PORTFOLIO COMMITTEE NO. 2 – HEALTH AND COMMUNITY SERVICES At Macquarie Room, Parliament House Sydney, on Tuesday, 11 April 2017 INQUIRY INTO ROAD TOLLING ——— CORRECTED PROOF ——— The Committee met at 9:00 am ——— MEMBERS The Hon. G. Donnelly (Chair) The Hon. M. Faruqi The Hon. J. Graham The Hon. T. Khan The Hon. Dr P. Phelps CORRECTED PROOF CORRECTED PROOF The CHAIR: Good morning, and welcome to the first hearing of Portfolio Committee No. 2—Health and Community Services—inquiry into road tolling. The Committee will inquire into a range of matters relating to tolling regimes in New South Wales, including how tolling contracts are negotiated; the processes for determining how tolls are set, varied and scrutinised; and the opportunity to increase assurances to the public that tolling arrangements represent the fairest possible outcome. Before I commence, I acknowledge the Gadigal people who are the traditional custodians of this land and I pay my respects to elders past and present of the Eora nation and extend that respect to other Aboriginals who may be present today or joining us on the internet. Today is the first of three hearings for this inquiry. Today we will hear from the toll road operator Transurban, representatives from several Government agencies, the Transport Workers Union, the Tolling Customer Ombudsman and Toll Redress. I need to clarify absences from the hearing today. A schedule of attendees was published on Friday, which stated that Mr Dennis Cliche, chief executive officer of the Sydney Motorway Corporation, would be present today. He confirmed his acceptance to give evidence on 4 April. However, on 10 April at 11.59 a.m., I received a letter from him cancelling his attendance at today's hearing, so Mr Dennis Cliche will not be available to give evidence today. Before I commence, I will make some brief comments about the procedures for today's hearing. Today's hearing is open to the public and is being broadcast live via the Parliament's website. A transcript of today's hearing will be placed on the Committee's website when it becomes available. We are expecting a large number of people in the public gallery today. I ask members of the audience to respectfully observe the discussions today. Please be aware that today's hearing is not an open forum for comment from the floor. Audience interruptions make it difficult, particularly for witnesses, to communicate with the Committee. If there are interruptions from audience members, I may stop the hearing and ask for quiet or for those making a noise to please leave the room. In accordance with broadcasting guidelines, while members of the media may film or record Committee members and witnesses, people in the public gallery should not be the primary focus of any filming or photography. I remind media representatives that they must take responsibility for what they publish about the Committee's proceedings. It is important to remember that parliamentary privilege does not apply to what witnesses may say outside of their evidence at the hearing, so I urge witnesses to be careful about any comments they may make to the media or to others after they complete their evidence as such comments would not be protected by parliamentary privilege if another person decided to take an action for defamation. The guidelines for the broadcast of proceedings are available from the secretariat. There may be some questions that a witness could only answer if they had more time. In those circumstances, witnesses are advised that they can take a question on notice and provide an answer within 21 days. I remind everyone that Committee hearings are not intended to provide a forum for people to make adverse reflections about others under the protection of parliamentary privilege. I therefore request that witnesses focus on the issues raised by the inquiry terms of reference and avoid naming individuals unnecessarily. Witnesses are advised that any messages should be delivered to Committee members through the Committee secretariat. To aid the audibility of this hearing, I remind Committee members and witnesses to speak into their microphones. In addition, several seats have been reserved near the loud speakers in the public gallery for persons who may have hearing difficulties. Finally, could everyone turn their mobile phones to silent or off for the duration of the hearing. PORTFOLIO COMMITTEE NO. 2 1 TUESDAY 11 APRIL 2017 CORRECTED PROOF ANDREW HEAD, Group General Manager, New South Wales Business, Transurban, and HENRY BYRNE, General Manager, Investor Relations and Corporate Affairs, Transurban, sworn and examined: The CHAIR: I begin with some apologies. two Committee members are unavailable and another participating member is not here today. Today on the Committee we have representatives from the Government, the Opposition and the crossbench. It has been agreed that the respective groups of members will ask questions in twenty-minute blocks. I note that we have received Transurban's submission, submission no. 100, and it has been published on the inquiry's website. This morning the Committee has also been given a copy of a map contained in that submission, which has been reproduced to a larger scale to make reading easier. Would either of you like to make a brief opening submission? Mr HEAD: I do not intend to reiterate what is in the submission but I want to say three quick things. The first is about toll road benefits, which is at the top right-hand side of the page that has been handed to the Committee. The second is to acknowledge that some of things I am going to refer to are the result of a bipartisan achievement. The third is to try—and this is very much new material on the right-hand side of the document— and put toll roads into the broader context of New South Wales Government service provision. Firstly, life is significantly easier for Sydneysiders as a consequence of the roads that have been delivered over the past 25 to 30 years. Every day 155,000 hours of time is saved by Sydneysiders who use the motorway network. In doing so, $14 billion worth of benefits have been derived over the past 10 years in economic and social areas and, just as importantly, in environmental areas. Secondly, I mentioned it was a bipartisan achievement. The map shown in the middle of the handout references the hard work and the difficult decisions that have been made—Labor Governments have delivered five of these projects, and Liberals-Nationals Governments have delivered four of these projects. The question that it is important for us to consider, particularly via the first speaker at this inquiry today, is: Why have governments decided to take this course of action? As the first speaker I thought it was important to try and put that into context, and this is what the right-hand side of this document attempts to do. Governments have very difficult budget allocation decisions to make; they only have taxes, asset sales and user-pays models to deliver services. Unfortunately for all of us, there is no silver bullet here. The alternative, if we are to do nothing in terms of provision of infrastructure via user-pays, is that the city will slowly congest, productivity will fall and the opportunity for citizens will diminish. To try and illustrate this point we have put forward a fictitious example—and I stress that it is a fictitious example to try and explain the industry. We start with the first column, which assumes that the State Government has a budget of $100. Governments have to make decisions about how to allocate those funds. The only way to expand that pool of funds is to increase taxes or asset sales. In our fictitious example, the next column proposes $20 of that $100 budget is put forward for public transport and roads. In our example we just split that down the middle—half goes to public transport and half goes to roads. Then you get to the roads portfolio, which is the next column. Of that, the Government has to decide how much of the $10 that has been allocated should go to maintaining existing roads and how much should go to new roads. The only other alternative is available to them is to go back to the original budget allocation of $100 and argue for more, at the behest of other services, or to consider a user- pays approach, and that is where the last column comes in. Again, we have just put forward a fictitious example to illustrate the point. In our fictitious example this is where the private sector comes in via a user-pays model. The opportunity here is to leverage the State budget further and to deliver more services. In our fictitious example we assume that $9 of the $10 is for construction costs and $1 is for a return for the private sector for putting that money in and taking the risk. The risks are real. Many of us would remember that the Cross City Tunnel and the Lane Cove Tunnel went into receivership—the Cross City Tunnel twice. Many investors have lost a lot of money. So how do we determine what is an appropriate return? That question is answered by the global capital markets. So investors think about whether they want to invest in ANZ, Woolworths, BHP or Transurban. In the case of Transurban, our investors are predominantly superannuation fund investors—70 per cent of the people who invest in Transurban do so via their superannuation. I would hesitate a guess that more than half of the people in this room are probably investors in Transurban through their superannuation fund.