service cuts set to cover tram costs

The council will borrow £231 million and pay it back over 30 years, with initial payments at £15.3m a year.

Critics fear the final cost, including risks and interest, will top £1 billion.

Council chiefs have warned that £4.8m a year will have to be stripped from the cost of the day-to-day running of the authority to help fund repayments of the loan.

The savings, which will come on top of the cuts already needed to fill the council’s massive funding gap, form part of the plan proposed to pay back the tram loan at £15.3m a year.

It will mean that £11 in every £100 that the council spends will have to go on interest payments to pay off its spiralling debt.

The latest report on the tram project yesterday also revealed that, if the council fails to approve funding, termination of the contract will actually cost £80m less than officials said earlier in the summer – before a vital vote on the future of the project was held.

Councillor Andrew Burns, leader of the Labour group on the council, said: “These recommendations commit Edinburgh to £15.3m of revenue payments for 30 years and that is money that could be spent on other services.

“Borrowing at the moment is at £1.3bn and we pay £100m a year in interest. This will take council debt to £1.5bn and it will require just over 11 per cent of the council’s budget to go on interest; it is completely unacceptable.

“This will be at cost to the taxpayer, and we will not support this.

“It all underlines that it is a big, big mistake to go beyond Haymarket.”

It has also emerged that Lothian Buses will be charged £2.7m a year to operate the tram vehicles – in addition to the £2m a year dividend that is to be paid to the council when the integration of trams and buses is completed, sparking fears about the impact it could have on bus services.

Other methods of meeting the massive repayments include “headroom” created from some loans taken out in the past now coming to maturity.

Councillors will meet next week to discuss the report, which urges councillors to press ahead with the plan to borrow in order to fund the project to St Andrew Square.

Councillor Jeremy Balfour, leader of the Tories on the council, said: “I have real concerns that the debt repayments will be worth 11 per cent of the council’s budget. That does not seem like a good use of council money and that has to be addressed. Front line services will be affected and I’m not sure that is acceptable.”

Council chiefs are still hopeful that the cost of repayments may reduce if the Scottish Government agrees to step in with extra funding.

Cllr Gordon Mackenzie, the city’s transport leader, insisted there would not be a significant impact on front line services.

He said: “We have had to face savings pressures five, six, seven times greater than this in the last four years and we have still balanced budgets and improved services. I’m confident we can continue to do so.”

The council report also detailed that cancelling the project now would result in a £180m impact in one year, with no guarantee that Transport Scotland would not demand its money back.

Council officials say they remain hopeful of securing additional Scottish Government support.

Dave Anderson, director of city development, said: “There is a strong rationale for the Scottish Government to provide additional revenue support. The tram is a Scottish project; the government have provided additional support to other capital projects.”

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