Lothian Buses set to hand council £20m to fund tram extension

Lothian Buses will be helping to fund the tram line extension. Picture: Dan Phillips
Lothian Buses will be helping to fund the tram line extension. Picture: Dan Phillips
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LOTHIAN Buses chiefs have agreed to put in place crucial financing which would allow proposals to extend the tram route to Newhaven to proceed.

The decision on whether or not to go ahead with the £162 million extension down Leith Walk will not be taken until after the city council elections in May.

The front page of today's Edinburgh Evening News.

The front page of today's Edinburgh Evening News.

But the council approached Lothian Buses more than a year ago to ask for a £20m “extra­ordinary dividend” to fund the initial stages of the project.

And now the council-owned bus company’s business plan – due to be rubber-stamped by councillors today – says the cash can be made available, starting next year and paid in full by 2021, on top of the normal annual dividend of £6m.

But the business plan acknowledges: “Committing to pay any dividend over and above that currently paid comes with risk.”

And today the Unite union, which represents bus and tram staff, urged the council to scrap plans to take the £20m payment, claiming that it could mean higher fares and cuts to services.

Edinburgh trams could be expanding to Leith Walk. Picture; Jon Savage

Edinburgh trams could be expanding to Leith Walk. Picture; Jon Savage

Unite regional officer Tony Trench said: “We support investment in the future of Edinburgh Trams. Our members there are working hard and doing an excellent job serving local people and visitors to the city.

“But that investment shouldn’t be at the expense of Lothian Buses. Lothian Buses have been clear – these plans carry risk. If the result is increased fares, and cuts to routes and fleet investment, then it is city councillors who will carry the blame.”

The union said Edinburgh should follow the example of Aberdeen City Council, which recently staged a successful bond issue worth £370m.

Mr Trench said: “The Aberdeen model shows that there are other, more sustainable, ways of raising finance for the successful future of Edinburgh Trams. Simply robbing Peter to pay Paul is short-sighted and dangerous.”

The tracks needed for the extension to Newhaven were purchased as part of the original contract for the tram scheme, before the route was curtailed as costs soared. The tram vehicles were also bought.

But embarking on a fresh round of construction work for the tram network remains a fraught political issue and the Labour and SNP members of the current coalition administration could not agree on whether it should go ahead.

Transport convener Lesley Hinds said the proposal would go to a council meeting in June, but Lothian Buses has now said it could provide the requested finance.

She said: “It’s up to the council after the elections to decide whether to take the trams down to Newhaven, but the request went to Lothian Buses for a £20m extraordinary dividend and they have said they can do it. The business plan we are approving contains a £6m per year annual dividend plus a £20m extraordinary dividend over the period.”

Officials had looked at the plan and judged it “prudent”.

She said the council had considered the idea of a bond, but it was a more expensive way of getting finance than normal council borrowing.

ian.swanson@edinburghnews.com