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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
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The Report for the RAC Foundation - Front Cover
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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
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OUTLINE
How we got to where we now are?
What role has appraisal played in the decision making process?
What are the present challenges?
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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
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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
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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.
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Reaching out to a wider audience
Moving beyond the BCR
Need for a strategic narrative
fit in with objectives
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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
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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.
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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.
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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
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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?
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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.
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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
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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
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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)?
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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.
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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.
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And so?
What should we be doing now to improve and inform policy making through evidence based methods?
Questions and discussion