A city humiliated

Official estimates suggest it will run up further debts of £4m a year as operating costs outstrip the numbers who will use it.

Even that prospect looked uncertain last night as LibDems and the SNP warned the council could be hit with an immediate bill of £161m -- leading to hundreds of job losses and service closures -- if a new agreement could not be struck with contractors to build a shortened route and the project had to be cancelled.

That suggestion was played down by sources close to the project, though it is understood the BSC consortium -- made up of Bilfinger Berger, Siemens and CAF -- is yet to decide on whether to agree to build the new route.

The tram project was originally planned to connect the airport to Leith and the waterfront at Newhaven and was due to open this year at a cost of £545m. But it was hit by delays and spiralling costs that led to the section east of the city centre being postponed indefinitely.

The latest cut followed heated exchanges in the city chambers yesterday in which parties traded accusations over who was responsible for the debacle so far.

Labour, which proposed stopping the line at Haymarket, argued against borrowing the £231m to meet the estimated £776m bill for completing the route as far as St Andrew Square in the city centre, an option that even council officials admitted carried uncertain risks.

It was backed by Tory councillors, who were outvoted in a bid to have the project terminated, saying they were not prepared to write a “blank cheque” for it. The SNP, after reiterating its historic opposition to the trams, abstained, leaving Labour and the Conservatives to defeat the LibDems by 25 votes to 19.

Gordon Mackenzie, LibDem transport convenor of the council, said the price of the Haymarket option could increase by a further £4m as a new turnback was factored into the plans and compensation for track-laying firm Bilfinger Berger “demobilising” its staff were paid.

However Labour, expressing doubts about figures presented to the council by officials in June, claimed the £700m price tag could be “driven down”.

Andrew Burns, Labour group leader, argued he had secured a “fixed price” for the project by building it only to Haymarket. “It is a fixed price rather than a target price. That was the major problem with the St Andrew Square option.

“There is, to me, a very clear understanding that cost can be driven out of that. The report from June included a big contingency in the Haymarket figure of £700m and I’m quite confident that can be driven down.

“We will be challenging those figures extremely robustly.”

But the decision was branded “crazy” by Mr Mackenzie, who questioned claims by Labour the Haymarket option would prove popular, allowing extensions to be built in the future.

“This is the worst possible outcome. We could end up on September 1 with a bill for £161m. I very much hope we won’t but, speaking to council staff, I understand the contractor is stunned by the decision,” he

said. “How putting a tram into Haymarket makes the case for trams I do not know. It beggars belief. On the heads of Labour and the Conservative Party so be it. Frankly it is crazy.”

Sources also questioned whether the cost of the Haymarket option was likely to decrease, given that most of the “unknown” elements related to the on-street section east of Haymarket.

Princes Street could still be closed in September for up to nine months -- either to repair the road surface or to lay tracks under the existing deal.

Steve Cardownie, SNP deputy council leader, said the council would try to negotiate a time extension with the contractor as an earlier deadline of September 1 to agree the St Andrew Square option is unlikely to be met.

He said: “All the options were unpalatable. I’m not comfortable with the situation but all three scenarios were uncomfortable.”

Jeremy Balfour, the Conservative group leader, said: “The cost of proceed-ing with the project would have bankrupted the city.”