Pokies reform faces a last minute challenge.

Paul Bendat: 'Local councils will just be added to the list of people who are addicted to pokies revenue.' Photo: Josh Robenstone

In a report by UnitingCare Australia, colleagues and I found that pokie losses in New South Wales, Victoria, Queensland and the Australian Capital Territory amounted to over $9.7 billion in 2010-11. Community benefit claims – assertions of community benefit declared to government by those clubs - amounted to about 1.9 per cent of that, a little over $180 million.

New South Wales was the worst performing state, with community benefit claims of $63.5 million amounting to 1.3 per cent of the $5 billion lost on pokies in that state.

The worst affected area we looked at was the federal electorate of Blaxland, in southwest Sydney, where pokie losses of $177 million produced community contributions of $2.5 million. The median individual income in Blaxland was a very modest $396 per week. Amongst the proportion of the population estimated to use the pokies, the amount they lost (over $7000 per year) was equivalent to more than a third of median individual income.

In Victoria, the worst example was the electorate of Maribyrnong, where pokie losses amounted to $137.5 million, an average of $6700 per user, or more than a quarter of median individual income.

At an even more local level, it is hard to believe the figures for the suburb of Braybrook, Melbourne's most disadvantaged suburb. In 2010-11, the 81 pokies in that suburb (all owned by Woolworths) raked in $16.6 million. That amounted to an average of $7700 for the actual pokie users in that community (even if we rather generously estimate twice as many users in Braybrook as the Victorian average). This is equal to 47 per cent of median individual income in Braybrook.

The damage that pokie losses of that magnitude do to families, community and for that matter local businesses are difficult to describe adequately. It includes physical and mental ill-health, family breakdown and divorce, the neglect and abuse of children, crime (both of violence and against property), self-harm and in some cases suicide. Poker machine losses on the scale catalogued above entrench poverty, and, perhaps more distressingly, help to transmit it between generations.

There is also little doubt that poker machines divert spending away from important and economically more effective purposes, such as food, rent, mortgage and loan repayments, utility bills, schoolbooks, clothes, and shoes. And from other businesses, which struggle to compete with the lure of what is effectively an addictive product, and with its subsidised drinks and meals.

These impacts, personal, social and economic, are supposed to be offset by community benefits. The claim made by pokie operators is that the availability of the stream of revenue their machines generate permits them to share this largesse amongst the broader community. Regulators in all four jurisdictions we examined operate schemes to document such claims, in return for which clubs get tax breaks. In Victoria, for example, clubs pay a lower gambling tax rate than pubs, on the basis that they provide annual statements showing that they distributed at least that much (8.3 per cent of pokie losses) to community purposes.

However, under the Victorian system, clubs are permitted to claim their operating costs as community benefits. If these costs, which include wages, superannuation payments, insurance costs, maintenance and capital costs are included, clubs appear to be providing significant benefits to communities.

However, operating costs amount to about two thirds of the benefits pokie clubs claim in Victoria. If these are stripped out, claims dwindle to 2.4 per cent of the value of pokie losses in 2010-11.

Pokie reform needs to take place on multiple fronts. First and foremost, the Productivity Commission's recommendations to reduce maximum bets to $1, and to introduce a pre-commitment system (as the government originally agreed with Mr. Wilkie), would significantly help to reduce harm. That ball is the Federal Government's court, but the $20 million ClubsAustralia campaign seems to have robbed the Gillard government of any courage on that front.

The Community Benefit Claims system in Victoria also needs reform. At present, it simply provides a smokescreen, allowing clubs to make grandiose claims about the extent of their community contributions, whilst ignoring massive social costs. Although the Victorian system provides more data than any other state, it could do much better.

Pokie licences are, to all intents and purposes, publically granted licences to print money. Those holding them need to be held to high standards of accountability. You could drive the proverbial truck through the standards that Victorian clubs are currently held to in declaring community benefits. Regardless of the fate of the Wilkie reforms, this is something the Victorian government can fix immediately.

Charles Livingstone is a Professor from the School of Public Health and Preventive Medicine at Monash University.