Institute for Transport StudiesFACULTY OF ENVIRONMENT

International comparisons of transport

appraisal practice

Transport Economists’ Group

28th May 2014

Tom Worsley Visiting Fellow

Outline

2 Studies – DfT and EU

Context of the studies

Findings from the DfT study

Additional information from the EU Sintropher

Conclusions

The DfT report

International Comparisons of Transport Appraisal Practice –

July 2013

www.gov.uk/government/publications/international-comparisons-of-

transport-appraisal-practice

• Overview Report – Peter Mackie and Tom Worsley

• Annex 1: England – Guehnemann A, Kelly C, Mackie P, Worsley T

• Annex 2: Germany- Guehnemann A

• Annex 3: Netherlands – de Jong G

• Annex 4: Sweden – Eliasson J

• Annex 5: USA – Weisbrod G

• Annex 6: NSW Australia – Douglas NJ and Brooker T

• Annex 7: New Zealand – Douglas NJ, Wallis I, Lawrence A, Wignall D

The Sintropher Report

Developments in the Appraisal of Transport Infrastructure

Investments in the UK and other European Countries and in

its Influence on Decisions. T Worsley

Not yet published

http://www.sintropher.eu/about/partners/university-college-

london

Project focuses on tramways/light rail links between main line

stations and peripheral regions of NW Europe

Sustainable Integrated Tram-Based Transport Options for

Peripheral European Regions

Context for the DfT report

DfT faced challenges on appraisal methods

How does the UK Department for Transport compare with

other countries-

• In the methods, framework and values?

• In the use made of CBA in the decision making process?

Method for the study-

• Selected 6 countries identified as leaders in CBA and with contacts

• Took EU HEATCO (2006) as the base and review changes since 2006

• Sought guidance/information on use of appraisal in decisions

• 7 weeks for draft report:10 for final

Context for the Sintropher

Report

UCL lead partner – Sir Peter Hall team leader

Land use planning focus – The Bartlett School of Planning,

with French, Flemish, Dutch and German partners

Demonstration projects: Blackpool, Valenciennes, Nijmegen-

Kleve(NL), Nord Hessen, West Flanders

Sintropher objective; Supporting Growth through Regional

Connectivity’ – how can better transport links promote

economic development at the regional level?

Report on economic appraisal methods and decision making

Interaction between economist and planners

Transport Cost Benefit

Analysis in the UK

Strong tradition over some 50 years

External challenge from ACTRA/SACTRA/Eddington

Occasional internal reviews – NATA (1998), NATA refresh (2008),

transport business case (2010), Understanding and Valuing the Impacts

of Transport Investment (2014)

Published detailed guidance – WebTAG

Evidence based values: increasing use of money values to replace

quantified or qualitative scores

Updated and extended eg wider benefits, reliability

Originally for highways and local transport capital schemes

Extended to national rail, walking, cycling, current expenditure

Published information about role of CBA in the decision-making process

Why does CBA remain in

favour in England?

The English policy framework supports the use of CBA-

• The parliamentary process – protecting the public interest

• The dominant role of HM Treasury – Green Book, value for money

• Accounting officer responsibilities – the role of the Permanent Secretary

• The absence of local taxation and funding – a national perspective

• The public inquiry process

• A British preference for evidence based decisions over political ones to

demonstrate ‘fairness’

BUT

• Desire to demonstrate ‘real economy’ impact

• Scepticism about time savings as a proxy for longer term effects

• Localism and devolution set different objectives

Key findings – Appraisal

Framework

Discount rate – Europe uses lower rates (2.5% – 4%) and longer periods

US or Australasia (7%-8%). Period – asset specific, or varies from 30 to

60+ years

Shadow prices – only Sweden uses 1.3 for public spending

Appraisal metrics – varies, several reported for some countries – BCR,

NPV, IRR, FYRR, with denominator either national costs or costs to

government or capital costs (Sweden)

Non-monetised impacts – varies, eg -presented as additional information in

standard reporting format ; provides ‘red flag’; translated into broad

monetised score to provide additional BCR

Risk and uncertainty – varies, QRA and/or OB used by some, risk premium

on discount rate (NL), sensitivity analysis (Germany)

Role of Finance Ministry in setting appraisal standards varies: delegated

powers in some countries for local schemes

Key Findings – Unit Values

User Benefits

Values of Time – Broadly comparable: England – EB high relative to

NWTTS (now x4) compared with other countries (x3) but WebTAG

NWTTS lower than NL and Sweden for commuting. Germany weights

savings <5mins by 0.7, Sweden by journey distance. NL uses SP

values in place of cost saving for freight. Factor on walk/wait applied in

England and outside EU

Reliability – either reliability ratio or IVT based value of lateness (typically

around 3). No value reported for Germany

Comfort/crowding – Sweden and NZ increases VoT for car congestion,

most use public transport crowding penalty, some depending on

crowding level

Safety – comparable except US has VoSL 3x the English value and

Sweden values serious casualty higher

Key Findings – Environmental

Impacts

Monetisation now widespread: much progress since HEATCO

• Noise – wtp approach in Europe, mitigation costs elsewhere. Methods

not easily comparable – eg in volume/value relationship, and area type.

• Local pollution – broadly similar approach for all, based on impact

pathway, damage to health and wtp based change in state of health,

with some differences in pollutants measured

• Climate change – other than Australia, all use money values, based on

EUETS or a shadow price of carbon. US and NZ low, Sweden high

• Environmental capital – qualitative assessment to inform MCA. NL

considering monetisation.

• Other impacts – Germany mark up for induced traffic (no VDM); NZ

disruption related strategic factors; social and distributional impacts only

in WebTAG

Key Findings – Wider

Economic Impacts

Range of methods – often ‘additional’ to BCR

Much progress since HEATCO

• Agglomeration benefits – relationship between generalised costs,

employment density and productivity – England, S, NZ, NSW (Australia)

and some NL - larger schemes only

• Regional spatial economic models – NL(large schemes –RAEM,REMI)

and some US states (REMI, TREDIS)

• Uplift for cross border and port connections – Germany

• Regeneration (regional/local distributional effects) – only in England,

Germany (direct employment effects), US and some NSW (A), generally

not monetised

• Labour supply and M2MPJs based output change – England only.

Applying the Guidance –

Capital & Current Projects

Roads – mandatory for all capital projects requiring central govt funding:

varies for state or locally funded schemes in US and NZ.

Rail passenger – as for roads, often with some supplementary guidance

Rail freight – mostly commercial, with mode shift appraisal in England.

Bus/tram – as for roads: not always in Sweden or for smaller German

schemes.

Air – varies. NL, England use appraisal for strategic decisions, regulation

and planning applications. Some appraisal use in US and NSW (A)

Sea/Water – mandatory in Germany, NL, US (central funding), and some

NSW (A)

Cycle/walk – mandatory in England, varies for others

Current spending –only a few examples provided: rail franchising and bus

subsidy in England

Appraisal and its influence on decisions –

qualitative and quantitative impacts

Increased use on monetised values since HEATCO – so role

of unquantifiables diminished.

• England uses initial BCR to categorise projects into v high, high,

medium and low value for money ( >4, 4-2, 2-1.5, 1.5-1); ministers

advised on whether non-monetised impacts would change category/rank

and make their judgement (only projects >2 approved)

• Less evidence from other countries – BCR >1 is a hurdle for most - NL,

Sweden, Germany.

• Germany and US rely more than others on BCR for ranking national

schemes because environmental appraisal sets mitigation measures.

Appraisal and its influence on decisions in

England – strategic factors - England

England uses Treasury business model – economic, strategic,

management, commercial and financial cases.

• Economic case is CBA/welfare – strategic is policy objectives – jobs,

GVA, carbon – some overlap with economic case

• Transfer of responsibility for local infrastructure investment to local

authorities – more weight on local strategic case, less on (national) CBA

• Guidance and evidence for strategic objectives much less prescriptive

than WebTAG (and only 8 pages) - estimates of jobs/GVA have usually

based on either LUTI plus economic inputs, or models of agglomeration

and employment densities, the UDM (SDG), or surveys to inform

changes in costs and trade flows. No English regional spatial economic

model.

Appraisal and its influence on decision-

making – strategic factors - other countries

US, Sweden and New Zealand identify various strategic factors for some

schemes

NL has used spatial regional economic models to identify GVA and jobs

impacts by region for some major schemes, but RAEM no longer

maintained

US TIGER programme – federal funding priority for projects which improve

economic efficiency and productivity and reduce the cost of exporting

US states use a variety on models of the local economy and some

prioritise on that basis

Countries with a federal structure often have two sets of guidance

In Sweden and NL (and others?), largest schemes are less likely to be

ranked on BCRs alone

Some Conclusions from

ICTAP

The principles of economic appraisal are widely accepted: however, they

face challenge (at least in England) from time savings sceptics, urban

land use planners and the real economy lobby

Extension of monetisation and of impacts included since HEATCO in all

countries reviewed – convergence of methods and values

While several countries estimate some ‘real economy’ impacts, there is no

consensus on how to do this

The structure of government (federal/central) affects the use of appraisal

and its influence on decisions.

Some of the values used in WebTAG need updating – some other

countries make use of more recent research findings

Did we meet the client’s requirements?

Further conclusions

The investigation showed that;

• England remains among the leaders in the use of CBA, all of whom face

similar challenges

• WebTAG provides a model of appraisal and modelling documentation,

often benchmarked by others

• No country explains how the CBA metric influences the decision making

process – the DfT provides more information than others

The authors proposed an international forum and information

exchange for officials and academics

Sintropher – additional

findings

Study covered schemes in Germany, Netherlands, Flanders,

England and France

Focused on local schemes, funded in Germany by the

allocation of central funds to the Länder and in France in

part by Versement Transport.

A BCR>1 was a requirement for schemes in Flanders and

Netherlands, where BCRs have some influence on

priorities, and in most cases for the German Länder

France: Vivre la différence!

Appraisal of local schemes in

France

France has high quality appraisal guidance – Boiteaux, Quinet

Law requiring the use of this guidance for all schemes

For major local schemes the CBA is largely ignored, but Préfet can always

veto scheme

The mayor ;

• Acts as the champion for the proposal

• Outlines a vision – transport, land use, public realm, regeneration

• Lobbies the communes, land owners, developers, businesses and

residents to get support and to cooperate on move from vision to

scheme design

• Lobbies national politicians for the state contribution

• Delivers the project

Pros and Cons of the French

Approach

Pros

Local buy-in – “l’excellence ferroviaire de Valenciennes”

Integration of land use and transport change – a package, not a transport

scheme

High quality public realm

Cons

No evidence that the chosen option was better than others

No concept of value for money

‘Unfair’ – might the mayor of Dunkirque had a better scheme?

Lack of transparency in decision making process

Questions?