Making the Economic case for Investment

Philipp Thiessen, Head of Appraisal scrutiny

Overview

 

• Background

• Existing Evidence base

• What does all that have to do with Growth?

• Practical demonstration

• Discussion

Background

• Cycling Delivery Plan published in October for consultation

• Ambition for cycling and walking to be delivered through cooperation of local and central activity and funding.

• Under LGF major source of funding now under local control

• Want to ensure capability for making the case is maximised.

Background: Five Case Business Case

The Green Book recommends that business cases are structured according to its best-practice Five Case Model:

Management

Financial Commercial

Strategic

Economic

Applicable – a strategic fit

Appropriate – optimum Public Value

Attractive – to supply side and feasible

Affordable – within the budget

Achievable – can be successfully delivered

The Existing Evidence base

• In support of the plan, the department recently published three reports on benefits of sustainable and active travel: – Value for Money assessment of the large LSTF

schemes– Value for Money assessment for Cycling

Grants– Claiming the Health dividend

The Existing Evidence base

Other relevant studies include

– Cycling Demonstration Towns– Sustainable Travel Demonstration Towns– Sustrans Linking Communities Fund– TfL’s Cycling Vision

The Existing Evidence base

Typical BCR’s from these studies

Sustainable Travel Towns 4.5:1 Decongestion benefits only

Cycling Demonstration Towns 2.59:1 Health benefits only

Local Sustainable Transport Fund 5.1:1 Based on 12 large schemes business cases

Cycling Ambition Grants 5.5:1 Based on business cases for 12 funded schemes

Linking Communities Fund 10:1 Based on eight representative schemes

Literature Review 5.6:1 Average BCR for UK case studies, overall average 6.3:1

Transport for London Cycling Vision 2.9:1 Very large programme - conservative BCR

What do those BCRs do for Growth?

Benefit Cost ratios represent the quantifiable transport benefits per pound invested

Time Savings

Health

Journey Quality

Air Pollution

Reliability

What do those BCRs do for Growth?

E.g. LSTF – over 80% are time and operating costs for road users – from mode shift and decongestion –

At least half of those are time savings to business – staff and goods spend less time stuck in traffic.

Road safety – less time loss from absenteeism, less disruption from clear up…

What do those BCRs do for Growth?

E.g. Cycling ambition grants – around 60% are physical fitness benefits.

These are the benefits of reduced premature mortality.

At least 30% of the value is from avoiding the loss of productive output that occurs when employees die prematurely.

Further benefits to business are reduced absenteeism, higher staff productivity, motivation and retention.

What do those BCRs do for Growth?

Other growth impacts:

Air quality – in areas of exceedances

Journey Quality – more satisfied workforce – esp highly skilled often demand good travel facilities

General well-being: growth is ultimately a means to the end of well-being – so why discount this?

In summary: the traditional transport appraisal accounts for the majority of economic impacts – even if it does not present jobs and GVA…

Working through an example

Based on the worked example in WebTAG A5.1 Active Mode Appraisal…

Conclusion

 These three papers reinforce the existing evidence that sustainable and active transport investment can have very high value for money.

Local Authorities should refer to this when making their case for investment to local decision makers. • https://www.gov.uk/government/uploads/system/uploads/attachment_data/file

/347894/vfm-assessment-of-lstf.pdf• https://www.gov.uk/government/uploads/system/uploads/attachment_data/file

/348943/vfm-assessment-of-cycling-grants.pdf• https://www.gov.uk/government/uploads/system/uploads/attachment_data/file

/371096/claiming_the_health_dividend.pdf

• A fuller summary of the evidence is due to be published in the near future.