Policy wreck: we’re being told two contradictory stories about NSW trains

Nov 26, 2021
Dominic Perrottet
It is impossible, however, to describe his response — or that of NSW Premier Dominic Perrottet as responsible, measured, or evidence-based. (Image: AAP/Dan Himbrechts)

Stories about Gladys Berejiklian’s private life or bureaucratic fights might sell papers, but they distract from grave problems in transport policy.

Stupidity is a big problem in NSW transport. Pointing motorways to CBDs or ”bespoke” infrastructure that precludes operational flexibility being two examples.

It arises from policymaking behind closed doors and pressure to cheer on ‘‘great concepts’’. An example is financial engineering for Sydney’s railway — leading to uproar about whether a new scheme misrepresents NSW’s financial position.

The scheme involves a for-profit, state-owned corporation — Transport Asset Holding Entity — owning rail assets while a separate authority, Sydney Trains, runs trains and — for the moment — maintains the assets.

The scheme appears to ignore painful lessons — including rail accidents — from almost identical arrangements in the UK and NSW in the late 1990s.

Parliamentary inquiry

A Legislative Council Inquiry into the scheme has intensified the debate. The debate is one Premier Dominic Perrottet can ill-afford to lose — being a leading proponent of the scheme. Yet it is not going his way.

Two questions arise. Is the government’s accounting treatment of the scheme appropriate? And is it safe?

On the accounting question, the auditor-general is holding-off approving the state’s accounts. There are allegations of “behind the scenes” intimidation and attempts to rewrite reports of consultants to make the accounting appear reasonable.

The safety question remains vexed. At the inquiry, former Transport secretary Rodd Staples expressed doubts. He said this was a contention with Treasury last year, advised then premier Gladys Berejiklian of his concerns and considered resigning. Others suggest this is associated with his hitherto unexplained sacking.

The inquiry has published a treasure trove of information including cabinet documents. The premier’s department asked for withdrawal of the documents. They remain at the inquiry’s website. Parliament’s Privileges Committee is to consider the issue. Constitutional conflict between Parliament and the government may ensue.

The inquiry’s information shows a dilemma: the government wants the auditor-general and the public to believe Sydney’s railway tracks are independently controlled by a profitable state-owned corporation that doesn’t run trains.

Yet it wants the public, and rail safety regulator, to believe something else — it controls the tracks via Transport for NSW and Sydney Trains. And that because Sydney Trains is doing the track maintenance, all is in hand.


Whatever the outcome of the debate, one document at the inquiry points to a cause visible in other transport fiascos since the Coalition took office in 2011.

The document is a 2016 Cabinet submission by then transport minister Andrew Constance and treasurer Gladys Berejiklian. Assuming it is bona fide — why else would the premier’s department seek withdrawal? — an apparently innocuous word in it reveals an astounding policy wreck.

The relevant text seemingly presages the safety issue now being debated:

“One concern is that splitting the maintenance of rail assets from operations is contrary to the recommendations of the Glenbrook or Waterfall (accident) inquiries.”

On that basis, it argued Sydney Trains’ maintaining the tracks would conform with inquiry recommendations — and deal with safety by keeping maintenance and operations together. However, the key word is: “or”.

A submission by ministers with nearly a decade experience in transport, backed by large departments and offices — on an issue with multi-billion dollar and public safety consequences — not knowing which? A guess?

Alas, the wrong guess. Neither inquiry made such recommendations. They recommended something else.

The very first recommendation of the Glenbrook second interim report was:

That the infrastructure owner RAC and the infrastructure maintainer RSA cease to be state-owned corporations and that their property and functions be merged into a single statutory authority, to be known as the Rail Infrastructure Authority, responsible to the minister for transport.

The Glenbrook recommendation was not about ensuring infrastructure maintenance is performed by a train operator. Rather, it sought to ensure maintenance was not split from the track owner, and the track owner was not to be a State-owned corporation.

The cabinet submission sought the opposite to what Glenbrook recommended. Apparently, it was accepted and underpins the current scheme. If cabinet had been properly advised would we be looking at a “train wreck for NSW government”?

The submission also seems the source of another persistent misunderstanding — about ”access charges” — that goes to the heart of the accounting question. It told cabinet an $800 million annual payment from Sydney Trains to the entity is needed to ”cover the costs of leasing or accessing the assets’’. More to the point, it is needed to make the scheme work.

To enable the payment, the government would give Sydney Trains this amount.

Under NSW regulation, the minimum access charge is the cost, to the track owner, of maintenance and train control. Sydney Trains performs these functions, apparently gratis, for the entity. Sydney Trains would not gain any benefit in return for an additional payment.

Hence most of the $800 million looks less like a ‘‘commercial’’ transaction than a gift with a deceptive name — from the government to the entity, washed through Sydney Trains. There is an open question whether Sydney Trains should — even can — pay it without orders from government.

When asked about the supposed access charge at the Inquiry, officials mentioned the NSW economic regulator — IPART — creating an image that all is well. IPART subsequently felt a need to put in a late submission to clarify the facts.

It seems the access charge/gift/IPART role has caused great confusion and is among triggers of the auditor-general’s doubt about the government’s scheme. If access was properly explained to cabinet, would there be the present turmoil?

A continuation of earlier policy

On safety and access, the cabinet submission is a continuation of a direction started in 2012-13 when Berejiklian was transport minister. Then the rail assets were moved away from the train operator/maintainer into her department — Transport for NSW. Reports had two predictable results ensuing.

First, a maintenance backlog developed. It will be hard to remedy. The likely reason it hasn’t had serious consequences — so far — is the reduction in rail use due to the pandemic.

Second, Treasury ogled the department’s new train set. Just a year later, in 2014, it had designs to move the assets to its portfolio.

The 2016 cabinet submission aimed to turn that into official policy. It appears some time then passed before the policy became a burning concern in the transport portfolio.

If Treasury remains unaware the 2016 cabinet submission was wrong on safety and access, I could understand it perceiving Transport for NSW’s belated concerns to be a bureaucratic tantrum.

Treasury would already have had doubts about the department if, like the electorate and supposedly the minister, it was not told of a $4.3 billion to $5.3 billion cost blowout in one Metro project for 18 months after it was discovered.

Three years ago, Pearls and Irritations questioned whether Sydney Metro is a $40 billion deception — as Transport for NSW publications supposedly justifying the Sydney Metro in fact said the opposite. The Australian Financial Review raised a similar question about the present scheme.

What now? Tantrum or not, and irrespective of auditor-general rulings and views from the Legislative Council inquiry, the government needs to be exceptionally careful about the railway. Some candour and rigour would seem necessary. Yet the portents are, at best, mixed.

NSW submissions and evidence to the inquiry forgot to mention the (former) minister was at that moment seeking advice from the NSW transport accident (!) investigator about the scheme. That was revealed in another forum a month later.

That consulting firms such as PwC and KPMG were recruited by various bureaucracies to advise on how the scheme should work — several years after enabling legislation was passed — is bad enough.

Inveigling the accident investigator is much worse. Not merely because of repeated assurance that all safety bases are covered. Rather, accident investigators are supposed to be independent of industry arrangements — as recommended by both Glenbrook and Waterfall inquiries.

Its involvement should debar it from rail accident investigations. Reports it hedged advice compounds the folly. This situation is amazing.

NSW has a new premier and transport minister. They face the first signs of immense damage done to transport since 2011 e.g.: cessation of light rail services in Sydney’s inner west for the next 18 months; new ferries that threaten passengers with decapitation or can’t travel in more than a light chop; new trains that don’t fit tunnels/are years overdue despite being bought overseas to save time; the worst transport idea Australia has seen — Western Sydney Airport Metro.

There is little prospect of mitigating impacts if policy includes deception. The premier should establish an open public — preferably judicial — inquiry into what has been going on in transport. Then at least he’d find out.

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