Presentation given by Professor Mackie (www.its.leeds.ac.uk/people/p.mackie) to seminar on Improving CBA for Spatial Infrastructure Plans, University of Amsterdam, September 2013

1. Institute for Transport Studies
FACULTY OF ENVIRONMENT
Peter Mackie
Presentation to Seminar on Improving CBA for Spatial
Infrastructure Plans, University of Amsterdam, 11/9/13
Cost-Benefit Analysis in Transport—
Role, Status and Challenges

2. Plan for the next 30 mins
• CBA as a tool to aid decision-making; where does it sit in the
overall process?
• Why is CBA seen as a useful tool for decision support?
• What is its current status?
• Technical challenges
• Policy challenges
• Institutional challenges

3. The decision-making process
Analysis
Pressures
Intuition &
Vision Judgement

4. The decision-making process
Analysis
Pressures
Intuition &
Vision Judgement
Creativity
Top of Office
Agencies
Saleability
Lobby Groups
Budget
Reputation
Economics
Planning
Legal system
Engineering

5. The decision hierarchy
Strategy
Programmes
Implementation
Policy Analysis
Project Appraisal
Optioneering
???5 business
case model
CBA
CEA

6. Contentions
• Strategic policy formulation is not always analytically
informed and rarely analytically driven
• The institutions and tools to support strategic assessment
are weak. Is there commitment to developing the analytical
content of the strategic business case?
• Prior political commitment is the bane of cool judgement in
decision taking
• There can be mis-assignment between available analytical
tools and what the decision hierarchy requires--- eg using a
programme appraisal tool for strategic assessment
• The analytical tools themselves are not always completely fit
for purpose

7. Transport CBA
• A powerful analytical tool ; has served the transport
community well for a long time. Why?
• A coherent and tractable theory capable of practical use
• Some liberal democratic credentials– discover willingness to
pay and add it up
• Tries to handle discounting for time—essential for long-
dated projects
• Useful for comparing alternative uses of public money
• Useful as a framework for supporting decentralised decision
making eg local public inquiries
• Brings a degree of discipline and rule to the process

8. Transport CBA—current status
• Recent report for DfT London International Comparison of
Transport Appraisal Practices –visit DfT website–we studied
England, Netherlands, Germany, Sweden, US, Aus and NZ
• All seven countries have transport appraisal manuals
• The body of evidence on core values for time, safety etc is
pretty consistent, impressive and up to date
• Last decade has seen a broadening to cover values for
reliability; comfort and crowding; fitness and health ; wider
economy impacts ; regeneration ; environmental impacts
• Core application is to capital projects requiring public funds
• The role of CBA in the overall case for decision is not always
transparent.

9. BUT
• I sense there is more challenge to CBA in transport than for
a long time
• Technical challenge
• Policy/planning challenge
• Institutional/political challenge

10. Technical challenge--example
• In a typical road or rail capital project in UK, Employers
business trips account for 10% of traffic and 40% of user
benefits.
• Most countries use Cost Saving Approach –value of travel
time saved equals wage plus non-wage employment cost
• But time use literature challenges this – ‘people can work on
the train’ ‘ travel displaces leisure not work’
• Willingness to pay is the gold standard but deriving
unbiassed combined employer + employee WTP is tricky.
• So, in context of high speed rail, longstanding appraisal
assumptions come under scrutiny, quite rightly.

11. Policy/planning challenges
• Policy agenda has moved on—the 3Rs, reliability,
regeneration and resilience are now key.
• Representing linkages between transport, accessibility
change and induced land use change has become much
more central ; many projects have a local/regional economic
development motive rather than a pure transport sector one.
• Policy embraces walking, cycling, current as well as capital
schemes, funding for public transport…
• Economic engineers think in comparative statics ; planners
think in dynamics. Who is right?
• All the above makes a demanding agenda for appraisal

12. Political/Institutional Challenge
• Global financial crisis has made politicians even more
interested in real economic impact not fairy gold of CBA
• They want an account of how primary impacts flow through
into the real economy.
• They want cities to compete more effectively and to open
the budget choices across sectors—the City Deal.
• So CBA has to compete with Gross Value Added methods
• CBA and GVA can produce very different results for the
same project – differences in perspective/geography; quality
of life benefits; treatment of value of additional output;
behavioural vs standard values ; potential vs realised
impacts

13. Conclusions
• CBA in transport is well-established mature technology in
terms of theory, framework, methods and values
• But much more strategic questions are being asked about
the impact of transport schemes on the spatial economy
• Impacts such as the 3Rs have become more important and
are difficult to model never mind evaluate
• There are two views of appraisal – it is an independent
testing ground for projects and policies which come forward
OR it is there to support whatever policy happens to be and
should morph accordingly. This is the intellectual
battleground.