Taxpayer bill for cashback scheme on Sydney toll roads hits $1.5 billion - and climbing

For the first time, the annual bill for taxpayers of refunding motorists who drive on the M5 South West is set to exceed $100 million this financial year.

That follows the cashback scheme for privately registered motorists driving on the M5 soaring by 18 per cent to almost $97 million in the 12 months to June.

An analysis of data from the state government's roads agency shows motorists have received almost $1.37 billion in rebates since the cashback scheme was introduced in the late 1990s, including a now expired refund for the M4.

Adjustments for inflation, administration of the scheme and payments in the first half of this financial year push the total cost beyond $1.5 billion.

With the annual cost for the M5 now set to amount to more than $100 million a year, taxpayers are on the hook for a $1 billion-plus bill over the next decade.

Tolls on the motorway in Sydney's south-west were due to expire in 2023 but the O'Farrell government agreed to extend them until 2026 when it signed a deal five years ago with the motorway's private operator to widen the road's western section.

The Baird government has not revealed whether the cashback scheme will be extended if tolls remain on the M5 after 2026.

Roads Minister Duncan Gay said he had no plans to wind back the cashback scheme and any future proposal to remove it would be a decision for the government of the day.

More than 150,000 vehicles travel on the M5 South West on average each day, making it one of Sydney's busiest toll roads. The one-way toll of $4.52 for cars on the M5 increases each quarter at the rate of inflation.

The Herald has previously revealed that the tolls on the M5 South West are set to remain until 2060 to help pay for the $16.8 billion WestConnex motorway project.

The project deed for the second stage of WestConnex shows that the eventual operator of the so-called New M5 between Beverly Hills and St Peters will gain the rights to charge tolls on the existing M5 South West.

By 2026, the toll on cars using the M5 South West will hit $5.75, according to University of Sydney transport researcher Chris Standen. That toll will not be included in the cap on what motorists pay for using WestConnex.

"It is becoming increasingly clear that WestConnex will not be able to pay for itself – even with significant taxpayer subsidy – and it depends on new tolls being levied on motorways that were previously free," he said.

"Effectively, western Sydney motorists will be forced to pay for new motorways for inner Sydney."

Mr Standen said cash-back schemes were effectively a mechanism for transferring large sums of taxpayers' money into the hands of private toll-road corporations, while at the same time shoring up support in marginal electorates.

However, he said an end to the M5 cashback would hurt lower-income households in south-west Sydney, many of whom would have no choice but to use heavily congested alternative routes.

A NSW legislative committee will hold an inquiry next year into tolls on the state's roads, which will look into why charges such as that on the M2 can rise quicker than inflation, and the rationale for extending concession periods for toll-road operators.

The controversial refund for the M5 South West began after the 1995 election, and has been dubbed the most expensive broken promise in NSW political history.

Former premier Bob Carr went to the election on a popular promise to abolish road tolls altogether. The decision is credited with swinging two western suburbs seats to Labor.

But after taking office, the promise no longer seemed financially viable and the government instead introduced the cashback scheme for the M5 and M4. The cash back on the M4 expired in 2010 after its control was placed back in the hands of the state government.

Distanced-based tolls of between $1.63 and $4.21 will resume on the M4 early next year following a widening of the motorway to four lanes in each direction between Parramatta and Homebush as part of the first stage of WestConnex.

A Roads and Maritime Services spokeswoman said the cashback scheme for the M5 benefited motorists from across Sydney, pointing out that only 60 per cent of those who claimed the refund lived in the city's west.

An online service was introduced in 2013 to make it easier for people to claim the refund. Since then, more than 900,000 motorists have submitted online claims.

Mr Carr did not respond to calls from the Herald while former Labor roads minister Carl Scully declined to comment on the cash-back scheme.