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A levy secretly slapped on Victorian public transport users – designed to help pay for the Suburban Loop and other Big Build projects – will be scrapped, the state premier has announced.

Ben Carroll announced on Thursday that he would move to abolish the levy “because there was no transparency in its creation and implementation”.

“There’ll be a proper cabinet process to come, but it’s my intention and the treasurer’s intention to abolish that charge,” he told reporters.

“Victorians do deserve better public transport. They also deserve to know what their money is buying. Under my leadership, they will.”

The existence of the levy was revealed in an auditor general report tabled in parliament on Wednesday, which also cast doubt on whether the first stage of the multibillion-dollar project – a 26km stretch of twin tunnels from Cheltenham to Box Hill dubbed SRL East – can be delivered on time or within budget.

The levy, in place since 1 January 2025, imposed a 1% annual increase on all public transport fares in metropolitan Melbourne and regional Victoria, on top of existing adjustments in line with inflation.

$50bn

Estimated cost of the entire the Suburban Rail Loop when announced by Daniel Andrews in 2018

90km

Length of the loop, which would run from Cheltenham in Melbourne’s south-east to Werribee in the west, via Melbourne airport

$33.3bn

Cost of stage one of the loop, dubbed SRL East, as promised by new premier Ben Carroll on 25 August 2026. It was estimated to cost $30-34.5bn in 2021

$14.5bn

Worth of contracts signed, according to Labor’s May budget

26km

Length of SRL East, which runs from Cheltenham to Box Hill

2035

The year SRL East is due to open

$96.4bn

Estimated cost of building SRL East and SRL North, the second stage of the project, based on a 2024 Parliamentary Budget Office analysis

$120.2bn

Estimated cost of operating SRL East and North for 50 years, according to PBO

2053

SRL North, which runs from Box Hill to Melbourne airport, due to open

Date and cost unknown

Completion of SRL West, the final stage of project, running from Sunshine to Werribee

Carroll was the public transport minister when the levy was first approved in 2021, according to the auditor general report. But he said on Thursday he was not involved in the decision.

“I was not part of the creation,” he said.

Carroll later said he was not on the state’s four-person budget and finance committee in December 2023, which was when he said the levy had been approved.

According to the auditor general report, further decisions about the levy were discussed by government in November 2024, when he had been added to the committee.

Carroll told reporters he would not “relitigate the past”, but under his leadership “transparency and accountability is fundamental”.

According to the auditor-general report, the levy was expected to raise $8bn in today’s dollars over 37 years, with 60% – or $4.8bn – to be directed to SRL East.

This would have made the levy the “largest source of value capture revenue” for the project. Under its funding plan, $11.5bn – one-third of the cost of building the tunnel – was to be funded by value capture.

On Thursday Carroll would not say how the $4.8bn shortfall as a result of abolishing the levy would be made up, but noted he had pledged to reduce the project’s cost by $2bn earlier in the week.

The government did not reveal the levy when it announced its value capture model in December, despite naming other sources. The auditor general also said Transport Victoria did not acknowledge the levy in its public communications about the 2025 and 2026 annual fare increases.

The deputy premier, Gabrielle Williams, told reporters she was aware of the levy when she announced an increase to public transport fares in December 2024.

“What I was unaware of was that there … had been any decisions taken about deliberately obfuscating the structure of our fare increases,” Williams said.

She conceded keeping it secret “did not pass the pub test”.

Both Williams and Carroll eventually apologised to Victorians when repeatedly asked to by reporters.

The opposition has described the revelation of the secret levy as the “final nail in the coffin” for the government in the lead-up to the state election in November.