Leader: Council should claw back cash to fund rest of tram project

FROM the very first, the Edinburgh tram project has been a national scheme and of national concern.

The single largest finance provider by far is the Scottish Government. It has committed up to 500 million for the project, with the city council left to find what seemed at first to be a residual amount. That residual has grown exponentially as problems over the line, unbudgeted costs and disputes with the contractors spiralled out of control.

The result is that, whichever option the city councillors chose after their marathon debate on Thursday night, some highly unpalatable consequences would result. In the event, the council has chosen - sensibly in our view - to proceed with the line to St Andrew Square in the city centre. The cost of this option is 773m - well in excess of the 450m originally envisaged for the whole project. This vote is thus by no means the end of the story.

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After allowances for council money already spent, how will it be able to raise the extra 228m to be found between now and the "drop dead date" of 1 September? If the council fails to meet this deadline, the main contractor Bilfinger Berger will halt all work and initiate proceedings for the payment of substantial cancellation and termination costs - up to and including court action.

Edinburgh is now heartily sick of this project. It should now be completed - speedily and with the minimum of extra cost. The vengeance of the city's voters is not the council's immediate concern. The urgent task now for the council's chief executive, Sue Bruce, and her officers is to complete an audit of the outstanding extra costs and put together a robust and credible funding package - all this with the clock loudly ticking. The council could borrow the money. But this would saddle the city with a 12m of interest and repayment costs each year for 30 years. And it is already 1.3 billion in debt.

The government has made clear it will not give a penny more on top of the 500m it has pledged. However, each year the government takes a considerable amount of the city's rates revenue to distribute to other parts of Scotland where need is considered to be greater. Last year, some 97m of the 286m raised in rates in Edinburgh was diverted in this way.

The council could argue on a needs basis that it should be allowed to keep more of the money it raises. This has been, after all, a long standing bone of contention with businesses in the capital who feel they get little in return for the contribution they make.

A 20m-a-year respite would go a considerable way to helping the council meet its tram obligations. Unless agreement on these lines is quickly hammered out, the city will either have to walk away from the project and incur penalty and cancellation costs, or find the extra money through spending cuts and sharply higher borrowing. This saga is by no means at the end of the line.