Select Committee on Public Accounts Thirty-Eighth Report

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 1,1011,851
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

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