John McLellan: Find a better way to line up tram funding

Passengers disembark from a tram at Haymarket. 
Picture: Ian Rutherford
Passengers disembark from a tram at Haymarket. Picture: Ian Rutherford
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Given the multi-million overspend on the Edinburgh tram, no wonder there were celebrations at the line making a £252,000 pre-tax profit in 2016, two years ahead of schedule. The city’s transport convener, SNP councillor Lesley MacInnes, said: “These are fantastic figures, demonstrating how popular trams have become.”

“Have become” is the operative phrase, not least within the SNP which readers will remember vigorously opposed the scheme and pledged to cancel the whole thing in its 2007 Scottish Parliament election manifesto. When the SNP won only minority control it allowed the city council to go ahead but withdrew the assistance of Transport Scotland.

Derek Mackay has signalled a U-turn on the Land and Building Transaction Tax. Picture: Andrew Cowan

Derek Mackay has signalled a U-turn on the Land and Building Transaction Tax. Picture: Andrew Cowan

The much-debated events which led to the project going more than £200m over budget, three years over schedule and stopping eight stops short are the subject of the ongoing inquiry by Lord Hardie, but it’s fair to say there is a great deal of confidence in the council’s new administration that the lessons of the past have been learnt, even if it’s not shared by the wider public or, indeed, the Conservative group.

The work to complete the line to Newhaven is expected to take two years at an estimated cost of £162m and will restart if, as is expected, funding is included in the £2bn City Deal with the UK Government, whenever that is signed.

The Conservative group has opposed reviving the project on the basis that it is no more financially robust than the first phase, but judging by the mood amongst the SNP-Labour-Green bloc it looks very much as if it will be put to the test.

The irony is that running the line down Leith Walk was the one bit of the original plan which made economic sense because of the density of the population on either side. If the tram is making a profit now, it could be making much more if it went through more places where people actually lived.

Where people live is key to the whole tram concept, one which the council got so badly wrong when the scheme was being devised. The project team were repeatedly told that for maximum efficiency the route had to link densely populated areas with major infrastructure like hospitals and railway stations.

The airport and Haymarket fitted the bill but that was it, and no-one has yet produced a credible reason for side-stepping Waverley.

In fact, the business case for building Tram Line 4 from Waverley to the new Royal Infirmary was stronger than that for the Borders rail link, but the political will was behind the latter.

Public support for the Newhaven line would be far greater if the risk was spread away from the council, and if the rationale is opening up more disused industrial land for badly-needed affordable housing then a different way of looking at the funding for both the line and the house-building is needed.

A recent TV documentary explored how some of the new London suburbs of the 1920s and 30s were in fact built by private railway companies keen to create commuter demand. Transport for Edinburgh shouldn’t get into the house-building business, but one way or another there needs to be a much more sophisticated relationship between future transport and infrastructure investment and housing development than the current blunt tool of extracting contributions from builders, who then just pass on the cost to their customers.

Mackay picks up LBTT pieces

The laws of unintended consequences have come to haunt Scottish Government Finance Minister Derek Mackay as he wrestles with the £800 million shortfall his predecessor John Swinney bequeathed to him in the form of the new Land and Building Transaction Tax, the replacement for Stamp Duty and the Scottish Parliament’s first foray into raising its own cash. The attempt to milk the wealthy when they buy a house, particularly in Edinburgh, has resulted in the wealthy deciding to stay put and keeping their money to themselves.

The knock-on effect in removal firms not booked, refurbishments not taking place and agents’ fees not being paid means the true impact of LBTT runs to well over £1 billionn and at the same time the Scottish Government has £800m less to spend on schools and hospitals. No wonder Mackay has signalled a U-turn.

Let’s make sure that the cap fits

At last week’s city council meeting a motion by Greens leader Steve Burgess called for a report into the steps needed to introduce a city-wide rent pressure zone to limit increases in high rents in the private rented sector, but the Conservative group supported Councillor Cameron Rose’s amendment which added that the report should be into the “desirability and anticipated impacts” of such a scheme.

Predictably the amendment was defeated by the SNP-Labour-Green alliance and in so doing effectively commissioned a report which can ignore the possible downsides of introducing what is essentially a rent cap in the apparent belief it can only bring good.

Housing market experts are, however, aghast at the prospect because rent levels tend to fluctuate over the years and the finance behind building projects relies on factoring in the highs to balance out the lows. Enforcing consistently lower rents will, they believe, depress returns, make investment unattractive and kill build-to-rent projects stone dead.

They could be wrong, but how can there be any certainty that there are no unintended consequences if an impact assessment has been ruled out? And should the report therefore ignore any findings which suggest that implementation would not be a good idea?

There is indeed a drastic shortage of affordable homes to buy or rent in Edinburgh, but the answer lies in addressing more fundamental issues of finance and land supply, not tinkering with markets in the false belief that the investment tap will never be turned off.

Bosses get off the gravy train

One statistic from Transport for Edinburgh’s 2016 accounts which will doubtless cheer many readers is the total directors’ pay, down from £716,000 in 2015 to £483,000. The explanation is the departure of four directors, including chief executive Ian Craig, who all had long notice periods to be honoured after the highly-publicised boardroom crisis in 2015, and this finally brings the whole sorry saga to a close.

The highest paid director (unnamed, as is standard practice in annual accounts, but is presumably current boss and retired Brigadier George Lowder, pictured) received a package worth £154,000, down from £211,000 which presumably went to Ian Craig.