A proper business case should contain optimistic, medium and downside scenarios which, in turn, should be subjected to numerous “what if” conditions. What a proper business case should not do, as in this and all previous tram business cases, is present the most optimistic scenario as accepted and robust.
That said, even the current optimistic report states that Transport for Edinburgh will make a £3.6 million profit over its first 15 years of operations – but that equates to only £2m at current value.
If, as expected, the trams never achieve these figures and make no gross profit, the result would be that the City of Edinburgh Council would never receive the fees and dividends that prop up the business case and could, in fact, lose a further £118m over the period.
This would take the losses, including repaying and servicing the capital debt, to more than £32m per year.
Add to this the fact that the business case does not factor in any losses to Lothian Buses, which are almost inevitable, given that 73 per cent of the passengers are anticipated to come from a so-called “modal shift” from bus to tram, and that such a shift would require current lucrative bus services to be radically decreased or cut to force this change.
John R T Carson BSc CEng FICE FCIHT