2 Justification for Section 2 of the
Link
7. When the project was restructured in 1998, the
Department experienced difficulties in quantifying the regeneration
benefits. When the project was restructured again in 2001, in
advance of construction works for Section 2, the Department concluded
that the then expected international transport benefits alone
would exceed costs by a factor of about 1.4:1. Under Booz Allen
Hamilton Ltd's low case assessment, however, the benefit cost
ratio fell to 0.5:1, (Figure 2). The Department believed
that once the benefits of domestic services were included the
benefits would exceed the costs. If passenger forecasts were revised
downwards again, regeneration benefits would necessarily have
to be higher to justify public support for the Link.[7]Figure
2: Cost-Benefit analysis for Section 2 of the Link
| Mid-case passenger forecast (£ million)
| Low-case passenger forecast (£ million)
|
| International transport benefits (increased capacity and journey time saving)
| 1,527 |
842 |
| Costs |
1,101 | 1,851
|
| Benefit: Cost ratio (excluding regeneration and domestic transport benefits)
| 1.39:1
| 0.45:1
|
Source: C&AG's Report
8. The justification for public funding of the Link
is dependent on wider and unquantifiable benefits, such as regeneration
and national prestige. The Department expects regeneration benefits
to arise in the Thames Gateway and the areas surrounding the three
international stations at St Pancras, Stratford and Ebbsfleet.
At these sites, the Department expects the project to create about
100,000 jobs, and some 18,000 homes and a substantial number of
retail developments to be built. The Department is not only assessing
transport costs and benefits, but now requires all projects to
undertake an economic impact report looking at the regeneration
consequences for major transport infrastructure projects.[8]
9. The achievement of regeneration benefits at the
planned level will be the key indicator of the success of the
project. The Department intends to re-visit the costs and benefits
of the Link to establish the outturn position and the lessons
to be learnt for the handling of other projects. The Department
will face a challenge in separating out the genuine regeneration
benefits of the Link from those attributable to other major projects
such as the Olympics, particularly at Stratford. The work will
be easier in the case of the Kings Cross railway lands, which
have stood semi-derelict for a long time, and Ebbsfleet because
of the considerable improvements in transport links with central
London. The Department considers that its new methodology for
measuring regeneration benefits, which it will use once the Link
is in use from 2007, will be able to distinguish the benefits
generated by the Link from other developments close by.[9]
7 Qq 10, 16 Back
8
C&AG's Report, para 4.8; Q 10 Back
9
C&AG's Report, para 16, Qq 21-22,68-69, 83 Back
|
