The Age: Napthine government has lost the right to decide Victoria’s future. June 30, 2014, David Hayward
With its polling in the doldrums, the state government no longer has the moral authority to make billion-dollar infrastructure decisions.
Illustration: Andrew Dyson
There comes a point in a government’s life where it must accept that its moral authority to make major new decisions has come to an end. Two recent disastrous opinion polls suggest that the Napthine government has reached that point.
Let’s not mince words here. Four months out from the next election, the numbers are terrible, following almost two years of almost continuous bad polling. The latest Nielsen poll has Labor ahead 59 per cent to 41 per cent, while Newspoll has Labor in front by 56 per cent to 44 per cent. It is true that a week is a long time in politics, but even the most diehard Liberal would have to accept that there’s no coming back from here.
Things would be bad enough even were the government to be nicely organised and in harmony. But it has enemies within, and enemies without. It is deeply divided and increasingly unable to sing with one voice. Things have sunk so low that even former premier Jeff Kennett has recently decided to chip in.
The government has become so distracted that it is unable to get even the most basic message across over a two-week period. Its well-received budget – the first bit of unambiguously good news in a very long time – was forgotten almost as soon as it was delivered, courtesy of Joe Hockey’s spectacular bellyflop of a first budget, quickly followed by an unmanageable Geoff Shaw running rampant.
Despite its impossible position, the government is proposing to sign giant contracts that will lock the state into financial agreements that will last as long as the eye can see. In Treasurer O’Brien’s own words, this is a “once-in-a-generation investment package”.
The projects include the East West Link, both east ($6 billion-8 billion) and west ($8 billion-10 billion) sections, the proposed airport rail link, improved inner north and west rail infrastructure and the proposed and vastly revamped metro underground rail lines ($8.5 billion-$11 billion). Together, these involve financial commitments that may exceed $28 billion and which will take over a decade to be complete, causing enormous disruption along the way.
The government argues that a lot of the cost will be picked up by the private sector under public-private partnership (PPP) arrangements, so the damage to the budget is much less than it would otherwise be.
This is the “magic pudding” view of PPPs which has recently been shot to pieces by none other than the Productivity Commission, which has pointed out that unless the revenue from user charges covers all of the costs, then the budget will be called upon to make up the difference. That is to say, if the project is budget neutral, that’s because you and I make up the gap in tolls.
Victoria’s PPPs have so far proven to be anything but budget neutral and so it will be with these new deals. In the case of the new tollways, the government reckons that the private sector “designs, constructs, finances, operates and maintains the road to specified standards in exchange for availability payments over the term of the concession period”. The value and duration of the availability payments and the terms on which they are struck are not known.
It is not generally well understood that five years ago existing PPP finance lease costs to the budget were $95 million. Today they are approaching $800 million and almost $1 billion if you include the operating leases that come with them. When Napthine’s new deals are done, expect them to clip the $2 billion mark, which is a lot of cash by any standards. And remember: every dollar unnecessarily spent on them is one dollar less for the teachers, nurses, firefighters and police that we need to keep services at levels needed in a state bursting at the seems.
The full cost-benefit studies behind these big toys have yet to be put into the sunlight. In the case of the proposed new Metro underground lines, the government has made major last-minute changes to the proposal that had previously been developed and evaluated but the reasoning and justification for this have neither been fully aired nor debated.
More damning still is the Auditor-General’s recent report into how well the government has been implementing its own High Value High Risk (HVHR) policy that is meant to govern infrastructure delivery involving projects worth more than $100 million. He has pointed out that none of these major proposed new infrastructure projects have been put through this wringer, instead being fast-tracked for reasons that remain opaque. “Given the significance and scale of these projects,” says the Auditor-General rather diplomatically, “it is critical that [Treasury] determine how it will effectively apply the HVHR process within these truncated timelines to ensure that the project costs, benefits and timelines have been robustly determined.”
But the biggest worry is the impact all of these projects will have on the very fabric of Melbourne and the state of Victoria. This vast network of infrastructure will, as the budget papers put it, “transform Victoria’s transport networks, supporting development of new suburbs, building new transport links and expanding the central business district”, yet Victorians will not have been given the chance to say whether that is what they would wish to see happen. Melbourne’s lord mayor, Robert Doyle, in a typically blunt assessment described the changes to Metro as a ”100-year catastrophe for the city”.
For the sake of good management not to mention the public finances, don’t sign those contracts, Mr Napthine. Put them on the table at the forthcoming election so that the people can have a darn good look and then decide for themselves.
David Hayward is dean of the School of Global, Urban and Social Studies at RMIT University.