The Evolution of London's Crossrail Scheme and the Development of the Department for Transport's Economic Appraisal Methods
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A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Worsley, Tom Working Paper The evolution of London's crossrail scheme and the development of the department for transport's economic appraisal methods International Transport Forum Discussion Paper, No. 2011-27 Provided in Cooperation with: International Transport Forum (ITF), OECD Suggested Citation: Worsley, Tom (2011) : The evolution of London's crossrail scheme and the development of the department for transport's economic appraisal methods, International Transport Forum Discussion Paper, No. 2011-27, Organisation for Economic Co-operation and Development (OECD), International Transport Forum, Paris, http://dx.doi.org/10.1787/5kg0prk600jk-en This Version is available at: http://hdl.handle.net/10419/68827 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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INTERNATIONAL TRANSPORT FORUM The International Transport Forum at the OECD is an intergovernmental organisation with 52 member countries. It acts as a strategic think-tank, with the objective of helping shape the transport policy agenda on a global level and ensuring that it contributes to economic growth, environmental protection, social inclusion and the preservation of human life and well-being. The International Transport Forum organises an annual summit of Ministers along with leading representatives from industry, civil society and academia. The International Transport Forum was created under a Declaration issued by the Council of Ministers of the ECMT (European Conference of Ministers of Transport) at its Ministerial Session in May 2006 under the legal authority of the Protocol of the ECMT, signed in Brussels on 17 October 1953, and legal instruments of the OECD. The members of the Forum are: Albania, Armenia, Australia, Austria, Azerbaijan, Belarus, Belgium, Bosnia-Herzegovina, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, FYROM, Georgia, Germany, Greece, Hungary, Iceland, India, Ireland, Italy, Japan, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Moldova, Montenegro, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, the United Kingdom and the United States. The International Transport Forum‟s Research Centre gathers statistics and conducts co-operative research programmes addressing all modes of transport. Its findings are widely disseminated and support policymaking in member countries as well as contributing to the Annual Summit. Discussion Papers The International Transport Forum‟s Discussion Paper Series makes economic research, commissioned or carried out at its Research Centre, available to researchers and practitioners. The aim is to contribute to the understanding of the transport sector and to provide inputs to transport policy design. The Discussion Papers are not edited by the International Transport Forum and they reflect the author's opinions alone. The Discussion Papers can be downloaded from: www.internationaltransportforum.org/jtrc/DiscussionPapers/jtrcpapers.html The International Transport Forum‟s website is at: www.internationaltransportforum.org For further information on the Discussion Papers and other JTRC activities, please email: [email protected] 2 T. Worsley — Discussion Paper 2011-27 — © OECD/ITF, 2011 SUMMARY ABSTRACT ............................................................................................................................................. 5 1. INTRODUCTION ............................................................................................................................ 5 2. THE DEVELOPMENT OF LONDON‟S RAIL PASSENGER NETWORK, 1835-1960 .............. 6 3. TRANSPORT APPRAISAL METHODS IN THE UK, 1965-2000 ................................................ 7 4. OPTIONS FOR INCREASING LONDON‟S RAIL CAPACITY .................................................. 9 5. DEVELOPMENTS IN APPRAISAL METHODS – WIDENING THE SCOPE ......................... 12 6. WIDER ECONOMIC BENEFITS AND CROSSRAIL ................................................................ 20 7. ALTERNATIVE METRICS TO THE WELFARE APPROACH ................................................. 25 8. EVIDENCE OF WIDER ECONOMIC BENEFITS; EX POST EVALUATION ......................... 29 9. CONCLUSIONS ............................................................................................................................ 30 NOTES ................................................................................................................................................... 33 ANNEX .................................................................................................................................................. 35 Leeds, November 2011 T. Worsley — Discussion Paper 2011-27 — © OECD/ITF, 2011 3 ABSTRACT Cost benefit analysis has been used in the United Kingdom for the appraisal of road schemes over the past fifty years. It was less widely used for rail, where most investment was concerned with renewing the existing network. The Central London Rail Study (1988) used cost benefit analysis to address the problem of overcrowding on London‟s rail network. The Crossrail scheme proposed in the Study was discontinued because of a recession and because of the priority given the developing links to London‟s Docklands. Progress on Crossrail was resumed in 2002 at the same time as the Department‟s appraisal methods were being revised to incorporate Wider Economic Benefits. The quantification of these additional benefits, the resolution of a source of funding and the role of the Mayor all influenced the Government‟s decision that the scheme should be built. Identification of some of the Wider Benefits poses problems for transport models that are only partially resolved through the use of land use transport interaction models. Although the use of a Gross Value Added metric provides an alternative way of estimating the economic impacts of a scheme, it does not replace cost benefit analysis as a decision aid for government ministers. 1. INTRODUCTION The role of cost benefit analysis in providing decision-makers with the information that helps them make good choices has always been unclear. In today‟s environment, with economic growth as a priority, many decision-makers seek evidence of how a scheme affects the real economy, a sentiment which is echoed by land use planners and others who want to know how it will affect economic activity in their city or region. Research commissioned by the Department for Transport has provided evidence of the Wider Impacts of transport in terms mainly of agglomeration benefits and effects on the labour supply. These go some way towards bridging the divide between the welfare based approach and a measure aligned to Gross Value Added and hence GDP. It is argued that the use of this additional evidence has been influential in the case of London‟s Crossrail scheme. It provided new evidence which demonstrated that the scheme would deliver high value for money and helped to make the case for the City‟s contribution to the scheme. The use of more traditional methods had failed to achieve this when the scheme was first appraised in the 1980s. Alternatives to the welfare based approach, such as estimating a present value of the cost savings that are measured in terms of GDP or estimating the Gross Value Added by a scheme, have been developed as a means of providing decision-makers with information about the economic impacts of a scheme but both of these measures are of less general application. However, despite