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Transport investment: we need a new approach

01.09.2016 | Anonymous | Better Transport
Photo: people on escalators

Our transport system is struggling because policy has focused on big construction projects and time savings when it should have been focusing on the part that people and places play in economic development. So argues David Metz, honorary professor at the Centre for Transport Studies, University College London, in this guest blog.

"Investment in the transport system is in fashion, driven by the political need to do something to boost UK productivity and economic growth. Other means seem trickier – public support for particular industries, tax breaks, apprenticeships. But when you shift earth, pour concrete, roll tarmac, politicians can believe they are getting value. And the standard approach to cost-benefit analysis developed by the transport economists encourages this belief.

The main economic benefit of investment is conventionally assumed to be the saving of travel time, which is valued because it allows more productive work or desired leisure. However, the National Travel Survey (NTS), which has been measuring average travel time for over 40 years, finds that this has remained unchanged at close to an hour a day, despite many £billions of public investment justified by travel time saved. This means that there are no time savings in the long run, the perspective of the NTS. Short run time savings, which may occur, are not a sound basis for justifying investment in long lived infrastructure.

What we get in the long run from transport investment is exemplified by the development of London’s Docklands. The introduction of containers and the large vessels to ship them rendered the docks obsolete. Phase 1 of the Docklands Light Railway showed how accessible this brownfield land was to the City, and as a result entrepreneurs developed Canary Wharf with high value office space. Subsequent rail investments made more land accessible for development: extensions of the DLR, the Jubilee Line Extension and the Overground, with Crossrail to open in 2018. Strategically, and as the basis of the business case, public investment in the rail system makes land accessible for development by the private sector, which provides accommodation for London’s growing economy and population, jobs and homes.

However, the economic case for Crossrail omitted any reference to such development or to the enhanced real estate values that reflect the increased economic worth of land made more accessible. On the conventional view, to include such benefits would be to double-count benefits already included in the time savings. So there is a disconnect between the business case and the economic case: real observable market values are rejected in favour of notional times savings derived from transport models. As a result, the economic benefits of urban rail schemes tend to be underestimated.

The conventional approach to economic appraisal of transport investments suffers from a further deficiency – lack of indication of how the benefits are distributed, both spatially and between different types of user. The economic case for HS2, the proposed new rail route north out of London, is based largely on time savings to business travellers, with no indication of how the benefits may be distributed between the connected cities. The political imperative, reasonably enough, is to boost the economies of the cities of the North and the Midlands, but the economic case offers no assurance in this regard.

Map of road schemesThe lack of indication of how benefits are distributed is also a serious shortcoming for road investments, where the Government has committed £15billion over 5 years to add capacity to the Strategic Road Network (SRN), with more being planned in the subsequent period. [The map, right, shows some of the new road schemes that the Government is investing in.] Congestion largely occurs in or near to populated areas, where local traffic impedes long distance users: remote from these, the traffic flows generally freely. Time savings estimated by Highways England (responsible for the SRN) for 'major schemes' of investment are quite small, 3 minutes on average – too little to change the behaviour of long distance users, but significant for local car-based commuters who gain more choice of jobs and homes, within the time they allow themselves for daily travel. 

Local commuters taking advantage of faster travel to travel further leads to more traffic – known as 'induced traffic' – which restores congestion to what it was before the addition of capacity, so that long distance road users are no better off. This is the basis of the maxim, 'you can’t build your way out of congestion', which we know from experience to be generally true. The failure of conventional economic appraisal to distinguish between different classes of road user is resulting in investment that will very largely benefit and promote car commuting, which surely is not the main purpose of the Strategic Road Network.

The conventional approach to economic appraisal biases transport investment decisions towards inter-urban road schemes and away from urban rail, thus promoting car commuting at the expense of urban regeneration. We need a better approach, grounded in reality, not based on over-simplified economic theory. This is a central theme of my new book: Travel Fast or Smart? A Manifesto for an Intelligent Transport Policy."

David Metz is an honorary professor at the Centre for Transport Studies, University College London, and a former Chief Scientist at the Department for Transport.