Scottish Conservative opposition Councillors on the City of Edinburgh Council have made calls for a new business case to be drawn up after it was confirmed a £18 million dividend from Lothian Buses will no longer be available. Despite these calls finance chiefs at the council have stated that this will be more than made up by lower borrowing costs.
As part of the previous revised final business case it had been expected that a £18 million dividend from Lothian Buses would be available but it is now expected that there will be no dividend from Lothian Buses for at least five years. A £2 million dividend from Lothian Buses has already been paid but this was expected to continue for a further nine years.
Hugh Dunn, Head of Finance, said: “That shortage in dividend for the tram business case has been picked up by reduced borrowing costs. We’ve been able to borrow at a rate substantially below what was assumed in the business case and that counters the reduction in the extraordinary dividend. The business case assumed an interest rate of over four per cent and we’ve been able to borrow at around two and a third, so you’ve got a saving of almost two per cent on £200m over 30 years, which will more than compensate for the loss of the £18m.”
He added: ““I think the key thing in the business case going forward is actually fare income. That’s the biggest risk just now – the fare box you’ll get from the tram with people continuing to work from home. Saying that, the tram extension doesn’t open until around June 2023 and things might move between now and then, but that’s an area of risk we’re aware of and looking at just now.”
The project remains both within budget and on time, despite the challenges of Covid.
Andrew Johnston, Scottish Conservative finance spokesman, said: “I think it would be for the benefit of all councillors who have to scrutinise the tram extension to have a revised business case setting out what’s happening with the dividend but also what’s happening with reduced borrowing costs and the new risk with Covid, and I presume the huge increase in materials costs which must be affecting construction.”