Edinburgh Trams: Big pay rise for boss despite £10million loss
Edinburgh’s trams recorded a loss of almost £10 million last year – while the managing director was handed a 33 per cent pay rise.
Accounts for Edinburgh Trams show the transfer of responsibility for maintaining the tram infrastructure from the city council to the tram company turned the previous year’s operating profit of £1.6m into an operating loss of £9.4m.
Meanwhile, managing director Lea Harrison saw his remuneration soar from £96,229 to £127,962.
The annual financial report notes the trams are outperforming the expectations set by the council before the service was launched in 2014. Passenger numbers increased last year by ten per cent from 6.6m to 7.3m and service income was up 18 per cent from £12.9m to £15.1m.
But Lothian Tory MSP Jeremy Balfour said maintenance should have been included from the start to show the “true cost” of the trams. “It was always a false picture to say the trams were making a profit,” he said.
“The trams are a commercial company and so the managing director gets a commercial salary – but we need a review of the pay in these arms length companies. It has been over-generous in the past.”
The council decided late last year to consolidate the costs of operating and maintaining the tram system, which it was known would lead to a loss.
Under the new arrangement, Edinburgh Trams has to pay access and maintenance fees for the use of trams, infrastructure, track and depot.
The financial report says: “Previously under the term Operator Only, Edinburgh Trams would have returned an operating profit in excess of £3m, up from £1.6m in 2017 and £252k in 2016.”
But Mr Balfour said the new rules revealed how much it really cost to run the trams. “Yet we are going to extend the line to Newhaven with greater maintenance costs and it will likely continue to make a loss.”
Other critics have argued there are further “hidden” costs of the trams, including a subsidy for concessionary fares, access fees charged by Edinburgh Airport and repayments on the £276m of borrowings.
George Lowder, chief executive of the tram parent company Transport for Edinburgh, defended Mr Harrison’s huge pay hike. He said: “Edinburgh Trams is gaining an enviable reputation as one of the most highly-rated public transport companies in the UK.
“Salaries for its key personnel, including the managing director are benchmarked against industry standards to make sure the company can retain and attract the best people for the jobs and reflect the additional maintenance and Trams to Newhaven responsibilities.”
Transport convener Lesley Macinnes said: “Edinburgh Trams continue to perform very well and have amply demonstrated their readiness as a company to take on the responsibility for maintenance costs, as per the Tram Operating Agreement approved before passenger services started in 2014.
“This transfer of responsibility was agreed by the transport committee back in December 2018.”