Great SRL Swindle plays us all for mugs

It was in August 2021, when most of Melbourne was stuck at home in our sixth and final COVID lockdown, that Daniel Andrews, Tim Pallas and their oh-so-clever advisers came up with the Great SRL Swindle.

This was a sham arrangement designed to conceal an important source of funding for the proposed rail loop and to maintain the government’s pretence that one-third of its total estimated cost could be covered by value capture.

Pallas, who by then had served as Victorian treasurer for seven years, understood better than anyone that hypothecating all land taxes from properties neighbouring SRL stations to help pay for the project was stealing from Peter to pay Paul.

To pay back Peter – the consolidated revenue into which land tax from those properties would otherwise go – they secretly devised a new, unannounced tax, a 1 per cent levy on all public transport fares until 2062. They called it the rail improvement charge.

For five years, the RIC has been the dirty little secret at the heart of the state’s largest transport infrastructure project. Thanks to the diligent work of Auditor-General Andrew Greaves and his team, the breathtaking cynicism involved is now clear for all to see.

Opposition Leader Jess Wilson described the secret tax as “a scandal of the highest order”. In truth, it is a low-rent con job designed to prop up a project that has never justified the massive expense of public money required to build it.

The SRL East business case assumes that it will raise $11.5 billion, a third of the funding required to meet the original $34.5 billion cost, through value capture – new taxes or levies imposed on people or businesses that stand to benefit directly from the project.

The government claims that $5.7 billion of this will come from directing to the project land tax raised on properties within SRL East precincts. But it knows that hypothecating existing revenue merely shifts money around. It does not create a new source of revenue.

This is where the RIC comes in. It is a tiny levy – 1 per cent of an $11.40 daily train ticket is just 11¢. According to Treasurer Colin Brooks, it has raised only $6.5 million a year since it came into force. But thanks to the magic of compounding inflation, it is forecast to generate $8 billion between now and 2062.

According to the auditor-general, 60¢ on every dollar raised by the RIC – about $4.8 billion – will go towards the SRL. Whether it does so directly, or in a roundabout way by replacing the land tax lost from consolidated revenue and siphoned to the SRL, doesn’t really matter.

The report by the Victorian Auditor-General’s Office notes that the RIC was first approved in August 2021 and was confirmed in December 2023 and again in November 2024. This was done through submissions to the budget and finance committee of cabinet.

In December 2023, shortly after Jacinta Allan had taken over as premier, the committee discussed whether it should publicly announce the RIC. According to a source with knowledge of the meeting, it decided not to.