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Ignoring BCRs may weaken transport’s voice in Treasury

Tom Worsley Visiting fellow Institute for Transport Studies University of Leeds Leeds
07 August 2020

Your article on the National Infrastructure Commission’s Rail Needs Assessment for the Midlands and the North noted that the Commission had eschewed conventional cost benefit appraisal methods (‘Commission eschews BCRs and complex modelling’ LTT 24 Jul). The Commission’s “more straightforward approach” is based on its working paper Capturing the value of urban transport investments, published in October of last year (‘NIC kicks time savings out the park with new urban appraisal method’ LTT 22 Nov 19). 

The working paper described an approach, outlined in LTT last issue, based on the assumption that increases in rail capacity serving city centres will be taken up by a shift in jobs from less dense locations, with resulting productivity benefits. These effects are supplemented by the increase in amenity benefits that denser locations enjoy. 

The reason for developing such an approach was, according to the working paper, to provide high level estimates of the potential impacts of a long list of projects so as to prioritise the more certain of these for more detailed modelling and appraisal. The working paper recognised the limitations of the proposed approach. It might be seen as one that supplements methods including the DfT’s Early Assessment and Sifting Tool (EAST) for assessing a long list of options against a set of critical success factors.

The NIC’s North and Midlands rail needs assessment has extended the approach to cover a wider set of criteria, including metrics for connectivity, development around stations, and a number of quality of life indicators. The objective for the enhanced approach is to allow decision-makers and others to appreciate the trade-offs between options that deliver more strongly on the productivity front and those that perform better in terms of quality of life and quality of life.

The NIC does not explain how this “more straightforward approach” fits in to the Treasury’s business case model. It might have value in strengthening the strategic case, ensuring that decision-makers understand the context of the scheme and the additional measures needed to ensure a reasonable chance of it meeting its wider objectives. It is unlikely to provide a substitute for the economic case, even after the forthcoming revisions to the Green Book and the DfT’s Transport Analysis Guidance (TAG) in response to the ‘levelling up’ agenda, since it lacks any evidence to suggest that the benefits of the package exceed the costs that the public sector incurs. 

The NIC assumes that the budget is fixed and therefore the decision is concerned only with the ranking of packages rather than with the overall size of the programme. In the past the transport capital budget has benefitted greatly by evidence of the value for money expected from the projects that ministers have approved. The risk that the failure to provide evidence of public money being well managed might influence the size of the transport budget is not a risk acknowledged in the “straightforward approach” advocated by the NIC.  

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