Table 1
Supplementary written evidence from the Department
for Transport (TE 105a)
I would like to thank the Chair and Members of the
Committee for the opportunity to give evidence as part of their
inquiry into Transport and the Economy. At the session I agreed
to write on a number of points. This additional material is set
out below:
Q507
I promised to provide more detail of the equalities
assessment undertaken as part of the decision to allow regulated
fares to rise by 3% above inflation for three years from 2012.
An Equalities Impact Assessment Screening Proforma was carried
out to identify whether the policy was relevant to the equality
duties and therefore needed to be impact assessed. The available
evidence showed that the policy was not relevant and so a full
EqIA was not required in this case.
Q516
The Crossrail business case was updated in June 2010.
The business case update included the conventional benefits of
Crossrail, such as travel time savings and congestion relief.
In addition to these conventional benefits, the wider impacts
to the economy arising from Crossrail were also estimated. These
benefits comprise of:
- ¾ Agglomeration.
- ¾ Move
to more productive jobs.
- ¾ Impacts
on output under Imperfect Competition.
- ¾ Increase
in Labour Force participation.
The June 2010 update estimated that these wider impacts
could add up to £50 billion to UK GDP over the 60 year appraisal
period. This is the benefits number I quoted in the evidence session
and is higher than the £20 billion previously estimated,
reflecting a number of significant changes made to the Department's
guidance on the estimates of these impacts, as well as updated
models and model inputs.
Q520
I promised to provide additional information about
the Department's motor traffic forecasts. The total amount of
car traffic in Great Britain has grown over the last five decades,
only slowing temporarily for recessions and when oil prices have
risen quickly.
However, the rate of growth has slowed in the 1990s
and 2000s, as shown in Table 1 below. Overall, the average length
of all car trips has remained fairly constant over time at around
17 miles and 21 minutes.
AVERAGE ANNUAL GROWTH IN CAR TRAFFIC (VEHICLE
MILES), GREAT BRITAIN
| 1960s | 8.6%
|
| 1970s | 3.3% |
| 1980s | 4.6% |
| 1990s | 1.2% |
| 2000s | 0.7% |
Source - DfT statistics
The Department forecasts that the recent downturn in road traffic,
including car traffic, will reverse as the economy begins to grow
again, and that the long term trend will be for road traffic to
grow to 2035 at an average rate of 1.1% per annum, compared to
around 2.1% over the last 25 years. These forecasts are based
on expectations that population and GDP will continue to grow,
and driving costs will fall as vehicle fuel efficiency increases.
Our forecasts show the most likely path of demand, given the expected
trajectory of its drivers. There is of course some uncertainty
over the path of the key drivers and the forecast range takes
these uncertainties into account. There may also be long term
changes in society which could lead to the relationships between
the key drivers and outturn traffic changing in strength, but
the evidence suggests that the relationship between the key drivers
and traffic growth is sufficiently strong to explain the recent
slowing of growth.
Q537
I promised to let the Committee know what work had been done on
the impact of cuts to bus subsidy on people travelling to work
by bus.
Table 2 below draws on our analysis and shows the possible impacts
on fares and service mileage, in England outside London, as a
direct result of the 20% reduction in Bus Service Operators Grant
(BSOG). It also shows the proportion of local bus boardings in
each area which are made by people commuting to work.
Table 2
POTENTIAL IMPACT OF BSOG CUTS, BY AREA
| Potential fares increases
| Potential service mileage reductions
| Proportion of commuter boardings |
| Rural areas | 2% | 2%
| 13% |
| Small towns | 1% | 2%
| 15% |
| Larger non-metropolitan conurbations | 1%
| 1% | 20% |
| Metropolitan areas | 2% |
1% | 23% |
Source - DfT analysis
This shows that, in areas where services might contract by around
2% (small towns and rural areas), there is a relatively small
proportion of overall bus trips that are made by commuters. A
greater share of bus journeys is made by commuters in metropolitan
and larger urban areas where our analysis suggests that services
might contract by around 1%.
These estimates are based on DfT modelling of potential bus operator
responses following a reduction to BSOG and show possible fare
increases in each area. However, as the bus market is deregulated,
it is not possible to predict with any certainty how bus operators
will actually respond. In practice, the impact will depend on
the commercial decisions of bus operators and, where relevant,
local authorities and Transport for London. My colleague, Norman
Baker, spoke to the Confederation of Passenger Transport UK, which
represents the bus industry, following the Chancellor's announcement
on 20 October. They were hopeful that, in general, the 20% reduction
in BSOG could be absorbed without fares having to rise.
Q560
The Committee asked about the Department's programme of work to
improve NATA. The Department's business plan committed to review
and revise DfT guidance on appraising transport projects. We will
in due course announce the changes to be made as a result of this
review.
Two changes were made to assist decision making during the Spending
Review. These were the use of DECC's latest carbon values and
a change to treatment of indirect tax revenues in the BCR formula
so that changes in indirect taxation are treated as a benefit
to non-transport users (via the exchequer) rather than a deduction
from project costs.
These changes will be made definitive in the appraisal guidance
later this month. In addition, the Department will also release
further updates and changes to the appraisal guidance to reflect
the Government's priorities ready for use in the revised decision-making
processes in April 2011.
We will also consider what further work is necessary on a broad
range of current appraisal issues, including how to better account
for new and emerging low-carbon vehicle technologies as the transport
sector continues to de-carbonise over coming decades.
ADDITIONAL INFORMATION
The Committee requested clarification of the appraisal and decision
making process used by my Department. In broad terms, there are
three key stages in the decision making process:
- ¾ option
identification and sifting to provide a short list of options
for further development;
- ¾ further
appraisal of the shortlisted options leading to identification
of a preferred option; and
- ¾ implementation,
monitoring and evaluation.
The Department has developed improved guidance on
these stages. This is published as TAG Units 2.1.1 to 2.1.4 and
is available here: http://www.dft.gov.uk/webtag/documents/project-manager/unit2.1.php#2.1
The Department uses the Treasury five cases model.
This considers the case for a project in terms of:
- ¾ its
strategic fit;
- ¾ its
value for money;
- ¾ the
ability of the promoter to deliver the project;
- ¾ the
project's affordability and financial stability; and
- ¾ evidence
that the project can be satisfactorily procured.
Of these, the assessment of strategic fit is essentially
a policy matter, as is the relative weight to be given to each
of the five cases. The other cases are more technical in their
nature. If they wish to, ministers can consider issues such as
regional equity, modal distribution and modal equity (as well
as other policy issues such as carbon impact and compatibility
with housing policy) when considering the first case ie the strategic
fit.
I recognise that past guidance on these issues, released
in 2000, was not as comprehensive as it could have been. Current
"for consultation" guidance improves on that, but the
Department continues to keep this field under review.
For local authority promoted schemes, such as the
Mersey Gateway, the promoting authority is required to publish
its business case on its website at the same time as it is sent
to the Department. Appraisal information relating to Highways
Agency major schemes is published at key points in each project's
lifecycle, for example prior to public consultation on options
or the commencement of public inquiry.
The Committee also asked for an explanation of why
NATA uses standard (national) rates of the value of passenger
time, regardless of location, despite the variations in hourly
wage rates from region to region.
NATA uses a standard national rate for the value
of time. To
vary the value of time between regions would skew investment towards
regions with a higher average income. For example, using regional
average income levels would divert investment from the North to
the South East. The regional aspect of a proposed investment can
be considered as part of the strategic case for the decision.
January 2011
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