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Tram chiefs are considering postponing any work on Princes Street until after Christmas, in order to ensure that businesses are not hit by disruptions in the run-up to the festive season.

It emerged today that the work could be delayed because of concerns that contractors will no longer have time to get the job completed by the original deadline of November 24.

City leaders also pledged that the tram project will not lead to fare rises and reduced services for the city’s buses. Their comments came after the main trade union for Lothian Buses had called for the whole project to be mothballed until a public inquiry is held.

Councillors were today meeting in the City Chambers to decide the future of the project and were expected to reverse last week’s decision to end the tram line at Haymarket and instead reinstate plans to build it to St Andrew Square.

It had been expected that the move could result in tram work returning to Edinburgh’s streets as early as next week, but council insiders revealed that the extra week’s delay to making a decision could mean Princes Street work will not happen for some time – and could cost the council hundreds of thousands of pounds.

One council source said: “A one-week delay in the decision could extend the programme because we have to go back to discussions with the contractor as we do not have a settlement agreement. The plan was to have that by September 1.”

Members of the Tram Business Forum, made up of city centre businesses, have met with Dave Anderson, the council director responsible for overseeing the tram project, and asked for Princes Street work to be delayed until January 2012.

It is understood that discussions are now taking place between the council and the construction consortium headed by Bilfinger Berger about Princes Street work taking place at some point between January and July 2012.

Essential Edinburgh chief executive Andy Neal, who chaired the meeting of the Tram Business Forum, said: “What goes on now is a lot to do with the overall timetable. The general feeling is, given the delay now and the fact that to get started again will take a few weeks, is it worth going in then clearing out again for November 24?

Our recommendation is to wait until after Christmas and the New Year and start then.”

Extra costs that could be added on to the project bill include the “demobilisation” of sub-contractors that were ready for a September 5 start to work between Haymarket and St Andrew Square.

It is thought several weeks of discussions could still be needed before work can begin.

The delay in signing a final settlement agreement with the consortium will also lead to “prolongation costs” for the council. It is not yet known how much the costs will be – as the extent of the delay remains unknown – but it is certain to be several hundreds of thousands of pounds at least.

The SNP group on the city council announced earlier this week that it would support its Lib Dem coalition partners and call for the line to continue to St Andrew Square, meaning it was fairly certain the move would get the go-ahead today.

Concerns still remain about the impact the line will have on Lothian Buses. The bus company, which will operate trams and buses, will be charged £2.7 million a year for “leasing” the trams and will also have to pay a dividend to the council if it brings in a profit.

But Councillor Gordon Mackenzie, the city’s transport leader, insisted that the council will stick to a previous pledge of not allowing Lothian Buses’ fares to rise any faster than the existing formula of up to one per cent above inflation per year.

Cllr Mackenzie said: “We recognise people have anxieties about the project but we are not going to roll back from our commitment given previously on Lothian Buses. That is our commitment and we hope that Unite will accept that.”

Cllr Lesley Hinds, transport spokeswoman for the Labour group on the council, said: “I find it staggering that he can make that comment when, as I understand it, Lothian Buses board have never been consulted regarding the £2.7m for ‘leasing of tram assets’.”

A tram report yesterday showed that funding for initiatives to help city centre businesses has been increased from the £210,000 a year announced last week to £445,000.

News of the increase has been welcomed by Essential Edinburgh but it also called for more help with issues like transport policies and parking.

mblackley@edinburghnews.com