City landed with £5m bill to fill gap in TIE pensions
Tram works continue on Princes Street as the city counts the cost of TIE
A NEW £5 million bill has emerged from the process of winding up beleaguered tram firm TIE – and it will have to be met directly by the taxpayer.
The city council will have to pay off a massive deficit in the pension scheme of the “arms-length” company it set up to run the tram project.
TIE staff past and present have accrued a bumper pension pot of £12.2 million – but there is only £7.6m left in the fund.
The council will have to pay £4.6m over the next five years to fill the gap in funding because of the decision to formally wind up the company, which will cease to exist next Monday.
The massive bill comes on top of £2.1m of redundancy costs already paid out to TIE staff, as well as the £2.8m-a-year charge of bringing in consultants Turner & Townsend to take over “project management” duties from TIE.
Councillor Lesley Hinds, transport spokeswoman for the Labour group on the council, said: “I am concerned that every day there is a new figure.
“I will be asking what the ongoing revenue cost of TIE will be, because we also have the £700,000-a-quarter impact of Turner & Townsend.
“When I first suggested that we do not have TIE any more because it has lost the confidence of the public, [transport leader] Gordon Mackenzie said it would be far too expensive to do that, then months later it was announced that it would be disbanded. What other costs are there going to be? Is the office where they are based on a long-term lease, for example, and what will that cost? You just wonder where these costs will stop.
“What councillors need to get is a proper indication of what these costs are likely to be in future.”
The cost to the council of plugging the TIE pension deficit will be paid to the Lothian Pension Fund, which administers the TIE scheme, over each of the next five years – meaning a re-occuring cost of nearly £930,000 a year over that period.
The boards of Transport Edinburgh Limited and TIE have already been reduced to “statutory minimum” levels – meaning they will continue to operate but only as largely dormant companies.
A council spokesman said: “The costs associated with winding down TIE, including all costs associated with redundancy payments made to TIE staff and, in a few cases, early access to pension, have been reported in full to councillors.
“The deficit in the pension fund for TIE Ltd is an issue that has existed independently from the costs directly associated with the change from TIE Ltd to the new Project Manager, Turner and Townsend, and is therefore a liability that would have fallen to the council regardless of the decision to close the company down.”
TIE moved into the CityPoint office at Haymarket Terrace in 2006, when it signed a ten-year lease. But it is understood that the company has an agreement in place to break from the lease in the fifth year – with the break clause coming into effect early next year.
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Comments
There are 41 comments to this article
Page 1 of 3
Richard Lionheart
Thursday, October 27, 2011 at 01:57 PMstockmarkets have rallied today. The pension scheme should be revalued now!
Richard Lionheart
Thursday, October 27, 2011 at 01:56 PMClearly our transport councillor has one skill! To waste taxpayers money. Why have no heads rolled at the council?
james(1)
Thursday, October 27, 2011 at 12:08 PMIf I hated Edinburgh and all the people who lived there, then I could not have conceived a better plan to hurt them than implementing this tram line.
WOTTPI
Thursday, October 27, 2011 at 10:11 AMMOCO at 31. I agree with your comments that tie should have been able to push the contractor with regard to the off road sections. However, because of the poor contract the contractor had them over a barrell with regard to the on road sections and thus had an upper hand so decided to pull people off the whole job. In the BBC Scotland Documentary Dr Jochen Keysberg referred to utiltiy problems and design changes as being the main issues. However while I accept this for elements of the on-road sections from an engineering point of view I can see little utility issues on long stretches of the off road sections. Similarly given the relatively simple design of the track and its foundation I cannot see where there woudl be any major design change issues outwith alterations to structures - and you can build the track up to the structures while those issues are being reosolved. The fact they they seem to be working away nicely on some of these sections now supports my theory that the contractor used problems elsewhere on the job to pull people of the whole contract. Other than the cash running out I have still had no decent explanation on why, for example, the Depot to Airport section was not progressed to allow vehicle delivery and testing.
WOTTPI
Thursday, October 27, 2011 at 09:57 AMSarah B @33. I agree with some of what you say, especially in relation to CEC officials loosing power and control over tie. Whether that is their fault or through political pressure to support tie we will only find out in time. I understand your notion of a 'gentleman's agreement' but believe that, just like the monthly briefings to Trans Scot, there will have been approrpiate arrangements put in place and documented. Whether that was adhered to is another matter. However as far as I know the only Senior officers who went to tie early on were Alex Macaulay and Barry Cross ( I am only aware of 3 to 4 mid level people who joined tie from CEC in the early days). Macaulay was appointed to Sestrans in Sept 2006 so left the scene early on and Barry Cross's time at tie was spent working on EARL. Therefore the principle of splitting of the mudfa infraco contract appears to have occurred on Macaulay's watch but others, with no CEC connections took that forward, Gallagher, Matthew Crosse, Stephen Bell etc. I am not overly sure what the arrangements were for Duncan Fraser and Keith Rim_mer. I think Duncan Fraser and his small team (Tram co-ordination) were are working on a secondement arrangment (therefore still CEC) mainly dealing with traffic related matter, TRO's and the like, along with acting as the tie CEC interface, writing up the council reports etc. I believe Keith Rim_mer did fully transfer to tie as a 'Tram Special advisor' but, from googling, he was still Head of Transport at CEC in early 2007 so when he went I'm not sure but he was with tie in 2008. However his main background was maintenance so I suspect he was maybe trying to resolve the utility issues and having transferred to tie then, as you say, he had no obligation to act on behalf of CEC. With regard to my link then google 'andrew holmes nicol stephen tie' and go to the entry entitled 'car'
Happy Hibee
Thursday, October 27, 2011 at 05:40 AMThere was me thinking Tie were a limited company?
Jools in Edinburgh
Wednesday, October 26, 2011 at 11:40 PM#32 That could well be the candidate for funniest username on this site:-0
The Genuine Mario Antionette
Wednesday, October 26, 2011 at 11:07 PMYou can blame the SNP for the trams fiasco. They were elected on an anti tram manifesto but showed a lack of commitment to carry out their promise - others took advantage of the SNP weaknesses & they can't be blamed for the mess which has since developed. The SNP have shown weak leadership & cannot be trusted to honour any pledges they make to the people of Scotland.
SarahB
Wednesday, October 26, 2011 at 06:33 PMWOTTPI (25) - I can't seem to find the document on your link but, having posted my earlier comment and read yours at (25), my memory has been jogged further. Andrew Holmes may well have taken the credit for setting it up, but TIE was actually Alex MacAulay's baby. Indeed, another fundamental mistake may have been that, because AM was going from CEC and obviously knew all the other CEC senior officials well, it was felt that a simple "gentleman's agreement" would be a sufficient basis for operations between TIE and CEC, ie, that there was no need to formally set out the relationship and responsibilities of TIE. By 2007, of course, some of those same CEC senior officials had moved over to TIE, leaving AH with a new crop of officers. It was obvious then that there were very serious issues with the project and with TIE's performance and attitude. CEC officials, realising that it would be they, not TIE, who would be held accountable, tried to enforce some control but it was not enough. They could have taken the much more sensible step of halting the project to sort out the issues, but that would have meant publicly admitting that there were problems both with TIE and the trams and, in these days of powerful media, that was unthinkable. So, the little flagging up that they did was too little, far too late.
Duncan in Edinburghs Fluffer
Wednesday, October 26, 2011 at 06:10 PMWould it not be cheaper just to take TIE out and shoot the lot of them? After all, thats what they have domne to the taxpayer of this city. What a complete burden this lot has become. Everyday they bleed the taxpayers dry......its getting ridiculous !!
MOCO
Wednesday, October 26, 2011 at 05:36 PM# 25 Tram Public Inquiry. ".... and the behaviour of the contractor (still no explaination of why off road sections were not progresseed) have ended up being the main problem." A fair question but IF the contractor was being dilliatory why did TIECEC not throw the book at them and threaten penalty charges? I suspect the answer is that CECTIE signed a contract full of holes, so keen were they to get this vanity project off the ground. The main problem with this project all along was the lack of due digligence shown initially by CECTIE. Everything else that has transpired is a consequence of this.
The voice of reason!
Wednesday, October 26, 2011 at 05:33 PMI wrok for the concil miself.
The voice of reason!
Wednesday, October 26, 2011 at 05:32 PMYou can't refuse to pay a council worker a pension for incopetence. It could affect thousands of them.
Argungu
Wednesday, October 26, 2011 at 05:13 PMThe sooner we have a Public Inquiry on the Edinburgh Tram Project the better.
Euan_1
Wednesday, October 26, 2011 at 05:07 PMOh come on, this has to be a joke, it HAS to be. Not one single former TIE employee should be entitled to that money, not one. Instead, these funds should be used to help compensate people who have had their very livelihoods put in jeopardy by the sheer ignorance, arrogance and ineptness of this now completely discredited and disbanded organisation. What next, I ask....?
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