Ministers withhold Edinburgh trams funding
The Scottish government has confirmed it will withhold about £72m of funding if the Edinburgh trams project stops at Haymarket.
Last week councillors rejected plans to borrow an extra £230m to run the line into St Andrew Square.
Transport Scotland has sent a letter to the council's chief executive saying it will not now pay the final instalment of a £500m government grant.
The city's lord provost is to convene a special council meeting on Friday.
Finance Secretary John Swinney said: "The government has made clear to the City of Edinburgh Council that a proposal which takes the tram system to Haymarket, that requires ongoing public subsidy in the years to come, is a significant departure from the original concept that the government supported, and which it was prepared to put forward £500m for.
"As a consequence of that we are just not prepared to make available any further funding to the city council.
"But I have made clear to them, also, that if they come forward with a credible proposition then government will consider that."
The controversial decision to end the line at Haymarket was made at a meeting last Thursday when councillors backed a Labour amendment.
It provoked a furious reaction but the decision could not be revisited for 12 months unless there was a material change in the circumstances that led to the decision.
The fact that the government is withholding the funding could represent such a change as it could undermine the economic case for the Haymarket option.
The government, despite the SNP's opposition to the plan, originally agreed to spend £500m on the trams project, which was to take passengers from Edinburgh airport to Newhaven on the banks of the Forth.
Transport Scotland director Ainslie McLaughlin outlined the government's decision to refuse more funding in a letter to council chief executive Sue Bruce.
He wrote: "In light of the council's decision on 25 August 2011 to take the tram only to Haymarket, ministers are now of the view that this represents a fundamental change to the basis on which the Scottish Government originally agreed to contribute up to £500m.
"It will result in the tram requiring significant ongoing public subsidy which is damaging in public expenditure terms.
"In these circumstances, I have to advise you that ministers are not prepared to make any further payments to the project and will not extend the existing grant arrangements beyond 31 August, 2011.
He added: "If the council wishes to make further proposals that are consistent with the basis of the original agreement given by ministers, these will be considered on their merits."
The construction consortium has acknowledged the council's decision to shorten the route, and is due to formally respond by Wednesday.
Figures for the cost of ending the scheme at Haymarket, which is thought to have increased further, are also expected to be finalised then.
Edinburgh Council Labour group leader Andrew Burns accused the Scottish government of trying to "sabotage the whole project".
He said: "John Swinney could have averted the present crisis by ordering his SNP councillors to do what he is now demanding.
"Instead we have the ludicrous situation of an SNP Government doing one thing and an SNP council doing another, but both doing it incompetently."
Mr Burns also questioned who would be expected to come up with the £231m required for the line to be carried on to St Andrew Square.
He added: "The biggest single mistake in this project was the decision to remove Transport Scotland experts from the management board in 2007 immediately after the SNP lost the vote in the Scottish Parliament.
"That means there has been virtually no government oversight of this project."
It is understood that the Liberal Democrat group on the council will press for a change of heart, urging colleagues to take the trams on to St Andrew Square.
Liberal Democrat councillor Gordon Mackenzie, the city's transport convener, hopes there will be a rethink on the shortened route.
He told BBC Radio Scotland's Good Morning Scotland programme: "We clearly thought it (Haymarket) was the wrong option last time and with the costs likely to increase and a considerable question mark over the funding, we're even more convinced that St Andrew Square is the better option.
"The big question is what do other parties think? I think the people of Edinburgh want us to act like grown ups - to have a serious look at this.
"Nobody liked the Haymarket option. There was outrage in Edinburgh and elsewhere with it, so, I hope other parties will look at it afresh and come to a different conclusion."