It was probably the worst, least decision – so to speak. A few days ago, the City of Edinburgh Council decided to continue building the tram line – but to stop it at Haymarket.
The councillors had three options in front of them: to cancel the project, to take it to Haymarket, or to carry on with the plan to run the trams to St Andrew Square. The result was a political compromise which made no economic sense, at least in terms of running a tram service that would ever break even.
That decision is back in the melting pot after the first minister, Alex Salmond, warned that the Scottish government might withhold around £60 million. That’s what remains of the £500m grant given to the project by Holyrood. Now the floundering project is back before the council after the lord provost confirmed there would be a special meeting convened on Friday morning.
There had already been some speculation about last week’s decision. Work was already scheduled to restart on Princes Street next month, paid for by Bilfinger Berger, the main contractor. There was also the question of what had been agreed during the protracted period of mediation. Would a change to the terms of this – by cutting back on the route – alter the willingness of the consortium to continue with the project?
The economics of the decision, at least in part, also seemed to fly in the face of reason. The city would no longer have to borrow the extra £231m to fund the service into the centre of town, saving something like £15m a year in interest charges. But, instead, it guaranteed the creation of the ultimate white elephant.
Yes, the tram would run from the airport to Haymarket – but how many tourists would want to take a tram part of the way into Edinburgh, only to have to change to a bus or train to complete the last part of their journey? Some projections have suggested that the route could, as a result, lose as much as £4m a year.
Edinburgh Chamber of Commerce has already described the decision as “bonkers”, and there has been outrage among city centre traders who face yet more disruption. Princes Street was closed to traffic for almost a year to allow tram lines to be laid. But if trams now stop at Haymarket, this section won’t be needed and it may well have to close again to allow the lines to be lifted unless a phase two is envisaged at some time in the future.
The company which until now has been in charge of building the tram network, TIE (now effectively being wound up), had gone out of its way to accommodate the objections of businesses along the route. There have been suggestions that this was, in part, one of the reasons why the project has taken so long. However, it has emerged that the £25m which businesses in the city centre would have paid would now be lost were the service to be cut short at Haymarket. Around £5 million has already been received and would have to be repaid, with the remaining £20 million being written off.
If the last tranche of government money is withheld, the economic case for restricting the line will be thrown into turmoil once again. Could it be that the case for continuing to St Andrew Square, via Princes Street, would once again be preferable? Last week’s decision was supposed to be final. It could not be revisited for 12 months unless there was a material change in circumstances. The first minister’s announcement may represent such a change.
Speaking to BBC Scotland, the council transport convenor, Gordon Mackenzie, said that his own party (the Liberal Democrats) clearly thought cutting to route at Haymarket “…was the wrong option last time and with the costs likely to increase and a considerable question mark over the funding, we’re even more convinced that St Andrew Square is the better option.
“The big question is what do other parties think? I think the people of Edinburgh want us to act like grown-ups – to have a serious look at this. Nobody liked the Haymarket option. There was outrage in Edinburgh and elsewhere with it, so, I hope other parties will look at it afresh and come to a different conclusion.”
Friday’s meeting could also discuss the possibility of allowing a new consortium to take over the scheme. There have been reports that the Canadian train manufacturer, Bombardier, and the operator of the Paris Metro, RATP, are “still interested” in taking on the project despite a similar offer having been rejected in July. They believe they could control the spiralling costs of the troubled development.
Unlike the existing consortium, BSC (Bilfinger Berger, Siemens and CAF), which is being paid up-front, the new group has offered to finance the deal itself and only be paid when the trams were running. It also offered to take on the risk should there be any further problems with construction. In addition, any delays in completing the project and then not operating trams according to timetable would lead to a cut in payments.
However attractive that may be, councillors will need to take other factors into account – not least the cost of extricating the city from the existing contract. Friday’s meeting is likely to be fraught. Labour and Conservative members looked rather pleased with themselves last week when they voted through the shortened line. They will feel a lot less comfortable now.