Tearing up East West Link contract would cost taxpayers ‘more than $1bn’

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Guardian: Tearing up East West Link contract would cost taxpayers ‘more than $1bn’ Oliver Milman. Tuesday 25 November 2014

Treasurer says Victoria would have to pay $1.1bn in compensation if Labor stopped the road project going ahead

Michael O’Brien has distributed legal advice which states the government was within its rights to enter into contracts for the first stage of the project. Photograph: Julian Smith/AAP Image

Victoria’s taxpayers would have to pay more than $1bn in compensation if Labor tears up contracts for the controversial East West Link road, the Coalition government has warned.

Michael O’Brien, the state treasurer, has distributed legal advice from Allan Myers QC, which states the government was within its rights to enter into contracts for the first stage of the project – a 6.6km road and tunnel that will cost $6.8bn.

Daniel Andrews, the Labor leader, has said the contracts are “not worth the paper they’re written on” and in September released his party’s own legal advice that stated successful legal action taken by three councils against the project would render it null and void.

O’Brien said the Myers legal advice proved this was wrong and said Victoria would have to pay $1.1bn in compensation if the road did not go ahead. The amount covered debt and equity, contracts for equipment and lost profits over the 25 years of the toll road project.

“That one reckless decision from Daniel Andrews would turn Victoria’s budget from surplus to deficit and in all likelihood trash our prized triple-A credit rating,” O’Brien said.

“The government has very strong legal advice that the contracts are sound, set in stone. We have guaranteed the compensation for one simple reason – whether the state of Victoria government says it will do something, it needs to stand by its commitments.

“We know Victoria needs the East West Link, it’s not rocket science, it’s joining up our major freeways. Everyone stuck in traffic knows we need joined up roads – East West link does that.”

O’Brien said the Coalition would release more of the business case for the road, which has largely remained a mystery despite its huge state investment and a $1.5bn contribution from the federal government.

The state government claims the road, joining the Eastern freeway and the CityLink roads in Melbourne’s northern suburbs, will reduce traffic congestion and improve business productivity.

The project’s opponents, some of whom live in the 92 houses set to be demolished for the road, say there is no evidence traffic will be alleviated and point out that the Coalition promised to invest in public transport, with no mention of the East West link, when it was elected in 2010.

James Merlino, Labor’s deputy leader, said the Coalition was guilty of “desperate blackmail” by warning of the $1.1bn compensation.

Victorians will go to the polls on Saturday, with Labor the favourites to win based on opinion polling.

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