ABC Victoria: Taxpayers to be hit with $1.1b compensation bill if East West Link scrapped: Coalition. By Jean Edwards 25 November 2014
A graphic showing the eastern entrance to the East West Link.
PHOTO: The Coalition said the consortium building the project would be entitled to the payouts for costs already incurred and future losses. (Supplied: Linking Melbourne Authority)
Victorian taxpayers will be hit with a $1.1 billion compensation bill if Labor scraps Melbourne’s East West Link road project, the Coalition claims.
Details of secret compensation clauses in the contract have emerged just days before voters go to the polls.
The contract did not specify an exact figure, but set out a formula by which any compensation would be calculated.
The Coalition said Treasury had estimated $1.1 billion was the most likely cost of breaking the contract by March 2015.
The bill would cover costs already incurred by East West Connect and lost profits over the 25-year life of the contract.
Premier Denis Napthine denied laying a contract “booby trap” for taxpayers.
“There is no booby trap in the contract, it is a standard contract, a standard contract to build a major piece of infrastructure,” he said.
“The only one who is being reckless and irresponsible and putting Victorian taxpayers at enormous risk is [Labor leader] Daniel Andrews and the Labor Party.”
Labor made an election pledge to rip up the contract because it believed it was invalid.
Mr Andrews was adamant the consortium would not be paid compensation.
“These arrangements, including the secret side deal, aren’t worth the paper they’re written on,” he said.
Mr Andrews accused the Coalition of making up the compensation figure.
He promised to release the full business case for the East West Link next week if Labor won Saturday’s election.
“On Monday I will release, for all Victorians to see, every piece of paper to do with this rushed and botched project, the full business case, the full contract, and this so-called side deal,” he said.
Mr Andrews said Labor would not build the multi-billion dollar road under any circumstances.
Coalition will honour contracts ‘regardless of court challenges’
Treasurer Michael O’Brien said the Coalition would honour the contract, regardless of the outcome of a court case brought by three councils.
“This is money that Daniel Andrews would sacrifice on the altar of political expediency,” he said.
“He is going to walk away from a legally-binding contract over one of the biggest infrastructure projects in Australia. If he thinks he can do that without any cost he has got rocks in his head,” he said.
The Government has very strong legal advice that the contracts are absolutely sound.
Michael O’Brien, Victorian Treasurer
Mr O’Brien said the legal advice the Coalition had received from Allan Myers QC showed the Government’s legal position was watertight.
In a memo, Mr Myers said even if legal action by Moreland and Yarra Councils was successful, the Government could still approve the road using other legislative tools.
“The Government has very strong legal advice that the contracts are absolutely sound, they are set in stone,” Mr O’Brien said.
“The guarantee provides that the compensation provisions in the contract will absolutely stand, and that is regardless of any subsequent legal proceedings.”
The compensation payout would be in addition to the $1.5 billion in federal funding for the project, which would have to be refunded.
Mr O’Brien said it was normal for a government to promise compensation for lost future earnings.
“This contract is basically a cookie cutter for what you will find on any sort of major PPP [public-private partnership],” he said.