Towering behind them was The Grand Organ, the world’s largest organ. As they rose to address the Labor Party faithful that day at Sydney Town Hall, Bill Shorten and NSW Labor leader, Luke Foley, may not have known it but beneath them lay ten thousand bones.

The Town Hall was built on top of Sydney’s oldest cemetery, the Old Sydney Burial Ground, in the 1880s. It was a fitting scene then for the annual Labor conference as this is where, that day, policy came to die.

The Labor and the LNP are neck-and-neck heading into the NSW election next March and Labor’s Luke Foley has been keeping his head low, especially when it comes to WestConnex, Australia’s largest infrastructure project. Instead of laying down anything of substance, Labor has embraced “small target” politics, given the government nothing to swing at and let Premier Gladys Berejiklian cop the blunders and all the bad press aimed at Sydney voters fed up with traffic congestion yet leery too of paying more road tolls.

Now that Labor’s big day had arrived, Bill Shorten locked in some evening news headlines with a $3 billion commitment for a Sydney Airport rail link, but what of state Labor and WestConnex; would Foley finally grasp the nettle?

Does Labor support the proposed F6 motorway to Sydney’s south or the construction of the Western Harbour Tunnel to the north? What about the Sydney Gateway? Would it continue to build the Rozelle Interchange if elected in March?

“There is a place for toll roads,” declared Foley, which at least confirmed the tepid policy position on WestConnex. Then, as protesters milled about below the Town Hall steps calling for the whole project to be dumped, came the surprise: a large transfer of wealth from NSW taxpayers to motorists in Western Sydney.

Foley had resorted to the old Roman empire formula of bread and circuses. He announced a cash-splash, promising cash-backs for tolls on the M4 to Homebush and M5 West as long as tolls existed. A forever cash-back.

Highway Robbery – the cuff-linked kind

Not to be outspent by the government which had not even considered mass transit as an option but committed its citizens to a whole new world of toll-pain, Foley also promised to keep the registration rebate which is cost taxpayers $100 million in its first years. It was the poker equivalent of “I’ll see you and raise you”.

The cash-back promise will be popular with private motorists who use the M4 and M5 but as M4 tolls rise by more than four per cent a year, the cost to the public is enormous. We will get to these costs in due course, but what else would Labor do about WestConnex?

Until now, the Opposition, and especially Shadow Minister for Roads Jodi McKay, had been highly critical of the government’s lack of transparency and the ramifications of the project for those communities affected, but they had little to say about what Labor would actually do if it inherited WestConnex.

There is plenty Labor could do to curtail WestConnex Stage 3 and its northern and southern extensions, the Western Harbour Tunnel and the F6. Stage 3 has received planning approval but is not yet fully designed. It includes the Rozelle Interchange which will be notoriously hard to build, exposing the public to more financial risk.

As the extensions are only at a very preliminary planning stage, they could easily be cancelled by an incoming government. The privatisation process is underway but not complete. Two bidders, Transurban and IFM Investors are preparing to launch their bids at the end of this month.

Would there be uncertainty for the two bidders? More clarity for those communities affected by Stage 3? The Conference provided the key moment to deliver this clarity. Instead, it appears to have delivered a better option for the private toll operators than even the government presently proposes.

WestConnex: when four tollroads become ten

The party itself has been split over the issue. In the lead up to the conference, Labor’s Inner West Environment Action Network (LEAN) and several inner city branches put forward a motion for a robust policy. This left no doubt that a substantial number of Labor grassroots members believed the party could take a strong stand.

LEAN policy opposed the F6, Western Harbour Tunnel and the Northern Beaches Link. It committed a Labor government to an “evidence based approach” to “cleaning up the mess” created by Stages 1 and 2 and a pause to work on Stage 2 until it could be “demonstrated that the benefits of completing the road exceeds the cost to complete”; and a review of reengineering options for use by public transport.

It also committed to “fighting to keep the Sydney Motorway Corporation in public hands and no bail-out for failed toll roads”. In a secretive process, the government shifted WestConnex into a private company Sydney Motorway Corporation (SMC) and plans to sell 51 per cent to the best bidder.

But any hopes of an “evidence-based” approach were dashed by events at the conference. The LEAN motion never made it to the floor. The conference papers simply ‘noted’ the motion and other anti-WestConnex motions put forward by Inner Sydney branches and referred instead to “Agenda Item 1.”

Agenda Item 1 provided 11 reasons why Labor condemned the Berejiklian government including “secrecy and lack of transparency that has marked the entire project”, selling the SMC; cost blow-outs to $18 billion in 2018 with the “likely final costs to be substantially higher” and “refusal to ensure compliance by construction contractors with the project’s conditions of consent, which resulted in harmful noise levels, and traffic and air pollution impacts on local communities.”

So, if that is the preamble, surely if the project is that bad, then Labor would do some things to make it less bad.

The actual policy commits Labor to prioritising investment in public transport in western Sydney, delivering the Western Metro, as the highest priority and “mitigating the enormous traffic impacts that will be imposed on local streets when stages 1 and 2 of the Westconnex project are completed and opened”. Even Labor’s previous opposition to Stage 3, or a halt to Stage 2 unless it goes to Port Botany, appear to have disappeared under the policy bus.

Later in the day, Federal leader Bill Shorten committed Labor to $3 billion for Western Sydney rail, associated with the new airport and “aerotropolis city” being planned by Lucy Turnbull’s Greater Sydney Commission and then $3 billion to accelerate the Metro West project.

WestConnex sale looms as bidding duel narrows to Transurban, industry funds

Back to cash-backs. These mean tolls remain but private motorists get cash back as long as tolls remain. The tollway owner gets the profits and the taxpayers who have already funded a big slice of the construction of WestConnex M4 East and New M5 tunnels, cough up to ease the pain for motorists.

As Luke Foley promised, it’s a simple arrangement between a Labor government and M4 car users — you pay the toll, send us the bill and we’ll pay you back. In the first year, Labor’s M4 cash-back will give back $193 million to Sydney’s motorists. It will be fully funded by savings measures that “tackle the Gladys Berejiklian’s waste”.

The waste was unspecified but will mean cuts of some sort and that’s just the first year.

Foley’s promise is aimed at winning back the seat of Penrith from the Minister for WestConnex, Stuart Ayres. It’s intended to compensate for the unfairness of Western Sydney drivers paying for Stage 3, long after the M4 widening is paid for next year. It would be all very reasonable if the cash-back was short-term and Stage 3 was not built but Foley is not saying he would halt Stage 3.

The cash-back will stay for as long as they tolls stay on the M4 and M5 West, which could be until 2060. So what will Labor’s cash-back policies cost?

The tolls increase at 4 per cent annually which means that by 2060 the M4 cash-back would cost $936 million or nearly a billion dollars.

The M5 cash-back cost – which originally would have been lifted by 2026 but will continue as part of WestConnex – will also increase in cost. In 2016, the cash-back already cost $100 million that was paid to Interlink roads.

The registration rebate, which covers any private NSW motorists who spend more than $25 a week in tolls, will cost $100 million in the first year and far more in future years, as more drivers pay more tolls.

Unless Labor puts a halt to WestConnex, there are large additional costs for the tax payer.

The two bidders for the Rozelle Interchange will be ensuring the public assumes responsibility for the unknown costs of building an underground interchange in a dense urban area, an engineering feat not previously achieved.

It would be interesting to know if Labor has even costed the likely financial risk of threatening to pull the plug on WestConnex rather than heading into a budgetary nightmare that could compromise other spending plans.

Which party then is helping SMC bidders the most?

To consider the impact of Labor’s announcements, we need to consider the impact of tollways on traffic flows and choice of mode of transport. There are several well rehearsed “evidence based” theories which can guide us here.

Transport expert and actuary Ian Bell writes:

  • M4 cash-back will create higher traffic flows. That is well documented by transport expert Dr Michelle Zeibots of UTS and even by Jacobs’ study on the Stage 1 M4 widening Stage 1 which predicted that the tolls would immediately shift traffic onto Parramatta Road. This will impact both the widened section and even though seemingly not applying to the M4 East, that tunnel will get a spin-off through more affordability overall.
  • By Mr Foley promising that the M5 will also have cash-back as long as tolls exist on it, the higher traffic flows will continue after 2026, which Macquarie’s research report did not anticipate (they projected traffic on the M5 West to be constrained by what they predicted to be the removal of cash-back when the existing tolling concession was taken over by SMC late in 2026. With the cash-back, traffic would be unlikely to choose alternative routes.
  • Cash-back will interact with Premier Berejiklian’s “light bulb idea” of a registration rebate for those private vehicles incurring more than $1,300 per year in tolls. Foley is committed to keeping this at a initial cost of $100 million a year. This will mean even more subsidy by government to motorists and hence greater induced demand, all other things being equal.
  • On the other hand, if a Foley government accelerates the delivery of Metro West, then it may affect demand for the M4 earlier than with NSW Infrastructure and Transport Minister Andrew Constance as Transport Minister; that deducts a quantum from SMC bids but we don’t know just how to guess the size of that effect given all the other uncertainties of traffic modelling and even the paucity of existing traffic data.
  • Shadow Minister Jodi McKay has hinted that Labor might be open to more stations on the Metro West than Constance has implied he was targeting. Nothing solid from either side on that issue, but clearly with more stations and a slower trip there is less mode shift theoretically of long-distance drivers but perhaps due to greater convenience, greater mode shift from tollway to the metro for the shorter trips. On the other hand, the tolling regime with its high Flag Fall imposes a bit of a price barrier up against the shortest range of trips.

Conclusion

“On balance, best guess is that the sheer financial weight of the cash-back subsidy to drivers, especially for longer and frequent trips, would see SMC bidders favouring Labor policies. That’s if they could secure them, as we are told the bids are due soon right in the heat of this upcoming uncertain pre-election period,” says Ian Bell.

“There is a mish-mash of factors for a client putting billions on the table. SMC bidders and their advisors should be studying Professional Indemnity policies very carefully and remembering AECOM v RCY and ARUP v BCS court cases. These cases followed the collapse of Brisbane tollroads and led to hundreds of millions in out-of-court settlements.”

For their part, Labor party members who had hoped their party might offer something to communities opposing WestConnex, now face the prospect of going into an election with a policy which is actually is more pro-WestConnex than that of the Gladys Berejiklian government which has been so thoroughly criticised by Labor.

How much have hidden industry influences played out?  Networking, lobbying (including by the industry Super funds which will provide the financial backbone to the bids), and political party donations? Thanks to the lag in reporting donations, we will have to wait until well after the election to see.

What is certain is that taxpayers, under both major parties, face high uncertainty on project costs, high tolls for decades to come, and the likelihood of a high transfer of wealth from the public to the private sector.

WestConnex: what NSW must learn from Victoria and Queensland