Victoria’s Department of Treasury and Finance released its costing yesterday of the Greens promise to extend 17 trams lines in Melbourne.
The party costed its proposal at $840 million, based on an assumed cost of $15 million per kilometre.
However Treasury says that’s just the cost of laying the tracks and doesn’t account for additional items like intersection works, substations, terminuses and stops.
Treasury’s estimate of the total cost is $1,360 million, based on $24 million per km. That’s a whopping 62% more than the Greens calculation.
I don’t take Treasury’s estimate at face value though. The whole costings process looks rushed and cursory; it appears to be more a compliance exercise than a serious analysis.
Which is hardly surprising given the time Treasury’s been given. The Government has provided 82 promises for costing since the election campaign began, 36 of them only in the last week.
The Greens delivered four promises for analysis on 13 November (including this one) and another six yesterday.
Treasury’s review of the Greens tram extensions proposal is skimpy to say the least. There are only 150 words of what could charitably be called analysis. This sort of superficial analysis gives the political parties the upper hand.
Its estimate of $24 million per km still looks awfully low compared to other places. The new Gold Coast light rail line which opened earlier this year cost $123 million per km to build.
The estimated cost of Sydney’s proposed CBD and South East light rail line is $183 million per km (the total cost was revised from $1.6 Billion to $2.2 Billion last month). The cost of building Canberra’s proposed Capital Metro, excluding operating costs, is $52 million per km.
That’s undoubtedly in large part because there’s a glaring omission in Treasury’s (and the Greens) estimate of cost; there’s no provision for the cost of acquiring and stabling additional trams.
The Greens’ plan involves building an extra 56 km of track; Melbourne has 250 km of track at present so that’s a 22% increase. Building all that extra track would be pointless if additional rolling stock isn’t purchased to make use of it.
The Greens attempt to counter this omission by portraying the promise as a series of very small or minor ‘fixes’ that don’t require additional trams. But that’s simply not true.
Seven of the proposed extensions are 4 km or longer and three of those are 6 km or longer (Vermont Sth to Knox is 7 km). Only three are less than 2 km.
This isn’t a program of minor tweaks. To put it in context, the new Gold Coast light rail line is 12 km. The planned Sydney and Canberra lines are also each around 12 km. (1)
At present, Melbourne’s fleet consists of almost 500 trams. If the 22% increase in track requires (say) a 10% increase in rolling stock, a further 50 trams would have to be purchased.
As it happens, Treasury released today its costing of another promise by the Greens; to provide 50 additional trams to relieve overcrowding on the existing network.
The Greens estimate of the cost is $350 million including maintenance. However Treasury says the cost of the 50 additional trams is $880 million.
One defence of the Greens costing is the claim that Melbourne can build new tram lines at lower cost than other places because we already have a very large network. There’s probably something in that but it’s hard to believe it explains a fivefold difference relative to the Gold Coast or a sevenfold difference compared to Sydney.
In any event Sydney has had light rail since 1997 (now extended to Dulwich Hill). And it’s strange the same principle doesn’t seem to apply to rail.
After all, Melbourne has historically had a pretty extensive rail system compared to Perth’s; and yet, as the Greens frequently point out, the cost of building new lines in the west is much, much lower than it is here.
In responding to the release of Treasury’s costings, Greens leader Greg Barber emphasised that Treasury says “efficiencies in the packaging and procurement works” may reduce the cost of the Greens package.
That might well be the case, but it’s at the margin. This argument is really just about saving face; and it could as easily be argued that having 17 separate locations raises the cost.
Another response to Treasury’s higher figure is that it doesn’t matter because the benefits from the extensions will still exceed the costs. Perhaps, but no one knows that because the requisite analysis hasn’t been done by the Greens or anyone else.
Political parties have a big incentive to understate the cost of promises because they want to appeal to various sectional interests; so they try to fit as many initiatives as they can within a plausible global budget.
That incentive is much less constrained in the case of minority parties. If you have no chance of winning office you won’t be called on to account for your promises; there’s no penalty for promising what can’t be delivered.
Propagating fictitious costs isn’t good for our political culture. The Greens and other political parties can and should do better.
Unfortunately, the mainstream media doesn’t have the interest in, or it seems the capacity to, examine in depth the reasonableness and honesty of the claims made by all political parties about the cost of their proposals. (2)
And the process of having political promises reviewed by Treasury during the election campaign looks seriously flawed in Victoria.
Sydney’s Inner West light Rail line from Central station to Wentworth Park, built in 1997, was 3.6 km. It was extended 3 km to Lilyfield in 2000. Earlier this year it was extended by 5.6 km to Dulwich Hill.
Update: As of 10:00 am Friday 21 November, The Age has not even reported on DTF’s costing of Greens’ promises.