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Appraisal Practice; The Crossrail Approach

Learn about the appraisal practice and approach used in the development of the Crossrail scheme, with a focus on its impact on London's rail capacity and journey time savings. Explore the history, funding, and institutional arrangements of Crossrail, as well as the wider economic benefits and labour supply effects of the project.

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Appraisal Practice; The Crossrail Approach

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  1. Appraisal Practice; The Crossrail Approach Tom Worsley

  2. Crossrail – the scheme • Crossrail map with connections Journey time savings Liverpool St - Heathrow 23 mins(55 now), - - Paddington - Canary Wharf 14 mins (30 now) Addition to London’s rail capacity – overall 6%, C.Area 10%

  3. Crossrail – from first proposal to start of works • 1944 Abercrombie Plan • 1987-9 CLRS • E-W and N-S Crossrail – best options • Docklands - a different type of scheme – referred to ELRS – JLE 1999 • 1990 Decision deferred – recession and decline in demand • 2002 CLRL established by SRA and TfL • 2005 Montagu review of 2003 Business Case • 2005 Updated business case – WEBs • 2007-10 Supplementary Business Rate – 2007-10 • 2005-8 Crossrail Bill/royal assent • 2009 Start of works

  4. Standard Appraisal and modelling practice - CLRS 1987-9 Models and appraisal – (required to follow DfT guidance) • LTS and RAILPLAN – Fixed employment, fixed trip totals - route, mode and for non-work trips destination choice allowed to change. Delta GC for appraisal. • Conventional benefits plus weights on time savings for interchange, walk, wait and crowding. Road decongestion externalities. • BCRs of between 1.6 and 1.9 for the better options – E-W and N-S Crossrail Unresolved • Funding • Institutional arrangements/governance • Scheme champion • Labour supply effects – zonal job totals fixed Exogenous – recession and decline in demand – Crossrail proposal deferred.

  5. Links to Docklands 1987-92 • ELRS – Jubilee Line Extension • Modelling and appraisal as for CLRS – extreme crowding in do-minimum • BCR<1.0 but scheme approved – completed in 1999 • In place • Funding (subsequently unravelled) • Institutional arrangements to deliver scheme and land use changes (London Transport, LDDC) and measures to induce development • Scheme champion (PM’s support, private developers and LDDC) • LDDC’s forecasts shifted jobs to Docklands zones, but no overall effect on labour supply • Modelling and appraisal methods failed to capture regeneration effects • Very different circumstances from C. London proposals

  6. Transport and the Economy 1999-2005 • Increasing policy focus on transport and the economy - DfT and HMT interest • SACTRA 1999 – identified links, focus on imperfect markets in transport and land use • Eddington 2005 – Noted good BCRs for transport, changes to DfT delivery processes recommended • Well established appraisal and modelling methods – incremental changes • Dependence on data, evidence and models to capture wider benefits • Main developments • Economic Impact Report – regeneration in policy priority areas • Wider Economic Benefits

  7. Wider Economic Impacts in DfT Appraisal Guidance -2005 Wider Economic Impacts – extension of standard CBA • Agglomeration • Increased competition between firms (not applicable in England) • Imperfect competition • Labour supply • Increased participation • Move to more productive jobs Now used for most larger schemes – requirement from 2012

  8. Agglomeration Benefits • A measure of the proximity of businesses and of workers to each other resulting in external benefits • Based on evidence of effective density and productivity by sector • Delta ED as estimated from transport model’s delta GC for commuting and business and zonal employment data/forecasts • Data /forecasts of value added per worker in DfT guidance • Coefficients defined in guidance • Distance decay parameter • Productivity wrt ED • Requires multi-modal model compliant with DfT guidance

  9. Labour Supply Effects • Increased participation • Labour supply elasticity wrt post tax wages plus change in generalised cost of journey to work • Welfare benefit – additional tax receipts • GDP effect – gross output from increase in numbers working Move to more productive jobs (sensitivity test) • LUTI model to estimate changes in location of employment • Data on output per worker by zone • Welfare and GDP effects as above

  10. Appraisal and decision rules in DfT No absolutes, but the Department has; • Published a definition of value for money • Provided categories based on adjusted BCRs which define poor, low medium, high and very high vfm • Made use of these categories for ranking and sifting out all poor, most low and many medium schemes • Adopted HM Treasury’s 5 case business model, setting the economic case into context

  11. Crossrail and Wider Economic Benefits • Proposal reviewed in 2003 following upturn in commuting and approved in 2008 • All the now standard transport user benefits plus (post 2005) WEBs adding around 50%+ to user benefits • No LUTI model – delta capacity constraint redistributed workers to C.London • What had changed since CLRS? • Institutions/governance – Montague • Funding – WEBs helped • High vfm – new DfT guidance includes WEBs • Champion – changed institutions

  12. Composition of Crossrail benefits

  13. Alternative metrics/objectives • GDP per £’s worth of public spending • GDP defined as PV of generalised cost savings for ‘productive’ trips, defined for this purpose as commuting, freight and business • Used by DfT ministers but • Not a pass/fail test – at the best sets priorities • Identification of GDP/non-GDP very crude • Impossible to audit/evaluate • Not in line with National Accounts

  14. An alternative approach – GVA effects • KPMG approach makes estimates of • Productivity effects of increased agglomeration • Changes in the distribution of employment in response to increased accessibility • Wage equation – elasticities of 0.11 business to business and 0.09 labour to business for wage rate wrt generalised cost • 80% of this productivity gain explained by changes in sectoral mix; 20% changes in productivity within sectors • Redistribution through an elasticity of employment density wrt labour and business accessibility – some allowance for intra-regional shift.

  15. Conclusions and Challenges • Is CBA plus WEBs an adequate guide for decision-makers? • Issues • Translating time savings into real effects • Is the BCR/VfM the right metric? • Appraisal of land use and other changes to deliver the overall outcome • Identifying beneficiaries – potential funding sources • Optimism bias in forecasts • Does it come early enough to influence decisions? • In support of CBA plus WEBs • Has worked for most schemes – exceptions – JLE, HS2 • Provides consistency between schemes and between forecasts and of appraisal methods • It relies on the transport model and so has low costs

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