‘Vehicles for deception’: Transport plan fails the truth test -  SMH  -  Tony Harris  August 20, 2021 

NSW governments have a reputation for designing fiscally shady schemes. They pretended the Sydney Harbour Tunnel was privately owned to avoid then existing controls over state borrowings and to get Commonwealth tax advantages not available to state entities. It took years to unravel that deceit.

They established the Port Macquarie Base Hospital as a for-profit public hospital in a deal that quickly foundered. They developed private prisons and privately owned public schools in an expensive, but failed, attempt to hide debt.

Now the Berejiklian government wants credit rating agencies and the public to believe that a government entity owning Sydney’s rail assets – the network, rolling stock and real estate – can be profitable and thus can be taken off the government’s budget.

The Transport Asset Holding Entity, TAHE, is a vehicle designed to own all Sydney’s rail assets and to hide government rail transport expenses. TAHE was foreshadowed over a decade ago but was established only in June 2020. It took this long for the government to devise a model that gave TAHE the appearance of being a commercially independent body, to escape from the government sector budget, while ensuring that passenger train operations remained in government hands.

The developed model fails the truth test. According to state documents, TAHE cannot negotiate with any potential customer other than Transport for NSW. It cannot independently decide to invest in new rail assets or to divest any rail asset. It must allow Transport for NSW to maintain TAHE’s trains and TAHE’s rolling stock. It cannot decide not to exclude Transport for NSW from running TAHE’s trains on TAHE’s tracks even when the government refuses to meet TAHE’s expenses, including a reasonable return on its assets. In short, TAHE is not an independent, commercial government corporation.

The government thinks it can fool credit rating agencies, which decide whether the government meets its principal fiscal goal, keeping a AAA credit rating, as required by the Fiscal Responsibility Act 2012. It is true that credit agencies have carried a tarnished reputation following their role in creating the Global Financial Crisis. But even they must be able to see through the accounting scam that TAHE is.

And if they are fooled, we can expect to see more NSW “commercial” bodies based on the TAHE model. Wednesday’s Herald reported that the NSW government is already thinking of a similar body to own state roads. We all know how profitable state roads can be when they collect no tolls. And no doubt some consultant will soon develop schemes for independent “commercial” state-owned corporations to own (fee-free) public hospitals and (fee-free) public schools.

These models are not only deceitful. They remove the need for the government to undertake real fiscal reforms, reforms that have a real economic impact. The Treasurer has made an attempt by proposing to replace stamp duty on property transactions with land tax. But there are many remaining opportunities. There have been countless reports on how to strengthen state finances, but alas, it is easier for our governments to devise accounting rorts.

The TAHE rort is now to be investigated by a committee of the Legislative Council. Hopefully, that committee can demonstrate these rorts are just vehicles for deception.