£20m hole in city budget puts building projects under threat

SOME of the city's major public building projects, including new schools, are set to face delays after council chiefs revealed a £20 million black hole in their finances.

City leaders had budgeted for around £43m to come from the sale of council-owned land in the current year to help bankroll its building commitments.

But a slowdown in the property market has meant a lot of these sales have been cancelled or delayed and the local authority is now facing a £20 million shortfall.

Among the capital projects which could be affected by the drop in revenue are the new schools building projects, a replacement for Meadowbank Stadium and the Glenogle Baths refurbishment.

Although council bosses do anticipate many of the planned land or building sales to go through in a couple of years' time, department heads in the council have been sent back to the drawing board to look again at the timescales of their commitments.

Among the options open to the council to make up the shortfall is taking money from elsewhere in its budget or borrowing.

However, it is thought that stretching some of the projects over a longer timeframe is the preferred option.

Council chiefs have also warned that many of the annual dividends from council-owned companies, such as Lothian Buses, are expected to be largely reduced as a result of the economic slowdown.

Opposition politicians today called on city leaders to get their own budgets in order, as well as lobbying the Scottish Government for more money.

The city's Tory finance spokesman, Councillor Cameron Rose, said: "We need to be looking at ways of trimming the fat right across the council but also looking at attracting outside investment to keep the projects going."

Earlier this month council bosses admitted that "a degree of risk" surrounds half of the £33m it has committed to rebuilding or replacing five crumbling schools in the city because of the credit crunch.

Labour's city finance spokesman, Councillor Ian Murray, said:

"It is vital that we keep public sector investment in capital projects going and indeed these circumstances would, if the Government provides the funding, mean you would also be getting more value for money."

Councillor Gordon Mackenzie, the city's finance leader, said: "This city, like every other community, will feel the effects of the credit crunch and rising prices.

"It will impact on our plans, but what we have to do is ensure that we continue to deliver as much for the people of Edinburgh as we can, and to keep ourselves well placed for when the recovery comes.

"Our intention is to plan for the long-term but we must also focus on the problems of today, especially with the current uncertainty over economic conditions."