Labor to scrap Melbourne’s East West Link if elected in November Labor to scrap Melbourne’s East West Link if elected in November. Gay Alcorn and Melissa Davey, Thursday 11 September 2014

Labor does U-turn after previously saying it would honour any contracts for the controversial $8bn road project

Opponents of the East West Link project protest outside the office of Melbourne MP Jennifer Kanis in Melbourne. Photograph: Julian Smith/AAP
The Victorian Labor party would scrap Melbourne’s controversial East West Link toll motorway if elected in November, even though contracts for the $8bn first stage are expected to be signed next month.

The decision means voters have a clear choice between Labor and the government over transport policy for the city, with the government saying the link is essential to improve traffic congestion and Labor concentrating on rail projects.

Opposition leader Daniel Andrews said he took the decision after seeking advice from the former federal court judge Ray Finkelstein, administrative law expert Richard Niall QC and a contract law expert, Siobhan Keating.

Labor has repeatedly said that while it opposes the link, it would honour any valid contracts signed before the election for the $6bn to $8bn first stage of the cross city road. Shadow treasurer Tim Pallas has said tearing up the contract could damage Victoria’s credit rating and that it was “a well-accepted practice that future governments accept and honour contracts signed by a previous government’’.

In a decision that effectively reverses that position, Labor is now relying on a supreme court challenge to the link by Moreland and Yarra councils, due to be heard on 15 December, two weeks after the state election. Labor argues that any contract cannot be validly entered into while the issue is before the supreme court.

The legal advice states that if the court found that the approval of the project by the government was invalid, “there is no power to enter into contracts for the project and any contracts entered into will be beyond power and unenforceable”.

The advice is only in the event that the councils’ court case succeeds.

Asked at a media conference what would happen if the court found the planning decision was valid, Andrews said a Labor government would not defend the court case, meaning the councils would be likely to win. The legal advice acknowledges that any consortium that had signed a contract could seek compensation if the project failed to go ahead.

Labor’s decision puts pressure on the Napthine government not to sign a contract before the election. “If we want to resolve the uncertainty the best way is to not sign contracts and let Victorians choose [at the election],” Andrews said.

“We will not build this project. This project is a dud.”

The government responded furiously, saying it remained committed to sign the contracts in October. This week it announced a preferred consortium, led by the construction company Lend Lease, to build the first stage of the link, a 6km road linking the Eastern Freeway to the Tullamarine Freeway.

“This threat to rip up contracts is the most reckless and irresponsible statement any opposition leader has ever made,” the treasurer, Michael O’Brien, said. The decision would cost $3bn in compensation, he claimed, including $2bn already provided by the federal government and $1bn to the successful consortium.

Labor had sent a “strong message to the national and international business community that under a Labor government Victoria is closed for business, creating a sovereign risk for businesses that enter into contracts with the state”.

A Lend Lease spokeswoman said as the East West Link consortium was still in discussions with the Victorian government, they would not be commenting.

Tim Piper, from the Australian Industry Group, said the move would undermine business confidence in government activities and raised the question of sovereign risk.

At a media conference to mark the start of geotechnical drilling on the second stage of the link, Napthine said the project would create 6,200 jobs and the government was confident the project and its approval process had been carried out responsibly and thoroughly.

There was now a “a real difference between the Coalition government that is decongesting Melbourne, and helping families and individuals get to work quicker and get home quicker … in contrast to Daniel Andrews and Labor who want to condemn Melbourne and Victoria to decade after decade of congestion and gridlock”.

Opinion polls indicate that most voters oppose the East West Link, but business strongly supports it.

The chief executive of the Victorian Employers’ Chamber of Commerce and Industry, Mark Stone, said he would request a meeting with Andrews to understand why Labor’s position had changed.

“There’s overwhelming support among major business and motoring groups and unions who all want it to go ahead,” Stone said.

“[We have] consistently supported East West Link as it will create jobs and be a vital part of our transport network.”

Business confidence would take a hit if the project did not come into fruition, he said.

The mayor of Yarra council, Jackie Fristacky, said it was “gratifying that we finally have clarification of the ALP position … voters now have a clear choice between a government that is determined to build the East West link at all cost irrespective of the consequences, and a Labor opposition that has declared it does not support the project.”

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