mitchelmore