Assessing the value
and viability of
transport schemes
Transport-Led Development in the
Midlands 2016
Dave Jevons
Partner
19 October 2016
Overview
The Midlands economy
Transport as a stimulus
Five case model
19 October 2016
2
The Midlands economy
GVA per head (current prices)
£30,000
£25,000
£20,000
£15,000
£10,000
£5,000
£0
United Kingdom
West Midlands
19 October 2016
East Midlands
3
The Midlands economy
Employment rate (%)
80
78
76
74
72
70
68
66
64
62
Nov 2014 to Jan 2015
19 October 2016
Nov 2015 to Jan 2016
4
The Midlands economy
Long term economic plan
Announced in 2015, six aims:
• raise the long term growth rate of the Midlands to at least
the forecast long term growth rate of the whole UK
• to create 300,000 extra jobs in the Midlands
• put skills at the heart of the economic revival of the
Midlands
• deliver £5.2 billion of investment into new transport
infrastructure in the Midlands
• back science and innovation in the Midlands
• improve the quality of life in the Midlands
19 October 2016
5
Transport infrastructure as a potential stimulus
New transport
project
Connectivity: availability
of transport links
More
investment
More international
trade
Increased
labour productivity
GVA
Cost of transport
Higher
efficiency
Changes to structure
of the economy
GVA/person
19 October 2016
More innovation
Enhanced
competition
Increased
labour supply
Employment
6
Transport infrastructure as a potential stimulus
Benefit to economic growth
Existing infrastructure
Investment options
Growth mechanisms
Direct
New networks
Increases
Enhancements growth
potential
Maintenance
Stock level, quality,
spare capacity
Demand
multiplier
Productivity
Configuration
effects
Innovation
Indirect
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7
The Five case model
Green Book-compliant assessment
The Green Book is a set of guidelines published
by the UK Treasury for appraisal of central
government projects
With regard to a project, the purpose of the tool is
to answer these two questions:
• are there better ways to achieve this objective?
• are there better uses for these resources?
These are answered by identifying relevant
options, attributing monetary values to impacts,
and assessing the costs and benefits of each
option
The principles could be applied to any
assessment; not UK-specific
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8
Five case model
Overview
That the intervention is supported by a compelling case for change that provides holistic
fit with other parts of the organisation and public sector – the “strategic case”
That the intervention represent best public value – the “economic case”
The that proposed Deal is attractive to the market place, can be procured and is
commercially viable – the “commercial case”
That the proposed spend is affordable – the “financial case”
That what is required from all parties is achievable – the “management case”
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9
Five case model
The process
Market
failure
Objective
Options
19 October 2016
Appraisal
Decision
10
Five case model
Economic case
User
benefits
Financial cost
of scheme
Environmental
impact
Social impact
Wider
economic
impacts
Benefits
Costs
= BCR
- agglomeration
- competition
Benefits + WEI
- labour supply
Costs
= BCR (including WEI)
Note: BCR, benefit–cost ratio. Source: Oxera.
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11
Contact:
David Jevons
[email protected]
+44 (0) 7725 240904
www.oxera.com
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