Canberra may have to pay compo if East West cancelled

The Age: Canberra may have to pay compo if East West cancelled. November 27, 2014. Adam Carey, Transport Reporter for The Age

Prime Minister Tony Abbott and the Victorian Premier Denis Napthine.

The federal government would have to pay compensation if a state Labor government cancelled the East West Link, under an agreement Prime Minister Tony Abbott signed with Premier Denis Napthine seven weeks ago.

A deal signed between Canberra and the states and territories on October 10 says: “In the event that a project has been cancelled, contractual obligations will be shared by the Commonwealth and states in proportion to their funding.”

The same deal would allow the Abbott government to divert funds to other projects in the same state.

If a major transport project part-funded by Canberra is cancelled, the Commonwealth “may choose to reallocate its share of any remaining funding to another project or projects in the relevant state”, it says.

But Mr Abbott has this week said he would instead take back $3 billion promised to Victoria for the road. The agrement contradicts a memorandum of understanding signed by Dr Napthine and Mr Abbott, signed in June.

Roads Minister Terry Mulder’s office supplied Fairfax Media with four sentences from that memorandum but declined to release the entire document.

It says that if the project is cancelled “the Victorian government is required to return all Australian funding to the Commonwealth”.

The political standoff over the East West Link is the biggest point of difference between the two major parties.

Mr Mulder said Labor’s threat to abandon the contracts for the road was “reckless” and would damage Victoria’s financial reputation.

The project would generate jobs, inject billions of dollars into the economy, and “solve one of Melbourne’s biggest congestion issues”, he said.

Labor wants to reallocate the $3 billion in federal funds to the $9 billion-$11 billion Melbourne Metro rail tunnel and is banking on persuading Mr Abbott to do so.

Opposition roads spokesman Luke Donnellan said Mr Abbott’s assertion that Victoria would be stripped of billions “will not stick with Victorians”.

If Labor was elected, Mr Abbott would be able to invest in other projects including rail and hospitals, he said.

“His own signature on the National Partnership Agreement opens the door for the relocation of funds to other projects in Victoria, which Labor if elected will vigorously pursue.”

The East West Connect consortium was contracted last month to deliver the $6.8 billion first stage of the road tunnel to connect the Eastern Freeway in Clifton Hill to CityLink in Flemington.

Treasurer Michael O’Brien has estimated compensation costs alone under the contract and a side agreement signed by the government would amount to $1.1 billion if Labor wins office and cancels the contract.

The NSW government this week wrote to Abbott government infrastructure assistant minister Jamie Briggs asking for the $3 billion directed to Victoria to instead go to Sydney’s biggest freeway project, WestConnex.

Mr Briggs’ spokesman said the $1.5 billion payment already made to Victoria for East West Link was not made under the agreement signed in October, but the previous MOU.

Deputy Prime Minister Warren Truss said in the MOU “that if the project does not proceed Victoria must return all funding for the project to the Australian government”, the spokesman said.

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