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Ryan Smith MP, Member for WARRANDYTE

Special Minister of State

Audit Amendment Bill 2017

6 April, 2018

I rise to speak for the coalition on the Audit Amendment Bill 2017. This bill is one that, contrary to what the member for Broadmeadows said earlier in his contribution about it being a commitment to the previous Auditor-General by this government, in fact has been in its stages over the last 10 years probably a commitment by the former Labor government, the Brumby government, about getting some formality around the operation of the Auditor-General's office. It certainly was an ongoing exercise during the coalition's time in government, and it has come to its conclusion under this government. I am sure the Auditor-General, as I have spoken to him, is pleased with the content of the bill, and certainly the opposition does not have any problems with this bill. The Auditor-General, as I said, is comfortable with it, and in our support of the independence of the office of the Auditor-General the opposition will certainly be supporting this bill.

The bill amends the principal act that provides for the appointment of the Auditor-General and the office staff; the circumstances under which an Auditor-General prepares the specification for an audit; who the Auditor-General may audit and how that audit is conducted, including the manner in which to deal with matters of confidentiality; and powers of entry, which the Auditor-General's office had not had occasion to use but believed that if they did need to use them, they would have the powers to do that — this legislation formalises those powers. There are some elevated penalties for various obstructions of an audit, and there is a legislated ability to share information with other Australian jurisdictions. It also covers off the manner and form in which an audit is made. I guess it is to that particular issue, covering around clauses 56 to 65, along with the broader clauses and provisions of the bill, that I will turn my attention.

The Auditor-General's office provides a great service to Victoria in that it enables the public to cut through the spin of government to make sure that the propositions that are put forward by government and the outcomes that the government says it is attempting to reach, or even claims sometimes that it has reached, are overseen. The Auditor-General's office basically makes sure that the operations of the public service, the departments and various agencies that make up government, are held to account, making sure that the claims by government, as I said, are audited and investigated and that the reality, which is often very different from the spin, is put to the public.

I would like to refer to a number of Auditor-General's reports that have cut through the spin — and certainly the spin of this government over the last three years — in a whole range of different areas. I will show over the next 20 minutes that the spin from and the culture of spin of this government have been put on show for what they are across a range of portfolio areas and a range of topics.

I will start with the very first mistruth of the government, which came to office saying it would rip up the contract for the east–west link and made it very clear to the public at large that the advice that the government received was that the ripping up of that contract would not cost a dollar. That lie was made very clear. Certainly as I and my colleagues move around Victoria — and I have no doubt at all that as members of the government move around Victoria they find the same thing — people, in most cases unbidden, actually raise as a waste of money the issue of the $1.3 billion that was spent to not build a road.

Despite the claims of the former leader of the opposition, the now Premier, that the contract would not cost a cent to rip up, the Auditor-General actually said in a report entitled East West Link Project in December 2015, and I quote:

… the decision to terminate was made without full consideration of the merits of continuing with the project.

Even though the opposition at the time said that the project was a dud project, the reality is, as I said, the Auditor-General made it very clear in his report that in fact the now government had done no such informed consideration that the project was not one that should be continued. The Auditor-General went on to say:

Failure to properly assess the benefits of termination against revised costs and benefits of continuing the project means the government —

and that means the government that came into office
in 2014 —

was deprived of comprehensive advice to assure it that termination was the best use of public funds.

What the Auditor-General was saying there very clearly to the public was that the decision by the government to rip up that particular contract and spend $1.2 billion of taxpayers money on nothing was a political decision and one made without full comprehension of the ramifications of that. The Auditor-General went on to say:

Terminating the …

east–west link —

project involved the expenditure of hundreds of millions of dollars for little tangible benefit.

I think that is something that, as I said, the general community in Victoria understands over three years later — that there was no gain at all for throwing that money away. The Auditor-General went on to say:

Following final settlement of outstanding costs —

and this goes back to 2015 —

the state will have incurred costs in excess of $1.1 billion.

That $1.1 billion has blown out by an extra $200 million since then.

The Auditor-General's office, as I said, can cut through a lot of the spin about what the now government had claimed in the past when in opposition and has continued to claim when in government, and it was on show for all to see that the waste of public money was something that was done with, as I said, very little consideration of the ramifications. That money certainly could have been spent on so many other things. Indeed the total cost to the state of this project was only ever going to be about $2 billion. The fact that more than half of that money was spent on nothing is a real indication to the Victorian community that this government has very little regard for the money that they take from the community.

The government also likes to point to the side letter in their conversations. The importance of that side letter and the reality of what it was and what it indicated to the community about the position that the former government took is very clear in this particular document, where it says:

The only scenario under which the side letter can be argued to have created additional exposures for the state is one in which the state did not have the power to sign the contract. Legal advice obtained by government both before and after …

I say after particularly because it is the current Labor government that received advice that there was never going to be an instant where the state did not have the power to sign the contract. The importance that the now government puts on the exposure that the side letter gave to the state is again one that the Auditor-General showed was a complete fabrication and completely untrue. It might work well with members calling across the chamber and it might work well from the speaking notes that senior members of the government give to the backbenchers, but the reality is that the Auditor-General, through his investigations and reports, actually showed that it was of little consequence whatsoever.

If I can turn to another Auditor-General's report, this one entitled Maintaining State-Controlled Roadways, which was issued in June 2017, we can see what happened to the government's promises to spend an additional $1 billion over and above the money that is usually spent on roads. The government claimed they would spend an extra billion dollars on country roads and indeed a further extra billion dollars on outer suburban roads. However, after many Public Accounts and Estimates Committee hearings, Legislative Council Economy and Infrastructure Committee hearings and again in the Auditor-General's report it has been shown that despite the money that the government claimed they would put forward, over three years later country communities have not seen any sign of it having been spent. If you listen to the member for Polwarth or the member for South-West Coast, you know that the deteriorating nature of the roads is one that is a constant irritant for people in the country. It is probably more than an irritant, but it has become dangerous to the point where the government has lowered speed limits from 100 kilometres per hour to 60 kilometres per hour in some areas because the roads are simply not good enough to drive on.

In this particular report the Auditor-General said:

The increasing proportion of the state road network in very poor condition presents a growing risk to public safety and increases road user costs.

The Auditor-General is very clear on the next line:

Not enough funding is allocated to road maintenance to sustain the road network, but VicRoads also cannot demonstrate clearly that it is making the best use of its existing maintenance funds.

So, even with the paltry amount that the government is allocating towards maintenance, the Auditor-General makes it very clear that money is not being spent in a way that represents best value for money.

The Auditor-General goes on to say:

Its approach to road pavement maintenance is reactive, with maintenance generally being carried out only when it becomes critical. Targeted early intervention to prevent roads from needing more costly and extensive maintenance has been limited. This approach has not kept up with the rate of deterioration of road pavements across the network.

As the complexity and cost of maintenance increases, less can be done using the available levels of funding, resulting in an increasing maintenance backlog and lower levels of service for road users.

Finally, he goes on to say:

The proportion of roads in 'very poor' condition is increasing in all regions. In some regions, the proportion of road pavements in 'poor' condition has also increased. The two metropolitan regions have had a considerable decline in road pavement conditions since 2015.

As I said, country members hear constantly from their communities that road maintenance is deteriorating. The government may say that they are spending money in this area, but they are patently not. The Auditor-General has made that clear.

The government has also talked about road safety. The issue of wire rope barriers has come up in recent times, both in this place and out in the community. The government talks about safety. I can tell you that my three years as shadow minister for roads and infrastructure certainly taught me that if you want to save the lives of people who travel on those roads, whether they be locals, tourists or visitors from the city, the best way to do so is to make sure that the roads are kept in good condition. Wire rope barriers are of course a help, and this side of the house has never said otherwise. We believe there are certainly many circumstances where wire rope barriers can assist in saving lives, but, as was pointed out in question time today, we will put the proposition forward that a blanket rollout is not the way to go.

But that aside, road maintenance is a very important part of ensuring people's safety. Having been on some of those roads out in the Macarthur-Myamyn area, I can say that the roads are about the worst I have ever seen. I am sure that my colleague the member for Gippsland South will also agree that the roads out in the east also leave a lot to be desired. The Auditor-General needs to be listened to by this government and more funding for road maintenance should be on the table.

The next Auditor-General's report that I want to have a look at is entitled Operational Effectiveness of the Myki Ticketing System. Again, the amount of spin that has been put out about Myki over the years, certainly going back at least two parliaments ago, by Labor governments certainly has little peer. The Myki ticketing system has become synonymous with government failure in terms of rolling out projects and in terms of time and budget blowouts. The Auditor-General again made it very clear in their assessment of the Myki project that Labor simply cannot manage major projects. The Auditor-General said about the Myki ticketing system:

It was expected that Myki would deliver around $6.3 million to $10.8 million per year in economic benefits to the state …

He goes on to say:

However, there have been significant implementation issues with the system. Specifically, the time taken to design and deliver it more than quadrupled from the original expectation of just two years to in excess of nine years. This has led to significant unanticipated additional costs — resulting in a $550 million, or 55 per cent, increase on the project's original budget.

The operational performance of Myki has also attracted significant complaints and criticism from users. In particular, overcharging has been, by far, the single most common complaint from users about Myki since its rollout.

Not only did it represent a significant cost to the state or show for all to see that the Labor government was unable to roll it out — not only were the economic disadvantages an issue — but also commuters and travellers found it significantly difficult to use.

The Auditor-General said the Myki project had an:

… overly ambitious and vaguely specified initial project scope …

These deficiencies meant the state was not in a position to assure that it was paying for a ticketing system that met clearly articulated and agreed performance standards …

Certainly we had to deal with Myki issues in our term of government, and the Auditor-General acknowledged the progress that we made on it when he said:

The original Myki governance arrangements were previously examined by —

the Ombudsman, the Public Accounts and Estimates Committee and —

… related internal reviews undertaken by the Department of Treasury and Finance in 2011 and 2014.

These reviews consistently found that the roles and responsibilities of key agencies initially charged with Myki's development were neither well-defined nor effectively implemented.

But it did say that in 2012, under the coalition government, Public Transport Victoria (PTV), which we established during our term and which was responsible for managing Myki and Victoria's public transport system, had actually led to improvements in the governance and contractual arrangements in place for Myki. Certainly under the Bracks and Brumby governments Myki was a project that had significant problems, but under our government we certainly attempted to make up — and, as the Auditor-General said, succeeded in making up — for a lot of those deficiencies. The functionality of this particular system seems to have gone backwards since then, and the Auditor-General again made it clear that it was a huge project that the government consistently mismanaged.

There have been other Auditor-General reports around the public transport system, in particular a report in 2016 entitled Managing the Performance of Rail Franchisees, which said that there were significant weaknesses in how this government through PTV oversaw the maintenance and renewal of assets leased to its franchisees under the current agreements, and a further Auditor-General's report from August 2017 entitled V/Line Passenger Services. Again, no doubt the member for Gippsland South and his country colleagues right across this state would attest to the fact that V/Line has been a real bugbear for country commuters. It has been a real problem in terms of its reliability, and you cannot blame the travelling community for feeling that they have been significantly let down by this government when it comes to V/Line.

While population growth has been a significant issue for Victoria — and certainly those on this side of the house have made a number of statements about decentralisation and population growth — this government, as the Auditor-General said, has done little to plan for that future growth of our population. In fact it says in this particular report:

V/Line did not —

I guess the government oversees V/Line —

foresee this growth or fully understand the causes of its poor performance because it lacked the necessary capability. It also lacked focus … on managing its assets.

So there has been little oversight of V/Line, and of course, as is the case with this government, it is the general population that pays the price.

The Auditor-General said:

V/Line has failed to meet key service criteria for the operational performance of its passenger services, as specified in its services agreement and in state budget papers …

During the current services agreement, V/Line has not been able to consistently meet punctuality targets for its train services.

Again, as I said, the community travelling out to the country understand that they are the ones who are left sitting on trains that do not go anywhere, having to deal with a constantly changing timetable or the reality of V/Line's performance that does not match the timetable in any way, shape or form.

I go forward to the other comments made by the Auditor-General in relation to V/Line:

Although V/Line internally tracks train loadings, it is not required to meet any specific standards.

The absence of a load standard in the current services agreement means we were unable to assess the extent of any load breaches or whether overcrowding is occurring.

There are some significant safety issues there that the government has not kept on top of, but it is indeed a positive thing that the Auditor-General is able to make the public aware of these deficiencies. One would hope that the government takes some advice from the Auditor-General's office and actually moves in the right direction, although I would be hard pressed to find too much evidence of the government actually admitting that these deficiencies that are clearly evident in these reports are actually happening. It is certainly a characteristic of this government to claim that every policy it has is perfect, every policy is beyond reproach and every policy is for the good of all Victorians, when it is plainly obvious to communities right across this state and through metropolitan Melbourne that they are being hard done by by the lack of oversight, commitment and ability of this government to deliver services correctly.

Going back to another issue that certainly was very prominent during my first term — some of the people in the chamber who were not here during this time may not be aware of the fairly robust conversations we had about the introduction of smart meters — former Minister Peter Batchelor was very excited about the benefits that smart meters would bring to the Victorian community. As the Auditor-General said in his 2015 report:

The 2005 business case anticipated a net incremental benefit of $79 million relative to a 2004 cost-benefit analysis for the rollout of interval meters. Key expected benefits of smart meters were to:

improve consumers' ability to monitor and control their electricity use, potentially allowing for cheaper and more efficient energy use.

You would be hard-pressed to find a Victorian who is lauding the fact that their power bills are going down. Certainly smart meters have not helped in that regard. It goes on to say in its conclusions in this report:

By the end of 2015, Victoria's electricity consumers will have paid an estimated $2.239 billion for metering services, including the rollout and connection of smart meters. The net position of the program has changed significantly since its inception, and there is now expected to be a substantially increased net cost to consumers over the life of the program.

If members had the inclination, they could certainly go back to Hansard for the 56th Parliament and have a look at what the coalition then talked about in terms of how the smart meter rollout was going to be detrimental to consumers. In fact pretty much everything we said and issues that we raised during that period — which were shunned by the government, who were blinded by the fact that the smart meter program would actually be a benefit to consumers by their own reckoning — have come to pass. The Auditor-General shows that while a few benefits have accrued to consumers, the realisation of the benefits is behind schedule and most benefits are yet to be realised. Over 10 years later we still have not seen the benefits, a large proportion of which former Minister Peter Batchelor and indeed the Bracks-Brumby governments said to Victorians were the reason for rolling out smart meters.

The Auditor-General also said:

There is a risk that the …

advanced metering infrastructure —

program's most recent 2011 estimate of a net cost … to consumers may worsen as costs are projected to increase and benefits remain decidedly uncertain.

I think those comments are a hallmark of the way this government operates, whether it is in this particular iteration that we are all living under now or in previous ones. They purport to be able to deliver great benefits to the state of Victoria and to Victorians, but time shows us that these benefits are rarely realised. When we look at Myki, the trains, the smart meters or the desalination plant, it is always the Victorian taxpayer who pays for the mistakes of a Labor government. It is always the Victorian taxpayer who pays for budget overruns.

We are seeing even now, and I am sure future Auditor-General reports will show us — as they recently did with the level crossing removal report that came out just at the end of last year — that because of poor planning and overstating what the government can achieve, we see cost blowouts that are now measuring in the billions. That might not mean much to those opposite, but it is in fact, I have to say, one of the reasons why I put my hand up to come into this place, because I cannot abide the waste of other people's money when I see multibillion-dollar wastage going to these projects. The government spruiks how great all these projects are, and in and of themselves they may be, but the management of them and the enormous cost they are imposing on the Victorian people — when they talk about projects costing a figure, you can just about double it because that is what the Victorian community ends up wearing.

I did mention the level crossing removal program, and I will turn to the Auditor-General's report. There is a quite a bit in this particular report, none of which the government has really responded to. But let me just quote from this report:

Contrary to publicly stated objectives, not all of the 50 level crossings selected for removal are the most dangerous and congested.

It is a good sound bite, isn't it — most dangerous and congested level crossings. But the fact of the matter is that it is just not true. The Auditor-General goes on to say that there are:

… risks to achieving value for money.

Well, that is no surprise. This is a Labor government after all. And:

These risks are compounded by an inadequate and delayed business case, and poor indicators to measure program benefits.

We have heard ministers and backbenchers alike get up here and spruik the advantages and great outcomes that removing level crossings will bring. I am not here to argue the case that removing level crossings is a bad thing. We support it — we support the concept of it, and indeed we began removing level crossings in our previous term. The ones that the government announced in its first few months of government are certainly ones that had already been budgeted for and started by the opposition, even though we have heard in this place that apparently not one — not one — was ever removed by the former government. That is a patent mistruth. But it has to make you worry as a Victorian taxpayer when you see that the Auditor-General, whom we hold up as an independent officer and whose role it is to objectively look at the performance of government, said that there is a risk that these level crossing removals will not achieve value for money and that:

These risks are compounded by an inadequate and delayed business case, and poor indicators to measure program benefits.

How can Victorians have any confidence in any major project that this government does when one of its signature pieces is billions of dollars over budget — we are talking several billion dollars over budget — and the Auditor-General says that the benefits of this project are not able to be realised, and in fact cannot even be measured. That is why we support this bill and why we support the office of the Auditor-General.

The government likes to talk about business cases and how important they are. They often talk about them at length. What does the Auditor-General say about the business case for the level crossing removal program? The business case was finalised in April 2017, almost two years after the program had commenced. How can you tell the Victorian people that this is a program that represents great value for money when you had not even written the business case when you started the project?

Again I say I am not opposed to the idea of removing level crossings, although this government has been shifty with the Victorian people, particularly through the Oakleigh electorate. Certainly the member for Frankston and the member for Carrum will also, I think, feel the backlash from their communities; they feel dudded by this government because they were promised one thing and were given another.

Maybe you can get away with giving the public an inferior product that is not what you said it was going to be, but I dare you to go out and actually tell your constituents — why don't you take this report out to your constituents and show them? — that it also does not represent value for money, that there is an inadequate and delayed business case, that there are no indicators to measure program benefits and that you started the program without actually having a business case. Why don't you go on to say that the departments and agencies that are involved did not assess the merits of the 50 level crossings identified for removal and that the business case does not include any analysis or rationale of why the 50 level crossings were selected.

We know why that is. Even though this Premier says often, 'We want to take the politics out of infrastructure', the selection of the particular level crossings was based purely on politics. If you want to have an argument about that, let us point to the Werribee level crossing, where four freight trains a day go through — the 'most congested level crossing'. The Auditor-General actually shines a light on that particular claim to show its complete untruth.

As I said, the Auditor-General plays a very important role, and again just flipping through this particular report, he said:

The cumulative cost of the program has increased by more than 38 per cent —

38 per cent! —

based on an initial estimate of $5–6 billion in 2015 — to $8.3 billion at July 2017.

That is a $3 billion cost blowout. I mean these guys just cannot manage money, and it is very important to have the Auditor-General, as I said, an independent officer who can look at these matters and put paid to the untruths, the claims, the spin, the shiny, glossy brochures that they put out and, apparently, the free food and Bollywood dancers that they have out there at openings. Let me tell you, nothing is free from the government. If you want to give people a free breakfast, someone is paying for it at the end of the line, and that is the Victorian taxpayers. It is like the old Roman adage about bread and circuses — you have to make sure that you keep the community distracted from the lie by putting some dancers out there and putting some supposedly free food on. But at the end of the day, for all the bells and whistles and for all the exhortations to the community that they look the other way — 'Do not look at what we're actually doing' — it is the taxpayers who will pay for the spin and the gloss and the shine, and they will also pay for the cost blowouts which, as I said, in this case amounts to 38 per cent, and that represents over $3 billion.

I have certainly just scratched the surface of the Auditor-General's reports into this government. They cover various issues, including the performance of hospitals and the lack of plans to help our farmers in regional areas — the list goes on and on. Certainly if you want to highlight the deficiencies of this government, if that is the role of the Auditor-General, then I would say the Auditor-General has a very busy job.

Mr Angus — It's a full-time job!

Mr R. SMITH — It certainly is a full-time job, as the member for Forest Hill points out. That is why we are not opposing this bill, because we enthusiastically support the work of the Auditor-General; we enthusiastically support his ability to shine a light on the spin and the gloss that the government tries to put on many of its projects, and shine a light on the operation of the departments and agencies that the government has oversight of. We will continue to support the Auditor-General. We will continue to look with interest at the reports that the Auditor-General puts out because, like the general population, we want to see what this government is actually doing, not what it purports to do.
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