Extra £115m funding lined up for trams 'won't save scheme'

A SCOTTISH Executive bail-out of £115 million towards Edinburgh's proposed tram network will not save the controversial project, it was claimed today.

Ministers are set to increase their 375m contribution by linking it to inflation, but even if the additional sum materialises this will still leave the project with a massive funding gap.

A new report by the company behind the plans - Transport Initiatives Edinburgh (TIE) - has all but ruled out building the full network, with a link from the airport to Newbridge likely to be indefinitely postponed.

The cost of the project would therefore be 655m, including emergency contingency funds, with the city council today admitting it cannot realistically afford to contribute anything above 45m.

This leaves a 120m black hole, which industry observers claim will be impossible to fill. Critics of the plan to reintroduce trams said TIE's new report only proves the city cannot afford the scheme.

But the transport firm said the new figures will go some way to persuading MSPs the project is viable, and said the funding gap can be overcome by selling off land near the routes or from contributions from nearby developers.

Project director Ian Kendall said: "This shows that progress is being made towards the funding of the network, and in addition demonstrates the two major funding parties, the Executive and the city council, are continuing to work together, taking positive steps to resolve funding issues." But SNP Lothians MSP Kenny MacAskill said even if the Scottish Executive links its grant to inflation, the costs remain too high.

"This will not close the gap, all it will do is stop it from widening massively," he said. "The question remains - how do we fund this? I don't think the council taxpayer can be expected to pay for it."

The true extent of the funding crisis facing the trams project was revealed by the Evening News in September. If both tram lines are built as planned, costs are estimated at 634m, but TIE is also forced to include an "optimism bias" contingency fund of up to 14 per cent by the UK Treasury - because similar projects have gone over-budget.

As a result, the Newbridge link is almost certain to be scrapped, reducing the cost to 575m - or 655m with contingency bias. Although the Executive has previously ruled out increasing its grant, transport chiefs have successfully persuaded ministers to strongly consider index-linking the funds, which would take the handout to 490m.

Insiders claim the city council wants the Executive to cover all the costs, but the local authority today said it is prepared to make 45m available for the project.

This figure takes inflation over the next few years into account, and includes around 17m in contributions from landowners along the route. The rest of the funding would come from the sale of council-owned land, with the remainder from a loan to be paid back through tram-related profits. Transport leader Andrew Burns insisted no cash would come from general revenue or council tax.

But Tory transport spokesman Councillor Allan Jackson said: "I am very cautious about this 45m figure, and I would want to look at this very closely before money is committed.

"Everyone involved will have to sit down and take a long, hard look at what we can realistically afford." Councillor Burns said:

"The council is considering a contribution of 45m towards the construction of tram lines one and two," he said. "As the tram project will be of great benefit to developers, most of this amount will come primarily from them, along with property deals - not from council tax contributions."

An Executive spokeswoman said plans to link its grant to inflation are still being "considered".