Institute for Transport StudiesFACULTY OF ENVIRONMENT

Transport Economists’ Group 24th June 2015

Transport Policy, Appraisal and Decision-Making – is the Process at the Crossroads?

Tom Worsley Visiting Fellow

ITS

The Report for the RAC Foundation - Front Cover

Context

Report commissioned by the RAC Foundation

Challenges facing transport appraisal and its role in informing decision-makers

UK appraisal methods were (2005 HEATCO) and still are (2013 Mackie and Worsley) technically among the leaders and play a role in decisions

But questions raised by:• Devolution

• Impacts on ‘real economy’ and on quality of life

• Technical weaknesses – reliability, VoTTS, etc

Method of Inquiry – interviewed 18 experts, reviewed literature

OUTLINE

How we got to where we now are?

What role has appraisal played in the decision making process?

What are the present challenges?

 

Development of Transport Appraisal Methods and Applications

COBA late 1960s

COBA plus Framework for environmental impacts and some others – ACTRA 1977

Urban schemes – light rail, CLRS, JLE

NATA, Appraisal Summary Table, WebTAG

SACTRA 1999, Eddington, Wider Economic Benefits

Rail enhancements and HLOS 2007

NATA Refresh 2009

Transport Business Case 2010

DfT’s UVITI 2013

Assessment of 50 years of transport appraisal

A necessary process; wide range of projects – some ranking evidence based process required because;

• Many decisions devolved – eg to Network Rail, HA, to LAs

• Role of Treasury in spending reviews.

• PAC, Public Inquiries, framework for democratic accountability process

A flexible evolutionary process, change followed by stability

Policy responsive – eg provided ‘an integrated approach’ 1997, benefits of active modes, WEBs

Many other countries use a comparable process

How influential? Marks out of 5

**** Project ranking and selection (except megaprojects)

Judgement - Effective - DfT VfM objective

*** Programmes and Plans - RIS, HLOS, 2000 TYP indicative projects

Judgement – programme seen only as package of schemes

** Policy goals – eg cutting road deaths, liveable cities, economic growth-

Judgement - works best where metrics are compatible with CBA

*? Policy levers – bus deregulation and privatisation, rail privatisation, concessionary fares,reform of HA, road pricing

Judgement - limited use of appraisal – but some glimmer of change.

Reaching out to a wider audience

Moving beyond the BCR

Need for a strategic narrative

fit in with objectives

Challenges and Opportunities

The TBC – an opportunity. 5 cases• Economic case - WebTAG compliant

• Financial – funding, private sector contributions, revenues, risks

• Management – delivery, governance, assurance

• Commercial – contracting, procurement and risk

• Strategic – narrative, problems, need, strategic fit, why now, scheme in context

TBC sets the CBA into context and provides opportunity for a more objectives led approach

The desire for big announcements

Eddington’s warning against ’Grands Projets’, mainly on VfM grounds

Political commitment before robust evidence is available

Momentum created by big studies – difficult for a minister to admit to the idea less good than first thought.

Opportunity cost of big projects unclear – probably not other transport schemes.

Conventional appraisal challenged by the ill-specified objectives of such schemes – rebalancing, maintaining London’s pre-eminence.

Transport investment and economic performance

Macro-economic relationship well established

Desire to demonstrate effect at scheme level on ‘real economy’

Current approach (TIEP) centres around:• First round impact through business transport cost changes

• Second round through static agglomeration in urban areas (WI1) – transport cost reductions increase economic mass

• Further effect through firms’ and households’ responses changing the location of economic activity – dynamic agglomeration (W!3 but with full change in GVA). Again tends to focus on urban areas.

CBA and ‘real economy’: which metric(s)?

BCR (a ratio)or DfT’s VfM (high, medium, low, poor) Metric provides for:

• Go/no-go decision

• Ranking

• Documented, evidence based methods

• Accountability –eg against DfT performance objective

GVA metric • Impressive number, though largely divorced from Chancellor’s strategy

• Evidence of ‘paying for itself’ at 35% of generated GVA

• Evidence of spatial impact of benefits

Predicting System Behaviour and Response

CBA – a tool for bottom up national planning

Reality is different –

TOCs have some freedom to set fares

Open access operators can enter the rail market.

Interaction between national and local authorities’ objectives

Autonomous vehicles are a potential challenge to the highway supply function.

Benefits of more London airport capacity feed through into airfares, airline asset values, airline responses.

Local funding – eg Crossrail and the London SBR – different from general taxation?

Technical Challenges

Values of time savings – now being addressed by DfT

Resilience and Reliability – valuation less of a problem than is modelling how an intervention changes the variable

Health impacts – physical fitness effects and values based on limited evidence and no attempt to assess car/pt mode choice and health

Modelling of responses:• Firms’ and households’ responses to transport cost changes – models

exist, but few and still ‘on trial’. Freight models.

• Integrating land use change – changes in the location of economic activity and its impact on welfare – borders on the ‘too difficult’ in appraisal, even if not in modelling.

Devolution 1

Devolution shifts responsibility for local transport from Whitehall to local government.

But challenges remain:• Responsibility for objectives, for funding, for outcomes, for assurance,

for mediation (between national and local objectives on ‘shared’ links, between planning control totals).

• Other challenges – economic impact models, mixed programmes with some of the investment in assets or programmes with no appraisal methodology (but good evaluation practices), capabilities within LAs

Devolution 2

Wide range of outcomes – • London out in front – structure with GLA and TfL helps delineate responsibilities

with boroughs

• GM and Transport for the North, despite more complex structure, following London’s lead.

• Elsewhere – ‘a mosaic’ of outcomes

But• Ministers will still want to intervene by delivering policies that can only be

implemented through local schemes

• Ensure national objectives (transport and land use planning) are not overridden

• Be accountable for nationally raised funding

Arms’ lengthening 1

Role of Highways England (and to lesser extent of Network Rail)

Aim- to incentivise efficient delivery of investment and management of infrastructure.

Creation of triangular relationship between central government, infrastructure provider and local authorities.

Whose objectives come out top – strategic traffic or commuters contributing to local goals (eg Northern Powerhouse)?

Arms’ lengthening 2

Targets and cost benefit analysis

Targets incentivise – simple, widely understood through organisation – eg rail reliability

CBA’s multiple objectives and trade-offs ‘too complex’

But simple targets put good solutions at risk – eg rail HLOS crowding target ruled out solutions which reduced time spent on crowded trains

CBA still used to ensure acceptable VfM but targets drive option selection.

Conclusions

Appraisal has had an essential role – in particular at the scheme level

It has been flexible but faces new institutional framework:• Devolution

• ‘Real economy’

• Arms lengthening

Analysis needs to extend to a better understanding of spatial and local economy impacts

But methods for predicting such impacts require development

DfT needs to remain the guardian of good practice.

And so?

What should we be doing now to improve and inform policy making through evidence based methods?

Questions and discussion