David Parker said the Borders Rail Project had been delayed by discussions between the Scottish Government and Treasury over new regulations that require

public/private finance (PFI) projects to be declared as public expenditure.

However, he claimed that the hurdle had now been overcome and urged Transport Scotland, the Government agency overseeing the project, to issue an invitation to tender, almost a year after it was originally due to be published.

Mr Parker told The Herald: “The whole process has been delayed for very good technical reasons by the financial treatment debate between Scottish Government and Treasury.”

The project is due to re-establish a link between Edinburgh and Tweedbank in the Borders, along the route of the old Waverley line which was mothballed by the Beeching cuts in the 1960s.

Transport Scotland was originally due to invite tenders to design, build and finance the line by December last year, but delayed this while further “market testing” took place to ensure it would prove effective value for money.

Industry sources claim there is reluctance among major contractors to pursue the Government’s previously untested “non-profit distribution” delivery mechanism -- effectively a form of PFI under which the private sector pays the capital costs but with a cap on the profits.

A Government-commissioned report published last year also raised serious doubts over the viability of the project, finding it had a “very poor” business case and was reliant on over-

optimistic forecasts of passenger numbers.

As recently as last week, Transport Scotland was forced to reassert its commitment to the project after members of the Scottish Borders Party, who oppose the line, requested a further review to assess whether it represented public value for money.

The Treasury confirmed yesterday that talks had taken place over summer with the devolved regions to clarify new European accounting guidelines. A spokesman said: “The Government has provided guidance to departments and devolved administrations on the budgeting implications of this change.”

However, the Scottish Government and its transport agency denied that this had led to delays with the project.

A spokesman for Transport Scotland also denied suggestions of reluctance among contractors, claiming that market testing undertaken this year had revealed “strong interest” in the project.

Opposition politicians yesterday pressed for further clarification of how the project would be financed.

Des McNulty, Labour’s transport spokesman, said: “There’s still a great deal of uncertainty about how the project is to be financed and also the vehicle for procurement. Bearing in mind the mess they made of the Glasgow Airport Rail Link, there are questions to be answered.”