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Edinburgh's latest Budget Black Hole

on Sat, 02/16/2013 - 19:43


Why everything to do with the Trams in Edinburgh is never what it seems

This contribution to explaining the unavoidable economics of the Tram project and by that, shedding light on the it, is from John Carson a long standing, well informed and knowledgeable critic of the Project.

The underlying economics of the recent headline announcement by CEC of their 'winning concessionary fares for the Tram' were not made clear by the Council.  

Below John Carson spells out another of set of the very significant 'inconvenient truths'; as ever glossed over by the City of Edinburgh Council always more anxious to focus on spin rather than substance.

This is in the form of an open letter to the Council's Leader Cllr Andrew Burns, the Labour group leader. 

Dear Andrew,

"The article in the EEN (Edinburgh Evening news) seems to be saying that CEC (City of Edinburgh Council) will pick up the bill for the concessionary fares on the trams.

If this is the case they hadn't you and your fellow councillors better be  aware of the following?

The most recent Atkins report basically said that there will be no new journeys produced by the trams, and that 90% of the predicted tram passengers would have to come from those presently using the buses.

By taking the decision to pay for concessionary fares on trams CEC have exposed themselves to a double whammy.

If, and it is a big if , there are eventually 9m passengers a year using the tram, with 90% of these coming from the buses, this would mean 8.1m passengers on the tram would be transferred journeys from the buses.

Overall, the percentage of  passengers using the buses splits roughly  into 40% concessionary fares to 60% paying customers. While the average fare of each bus journey is £1.50p, the balancing amount paid by Government isn't 100% of that fare but 67%

Thus if  LB (Lothian Buses) loses 8.1m of it's present bus passengers to the tram, in respect of who LB would have  received concessionary fares reimbursement  for 40%  of these from the Government; that fare concession subsidy will just no longer be paid by them.

The Double Whammy arises from the consequences of the Scottish Government's oft stated position to the people of Scotland their position of  'Not a penny More' for the tram, which leaves only our local council as funder of the concessionary fares for tram passengers.

The mathematics are that  LB would have received the sum of 8.1m x 40%x 67% of the £1.50p average fare this is equal to £3.2m from the Government that will be  lost revenue to LB.

By taking the decision to underwrite the concessionary fares on the trams themselves , CEC will incur a direct cost of 9m (the total journeys) x 40%x67%x£1.50 (assuming the same average fare) making £3.6m Direct costs to CEC.

Taking the lost  revenue to LB and adding the Direct costs of taking up the paying of the concessionary element by CEC means a total hit to Edinburgh's already tottering budget, compared to the situation now, of £6.8m every year."

No wonder John Carson ends 

"Are you sure you have thought about this?"

The Council desperately hope that when the tram finally runs they will be able to portray that as marking the end of their problems---in truth, in so many ways, the problems will actually only just be starting