Victory for Lib Dems, but at what cost for city?

A truncated line from Edinburgh airport to St Andrew Square will be pursued over the next few months after calls for a cheaper alternative which would have halted the tram at the Haymarket area were defeated.

However the fate of the project still hangs in the balance because of the Scottish Government’s refusal to grant any more funding to the beleaguered scheme, which is expected to cost up to £773m.

Officials have been given two months to produce detailed funding options to get the scheme up and running amid fears the council is facing a costly legal action if it ends up pulling out of the project.

Council officials last night said they hoped Alex Salmond’s administration would allow them to use the next round of capital funds due to be released in the autumn to help bridge the funding gap.

And they said they were still hopeful of a change of heart on the Scottish Government’s pledge not to allocate the project any more funding. It was forced to stump up £500m four years ago when the SNP was outvoted by opposition MSPs.

The Liberal Democrats, the biggest party in the City Chambers, could not find another party to support its plans last night, although none of the groups voted to scrap the scheme, a week after such a prospect was priced at up to £750 million.

Tory and Green councillors’ pleas to delay a decision for another few months to allow officials to produce more detailed costings fell on deaf ears, while Labour councillors voted in favour of cutting short the first phase at Haymarket, an option which the SNP, who argued unsuccessfully for a snap referendum, ridiculed.

Council leader Jenny Dawe said: “The only logical option open to us is to go to St Andrew Square. Now is the time for certainty and not further doubt. I would plead with you all to think of the citizens of the future rather than political point scoring.

“All of us enjoy a cut and thrust political debate, but there are occasions when the greater good of the city should transcend political point-scoring . This is one of them. Yes, the going has got tough, but this is not the time to procrastinate or walk away.”

However her deputy, SNP councillor Steve Cardownie, whose party has opposed the tram scheme while in coalition with the Lib Dems in Edinburgh, said: “I believe the people of this city should get an opportunity to decide how their money is going to be spent. The only reason that they have not been asked until now is because people are scared of what the answer will be.”

However, Labour’s transport spokeswoman Lesley Hinds said: “There has been absolutely no political leadership in this council. SNP councillors have been happy to accept the responsibility allowances in power, without taking the responsibility that goes with that. They are simply chickening out by calling for a referendum.”

During almost six hours of debate and cross-examination of officials, councillors were told there was “no indication” that the city council would have to refund any of the Scottish Government’s money spent on the project.

But officials warned that if the council ended up scrapping the whole scheme it faced having to find all costs over and above the £500m awared by the government four years ago.

They were also told that the main construction consortium could instigate court action against the authority as early as September if the project was scrapped or further delayed.

The council’s finance director, Donald McGougan, said a fixed-price had not been agreed with the contractors to build the line to St Andrew Square, admitting the cost was “variable”, but insisted it was not a “guesstimate”.

He added: “The Scottish Government have not officially said what their preferred option for taking the project for is.

“What they have said is that they are prepared to give us some flexibility in terms of how we run our finances.

“I appreciate it is difficult for the Scottish Government given what they have said, but in politics people do change their minds sometimes and it is important we continue to engage with them.”

The council’s solicitor, Alistair MacLean, warned the authority could face court action from the contractors if it failed to press ahead with the project by early September.

Councillors also heard the Scottish Government’s transport agency would have to agree to the council selling any tram vehicles as they had met 91 per cent of the cost.

Mr McGougan said the council may be able to use capital funding allocations from the government to meet the funding gaps with the project. He added: “We won’t know what our allocations for the next few years will be until September. Not all of that funding is committed by the council and we wouldn’t have to cancel other projects.

“There are no easy options open to the council. There are further disputes ongoing with the contractors and there could be further significant costs.

“To run the tram into the city centre would give us a better base and platform to eventually get the tram to Newhaven.”

Mr McGougan said there was “no indication” from the government or Transport Scotland that the council would have to repay the original grant. First Minister Alex Salmond pledged last week the government would do all it could to help by offering the council “flexibility” in how it runs its finances.

However, Mr Salmond added that extra funding was not on the table, insisting it “wouldn’t be fair” on the rest of the country for the project to be bailed out now when the SNP had tried to cancel the project four years ago.

Despite the vote, the fate of the project remains far from certain, mainly over the lack of certainty over how the council will bridge the huge funding gap. Some £469m of the Scottish Government’s £500m has already been spent, up £29m from estimates given in May, and ministers are insisting there will be no further money made available.

The council is still locked in a bitter legal battle with the main construction consortium, led by German outfit Bilfinger Berger, with the dispute now into its third year.

Mr McGougan revealed that there were still several “very significant” outstanding claims which could see the overall bill increase even further.

Much of the infrastructure work has yet to be completed and Princes Street is due to be closed for up to a year from early September to allow repairs to botched works to be carried out.

The St Andrew Square option has been priced at up to £773m, while curtailing the first phase at Haymarket was estimated at up to £700m by officials. They had warned councillors that the cost of cancelling the entire scheme may vary from between £690m and £750m.

Labour councillors had called for the council only to commit to a line with the “least construction risk,” an initial tramline from the airport to Haymarket, as the first phase of a “longer-term strategic plan” should funding become available.

However, they also said the business case for the tram had to be reassessed before the final go-ahead is given for the project and called for Lothian Buses to be involved. The capital’s Tories argued for the council’s chief executive, Sue Bruce, to go back to the drawing board with the scheme’s contractors and produce “fixed price” estimates for the two options for either Haymarket or St Andrew Square, as well as detailed costings for cancelling the entire project.

The vote leaves the council facing a huge funding gap for the project, with the Scottish Government insisting it will not increase the £500m grant MSPs voted for in 2007.

Unless a deal can be struck with ministers, the council faces a huge borrowing bill simply to get the truncated line operational, with the earliest start date for the tram now pushed back until 2014. The tram scheme, which was due to start running in February of this year, has been dogged by problems since being given the initial go-ahead by the then Scottish Executive in 2003.

At the time the council was awarded £373m to build two tramlines to serve the north and west of the city.

A third line linking the south side of the capital was due to be paid for by the city’s congestion charging scheme, only for it to be voted down in a referendum.