Tram bosses 'inflated cost of scrapping beleaguered £1bn project'

OFFICIALS in charge of Edinburgh's tram project have been accused of "inflating" the costs of cancellation after it emerged £80 million has been chopped off the latest estimate in the space of two months.

A new report has revealed that Edinburgh City Council would end up paying another 180m to wrap up the scheme if it cannot reach an amicable settlement with its construction consortium.

But it warned against the total 670m cost of cancellation - which would include the Scottish Government's 500m grant - due to the "significant reputational damage" to the city and that it could scare off potential investors.

However, the latest "best-case" estimate for getting the scheme up and running has now soared from 772m in June to more than 1 billion when the costs of repaying a massive loan are taken into account.

Even this would only pay for a drastically-shortened first phase, running from Edinburgh airport to St Andrew Square.

The latest figures mean the fate of the scheme is again hanging in the balance, as opposition councillors opposed to the prospect of hefty loan payments could join forces with the SNP to vote for cancellation next week.

Work is due to restart today in Edinburgh city centre on a project which is already running more than three years behind schedule, with Princes Street due to be closed to traffic early next month for the best part of a year.

Opposition councillors said they would be demanding explanations from officials over the latest report, which admitted it is "not possible" to guarantee a fixed cost for getting the scheme up and running.

With no prospect of extra funding for the tram from the Scottish Government, the council is being asked to endorse plans to fork out 15.3m a year for the next 30 years for the project, taking the overall cost to 1.09 billion.

But in his report, director of city development Dave Anderson said the council would face one-off costs of 180m in the first year after cancellation.

The council has only previously budgeted 545m for the tram project, with 500m coming from the Scottish Government, almost all which has been spent. In his report Mr Anderson said there had been an 80m reduction in the costs of cancellation after each of the consortium members prepared "sealed-envelope" estimates of their costs from "walking away" from the contract if the council was unable to put a funding package together.

He added: "It should be noted this (new figure) is currently not legally binding. It is only available if the council is unable to approve funding to complete to St Andrew Square."

Gordon Mackenzie, the council's transport leader, said: "It is important we get a clear decision from the council to provide certainty for residents, businesses and to fulfil our contractual obligations.The current council has a strong record of balancing the budget while improving services and I am confident that will continue."

However SNP councillor Steve Cardownie, the deputy council leader, said: "It would appear that these figures for cancelling the project have been inflated. If we had known what we do now two months ago it begs the question of what the vote would have been at the time.

"It hardly gives us any confidence in any of the other figures we are now being presented with. We must ensure they are cast-iron before any other decisions are made."

Labour group leader Andrew Burns said: "We are opposed to the prospect of the council paying for the tram for the next 30 years. The council should not be pressing ahead with something it clearly cannot afford."