SCOTTISH taxpayers will pick up the tab if the capital’s controversial trams scheme proves a financial flop.
Under new proposals, Edinburgh Council will pay trams operator Lothian Buses a fixed fee to run the tram line – and shoulder the full brunt of any financial losses.
The plans will see a new tram company called Tramco formed and wholly owned by the council.
The council claim the move is “what the public want”.
But transport critics warn that empty trams could leave the council, and taxpayer, millions of pounds out of pocket.
Councillors will debate plans tomorrow for the council to take full financial responsibility for running the tram line.
Official council papers reveal the “council will bear the financial risk” if revenues are lower than “set out in the business case”.
A transport insider slammed the council’s idea.
He said: “From the agreement its clear that Lothian Buses will be paid a certain amount to run the tram network – say, as an example, Lothian got £6million from the council to run the system.
“Empty trams could run all day and Lothian would still get its £6million and the council are out of pocket.
“If the tram is a roaring success, as unlikely as that may be, and makes £7million, Lothian still get its £6million and the council would take the £1million.
“In reality this is probably not a good deal.”
A financial loss to the trams threatens to leave taxpayers needing to foot another soaring bill, outside the projects estimated £776 million budget.
Under the complex operating plan, TopCo would oversee the running of Lothian Buses and Edinburgh Trams, and Tramco would be responsible for collecting revenue and paying any maintenance costs.
A 10% management fee would be paid to Tramco by the council, which could costs up to £250,000 a year.
Tramco would have the power to set fares.
The council report continues: “It has been agreed that Tramco will receive a fixed fee as operator and that financial risk will effectively remain with the council.
“The disadvantage of this fixed fee arrangement is that there is no financial incentive for the tram operator to maximise revenues beyond those which are required to ensure their fee can be met.”
The council nominated Lothian Buses as its preferred tram operator two years ago.
Green transport spokesman, Councillor Nigel Bagshaw, said: “This report is a work in progress, with the main aim being to draw in the expertise of one of the UK’s most successful public transport operators, Lothian Buses, while still protecting the bus network while the tram rakes its first steps.
“That is what the public would want to see, I believe.
“But it also has the effect of putting the burden of risk wholly on the council, which is why councillors must insist on proper representation on the company structure being set up.”
Conservative transport spokeswoman, Joanna Mowat said there was serious concerns about the financial implications of the deal.
She said: “We have spotted that the risk is all on the council and also there’s various ways that the council can be held hostage to fortune in it and we just want to explore those issues a bit further.”
A transport industry insider said: “Lothian Buses aren’t a completely free agent, and the council leant on them to take this on.
“If Lothian Buses run Edinburgh Trams however, it means they will run complimentary to the buses, rather than in opposition.
“If First, Stagecoach or National Express had run the trams they might have used it to get as many passengers off Lothian Buses and increase revenue as much as they could.
“In effect there would have been a bus / tram war, so it makes sense for Lothians to run it.”
The trams project has so far cost £700million to build.
Edinburgh Council are currently in negotiations with Edinburgh Airport over plans to build extra parking the a “gateway” for tram users at Ingliston.
Council chiefs previously knocked back plans for a 30% rise in spaces, from 8200 to 10,700, citing traffic concerns at the time.