We have a broken process for evaluating costly government investments. The evolving plan for an underground railway through Melbourne’s middle suburbs reminds us that we need something better.
The Victoria government is currently in the early stages of building what would likely be Australia’s first $100-billion-plus infrastructure project – the Melbourne Suburban Rail Loop. That price tag would make it bigger than the national broadband network, but with the costs borne by just a quarter of Australia’s population.
The Loop is currently wildly popular in Melbourne, as best I can tell. It also seems to be a favorite of , who announced it as a fait accompli before it had much assessment at all.
Victorian premier Daniel Andrews loves the Loop. Why? It’s a mystery I’ve explored elsewhere on Troppo. The project seems unlikely – a mostly underground and hence expensive rail line through Melbourne’s middle suburbs, whose spread-out nature minimises their potential capture area and dilutes and rail line’s impact. To most transport experts, this doesn’t seem a very good way to improve Melbourne’s transport grid or foster the development of new urban hubs.
And if it doesn’t pay off, the resulting debt could act as a drag on the state’s economy for years.
So it really does merit someone running the ruler over it fairly dispassionately, to see if it will help or hinder the state. And that evaluation needs to look at all the social benefits as well as all the social costs. Those benefits and costs are many and various, so the only really comprehensive way to do this evaluation is to attach a common value to each of them and then compare. In other words, we need a benefit-cost assessment.
Infrastructure Victoria, sidelined
In theory, Victoria has just the body to do such an assessment: Infrastructure Victoria, created in 2015. Andrews said at the time that it would “take short-term politics out of infrastructure planning, and keep our pipeline of major projects full”. It would ensure “Victoria’s immediate and long-term infrastructure needs are identified and prioritised based on objective, transparent analysis and evidence”. It would “prioritise the projects that deliver the best results”.
Here’s the twist: once announced, the Loop quickly became government policy. And at that point, Infrastructure Victoria could no longer evaluate it.
So instead, the Loop has what the government calls a “business case”, which it has represented as proof that the Loop makes sense. This business case comes from KPMG, working for the government. It appeared in August 2021 (PDF link).
We’d have a lot more reason to trust the business case if it were done under the eye of a more disinterested assessment group. Specialist bodies like Infrastructure Victoria seem too easily sidelined, and sidelining them won’t attract political penalty: Infrastructure Victoria seems just too small to catch the public’s attention. A better alternative might be Nick Gruen’s suggested independent government-wide institution to monitor and evaluate policymaking and service delivery – the Evaluator-General.