Economics

EconomicsTransport

The Department for Transport has issued a draft National Networks National Policy Statement (NNNPS) for consultation . It covers major investments on the road and rail networks in England. The draft is intended to replace the version issued in 2015, before the government’s commitment to Net Zero and publication of the Transport Decarbonisation Plan. The House of Commons Transport Committee has announced an inquiry into this draft.

The DfT states that the 2015 NNNPS shall apply to projects already selected for public examination, so the new NNNPS will apply only to applications accepted after it is implemented, following the consultation. It therefore looks as though the Lower Thames Crossing tunnel, which has been accepted by the Planning Inspectorate for consideration, will be subject to the old guidance, despite construction being deferred by two years as announced in the recent Budget, which seems odd.

The purpose of such National Policy Statements is to provide guidance for decision-makers on the application of government policy when determining development consent for major infrastructure. The intention is to remove the need for consideration of fundamental national policy questions at planning inquiries. Those subject to this guidance are the scheme promoters (National Highways for most road proposals), planning inspectors, and the Secretary of State when granting Development Consent Orders.

The important question is how investment in new road capacity could be reconciled with the government’s legal commitments to achieve Net Zero greenhouse gas emissions by 2050, meeting the requirements of both the Climate Change Committee’s Sixth Carbon Budget that has been agreed by the government and the intentions of the DfT’s Transport Decarbonisation Plan. (Rail, already substantially electrified, is less of a problem.)

The draft opens by rolling the pitch, stating that the government sees a compelling need for the development of national networks (para 3.22), such that there is a presumption in favour of granting Development Consent Orders (para 4.2), while at the same time recognising the need to move away from ‘predict and provide’ (para 3.44). This is very different from the new approach of the Welsh government, which does not see a compelling need to develop its national road network.

Scheme proposals are to be supported by assessments of whole life carbon emissions, to ensure minimisation as far as possible (para 5.29). The draft states that, in reaching a decision, the ‘Secretary of State should be content that the applicant has taken all reasonable steps to reduce the total greenhouse gas emissions from a whole life carbon perspective. However, given the important role national network infrastructure plays in supporting the process of economy wide decarbonisation, the Secretary of State accepts that there are likely to be some residual emissions from construction of national network infrastructure’ (para 5.36). Moreover, a net increase in operational greenhouse gas emissions [from more traffic] is not, of itself, reason to prohibit the consenting of national network projects or to impose more restrictions on them in the planning policy framework (para 5.37). So in policy terms, additional road capacity is more important than decarbonisation.

Importantly, the application for development consent orders applies to individual schemes. There appears to be no requirement to estimate the impact on carbon emissions from an investment programme, such as the planned five-year Road Investment Strategy 3 (RIS3) due to start in 2026. Accountability scheme by scheme is not so very different from the present practice whereby National Highways argues that each individual scheme makes only a de minimus contribution to national carbon emissions, which can therefore be disregarded.

The DfT’s Transport Decarbonisation Plan made broad-brush estimates of carbon reduction from policies and programmes, for instance 1-6 MtCO2e from increased active travel over the period 2020 to 2050, and 620-850 MtCO2e for electrification of cars and vans over the same period. It is inconsistent not to recognise offsetting carbon increases from investment in new road capacity, likely to fall somewhere between the above ranges, and certainly not de minimis for the programme as a whole.

There is also a problem of modelling future carbon emissions arising from road investment. Transport models are complex and opaque, with many parameters, the value of which requires expert judgement. In consequence, the are two types of protagonist: experts who have a good working understanding of transport models because they earn their living from building and running such models; and non-experts, who are interested in the output of models but are not able to understand the assumptions, simplifications and judgements that the experts must make. Non-experts include decision makers in national and local government who have prior expectations of the economic value of particular road schemes, and whose test of a good model is that it delivers outputs, comparing with- and without-investment cases, consistent with these expectations. Other non-experts are those opposing road schemes at public inquiries, who are faced with modelled outputs as part of the promoter’s proposal that are not open to detailed scrutiny. Inspectors at planning inquiries are also non-expert in this sense.

The NNNPS requires projects to be supported by a local transport model, but planning inspectors and the Secretary of State do not need to be concerned with the national methodology and national assumptions around the key drivers of transport demand (para 4.7). In practice, most schemes on the Strategic Road Network employ local versions of a set generic traffic and economic models, typically SATURN for network traffic modelling, the outputs of which are inputs to the TUBA economic model. So, as it appears, consideration of the predictive validity of these models for projecting carbon emissions need not be considered either at a public inquiry or by the Secretary of State. One can understand why a planning inspector should not be burdened with a task for which they are not professionally trained. Nevertheless, the question is where in the decision-making process the validity of the supporting modelling might be assessed.

The need to assess the predictive validity of transport models is pointed up by the failure of standard models to project fairly short-run traffic flows in two cases of motorway widening, on the M25 and the M1, as I have recorded previously. This does not increase confidence in the ability of such models to project economic benefits and carbon emissions out to sixty years.

One particular problem of transport models is that they are largely used to justify new investment, in which context the saving of travel time is supposed to be the main economic benefit. Yet average travel time, as estimated by the National Travel Survey, has changed very little over fifty years, excepting the period of the coronavirus pandemic. The implication is that people take the benefit of faster travel as enhanced access to desired destinations, people, places, activities and services, for the opportunities and choices on offer. Travelling further, rather than using travel time savings for more productive work or agreeable leisure, means more externalities related to vehicle-miles travelled, carbon emissions in particular.

Modellers who aimed to model such access benefits, and the resulting changes in land use and value, would not be appreciated by the economists who are wedded to travel time saving as the main economic benefit of investment, nor by decision-makers who are well used to conventional economic investment appraisal. So modellers must fix their assumptions, simplifications and parameters to get outcomes that satisfy a ‘realism test’ of prior expectations, subject to conformity with unspecified standards of professional respectability.

The upshot is that the modelling of the impact of new road investments will systematically underestimate carbon emissions from the additional (induced) traffic. This makes it easier to appear to comply with the pathway to Net Zero, but means that the outcome is likely to fall short of that pathway.

Some further light is shed on this matter by the cost-benefit analysis the DfT has published in support of options to implement the Zero Emissions Vehicle Mandate, the legislative framework to fulfil the government’s objective to phase out the sale of internal combustion engine cars and vans by 2030. The need for this cost-benefit analysis is not stated, since the timing of the phase out is largely for negotiation between the government and the motor manufacturers. Perhaps the Treasury wish to be assured that this route to decarbonisation represents good value compared with other possible decarbonisation measures. Or perhaps the DfT economists wish to parade their competences after cost-benefit analysis failed to be supportive of a number of major rail and road investments.

The modelling assumes that that the switch to ZEVs could result in increased mileage per ZEV driver because electricity as fuel is cheaper than petrol or diesel (which begs the question of whether some new charge for EVs might be introduced, as I have suggested). This extra driving, a ‘rebound effect’, is supposed to lead to more congestion delays, with a very substantial cost impact: for a central sensitivity case of the preferred policy option, the abatement cost of the ZEV Mandate for cars and vans estimated as £12/tCO2e excluding the rebound effect, and £100/tCO2e including it (Tables 61 and 62).

So, the DfT thinks it would be much more costly to reduce CO2 emissions by means of the Mandate if the lower operating cost of EVs led to greater distances travelled. However, in my view, rebound of the magnitude modelled is unlikely, quite apart from the possibility of a road user charge for EVs. The per capita distance travelled by car depends on three main factors: speed of travel, time available for travel, and household car ownership. None of these are affected by the switch to electric propulsion. Vehicle operating costs have a second order impact at best, witness the growth of SUV ownership despite higher fuel use.

Paradoxically, the DfT modellers postulate additional traffic from reduced vehicle operating costs arising from electrification (mistakenly, in my view), while being in denial about the additional traffic arising from road users taking the benefit of investment in increased capacity as enhanced access involving more travel (again mistakenly).

The ZEV Mandate cost-benefit analysis states that the preferred policy option is expected to achieve emission savings of 415 MtCO2e in the period 2020-2050 (Table 29). This is substantially less than the savings from switch to electric propulsion of car and vans of 620-850 MtCO2e projected in the Transport Decarbonisation Plan, mentioned above. No clear explanation for this discrepancy is given; it may be because the present Mandate is for the period to 2030, with a further Mandate promised for 2031-35; or it may reflect the sensitivity of model outputs to input assumptions.

More generally, modelling for the ZEV Mandate exemplifies how modelling outputs can be very sensitive to input assumptions that are made in the absence of firm evidence of future travel behaviour. This is a caution that applies to most transport modelling, not least to the projections of transport sector carbon emissions to support decisions necessary to achieve reductions required by the legislative framework to achieve Net Zero.

We have been before in a situation in which there have been doubts about approaches to transport economic analysis endorsed by the DfT. Good work was done by SACTRA – the Standing Advisory Committee on Trunk Road Assessment – an independent body created by the DfT, that issued two influential reports in the 1990s. One confirmed the importance of induced traffic arising from new road construction, a view that had been resisted by the DfT since such traffic added to congested and reduced travel time savings. The other report recognised the wider economic impacts of investment, beyond the conventional time saving, vehicles operating costs and those externalities to which monetary values could be attached; estimation of such wider impacts, such as agglomeration effects, now forms part of the standard approach to investment appraisal.

Although SACTRA, by its very name, was intended to remain in existence, at least until formally stood down, it seems to have fallen into that state by not receiving new commissions. There is a need, in my view, to reconstitute it, or some similar body of independent experts, to look at the suitability of the current body of official guidance on transport economic analysis and modelling in an era when decarbonisation is a national policy priority. As it is, however, the people in DfT and their consultants, who naturally wish to please their clients, are talking to each other in an echo chamber, from which interested outsiders are excluded.

Other departments do better. The Treasury’s model of the UK economy has long been available to independent forecasters. The Energy Department collaborates with academic energy modellers and makes available the online Mackay Carbon Calculator that allows users to explore the options for reducing carbon emissions. Modelling of the coronavirus pandemic was largely carried out collaboratively by academic groups whose models and outputs were public for all to debate. And the modelling of climate change is carried out openly, collaboratively and internationally as input to the reports of the Intergovernmental Panel on Climate Change.

Th DfT instigated a move to update the National Transport Model to generate a new version, NTMV5, intended to be open to other users, but this seems not to have worked out in that the National Road Traffic Projections 2022 employed the previous version (as I have noted). The DfT should explain what went wrong, and should engage openly with those beyond the Department and its immediate advisers on how best to model the decarbonisation of the transport sector.

This blog post is the basis for an article in Local Transport Today 23 May 2023.

My written evidence to the House of Commons Transport Committee inquiry into the National Networks National Policy Statement is based on this blog.

Car useEconomics

The National Infrastructure Commission has published an Advice Note, directed to the government, on roads policy, to help inform plans for the Third Road Investment Strategy (a five year investment programme for strategic interurban roads). I found this rather disappointing in its analysis of the problem.

The need to decarbonise road transport is obligatory, yet investment in new road capacity is counterproductive, whatever is achievable through the switch to electric propulsion. The Department for Transport’s draft National Networks National Policy Statement, recently issued, persists in addressing carbon emissions at scheme level, where they can continue to be treated as de minimis. There should be a requirement to estimate carbon emissions for the whole future programme (RIS3), when announced.

Given the conflict between road building and achieving decarbonisation, a critical look is needed at the econometric analysis of the relationship between interurban road investment and GDP growth, which is less than convincing. Likewise, scepticism is justified as regards projections of the growth of future traffic growth based on demographic and economic factors; per capita car use did not increase for twenty years prior to the pandemic. The main factors determining car use per capita are speed of travel, time available for travel and household car ownership, none of which seem likely to increase in the future.

The benefits of road construction are subject to diminishing returns. Arguably, the UK has a largely mature road network. For instance, cities such as Stoke-on-Trent and Wakefield, which would see themselves as lagging economically, are well located in relation to the Strategic Road Network. For devolved regional governments able to decide priorities for infrastructure investment, new road capacity may not be high, except where it is required to permit major site-specific development.

The Advice Note argues that effective prioritisation of road projects requires a focus on the links that will be most significant for trade between major regional cities. However, interurban roads are used by commuters travelling into cities. It is a common situation for traffic on interurban routes in or near populated areas to show pronounced morning and evening peaks, the consequence of commuting. If capacity is increased to alleviate congestion at these times, this will attract commuters from local roads on account of the faster travel made possible – one type of induced traffic, and one reason why we cannot build our way out of congestion. This diversion of commuters on to new major road capacity is facilitated by the wide use of Digital Navigation (generally known as satnav), which makes fastest options clear. The increased local commuting pre-empts the additional capacity intended for longer distance business users.

The proposal for a systematic analysis of the road network to see which routes are slow or unreliable is reminiscent of the approach of US highway engineers to categorising levels of service as the basis for proposals to increase capacity, thus justifying multilane freeways that attract more traffic. Yet there is a conflict between accepting the need for further road construction and demand management measures to reduce carbon emissions from the sector.

We no longer add to urban road capacity to accommodate growth of demand for road traffic; indeed, the trend is to subtract carriageway available for general traffic in favour of more space for buses, cyclists and pedestrians, plus investment in urban rail, traffic management and demand management measures. Yet the focus of interurban roads policy continues to be on investment in new capacity (although the Welsh Government has taken a different view). Given the demands of decarbonisation, a reconsideration of this traditional focus is desirable.

The prospects for autonomous vehicles as a source of economic benefit are unclear. Yet Digital Navigation is widely use and is changing travel behaviour. Road freight operators take advantage of similar digital technologies to manage their fleets effectively. There are opportunities to exploit digital technologies to improve the operational efficiency of the mature road network, which would be far more cost effective than civil engineering technologies employed to increase capacity.

Car useEconomics

Road pricing has been a perennial issue for transport policy, seen by transport economists as a rational means for allocating scarce road capacity when congestion is prevalent. The loss of revenue from road fuel duty as we switch to electric propulsion is a further reason to introduce road pricing, as the House of Commons Transport Committee argued in a report published in February 2022. The Government’s belated response, in the form of a letter from the Chancellor of the Exchequer sent in January 2023, stated that the government does not currently have plans to consider road pricing. The Transport Committee chair was not satisfied with this brush-off and has invited the Treasury to respond in greater detail to the Committee’s conclusions and recommendations.

The recent webinar, in which I participated, on the role of road pricing in achieving Net Zero, organised by Landor in partnership with SYSTRA, was therefore very timely. (View here https://www.youtube.com/watch?v=keDmdMMvPO0 )

Road pricing (or road user charging) has been in use for centuries in the form of toll roads, the money levied used to reimburse the cost of construction. Road pricing (or congestion charging) has been adopted in London, Stockholm and Singapore as a demand management measure. A more recent aim has been to reduce air pollution in urban areas by imposing a charge on the more polluting vehicles if they enter a Clean Air Zone (CAZ). And the need to decarbonise the transport system now prompts the question of whether and how road pricing might help achieve this objective.

Webinar contributor, David Connolly, SYSTRA, argued that to achieve a Net Zero trajectory for transport, there would need to be a significant reduction in car use. To attain this, the cost of car use would have to rise significantly, to increase the relative attractiveness of all of the alternative modes, (including car-sharing) and encourage shorter &/or less-frequent car trips. Increased costs of car ownership, of fuel and of parking were possibilities, but distance-based road pricing would have a direct impact on car use and could plug the revenue gap created by the loss of road fuel duty.

Trevor Ellis, an expert in the technology of road pricing schemes, outlined how these have been applied throughout the world. GPS-based tolling has already been adopted by a number of European counties for trucks, while many US states are trialling or operating per mile fee programmes. In Asia, Singapore and Indonesia are to implement national all-vehicle distance-based schemes soon. Trevor concluded that distance-based charging by GPS gives the flexibility to vary the charge by time and place, as well as by distance and emissions, but the biggest challenges are likely to be gaining political and public acceptance.

Silviya Barrett, of the Campaign for Better Transport, reported the outcome of a survey of public attitudes to road pricing, finding substantial agreement that the present system of vehicle taxation is in need of reform as we switch to electric vehicles (EVs), with almost half respondents supporting pay-as-you-drive as they reached the end of the survey. There would be more support if public transport were cheaper with improved connectivity.

My own view is that it would be difficult politically to use road pricing to increase the costs of motoring or of road freight, as a means to reduce vehicle usage. Our society is too dependent on road transport, so that not many politicians would be brave enough to attempt to reduce carbon emissions by a direct hike of road fuel duty or imposing an additional charge for road use. The situation of low-income motorists needing their cars for travelling to work would be a point of particular sensitivity.

However, EVs do not pay fuel duty, so there is a case that they should pay a charge for use of the roads, both to contribute to the costs of operation and maintenance of the network, and to make a contribution to the Exchequer, as do internal combustion engine (ICE) vehicles. Yet this could not be implemented immediately since the lower operating costs of EVs are important to compensate for the present higher capital costs. Nevertheless, it is expected that capital costs will decline as battery technology advances and that equivalence in capital costs of EVs and ICEs will be reached prior to the 2030 date for completion of the phasing out of sales of new ICE cars and vans.

The phasing out by 2030 is a policy that commands wide support across the political spectrum, as well as from the car manufacturers and the public, who are purchasing EVs in impressive numbers. It would be desirable to link the introduction of a road user charge for EVs to this policy approach, on the grounds of fairness as between the two kinds of vehicle in respect the operating costs incurred. This would allow time to develop a suitable road pricing system for EVs. I suggest that the existing fuel duty should remain in place for ICEs, which would avoid the anxiety that would be created, particularly amongst low-income motorists, by a major change in the charging regime. EV owners are generally better off, given the newness of the technology and the very limited second-hand market, and would be more able to cope with the cost increase.

There are variety of technologies that might be used to implement road user charging, some of which are in use other countries. Yet rather than introduce an unfamiliar technology, there would be much to be said for building on London’s experience, as the basis for a national system.

The London congestion charge has been in operation for twenty years. It has been technically successful, publicly acceptable, with no concerns about privacy despite camera surveillance for enforcement purposes, and it generates useful net revenues that support public transport provision. London has employed the same enforcement and charging system to implement the ULEZ (its version of a CAZ), initially within the central congestion charging zone, expanded last year to encompass the area within the North and South Circular Roads with fairly minimal public opposition, and intended to cover all London boroughs later this year (albeit with some local political resistance emerging in the outer boroughs). This exemplifies the scope for incremental roll-out of an established technology.

London’s daily congestion charge is based on the presence of the vehicle within the charging zone, for however long. For London’s technology to the basis for a national road user charging scheme for EVs, it would be necessary to migrate the charging arrangements to a smartphone app, since a smartphone knows where it is in time and space, so knows if it is in a charging zone at a time when the charge is levied. Smartphones are generally linked to  payment mechanisms. They would also need to be linked to the vehicle, since it is the presence of the vehicle that is chargeable, not the phone, but this should be feasible.

Adoption of the smartphone as the mechanism for payment could be incentivised by capping the daily payment at no more than the standard daily charge as paid via the existing online payment mechanism, at present £15. Once there was sufficient uptake of the app, there would be opportunity to vary the charges according to such factors as duration in the charging zone, time of day, level of congestion, location or distance within the zone. This should be publicly acceptable with the daily charge cap in place, analogous to the capping of fares on London’s buses and trains when contactless payments are made. The standard daily charge payable online would remain for those not wishing to use the app, as would the existing camera-based enforcement system.

With the app payment mechanism tested and accepted, it would be possible to extend it beyond the existing congestion charging zone. In the past, there had been a western extension of the London scheme, introduced by Ken Livingstone when he was mayor, but revoked by Boris Johnson. It would also be possible for other cities to adopt the technology, whether before or after national adoption for EVs. In the past both Manchester and Edinburgh developed plans to implement congestion charging, which, however, were rejected in referenda. Cambridge is considering a similar initiative. Adoption by a single city may seem a major step by the voters, whereas taking advantage of a national charging system in prospect may lessen their reluctance.

A national scheme of charging for road use by EVs could be introduced incrementally, whether by road type (such as motorways) or region, and by starting the charge at a low level, increasing over time as the arrangements bed down.

While a national scheme for EV road user charging might employ a separate payment app from that used in London or other cities, it would make more sense to use a single payment mechanism, apportioning the revenues between the Exchequer and the highway authorities, allowing the latter scope to vary their component of the charge to meet local needs. Over time, this could reduce the need for local authorities to bid competitively to central government pots of money for funding local transport initiatives, consistent with a general policy trend to increasing devolution of responsibilities from national to local government.

One particular possibility for the exercise of local decisions on the local component of the road user charge would be to fund improvements to public transport by increasing the charge, subject to the willingness of the electorate. More and better bus and rail services would be important in providing an alternative to car use, so facilitating decarbonisation. However, fare box revenues are insufficient to support good services, both frequency and geographical spread, so external funding is required. Yet subsidy from government, whether national or local, will always be in short supply. So revenues from road user charging seem the most likely source of further support to improve local bus and rail services.

The phasing out of sales of new ICEs by 2030 is generally agreed to be about as rapid as is feasible, but faster decarbonisation thereafter could employ the revenues from EV road user charging to fund a scrappage scheme for ICEs. This would need to be targeted at the most carbon emitting vehicles, a function of engine size and distance travelled. Age would also be important since the amount payable per vehicle would become more attractive as vehicles became older and less valuable. However, such a scrappage scheme could not usefully be implemented until there were good numbers of EVs available in the used car market.

Overall, my view is that road user charging seems unlikely to be acceptable as a means to increase the costs of road vehicle use generally in order to reduce distance travelled and carbon emissions. But there is a case for charging EVs once capital costs reduce, on grounds of fairness between vehicle with different types of propulsion. The good experience of the London congestion charge offers an incremental route to nation application, the key step being migration to a smartphone app, a familiar payment mechanism. Revenues could be apportioned between central and local government consistent with further devolution, and employed to facilitate transport decarbonisation by supporting improved public transport and funding a scrappage scheme for internal combustion engine vehicles.

So no big-bang implementation of road charging technology, rather an incremental approach that aims to carry the public along, step by step.

This blog post was the basis for an article in Local Transport Today of 20 March 2003.

Car useEconomics

The House of Commons Transport Committee is holding a timely inquiry into investment in strategic roads, following a critical report from the National Audit Office about progress with the £27 billion Road Investment Strategy 2 (RIS2) programme, now at midpoint. I submitted evidence as follows.

Summary

This submission is concerned with whether the Government’s road investment programme is meeting the needs of users, whether the programme aligns with other policies, and the relevance of technological developments. These are matters in which I have taken an interest for many years, starting when I was Chief Scientist at the Department for Transport.

Here I argue that:

  • the economic benefits of road investment have been overstated;
  • there is conflict with other Government policies, particularly Net Zero;
  • technological opportunities to improve the operational efficiency of the road network are neglected.

Economic benefits of road investment

The main economic benefit of investment in new road capacity is supposed to be the saving of travel time. The benefit-cost ratio of a proposed scheme, a measure of value for money, largely depends on the estimated value of time savings to business users and others, in relation to the cost of construction. However, there are now available evaluations of outcomes of smart motorway schemes 3-5 years after opening that find no time savings, in part on account of traffic volumes greater than forecast.

I have compared the traffic and economic forecasts with the outturns for the two smart motorway schemes for which data is available: M25 Junctions 23-27 and M1 Junctions 10-13.[i] A salient feature of the forecasts is that the value of time savings to non-business users (commuters and others) is almost entirely offset by increased vehicle operating costs. This is the result of local users diverting to the new motorway capacity to save a few minutes travel time, for instance from home to work, not fully recognising the additional fuel costs arising from the longer trip. Such diversion is facilitated by the widespread use of Digital Navigation (generally known as satnav), which makes clear the fastest routes.[ii]  Increased use by local users pre-empts capacity for longer distance business users, for whom the additional capacity was intended, and based on which the economic case for investment depends.

It is likely that these examples are representative of the general situation in that the Strategic Road Network comes under greatest stress in or near areas of population density where local and long-distance traffic compete for carriageway. Remote from such locations, for most of the time traffic generally flows freely. Investment in additional capacity that is prompted by peak hour congestion serves to accommodate more local users, who have the flexibility to choose from a number of routes.

There is a maxim that we cannot build our way out of congestion, which we know from experience to be generally true, and to which the wide use of Digital Navigation contributes. It is common for the public justification of investment in new strategic road capacity to claim the relief of congestion and boosting the economy through improved connectivity. Yet such effects are very short term, negated by the local traffic induced by the new construction that restores congestion to what it had been. Accordingly, we have been deluding ourselves about the economic benefits of road investment.

Lack of alignment with other policies

The Department for Transport recently published new National Road Traffic Projections that include a Core Scenario plus seven variant scenarios. Traffic is projected to grow in all scenarios, by between 8% and 54% by 2060, which contrasts with the widely held view that car use needs to be reduced to meet the Government’s commitment to Net Zero by 2050. Projections of traffic growth would support a future road investment programme, yet would conflict with decarbonisation policies.

The Core Scenario, based on ‘existing firm and funded policies only’, projects 22% increase in traffic to 2060 and 42% decrease in carbon emissions. Yet Net Zero by 2050 is surely a firm government commitment. The Department for Transport published its Transport Decarbonisation Plan in 2021 which claimed that this commitment could be achieved, implying that future funding and policy development would need to constrain carbon emissions from road traffic to zero by 2050. So there is an apparent inconsistency between the 2022 National Road Traffic Projections and the 2021 Transport Decarbonisation Plan.

We are at present midway through the second five-year road investment programme, known as RIS2, worth £27bn over the period 2020-2025 when announced. RIS3 is now being planned. Yet there are headwinds:

  • The potential economic benefits are likely to be overstated, as discussed above.
  • Any increase in road capacity is counterproductive for the Net Zero climate change objective since both tailpipe and embedded carbon would be increased.
  • There are public anxieties about the safety of Smart Motorways in the absence of the hard shoulder, reflected in a critical report from the House of Commons Transport Committee, to which the Government responded by halting new schemes until five years of safety data is available.
  • The Government’s Levelling Up White Paper, published in early 2022, identified a dozen ‘missions’ across departments. The single mission for the Department for Transport is aimed at improving public transport in regional cities towards that achieved in London, a sensible political and social objective. There was no reference to road investment, which is appropriate, given that congestion delays on the Strategic Road Network are less in the Midlands and North than in the South East.
  • Current pressures on public expenditure.

Given these impediments, there is a good case for treating the Strategic Road Network as mature, with the future focus on improving operational efficiency. This is the situation for urban roads, which in the past were enlarged to accommodate more traffic, but nowadays the policy direction is to reduce capacity allocated to general traffic, to encourage active travel and facilitate public transport. Similarly, the aviation sector focuses on operational efficiency – airlines maximising flying time of aircraft, use of allocated routes and passenger load factors; airports (struggling recently) optimising throughput of passengers and baggage; and air traffic management making best use of crowded airspace. The underlying discipline is operations research, not civil engineering, together with modelling and economic analysis of operations, rather than of long-lived investment.

Technological developments

A focus on operational efficiency of the Strategic Road Network would naturally prompt consideration of how best to take advantage of the huge investment in Digital Navigation that has been made, both by providers of the service and by road users. Here a very odd phenomenon is the apparent disregard of Digital Navigation by road authorities, at least as judged by their publications – no reference to satnav in those of National Highways, the Department for Transport, or local authorities (with one exception known to me, Transport for London’s collaboration with Waze). Possible explanations include: preoccupation of highways engineers with civil engineering works; the need to spend the large budget allocated to road investment; the lack of staff with professional background to cope with digital technologies; and road authorities being monopolies, so not subject to competitive pressures to maximise efficiency.

The one constituent of road users that is highly competitive is road freight, particularly that forming part of integrated logistics businesses, which makes extensive use of digital technologies to manage HGV fleets on major roads and delivery vehicles on local roads. We are conscious of this when we order goods online, with a specified delivery date and often a time slot, the ability to track packages, delivery confirmed on the doorstep, and our feedback sought on the experience – all done by algorithm. This kind of operational efficiency needs to be brought to bear on the totality of traffic on the road network.

Road network operators with such experience would naturally want to take advantage of Digital Navigation, one aim being to better cope at times of stress – major incidents, bad weather, peak holiday flows. A second aim would be to optimise use of the network in normal times, including avoiding routing traffic through unsuitable minor roads.

When road users are asked why congestion is a problem, their main concern is the uncertainty of journey time. Digital Navigation provides estimates of journey time in advance, so those who need to be at their destination at a particular time can decide when best to set out; those who are more flexible can avoid the worst of congestion; and all can choose the fastest route. Digital Navigation is vastly more cost-effective as a means to mitigate the impact of road traffic congestion than costly and ineffective civil engineering investment.

While the Department for Transport and National Highways disregard the impact of Digital Navigation on traffic flows, they do pay attention to the possible impact of autonomous vehicles. The National Road Traffic Projections includes a Technology Scenario that envisages autonomous vehicles entering the market in the 2020s and making up 50% of it by 2047. And the government intends to introduce comprehensive legislation governing driverless vehicles when parliamentary time allows.

However, any significant impact of driverless vehicles on use of the road network seems a long way off at best. Eventual benefits would be experienced by vehicle occupants whose time might be available for non-driving tasks, with little scope to increase the operational efficiency of the network. The preoccupation with this future digital technology seems perverse when an existing digital technology, Digital Navigation, is widely used and is capable of changing travel behaviour in ways that are far more cost-effective than civil engineering.

[i] Metz, D. Economic benefits of road widening: Discrepancy between outturn and forecast. Transportation Research Part A, 147, 312-319, 2021.

[ii] Metz D. The impact of digital navigation on travel behaviour. UCL Open: Environment. 2022;(4):05. https://doi.org/10.14324/111.444/ucloe.000034

Car useEconomicsTravel

I made a presentation to the Highways UK Conference held at Birmingham 2-3 November 2022. These are the main points.

The widespread use of Digital Navigation (DN) (generally known as satnav) is changing travel behaviour (see my recent paper). One impact is to divert local users to major roads to take advantage of increased capacity. I have analysed two Smart Motorway investments in detail: M25 Junctions 23-27 and M1 Junctions 10-13. The Smart Motorway concept involves converting the hard shoulder to a running lane, originally during the periods of morning and evening peak demand, or, as has been recent practice, throughout the day. The advantage is that capacity can be increased without the cost of additional land take or rebuilding bridges.

Monitoring the traffic flows and speeds 3-5 years after opening of the two schemes showed that the forecast increases in speed had not occurred, and hence the economic benefits, which largely depend on the value of time savings, were not obtained. Something had gone badly wrong with the traffic modelling that informed the investment decisions. Accordingly, I sought and obtained copies of the relevant reports.

The traffic modelling in both cases employed regional variable demand models that utilised the long established SATURN software. Traffic flows and speeds for the with- and without-investment cases were compared, and the outputs fed into the economic model, the Department for Transport’s TUBA model, which forecasts the economic benefits. In both cases, substantial travel time saving benefits were projected for business users, offset by a small increase in vehicle operating costs (VOC). There were also substantial time savings for non-business users (commuters and others) but these were very largely or entirely offset by increased VOC. Hence there was no net economic benefit to non-business users. It seems likely that increased number such users, above that forecast, pre-empted the increased capacity intended for longer-distance business users.

Examination of the routing information offered by Google Maps, for a journey between two locations in the neighbourhood of a Smart Motorway scheme, shows that diversion to the motorway can save time, but at the cost of increased distance and hence fuel cost (see screenshot at top). This is consistent with the modelling, on the basis that road users are likely to take the faster route and be less concerned about VOC.

Those making local trips have a variety of options, using the motorway as well as local roads, while long-distance users are likely to stay on the motorway. In the past, local users would have made routing decisions based on recent experience of congestion and  broadcast traffic information. But with the widespread use of DN, the choice of the fastest route is clear. The impact of DN is to increase local use of motorway capacity, to the disadvantage of longer-distance users. This seems likely to be an important contributory factor to the failure of the M25 and M1 Smart Motorway investments to deliver the expected travel time savings.

Although detailed information is available only for two Smart Motorway schemes thus far, it is likely that these may not be unrepresentative. The Strategic Road Network (SRN) is under greatest stress in or near areas of population density, where local users and longer-distance users compete for road space. Remote from such areas, the traffic generally flows fairly freely. So opportunities for investment appear to be where local users are best placed to take advantage of new capacity.

If the motorway system operated as a toll road, as in France or Italy, tolls would deter use by locals. The one example in the UK is the M6 Toll road in the West Midlands, built and operated with private finance, where daily traffic is half that on the adjacent M6 proper, doubtless due in part to the toll that local users do not choose to pay. But this is the exception that proves the rule: which is that attempts to alleviate congestion by increasing the capacity of major roads experiencing marked peaks of traffic at commuting times, as with Smart Motorways, must be expected to result in increased use for local trips, to the disadvantage of longer-distance users.

To better appreciate the benefits of road investment, it would be important to understand the impact of DN on road user behaviour, so that this can be incorporated into the traffic modelling that informs investment decisions. It would also be important to get a more granular evaluation of outcomes of investment. Traffic and economic modelling of prospective investments distinguishes between business and non-business users, the former split between cars, light goods and heavy goods vehicles, and the latter between commuter and other journey purposes. In contrast, monitoring of outcomes only tracks total traffic, volume and speed. However, it is now possible to employ DN to distinguish between local and longest-distance traffic, as exemplified by the TomTom Origin/Destination analytical service. Making such a distinction is important for evaluating the economic benefits of investment since the total volume of traffic might be close to that forecast, but if the share of local users is greater than forecast, the economic benefit will be less than expected.

We are at present midway through the second five-year road investment programme, known as RIS2, worth £27bn over the period 2020-2025. RIS3 is now being planned. But there are headwinds:

  • The potential economic benefits are likely to be overstated, as discussed above.
  • Any increase in road capacity is inconsistent with the Net Zero climate change objective since both tailpipe and embedded carbon would be increased.
  • There are public anxieties about the safety of Smart Motorways in the absence of the hard shoulder, reflected in a critical report from the House of Commons Transport Committee, to which the government responded by halting new schemes until five years of safety data is available.
  • The government’s Levelling Up White Paper, published in early 2022, identified a dozen ‘missions’ across departments. The single mission for the Department for Transport is aimed at improving public transport in regional cities towards that achieved in London, a sensible political and social objective. There was no reference to road investment, which is sensible given that congestion delays on the SRN are less in the Midlands and North than in the South East.
  • Current pressures on medium term public expenditure.

Given these impediments, there is a good case for treating the SRN as a mature network, with a focus on operational efficiency. This is the case for urban roads, which in the past were enlarged to accommodate more traffic, but nowadays the trend is to reduce capacity allocated to general traffic, to encourage active travel and facilitate public transport. Similarly, the aviation sector focuses on operational efficiency – airlines maximising use of aircraft, allocated routes and passenger load factors; airports (struggling recently) optimising throughput of passengers and baggage; and air traffic managment making best use of crowded airspace. The underlying discipline is operations research, not civil engineering, plus the modelling and economic analysis of operations, not long-lived investment.

A focus on operational efficiency of the SRN would naturally prompt consideration of how best to take advantage of the huge investment in DN that has been made, both by providers of the service and by road users. Here a very odd phenomenon is the apparent disregard of DN by road authorities, at least a judged by their publications – no reference to satnav in those of National highways, the Department for Transport, or local authorities (with the one exception known to me, Transport for London’s collaboration with Waze). Why is this? Possibly because of the preoccupation of highways engineers with civil engineering works, the need to spend the large budget allocated to the SRN, the lack of professional background to cope with digital technologies, and that fact that road authorities are monopolies, so not subject to competitive pressures?

The one constituent of road users that is highly competitive is road freight, particularly that forming part of integrated logistics businesses, which makes extensive use of digital technologies to manage fleets on the SRN and delivery vehicles on local roads. We are well aware of this when we order goods online, with a specified delivery date and often a time slot, the ability to track packages, delivery confirmed on the doorstep, and our feedback sought on the experience – all done by algorithm. This kind of operational efficiency needs to be brought to bear on the totality of traffic on the road network.

Experienced network operators would naturally want to take advantage of DN, which is vehicle-to-infrastructure connectivity that is changing travel behaviour on a massive scale. One aim would be better to cope at times of stress – major incidents, bad weather, peak holiday flows. A second would be to optimise use of the network in normal times, including avoiding routing traffic through unsuitable minor roads.

There is a maxim that you can’t build your way out of congestion, which we know from experience to be generally true. The Smart Motorway case studies exemplify this truth and provide an explanation: increased capacity is taken up by local users, pre-empting capacity intended for longer-distance business users, with no overall economic benefit, and restoring congestion to what it had been before. However, when road users are asked why congestion is a problem, their main concern is the uncertainty of journey time. Digital Navigation provides estimates of journey time in advance, so those who need to be at their destination at a particular time can decide when best to set out; those who are more flexible can avoid the worst of congestion; and all can choose the fastest route.

Digital Navigation is vastly more cost-effective as a means to mitigate the impact of road traffic congestion than costly civil engineering investment.

Car useEconomicsTransport

The Department for Transport (DfT) has started planning its third Road Investment Strategy (RIS3), a five-year investment programme for the Strategic Road Network (SRN) for the period 2025-2030. The approach is conventional – a programme of projects, with little overview of how societal objectives will be advanced by the likely substantial expenditure. Yet there are five major issues that need to be addressed for the programme as a whole.

First, there is a need to reconcile the government’s Net Zero objective with the carbon emissions from both the tailpipes of the additional traffic arising from increased road capacity and the embedded carbon in the cement, steel and asphalt used in construction. Recent presentations by the DfT’s Transport Appraisal and Strategic Modelling (TASM) division indicated an intention to tackle this issue at scheme level, but this is misconceived. What matters is the overall contribution of RIS3 to carbon emissions and how this is to be offset or otherwise justified.

Second is the question of how RIS3 advances the government’s Levelling Up agenda, where the recent, well-received White Paper identified twelve medium-term ‘missions’ to be pursued across all departments. The one specific to transport states: ‘By 2030, local public transport connectivity across the country will be significantly closer to the standards of London, with improved services, simpler fares and integrated ticketing.’ Although the rate of progress implicit in ‘significantly closer’ is vague, the direction of travel is clear and the objective is not in dispute.

There is no mention of investment in the SRN in the Levelling Up White Paper. This is appropriate since there is, if anything, an inverse relation between the performance of the road network and economic prosperity across the nation, given that delays on the SRN due to congestion are greater in London and the South East than in other regions of England.

The implication of the White Paper approach is that there should be a substantial switch of DfT funds from road investment to improve public transport beyond London, if the Department is to play a full role in supporting the government’s the Levelling Up agenda. Yet the Department’s recently issued Levelling Up Toolkit is essentially a pro forma for a box-ticking exercise aimed at justifying investments already forming part of agreed expenditure programmes. There is palpable inconsistency here.

Third, we have the problem of the safety of smart motorways. These require conversion of the hard shoulder to a running lane as an economical means of increasing capacity without the expense of rebuilding bridges. Generally, new roads are safer than older roads, which meant that adding road capacity yields a modest safety benefit. But this is not obviously the case for smart motorways, and there has been considerable pushback from the public and the House of Commons Transport Committee. As a result, the DfT has paused the roll out of new smart motorways until five years of safety data is available for schemes introduced before 2020. A decision on the generic safety of smart motorways will be an important factor in developing RIS3.

Fourth, and less recognised, there is a question about the economic benefits from additional road capacity. There are two published evaluations of smart motorway schemes where the traffic flows after opening were very different from those that had been forecast. For the M25 Junctions 23-27 scheme, the traffic flowed faster one year after opening but subsequently delays reverted to what they had been before opening on account of greater traffic volumes than forecast. For the M1 J10-13 scheme, traffic speeds five years after opening were lower than before opening. Since the main economic benefit of road widening is the saving of travel time, both schemes had negative benefit-cost ratios (BCR) at outturn.

Examination of the reports of the traffic and economic modelling of these two schemes showed substantial time-saving benefits expected for business users, offset by a small amount of increased vehicle operating costs (VOC) arising from additional traffic volumes. There were also time savings to non-business users (for commuting and other local travel) but these were entirely offset by increased VOC – because these were local trips that rerouted to the motorway to save a few minutes of time, at the expense of additional fuel costs.

The scope for rerouting local trips to take advantage of increased motorway capacity is likely to be underestimated in modelling. Local users have the flexibility to vary routes whereas long distance business users will stay on the motorway unless there is a major holdup. Moreover, the general use of digital navigation in the form of Google Maps and similar offerings makes choice of minimum time options commonplace.

Even when the outturn total traffic flows are a reasonable match to those forecast, the scheme economics could be much worse than predicted if there is more local traffic, and hence less long distance business traffic, than projected. Traffic and economic modelling involve recognition of different classes of road user with different values of travel time: cars, LGVs, HGVs, business, local commuters, and other local users. However, the monitoring of outturn traffic flows does not distinguish between these classes of users. GPS tracking make such distinctions possible.

The DfT has emphasised the importance of evaluation of outturns of investments. Yet the failure to appreciate the need to break total traffic flows down into the segments that had been modelled reflects a serious professional shortcoming. As a result, we cannot be at all confident that investments to increase SRN capacity do more than facilitate rerouting of short trips by local users, of nil economic value. Likewise, we do not have the kind of detailed evaluation data that would allow traffic models to be better calibrated for future use.

The fifth issue for RIS3 is that the widespread use of digital navigation by drivers prompts questions about the continued focus of DfT and National Highways on major civil engineering expenditure. Contrast the aviation sector, where new runways or terminals are occasional efforts, not regular business. The main focus of airlines and air traffic control is to improve operational efficiency, to sweat the assets employing the techniques of operational research. We have a mature road network in Britain. It’s time to focus on operational efficiency. Yet it seems not to occur the National Highways that working with Google Maps, TomTom and other providers of digital navigation services would be a cost-effective means of improving the performance of the network.

More generally, the DfT is trapped in its box labelled Transport Analysis Guidance (TAG), a thousand pages of prescription to which more text is added when some new issue or policy arises, such as Net Zero, Levelling Up, inequalities or gender. The task for those promoting a scheme is to tick all the boxes and flex the modelling to generate BCRs that represent good value for money. Evaluation of outturns is inadequate to distinguish between success and failure.

Although the DfT pays lip service to the need to think at the strategic level, the TAG framework does not facilitate this in that the detailed analysis is at project level. Other interested parties do not challenge the Department’s approach. The consultants and local authorities do not bite the hand that feeds them. The professional societies, institutions and think-tanks do not engage. The National Audit Office carries out good analysis of road investments on occasion, but not systematically. The Office for Rail and Road scrutinises the management of the SRN, including how well new investments are delivered, but does not see its role as enquiring into how investments benefit road users. This is quite unlike the regulators of other infrastructure industries – electricity, gas, water, telecoms – that are focused on how consumers benefit from investment.

The DfT is stuck in its box and seems unlikely to break out. The best bet for a strategic view of RIS3 may come from the National Infrastructure Commission, which has begun the development of its second National Infrastructure Assessment. The Commission’s advice was the basis of the government’s £96 billion rail investment programme for the North and the Midlands. This required fresh thinking about the benefits of transport investment at the level of the whole programme, an approach clearly needed for RIS3.

This blog post formed the basis of an article in Local Transport Today of 25 March 2022.

Car useEconomics

I have previously discussed the widening of the M25 motorway between Junctions 23 and 27, where the economic benefits forecast did not materialise. Another example has now arisen.

Conversion of the hard shoulder of the J10-13 section of the M1 motorway to dynamic running was intended to reduce congestion by allowing the hard shoulder to be used as an additional running lane during busy periods. The scheme, one of the earlier ‘smart motorways’, opened in 2012 and a report of its first five years of operation, up to 2017, was published in 2021. The cost was £489m for 15 miles of widened motorway, adjacent to Luton, to the north of London.

Electronic signs tell drivers when it is safe to use the hard shoulder as a running lane, but then speeds are limited by the level of congestion, with a maximum of 60mph. This, together with some traffic growth on the route, meant that journey times were in fact longer than before the road was converted.

The main economic benefit of road investments is taken to be travel time savings. In the present case, the forecast had been for an average travel time savings of 1.5 min per vehicle in the opening year, increasing to 2.25 min by 2028. But time savings were not observed. The forecast benefit-cost ratio (BCR) had been 1.4, whereas the estimate based on the five-year outturn was negative, -0.8.

The stated conclusion, five years after opening, was: ‘In this case, the monetisation of journey time benefit is not a good measure of value for money and the qualitative evidence presented in the evaluation is considered a more robust measure.’ The failure of forecasting was attributed to limited prior experience of such smart motorway conversions.

In view of this marked discrepancy between forecast and outturn, I made a Freedom-of-Information request to see the detailed reports of the traffic modelling and economic analysis of the proposed investment. The original modelling had been for a widening from three to four standard lanes in each direction. The model was adapted for the use of the hard shoulder for the extra lane. The model drew upon the East of England Regional Model, a variable demand model, for data to input to a local traffic model for the section of the M1 involved. As elsewhere, the traffic modelling employed the established SATURN package.

The traffic modelling projected increased traffic volumes, comparing the investment case with the ‘do minimum’ case without the investment, as well as journey time reductions in the range 4-15% for the opening year, depending on section of the road and time of day. The economic appraisal used the output of the traffic model as input to the standard TUBA economic model to project the economic benefits. The main benefits were time savings to business users of £456m pv, offset by increased vehicle operating costs (VOC) of £61m. There were time savings to consumers of £170m, more than offset by increased VOC of £197m. This suggests that the increased road capacity is attracting local users, such as commuters, who save a few minutes of their journey by rerouting to the motorway, at the cost of more fuel use for a longer trip, as illustrated in the screenshot from Google Maps above. A similar situation arose in the M25 case.

The forecast BCR from the TUBA model was 3.5, which is different from the forecast of 1.4 provided in the year five report (above), apparently on account of a change in how increases in revenue from fuel taxation are required to be treated, whether as offsetting the scheme costs or as an element of the benefits from the investment.

Conclusion

Transport models are complex and opaque. Generally, little effort is made to valid forecast against outturn. The present M1 case demonstrates a marked failure of a model to forecast the observed traffic flows and speeds five years after opening.

More generally, monitoring traffic flows and speeds provides only limited information about the validity of a model that projects economic benefits for different classes of road user. The outturn of a widening scheme that matched projected flows might arise if all the increase in traffic volumes arose from more local users taking advantage of the increased capacity to save time on local trips, thereby pre-empting benefits to long distance business users. Effective monitoring needs to track the travel behaviour of different classes of road users.

It seems likely that there is often a bias in traffic modelling of road investments to underestimate the growth of local traffic and hence to overstate the economic benefits to business users.

Economics

In my previous blog I outlined the economic thinking behind the Government’s Integrated Rail Plan for the North and Midlands. This was based on an approach developed by the National Infrastructure Commission (NIC) that put values on the benefits to both businesses and consumers of improving transport to achieve higher density city centres. For businesses, what are known as agglomeration benefits arise from improved opportunities to share facilities and suppliers, better matching between employers and employees, and more learning that fosters innovation. For consumers, there are analogous benefits from improved opportunities for consumption of material goods and cultural services, as well as for social interactions.

Economic appraisal of transport infrastructure investment based on these real-world observable benefits is more relevant to decision makers than is orthodox analysis based on theoretical ‘generalised costs’, which lumps together time costs and money costs and then disregards the awkward finding that average travel time has not changed for at least half a century. Importantly, the NIC approach addresses the benefits from programmes of investment, not of individual schemes, which is also more useful to decision makers responsible for major capital expenditure programmes.

The question is whether the NIC approach might usefully be applied to road investment. After all, the strategic purposes of road and rail investment are not fundamentally different, although there are differences in application. Crucially, rail investment can move more people into city centres where road capacity cannot be increased, and indeed is commonly being decreased to create more space for buses, active travel and pedestrians.

Investment in new road capacity is therefore generally beyond cities, intended to reduce road traffic congestion and to foster connectivity between cities for mutual economic benefit. However, induced traffic arising from new capacity tends to restore congestion to what it had been, reducing predicted economic benefits. Besides, the standard approach to economic appraisal addresses the benefits of individual schemes, not the benefits from a programme of improvements as a whole. The National Audit Office reported in 2019 on the DfT’s plan to construct a tunnel adjacent to Stonehenge, drawing attention to the lack of a plan for the A303 corridor as a whole. This includes 35 miles of single carriageway, with eight improvements intended, seven of which, considered individually, have low or poor benefit-cost ratios. The question is whether investment in the whole corridor is greater than the sum of the parts. To answer this, appraisal at strategic level is needed.

The DfT’s road investment strategy is now being developed for a third five-year programme, to follow the current £27 billion 2020-2025 RIS2 programme. This requires a view of the economic benefits of the programme as a whole, as happened for the Integrated Rail Plan. We need to address the real observable economic benefits of road investment, particularly important given that new road capacity leads to more traffic and so more carbon emissions, at a time when we are committed a rapid reduction on transport’s contribution to climate change.

The NIC has started work on its second National Infrastructure Assessment. For this purpose, it is developing a high-level approach for future investment, including a framework for decision making and prioritisation for interurban transport improvements across the modes.

Another strategic multi-modal transport investment programme whose economic case needs to be considered arises from the Union Connectivity Review, chaired by Sir Peter Hendy, published in November, and intended to improve connectivity between the nations of the United Kingdom. This concluded that while devolution has been good for development of transport within regions, cross-border schemes have tended to be of lower priority. The Review made a number of specific recommendations, including investing in the West Coast Mainline north of Crewe to achieve better interconnectivity between England and Scotland by means of HS2, and endorsing the Welsh Government’s multi-modal approach to dealing with congestion on the M4. However, the economic content of the Review was minimal.

The Union Connectivity Review recognised that domestic aviation is important for Northern Ireland and the more northern regions of Scotland. Some services receive subsidy from government through ‘public service obligation’ arrangements. Contrarywise, fares have been higher because Air Passenger Duty has been imposed on both the outbound and inward legs of domestic flights. However, the government has announced that the duty will be halved for domestic flights from 2023.

Air travel is of concern on account of its contribution to global warming. Journeys between London and Glasgow by plane produce more than five times more greenhouse gas emissions per passenger than the equivalent journey by rail. However, much effort in underway to develop sustainable aviation fuels for existing aircraft and electric propulsion for new models. If these developments succeed, domestic air travel may become economically attractive, with its limited requirement for airport and air traffic control infrastructure, in contrast to road and rail travel with carriageway and track requiring maintenance over the whole route.

Besides Union Connectivity, we are expecting the government to articulate its approach to ‘levelling up’, which will doubtless make reference to transport investment. Given the range of developments of transport infrastructure that are being contemplated, fresh thinking is needed to identify and value the benefits in ways that facilitate good decisions. The DfT’s Transport Analysis Guidance is no longer fit for purpose.

This blog was the basis for an article that appeared in Local Transport Today of 28 January 2022.

EconomicsTransport

The Government published its Integrated Rail Plan for the North and Midlands (IRP) in November. Despite headline investment worth £96bn, public reception was mostly unfavourable. Expectations had been excessively raised. Cities that failed to gain hoped for improved services and new stations spoke up more loudly than the winners of this apparent lottery. Huw Merriman MP, chair of the Commons Transport Committee, put well ‘the danger in selling perpetual sunlight and then leaving it for others to explain the arrival of moonlight.’

What has not previously been remarked is the absence of any supporting economic analysis to justify the investment choices of the IRP. This is in marked contrast to the succession of documents justifying HS2, with benefit-cost ratios that declined over time as the capital costs steadily rose. One problem with applying the DfT’s standard approach to economic appraisal, for which the main benefit is travel time saving, is that it is silent on the distribution of economic benefits, a serious disadvantage for a project whose strategic purpose is to boost the economies of the cities of the North and Midlands.

The DfT has at long last recognised the problematic nature of theoretical time savings. The IRP states: ‘Over the last 50 years the time people spend travelling has remained relatively constant, though distances travelled have increased…. Overall, people have taken the benefits of better transport links as the ability to access a wider range of jobs, business and leisure opportunities, rather than to reduce total time spent travelling.’ (para 2.8)  

It is gratifying to find the DfT seemingly accepting an understanding of this reality, to which I have been drawing attention for many years. Nevetheless, there is a footnote appended that suggests the Department doesn’t yet quite get it: ‘Noting that the use of estimated time savings as the basis for quantifying economic impact remains robust.’

If time savings are a ‘robust’ measure of economic impact, why was the standard cost-benefit approach to investment appraisal not employed? The answer, as the IRP recognises, is that ‘rail schemes in the North are at increased risk of being considered poor value for money when applying conventional cost-benefit analysis. This is driven in part by smaller city populations in the North, different travel patterns, as well as the general high cost of building rail infrastructure.’ (para 3.59). So conventional cost-benefit analysis, as prescribed in the thousand-pages of the DfT’s Transport Analysis Guidance (TAG), is not fit for the purpose of appraising rail investments. The main problems are the absence of observed time savings in the long run, silence on the spatial distribution of benefits and on the value of consequential property development and economic regeneration.

In developing the IRP, the Government has been guided by the analysis of rail investment options carried out by the National Infrastructure Commission (NIC), which concluded that prioritising regional links appears to have the highest potential economic benefits overall for cities in the Midlands and the North and would improve many of the currently poorest services. Improving East-West links are higher priority than North-South routes. The Government agrees with the NIC’s analysis that there are opportunities to better serve existing city centres and wider city regions for greater economic benefit, and better integration with existing transport networks. Given constraints on public expenditure, the eastern leg of HS2 between the East Midlands and Leeds will not now go ahead.

To reach its conclusions, the NIC developed a novel multi-criteria analytical approach that attributed monetary values to improvements in productivity in city centres, benefits from connecting people to city centres, and environmental impacts. In addition, estimates were made of improvements to connectivity from faster journeys and of the benefits from unlocking investment in land around stations. In essence, this approach replaces traditional transport user benefits, which mainly take the form of a reduction in time costs, with estimates of the benefits of increased productivity and consumer amenity arising from higher city densities made possible by urban transport investment.

The NIC analytical approach was developed for consideration of a portfolio of rail investments. This is very welcome since there is an undoubted need to move beyond appraisal of individual schemes to view the benefits of whole programmes of infrastructure investments. In a subsequent blog, I will consider the applicability of this approach to road investments.

This blog was the basis for an article in Local Transport Today of 14 January 2022.

Car useEconomicsTravel

Induced traffic is the additional traffic that arises from investment to increase road capacity. The usual reason to increase capacity is to relieve congestion. The intended outcome is that journeys are faster and easier. Yet this can lead to more frequent or longer car trips, changes to route or destination, or mode switching from public transport. All these changes lead to more traffic on the network.

The problem with induced traffic is that the more of it there is, the less the savings in travel time, which are treated as the main economic benefit of investment. So, the magnitude of induced traffic is of interest, prompting the Department of Transport to commission a study by consultants WSP and RAND Europe of options to improve its measurement. Two broad approaches were identified: econometric analysis that quantifies the relation between road capacity changes and observed traffic levels over time; and Before and After (B&A) studies that compare traffic before and after particular interventions.

The disadvantage of the econometric approach is that it generates an aggregate measure that does not indicate the components of induced traffic. B&A studies are more illuminating and could be improved by use of mobile phone network data (MND) to quantify changes to travel behaviour. MND allows an understanding of origins and destinations of trips, before and after an intervention. Large samples of road users are available, which would enable distinction to be made between the various kinds of change in travel behaviour. Transport for London has developed a multi-modal strategic transport model that estimates demand from MND.

One possibility not considered in the WSP/RAND study would be to carry out a sample survey of users of the road network, before and after an intervention, identifying changes in travel behaviour over time. This could employ seven-day travel diaries as for the National Travel Survey, or GPS to track travel patterns via a smartphone app. Studies of this kind, known as longitudinal studies, are well established in medicine and the social sciences. Much current research into the impact of Covid-19 is longitudinal, for instance following the immune response to vaccination over time. However, longitudinal studies of travel behaviour are rare, although they have the potential to understand the impact of investments in far more illuminating detail than is possible with conventional before and after traffic counts. 

The WSP/RAND study concludes that all components of induced travel can be represented in the standard four-stage transport model, except that arising from changes to land use, which may have a substantial impact. However, the study did not consider the implications of induced traffic for the economic analysis of road investments, which routinely employs the output of a traffic model (including induced traffic effects) as input to an economic model. This is usually the DfT’s TUBA model, which generates monetary values of the time savings and other benefits/disbenefits. The net present value of the benefits is then compared with the investment costs to yield a benefit-cost ratio, important for investment decisions.

The phenomenon of induced traffic was recognised in a landmark 1994 report by the Standing Advisory Committee on Trunk Road Assessment (SACTRA). It is remarkable how little progress has been made in understanding its origins and incorporating this into modelling and economic appraisal. A cynic might say that this is because induced traffic undercuts the economic case for a road investment where the main benefit is supposed to be travel time savings, and so is yet a further headwind for the DfT’s £27 billion road investment programme. My own analysis of the widening of the M25 J23-27 showed that induced traffic, largely arising from rerouted local trips, was substantially greater than forecast and wiped out the economic benefits expected to accrue to longer distance business users. This is likely to be typical of investment to add capacity near densely populated urban areas where local commuters and others compete for road space with long distance business users. Standard traffic models are biased against fully recognising induced traffic.

The concept of induced traffic as an aggregate measure is now obsolete. Instead, we need to focus on how travel behaviour actually changes as the result of an intervention, and then work out how to value those behaviour changes. If an investment allows travel time to be saved, then monetary value can be ascribed according to established methods. However, we lack methodology for valuing longer trips to more distant destinations, motivated by the greater value of access to goods or services. Increased access is the real benefit of transport investment.

The above blog post was the basis for an article in Local Transport Today 836, 16 December 2021.