£7m more cuts on the way to pay tram debt

Published on Thursday 20 October 2011 12:30

Nearly £7 million more of cuts to council services will have to happen in the early years of the tram project than first expected in order to pay off the loan used to rescue the scheme.

It emerged today that the city council’s revenue budget will take a £21.4m hit in the next three years as a result of the cost of paying off loans taken out to cover a £231m funding gap.

The figure is much higher than the £4.8m a year revenue impact that councillors were told to expect as a result of borrowing to take the project to St Andrew Square.

Opposition councillors said the figures were “staggering” and went against what they had been told when they decided to take out the massive loan.

The worst hit will come in the first year of the tram being in operation – 2014/15 – when the impact on the council will be £8.4m.

There will also be a £5.3m cost in 2012/13 and £7.7m in 2013/14.

Council chiefs say the reason for the figures now being higher is that the £4.8m figure was an average over 30 years but passenger income is not available in the early years to offset the overall cost of repayments.

Councillor Lesley Hinds, transport spokeswoman for the Labour group on the council, said: “I think these figures are pretty staggering. Our interpretation of why we should not go to St Andrew Square was because of the cost of borrowing and at the time they said it would be £4.8m a year to pay off that debt.

“Now it looks like it will cost the council another half million next year, £3m the next year and £3.5m the year after that.

“I am almost speechless that only now are we being told that, even when the tram is up and running, it will still be £3.5m a year more than anticipated.”

The council will have to pay £15.3m a year over 30 years to cover the money it borrowed to plug the £231m funding gap to rescue the project.

Initial council reports said that the repayments would be made through four funding sources: leasing the tram assets to Lothian Buses, profits from council arms-length firm Transport Edinburgh Limited, which owns the trams, loan “headroom” created from existing historical repayments coming to an end and money already earmarked for infrastructure improvements – which left £4.8m to be picked up through the council’s revenue budget.

TEL – including Lothian Buses – is expected to make a profit from year one but the tram is not expected to be profitable in the first three years.

Councillor Jeremy Balfour, leader of the Conservatives on the council, said: “I was always concerned about the impact it will have on the revenue budget and clearly the council will have to pay more up front until the tram makes a profit.

“We do not know if that will be in two years, three years or beyond that. That is money that could go to frontline services that is now being diverted.”

Alastair Maclean, director of corporate governance for the council, said: “As explained to councillors in recent briefings and reports, the annual funding requirements for the project will be higher in the period prior to the tram becoming operational due to construction costs and the fact that the line will not be producing revenues. These costs will average out over the longer term.”

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90

Alternative (High Octane) Fuel Head

Monday, October 24, 2011 at 10:22 PM

It really is about time that they saw sense and scr@pped this insane project. It will be of no benefit to the vast majority of the people of Edinburgh, yet will suck resources dry and deprive the city of vital services. Scrap it NOW!!!

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89

Alternative (High Octane) Fuel Head

Monday, October 24, 2011 at 10:22 PM

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88

RS here

Friday, October 21, 2011 at 10:32 AM

yip the Council implied that with a number of loans coming to an end the debt increase would be mininmal........ how can you trust any PoliticianCouncil Official that puts spin on things.... lets get back to honesty and plainm english

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87

RS here

Friday, October 21, 2011 at 10:30 AM

whats surprising is the fact that so many are surprised by this latest story that has misled the Scottish Public. we should no longer be surprised given the history and there is a lot of it

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86

Irritatingly Intelligent Chauvinist

Friday, October 21, 2011 at 02:01 AM

I think we should go back to square one. Let`s build a tram NETWORK servicing all of Edinburgh. At £370 million, I know it`s expensive, but hey, Edinburgh`s future prosperity depends on us having an "integrated transport system". Without it, we`re all doomed.

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85

Scrapitnow

Friday, October 21, 2011 at 01:03 AM

Hmm, can get the S word in to the username though! Tried re-registering my Scrapthetramline name and got no confirmation e-mail. Tried to register a second time and they said the name was taken!! Not impressed with this - too much moderating takes away a lot of the humour and spontaneous outbursts of venom. Anyhow, here we go again - how many times are councillors to be amazed by a fluctuation in the original info given to them. Are we to believe they are really so gullible? Or maybe just incompetent, corrupt, self-seeking, party-led sheep? Unelectable one and all. I've been banging on for over two years for a council of independents and only now are many agreeing that, locally and nationally, the party system is the problem. But the turkeys will never vote for christmas. Nope, it's going to be a revolution methinks- that's if the british can overcome their apathy.

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84

lewdboy

Friday, October 21, 2011 at 12:18 AM

Price per meter of track - £60-£70k

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83

lewdboy

Friday, October 21, 2011 at 12:15 AM

Lets quantify this disaster, You could line the whole lengh of the route with brand new double-decker buses and stack them all three high and still have change of £1bn At that price, you could line enough brand new double-deckers up nose to tail to run from Edinburgh to Stirling. A sickening thought.

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82

SarahB

Friday, October 21, 2011 at 12:00 AM

Disgruntled Resident (72) - If only it were that simple. We could vote out every last councillor we have, but we would still be left with a few problems: (a) the new councillors are unlikely to have enough savvy to be able to understand the implications of important decisions they may have to take; (b) because of (a), Council groups may arrive at a view for political, rather than informed, reasons; (c) new councillors will then probably be whipped on every decision and unable to vote according to their own judgement or in line with local opinion; and (d) probably most importantly, we will still be lumbered with senior officials who seem to think nothing of either taking decisions upon themselves which should properly be dealt with through committee, and misleading elected representatives by withholding crucial information. Whoever wins the next local election, if they truly want to return the city to competent and fair representation, is going to have to take immediate steps to restore honesty, integrity and impartiality amongst high-ranking officials.

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81

Snails dont like curry and chips

Thursday, October 20, 2011 at 08:17 PM

Just simply more deceit and lies from CEC. What more do you expect. The scale of the financial commitment to this wasteful and needless project is quite staggering - how anyone can still claim to support it is beyond me. However this will be the last surprise to be sprung on the council tax payers won't it - aye right!!!

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80

infamous clarity

Thursday, October 20, 2011 at 08:11 PM

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79

Jams

Thursday, October 20, 2011 at 07:57 PM

If the council had produced as much tram line as they have LIES they would have reached Penzance by now. For sale, Scottish capital city - one really poor owner, lousy condition, severe debt handling problem, complete inability to put the brakes on. If you own a vinatge sports car and like fixing things every five minutesthis could be just the city for you. Payment taken in Sterling, Dollars, Yen, used lemonade bottles or vouchers for Pizza shop.

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78

RS here

Thursday, October 20, 2011 at 07:22 PM

Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation Pending Moderation

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77

RS here

Thursday, October 20, 2011 at 07:21 PM

yip fuel head is right, you cant enter the word scr*pped, must be some website that the Scotsman had bought RS

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76

RS here

Thursday, October 20, 2011 at 07:18 PM

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