June 3rd 2000

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Articles from this issue:

Canberra Observed: National Party vanishing ignominiously

National Affairs: Time to rethink UN treaties

Victoria: Transurban: now itÂ’s BrackÂ’s problem

Drugs: Why free heroin is not the answer

Economics: Markets or electorate?

Straws in the wind

Comment: Traditional supporters not buying what Coalition is selling

Population: Eastern EuropeÂ’s collapsing birth rates

United States: Poverty amidst the plenty

United States: Manipulating the next generation

Medicine: Teen contraceptive message has failed

New moves to legalise euthanasia in the Netherlands

Books promotion page

Victoria: Transurban: now itÂ’s BrackÂ’s problem

by Richard Egan

News Weekly, June 3, 2000
Melbourne’s new toll roads will become a major headache for the Victorian Government. Colin Teese explains why.

In Opposition, Victoria’s ALP, and especially its then leader, Mr Brumby, along with Transport Minister Batchelor, were steadfast critics of the toll road project development which was to become the centrepiece for the Kennett Government’s vision for Melbourne

In government it has been an entirely different story. Mr Bracks at least has been voicing the same sentiments and justifications, which previously came from the mouth of former Premier Kennett.

No doubt the new Premier has shaped the attitude of his Transport Minister. For all his huffing and puffing in Opposition, Mr Batchelor now claims that the nature of the binding contracts the Kennett Government concluded with the operator of City Link, Transurban, means that he is powerless to make any of the changes he urged in Opposition. Some believe that Mr Batchelor may be secretly pleased to be able to advance this excuse.

Incoming Labor, or at least its Leader, is, you see, of no disposition to antagonise the business community. Presumably, the message has gone out “don’t panic business” by rocking the Transurban boat.

Fine, as far as it goes, but one assumes Mr Bracks has ambitions, which extend beyond a single term as Premier. Whatever he thinks, or has been told, the business community cannot help him achieve that outcome, even if, as seems unlikely, they were prepared to vote en masse for his party. And has Mr Bracks forgotten altogether that, currently, he does not have enough seats to form a government in his own right. His position remains precariously dependent upon a group of independents, not natural supporters of Labour. They are with him perhaps for this term, but beyond that he needs either continuing support from the independents or four or five extra seats in his own right.

Those seats must come mainly from the city electorates, whose voters, if they are not already so, are likely to be very sensitive to issues relating to Transurban’s tolls.

What then are the issues?

Uppermost is the matter of the toll itself, about which more later. Immediately, the issue relates to the changes to existing arrangements for public roads adjacent to the toll roads. Here the Kennett Government’s contract requires the Government to effectively inconvenience users who exercise their right to use these publicly-funded roads as an alternative to paying tolls.

The reason for this arrangement is obvious. It is to compel road users to pay for the supposed convenience of the toll system. The changes include blocking off the Flinders Street end of the old Footscray Road and abolishing the Clearway in Toorak Road during peak hour.

These inconveniences have already raised enough concern for Mr Batchelor to advance his excuse that the contract is binding and to rescind it would cost the Government $2 or $3 million dollars a year in each case. But is it?

In any event the Premier obviously thinks, or has been persuaded to believe, he is sitting pretty. The business community can be kept on side while the plight of the wider community can be blamed on the sins of the previous government. And, additionally, the Opposition is in no position to condemn the Government for its inaction

Mr Bracks should never forget the fate of the Greiner Government in New South Wales. It came into office on the back of promises to overturn decisions of the outgoing government with a safer margin than Bracks and after backing off on its promises, was effectively outed after a single term.

And Mr Bracks may not even enjoy the excuse of inescapable contractual obligations.

Legal obligations

The Age feature writer, Ken Davidson, has pointed out in a series of recent articles that the Kennett Government’s so-called binding contracts are anything but watertight — indeed one is already under private challenge in the courts.

Davidson’s reasons are somewhat technical, though persuasive. Transurban, if pressed, may not wish to pursue its right to change the conditions of access users have enjoyed on publicly funded roads, if doing so means admitting that this action constitutes a restriction of competition. It turns out that Transurban’s “life of the project” tax break currently applying to the project bond holders is conditional that the project’s operation not restrict competition.

In any case, Davidson further observes, that even if the Government incurred a penalty under the contract by refusing to impair access to public roads, it would, in fact, amount to nothing more than paying Transurban part of the toll from State Revenue rather than from users’ pockets.

lf Davidson is right on both counts a serious dilemma is facing both the Labour government and Transurban.

Consider the company first. As the contract now stands Transurban is caught between two incompatible needs — first, to maximise revenue collections (i.e. tolls) and, second, to retain its tax break privilege. As the contract now stands gaining either one of those objectives may put at risk the other. Assuming the company is sufficiently aware of its own interests, would it want this circumstance to continue?

The Government, for its part, seems unaware of the political problems the City Link project may visit upon it. They are many, and all stem from potential user (that is, voter) dissatisfaction. First there is the level of charges — already high by reason of the fact that the company is guaranteed a return of 18%. And likely to be increased by what must surely be considerable cost overruns in construction, and delays in start up.

The time may well be approaching when the toll charge increases needed to preserve Transurban’s revenue stream may act as a disincentive for customers to use the system. The imminent introduction of the GST exacerbates this problem.

A further political problem arises from the fact that the GST applies to toll charges. City Link is a uniquely Victorian phenomenon, in that no other State has such an extensive (and expensive) toll road system.

In effect, Victorians, through the GST will be contributing to what is a Commonwealth revenue stream in vast disproportion to its accruing benefits. If the Labor Government is not concerned about this, electors certainly will be.

There is also the inflationary effect of this tax, which, again, will fall with disproportionate weight on the Victorian economy, including, by flow-on effect, its country regions. Like it or not the Labor Government will have to manage the political fallout of these consequences.

The question now is how? The means exist, if, as we hope, the Bracks Government and its independent supporters are not possessed of the same ideological drive to undiluted privatisation as their predecessors.

The Government could continue to do nothing and hope that none of what seem to be obvious problems solve themselves. It is unlikely that they will.

Or it could contest its predecessor’s contract and allow the courts to decide whether or not the company is restricting competition. The trouble is this outcome could place the company in a no-win situation. That, in turn, could undermine the viability of the project, which would attract massive hostility to the Government.


A more sensible solution would be to renegotiate the contract with Transurban. In view of the company’s dilemma, this may not be as difficult as Mr Batchelor apparently believes. In essence, the aim could be to abandon the idea of changing the present situation of public roads and negotiate new terms which could help Transurban.

Suppose, for example, the Government agreed to pay the tolls as presently recorded, on a monthly basis from revenue, having first levied a tax on fuel to pay for it. (Mr Kennett, it will be recalled, did this, though for different purposes.) The immediate benefit of this would be

1. to avoid the tolls including a Goods and Services Tax; and,

2. to would maximise the use of City Link without the need to make unpopular changes on existing public roads.

On first sight, country people would resent paying a tax seen mainly as of benefit to the city. But the toll could be structured to avoid that outcome by the country element of the tax being used exclusively for country purposes.

There may be other more workable solutions. If so, Mr Bracks and his advisers had better get to work on them. Time is running out.

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