City Guide to Edinburgh, Scotland

City Guide to Edinburgh, Scotland

Edinburgh Trams - Taking the Tram to Bankruptcy?


By actionman - Posted on 30 July 2013

Edinburgh Trams at Depot

Information has at last been released by Edinburgh City Council admitting that the tram project is going to run at an operating loss for the next fifteen years - which is a fact that the critics of the project have long stated, only to have this vehemently denied up to now by Council Officials and by those in charge of the last administration.

However, we are now told that there is need for a "start up loan" of some £3 million - and as this clearly seems to the public to be yet another new cost which has been hidden, we are entitled to ask why this not included in the overall project cost? Presumably the "start up loan" is required because the so called "tram" is actually a light rail project, so stricter introduction safety checks are necessary.

The forecast now given by the Council for receipts is some £51 million with payments for maintenance and refurbishment running at £85 million. Therefore it is going to be up to Lothian Buses to cover the difference of £34 million which theoretically wipes out the Lothian Buses profit of £33 million, although it appears that the Council are subsidising the tram from other budgets so that they are able to claim somehow that this leaves them with a nominal profit of £5 million for the bus operation.

The 'smoke and mirrors' that the Council are employing to try and defend the cost of the tram project and the viability of Lothian Buses is truly ingenious! The costs of the additional money - some £231 million - which the Council has had to borrow, will be a mill stone round the necks of the Council and those who pay Council Tax for years to come.

What is really interesting is that the Council officials seem able to so clearly forecast the revenue for the tram when it has not even started to operate. Apart from a few rugby matches there will be few occasions when it will run at anything like full capacity and the city seems to be faced with an empty tram simply blocking the roads and totally snarling up the city transport system.

In line with every aspect of this shameful project the forecasts by the Council officials are hopelessly optimistic, just as their 'business case' for the project has been proved to be totally inadequate and plain wrong. In addition one wonders what damage will be done to Lothian Buses who will have to keep covering the deficit year on year. Their investment in eco-buses is bound to suffer as the money will simply not be there.

Edinburgh Council Tax payers are watching the financial crisis deepen with some concern as they see every Council budget being raided to try and pay for the tram project. There is an urgent need for a Public Inquiry before many of those responsible have retired from the scene with fat pensions, so we should be pressing our MSPs to force the Scottish Government to get things moving and hold an inquiry forthwith. The First Minister promised to be open and transparent in government and a Public Inquiry now would demonstrate this very principle.

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Just makes the eyes and mind boggle when it's written out in cold hard facts like the above... Here's hoping Tourists LOVE the trams when they are finally, finally finished... Edinburgh residents I fear will contain actionman's point of above: "faced with an empty tram simply blocking the roads and totally snarling up the city transport system".

It looks like the Council has a different interpretation of the numbers (media release quoted in full below):

"Tram bosses have insisted that the tram service is predicted to run at a surplus over fifteen years following recent news coverage that suggests otherwise.

The Council has set out a fifteen year business model which integrates the finances of Lothian buses and the tram service as part of a new transport company for Edinburgh.

When revenue and operating expenditure is taken into consideration, Council would draw a surplus of £5m over 15 years. The tram on its own is forecast to run with a £48m operating surplus.

Maintenance and refurbishment costs for the tram system (totalling £87m and which aren’t part of operating costs) would be covered by surplus income from the tram (£48M), through the dividend paid to the council by Lothian Buses (£30m), a dividend from tram operation (£3m) and through other funding which totals £11m. Other funding may be achieved through tax savings and through additional income generation such as advertising.

Transport Convener Lesley Hinds said:

“These figures are provisional but they stack up and, all things considered, Edinburgh’s new transport company is predicted to deliver a surplus. Even on its own, the tram is predicted to deliver an operating surplus. The tram and bus service will be fully integrated, with tickets, timetabling and everything else being delivered through one system - this is the same for the finances. Under one company both services need to operate together.

“We’ve already committed that tram will have no negative financial impact on the bus service and, although the arrangements are still in draft form, we’ll ensure that any dividend drawn from income will go back into Edinburgh’s transport system.

“Whilst this business model and all predictions have been and continue to be verified externally, it’s important to remember that they are still predictions. The Council will bear the financial risk so I’m determined that numbers are closely and continuously scrutinised as we move towards service.”

The full council report can be found on the Council’s web pages. It will be considered at a meeting of the Full Council on Thursday 27 June. A further report will be presented to Council on 22 August to confirm arrangements once further financial due diligence has been carried out.