Edinburgh tram inquiry report: Council and ministers 'principally responsible for failure to deliver project on time and budget'

Lord Hardie says “little doubt council tram firm Tie’s mismanagement played a significant role in the failure”

Tram inquiry chair Lord Hardie has pointed the finger at the City of Edinburgh Council, its tram firm and ministers for the huge delays, cost overruns and cuts to the tram line scheme, in his long-awaited report into the fiasco.

He also said in his 959-page report the “best estimate” of the total cost of the scheme was £835.7 million – nearly £50m more than the council had previously said.

He said: “The report contains criticisms of many companies, organisations and individuals but today I wish to highlight the actions of Tie (Transport Initiatives Edinburgh), the City of Edinburgh Council and Scottish ministers whose acts or omissions were principally responsible for the failure to deliver the project on time, within budget and to the extent projected.”

He singled out Tie for particular criticism in his four-volume report on Tuesday, stating: “There can be little doubt that Tie’s mismanagement played a significant role in the failure to deliver the project on time and within budget and to the extent projected.”

The inquiry report comes more than nine years after Lord Hardie was appointed to conduct a “swift and thorough” investigation by the then First Minister Alex Salmond.

The former judge said its cost – to the end of July – had been reduced from £13.1m to £8.7m “by using existing public resources that were not replaced and discounting the public expenditure already incurred relating to these resources”.

The 8.5-mile line between Edinburgh Airport and York Place at the east end of the city centre opened three years late in 2014 at a cost of nearly £777 million, £231m over budget, with a northern loop between Roseburn, Newhaven and the city centre shelved.

A tram in the west end of Edinburgh during work on the tram line extension between the city centre and Newhaven, which opened in June. (Photo by Lisa Ferguson/The Scotsman)

The report’s 24 recommendations include consideration of a new law to enable civil and criminal sanctions against individuals or companies “who knowingly submit reports that include false statements to councillors”.

Lord Hardie said there had been a “litany of avoidable failures on the parts of several parties”. He concluded: “Poor management and abdication of responsibility on a large scale have had a significant and lasting impact on the lives and livelihoods of Edinburgh residents, and the reputation of the city.”

Among others criticised in the report Lord Hardie highlighted the then Finance Secretary John Swinney’s decision to Transport Scotland officials to “scale back” their involvement in the project, which he said “was a material change of such significance that officials gave serious consideration to their seeking a ministerial direction to obey this instruction”.

The Labour-Liberal Democrat Scottish Government had provided £500m funding for the scheme but the SNP said it would not provide “a penny more” after failing to get the scheme scrapped when coming to power in 2007.

Tram line construction in Princes Street in 2009, which caused prolonged disruption to Edinburgh city centre because of a dispute between contractors and the council. (Photo by Jeff J Mitchell/Getty Images)

Lord Hardie said: “Ministerial directions are formal instructions from ministers telling their officials to proceed with a spending proposal in a particular manner, despite an objection from the permanent secretary or other senior official in the department.

"They are extremely rare and have been described as the ‘nuclear option’.

"It appears that Mr Swinney may have realised the fundamental error and unreasonableness of the ministerial decision to scale back officials’ involvement in the project when problems arose with it after the Infraco [infrastructure] contract was signed.

"He became directly involved in it. During the course of the Princes Street dispute he told [David] Mackay, the chairman of Tie, “to get it sorted”. His explanation that he meant Tie to follow the dispute resolution procedure does not bear scrutiny."

A tram running in Edinburgh

Lord Hardie observed in the report: “From seeking to distance themselves from major decisions on the project, they [ministers] were now directing the council as to what should be done.”

He said: "Following the emergence of the difficulties with the project, it can be seen that Scottish ministers, represented by Mr Swinney, not only recognised their mistake in withdrawing the oversight of Transport Scotland officials designed to protect the public purse but became more involved in issuing directions to the local authority and Tie about actions to be taken by them.

“Such intervention would not have been necessary had Scottish ministers allowed officials to undertake their normal role in major transport projects that were in receipt of substantial grant funding. Their role was intended to protect public funds represented by the grant funding but such protection was removed as a result of the actions of Scottish ministers.”

Lord Hardie also concluded the cost of the scheme “was an understatement because the council allocated costs to other budgets that truly related to the project and failed to include the net present value of borrowing £231m to complete the restricted line”. He said there had also been a “substantial claim” by a landowner, with the council unaware at the time of its cost.

He said the budget overrun was caused by a series of factors including Tie’s “failure to work collaboratively” with the council and others, its failure to report accurately on progress, the council’s failure to monitor that, design delays and deficient governance.

Council leader Cammy Day said: “From a first reading of the report, it’s clear that serious mistakes were made and that this had a significant impact on the city.

"There’s no getting away from the fact that the original project caused a great deal of disruption to residents and businesses, as well as damaging the city’s reputation, and, on behalf of the council, I want to apologise for this.

“I won’t, however, apologise for building a tram system, or for our ambition to develop it further. After all, creating a better connected, environmentally friendly transport system is essential for a modern, successful city and we need to transform the way people move around if we are to achieve our net zero goals.”

“We’ve now launched passenger services on the completed line to Newhaven, the success of which was down to the hard work of the council-led project team, but also thanks to lessons learned from the first project.”

Transport Secretary Mairi McAllan said the Scottish Government “must take our time to consider the detail and the recommendations”, but commented: “The inquiry took too long, was too costly and in some instances the evidence heard does not support the conclusion drawn.”

She told BBC Scotland: “Evidence was led during the inquiry that made very clear that it is good governance...for there to be one project lead, and in this case, it was the council.”

Lord Hardie had recommended that ministers “should be involved in the delivery of the project as they were before the withdrawal of the support of officials from Transport

Scotland in 2007”.

A Scottish Government spokesperson said she would elaborate in a statement to the Scottish Parliament. They said: “When the overall context of the decision around Transport Scotland’s involvement in the project is considered, the criticism in Lord Hardie’s report is not justified."

Scottish Conservatives Lothians MSP Miles Briggs said: “Lord Hardie’s report is a scathing critique of the SNP Government and City of Edinburgh Council’s roles in a national scandal.

“Lord Hardie is highly critical of councillors and the arms-length bodies responsible for the project – but he also singles out Scottish government for criticism.

“He is clear that ministers failed to protect the public purse and acted in the SNP’s political interests, rather than the public interest. John Swinney, especially, has questions to answer for removing safeguards that would have protected grant funds.”

The date and timing of the report’s publication was decided by Lord Hardie and the inquiry team, officials told The Scotsman.

Warning letters were sent last year to those to be criticised by Lord Hardie in the report to give them an opportunity to respond.

The inquiry was ordered into why the ill-fated project was delayed by years and went hundreds of millions of pounds over budget, with only a fraction of the original scheme completed when trams finally started running in 2014.

It involved sifting through six million emails and other documents, while nearly 100 witnesses gave evidence during eight months of public hearings.

The tram work also caused massive disruption to the city centre, especially around Princes Street, as well as during preliminary work on Leith Walk before that section of the line was shelved.

A significant factor in the fiasco was the major fall out between Tie and a consortium of construction companies which built the line, including over incomplete designs.

It led to the council having to pay at least £66m to the consortium after the acrimonious dispute went to mediation.

Lord Hardie’s conclusions about Tie come in stark contrast to ill-tempered outbursts by Mr Mackay, who described principal tram line builder Bilfinger Berger as a “delinquent contractor who scented a victim”. He quit his post in 2010, calling the project “hell on wheels”.

The tram scheme also suffered major problems during preliminary work which started in 2007 to move underground pipes and cables from the route, with far more having to be replaced than planned, and unexpected obstacles being encountered.

Construction of the line started in 2008, but hit major problems the following year when a row blew up between Tie and the contractors over the cost of work in Princes Street.