Victoria: Cain-Kirner Mentality Brings East-West To A Costly End

SCANT REGARD for taxpayers’ money — with a reckless embrace of state debt, and indifference to Victoria’s investment reputation — saw the Andrews government piss almost $1 billion up against a post yesterday, finally axing Melbourne’s East-West Link road project for $339 million plus associated costs. The episode is reminiscent of the ruinous Cain-Kirner regime of the 1980s and 1990s. Other reminders of that time will soon follow.

One of the ugliest episodes of governance in Victoria since — well, since the Labor government that held office between 1999 and 2010 blew billions and billions of dollars on over-budget debacles and white elephants such as myki, the North-South Pipeline, and a desalination plant at Wonthaggi — has come to a costly end, with Premier Daniel Andrews announcing yesterday that his government had “reached agreement” with the consortium contracted to build Melbourne’s East-West freeway project to terminate the arrangement for $339 million in compensation.

I use the word “compensation” very deliberately; prior to the state election in November, Andrews claimed the contract “was legally unenforceable” and “not worth the paper it was printed on;” an Andrews government, he said, would not pay compensation to the consortium under any circumstances.

Yet his government — elected, he says, on a statewide mandate not to build the road — has nonetheless handed over more than a third of a billion dollars in compensation money: Andrews tried to spin the payment by saying the consortium was merely refunded the monies it had spent to date.

But had the contract been invalid, unenforceable, not legally binding or any other formulation of “void,” its beneficiary would not have been paid hundreds of millions of dollars for its termination.

No government — even a recklessly irresponsible one in the classic Labor mould, as the Andrews government is fast proving itself to be — shells out those sorts of dollars just to be nice. The contract was binding, and some form of settlement to compensate the consortium was required.

So I have no truck with Andrews’ claim to have “delivered” on a promise not to pay compensation: such a suggestion is an insult to the intelligence of a reasonable person, and is complete bullshit in any case.

There has already been countless articles written on this subject in the last 18 hours or so (see here, here, here and here for a handful of them) and part of the problem is that there are so many ways to sift and dissect the issues at play — not least, who is culpable and who is not — that I don’t profess to resolve such a discussion any more than the extra reading I’m sharing from the mainstream press does.

To me, the issue boils down to an evaluation of two aspects of the entire East-West disaster.

On the one hand, the former Liberal government of Denis Napthine — which signed a contract to build the road eight weeks before a state election — augmented that contract with a side letter guaranteeing compensation of up to $1.2 billion if the contract was invalidated and/or if the project was otherwise not proceeded with.

And on the other, the incoming Labor government wantonly abandoned a legally binding document to pursue a major infrastructure project that is sorely needed in Melbourne, and at a cost to taxpayers of almost a billion dollars — for nothing in return — once so-called “sunk costs” and other ancillary expenses associated with the project over and above the $339 million compensation payment are factored in.

There is a strong, and almost compelling, moral argument to suggest that Napthine’s government should not have signed a side letter to the contract, knowing as it did that Labor had pledged to tear the contract up anyway if it won office in Victoria; I have been speaking to a few legal people around Melbourne over the past few months, and the consensus seems to be that even if the side letter did not exist, the consortium would still have eventually received compensation anyway: by the messy, protracted and potentially much more expensive route of litigation — possibly for years — as it pursued the state of Victoria through the Courts to obtain recompense.

In that sense, the fact there was a side letter at all may, ironically, have saved time, money, and further damage to Victoria’s reputation as a safe place to invest. But should that letter have been signed? On face value, probably not.

But I think it is necessary to consider the political imperatives faced by the Napthine government in any assessment of its decision to sign a side letter to the contract, rather than moral considerations, because whilst I readily admit the whole matter of the side letter bothers me greatly, it is the political aspects of its existence that are the key to understanding why things have played out as they have.

And yes, time to bash the ALP.

“Modern” Labor, whenever it finds itself in opposition these days, has adopted an explicit strategy of preventing conservative governments from governing where it can in any way possible, at any cost, and irrespective of the damage it causes in any way: be that to the Liberal Party, institutions of governance, the reputation of Parliament, or collateral damage to what ought to be respected pillars of the community.

One look at the present Senate — where the ALP under federal “leader” Bill Shorten heads up an effort to defeat any government bill that might undo profligate spending from Labor’s last period in office, or repair the damage to the budget that was caused in the process — illustrates the point: obstruction to the point of rendering the Abbott government powerless to govern is the obvious objective.

The use of health and emergency services workers (or union ticket-holding impersonators of them) in Victoria and Queensland to help destroy the legitimacy of conservative governments in those states is another pointer to the same strategy.

And far from simply opposing (as it claims) and working to advance its case for a return to government at the ballot box, Labor these days embodies the obscene mantra that if it isn’t elected to govern, it will nonetheless see to it that its opponents are prevented from doing so until its strategy of strangulation kills them off.

Where this ties into the East-West Link and the charade over compensation that was played out yesterday comes relates to the idea that governments in Victoria are elected to govern for four years: not three years and nine months, or some other arbitrary period deemed by the ALP to represent the end of an effective term in office where the Liberal Party is concerned.

Labor has complained that the Napthine government signed contracts to build the East-West Link without taking it to an election first, and that is right; but Victorians had elected the Coalition to govern for four years in late 2010, so the decision to commission the road was wholly appropriate.

In any case, Labor can ill-afford to be making such arguments when its own federal government, in 2010, introduced a carbon tax after an explicit election promise not to do so.

And Labor itself won state elections in Victoria in 1999 and 2002, in part, with a promise to build the Scoresby Freeway in Melbourne’s outer east without tolls…

…and then unilaterally proceeded to build the road as a tollway anyway, calling it “Eastlink” instead and trying to argue that it was a different road project altogether to justify the deception, so arguments from the ALP of this nature should be dismissed with the contempt they deserve.

And it’s not as if the Coalition exhibited undue haste in commissioning the East-West Link, or could be tarred as unduly partisan in doing so, for an infrastructure audit commissioned by the Labor state government in 2008 identified the need for (and recommended) a road link between the Eastern Freeway at Clifton Hill and the Western Ring Road at Laverton, interconnecting with CityLink along the route.

This link — the East-West Link — was adopted as a project by Labor before it lost office under John Brumby two years later, and remained ALP policy until Andrews announced in September last year that his party would not build the road if it won the state election in a desperate attempt to stop the Coalition signing the contract to do so.

In other words, Andrews’ tactic was to bully the Coalition out of governing, and to bully it out of being responsible for starting work on a desperately needed piece of road infrastructure: Melbourne is grinding to a halt, as population growth sees tens of thousands of additional cars pour onto a road network each year that has been largely unchanged for a decade.

But in truth — not that any Labor figure will ever say so publicly — this stunt (which is all it was) was aimed solely at sandbagging four inner-city Labor electorates at risk of falling to the Communist Party Greens; there is no credible research into voting at the November state election that suggests the East-West Link was even a contributor to Labor’s victory, which it owed more to the havoc created by miscreant MP Geoff Shaw in a finely balanced knife-edged Parliament and to the reprehensible emergency services campaigns.

So there you are: for the eventual cost of some $900 million in sum, Labor held onto the seats of Northcote, Brunswick and (only just) Richmond, whilst losing Melbourne to the Greens anyway.

And that, if you live in Melbourne, is what your taxpayer money ultimately is going to pay for. There sure as hell won’t be a road. It’s a hell of a price to pay just for that.

In this sense, the perfectly legal side letter to the contract to build the road becomes understandable, if not entirely desirable or even defensible; when it is remembered that the East-West Link was only ever abandoned as a priority by the ALP to save a few seats, to the ongoing and compounding detriment of hundreds of thousands of road users further afield (and domiciled mostly in Liberal-held electorates) the moral outrage of Andrews and his Labor Party over the contract, the side letter, and the concept of the road at all is reduced to nothing more than cynical and negligently misleading partisan blather.

And on balance, it points the finger of blame squarely at the ALP for the waste of hundreds of millions of dollars on a road that isn’t going to be built: taxpayers will get nothing in return for their hard-earned, and as much as Andrews has played a game of smoke and mirrors by arranging for other funds associated with the axed project to be diverted to other schemes, the hard reality is that Labor has pissed almost a billion dollars up against a post for nothing.

Fair-minded Victorians (and observers elsewhere) can and should be aghast at the eerie similarities of this episode to some of the worst excesses of financial mismanagement under the Labor government of John Cain and Joan Kirner more than a generation ago: then, state-backed enterprises such as Tricontinental and the VEDC played fast and loose with Victorians’ money under the auspices of picking winners in new industries.

There were none, of course, and the financial collapses presided over on Labor’s watch left the state tottering on the brink of bankruptcy, until Jeff Kennett’s Liberal government spent most of the 1990s fixing the damage.

The comparison gains additional currency when it is pointed out that as part of its settlement of the East-West issue, the Andrews government has taken on a loan of some $3 billion from the consortium for reallocation to “other projects:” and this lack of transparency, coupled with the transfer of billions of dollars in debt from the private sector to the state, should ring alarm bells in the minds of Victorian voters.

And the Andrews government is soon to shell out another half a billion dollars for no return, this time to fix the mess it made of a botched tender for the state’s lotteries when it was in power under Brumby, in a mess presided over (in a delicious irony) by Andrews himself when he was gaming minister.

There are other financial bombs already primed by this government waiting to explode, but even the half-billion dollars in compensation for the lotteries debacle and the $900 million wasted on East-West means Labor has already taken $1.5 billion and more or less flushed it down the toilet — in addition to increasing state debt by $3 billion at a stroke — in less than six months in office.

At the bottom line, the Liberal Party emerges from the East-West quagmire smelling less than fresh, and deserves some criticism for the manner in which it went about commissioning a much-needed infrastructure project that will now have to wait, at the very minimum, for a change of government before works can even commence.

But the real villain is the ALP, with its brutal and uncompromising refusal to accept the verdict of the electorate when it loses, and the vicious tactics it uses to seize power at literally any cost — and yesterday’s events neatly proved it.

It seems any lessons the ALP learned from the train wreck it presided over in the 1980s and early 1990s have been lost, for the methods and outcomes of that time are well and truly back in evidence in the state of Victoria.

To the detriment of anyone living in this fine state (and, regrettably, to others in Australia who are adversely affected by what happens south of the Murray River), the necrotic, pustulent political ghosts of John Cain and Joan Kirner are alive, thriving, and again walking the corridors of power in Spring Street and Treasury Place, reincarnated in the form of the Premier of Victoria, Daniel Andrews.

The events of the past 24 hours show that if Victoria is to avoid being once again bankrupted by a Labor government, Andrews’ defeat at the state election due in three-and-a-half years’ time is crucial.

The imperative for the Liberals to win next time got that bit more urgent yesterday. The red ink in Victoria is spreading fast.

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2 thoughts on “Victoria: Cain-Kirner Mentality Brings East-West To A Costly End

  1. Politics is alive and certainly kicking. Napthine signed the East West contracts, weeks out from the election, quite probably in an attempt to wedge Andrews. Andrews (who clearly saw the wedgie coming) committed to ‘tearing up’ the contracts if elected (despite previously supporting the road). He was elected. He (virtually) tore up the contracts. Technically, no compensation has been paid – the consortium is able to keep money already paid, but nothing further will be handed over. So $339 million bought us (taxpayers) a proposal and that’s about it.

    Then of course there’s the desal plant. We’re currently paying $600 million a year to NOT use it. The stupidity is stupefying.

    And now Dan the Man reckons we should rip up Swanston St for a couple of years, to build a rail tunnel. Odds on the number of years that will take?

    And, to put the cherry on top, Dan’s now talking about fast tracking an undefined roads project which might be announced in the coming weeks. And that’s after he sniped at Napthine for not taking the East West Link to the polls.

    Ah yes. Politics is alive and toxic.

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