Edinburgh tram extension: Covid should dampen any 'optimism bias' about knock-on effects of multi-million-pound costs on council services – John McLellan

The world collectively punched the air this week on news that a coronavirus vaccine could soon be available, and with it the promise of social and economic revival which was slipping away with every tightening of lockdown, like trying to save a patient from a brain haemorrhage with a tourniquet round the neck.

The coronavirus outbreak may affect the number of passengers using Edinburgh's trams for some time to come (Picture: Danny Lawson/PA Wire)

But one enterprise will survive the crisis, the seemingly indestructible Edinburgh tram completion which the council has now been told would cost £107m to cancel, £47m of it to put Leith Walk back together and £32m from reserves to pay compensation for broken contracts. With reserves diminishing fast, it’s money the council doesn’t have.

It’s too far down the line, as it were, to turn back, but a fast economic recovery is vital if the tram is not to wreak greater havoc with Edinburgh’s finances than if the plug was pulled.

A report to today’s transport committee explains that if passenger demand isn’t back to 2019 levels by 2023, the authority might need to find up to £93m from reserves to fund the project. And if it hasn’t got £32m now it certainly won’t have £93m any time soon.

The tram demand in 2019 was driven largely by a bustling airport and a tourism boom which led the council to collapse Marketing Edinburgh because it felt the visitor economy was over-heating and tourism demand was so great it no longer needed promoting.

So to avoid a £93m hit on reserves, the council is betting on a full transport recovery in just over two years but, even with a vaccine, that can’t be guaranteed because employment conditions are changing to retain the benefits of home working, the aviation industry is unlikely to have fully recovered and other destinations less queasy about tourism will be promoting themselves with enthusiasm. And all the while the Edinburgh SNP-Labour coalition dances to the Green tune and its hatred of air travel.

The original tram business case spoke at length about “optimism bias” and how the estimated £207m bill for the final three-mile stretch to Newhaven allowed for the tendency in all projects to minimise problems. It also identified a 39 per cent chance of the final price being over £250m and it’s not just passenger projections which need updating but, with wishful thinking more than evident, the optimism bias itself.

At the transport committee meeting, no doubt administration councillors will praise the tram team for a thorough report, despite there having been no consultation with major employers along the route or even Edinburgh Airport. Had they done so they might have discovered the International Air Transport Association does not expect pre-Covid demand to return until 2024 at the earliest.

No doubt some will say the Conservative group just picks holes, so do not take our word for it. An Accounts Commission “Best Value Assurance” report about Edinburgh Council published this month says that the authority “does not have a longer-term financial plan to address its significant revenue budget challenges”.

The SNP-Labour administration has repeatedly assured the public the tram will have no impact on council services, but how could they possibly give such a guarantee when tying the city into such a costly project without an overall longer-term financial plan? Optimism bias is putting it politely.

John McLellan is a Conservative councillor

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