Beyond BCR. Putting the politics back into transport appraisal.
London has one of the best transport systems in the world.
Manchester, Birmingham, and Leeds have three of the poorest.
Within England’s centralised political system, the simple answer is that this is what the UK government has chosen.
A common argument in defence of the current situation is that investment in London creates greater returns for the country and is thus prioritised. “A pound spent in Croydon is far more of value to the country than a pound spent in Strathclyde. You will generate jobs in Strathclyde far more effectively if you invest in parts of London” is how Boris Johnson put it.
This is the majority view in Whitehall and Westminster. But is it correct?
And if it is correct, is pure economic return on investment the best way to decide where to spend?
The myth of evidence-based policy
I think that the first question is easy to answer. My analysis of the UK government’s investment decisions over the past two decades shows that under current UK transport appraisal methods,
- Transport investments in London do not offer higher returns than investments in other large cities.
- That despite this, the UK government has chosen to invest significantly more in London.
- This shows that UK transport investment decisions are taken largely for political reasons, not economic ones.
More recent and exhaustive work by Diane Coyle and Marianne Sensier on The Imperial Treasury: appraisal methodology and regional economic performance in the UK supports this view.
The second question is harder to answer.
The appraisal system and fairness
The Mayor of Greater Manchester Andy Burnham has argued loudly for fairer investment. He is convinced that the current transport investment appraisal techniques, combined with Treasury business model tests, make it difficult to justify investment in poorer regions.
My research does not suggest that this is why the UK government has invested far more heavily in London. Investment in Birmingham, Manchester, and Leeds has consistently been better value than investment in London, but has been pushed back in order to fund lower-value improvements in the capital.
But I suspect that the Mayor is right with respect to decisions taken on whether to invest in London, Manchester, Leigh, or Wigan. Investments in London and Manchester often deliver higher economic returns than investments in Leigh, Wigan, or similar places. This is especially true if the proposed investments connect pairs of smaller and poorer places instead of connecting those same places to larger cities nearby.
I agree with Andy Burnham that more matters to where we invest than simple economic return. Most people agree. So how can we change our current appraisal system to reflect this?
Complexity and change
One suggestion is to add extra parameters into the economic model for valuing transport investment.
Instead of focusing primarily on the value of time saved by existing commuters due to reduced congestion and faster journeys, we could consider the effects,
- On unemployment (as in Germany).
- On school choice for pupils from poor families.
- On the likelihood of increased wages due to increased job choice and thus bargaining power.
Most likely, we would consider a weighted mix of all of these factors, and many more. I think it would be justifiable to use as blunt a method as simply valuing workers with low wages more than thos with higher wages.
The problem with this suggestion is that the UK’s transport appraisal system already considers alternative measures of value.
International comparisons of transport appraisal practice, a 2013 external report for The Department for Transport, found that the UK’s method of transport appraisal are technically excellent and that “English practice has gone further than most in extending the use of appraisal beyond its core application to road and rail investment. Guidance now covers policy areas from walking and cycling to aviation and dimensions such as social and distributional impacts”. The situation has improved since then, and The UK Industrial Strategy and The UK Transport Investment Strategy commit to improving further with a promise “to develop a new rebalancing assessment toolkit” to make it easier to invest in poorer regions.
Adding more complexity to the appraisal system is a temptation we should avoid. To see a better solution, we need to step back and look at the system as a whole.
Less expertise. More politics
The UK has an extremely complicated transport appraisal system called WebTAG. There are 1008 pages to read, 32 Excel Spreadsheets to use as workbooks, and 4 pieces of software to download and install.
Transport modellers almost all agree that there are already huge opportunities to “get the answer that’s needed” by tweaking parameters and changing assumptions. Where no amount of tweaking can get the economic value high enough to justify government investment in a politically desirable project, new methods spring up. “Wider economic benefits” are invoked, or the appraisal period (the time over which the project generates the “return” part of its return on investment”) is extended.
This system is already too complicated for most experts to understand, and far too complicated for politicians or the public to discuss. Adding extra parameters to these models will only make that worse.
But more importantly, what is the point of improving the transport appraisal method, if the results of those models are ignored? The economic models are ignored today and they will be ignored in the future. There is little point “fixing” them.
So far, so grim. But there is some good news. We can improve how transport investment decisions are made, and the secret is in the 2013 report for the DfT I mentioned earlier.
“There are interesting differences of country practice according to institutional organisation, notably between unitary and federal countries” it says. These differences are indeed extremely interesting, and show us the way to improve what we invest in here.
By emulating the best features of how transport appraisal works in federal countries within England we can use data to more reliably make better political decisions.
Simple, interactive, competitive, open.
The UK’s transport appraisal system is technically excellent. As a result it is politically awful.
Its recommendations cannot be questioned or challenged by the public or by politicians, and so they are ignored.
Decisions are informed primarily by political considerations and then economic models are created to justify them. The few people who understand the system work in government, and so are not free to criticise those pronouncements.
We need a new system, with four characteristics.
- Simple. The general principle of the transport appraisal system should be stated clearly in under a page. The full method should be less than 5000 lines of code, and 20 written pages. It should be celebrated that it is less good than the current national system.
- Interactive. The benefit to cost ratio of schemes that are being considered should be shared on the web and understandable by the general public. These calculations are not that complicated, and data visualisation techniques have improved enormously in the past five years.
- Competitive. The appraisal system should not be national. Different cities, regions, and nations should build different system. Each will almost certainly favour investments in that region, and this should be celebrated.
- Open. But the code behind all the systems should be open. The appraisal systems should be free for somewhere else to criticise or copy.
Alongside this transport appraisal system we should build on the Transforming Cities Fund and the recommendations for further devolution of transport funding in The National Infrastructure Assessment. Local models, built by local experts, informing local decisions on how to spend local money. All open to challenge and improvement by being open.
I have discussed my idea with experts in the field, both economists in general and transport planners in particular. Most are sceptical of greater political control of these decisions. They fear that it will undermine expertise, and they dislike the need to radically simplify and weaken the models that exist today. For them the easiest option is to keep on adding to the current system.
What could be better than 1008 pages, 32 spreadsheets, and 4 pieces of software? 1200 pages, 40 spreadsheets, and 5 pieces of software? And maybe it would be, if politicians and the public were listening. But they’re not, and nor should they be expected to.