Edinburgh tram works could harm Lothian Buses’ duty to pay £20m dividend for project

Disruption caused during the proposed tram extension from the city centre to Newhaven could lead to Lothian Buses not being able to cough up a £20m dividend needed to pay for the project.

An artist's impression of the tram extension. Pic: Edinburgh City Council

The city council’s transport and environment committee will today scrutinise the final business case before the full council determines whether to press ahead with extending the tram line to Newhaven on March 14.

The final business case, with a budget of £207m, along with an additional £50m of allocated reserves, highlights a risk that the upheaval during the works would make it more difficult for Lothian Buses to provide £20m in the form of a dividend. The impact on the company could, in part, be down to diverted traffic around the Leith Walk area for up to 18 months.

The final business case states: “The company will also see significant operational disruption, revenue loss and incur additional costs of operation during the construction phase.

Works on Leith Walk , Edinburgh. Pic: Ian Georgeson

“There is a risk that the tram construction works may impact on the ability of Lothian Buses to pay the modelled level of dividend due to the challenging commercial environment in which it operates.”

Other than the dividend from Lothian Buses, if approved, the extension would be funded by borrowing paid back by future ticket sales – meaning no money is being taken away from public services.

Transport convener, Cllr Lesley Macinnes, said: “In jointly agreed wording, clearly set out in the final business case, Lothian have expressed their confidence that they will be able to deliver the dividend to help Edinburgh achieve a sustainable and integrated public transport system fit for the future.

“We’re working closely with them to make sure any traffic diversions needed for tram construction cause as little disruption as possible to their operations so that they can maintain services.

“We’re also taking forward a number of different measures to help public transport flow more freely around the city, including improved bus priority to speed up journey times and better enforcement around parking problem hotspots so that buses aren’t held up unnecessarily by illegally parked vehicles.”

Conservative councillors believe the potential problems to the finances of Lothian Buses could “blow a hole” in the business case.

Tory transport spokesperson, Cllr Nick Cook, said: “The tram business case lays bare that the project presents significant logistical and financial challenges for Lothian Buses, both during and after construction.

“On one hand, the council is relying on Lothian Buses to part fund the tram extension, while on the other, expect them to cut services and see their passengers jump on the tram instead.”

He added: “There is a real danger that the likely downturn in Lothian Buses performance would blow a hole in the entire business case, leading to even greater cost to taxpayers.

“Regrettably, the council seem prepared to run the risk of taking Lothian Buses financial success for granted.”

Green councillors are tabling a motion at tomorrow’s meeting, asking for assurances to “ensure the smooth running of buses during the construction works”.

Chas Booth, Greens transport spokesperson, said: “It’s essential that any disruption to Edinburgh’s excellent bus service during the tram works is kept to an absolute minimum, so residents can continue to travel around our city.

“I’ve asked council officers to consider accelerating the extension to bus lane hours and the review of parking restrictions in Leith, which will help ensure our buses remain reliable and impact on journey times is minimised. I hope the council will also ensure an open and constructive dialogue with Lothian Buses throughout the tram works to keep our public transport system moving.”

A Lothian Buses spokeswoman said: “Lothian’s ability to pay a base or an extraordinary dividend to the City of Edinburgh Council is conditional on the ongoing profitability of our business.

“Whilst there is potential for the tram construction phase to have a negative impact on revenue generation we continue to work closely with The City of Edinburgh Council to mitigate risk and as such it is critical that new and extended bus priority measures are both aligned and implemented in the context of tram construction and the wider city to deal with congestion and reducing journey times.”