East West link compensation costs billions

Sky news: East West link compensation costs billions. Tuesday, 25 November 2014

Vic govt says compensation will cost over a billion dollars if East West Link contracts are torn up by Labor

More than $1 billion in compensation will have to be paid if the East West Link contracts are ripped up by Labor, the Victorian government says.

Treasurer Michael O’Brien says the government guaranteed compensation outside of the contracts so even if the they are declared invalid, $1.1 billion will still have to be paid.

‘The state government has guaranteed the compensation provisions in the contract because when Daniel Andrews came out and said I’m going to threaten to rip up the contracts’ the only way that you can have anybody having confidence in dealing with the state of Victoria is to provide a guarantee,’ he told Fairfax Radio on Tuesday.

‘Those compensation provisions are guaranteed outside of the contract.’

Mr O’Brien said not following through with the East West Link contracts would also waste millions of dollars the state government has already spent on the project.

‘I’d say $400-500 million,’ he said. ‘That’s the cost of the project to date.’

A further $1.5 billion contributed by the federal government for stage one would also be withdrawn, Mr O’Brien said.

‘The total outcome would be that it would put the budget from surplus into deficit and effectively you would pay billions of dollars without any improvement in traffic,’ he said.

Opposition Leader Daniel Andrews has said he will scrap the contract if Labor wins Saturday’s election.

Premier Denis Napthine said tearing up the contract was ‘absolutely the most irresponsible thing anybody could do’.

‘We believe there will be a significant compensation for being so irresponsible and so reckless as to tear up what is an important contract to deliver improved transport services in Victoria for a growing population,’ Dr Napthine told reporters.

‘And I would expect that the cost would be over a billion dollars.’

He said it was a normal government contract.

‘There is no booby trap in the contract. It is a standard contract,’ Dr Napthine said.

Asked about reports the consortium would be compensated for lost future profits, Dr Napthine said there were consequences.

‘Daniel Andrews is taking Victorians for fools if he tries to tell them there will be no consequences for tearing up a legally binding contract to build East West Link.’

He said the contract would be released under the coalition government but it was being handled by the Linking Melbourne Authority while the state was in the caretaker mode.

– See more at: http://www.skynews.com.au/news/local/melbourne/2014/11/25/east-west-link-compensation-costs-billions.html#sthash.ATjpqQah.dpuf

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