Friday, 27 November 2009

How the Tram will destroy Lothian Buses

The Tram Business Case (oh yes) indicated that the Tram wouldn't make a profit and would be reliant on the money made by Lothian Buses to stay afloat. This was a plan written in easier economic times and with an awful lot of optimism as has been discussed by myself and some others at some length, so lets look at it a different way.

The tramline is being laid on the number 22 bus route because the 22 is the busiest route in the service, so we can assume that its the most profitable. The tour buses must make a profit or they'd be disposed of; they're not core to the business. The Airlink buses must make a profit or their frequency would be reduced.

Given that Lothian Buses profits have been healthy (until recently) but not huge, I think that they must be just about the only three services that make profits. The tram is intended to replace the 22 and the Airlink and not make any profit at all - removing two profit sources and replacing them with one loss source. Marvellous, eh?

So we now have a project which is massively over budget and behind schedule, where the organisation delivering it (after a fashion) is in denial about the state of the project, where the council can't find the money it was supposed to put into the project when it was on budget, never mind all the additional money it's going to have to find as the project costs go into orbit and where borrowing isn't an option because money borrowed for a transport project has to be repaid within two years.

If the tramline ever gets built Edinburgh Council will have an enormous capital costs bill to settle £250 million and rising, there will no longer be any dividend paid from Lothian Buses to the council because the combined tram/bus company will be making losses and because the bus service will no longer be making a profit it will need greater subsidies for the social responsibility routes - something we've seen starting already - and from the position of a couple of years ago where our award-winning, publicly-owned, profitable bus company was providing money to our council, well be facing a situation where the council will be seriously in hock for the tram and shelling out on a regular basis to cover the deficits in running the combined company.

If you became leader of Edinburgh Council in 2012 and you were faced with that situation, what would you do? The simple answer, and the answer that every single politician would get to, is that you dispose of the loss-making services and realise some capital receipts to off-set the costs. Short-term fix? Yup. The alternative is to continue loading losses onto the council budget while dealing with the costs of the huge debt incurred.

Continuing with the tram project will mean that the council will be forced to sell Lothian Buses - probably at less than its worth. If we want to save our bus service in Edinburgh we have to stop the tram project.

1 comment:

johng said...

Calum - one serious problem for the council is that abandoning the project does not remove the cost.The Scottish Government has included in the legislation, I understand, that in the event of the project failing to be completed the ontribution of the government must be repaid. There should now be enormous activity on means of financing he overrun, at the same time implementing all possible action to reduce the over-budget cost.