The document, obtained by the Herald , demolishes the metro proposal and the "optimistic" assumptions underpinning it. It raises serious questions about the key transport commitment on which Morris Iemma has staked his Government's future.

Written by Jim Steer, a world-leading transport consultant and executive with Britain's former Strategic Rail Authority, the Sydney Transport Review report says the planned 38-kilometre Euro-style subway - from Rouse Hill to St James Station - is too long to be viable as a metro, is predicated on a poor business case and will do little to alleviate the CityRail congestion crisis.

"As it stands, it would seem that more harm than good would accrue to Sydney and its economy from proceeding with the project," it says.

The Transport Minister, John Watkins, briefed Mr Steer in London last December. In January Mr Steer was flown to Sydney, provided with all the north-west metro project data and reports, and given a tour of the city by helicopter.

By late January he had briefed the Treasurer, Michael Costa, and the bureaucrats running the project. When Mr Iemma's office learnt of his findings it ensured the report was buried and Mr Steer's appointment cancelled.

A month later, the Premier forged on with the announcement, claiming it was "the biggest day in the history of public transport in NSW".

The Steer report was the culmination of a push by Mr Costa to have the north-west metro moved off the agenda. Yet it was the only independent review undertaken at that time, and it strongly criticised the proposal's inferior network planning, and warned that Mr Iemma's transport agenda might be leading Sydney in the wrong direction.

Among the criticisms is that the north-western half of the metro would service a low-density and fairly affluent area that is wedded to its cars. With 30 kilometres of tunnel, it would be hugely expensive with no guarantee of high patronage, the report warns. Elsewhere in the world, metros are specifically designed to move people between high-density residential areas and employment centres such as the CBD.

The report says: "The business case for the north-west metro is weak, reflected in a poor benefit-cost ratio. In fact, the evidence presented to the review, with a set of explicit, yet fairly optimistic assumptions, suggests that the project benefits are substantially outweighed by its costs.

"In such circumstances, there would have to be good reasons not present in the appraisal work to date that create the case for proceeding to implementation."

The report also suggests the project could be at risk of an enormous cost blow-out.

It says that the capital cost for the project is estimated at $7.2 billion in 2007 dollars "excluding any explicit allowance for 'optimism bias' ", which is a documented tendency for large-scale infrastructure projects to be undercosted by governments.

On top of this, the project's costings had been based on the unit prices of the Epping to Chatswood line and only "limited work" had been done on comparing these with other metro systems around the world: "The comparators chosen in the work that has been done are not necessarily the most appropriate to the circumstances in Sydney.

"At this early stage of the project it would be wise in decision-making and any budget setting to assume that OB [optimism bias] of perhaps 40 per cent should be applied," the report states. "Clearly, this change would further worsen the benefit-cost appraisal as it stands."

Mr Steer is lauded around the world for his part in a dramatic turnaround by a dysfunctional British Rail in the 1990s.

In February, Mr Costa's spokeswoman, Heather Gilmore, told the Herald that Mr Steer had been appointed to ensure "that public money is spent wisely". But the Steer report found the north-west metro was not a wise investment.

In May, the report was missing from a box of documents provided to the NSW Parliament's upper house that had used legislation to "call for papers" on the project. Only now has it been revealed the report warned that the project was threatened by "high-risk patronage".

"The north-west metro concept stretches into a 30-kilometre tunnelled route into low-density, high-income suburbs, remote from the congested western corridor, the busiest in the Greater Sydney Metropolitan Area," the report says. "It would be a brave decision to assume that car users in the low-density north-west can be converted to metro users in large numbers."

Crucially, the centre for transport planning and product development, the government agency responsible for the metro, recognised there were serious flaws.

"The journey times achievable by metro are acknowledged by [the centre] to be somewhat ambitious, with journey speeds of 62 kmh over the route," the Steer report says.

" [There is also] an assumption of a very high frequency - three-minute intervals throughout. It is acknowledged that this would not be achieved in practice over the whole length of the route … It is likely that these assumptions are leading to modelled estimates of transfer to metro over an unrealistically broad area, especially from car."

The Government expects the north-west metro to attract 25 per cent of its demand from a shift from private cars, which the Steer report calls a "high proportion".

"Demand models sometimes significantly overestimate the propensity to mode shift."

The other key problem is the "dispersed nature of the demand pattern". "Instead of a route of perhaps 15 kilometres, as envisaged in the [centre for transport planning] conceptual work, the north-west metro is a much longer route … While the 'inner' catchment of the north-west metro (Epping/Ryde-CBD) is in an area of relatively high residential density, the outer sections are not … As [the centre for transport planning] initially postulated, metro would probably work better with radial routes perhaps of 15-kilometre length, each fashioned into cross-city routes."

The metro undoes more than a decade of planning that went into establishing links between residential development in the north-west and employment growth in the Macquarie Park corridor.

"Scarcely 4 per cent of the new jobs in the 'northern corridor' would be served uniquely by the planned metro," the report says. There is also a weak prospect for "off-peak travel demand".

It recognises a key concern: "There is a risk of overcrowding on the CityRail network as demand is rising at rates, if they continue, [that] will lead to a serious deterioration in … reliability." But the metro failed to address Sydney's busiest corridors, and "its ability to relieve what will become very congested CityRail routes is limited".

Justin Kelly, a spokesman for the Premier said: "Mr Steer's work did not adequately address the question of how to deliver on the Government's election commitment to deliver rail services to the north-west by 2015. The Government has a clear commitment to deliver rail services to Castle Hill by 2015 and Rouse Hill by 2017. So when advice was received that took it away from the plan we'd outlined to the people of the north-west, it was never going to be accepted.

"Mr Steer's report was requested as part of considerations for the budget committee of cabinet and as a result is classified 'cabinet in confidence' and exempt from standing order 52 in the upper house."