It does not matter how former state treasurer Michael O'Brien tries to frame his explanations for the side letter he provided to the East West Link consortium. However he tries to justify it, the guarantee remains one of the most expensive and cynical political indulgences this state has seen. It may end up costing Victorian taxpayers more than $1 billion – a potentially staggering windfall for the commercial entities, led by Lend Lease, and a sum that could have been directed to countless other essential services in this state.
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Two things are deeply troubling about the conduct of the Liberals in this. First, this appears to be the second time that members of the former government have released documents that are, properly, the property of the state. In December, when the new Andrews government was about to release batches of documents detailing the Napthine government's justification for proceeding with the $6.8 billion toll road, a selected portion of the documents was released to a media outlet before the embargo.
Now, Mr O'Brien has taken it upon himself to release the side letter that he signed with the consortium on September 29, plus legal advice from commercial silk Allan Myers, QC. The release of such documents by the former administration goes against convention and raises questions about what other documents have been retained by the Liberals.
The big question, though, is why Mr O'Brien and the Napthine government committed Victorian taxpayers to such a fundamentally weak deal. The side letter ensured that the state of Victoria would pay compensation to the EastWest Connect consortium – potentially representing expenses committed and the cost of the lost opportunity – if the road construction contract was terminated. That compensation would be payable even if a court was to find that the contract was void or otherwise unenforceable. In short, Mr O'Brien left behind a very expensive bomb.
In the side letter, Mr O'Brien claimed the consortium had warned that it could not sign the construction agreement and move to a commercial close on the deal "in circumstances where the ability of the state to sign the project agreement has been questioned by others". This appears to refer to the legal advice Labor obtained while in opposition, which argued that the contract would not be enforceable, and to Daniel Andrews' vow that the road would not proceed if Labor won government at the November election.
The legal advice obtained by the Napthine government, though, argued that the building of roads was part of the normal conduct of government business and the size of the contract was not relevant to that consideration; the Linking Melbourne Authority had power to enter into big contracts on behalf of the state; and the terms of the contract would be enforceable.
Both major political parties have behaved poorly in this venture. Victoria is now in an extraordinary and invidious position. Premier Daniel Andrews made a reckless decision when in opposition that a Labor government would not build EastWest. His extravagant and ill considered vow is now colliding with the realities of responsible government.
The absurdity of the situation is that the state may have to pay as much as $1.1 billion for nothing when, as Prime Minister Tony Abbott has noted, for a few hundred million dollars more Victoria could get an injection of infrastructure funds from the federal government and have a major new road built. Dare we suggest Mr Andrews might recognise the financial realities and reconsider Labor's position on this? To dole out more than a billion dollars and have no improvement in transport infrastructure would be utterly irresponsible.
