The former Labor government has been strongly criticised by the Auditor-General over the secret deal it struck as part of its controversial $1.605 billion privatisation of the Lands Titles Office.
In his review into the 2017 sale, released today, the Auditor-General found Labor conducted ‘no formal analysis’ into the reasonableness or risk to taxpayers of interest payments to the Land Services SA (LSSA) consortium.
These interest payments relate to giving LSSA an exclusive right to negotiate (ERN) for the further privatisation of the state’s Motor Vehicle Registry in exchange for $80 million.
The Auditor-General was also strongly critical of the former Labor government’s secrecy over the deal in refusing to disclose the contract as required by government rules (DPC Circular PC027). In fact, the former Labor government deliberately concealed this secret deal to privatise the Motor Vehicle Registry.
Under the secret deal, if the state and LSSA do not enter a privatisation agreement for the government-owned Motor Vehicle Registry by 12 October 2020, or the state appoints a third party to manage the Motor Vehicle Registry before this date, then the state must either elect to repay LSSA the $80 million – including interest charges at 10 per cent per annum - or grant the consortia an additional seven year extension to the existing 40-year term of the Land Services Agreement.
Ultimately, that would cost the taxpayer up to $104 million if the State Government doesn’t proceed with the privatisation.
The Auditor General’s report states: “…no financial analysis was performed to assess the SA Government’s potential maximum financial exposure from this interest condition, and whether the proposed interest rate was reasonable relative to market interest rates or other relevant benchmarks such as industry rates of return.”
“As a result, it is possible that the ERN condition may not achieve value for money for the State.”
Treasurer Rob Lucas said the findings were further confirmation of Labor’s gross financial mismanagement and incompetence.
“We blew the whistle upon coming to government, now we have the state’s Auditor-General confirming no formal financial analysis on this aspect of the deal was done on its reasonableness or impact on taxpayers,” said Treasurer Lucas.
“While we make no criticism of LSSA in relation to this deal, it requires the new Marshall Government to undertake a scoping study for the potential privatisation of the Motor Vehicle Registry.”
Last month, the State Government announced it was forced to appoint advisors to conduct a six-month commercial scoping study into the potential privatisation of the Motor Vehicle Registry.
The government welcomes the Auditor-General’s general conclusion that he was generally satisfied the deal had been well managed and a fair and transparent procurement process had been used.