The two parties which make up the city’s ruling coalition have been divided over the £162.2 million project, with the SNP warning the business case was not robust enough.
But they voted together at yesterday’s full council meeting to approve the extension in principle, while delaying any further move until next month’s council meeting on December 10.
Only the Conservatives voted against the extension in principle, so the coalition’s position was approved by 44 votes to 11.
The project – taking the trams from York Place through Leith to Newhaven – would be part-financed by securing a £20m “extraordinary dividend” from Lothian Buses. But fears have been raised about possible reduced investment, job cuts and fare rises.
The council is to now to ask Lothian Buses what impact the dividend proposal would have.
Labour council leader Andrew Burns told yesterday’s meeting he was “acutely aware” of the damage done to the city’s reputation by the previous problems with the tram project.
But he said Edinburgh’s population was growing at the rate of 100 people a week and in the long term the bus network would not be able to cope.
He said it would be a “dereliction of duty” if the council did not plan for that situation.
But he said: “If we get a formal reply that that extraordinary dividend request will somehow significantly damage the bus company, we’re not going to do that.”
Deputy council leader Sandy Howat, of the SNP, highlighted “justifiable fears and concerns” voiced by bus union Unite.
He said: “We must not rush into making a decision, but scrutinise and scrutinise again. Our reservations are primarily around the financial risk to the city.”
A team of four Labour and four SNP councillors has been appointed to handle the issue over the next three weeks.
They will meet at least twice a week between now and the council meeting in December.
An insider said: “They will make all the different inquiries and get all the information required so an informed decision can be made. Councillors with any misgivings can feed into that.”
Green and Liberal Democrat councillors voted with the coalition, but only on the understanding a decision on starting work on the extension would be made on December 10.
However, the Conservatives argued the three-week delay would make no difference to the fundamentals of the issue.
Inverleith councillor Iain Whyte said: “The people of Edinburgh are angry – they feel they were ripped off during the last phase and they want to see us look after things for the city.
“We are being failed. The administration are not pressing officers hard enough to get value for money.”
And Tory group leader Cameron Rose accused the coalition of being “addicted to fudge”.
He said the plug should be pulled on the extension. “It’s not viable, it’s much too expensive and it’s going to take far too long,” he said.
SNP group leader Sandy Howat said the coalition was keen to get answers to allay fears over impact on Lothian Buses.