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Financial largesse to the prime minister's friends

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30th November 1989



3604 SENATE 29 November 1989 Adjournment


AD JOU RNM ENT Royal Australian Air Force: Use by Commercial Airlines— South Australian Election—M inister for Telecommunications

and Aviation Support—M ilitary Equipment— Planet Earth The DEPUTY PR ESID EN T—Order! It being 7.30 p.m., under sessional order I put the question:

That the Senate do now adjourn.

Senator NEW M AN (Tasmania) (7.30)— For some time I have been pursuing in the Senate the question of the legality of the Defence Departm ent’s action in providing

Defence Force aircraft to commercial air­ lines while not charging full cost recovery, as well as the procedures which led to this decision. On 23 August this year the Minister

for Defence, M r Beazley, directed his De­ partment in writing to ‘provide assistance to the domestic civil airlines in maintaining civil air transport during the current difficulties’. He also said:

. . . the Prime Minister intends that the air­

lines should retain responsibility for ticketing and seat allocation and that the Commonwealth would recover from the airlines the full costs of operating

these services.

This direction was entirely consistent with a Defence Instruction (General) which set out the procedures that the Defence Force must follow in cases of aid to the civil community such as the airline charters. This document

required full cost recovery unless the De­ partment had sought and received a waiver from the Minister for Defence and the Min­ ister for Finance (Senator Walsh). This doc­

ument has the force of law under the Defence

Act and is mandatory for the Department, unless the Minister overrules it. I seek leave to table advice from the office of the Attor­ ney-General (M r Lionel Bowen) to the De­ partment of Defence on the force of law of

Defence Instructions (General).

Leave granted.

Senator NEW M AN—I am informed that on or about 24 August Mr Hugh White, the Senior Private Secretary to the Defence Min­ ister, Mr Beazley, together with officials from the office of the Prime Minister (Mr Hawke) and representatives from the airlines, met in

Canberra to negotiate the charters. I am informed that the Royal Australian Air Force had already asked for $12,000 per hour for the charter of the 707 aircraft and that such

request had been rejected by the airlines. I am also informed that at the Canberra meet­ ing the Government suggested a rate of

$5,100 per hour for the charter of this air­ craft but that this was refused by both air­ lines. I am further informed that a

representative from Australian Airlines ac­ cepted a rate of $4,000 per hour but that this was not accepted by the representative from Ansett Airlines of Australia, who said

that he would have to refer the m atter to his Melbourne bosses. I am further informed that the Prime Minister then received a com­ munication from Sir Peter Abeles in which he was advised that Ansett would meet a charter rate for this aircraft of $1,500 plus the fuel costs of approximately $2,000 per


On 24 August M r Hugh White, to whom I referred previously, advised the Depart­ ment of Defence by telephone that the

charter rate would be $1,500 per hour for the 707, $800 per hour for the HS748 and $970 per hour for the C l30. On 28 August he confirmed that telephone conversation in

writing to the Department, saying that the Prime Minister had agreed to a schedule of maintenance charges as I have just set out above. It appears that at no time has the

Minister for Defence given a direction to his Department to overrule his own direction of 23 August or to overrule the application of the departmental Defence Instruction (Gen­ eral), bdth of which required full cost recov­ ery.

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The Defence Force is thus in the situation of unlawfully chartering its aircraft at less than full cost recovery.

A departmental schedule of Determina­ tion No. 18 of 1989 sets out the direct costs and the full costs of all aircraft types as at September 1989. The full costs per hour of the 707 is shown as $12,031; the HS748 as $3,256; and the C l30 is shown as $4,983.

Even the list of direct costs shows that the 707 is $8,866; the HS748 is $2,095; and the C l 30 is $3,061. On 31 August, the Minister for Defence told my colleague, M r Carlton,

in Question Time in the other place that this operation is being conducted on a non-sub- sidised basis. He also told Mr Carlton that if there was a gap between what was being

paid and the actual cost he would apply for additional funding in the Additional Esti­ mates. He said: . . . however that is not anticipated as the likely


But the Minister already knew that this was not the case. Only five days later, on 5

September, he wrote to the Prime Minister referring to the fact that the Prime Minister had agreed to the schedule of hourly charges to be levied by the Department of Defence on the airlines, and further pointed out that

‘the adequacy of these charges to cover the RAA F’s actual maintenance expenses could not be determined’. He also pointed out the following:

. . . the RAAF has had to cancel a number

of its own scheduled services because its aircraft are under charter to the airlines, consequently Defence has been required to pay fares to airlines for Defence personnel to travel on RAAF aircraft.

The Minister then asked for confirmation of an agreement to supplementation being made available to Defence in the context of the 1989-90 Additional Estimates review.

In a letter to Mr Beazley dated 18 Sep­ tember the Prime Minister said: I confirm our earlier discussions about being pre­ pared, at an appropriate time after the conclusion of the dispute to consider a level of supplementation

for the Defence Portfolio in the context of the 1989/ 90 Additional Estimates Review.

Clearly that lukewarm statement is no com­ mitment to supplement the Defence budget, but if it is to be supplemented it will be with taxpayers’ funds. Why should it be supple­ mented by the taxpayers?

29 November 1989 SENATE 3605

Senator Richardson said last night in an­ swer to my question that the taxpayer should provide the supplementation because it was in the public benefit. But I ask why is it in the public benefit? The public benefit is served by the provision of the Defence Force aircraft. The airlines should pay full cost

recovery of such aircraft. They already have the benefit of the waiver of charges by the Federal Airports Corporation and the Civil Aviation Authority. Neither do they have to pay any navigation or landing charges on the chartered Defence Force aircraft. They are receiving full economy fares for every seat sold on a Defence Force aircraft. Why should

they also be massively subsidised by the tax payers in their charters of Defence Force aircraft? The amount of the subsidy must be at least $25m and is probably considerably greater. It is a national disgrace and as a

result of this I referred the matter to the

Auditor-General last Friday for investiga­ tion. I undertstand that the inquiry is now being commenced. The Prime Minister in

answer to a question today in the House of Representatives failed to answer the essential points raised in the question. Any right­ thinking Australian would have to be con­ cerned at a misuse of taxpayers’ funds and an abuse of Government process in order to

again provide financial largesse to the Prime