Lothian Buses' cancelled extraordinary tram dividend payment prior to Covid-19

The revelation came through board papers released to the Evening News

More of the tram will be paid for through borrowing, it can be revealed.

A crucial £2m payment for the tram extension from Lothian Buses was cancelled months before the impact of Covid-19 battered the bus company’s finances.

The Evening News can reveal the extraordinary tram dividend from the buses for 2019, a central plank of the immediate funding of the tram extension for Edinburgh City Council, had been cancelled by December.

Minutes from a meeting of the Lothian Buses board meeting on December 12 said the bus operator had agreed with “council representatives” the money would not be sent to the council.

They state: “He [the interim finance director] also explained that it had also been agreed with council representatives that a 2019 contribution towards the extraordinary tram dividend would not be paid.”

Lothian Buses said the money was not forthcoming partly due to “significant investments” including its fleet of buses.

The council said the £2m shortfall will be covered by additional borrowing below the interest rates listed in the business case for the extension.

Conservative transport spokesperson, Cllr Susan Webber said the revelation “underlines” her party’s concerns around the funding of the trams.

She said: “The Conservatives have always had concerns over the financing of the trams and the interdependency on the Lothian Buses dividend.

“This just underlines and makes quite clear our concerns are becoming real in terms of decisions that have to be made.

“The council is facing some extraordinary financial decisions on how we move forward on a number of large projects such as the tram and this should be an alarm bell about us going ahead.”

Cllr Kevin Lang, the Liberal Democrat transport spokesman said it was “wholly wrong” to expect the bus company to pay for the tram extension.

He said: “Lothian Buses has gone from being the beating heart of the city to a company that’s on life support.

“Even before coronavirus hit, I had deep concerns at the Council’s plan to use Lothian as a cash cow for the tram extension.

“The economic and financial crisis now means it would be wholly wrong to expect any funds from Lothian to pay for trams. Any and all money needs to be used to keep essential bus services running”.

A spokesman for Lothian Buses said: “In December last year, our board and senior representatives from The City of Edinburgh Council agreed that due to significant investments (including fleet renewal) across 2020 there would be no extraordinary dividend paid for the 2019 financial year.”

Councillor Lesley Macinnes, transport convener, said: “This [the tram extension] is a project which is being delivered for the future of our City and it will be largely funded through borrowing repaid by future tram revenues.

The non-receipt of the annual dividend was previously reported in a finance update to Policy and Sustainability Committee and the tram team is making every effort to mitigate the impact.

“It’s hugely welcome to see the construction of the Tram to Newhaven back up and running.”

A message from the Editor:

Thank you for reading this story on our website. While I have your attention, I also have an important request to make of you.

The dramatic events of 2020 are having a major impact on many of our advertisers - and consequently the revenue we receive. We are now more reliant than ever on you taking out a digital subscription to support our journalism.

Subscribe to the Edinburgh Evening News online and enjoy unlimited access to trusted, fact-checked news and sport from Edinburgh and the Lothians. Visit https://www.edinburghnews.scotsman.com/subscriptions now to sign up.

By supporting us, we are able to support you in providing trusted, fact-checked content for this website.

Joy Yates

Editorial Director