APPENDIX 1
Supplementary memorandum submitted by
the Department of the Environment, Transport and the Regions (PAC
00-01/175)
DETR RESPONSE TO NOTE OF ASSUMPTIONS USED
IN NAO ASSESSMENT OF CTRL VALUE FOR MONEY: GOVERNMENT CENTRAL
CASE
BENEFITS
INFB. Time savings. These are based on 14
minutes' time savings (47 per cent of 30 minutes, as per DETR
assessment) from 2003-07 and for the whole period for Waterloo
passengers. One third of trains/passengers are assumed to use
Waterloo after Stage 2 opens (as per DETR assumption, advised
in meeting with economists). Time savings of 30 minutes for St
Pancras passengers as per DETR value for money assessments.
I have reviewed source documents (see attachment)
and conclude the appraisal is correct. The assumed time savings
from Waterloo and St Pancras are shown below and when weighted
give an approximate time saving of 32.5 minutes which is consistent
with the appraisal of 30 minutes.
Value of time growth assumptions have been
corrected. The growth rate was 2.4 per cent a year in the DETR
version. We have used the growth rates in HEN 2: ie 2.07 per cent
until 2016, and 2.21 per cent a year thereafter.
Agree the growth rates for the value of (international)
time savings need to be lowered to be consistent with DETR appraisal
guidance. An average value of 2.16 per cent per annum rather than
the 2.4 per cent should be used. This reduces the present value
of international non financial benefits from £1.8 billion
to about £1.7 billion.[1]
(Revised DETR appraisal guidance to be issued in November will
probably lower the value of time growth rate to about 2.06 per
cent per annum).
Capacity benefits. These are based on Government
Central Case patronage and yield figures in base case (unconstrained
no-CTRL). Fares in the constrained no-CTRL case are then increased
by (per cent difference between unconstrained case and 19.2 million
capacity)/1.2 from when capacity reached. -1.2 is the weighted
average price elasticity for business and leisure passengers.
The difference between the with-CTRL fare
and the constrained (NAO version) no-CTRL fare is the capacity
benefit per passenger.
For time savings and capacity benefits the
rule of half applies, so those "existing passengers"
(ie up to 19.2 million) get the full benefit. Those above that
only get half of the benefit.
No change to appraisal required.
DNFB. The OPRAF figure for phased benefits
has been input, at £800 million. The DETR has used the unphased
figure of £1,000 million.
Accept use of £800 million.
Road decongestion benefits. These have been
adjusted to take account of phasing of construction as in the
DETR case. They stand at £30 million.
No change to appraisal required.
Environmental freight benefits. These are
not adjusted to take account of phasing in the DETR calculations,
but have been reduced here in the same way as road congestion
benefits, so fall to £60 million (2/3
of £90 million).
The environmental freight benefits come from
releasing capacity on the existing network for freight operators.
The bottleneck for freight trains is between Ashford and the tunnel
and is relieved by Phase 1. Beyond Ashford freight trains travel
on the existing network and their route does not conflict with
Eurostar services. Therefore, the environmental benefits are dependent
on Phase 1 and it is not appropriate to reduce them in the manner
suggested by NAO.
Regeneration benefits. These are estimated
at £500 million by the DETR. However, the inclusion of an
explicit monetary value for these benefits goes against DETR and
Treasury guidance, as the methodology is not sufficiently robust.
DETR has tried to avoid double counting of these benefits by removing
a figure to represent those benefits already reflected in time
savings, but the figure included is still very high. If regeneration
benefits were included in the NAO assessment, this would turn
the value for money assessment positive. We do not feel that the
figure is sufficiently robust for the whole economic justification
to hinge on regeneration benefits.
Suggest NAO value for money appraisal is presented
with and without monetised regeneration benefits. The latter would
recognise the basic NAO point that DETR appraisal guidance does
not allow for the inclusion of monetised regeneration benefits
within a standard transport appraisal. The former would help the
reader of the NAO report to understand that the project was not
just about a fast rail link to the Channel Tunnel and increased
domestic rail capacity. The project was equally about regeneration
hence why there was so much argument about route choice and, particularly,
the location of stations.
Reduced Thameslink 2000 benefits. DETR originally
had a figure of (£200 million) for the impact of the CTRL
delay on the benefits of the Thameslink 2000 project. They removed
them from the final assessment as they said there had been a two-year
delay in Thameslink 2000 anyway. However, Footnote 12 of the DETR
assessment of April 1998 stated that the CTRL delay was three
years, so we have included an impact of (£100 million) on
the Thameslink 2000 benefits.
Accept inclusion of £100 million.
COSTS
LUL and A2/M2 costs. These were originally
(£130 million), but DETR removed them from the final assessment
as they said the work would need to be done even in the absence
of CTRL. However, closer reading of the text in the original assessment
says that these works are specifically to fit in with the CTRL
(Annex B, paragraphs B1 and B2), so the figure has been reinstated.
Agree. In fact this should be a present value
of £170 million because in 1998 the entire King's Cross Underground
redevelopment was calculated as costing £205 million. This
would have met CTRL needs as well as LUL's outstanding Fennel
requirements and non-CTRL-generated growth. If there was no CTRL,
then LUL would have undertaken a scheme costing £35 million
to meet its requirements.
Government grants, etc. The direct grants
are (£1,800 million).
Additional support. The DPM's announcement
on 3 June 1998 gave a figure of (£140 million) in the Government
Central Case. The DETR's final assessment rounded this down to
(£100 million), but we have input the correct figure of (£140
million).
Agree figure should be a present value of £140
million.
OPRAF subsidy (after phasing). This has been
taken from the OPRAF paper of 19 June 1998 and includes the impact
of phasing the CTRL. This gives a figure of (£250 million),
rather than the unphased (£400 million) included in the DETR
assessment.
Accept should be a present value of £250
million.
Eurostar revenue forgone. The DETR figure
of £440 million has been retained.
No change proposed.
Thameslink 2000 work avoided. The costs of
the project include works for Thameslink 2000 at St Pancras, and
the DETR assume that this would have to be funded from another
source if the CTRL did not go ahead. However, the Thameslink 2000
project is currently subject to a Public Inquiry so is not yet
certain to go ahead. As the costs are not yet committed, we have
removed the costs avoided.
We do not accept this point. The Thameslink
project is subject to the outcome of the public inquiry, however,
we believe the modelling and appraisal assumption to assume the
project will go ahead is reasonable. Indeed, other financial impacts
of the Thameslink 2000 scheme are assumed elsewhere in the appraisal.
Moreover, if we were to follow the NAO suggestion the alternative
is not to exclude these forgone costs. If Thameslink 2000 were
not built as proposed it would have much greater implications
for the design and costs of the CTRL scheme with respect to the
impact on LUL and the existing Thameslink line.
Eurostar debt payments avoided. Although
Treasury says that Eurostar debt does not count as public expenditure,
debt repayments avoided have been included at £400 million.
These have been retained in our calculations.
Project wind up costs. The DETR figure of
£110 million has been retained.
No change proposed.
CTRL VALUE FOR MONEY ANALYSIS: MAY 1998 NAO
REWORKING
| |
| | Gov Central
| Gov Downside
|
| | Gov Central
DPM submission
21 May 1998
| Gov Central
NAO assessment
August 2000
| Proposed DETR 1998 base October 2000
| ex Regen | Indicative NAO base October 2000
| ex Regen |
| International non-financial benefits | 1,800
| 1,400 | 1,700
| | 1,550
| |
| Domestic non-financial benefits | 1,000
| 800 | 800
| | 800
| |
| Road decongestion | 30
| 30 | 30
| | 30
| |
| Environmental freight benefits | 90
| 60 | 90
| | 90
| |
| Regeneration benefits | 500
| 0 | 500 or
| 0 | 500
| 0 |
| Reduced Thameslink 2000 benefits | 0
| -100 | -100
| | -100
| |
| TOTAL BENEFITS | 3,420
| 2,190 | 3,020 or
| 2,520 | 2,870
| 2,370 |
| | "around £3 billion"
| |
| |
| |
| LUL and A2/M2 costs | 0
| -130 | -170
| | -170
| |
| Government grants etc | -1,800
| -1,800 | -1,800
| | -1,800
| |
| Additional public support | -100
| -140 | -140
| | -360
| |
| EURL revenue forgone | -440
| -440 | -440
| | -400
| |
| SRA subsidy of domestic services | -400
| -250 | -250
| | -250
| |
| Repayments of F1 debt and interest forgone |
400 | 400
| 400 |
| 400 |
|
| Thameslink costs forgone | 240
| 0 | 240
| | 240
| |
| Advance land and project wind up costs forgone
| 110 | 110
| 110 |
| 110 |
|
| TOTAL COSTS | -1,990
| -2,250 | -2,050
| -2,050 | -2,230
| -2,230 |
| NPV | 1,000 |
-60 | 970 or
| 470 | 640 or
| 140 |
| Benefit Cost Ratio | 1.72
| 0.97 | 1.47
| 1.23 | 1.29
| 1.06 |
| | "about 1.5:1"
| |
| |
| |
January 1997 prices, discounted at 6 per cent per annum to
1997.
BT/DETR
November 2000
COMPARISON OF JOURNEY TIMES FOR INTERNATIONAL TRAINS
|
| Reference journey times
(Schedule 1)
|
|
|
| Without CTRL
| With CTRL
| LCR 270 km/h times
With CTRL
| Differences between Schedule 1 and LCR times
| |
| From | To | Down
| Up | Down
| Up | Down
| Up | Down
| Up | See note
|
| Waterloo | Cheriton | 71
| 71 | 50½
| 49½ | 52
| 50½ | 1½
| 1 | A
|
| Fawkham | Cheriton | —
| — | 22½
| 21½ | 24
| 22½ | 1½
| 1 | A
|
| St Pancras | Cheriton | —
| — | 32
| 31½ | 32
| 32 | 0
| ½ | C
|
| St Pancras | Stratford | —
| — | 6
| 6½ | 6½
| 6½ | ½
| 0 | B
|
| St Pancras | Ebbsfleet | —
| — | 13½
| 14 | 14
| 14 | ½
| 0 | C
|
| Waterloo | Ashford | 59
| 59 | 46
| 46 | 47½
| 47 | 1½
| 1 | A
|
| Fawkham | Ashford | —
| — |
| | 19½
| 19 |
| |
|
| St Pancras | Ashford | —
| — | 27½
| 28 | 27½
| 28½ | 0
| ½ | C
|
| Stratford | Cheriton | —
| — | 28
| 27½ | 28
| 28 | 0
| ½ | B
|
| Ebbsfleet | Ashford | —
| — | 17
| 16½ | 16½
| 16½ | -½
| 0 | C
|
| Ebbsfleet | Cheriton | —
| — | 21½
| 20 | 21
| 20 | -½
| 0 | C
|
| Stratford | Ebbsfleet | —
| — | 9½
| 10 | 10
| 10 | ½
| 0 | B
|
| Ashford | Cheriton | 13
| 13 | 8
| 7 | 8½
| 7½ | ½
| ½ | C
|
Notes:
* Times are based on VISION simulations, plus 5 per cent
performance allowance, rounded to nearest ½ minute. All times
are net of station stop times.
A Additional 1½ minutes on Gravesend West Branch
between Fawkham Junction and Southfleet Junction is attributable
to enhanced detail and lower speed restrictions now included in
VISION compared to earlier runs.
B Additional time taken for Stratford station stop as
a result of station detail now loaded into VISION, including 70
km/h turn-out speeds into platform loops.
C Inconsistency with previous times results from cumulative
effects of roundings.
Source: "Operational Simulation of the CTRL by the
Project Representative", 4 July 1996, Simon French.
DETR
1 November 2000
1
Spreadsheet IGCE October 2000: Consumer surplus: Method C = £3.315
billion, of which UK residents' share is 50 per cent or about
£1.7 billion. Back
| 
