Written evidence from Halton Borough Council
(TE 55)
SUMMARY AND
RECOMMENDATIONS
S.1 This submission from Halton Borough Council
puts forward views on the links between transport and the economy;
assessment criteria and techniques for prioritising spending;
and priorities for spending going forward in the context of forthcoming
cut-backs. In this submission we make reference to the Mersey
Gateway [Bridge] project, which relates to the construction of
a new river crossing and associated regeneration proposals to
illustrate our wider views and real experience in this area.
S.2 Mersey Gateway is an integrated transport
project that will provide the vital infrastructure that is required
to deliver sustainable economic growth in Halton and the north-west
of England. It will relieve a source of serious congestion in
the regional road network by providing a new, high-standard crossing
of the river Mersey and by modifying the existing Silver Jubilee
Bridge to deliver and facilitate local sustainable transport policy.
The Project has been developed over many years and now forms an
essential component of local and regional social and economic
regeneration programmes
S.3 During the course of our work on Mersey Gateway
we have prepared extensive and robust analysis of the economic
impact of the project. The methodology applied is wholly consistent
with current Department for Transport policy as determined in
their Webtag guidance. Although the results have shown consistently
over a number of years that the project would result in a high
economic return we have been conscious throughout that the scope
of the evaluation undertaken is relatively narrow.
S.4 The current specified methodology is largely
a welfare-based approach, focused on road user cost and benefit.
Although the results provide a reliable baseline forecast of economic
value the evaluation is not centred on the real economic outcomes
this type of scheme is designed to unlock. The prevailing agenda
is now moving to assess the potential catalytic impact of transport
schemes in driving and facilitating employment growth through
improving the workings of the labour market, and in providing
increased accessibility to jobs in areas of high worklessness,
combined with driving desirable changes in land use and spatial
planning. In addition to relieving congestion, large strategic
transport improvements like Mersey Gateway are aimed at achieving
particular outcomes in social and economic regeneration.
S.5 We would suggest that the following changes
are made to assessment criteria and techniques in order to capture
the full economic potential of improvements to transport infrastructure:
- A key criteria for assessing and prioritising
schemes should include the estimated impact on the real economy,
measured in terms of GDP (driven by employment and productivity
growth);
- The ability of transport schemes to drive and
facilitate desirable land use changes is properly recognised;
- Schemes that address accessibility issues within
areas of high worklessness and deprivation should be given due
weight and given priority over alternative strategies where investment
is proposed in areas of higher productivity prompting concern
over the sustainability of growth; and
- Consistency of approach across related sectors
such as transport, regeneration and housing, such that schemes
can be compared, planned together, and assessed properly when
delivered in combination.
S.6 In terms of priorities for spend going forward,
we argue that capital spend should be targeted at releasing bottlenecks
where the potential benefits spread well beyond the immediate
vicinity of the scheme itself. Such an approach is consistent
with making best use of the current capacity of the transport
system whilst recognising that pressure points need to be relieved
to restore effective service and resilience network wide.
S.7 Transport projects which target specific
economic objectives embracing interventions that encompass economic,
housing and social regeneration programmes should be given priority
over more isolated schemes where objectives are restricted to
delivering improvements in welfare to existing transport users.
A national "one-size-fits-all" approach to project assessment
is not consistent with this, as it means that spend does not match
with local economic requirements and inevitably leads to productivity
gaps within and between regions. It is recognised that extending
and targeting appraisal in this way will require an assessment
of the level of confidence in the delivery of wider economic benefits,
particularly where the benefits claimed from transport investment
also depend on the success of complementary regeneration interventions
that may be outside the control of the promoting agent. It is
likely that this uncertainty over deliverability has been a factor
in the Department of Transport being sceptical over the delivery
prospects for wider economic benefits. However, the fact that
benefits across a wider scope of outcomes are intrinsically more
uncertain should not lead to these critical outcomes being excluded
from the appraisal.
S.8 Finally, projects that ultimately pay for
themselves should be prioritised. However, it is more important
than ever that a balance is struck between the affordability of
projects and the economic objectives that underpin the project.
1. INTRODUCTION
1.1 In this submission we draw upon our work
on the Mersey Gateway project to put forward generic views on
how transport schemes can influence economic activity and how
transport and other related spend should be prioritised based
upon the real economic impact of such schemes.
1.2 Mersey Gateway is an integrated transport
project that will provide the vital infrastructure that is required
to deliver sustainable economic growth in Halton and the north-west
of England. It will relieve a source of serious congestion in
the regional road network by providing a new, high-standard crossing
of the river Mersey and by modifying the existing Silver Jubilee
Bridge to deliver and facilitate local sustainable transport policies.
1.3 The Project has been developed over many
years and now forms an essential component of local and regional
social and economic regeneration programmes. The Project is widely
supported by businesses and public authorities across the region
and is seen as a priority for investment.
1.4 Overall, the present value net economic
impact of the Mersey Gateway on GDP is estimated to be £373
million in 2009 prices. To comply with the current appraisal policy
the economic impact is largely based upon existing DfT transport
appraisal guidance which is dominated by the welfare benefits
to users of the scheme. To a great extent a qualitative assessment
of the scheme's incremental impact on actual economic growth is
excluded from the formal benefit to cost relationship that is
used by the Department for Transport as the indication of the
scheme's value for money. Although applying this partial assessment
of economic value still places Mersey Gateway in the "High"
category of economic return, used by the Department to rank projects,
the benefits are understated and some other projects may be disadvantaged
by restricting the analysis in such a manner. As part of the
Borough Council's case in favour of the Mersey Gateway we also
provided a wider economic assessment, which is broader in scope
than the Webtag guidance.
2. Have the UK's economic conditions materially
changed since the Eddington Transport Study and, if so, does this
affect the relationship between transport spending and UK economic
growth?
2.1 It is clear that economic conditions have
changed since the publication of the Eddington Transport Study,
with the fundamental implication for shorter term public spending
being a shift in agenda from "How do we spend the proceeds
of growth to maximise welfare?" to "How do we prioritise
spending in a way that best supports economic growth?".
2.2 However, we believe that the broad relationship
between transport spending and UK economic growth that existed
before the publication of the Eddington Transport Study still
remains now. Indeed, Eddington formally identified that the transport
spending can drive economic growth as well as deliver welfare,
but his recommendations have yet to be fully embraced by authorised
DfT methodology and enshrined in Webtag guidance. Current DfT
appraisal methodology is still rooted in measuring welfare benefits
to users with wider benefits being often seen as "below the
line" in any formal BCR agreement with the Department.
2.3 In this submission we conclude that the
agenda has moved beyond Eddington's yet to be implemented recommendations.
The impact of schemes on productivity, growth and therefore real
GDP has to be the way forward in prioritising not only transport
schemes, but also schemes across related sectors such as regeneration
and housing.
2.4 Mersey Gateway is a classic example of an
economically-driven scheme, whose objectives directly target issues
that currently limit the degree of economic growth in the area.
2.5 Halton and the wider area, in particular
Merseyside, suffer from a number of significant socio-economic
challenges. Between 1998 and 2008, the total number of jobs in
Halton decreased by over 5% to around 52,000, whilst employment
growth for the North West as a whole was almost 8% and nationally
it was 10%. Halton and the wider area suffer from relatively high
levels of deprivation and worklessness. In short, the area did
not benefit from the period of sustained national economic growth
from 1995-2007, and has suffered more than most since the start
of the recession.
2.6 One of the key reasons for these long-standing
issues is the relatively poor levels of accessibility within the
area and between the area and the wider region and rest of the
UK. The existing Silver Jubilee Bridge lacks the required capacity
and reliability to cope with the levels of traffic wishing to
cross the river at Runcorn and Widnes, which has major knock-on
impacts on the surrounding road network, and which contributes
to the lack of accessibility. All of which is holding back economic
growth in the area. Over the relatively short term it is anticipated
that the Silver Jubilee Bridge will require further interventions
- and cost - to maintain even current service levels.
2.7 In welfare terms the new bridge would help
to address all of these issues by relieving congestion and improving
journey times across a wide geographic area. But we believe that
the key benefit of this would be to enhance the productivity of
the region and improve accessibility to jobs, thereby driving
economic growth, resulting in improved prosperity and quality
of life for individuals and families.
2.8 The existing DfT appraisal methodology captures
a proportion of these benefits through time savings to business
users - which feed straight through into productivity benefits
for the economy, and through agglomeration benefits.
2.9 In the case of Mersey Gateway a very high
proportion of user benefits are to business users, which is a
consequence of tolling. However, for many schemes a high proportion
of benefits are effectively welfare benefits to existing commuting
and leisure users through journey time savings. The relative value
of time across trip purpose and income groups determine the relative
economic user benefit but is not clear to what extent such savings
feed through to real economic activity, particularly where improvements
result in induced demand impacting adversely on the journey times
of all road users. The existing methodology effectively treats
£1 of welfare benefit as being the same as £1 of real
economic activity.
2.10 Overall, it is our view that existing DfT
appraisal methodology is unduly conservative. It does not adequately
capture the types of real economic benefits that this type of
scheme is designed to unlock, and the largely welfare based approach
to transport fails to address the current desire to prioritise
projects that maximise economic return from constrained resources.
Specifically, it does not recognise the potential impact of
transport schemes in driving and facilitating employment growth
through improving the working of the labour market, and in providing
increased accessibility to jobs in areas of high worklessness.
3. How could assessment criteria be improved
to better reflect the real economic benefits of such schemes?
3.1 In order to address the restrictions of
existing transport appraisal criteria and techniques and make
them more closely aligned with the prevailing political and economic
agenda, we would suggest that the following substantive changes
are made:
(a) The key criteria for assessing and prioritising
schemes is the estimated impact on the real economy, measured
in terms of GDP (driven by employment and productivity growth);
(b) The ability of transport schemes to drive
and facilitate land use changes are properly recognised;
(c) Schemes that address accessibility issues
within areas of high worklessness and deprivation are given due
weight; and
(d) Consistency of approach across related sectors
such as transport, regeneration and housing, such that schemes
in these sectors can be prioritised against each other, planned
together, and can be assessed as a full package when delivered
in combination.
3.2 The approach we advocate is broadly in line
with that set out in the recently published Network Rail paper
"Prioritising investment to support our economy"[160].
3.3 By focusing scheme assessment on the real
economic impacts of schemes we would see a shift in emphasis towards
schemes which benefit links between businesses, and which expand
the available pool of labour for business across a wide range
of areas including those that currently have poor accessibility
to jobs and services, and away from schemes which only make marginal
improvements to journeys between already well-connected places.
3.4 The idea that transport schemes and land
use changes are somehow independent of each other is proven to
be incorrect by countless practical examples. The relationship
between the two needs to be formally recognised within scheme
assessment. The case for investing in Mersey Gateway has addressed
these wider issues but often the professional judgements are made
on qualitative grounds in the absence of an authorised methodology
to quantify the likely increase in project economic return. One
of the best practical examples of understating the wider desirable
impact of a transport improvement is perhaps the extent to which
development on the Isle of Dogs has been facilitated and accelerated
by the Jubilee Line Extension since 1999, and the real net UK
economic benefits that this has delivered.
3.5 Mersey Gateway forms part of a Borough-wide
investment programme leading to improved transport outputs and
major regeneration through releasing land and improving accessibility/connectivity,
yet current appraisal guidance only recognises the potential impact
of land use changes on demand for schemes, and not the extent
to which a new scheme can facilitate and drive land use changes
leading to real net economic impacts.
4. What type of expenditure should we prioritise?
4.1 Despite the substantial impact of the current
economic climate, the long term trend remains one of ever-increasing
demand which places increasing strain on transport networks, with
inevitable knock-on consequences for economic activity which relies
upon an efficient, well-connected transport system.
4.2 It is our view that capital spend should
be targeted at releasing bottlenecks which not only improve conditions
for trips that use the new infrastructure, but which also relieve
pressure on the surrounding network and which substantially improve
network reliability and resilience.
4.3 Projects should receive priority where objectives
support focused economic strategies which explicitly take into
account appropriate local economic circumstances, addressing issues
such as worklessness, poor business-to-business connectivity and
poorly functioning labour markets. A national "one-size-fits-all"
approach to project assessment is not consistent with this, as
it means that spend does not match with local economic requirements
and inevitably leads to productivity gaps within and between regions
widening, rather than narrowing, as local issues are not addressed.
4.4 Finally, projects that ultimately pay for
themselves should be prioritised. In this context capital projects
need to include whole life appraisal and demonstrate whole life
funding to ensure that revenue consequences are addressed. However
in today's constrained circumstances it is more important than
ever that a balance is struck between the affordability of projects
and the economic objectives that underpin the project.
4.5 The Mersey Gateway project is an example
of such a scheme where the objectives are explicitly aligned with
local and regional issues, and where the balance between affordability
and the economic objectives of the project have been explicitly
dealt with in the development of the scheme. The objectives of
the scheme address local economic issues such as relieving congestion
on the existing Silver Jubilee Bridge, improving accessibility
to jobs in areas of high worklessness, improving public transport
links across the Mersey and improving network resilience throughout
the area, and specifically on the strategic road network. These
objectives are set against the need for the scheme to be affordable
and to pay for itself so far as possible through the application
of user tolls. Thus, where a higher toll may improve the affordability
of the scheme the approach that the Borough Council has taken
aims to avoid this being at the expense of delivering the local
and regional economic objectives the scheme is designed to deliver.
We have therefore explicitly set an objective of applying affordable
toll charges to both the Mersey Gateway Project and the Silver
Jubilee Bridge in order to meet affordability constraints whilst
protecting the successful delivery of the project objectives.
5. INSTITUTIONAL
IMPLICATIONS
5.1 Institutional arrangements should reflect
the objective of maximising the value of investment made and reducing
delivery risk leading to the economic value at a local and regional
level, as well as the net national level. This can only happen
if governance is permissive of local strategies and assessment
criteria are flexible enough to recognise differences in local,
regional and national objectives.
5.2 Mersey Gateway demonstrates the value of
collaboration across public and private interests at a regional
level, which was achieved by establishing a promoting stakeholder
group across public and private sector agents. Not only does this
ensure that the scheme is shaped in a way which aligns with the
economic interests of businesses, it also maximises the potential
of leveraging funding from those that benefit, although in most
cases the public sector will bear the majority of the risk.
5.3 If transport, regeneration and housing projects
are going to be more closely compared, planned and prioritised,
it would also make sense for the new Local Enterprise Partnership
to have a greater degree of flexibility in trading across such
budgets to meet local economic requirements than is the case at
present.
September 2010
160 Network Rail, September 2010:
http://www.networkrailmediacentre.co.uk/Resource-Library/Prioritising-investment-to-support-our-economy-ee4.aspx
(link correct at 15 September 2010).
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