Making the most of Infrastructure Victoria - …

1 Making THE most OF Infrastructure VICTORIA1 Making the most of Infrastructure Victoria1 IntroductionThe Andrews Labor Government is pressing ahead with its election commitment to establish Infrastructure Victoria (IVIC). The Minister sponsoring the IVIC legislation the Hon Gavin Jennings has described the new body as providing independent oversight of Infrastructure planning and delivery beyond the electoral cycle, (thus) taking the politics out of Infrastructure . He has also characterised IVIC as part urban planning body and part economic modelling agency . It s an agency that understands how you piece all these things together, and then, from those platforms, you make sensible decisions about how and when you should roll out your Infrastructure programs .On the 16th April 2015, SGS Economics & Planning hosted an event to inform public debate about what IVIC might do and how it might go about doing it.

2 In particular, the following questions were posed to the guest speakers: Can the politics really be taken out of Infrastructure planning and investment? How will IVIC fit in with other bodies advising government on city shaping projects, such as the Metropolitan (or Victorian) Planning Authority? What can we learn about the efficacy of these bodies from experience with Infrastructure Australia and Infrastructure NSW?The panel of experts that addressed these questions included: Hon. Paul Lucas - Former Deputy Premier and Minister for Infrastructure , Local Government and Planning for Queensland. Lecturer in Strategic Metropolitan Planning; Governance and Public Policy Specialist Specialist, University of Queensland Kirstie Allen - Specialist policy consultant - City Plan Strategy and Development. Former executive at KPMG and NSW Government, and Tony Canavan - National transport Leader at Ernst & Young.

3 After short presentations by each of the panel members, Bill Dunbar (CEO SGS Economics & Planning) facilitated a panel discussion and an interactive Q&A session, with audience members posing the vast bulk of questions. The audience was comprised of ~180 guests from state govern-ment agencies, local councils, Infrastructure Making THE most OF Infrastructure VICTORIA2providers, private sector advisory firms, academia and community issues paper summarises these discussions and also includes some material which informed the design of the need for reformThe identification and scoping of state and region-ally significant Infrastructure projects varies across Infrastructure sectors and government jurisdictions. In general however, a lead govern-ment agency undertakes planning, considers options, develops and assesses project propos-als, and provides advice on the outcomes of these processes to relevant Minister(s).

4 Ministers priori-tise the list of projects to be considered by Cabinet, with Cabinet ultimately deciding on which projects will proceed. The Productivity Commission (2014)1 identified some of the potential shortcomings of this approach. The Commission highlighted that while elected governments can, at least in principle, weigh up costs and benefits from a community-wide perspective, some of the shortcomings of this approach include: Inadequate incentives and accountabilities for ensuring that projects are properly analysed Decision makers having difficulties in judging whether analyses accurately represent the likely costs and benefits of projects Budget processes that consider capital and operational expenditure separately, leading to a lack of incentives for developing project proposals that optimise whole-of-life costs Decisions being driven by political considerations rather than by economic merit, particularly in the lead up to elections Decisions being based on inadequate analysis due to a perceived need for governments to react quickly to Infrastructure problems that receive media attention or to provide stimulus to the economy during a downturn Preference being given to large iconic projects.

5 Rather than projects which are less attention 1 Productivity Commission (2014) Public Infrastructure , Volume 1, No. 71, 27 , but which might offer higher net benefits, and Incentives for a preferred project to be selected at an early stage and maintained even if new information shows later that it is response to these shortcomings, the concept of an independent Infrastructure agency gained support. Indeed following the earlier establishment of Infrastructure Australia (IA), New South Wales and Queensland have introduced reformsInfrastructure AustraliaInfrastructure Australia (IA) was established in April 2008 to assist the Federal Government in identifying and prioritising the delivery of public Infrastructure . IA was established as a statutory advisory council under the Department of Infrastructure and Regional Development.

6 The Infrastructure Australia Act was then amended in 2014 to restructure the agency as an independent statutory body. IA serves as an independent advisor to government, investors and Infrastructure owners on issues relating to: Australia s current and future Infrastructure needs Mechanisms for financing Infrastructure investments, and Policy, pricing and regulation and their impacts on investment. One of IA s key functions is to produce the Infrastructure Priority List, which sets out the projects that IA considers to be central to strengthening the economy, dealing with sustainable population growth, export bottlenecks, urban congestion and/ or climate change. Importantly, IA does not determine Commonwealth funding of projects; this remains with the THE most OF Infrastructure VICTORIA4 The political mandate for the establishment of IA was to end the perceived under investment in public Infrastructure , buck-passing and pork-barrelling, and to provide long-term planning for governments to predict and anticipate Infrastructure needs rather than reacting to NSWI nfrastructure NSW (INSW) was established in July 2011 to assist the NSW Government in identifying and prioritising the delivery of critical public Infrastructure for NSW.

7 INSW is an independent statutory agency, established under the Infrastructure NSW Act Government s mandate for INSW was to remove politics from Infrastructure decision Making , and to deliver the right Infrastructure projects on time and on budget. INSW is charged with coordinating Infrastructure planning across the whole of government while engaging the public and private sector. Outlined by the Premier in NSW Parliament, the intention of establishing INSW was to secure the efficient, effective, economic and timely planning, coordination, selection, funding, implementation, delivery and whole-of-lifecycle asset management of Infrastructure required for the economic and social wellbeing of the community, with decisions informed by expert professional analysis and principal tasks of INSW are to advise the Government on Infrastructure priorities and assist government agencies in reviewing the delivery of major projects over $100 million.

8 Infrastructure priorities are advised through the development of a 20-year State Infrastructure Strategy and 5-Year Infrastructure Plans which identify specific priority INSW aims to address the shortcomings of political project selection, project selection remains with & Infrastructure Cabinet (Queensland)The Newman Government established an Economic Infrastructure Prioritisation Framework as an initiative to deliver a more disciplined approach to Infrastructure investment in Queensland. The framework was to be implemented by the Property and Infrastructure Cabinet, with the expanded role of prioritising projects from a whole-of-government perspective, and overseeing the development of a 10-year state Infrastructure plan. While this approach may have delivered the potential for improved project prioritisation and integration, the perceived lack of independence from Government did not overcome the potential shortcomings of political influence on project selection.

9 In response to this, the recently elected Palaszczuk Government made a pre-election commitment to establish an independent body called Building Queensland to prioritise Infrastructure projects. This broad review suggests that while recent reforms have enabled elected governments to receive expertly prepared, independent advice from a whole of government perspective in relation to Infrastructure needs, options and preferred projects, the final selection of projects remains with elected officials. 5 Expert panel presentations (and facilitated discussion)The expert panel members picked up at this point. Although the manner in which they articulated their recommendations varied, the expert panel members broadly agreed on the following eight points:1. Infrastructure is fundamentally important to Victoria s competitiveness and standard of living.

10 By its very nature, physical Infrastructure is the backbone on which important state growth, development and sustainability objectives are built. 2. Chopping and changing Government commitments to major Infrastructure projects imposes significant costs on Victorians. This includes wasted project planning and development efforts, important project alignment and sequencing dis-benefits, and the significant uncertainty that is introduced into a raft of private and public investment decisions. 3. Commitment to Infrastructure projects must align with a long term (and hopefully bipartisan) Infrastructure strategy for Victoria . That is, Infrastructure project funding and contracting needs to be depoliticised. 4. To effect this de-politicisation, there is a clear need to: a. Undertake long term Infrastructure planning to support Victoria s developmentb.