Secret fare hike to fund Melbourne's Suburban Rail Loop, report finds

Public transport fares were raised last year to help fund the Suburban Rail Loop, which is likely to be delivered late and over budget, the Victorian Auditor-General's Office has found.

New Premier Ben Carroll on Tuesday declared he would find $2 billion worth of savings on SRL East, the first leg of the mega project, and that it would be delivered on time and under budget.

But this has been immediately challenged by an audit of the SRL East delivery, revealing the state government had introduced a secret levy on public transport fares to help fill the funding gap.

The government wants to fund one-third of the project — which has been cut from $34.5 billion to $33.3 billion, with a further $1 billion saving expected — through taxes and charges known as value capture.

The Victorian Auditor-General's Office (VAGO) on Wednesday said the government never revealed this included a new levy on public transport fares from the start of 2025. 

This 1 per cent increase was hidden in the annual increase to ticket costs with inflation.

"The government plans to allocate 60 per cent of the revenue it collects through the levy, estimated at $4.8 billion in net present value (NPV) terms to 2062, to fund SRL East," the report said.

"This levy will be the project's largest source of value capture revenue."

This was approved in August 2021, when Mr Carroll was public transport minister. Public transport is half-price this year.

"The government and Transport Victoria did not acknowledge the levy in their public communications about the 2025 and 2026 annual fare increases."

Treasurer Colin Brooks today insisted this levy, which has so far raised $6.5 million, was not part of the value capture framework. 

He conceded the government should have been more transparent so the public understands what it is funding.

SRL East likely 'exceed publicly disclosed cost', VAGO finds

Mr Carroll this week announced $1 billion in immediate savings to SRL East by removing "nice to haves" such as pedestrian bridges and underground interchanges, and announced a review to find a further $1 billion in cuts.

This would bring the total estimated investment down from $34.5 billion to around $32 billion.

The premier said further contracts would not be signed until that review was completed, likely after the election.

"The project has experienced significant delays," VAGO said.

But the VAGO report said the procurement process to build six stations was delayed by around one year. 

An early works package was also finished six months late.

SRL East is "more likely than not to exceed its publicly disclosed cost", the report said. 

Soil contamination, higher than expected market costs, and delays because of government decisions to slow spending on the project to manage debt had all helped push up the cost.

Victoria hopes to get one-third of the cost from the Commonwealth, which has so far committed $6 billion.