Description
Delays on roads in urban areas cost the economy around 11 billion a year1. And the impacts of physical inactivity are just as large, leading to billions of pounds of avoidable costs for businesses and the NHS.
Do not remove this if sending to pagerunnerr Page Title
Value for Money Assessment for the
Local Sustainable Transport Fund
August 2014
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Contents
Introduction......................................................................................................... 4
1. Background to the Local Sustainable Transport Fund ................................ 6
2. Economic Appraisal - Summary .................................................................. 8
Introduction..................................................................................................... 8
Overall BCR.................................................................................................... 8
Decongestion Benefits.................................................................................. 10
Health Benefits ............................................................................................. 10
Carbon.......................................................................................................... 11
Indirect Taxation ........................................................................................... 11
Other Benefits............................................................................................... 11
3. Submitted Appraisals and Scrutiny - Details ............................................. 12
Business cases submitted ............................................................................ 12
Appraisal Scrutiny......................................................................................... 12
General Assumptions ................................................................................... 16
4. Conclusion ................................................................................................ 18
3
1. Introduction
1.1 Delays on roads in urban areas cost the economy around £11 billion a
year
1
. And the impacts of physical inactivity are just as large, leading to
billions of pounds of avoidable costs for businesses and the NHS.
2
1.2 The Local Transport White Paper 'Creating Growth, Cutting Carbon'
3
,
published in January 2011, placed localism at the heart of the transport
agenda in order to cut carbon emissions and create local growth. The
White Paper set out ways in which local authorities can stimulate local
growth – enhancing access to employment, shops and key local services
– at the same time as cutting carbon and delivering other environmental
and public health benefits, by improving access via sustainable modes.
1.3 To help deliver this vision, £560m was made available through the Local
Sustainable Transport Fund ('the Fund') in 2011. A further £40m was
added to the Fund in 2012, to enable the Department to fund a number
of high quality bids. During 2011 and 2012, the Department awarded
funding to 96 projects, to be delivered by 77 authorities and a number of
supporting authorities, which will bring benefits to all regions across
England (outside London).
1.4 In line with the published guidance
4
, an assessment of value for money
(VfM) for all projects was carried out before funding was awarded. For
small schemes that applied for no more than £5m Departmental
contribution, bidders were not required to submit a full cost benefits
analysis. For such schemes, the VfM assessment was based on the
likely impact on transport users and the local community set out in the
application form as well as based on evidence from similar recent
schemes elsewhere. Large schemes (more than £5m Departmental
contribution) were required to undertake a proportionate appraisal in line
with the Department’s appraisal framework (WebTAG). The submitted
economic cases were comprehensively scrutinised by transport
modellers and economists in the Department.
1.5 This report summarises the findings of the assessment of the VfM for the
large projects, which concluded that the 12 projects that received funding
represent a combined return on investment of at least 5:1. This
conclusion demonstrates that investment in local sustainable transport
projects represents very high value for money. The value for money
1
Cabinet Office 2009 The costs of urban transport
http://webarchive.nationalarchives.gov.uk/+/http:/www.cabinetoffice.gov.uk/media/308292/urbantransporta
nalysis.pdf
2
NHS (2008) 'Physical activity and the environment - Costing report - Implementing NICE guidance',
available at http://guidance.nice.org.uk/nicemedia/live/11917/38990/38990.pdf
3
https://www.gov.uk/government/publications/creating-growth-cutting-carbon-making-sustainable-local-
transport-happen
4
https://www.gov.uk/government/publications/local-sustainable-transport-fund-application-process-and-
bidding-guidance
4
assessment of the smaller bids suggested that, as a package, these also
represented high value for money.
5
2. Background to the Local
Sustainable Transport Fund
2.1 During 2011 and 2012, the Department received 130 bids to the Local
Sustainable Transport Fund, collectively representing nearly £800m
worth of investment opportunities. All local authorities that were eligible
to apply to the Fund submitted one or more applications during three
funding rounds, either with individual bids for local delivery, or as joint
bids, working in partnership with other local authorities across the
country.
2.2 The available funding was allocated in three rounds as illustrated in
Figure 2.1:
? On 5 July 2011, Ministers awarded £155m to 39 Tranche 1 projects
(small projects up to £5m).
? On 24 May 2012, Ministers awarded £113m to 30 Tranche 2 projects
(small projects up to £5m).
? On 27 June 2012, Ministers awarded £225m to 12 Large Projects
(above £5m), plus £41m to 14 more Tranche 2 projects (small
projects up to £5m).
Figure 2.1: The Three Elements of the Fund
6
2.3 The final LSTF funding announcement was made on 11 September
2012, for the Tyne and Wear ‘Go Smarter to Work’ small scheme (£5m).
2.4 As well as investing in these 96 projects across England, the Fund is
also providing £11m per financial year for Bikeability
5
cycle training in
schools in England. Additionally, some funding was provided in 2011/12
to transitional projects, ensuring some continuity from sustainable
transport projects between the termination of previous funding
arrangements and the first announcements in July 2011.
2.5 Local authorities are also making local financial contributions which
match the Department’s overall investment pound for pound across the
whole programme. As a result of combined funding from the Department
and local contributions for these 96 projects, local authorities are
collectively investing over £1bn in implementing local sustainable travel
projects from 2011-15.
2.6 Successful projects demonstrated that they will meet the Fund’s twin
objectives: supporting the local economy and facilitating economic
development, and reducing carbon emissions.
2.7 They include a variety of sustainable transport measures designed to
enhance growth and reduce carbon; projects include smart ticketing, the
promotion of infrastructure for electric vehicles, bus, rail and ferry
improvement measures, the promotion of car clubs, and infrastructure
improvements for cycling and walking.
2.8 Funding for Bikeability allows for at least 275,000 children to be trained in
each financial year, giving them the skills and confidence to cycle safely
on today’s roads.
2.9 In the spirit of localism, the Department has ensured that local authorities
and their partners are able to progress their projects with minimum
intervention from the central Government. Local authorities and their
delivery partners are the best agents to decide on transport solutions for
their communities.
2.10 However, the Department is keen to learn about the effectiveness of the
programme. This is in line with the Department's general approach to
monitoring and evaluation as well as the need to add to the evidence
base for sustainable travel options.
2.11 A Monitoring and Evaluation Framework has been published, which
describes how outcomes and benefits from this investment will be
monitored and evaluated, without placing disproportionate reporting
burdens on local authorities.
2.12 A list of all projects receiving funding, the Monitoring and Evaluation
Framework, and information about what is being implemented across the
country through the Fund can be found at:
https://www.gov.uk/government/organisations/department-for-
transport/series/local-sustainable-transport-fund
5
Bikeability training is provided in schools across England with the purpose of increasing riders'
confidence in cycling and improving cycling safety. Typically students will enrol after having learnt how to
ride a bike.
7
3. Economic Appraisal - Summary
Introduction
3.1 The Department carried out a value for money appraisal on all large
project business cases in early 2012 as part of the wider assessment
process.
3.2 The twelve large projects collectively receive £225m, a significant portion
of the money available to local authorities through the Fund. Therefore,
the bidding and assessment process was more extensive for these
projects. Bidders were required 'to undertake a proportionate approach to
modelling and appraisal and to place most effort on those aspects which
are most significant to the business case e.g. highest cost, complex/risky
elements, biggest impact'.'
6
3.3 The Department extensively scrutinised the appraisals received and the
various assumptions underlying each analysis. These were
benchmarked amongst the bids received as well as against existing
evidence on the effectiveness of sustainable transport schemes. The
original analysis was amended where necessary to ensure the results
had a consistent and generally conservative evidence base. Given the
limited time, the aim of this assessment was primarily to establish a
'lower bound' case rather than necessarily produce the 'best estimate'.
Overall BCR
3.4 As a result of this analysis, the Department's conservative estimate of the
collective benefit-cost ratio (BCR) of the Large Projects has been
estimated to be approximately 5:1
7
- that is, for every £1 spent on these
projects, society derives benefits worth at least £5.
3.5 Figure 3.1 below shows a summary of the types of benefits expected
from the schemes and their proportions. It is important to note that not all
possible benefits have been quantified by all bidders because the
guidance had asked for focus to be placed on the most significant
aspects. Different bidders interpreted this requirement differently.
6
DfT (2011) ' Local Sustainable Transport Fund - Supplementary Guidance for Local Authorities
Shortlisted for Large Projects', available at https://www.gov.uk/government/publications/local-sustainable-
transport-fund-application-process-and-bidding-guidance
7
In the absence of significant non-monetised benefits, this is classified as ‘very-high’ value for money by
the Department.
8
Figure 3.1 Split of benefits of the Local Sustainable Transport Fund
3.6 Figure 3.2 shows how many bids included each of the various possible
impacts in their analysis. While all bids included estimated decongestion
benefits, only a small minority made the additional effort of quantifying
health or noise impacts.
9
Figure 3.2: Number of bids providing estimates of various benefits
Decongestion Benefits
3.7 A major element of the benefits from these projects is decongestion,
which benefits businesses and other users - accounting for about 90% of
all benefits. This results from people changing their travel choices from
car use to more sustainable travel options, such as public transport,
walking and cycling. Subsequently, journey times and vehicle operating
costs for motorists are reduced.
Health Benefits
3.8 Health benefits result from increased physical activity (based on the
reduced relative risk of premature mortality as well as benefits to
businesses from reduced absenteeism of staff). Since no firm evidence
exists on the scale of NHS savings and wider social benefits from
reduced morbidity, these are not captured in the monetised economic
benefits.
3.9 Lack of physical activity is a major cause of health problems, such as
obesity, diabetes, heart disease and depression, all of which create a
significant burden on the NHS. It is suggested that active travel can,
therefore, produce a major benefit by reducing these costs.
3.10 As explained above, only a minority of bidders estimated the likely health
benefits of their schemes. For those that did, they accounted for up to
20% of the total.
10
Carbon
3.11 One of the two central objectives of the Fund is to reduce carbon
emissions. Ambitious reductions in transport greenhouse gas emissions
are needed to help meet current and future Carbon Budgets, as set out
in the Carbon Plan
8
.
3.12 The modelling results from of the 12 Large Projects show that they are
expected to lead to a small reduction of 1.5 million tonnes in ??
2
emissions over the appraisal period. This results from a reduction of
approximately 0.01 million tonnes in the First Carbon Budget (2008-
2012), 0.6 million tonnes for both the Second (2013-2017) and Third
(2018-2022) Carbon Budgets, and 0.2 million tonnes for the Fourth
Carbon Budget (2023-2027)
9
. This represents no more than 0.1% of the
UK transport emissions forecast over any of those periods.
Indirect Taxation
3.13 The reduction in car use as a result of the 12 projects reduces the
amount of fuel burnt, thus reducing the fuel duty revenues expected. In
addition, the increased spending on public transport fares reduces the
expenditure on other goods that are subject to other indirect taxation
(mainly VAT). This is counted as a negative benefit and accounts for -8%
of the total.
Other Benefits
2.13 Other benefits include a reduced risk of accidents and improved journey
quality and ambience due to developments such as new bus shelters,
street lighting or segregated cycling lanes.
2.14 No particular trends emerged among the 12 schemes from analysing
non-monetised benefits, such as security or affordability of transport,
since schemes were quite varied. Some schemes demonstrated non-
monetised benefits from improved journey quality, access to services,
reduced severance and option values
10
. No significant adverse impacts
were identified as likely consequences of the schemes.
8 Please read on:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/47621/1358-the-carbon-
plan.pdf
9 The total of the four Carbon Budgets does not add to the total ??
2
emission reduction because the
appraisal period for some schemes goes beyond 2027.
10
Option value is the benefit that people derive from having the choice of different transport options, even
if they do not necessarily use them. For instance, a car driver will derive benefits from having a bus route
running from his house to his workplace as a contingency mode of travel in the event that he cannot use
his car.
11
4. Submitted Appraisals and
Scrutiny - Details
Business cases submitted
4.1 As outlined above, the bids varied in their approach to proportionality of
appraisal and to presenting cost benefit analysis. The range of benefits
that bidders chose to quantify and the methods for doing so varied
considerably.
4.2 If a promoter chose not to estimate some of the potential benefits of their
scheme this does not necessarily imply that such benefits would be
immaterial.
4.3 For example, one business case relied entirely on the decongestion
benefits resulting from their traffic model. The reduction in car traffic was
well evidenced and generated a very high BCR. In addition, their
proposal included improvements to their public transport offer which
could have easily been demonstrated to significantly improve journey
quality and other elements that are likely to result in improved health.
But, under the proportionality guidance, the promoter chose not to report
these (and saved the costs of estimating them).
4.4 Table 4.1 below provides more detail on the methodologies used and the
range of benefits estimated as part of the submitted business cases.
Appraisal Scrutiny
4.5 As suggested above, the underlying assumptions as well as the models
used were comprehensively scrutinised. Where necessary, clarification
questions were issued to local authorities and appropriate adjustments
were then applied to the submitted appraisals.
4.6 Bidders had to make assumptions on how effective the various elements
of their proposals would be in order to complete their business cases.
Analysts in the Department compared the approaches and supporting
evidence between different bids and to existing evidence, especially from
the sustainable travel towns report
11
but also others, for example on the
value of quality factors in the bus market
12
. Assumptions included such
11
Sloman et al. (2010) The Effects of Smarter Choice Programmes in the Sustainable Travel Towns:
Summary Report to the DfT. Available at
http://webarchive.nationalarchives.gov.uk/20111005180138/http://assets.dft.gov.uk/publications/the-
effects-of-smarter-choice-programmes-in-the-sustainable-travel-towns-summary-report/summaryreport.pdf
12 DfT (2009): 'The Role of Soft Measures in Influencing Patronage Growth and Modal Split in the Bus
Market in England' , available on: http://assets.dft.gov.uk/publications/role-of-soft-factors-in-the-bus-
market-in-england/report.pdf
12
details as: how many new cyclists would have otherwise driven a car or
how passengers value real time information provided at bus stops.
4.7 Where assumptions were considered to be optimistic, given the evidence
provided, adjustments were made. Where possible, these were based on
sensitivity tests provided by local authorities or, if not available, they were
based on other evidence sources.
4.8 Table 3.1 provides some more detail on the scrutiny undertaken and
provides some examples of the adjustments made as a result.
4.9 For all proposals, a consistent optimism bias
13
rate of 44% was used
reflecting the planning stage these schemes were considered to be at,
given the short period between announcement of the Fund and
submission of bids.
14
4.10 As a result of Ministerial decisions, a number of schemes were only
partially awarded the Departmental funding sought. Where it was clear
which element was to be excluded from the scheme, the benefits of that
element were removed. Where the decision on how to accommodate the
funding reduction was left to local authorities, benefits were adjusted in
proportion to the funding shortfall, leaving the BCR unaffected. In reality
it might be expected that less effective scheme elements are withdrawn,
thus raising the BCR.
4.11 It is important to note that it was not possible in the time available to
come to a coherent 'best view' of the likely BCRs and value for money of
all the proposed schemes. The Department's analysts were not always
able, for example, to establish estimates of benefits for which the
promoters decided not to provide monetary values. The primary focus
was to establish a reasonable lower bound of benefits to avoid funding
bids that might fail to provide at least medium value for money.
13
Optimism bias reflects the tendency for systematically underestimating costs and overestimating
benefits in the earlier phases of business case development. It gets added to the otherwise best estimate
of costs. The Department’s transport modelling guidance WebTAG sets recommended standard rates
depending on type of scheme and stage of business case development.
14
Local Authorities were unlikely to have received cost estimates from contractors, achieved required
planning permission or transport orders etc.
13
Table 4.1: Summary of appraisal methods and Departmental scrutiny
Type of
Benefit
Method of estimation by local
authorities
Department's scrutiny and adjustment
Decongestion To estimate the decongestion benefits Modellers within the Department assessed the
(Travel time, from reducing car use forecast to models used for their compliance with WebTAG.
vehicle result from their proposal, most On one occasion the model used was not found to
operating promoters relied on existing local provide reliable estimates of decongestion benefits
costs, carbon transport models which would model and analysis based on WebTAG decongestion
emissions, the equilibrium responses to the rates was used to estimate benefits instead.
noise/air reduction in demand. The results were
quality and then inputted into TUBA software
15
to
Several proposals included the introduction of
indirect obtain a monetised estimate of time
signal priority for late running buses. One appraisal
taxation) savings, changes to vehicle operating
costs and carbon emissions.
worked out the full benefits to bus passengers but
assumed no dis-benefit to other road users. Other
scheme promoters either did not estimate the
benefits or allowed for a small delay imposed on
other traffic. As no clear evidence on this issue
was put forward, we requested additional
sensitivity tests from the relevant promoter. The
final assessment was based on those results.
Scrutiny of 'standard' appraisal assumptions, such
as annualisation factors and optimism bias rates,
was undertaken. Where appraisals did not have
strong evidence or, for example, excluded benefits
for certain time periods, an adjustment was made
to reflect this.
Wider One of the bids for funding was As the analysis was generally not well evidenced,
Economic supported by an analysis of job a 10% uplift to business user impact was applied
benefits creation based on the change in
commuting trips within the model
outputs.
to represent the benefit from increased competition
in less that perfectly competitive markets. This is
common practice for schemes where explicit
modelling of wider impacts is missing.
Health and Only five appraisals included Generally, the analysis supporting these benefits
Absenteeism monetised estimate of health benefits
from more active travelling. These
were based on the World Health
Organisation's HEAT tool also
embodied within WebTAG. For one
scheme they represent 22% of the
total benefits.
Only three of the five went further to
also estimate the benefit increased
activity levels have through reduced
absenteeism. Again, these followed
WebTAG.
was found to be sufficiently evidenced. The
methods in WebTAG are fairly clear and no
problems were found in their application.
15
TUBA (Transport Users Benefit Appraisal) is a computer program developed for the Department to
undertake an economic appraisal for a multi-modal transport study. Available at
https://www.gov.uk/government/publications/tuba-downloads-and-user-manuals
14
Journey Only half the bids included estimates The use of WebTAG was scrutinised with no
Quality of Journey Quality benefits, although
most proposals contained some
elements that would be expected to
generate these.
The approaches used included the
WebTAG guidance on unimodal
appraisal for journey quality benefits
for cyclists and pedestrians, while
benefits for bus users were typically
modelled through the mode
constant
16
.
significant concerns arising. Where mode
constants were being adjusted, evidence on, for
example, the quality elements proposed were
compared to existing evidence on passengers'
valuation of such elements
17
.
In one case where significant benefits were
claimed for bus quality, the final assessment
excluded all of those benefits. This does not mean
the proposals are unlikely to significantly improve
the journey experience of a large number of users;
but this conservative approach addressed the risk
that users might not fully distinguish the quality
gain in a package delivering so many other related
improvements (and the scheme provided high
value for money even in the absence of quality
benefits).
Road safety All but two submitted appraisals
included monetary estimates of the
impact their schemes would most
likely have on accidents. These were
in general small and a result of
reduced traffic flows. They were
estimated using traffic model outputs
or the decongestion rates approach.
For one scheme, safety disbenefits
were expected. This is due to a
significant redesign of the road
network proposed that would
significantly benefit non-car modes
but would involve more complex
vehicular movements.
The road safety benefits were typically a small
proportion of the overall benefits and were in line
with expectation. As their estimation is directly
linked to the estimation of decongestion benefits,
no further scrutiny was undertaken.
16
In transport models the mode constant reflects aspects of traveller's preferences that are not
represented by time or money cost.
17 DfT (2009): 'The Role of Soft Measures in Influencing Patronage Growth and Modal Split in the Bus
Market in England' , available on: http://assets.dft.gov.uk/publications/role-of-soft-factors-in-the-bus-
market-in-england/report.pdf
15
4.12 Table 4.2 provides a comparison of estimated costs and benefits as
submitted and the final ones concluded by the Department's analysts.
Table 4.2 : Costs (PVC) and Benefits (PVB) in £'000 as submitted and
adjusted by the Department
Submitted Adjusted
PVB PVC BCR PVB PVC BCR
South Yorkshire 200,929 28,576 7.0 204,630 30,176 6.8
Manchester 476,815 109,354 4.4 401,777 105,734 3.8
Hertfordshire 107,869 20,445 5.3 137,874 19,975 6.9
Nottingham 120,280 26,943 4.5 206,073 26,404 7.8
Bristol 455,160 74,525 6.1 493,820 74,525 6.6
Merseyside 164,796 12,331 13.4 62,182 14,777 4.2
Reading 355,137 20,139 17.6 68,585 18,720 3.7
Surrey 91,095 23,296 3.9 105,361 27,880 3.8
South East Dorset 311,978 16,202 19.3 31,720 15,300 2.1
Telford & Wrekin 27,751 6,822 4.1 12,390 6,635 1.9
West Midlands 473,259 45,289 10.4 157,037 45,289 3.5
South Hampshire 286,970 33,766 8.5 306,964 42,281 7.3
Total 3,072,039 417,687 7.4 2,190,285 428,598 5.1
General Assumptions
3.14 In addition to the assumptions discussed above, a number of more
general appraisal assumptions have an impact on the estimation of
BCRs. On balance, these are considered to be conservative.
Longevity of behaviour change initiatives
4.13 Bidders applied an average decay rate
18
of 33% to the impacts of soft
measures (such as travel planning). This implies that benefits of such
interventions fall by over half within two years after funding ceases and
less than 10% lasts beyond the fifth year.
4.14 On the one hand, it is clear that measures, such as school travel
planning, are unlikely to have lasting impacts once the cohort of students
receiving the training has left the school. Similarly when people move
jobs or home, the benefits of previous personalised travel planning is
diminished.
4.15 On the other hand behaviour change could lead to new habits forming or,
for example, 'peer pressure' or 'role modelling' that results in a different
travelling culture being established at a school or workplace.
4.16 In the absence of a clear evidence base on the longevity of impacts, the
bids have used conservative assumptions here.
18
Decay rates refer to rate of deterioration of the effects of a particular measure. 33% suggests that within
one year of receiving personalised travel planning or other 'smarted choices' treatment, one third of
respondents 'forget' what they learned and revert to their original behaviour.
16
Appraisal Period
4.17 The appraisal periods used in Large Projects varied from 10 to 60 years
with an average across the 12 bids of 38 years. The choice of appraisal
period is based on the likely lifetime of the asset created by the project.
For road or rail infrastructure the usual choice is 60 years while public
transport of smarter choices projects often use significantly shorter
appraisal periods.
4.18 Considering that effects of smarter choices only affect the earlier years of
the appraisal due to decay assumptions (see above), the appraisal
periods used were judged to be sufficiently conservative.
17
5. Conclusion
5.1 The analysis summarised in this paper concludes that the 12 large
schemes funded under the Local Sustainable Transport Fund are jointly
expected to deliver about five pounds of benefits for each pound invested
by local and central Government. On balance this would appear to be a
conservative estimate and the upside risks are more substantial than the
downside ones.
5.2 At an individual scheme basis, the estimated benefit cost ratios vary
between two and eight. With all the non-monetised impacts being
positive as well, all the schemes are judged to provide high or very high
value for money.
5.3 While this conclusion is based on ex ante appraisal information, it is in
line with previous evidence from the evaluation of sustainable transport
initiatives.
5.4 The Sustainable Travel Towns evaluation report quotes a decongestion
only cost benefit ratio of 4.5. The evaluation of the Cycling
Demonstration Towns found that the health benefits alone exceeded
costs two and a half times.
5.5 The twelve large LSTF schemes provide high value for money based on
estimated decongestion benefits alone. This suggests that sustainable
travel measures can be real alternatives to more traditional solutions to
congestion problems.
18
doc_537856294.pdf
Delays on roads in urban areas cost the economy around 11 billion a year1. And the impacts of physical inactivity are just as large, leading to billions of pounds of avoidable costs for businesses and the NHS.
Do not remove this if sending to pagerunnerr Page Title
Value for Money Assessment for the
Local Sustainable Transport Fund
August 2014
The Department for Transport has actively considered the needs of blind and
partially sighted people in accessing this document. The text will be made
available in full on the Department’s website. The text may be freely
downloaded and translated by individuals or organisations for conversion into
other accessible formats. If you have other needs in this regard please contact
the Department.
Department for Transport
Great Minster House
33 Horseferry Road
London SW1P 4DR
Telephone 0300 330 3000
Website www.gov.uk/dft
General enquiries https://forms.dft.gov.uk
© Crown copyright 2014
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You may re-use this information (not including logos or third-party material) free
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Where we have identified any third-party copyright information you will need to
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Contents
Introduction......................................................................................................... 4
1. Background to the Local Sustainable Transport Fund ................................ 6
2. Economic Appraisal - Summary .................................................................. 8
Introduction..................................................................................................... 8
Overall BCR.................................................................................................... 8
Decongestion Benefits.................................................................................. 10
Health Benefits ............................................................................................. 10
Carbon.......................................................................................................... 11
Indirect Taxation ........................................................................................... 11
Other Benefits............................................................................................... 11
3. Submitted Appraisals and Scrutiny - Details ............................................. 12
Business cases submitted ............................................................................ 12
Appraisal Scrutiny......................................................................................... 12
General Assumptions ................................................................................... 16
4. Conclusion ................................................................................................ 18
3
1. Introduction
1.1 Delays on roads in urban areas cost the economy around £11 billion a
year
1
. And the impacts of physical inactivity are just as large, leading to
billions of pounds of avoidable costs for businesses and the NHS.
2
1.2 The Local Transport White Paper 'Creating Growth, Cutting Carbon'
3
,
published in January 2011, placed localism at the heart of the transport
agenda in order to cut carbon emissions and create local growth. The
White Paper set out ways in which local authorities can stimulate local
growth – enhancing access to employment, shops and key local services
– at the same time as cutting carbon and delivering other environmental
and public health benefits, by improving access via sustainable modes.
1.3 To help deliver this vision, £560m was made available through the Local
Sustainable Transport Fund ('the Fund') in 2011. A further £40m was
added to the Fund in 2012, to enable the Department to fund a number
of high quality bids. During 2011 and 2012, the Department awarded
funding to 96 projects, to be delivered by 77 authorities and a number of
supporting authorities, which will bring benefits to all regions across
England (outside London).
1.4 In line with the published guidance
4
, an assessment of value for money
(VfM) for all projects was carried out before funding was awarded. For
small schemes that applied for no more than £5m Departmental
contribution, bidders were not required to submit a full cost benefits
analysis. For such schemes, the VfM assessment was based on the
likely impact on transport users and the local community set out in the
application form as well as based on evidence from similar recent
schemes elsewhere. Large schemes (more than £5m Departmental
contribution) were required to undertake a proportionate appraisal in line
with the Department’s appraisal framework (WebTAG). The submitted
economic cases were comprehensively scrutinised by transport
modellers and economists in the Department.
1.5 This report summarises the findings of the assessment of the VfM for the
large projects, which concluded that the 12 projects that received funding
represent a combined return on investment of at least 5:1. This
conclusion demonstrates that investment in local sustainable transport
projects represents very high value for money. The value for money
1
Cabinet Office 2009 The costs of urban transport
http://webarchive.nationalarchives.gov.uk/+/http:/www.cabinetoffice.gov.uk/media/308292/urbantransporta
nalysis.pdf
2
NHS (2008) 'Physical activity and the environment - Costing report - Implementing NICE guidance',
available at http://guidance.nice.org.uk/nicemedia/live/11917/38990/38990.pdf
3
https://www.gov.uk/government/publications/creating-growth-cutting-carbon-making-sustainable-local-
transport-happen
4
https://www.gov.uk/government/publications/local-sustainable-transport-fund-application-process-and-
bidding-guidance
4
assessment of the smaller bids suggested that, as a package, these also
represented high value for money.
5
2. Background to the Local
Sustainable Transport Fund
2.1 During 2011 and 2012, the Department received 130 bids to the Local
Sustainable Transport Fund, collectively representing nearly £800m
worth of investment opportunities. All local authorities that were eligible
to apply to the Fund submitted one or more applications during three
funding rounds, either with individual bids for local delivery, or as joint
bids, working in partnership with other local authorities across the
country.
2.2 The available funding was allocated in three rounds as illustrated in
Figure 2.1:
? On 5 July 2011, Ministers awarded £155m to 39 Tranche 1 projects
(small projects up to £5m).
? On 24 May 2012, Ministers awarded £113m to 30 Tranche 2 projects
(small projects up to £5m).
? On 27 June 2012, Ministers awarded £225m to 12 Large Projects
(above £5m), plus £41m to 14 more Tranche 2 projects (small
projects up to £5m).
Figure 2.1: The Three Elements of the Fund
6
2.3 The final LSTF funding announcement was made on 11 September
2012, for the Tyne and Wear ‘Go Smarter to Work’ small scheme (£5m).
2.4 As well as investing in these 96 projects across England, the Fund is
also providing £11m per financial year for Bikeability
5
cycle training in
schools in England. Additionally, some funding was provided in 2011/12
to transitional projects, ensuring some continuity from sustainable
transport projects between the termination of previous funding
arrangements and the first announcements in July 2011.
2.5 Local authorities are also making local financial contributions which
match the Department’s overall investment pound for pound across the
whole programme. As a result of combined funding from the Department
and local contributions for these 96 projects, local authorities are
collectively investing over £1bn in implementing local sustainable travel
projects from 2011-15.
2.6 Successful projects demonstrated that they will meet the Fund’s twin
objectives: supporting the local economy and facilitating economic
development, and reducing carbon emissions.
2.7 They include a variety of sustainable transport measures designed to
enhance growth and reduce carbon; projects include smart ticketing, the
promotion of infrastructure for electric vehicles, bus, rail and ferry
improvement measures, the promotion of car clubs, and infrastructure
improvements for cycling and walking.
2.8 Funding for Bikeability allows for at least 275,000 children to be trained in
each financial year, giving them the skills and confidence to cycle safely
on today’s roads.
2.9 In the spirit of localism, the Department has ensured that local authorities
and their partners are able to progress their projects with minimum
intervention from the central Government. Local authorities and their
delivery partners are the best agents to decide on transport solutions for
their communities.
2.10 However, the Department is keen to learn about the effectiveness of the
programme. This is in line with the Department's general approach to
monitoring and evaluation as well as the need to add to the evidence
base for sustainable travel options.
2.11 A Monitoring and Evaluation Framework has been published, which
describes how outcomes and benefits from this investment will be
monitored and evaluated, without placing disproportionate reporting
burdens on local authorities.
2.12 A list of all projects receiving funding, the Monitoring and Evaluation
Framework, and information about what is being implemented across the
country through the Fund can be found at:
https://www.gov.uk/government/organisations/department-for-
transport/series/local-sustainable-transport-fund
5
Bikeability training is provided in schools across England with the purpose of increasing riders'
confidence in cycling and improving cycling safety. Typically students will enrol after having learnt how to
ride a bike.
7
3. Economic Appraisal - Summary
Introduction
3.1 The Department carried out a value for money appraisal on all large
project business cases in early 2012 as part of the wider assessment
process.
3.2 The twelve large projects collectively receive £225m, a significant portion
of the money available to local authorities through the Fund. Therefore,
the bidding and assessment process was more extensive for these
projects. Bidders were required 'to undertake a proportionate approach to
modelling and appraisal and to place most effort on those aspects which
are most significant to the business case e.g. highest cost, complex/risky
elements, biggest impact'.'
6
3.3 The Department extensively scrutinised the appraisals received and the
various assumptions underlying each analysis. These were
benchmarked amongst the bids received as well as against existing
evidence on the effectiveness of sustainable transport schemes. The
original analysis was amended where necessary to ensure the results
had a consistent and generally conservative evidence base. Given the
limited time, the aim of this assessment was primarily to establish a
'lower bound' case rather than necessarily produce the 'best estimate'.
Overall BCR
3.4 As a result of this analysis, the Department's conservative estimate of the
collective benefit-cost ratio (BCR) of the Large Projects has been
estimated to be approximately 5:1
7
- that is, for every £1 spent on these
projects, society derives benefits worth at least £5.
3.5 Figure 3.1 below shows a summary of the types of benefits expected
from the schemes and their proportions. It is important to note that not all
possible benefits have been quantified by all bidders because the
guidance had asked for focus to be placed on the most significant
aspects. Different bidders interpreted this requirement differently.
6
DfT (2011) ' Local Sustainable Transport Fund - Supplementary Guidance for Local Authorities
Shortlisted for Large Projects', available at https://www.gov.uk/government/publications/local-sustainable-
transport-fund-application-process-and-bidding-guidance
7
In the absence of significant non-monetised benefits, this is classified as ‘very-high’ value for money by
the Department.
8
Figure 3.1 Split of benefits of the Local Sustainable Transport Fund
3.6 Figure 3.2 shows how many bids included each of the various possible
impacts in their analysis. While all bids included estimated decongestion
benefits, only a small minority made the additional effort of quantifying
health or noise impacts.
9
Figure 3.2: Number of bids providing estimates of various benefits
Decongestion Benefits
3.7 A major element of the benefits from these projects is decongestion,
which benefits businesses and other users - accounting for about 90% of
all benefits. This results from people changing their travel choices from
car use to more sustainable travel options, such as public transport,
walking and cycling. Subsequently, journey times and vehicle operating
costs for motorists are reduced.
Health Benefits
3.8 Health benefits result from increased physical activity (based on the
reduced relative risk of premature mortality as well as benefits to
businesses from reduced absenteeism of staff). Since no firm evidence
exists on the scale of NHS savings and wider social benefits from
reduced morbidity, these are not captured in the monetised economic
benefits.
3.9 Lack of physical activity is a major cause of health problems, such as
obesity, diabetes, heart disease and depression, all of which create a
significant burden on the NHS. It is suggested that active travel can,
therefore, produce a major benefit by reducing these costs.
3.10 As explained above, only a minority of bidders estimated the likely health
benefits of their schemes. For those that did, they accounted for up to
20% of the total.
10
Carbon
3.11 One of the two central objectives of the Fund is to reduce carbon
emissions. Ambitious reductions in transport greenhouse gas emissions
are needed to help meet current and future Carbon Budgets, as set out
in the Carbon Plan
8
.
3.12 The modelling results from of the 12 Large Projects show that they are
expected to lead to a small reduction of 1.5 million tonnes in ??
2
emissions over the appraisal period. This results from a reduction of
approximately 0.01 million tonnes in the First Carbon Budget (2008-
2012), 0.6 million tonnes for both the Second (2013-2017) and Third
(2018-2022) Carbon Budgets, and 0.2 million tonnes for the Fourth
Carbon Budget (2023-2027)
9
. This represents no more than 0.1% of the
UK transport emissions forecast over any of those periods.
Indirect Taxation
3.13 The reduction in car use as a result of the 12 projects reduces the
amount of fuel burnt, thus reducing the fuel duty revenues expected. In
addition, the increased spending on public transport fares reduces the
expenditure on other goods that are subject to other indirect taxation
(mainly VAT). This is counted as a negative benefit and accounts for -8%
of the total.
Other Benefits
2.13 Other benefits include a reduced risk of accidents and improved journey
quality and ambience due to developments such as new bus shelters,
street lighting or segregated cycling lanes.
2.14 No particular trends emerged among the 12 schemes from analysing
non-monetised benefits, such as security or affordability of transport,
since schemes were quite varied. Some schemes demonstrated non-
monetised benefits from improved journey quality, access to services,
reduced severance and option values
10
. No significant adverse impacts
were identified as likely consequences of the schemes.
8 Please read on:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/47621/1358-the-carbon-
plan.pdf
9 The total of the four Carbon Budgets does not add to the total ??
2
emission reduction because the
appraisal period for some schemes goes beyond 2027.
10
Option value is the benefit that people derive from having the choice of different transport options, even
if they do not necessarily use them. For instance, a car driver will derive benefits from having a bus route
running from his house to his workplace as a contingency mode of travel in the event that he cannot use
his car.
11
4. Submitted Appraisals and
Scrutiny - Details
Business cases submitted
4.1 As outlined above, the bids varied in their approach to proportionality of
appraisal and to presenting cost benefit analysis. The range of benefits
that bidders chose to quantify and the methods for doing so varied
considerably.
4.2 If a promoter chose not to estimate some of the potential benefits of their
scheme this does not necessarily imply that such benefits would be
immaterial.
4.3 For example, one business case relied entirely on the decongestion
benefits resulting from their traffic model. The reduction in car traffic was
well evidenced and generated a very high BCR. In addition, their
proposal included improvements to their public transport offer which
could have easily been demonstrated to significantly improve journey
quality and other elements that are likely to result in improved health.
But, under the proportionality guidance, the promoter chose not to report
these (and saved the costs of estimating them).
4.4 Table 4.1 below provides more detail on the methodologies used and the
range of benefits estimated as part of the submitted business cases.
Appraisal Scrutiny
4.5 As suggested above, the underlying assumptions as well as the models
used were comprehensively scrutinised. Where necessary, clarification
questions were issued to local authorities and appropriate adjustments
were then applied to the submitted appraisals.
4.6 Bidders had to make assumptions on how effective the various elements
of their proposals would be in order to complete their business cases.
Analysts in the Department compared the approaches and supporting
evidence between different bids and to existing evidence, especially from
the sustainable travel towns report
11
but also others, for example on the
value of quality factors in the bus market
12
. Assumptions included such
11
Sloman et al. (2010) The Effects of Smarter Choice Programmes in the Sustainable Travel Towns:
Summary Report to the DfT. Available at
http://webarchive.nationalarchives.gov.uk/20111005180138/http://assets.dft.gov.uk/publications/the-
effects-of-smarter-choice-programmes-in-the-sustainable-travel-towns-summary-report/summaryreport.pdf
12 DfT (2009): 'The Role of Soft Measures in Influencing Patronage Growth and Modal Split in the Bus
Market in England' , available on: http://assets.dft.gov.uk/publications/role-of-soft-factors-in-the-bus-
market-in-england/report.pdf
12
details as: how many new cyclists would have otherwise driven a car or
how passengers value real time information provided at bus stops.
4.7 Where assumptions were considered to be optimistic, given the evidence
provided, adjustments were made. Where possible, these were based on
sensitivity tests provided by local authorities or, if not available, they were
based on other evidence sources.
4.8 Table 3.1 provides some more detail on the scrutiny undertaken and
provides some examples of the adjustments made as a result.
4.9 For all proposals, a consistent optimism bias
13
rate of 44% was used
reflecting the planning stage these schemes were considered to be at,
given the short period between announcement of the Fund and
submission of bids.
14
4.10 As a result of Ministerial decisions, a number of schemes were only
partially awarded the Departmental funding sought. Where it was clear
which element was to be excluded from the scheme, the benefits of that
element were removed. Where the decision on how to accommodate the
funding reduction was left to local authorities, benefits were adjusted in
proportion to the funding shortfall, leaving the BCR unaffected. In reality
it might be expected that less effective scheme elements are withdrawn,
thus raising the BCR.
4.11 It is important to note that it was not possible in the time available to
come to a coherent 'best view' of the likely BCRs and value for money of
all the proposed schemes. The Department's analysts were not always
able, for example, to establish estimates of benefits for which the
promoters decided not to provide monetary values. The primary focus
was to establish a reasonable lower bound of benefits to avoid funding
bids that might fail to provide at least medium value for money.
13
Optimism bias reflects the tendency for systematically underestimating costs and overestimating
benefits in the earlier phases of business case development. It gets added to the otherwise best estimate
of costs. The Department’s transport modelling guidance WebTAG sets recommended standard rates
depending on type of scheme and stage of business case development.
14
Local Authorities were unlikely to have received cost estimates from contractors, achieved required
planning permission or transport orders etc.
13
Table 4.1: Summary of appraisal methods and Departmental scrutiny
Type of
Benefit
Method of estimation by local
authorities
Department's scrutiny and adjustment
Decongestion To estimate the decongestion benefits Modellers within the Department assessed the
(Travel time, from reducing car use forecast to models used for their compliance with WebTAG.
vehicle result from their proposal, most On one occasion the model used was not found to
operating promoters relied on existing local provide reliable estimates of decongestion benefits
costs, carbon transport models which would model and analysis based on WebTAG decongestion
emissions, the equilibrium responses to the rates was used to estimate benefits instead.
noise/air reduction in demand. The results were
quality and then inputted into TUBA software
15
to
Several proposals included the introduction of
indirect obtain a monetised estimate of time
signal priority for late running buses. One appraisal
taxation) savings, changes to vehicle operating
costs and carbon emissions.
worked out the full benefits to bus passengers but
assumed no dis-benefit to other road users. Other
scheme promoters either did not estimate the
benefits or allowed for a small delay imposed on
other traffic. As no clear evidence on this issue
was put forward, we requested additional
sensitivity tests from the relevant promoter. The
final assessment was based on those results.
Scrutiny of 'standard' appraisal assumptions, such
as annualisation factors and optimism bias rates,
was undertaken. Where appraisals did not have
strong evidence or, for example, excluded benefits
for certain time periods, an adjustment was made
to reflect this.
Wider One of the bids for funding was As the analysis was generally not well evidenced,
Economic supported by an analysis of job a 10% uplift to business user impact was applied
benefits creation based on the change in
commuting trips within the model
outputs.
to represent the benefit from increased competition
in less that perfectly competitive markets. This is
common practice for schemes where explicit
modelling of wider impacts is missing.
Health and Only five appraisals included Generally, the analysis supporting these benefits
Absenteeism monetised estimate of health benefits
from more active travelling. These
were based on the World Health
Organisation's HEAT tool also
embodied within WebTAG. For one
scheme they represent 22% of the
total benefits.
Only three of the five went further to
also estimate the benefit increased
activity levels have through reduced
absenteeism. Again, these followed
WebTAG.
was found to be sufficiently evidenced. The
methods in WebTAG are fairly clear and no
problems were found in their application.
15
TUBA (Transport Users Benefit Appraisal) is a computer program developed for the Department to
undertake an economic appraisal for a multi-modal transport study. Available at
https://www.gov.uk/government/publications/tuba-downloads-and-user-manuals
14
Journey Only half the bids included estimates The use of WebTAG was scrutinised with no
Quality of Journey Quality benefits, although
most proposals contained some
elements that would be expected to
generate these.
The approaches used included the
WebTAG guidance on unimodal
appraisal for journey quality benefits
for cyclists and pedestrians, while
benefits for bus users were typically
modelled through the mode
constant
16
.
significant concerns arising. Where mode
constants were being adjusted, evidence on, for
example, the quality elements proposed were
compared to existing evidence on passengers'
valuation of such elements
17
.
In one case where significant benefits were
claimed for bus quality, the final assessment
excluded all of those benefits. This does not mean
the proposals are unlikely to significantly improve
the journey experience of a large number of users;
but this conservative approach addressed the risk
that users might not fully distinguish the quality
gain in a package delivering so many other related
improvements (and the scheme provided high
value for money even in the absence of quality
benefits).
Road safety All but two submitted appraisals
included monetary estimates of the
impact their schemes would most
likely have on accidents. These were
in general small and a result of
reduced traffic flows. They were
estimated using traffic model outputs
or the decongestion rates approach.
For one scheme, safety disbenefits
were expected. This is due to a
significant redesign of the road
network proposed that would
significantly benefit non-car modes
but would involve more complex
vehicular movements.
The road safety benefits were typically a small
proportion of the overall benefits and were in line
with expectation. As their estimation is directly
linked to the estimation of decongestion benefits,
no further scrutiny was undertaken.
16
In transport models the mode constant reflects aspects of traveller's preferences that are not
represented by time or money cost.
17 DfT (2009): 'The Role of Soft Measures in Influencing Patronage Growth and Modal Split in the Bus
Market in England' , available on: http://assets.dft.gov.uk/publications/role-of-soft-factors-in-the-bus-
market-in-england/report.pdf
15
4.12 Table 4.2 provides a comparison of estimated costs and benefits as
submitted and the final ones concluded by the Department's analysts.
Table 4.2 : Costs (PVC) and Benefits (PVB) in £'000 as submitted and
adjusted by the Department
Submitted Adjusted
PVB PVC BCR PVB PVC BCR
South Yorkshire 200,929 28,576 7.0 204,630 30,176 6.8
Manchester 476,815 109,354 4.4 401,777 105,734 3.8
Hertfordshire 107,869 20,445 5.3 137,874 19,975 6.9
Nottingham 120,280 26,943 4.5 206,073 26,404 7.8
Bristol 455,160 74,525 6.1 493,820 74,525 6.6
Merseyside 164,796 12,331 13.4 62,182 14,777 4.2
Reading 355,137 20,139 17.6 68,585 18,720 3.7
Surrey 91,095 23,296 3.9 105,361 27,880 3.8
South East Dorset 311,978 16,202 19.3 31,720 15,300 2.1
Telford & Wrekin 27,751 6,822 4.1 12,390 6,635 1.9
West Midlands 473,259 45,289 10.4 157,037 45,289 3.5
South Hampshire 286,970 33,766 8.5 306,964 42,281 7.3
Total 3,072,039 417,687 7.4 2,190,285 428,598 5.1
General Assumptions
3.14 In addition to the assumptions discussed above, a number of more
general appraisal assumptions have an impact on the estimation of
BCRs. On balance, these are considered to be conservative.
Longevity of behaviour change initiatives
4.13 Bidders applied an average decay rate
18
of 33% to the impacts of soft
measures (such as travel planning). This implies that benefits of such
interventions fall by over half within two years after funding ceases and
less than 10% lasts beyond the fifth year.
4.14 On the one hand, it is clear that measures, such as school travel
planning, are unlikely to have lasting impacts once the cohort of students
receiving the training has left the school. Similarly when people move
jobs or home, the benefits of previous personalised travel planning is
diminished.
4.15 On the other hand behaviour change could lead to new habits forming or,
for example, 'peer pressure' or 'role modelling' that results in a different
travelling culture being established at a school or workplace.
4.16 In the absence of a clear evidence base on the longevity of impacts, the
bids have used conservative assumptions here.
18
Decay rates refer to rate of deterioration of the effects of a particular measure. 33% suggests that within
one year of receiving personalised travel planning or other 'smarted choices' treatment, one third of
respondents 'forget' what they learned and revert to their original behaviour.
16
Appraisal Period
4.17 The appraisal periods used in Large Projects varied from 10 to 60 years
with an average across the 12 bids of 38 years. The choice of appraisal
period is based on the likely lifetime of the asset created by the project.
For road or rail infrastructure the usual choice is 60 years while public
transport of smarter choices projects often use significantly shorter
appraisal periods.
4.18 Considering that effects of smarter choices only affect the earlier years of
the appraisal due to decay assumptions (see above), the appraisal
periods used were judged to be sufficiently conservative.
17
5. Conclusion
5.1 The analysis summarised in this paper concludes that the 12 large
schemes funded under the Local Sustainable Transport Fund are jointly
expected to deliver about five pounds of benefits for each pound invested
by local and central Government. On balance this would appear to be a
conservative estimate and the upside risks are more substantial than the
downside ones.
5.2 At an individual scheme basis, the estimated benefit cost ratios vary
between two and eight. With all the non-monetised impacts being
positive as well, all the schemes are judged to provide high or very high
value for money.
5.3 While this conclusion is based on ex ante appraisal information, it is in
line with previous evidence from the evaluation of sustainable transport
initiatives.
5.4 The Sustainable Travel Towns evaluation report quotes a decongestion
only cost benefit ratio of 4.5. The evaluation of the Cycling
Demonstration Towns found that the health benefits alone exceeded
costs two and a half times.
5.5 The twelve large LSTF schemes provide high value for money based on
estimated decongestion benefits alone. This suggests that sustainable
travel measures can be real alternatives to more traditional solutions to
congestion problems.
18
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