Edinburgh Council and its Tram Extension

Edinburgh is being consulted on a tram extension. The Council wants you to reject the idea.

Edinburgh Council is currently consulting on its plans to build another tram line through the city. This would start from Granton in the north and run to the Royal Infirmary at Little France. Or Shawfair. It’s a little unclear.

The Consultation does not make clear the amount of money the Council is proposing to spend on the extension, or the problem it is attempting to solve.

I’ve done some digging and come up with the following information that is hopefully relevant to the debate.

The tram extension goes from the North of Edinburgh in Granton to Little France in the South, I’ll refer to it as the NS line. The existing tram goes from the West of Edinburgh at the airport to the East in Newhaven, referred to as the WE line.

Journey Times

According to CityMapper, the Number 8 bus gets you from Grierson Avenue (just off the Lower Granton Road) to Little France in 47 minutes. If you can bare to change buses, there are several more options available with a small increase in time, perhaps 10 minutes extra.

According to the tram consultation’s journey times paper, it will take approximately 61 minutes to get from Granton to Shawfair. There are no times for Granton to Little France, and the current cost of the line does not include getting to Shawfair. But if we make an assumption, let’s say you can cut 5 minutes off the 61 minutes to get off at Little France and you’re at 56 minutes. That is 9 minutes longer than the existing bus service.

If you’re starting on Princes St, there are three direct buses, two of which take 27 minutes and the third 40 minutes (the No. 24, which does swing out west quite a bit). Slum it on a Borders Bus No. 51 and you can do it in 22 minutes from the St Andrew Square bus station.

From Princes St to Shawfair, the tram is expecting a travel time of between 34 and 45 minutes, depending on the time of day. So for the busier part of the route, the existing bus is one third quicker than the tram. Take the Borders Bus No. 51 and you will potentially arrive at the Hospital in less than half the time the tram will take.

For reference, the current tram takes 32 minutes to get from the airport to Princes St. The 100 Bus service takes 25 minutes, and is £2.40 less expensive.

Cost – to Edinburgh City Council

The cost of the tram is published at between £2.0bn and £2.9bn, depending on which of the two routes from Princes St to Granton is chosen.

£2.9bn is a big number, let’s put it in context. In the Council’s current Capital Expenditure Plan, it outlines capital spending projects for the next ten years, 2026 – 2035. In total, the Council anticipates spending £1.33bn over the period on capital projects. This is across all items: schools, housing, culture, RAAC fixes, transport, etc. So to add £2.9bn to this sum will more than triple the entire budget. The tram is only expected to take seven years, so this is an underestimate.

Over the same period, the Council will spend £306m on transport. So the NS tram weighs in at 9.5x the size of an entire decade of other transport initiatives. On an annual basis, in 2025/26, the capex budget is £352m. So the tram is equal to approximately eight times what the city wants to spend in one year on new schools, other transport (all of it), parks, theatres etc. But if you fast forward a couple of years, the Capital Expenditure plans plummet – the Council expects to only spend £79m by 2030 on new stuff. This makes the tram 37 times the annual Capital Expenditure budget.

Looking at other lines, you’ll find the Council will spend £122m on Affordable Housing in 2025/26. So the tram will cost 24 times the current annual expenditure on affordable housing. Or almost six times the total spend on affordable housing over the decade to 2035 (£512m).

And if you’re hoping for some productivity improving extra nursery care for your young children, please note the budget for both new pre-primary and improving existing pre-primary facilities for the next ten years is £0. Not a single penny.

It’s worth noting that the word “Tram” appears a modest six times in the Council’s Capital Budget Update 2025-2035 report. All mentions relate to the £50m (£5m / year) budget required for new tram rolling stock. These “lifecycle works” will be funded by yet more borrowing, so will not show up in the tram’s own P&L.

Cost – to Holyrood

Looking at how the NS Tram fares on a national scale, Holyrood spent £6.49bn on capital projects in 2024 and £6.43bn in 2025. The current year to 2026 is budgeted at £7.2bn. Therefore, a total project cost of £2.9bn is 40% of the entire country’s capital budget for the current year. If we include debt interest (see below), then the £5.14bn in total cost would be 71% of the entire country’s capital budget for the year. Looking just at transport, the capital spending for 2026 is £2.13bn. So the tram would eat up the entire national spending on transport (roads, ferries, cycle paths etc.) for one year. And still be short £787m. The total spend for the country’s entire rail network (both current and capital) is £1.5bn, or 49% of the total cost of the tram.

It’s worth noting that the only time the word “Tram” exists in the 139 page Scottish Government Budget is on Page 74, to note the cost of the Tram Enquiry in that year, which was £0.5m. There is no note of the strategic national importance of the NS tram to the country.

Debt

I was told off by a councillor once when I asked why we weren’t building more cycling infrastructure and instead pouring cash into tram tracks. “The tram is not funded by the Council. It is funded by debt against future ticket income.”

In fact, the first stage of the tram was funded by a massive grant from Holyrood of £225m, topped up with debt of £150m, adding up to £375m. The final bill, including debt interest that’s still to be paid, will be £1.06billion, or roughly three times the initial estimate. The Council is carrying a huge portion of that overspend.

The interest charge each year on the existing debt is roughly £14m, though that is buried in the Council’s top company accounts. The Council charges the tram company an Asset Fee of £8.5m. I can’t find the missing £5.5m in the accounts. After this fee, the tram company made a loss in its last set of accounts of £11.85m (before tax). So it loses £3.35m on its operations even before the Asset Fee. And the Asset Fee isn’t the full amount of the debt repayment.

It’s hard to gauge the impact of the tram on the bus network, as Covid gets in the way. But it’s hard not to assume the tram is cannibalising on the performance of the buses. Certainly, pre-pandemic Lothian Buses would provide a relatively steady £6m dividend to the Council each year. From 2020 to 2022 there was nothing, and in 2023 a £3m dividend was paid. As far as I can tell, the interest income on Transport for Edinburgh’s pension scheme provided the cash to fund that dividend. I won’t claim to understand pensions accounting, so I don’t know how this functions, but Transport for Edinburgh makes a loss at the operating level. It’s only the interest income on its pension scheme that allows it to pay a dividend.

Interest rates were <1% for the entire period the first tram was being built. They’re currently 4% and inflation is proving sticky. New debt will therefore be much more expensive.

If we do some simple maths, let’s say Holyrood finds a similar proportion of the initial build cost. For the WE line, it offered 60% of the £375m budget. For the NS line, therefore, 60% of £2.9bn, is £1.74bn. That leaves £1.16bn to be found by the Council. The existing debt was financed through the Public Works Loan Board, and used a range of maturities and yields, so it’s hard to put a simple figure on the cost, but on average, according to the public enquiry into the tram overspend, the rate was roughly 4 – 5%. Today’s rates on PWLB debt are above 6%.

Using a standard interest and repayment calculation over 30 years, for the Council to borrow £1.16bn it would be paying roughly £74.6m per year in interest alone, and a further £38.6m in principle repayments, totalling £113.2m a year. Over the 30 year term, that equates to £1.16bn in principle repayments (as above) and £2.24bn in interest. A total of £3.4bn. So by borrowing 40% of the total cost, we need to add a further £2.24bn in interest payments to the £2.9bn construction cost. So the tram will actually cost a total of £5.14bn.

Opportunity Cost

In terms of how to place the £2.9bn cost in the context of other projects, it’s worth looking nationally to see what the opportunity cost is.

This summer, many headlines were made by business executives lamenting the terrible experience at Edinburgh Airport. The airport is operated by Vinci, a French company, which paid £1.27bn for a 50% stake in 2024, valuing the entire Edinburgh Airport at £2.54bn. So Edinburgh Airport could be bought for less than the cost of the NS tram. With £400m left to spend on improvements.

Edinburgh airport processed 15.8m passengers in 2024, a 10% increase on 2023. Porto airport in Portugal processed an almost identical 15.9m passengers (and is owned by the same operator). It’s hard to find good data on the relative internal sizes, but fly from one to the other and you will quickly spot the fact that Porto Airport is gigantic, spacious and capable of handling 16m people a year. I will leave you to make your own judgements on Edinburgh airport. Vinci has committed to investing £200m in the facilities. £75m has already been spent, leaving £125m of that pot left. If you’ve been through recently, I don’t blame you for not noticing where that £75m has gone.

It’s impossible to guess at how much an airport costs to build, but Porto built a new terminal for €108m in 2006. Heathrow Terminal 5 opened in 2008 at a cost of £4.3bn. But T5 processes 33m passengers a year, more than double Edinburgh’s 15.8m. Gatwick, meanwhile, is getting a second runway at a cost of £2.2bn, less than the NS tram.

Hospitals

As a quick reminder, the cost of this tram is £2.9bn. That’s two thousand, nine hundred million pounds; to get people from Granton to the new Royal Infirmary in Little France. The construction cost of the Royal Infirmary at Little France was £185m in 2003. So you could build another Royal Infirmary in Granton for less than the cost of the tram to get to Little France. In fact, you could build 15 Royal Infirmaries in Granton for less than the cost of the tram, and still have £125m spare to invest in a new terminal at Edinburgh Airport.

Yesterday’s Technology

I think what is most stark, when you start thinking about the cost of the tram, is that trams are a 19^th Century transport solution. We are talking about “light” rail, that trundles around cities. Trams pre-date buses. Edinburgh’s old tram network operated on winches, with huge winch stations powered by coal to pull the cars up Leith Walk. Modern buses, powered by batteries, can be quiet, fuel efficient and require zero additional road works. There is no available data, but I would guess £1bn would go a long way to making the entire Lothian Bus fleet electric.

More importantly, if we look at how people use services, the fastest growing public transport device is a Lime e-bike. Use of bikes in London has recently surpassed car transport, according to The Economist. Not just in the centre, but across all boroughs. Not because the Government spent £2.9bn on an e-bike roll out. But because putting lots of bikes on the streets is quite cheap and it turns out they’re really, really popular. Edinburgh’s hills quake at the thought of a 56 ton tram, but give them a 30kg e-bike and they giggle. Lime regularly announces new investment in London because consumers absolutely love the service. Other e-bike operators are available, but the point is cheap batteries pushing bikes around cities is the future.

My point is, you don’t need to spend 823% of the City’s entire annual capital budget on a bus replacement rail service to get people from Granton to a hospital across town you could build for 1/15^th of the cost of the tram to get there. And I haven’t even mentioned Liability Benchmarking yet. (Short story - the Council’s credit card is absolutely maxed out and it will need to borrow a lot to deliver its existing capital investment programme, not including the tram.)

Paul Lawrence, the CEO of the Council, is a serious person. I have a lot of time for him and I think he is good for the city. My only conclusion, therefore, is that he wants this consultation to fail. He wants you to say this is a crazy idea, because he has lots of uses for £2.9bn and none of them involve building a tram across North Bridge. (A bridge which, if you read the consultation document, has not been strengthened [pg 7] to handle the weight of 56 ton trams crossing it, despite being partially closed for seven years. And don’t even mention South Bridge. Despite looking very street like, very much a bridge. That will need reinforcing.) Help Paul Lawrence, say no to the tram.