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The Hawke government was warned the proposed route of a very fast train would "seriously compromise or render inoperable" several Defence facilities in the ACT and NSW.
Ministers were also told the case presented by the joint venture did not warrant government intervention on the scale sought for the private sector project.
Cabinet established a ministerial committee in March 1991 to investigate how the government could help the VFT joint venture, without the need for direct financial assistance.
The joint venture, comprising TNT Australia Pty Ltd – chaired by Sir Peter Abeles, a close friend of Prime Minister Bob Hawke – Broken Hill Proprietary Co Ltd, Elders IXL Ltd and Kumagai Gumi Co Ltd, had proposed the $14 million high-speed rail link from Sydney to Canberra via Goulburn, and then on to Melbourne using a coastal or inland route.
More than two decades later the Commonwealth is no closer to committing to a very fast train with the Abbott government's decision in 2013 to protect identified rail corridors but abolish the High Speed Rail Advisory Group.
In the same year an AECOM study costed the VFT at $114 billion for 1748 kilometres of track that would take until 2065 to build.
It would cover a route from Melbourne, via Canberra and Sydney to Brisbane (with 12 stops in regional Australia).
Cabinet papers released by the National Archives this week show Defence had "major concerns" about the impact of the VFT route on a number of Defence properties.
A submission brought to cabinet by Treasurer Paul Keating and Land Transport Minister Bob Brown detailed the requested changes to existing taxation arrangements to enable the financing of the project, and requested changes to existing environmental impact assessment procedures.
The ministers recommended rejection of the joint venture's call for tax concessions.
Cabinet had given in-principle support to the project in August 1989 "on the basis that it would not provide financial support".
The submission says tax changes sought by the joint venture would cost $465 million in 1993-94, $629 million in 1994-95 and continuing costs for a number of further years.
"The JV [joint venture] considers that the project is not financially viable under current tax laws," ministers were told.
The joint venture sought immediate 100 per cent tax deductibility for the $2.4 billion equity expected to be invested in the project and accelerated depreciation on some of the $7.4 billion cost of infrastructure.
The upfront cost to the federal government of providing tax assistance was estimated to be $3.2 billion over the period to 2005, when the first positive cash flow to the Commonwealth was expected.
"The effect of the concessions package is to shift, to the Commonwealth, much of the risk associated with the project," the submission says.
"Because of the nature of the assistance sought and the risks involved, the overall cost to the Commonwealth could be very much higher – the JV have not settled on a final financial package.
"The JV have sought to justify their request on the basis of alleged anomalies in the tax system against private sector infrastructure projects ... the JV's requests go well beyond addressing the alleged anomalies they have identified.
"To subsidise the project would entail income redistribution from taxpayers at large to VFT users, who tend to be business travellers and/or in middle-upper income brackets. No case has been made in support of such an income distribution.
"Clearly, the external benefits from the project are not sufficient to warrant government intervention on the scale sought, for what is essentially a commercial private sector proposal.
"To protect future options, it would be appropriate to explore arrangements with the states for protecting land corridors and setting standards necessary for future high speed rail projects."
The ministerial committee was told to hold discussions with the joint venture to explore alternatives for providing support to the project which could be acceptable to the government.
In August 1991 cabinet rejected the proposed tax breaks which were estimated to cost $1.4 million in 1990 dollars.
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