Some Edinburgh City councillors already privately refer to the city’s tram project as the problem that “cannot be named”. Much as actors refer to Shakespeare’s tragedy as “the Scottish play”, superstitions of bad luck now bedevil the production. A dramatic shift from the optimism that initially characterised the development of the Edinburgh tram, towards pessimism.

That which cannot be named is no longer just the failure of a flagship local transport policy. The issue has engulfed the City of Edinburgh Council, and now risks destroying local politics completely: Not only the existing administration, but public trust in local government decision-making.

Political heavy-weights, who normally shy away from the minutiae of local governance, are now offering parental guidance in public: Alistair Darling (local Member of Parliament, and former United Kingdom Chancellor and Secretary of State for Transport) described the option to borrow £231 million ($370 million) to complete the city centre section of the tram line as “absolute madness” – the local population would be saddled with vast debts. Days later, Graham Birse (chief executive of the influential Edinburgh Chamber of Commerce) called the decision to not complete the city centre section, “bonkers” – far fewer passengers would use a tram that did not serve the city centre adequately. Even Alex Salmond (Scotland’s First Minister) has become directly embroiled, struggling to contain calls for an immediate public inquiry to identify who is responsible.

Burn the witches! This Scottish tragedy is rapidly descending into farce. That would be unfortunate, because this particular local difficulty goes to the heart of the Scottish nationalist agenda: A desire for greater devolution of public funds to local level. More localised independent entities have fewer financial resources, so are less able to manage expensive, risky projects. Consequently policy ambitions also need to be scaled back. Such scale isn’t necessarily a problem – small can be beautiful. The problem lies in pretending to be big, when not.

This article introduces the concept of risk in tram (and similarly large public transportation and infrastructure) projects, chronicles the decisions that lead a relatively small local authority to need to find hundreds of millions of pounds to support a single project, and explores the implications for future policy-making, especially in the context of a more devolved Scotland. On this page:

• Tram Cost Uncertainty
• Devolution of Chaos
• Scaling Ambition
• Appendix: Policy History of Edinburgh Trams

Tram Cost Uncertainty

I have previously discussed why estimations of the cost of large transportation infrastructure projects (especially light rail) are both inherently inaccurate, and tend towards optimism. Edinburgh Trams transpire to be an extreme example: From £375 million estimated for the original 3-line network, via £545 million for a more pragmatic 2-line network, to over £1 billion for today’s single line (which is still far from completion).

However, this uncertainty was somewhat predictable: The graph below is taken from Bent Flyvbjerg’s 2004 Procedures for Dealing with Optimism Bias in Transport Planning, guidance issued to central government alongside HM Treasury’s Green Book. It shows the probability that the cost of rail projects (including trams) will exceed the estimated budget.

Distribution of Rail Cost Overruns (Bent Flyvbjerg, 2004)

(Data is based on analysis of 46 rail projects from across Europe and North America – UK has few recent rail schemes, however comparison of road schemes suggests patterns are very similar for all regions.)

The average cost overrun is about 40%. In the planning/appraisal process 40% is literally added to the estimated cost of a project as “optimism bias”. Optimism bias is part of Scottish Transport Appraisal Guidance, to which the Edinburgh Tram was subjected, although the original tram analysis pre-dates formalised optimism bias.

The 40% value should protect the UK treasury:

• Over many separate projects, cost overruns will average to zero. Broadly, in the long-term, the treasury will remain balanced, without requiring individual projects to be micro-managed from the top of government.
• Individual project costs are in the hundreds of millions (£). These are still a tiny proportion of UK Gross Domestic Product, taxes collected, or ability for the UK government to take loans. The national economy will not be thrown into a crisis if one specific project goes badly wrong.

Unfortunately, merely adding 40% adds a sense of certainty to an individual project which remains uncertain. For the immediate funders of a project, the important question is, can we fund a cost overrun of 80%? For the City of Edinburgh Council, the answer to that question was effectively, “we cannot”.

A quick glance at the council’s budget puts the tram in perspective: The council’s total annual capital budget (for investment in everything) is only £235 million, less than a quarter of the capital cost of one tram line. Typically transport accounts for 20% of local government capital expenditure, so we might expect a local authority like Edinburgh to be investing around £50 million each year in transport projects. Placing over 10 or 20 years worth of investment into just one project suggests a tram scheme was far too ambitious to ever be a local government responsibility.

Not only do councillors appear to be losing a high-stakes casino game, but they seem to be playing with all theirs chips on the table.

However, the tragedy is not so simple, because while the City of Edinburgh Council are responsible for the tram project, they are not the only funder:

Devolution of Chaos

Conventionally in Britain, higher tiers of government act as financial guarantors for low tiers. A local authority has statutory (in law) responsibilities, and hence cannot “go bankrupt”, however badly it manages its budget. This hierarchical structure is not accidental: It is rooted in currency (money itself), for which central government is solely responsible. In practice central government imposes strict financial controls on local government, which limit the scope for mis-management. Historically important cities, such as Edinburgh, also tend to own a lot of local assets (like property), which can be sold in a crisis.

1990s Scottish devolution did not devolve money, it just altered the hierarchy slightly, with an extra decision-making tier (the Scottish Parliament and their civil service, the Scottish Executive) in between Edinburgh’s council and the United Kingdom’s central government.

In addition to keeping a watchful eye on how the council manages its budgets, the Scottish Parliament is part-funding the Edinburgh Tram – providing extra money beyond normal budgets or spending approvals. The Scottish Parliament’s contribution (currently via Transport Scotland) is limited to £500 million [PDF]. And herein lies the problem: When that funding package was agreed, the local council’s contribution was the remainder, just £45 million, a value broadly attainable by the local authority. But since Scotland’s contribution is fixed, every time the estimated price rises, the City of Edinburgh Council’s contribution rises out of proportion: Without other sources of funding, a doubling of project cost to £1 billion is actually a ten-folded increase in the cost to the council…

By attempting limit the Scottish Parliament’s exposure to the tram project, all the risk has been transferred down the hierarchy, towards the tier of government least able to raise large amounts of cash in a crisis.

Brinkmanship of the worst kind? In the interim, the council’s response is to control escalating costs by reducing the length of the route to be completed, with apparent disregard for whether the resulting tram track connects places large numbers of passengers might want to travel between. Underpinning their decision appears to be one of the worst assumptions of “modern” accountancy: That the asset value of a (tram) service is defined by the cost of constructing the infrastructure on which that service operates. Strategically, the value of the (tram) service to the city of Edinburgh is linked to the number of passengers that use it. Cynically, to the number that see it. Even commercial assets that are technically transferable (like land and tram vehicles) tend to sell for a lot less than they were bought. Scottish government’s reaction to the council’s decision was to withhold part of Scotland’s funding contribution, effectively forcing the council to reach a different decision [the following Friday, 2 September, the city centre section was added again].

With Scottish national government substantially funding the Edinburgh tram, and the project appearing too risky for local government, perhaps the Scottish level of government should have conceived and manage the project from the outset? The appendix at the bottom, Policy History of Edinburgh Trams, will help explain.

Haymarket Tram Terminus? Existing bus to Edinburgh Airport, with new tram station “under construction” on the left (August 2011)

Scaling Ambition

Broadly, there are 2 viable methods of containing risks on the scale of the Edinburgh tram:

• As a Scotland-level public project: Even £1 billion is only around 1% of Scotland’s Gross Domestic Product, a magnitude of (over-) spending that should be manageable by a truly devolved Scottish government. The Scottish Parliament has subsequently established an organisation (theoretically) capable of managing transport projects at this level, Transport Scotland.
• As a primarily private project: Most modern tram systems built in England transferred risk to the private sector (rather than Edinburgh’s model of merely contracting private sector suppliers). Scotland’s past record on private sector transport projects is poor (most obviously on the Skye Bridge), because policy changes too fast.

Unfortunately neither of these methods complement good local public governance: Decision-making and responsibility becomes remote from local politicians. Ultimately, this would dilute the role of local authorities: Logically to organisations that deliver (statutory) local services and act as “community council” talking shops, with no ability to actively shape or invest in the long-term future of their own areas.

That may be where Scotland is heading: Far greater centralisation of powers at Holyrood (the Scottish Parliament), drawn simultaneously from both Westminster (UK government) and Scottish local authorities. Such a structure might even work, and would address one of the major post-devolution issues – “too much democracy”.

However, the most important lesson of the Edinburgh tram is not that such projects should be managed more centrally. Rather, that capital investments should be scaled to match the scale of the government trying to deliver them: The tram’s fundamental failing is that it is too expensive (and consequently risky) a mode for a local public transport project. If an inherently local policy can only be enacted by a non-local government, then (I argue) it is the wrong policy. Local policy ambitions need to be scaled down to what is reliably achievable at local level.

The issue will become critical for a future Scottish government with financial independence from the rest of the United Kingdom (a distinct possibility, given the current dominance of the Scottish National Party). Scotland represents approximately 10% of the UK population and economy. This implies that a truly independent Scottish government could only safely manage 1/10 the amount of risk that the UK government is capable of managing. Meaning, the most ambitious project an independent Scotland could achieve would be 90% less ambitious than a UK-backed project.

Scotland’s current transport projects are still reasonably modest, like reopening short sections of old railway line. But it is easy to imagine the Scottish Parliament’s ever-increasing ambition proposing grandiose projects that the UK might contemplate, but which could bankrupt Scotland – like a new high speed rail network: A core route serving Scotland’s largest 5 or 6 cities, with an under-sea tunnel to Lerwick in phase 2…

The challenge for Scotland is not to pretend to be big, to still be part of the British Empire, or a modern-day China. Quite the opposite: To deliver the same (or better) policy impact, while the maximum cost of individual projects is limited to a tenth what the population has learnt to expect. Overall expenditure would not be reduced – there would simply be far more, smaller, projects. Fortunately, there’s a lot more scope to improve the humble bus stop than you might think!

I suspect Scotland’s history already contains the best example of what can happen when a nation stops pretending to be big, and instead focuses on itself: The original Acts of Union (with England) removed colonial and military distractions, allowing Scotland to develop domestically as an intellectual and commercial 18th century power-house.

The management of chaos (of which financial risk is a part), may become one of the great challenges for structured 21st century government, regardless of size. Paradoxically, the easiest way to manage chaos is not to have to: To foster a system where no one part is too important to fail.

Appendix: Policy History of Edinburgh Trams

The idea for the Edinburgh tram was originally developed by the Scottish Office (the pre-devolution civil service responsible for administering Scotland), as part of a package of transport measures for south-east Scotland, to be funded by road pricing (tolls on car journeys within Edinburgh).

3 conditions made Edinburgh a perfect target for such ambitious transport policy initiatives:

1. Transport was (is) a constant source of annoyance for many city residents – a “political hot topic”.
2. Edinburgh’s geography – densely populated, but hilly – historically lead to above-average local public transport use, with bus travel remaining socially acceptable among Edinburgh’s “middle classes”.
3. Minimal democratic interference (the Thatcher/Major governments contained almost no Scottish Members of Parliament) allowed Scotland’s civil servants to focus.

The first Blairite UK government (1994) heralded both devolution in Scotland, and a shift in transport policy towards public transport. That combination should have been perfect for Edinburgh, except that the Scottish Executive (the devolved equivalent of the Scottish Office) became considerably more focused on managing opinions. Which in transport, has a tendency to result in nothing…

Instead, policy momentum was picked up by the recently liberated (from Lothian Regional Council during local government reorganisation) City of Edinburgh Council: Local ambition steadily grew, from “Greenways” (networks of bus lanes) in the early 1990s, through guided busways and radical parking policies, to strategies based around trams and road charging.

Charging proved too radical: Scottish government compelled Edinburgh to hold a referendum – but only on road pricing, not the trams that pricing had originally been intended to fund. Edinburgh’s population naturally rejected road pricing in isolation – Turkeys don’t vote for Christmas – and the tram project proceeded with traditional forms of funding.

In spite of (initially) primarily being funded by Scotland, the trams were local in scope (with no tangible benefit to anyone outside Edinburgh), and hence construction was “managed” by the council. This was done through Transport Initiatives Edinburgh, a council-owned company established to deliver Edinburgh’s light rail scheme – something which it has since struggled to achieve.

The marriage of the Queen’s granddaughter, Zara Phillips, to Rugby player Mike Tindall has been widely reported, especially by the celebrity press. It has been referred to as “the other” royal wedding, for its stark contrast with the marriage of William and Kate (the Duke and Duchess of Cambridge) a few months before.

That contrast isn’t just in the status of those getting married – Zara being 13th in line to the British throne, William 2nd. William and Kate’s wedding was a public spectacle, with all the pomp and ceremony of state, while Mike and Zara’s was a “quiet” family affair. Unfortunately the later wedding still generated significant public interest, and the result was a bizarre clash of family and celebrity, privacy and publicity.

A Family Affair

Canongate Kirk is a congregational church in the centre of Edinburgh. One designed to serve the needs of local people. Even those with a palace in parish. The church is unremarkable, except for the presence of a few famous corpses in its graveyard.

The church faces onto the lower section of the Royal Mile, a relatively narrow street, bounded by 4 or 5 storey tenement blocks. With no space for parking, the groom’s guests are bussed in on coaches. The male guests are of above average build, invariably dwarfing their daintily dressed spouses. There aren’t many kilts to be seen – few guests appear to be Scots. Still, this is a Scottish wedding, and the customary piper is going to play whether the guests like the bagpipes or not. Indeed, the bride and groom have spared no expense, with both an official photographer and video-maker, who scurry around the grounds, trying to record the presence of everyone.

A few minutes before the ceremony the bride’s extended family arrive in a fleet of luxury cars – even though they have a house at the end of the street, and weather is perfect for walking. The bride follows in a rather bland saloon car, fashionably late, and quickly disappears into the church. She emerges 45 minutes later with husband in tow. Then it’s back into the car for the short drive to the reception, followed by the guests, in inverse order of their arrival.

A Celebrity Affair

For most people weddings are family affairs. However, when the groom’s guest list consists primarily of well-known Rugby players and sports-people, and the bride’s guest list includes every senior member of the royal family from the Monarch down, there are a few minor differences:

Burly personal body guards and royal protection officers amble outside the venue, unusually blending in to their environment – being almost indistinguishable from many of the guests. Lothian and Borders Police officers outnumber guests. In the street, from the rooftops, waiting in vans parked in neighbouring streets; I’ve seen riots more scantly policed. Police officers even patrol the walled church graveyard: Are they expecting David Rizzio (the murdered private secretary of Mary, Queen of Scots) to rise up from the dead and take care of some unfinished business?

A scrum of press photographers and “paparazzi” on step ladders vie for space on the pavement with ardent royal-watchers, many of who have spent the whole day waiting patiently. The combination of narrow pavement and narrow church gates mean only a handful of people can get a clear view of the couple emerging from the church. Only about a hundred are close enough to see any more than vaguely human shapes getting in and out of vehicles. Most casual “well-wishers” see only passing cars.

Picture: Press photographers outside Cannongate Kirk – stepladders not optional

The guests arrive as if part of a strange fashion show, with people who may or may not be famous, wearing garments that may or may not be desirable. The catwalk merely ends at an altar. The skill of the paparazzi is apparent: To know which people in the line of bodies climbing off a coach are famous enough to be pictured. Few guests play to the cameras, most preferring to walk straight into the church grounds. None of the vehicles are open-top – even the Queen arrives in a saloon car with narrow windows, presumably keen to remain out of sight of the minions lining the street. The only person of note to walk to the church is the Minister, Reverend Neil Gardner, who is cheered loudly for his efforts.

Press photographs of the event tend to be famous people walking away from the camera, or famous people behind the iron bars of the church fence. Both convey inappropriate symbolism of celebrities – glamorous faces need to feel accessible to their audience, not walking away or protected by metal railings. To add insult to injury, the official wedding photographer and video-maker have a free run of the church grounds, while major news organisations and broadcasters are left clinging to stepladders, scaffolds and window-frames, often only to have their views blocked by the arrival of a large coach.

Are They Watching Us?

Even the most deluded of celebrity-obsessives would have felt unwelcome. And yet, as consummate professionals, the media continue to tell a fairytale: Journalists interviewing the watching public have a predictable list of questions, dresses and celebrity paramount. Not that anyone they interview catches more than a glimpse.

But this media narrative isn’t entirely fictitious. I notice a woman enthusiastically typing a report of the wedding dress into a Facebook iPhone application. An elderly couple who had found themselves trapped behind a mass of step-ladders are remarkably sanguine about their day waiting to see almost nothing. “We were near the cathedral for the wedding of William and Kate, and we didn’t see anything then either.” I start doing something quite odd: Holding my mobile phone camera up to the sky to record the arrival of assorted members of the royal family. Everyone is, like a Mexican Wave or mass prayer to a strange god. My arms frame every photograph the woman behind me captures. I apologize, but she seems quite happy: “That’s what these are events are about, isn’t it?”

Indeed. One royal watcher poses an interesting question as we stand, eyes fixed on the wedding guests behind the bars: Are they watching us? Almost certainly not. A better question would be, are we watching them? Almost certainly not: We’re watching us. The spectre of celebrity may be what bought us together on this pavement, but that isn’t what makes us feel happy. What makes us happy is the gathering of people with common aim, however facile the aim, or however poorly we succeed.

And just as we are watching us, and the wedding guests are presumably pre-occupied with themselves, there are other people neither group sees: As the event draws to a close a pair a street cleaners start work on the mounds of rubbish that the crowd have left behind. In a broad Edinburgh Scots (“working class”) accent, they grumble that there’s no way “the machine” will fit down the still congested pavement, and start picking litter up by hand. The crowd doesn’t see them – they’re still looking towards the church.

Picture: Street cleaners at work in the shadows, while the crowd looks the other way

Private in Public

I pity those born into the British royal family, since not only are their individual beings intrinsically iconic symbols, but almost uniquely in British society they have no pretense of free will: They definitely don’t choose to be famous. For a “minor royal” like Zara Phillips, unlikely to have a significant constitutional role, it must be very tempting to pull up the drawbridge and attempt to live a “normal life”.

But as the volume of police, photographers and public that turned up at their wedding demonstrate, such an attempt is naive. And trying to deny widespread public interest in one’s affairs, forcibly making those affairs as private as possible, is arguably disrespectful of those interested people.

Critical to that argument is the extent to which British society has become relativist – structured on relationships between people, however symbolic and impersonal some of those relationships actually are. In this model elements like knowledge cease to be absolute (God or, in the modern era, science-given) facts, and are instead defined by what different groups of people agree upon, potentially without common agreement between different groups. The British monarchy is already adept at this, over the last few centuries moving from absolute monarchy to a form of relativist monarchy, embracing first collective symbolism, and then collective celebrity. Showpiece public events, like the wedding of William Windsor and Kate Middleton, fit such a role perfectly.

What’s intriguing is just how little contact is actually required between such celebrity figures and their public admirers, for that public to remain content. The celebrity individual seems to need to be vaguely human to be a suitable target for admiration, but after that the prime human interaction is between fellow admirers – the celebrity themselves is almost redundant to the relationship. And hence thousands of people can turn up at your wedding, barely even see you, but go home happy afterwards, feeling like their 5 or 10 hours on the pavement were well-spent.

Minimal contact between different groups of people isn’t a unique function of celebrity relationships, as our street cleaners demonstrate. And herein lies the real challenge: To maintain an quasi-authoritative structure across many disparate groups. The irony for British governance is that our apparently undemocratic, but relativist, monarchy may be better placed to link disparate groups of citizens, than our democratic, but absolutist government.