Transport minister Sadiq Khan has granted conditional approval for construction of the second phase of Nottingham’s tram network through a private finance initiative which is valued at £680m.

Nottingham Express Transit phase two involves building two new tram lines to the west and south west of the city. Central government will provide PFI credits capped at £530.7m towards the cost of the tram scheme with the city council responsible for finding £149.5m.

This week’s decision will allow Nottingham City Council, the promoter of the tram project, to start the procurement process. Subject to a successful outcome construction of the extensions is scheduled to start in 2011 and the lines will open to passengers in 2014.

The government has also confirmed that Nottingham will be allowed to introduce a Workplace Parking Levy - the first of its kind in the UK - allowing the local authority to levy a charge on businesses according to how many parking spaces are available for staff at their premises. The WPL will allow Nottingham City Council to raise cash needed for the local contribution to NET phase two and will also support the £67m redevelopment of Nottingham’s railway station and the Link bus network, which transports people to and from some of the city’s major employers.

Although the government has agreed to grant the order for Nottingham’s Workplace Parking Levy as well as providing for the enforcement of WPL schemes generally, the charge will not be introduced until April 2012 - two years later than had been planned and after a General Election. The city council says this has been agreed to give businesses respite from the recession and ministers have agreed to provide an additional £13m in PFI credits to cover the shortfall in revenue and ensure the programme for public transport investment will not be disrupted. It is proposed that businesses will need to be licensed for the WPL, at no charge, from October 2011.

Cllr Jane Urquhart, Nottingham City Council’s portfolio holder for transport and area working, said: “This is a massive boost for Nottingham. NET phase two would be the largest single financial investment by government in the city. This will help steer Nottingham out of a recession by creating jobs and bringing in much needed new investment. Equally important is the fact that even more of our residents and visitors will be able to use a clean, modern and efficient tram to travel in and out of Nottingham.”

She added: “The fact that we have over two years before the WPL is implemented gives us the opportunity to work with businesses to help them develop more sustainable transport policies, encourage behavioural change and reduce congestion, which has a significant impact on business.”

Sadiq Khan said: “The Nottingham tram continues to be a great success in encouraging people onto public transport. These extensions provide the opportunity to improve on this success, and give people in the south of Nottingham and longer distance commuters quicker, more convenient access to the city centre.”

Following this week’s conditional approval for the NET phase two scheme Nottingham City Council will be able to advertise a tender for the design, build and operation of the expanded tram network. Final approval will only be granted following procurement when firm costs are known. An order under the Transport and Works Act, allowing construction of the two new lines, was granted earlier this year (Transport Briefing 01/04/09).

The first line of Nottingham Express Transit (NET) opened in March 2004. The total cost was £200m, of which Government provided £174m in PFI credits.

The new 10km Chilwell via Beeston tram route will serve the Meadows, the ng2 development site, the Queens Medical Centre, the University of Nottingham, the Science Park, Beeston town centre and Chilwell before terminating at a park and ride site near the A52 close to junction 25 of the M1 motorway. The 7.5km Clifton route will serve densely populated residential areas including the Meadows, Wilford/Ruddington Lane and the Clifton Estate before terminating at a park and ride site near the A453, close to junction 24 of the M1.