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STAG
• Scottish Transport Appraisal Guidance
– Objective led system of option appraisal
– Appraisal taken against 5 government objectives
• Key themes running through the STAG appraisal
methodology
– Objective led
– Open-minded
– Pragmatic
– Auditable
– Inclusive
Government Objectives
• Environment
• Economy
• Safety
• Integration
• Accessibility and Social Inclusion
Economy
• Analysis of the extent of economic impacts
resulting from a proposal;
• Transport Economic Efficiency (TEE) –
welfare gain which results from an
intervention; and
• Economic Activity and Location Impacts
(EALI) – measures the distributional effect of
the intervention, in terms of employment and
income.
• Wider Economic Impacts (WEBs) –
Agglomeration impacts
TEE Analysis
• Cost-Benefit Analysis under the WTP
framework introduced by the 2003 Green
Book
• Appraisal period is 60 years from scheme
opening
• Values are discounted present values at
2002 market prices.
Forth Replacement Crossing
Example – Forth Replacement
Crossing
FRCS Replacement Crossing Economics (£mill, 2002 values and prices)
C C D D D E
Corridor
Cable-
Immersed Suspension
Crossing Type Tunnel Tunnel Stayed Tunnel
Tunnel Bridge
Bridge
Present Value of Benefits (PVB) 4,655.6 4,655.6 5,303.1 6,026.1 6,026.1 6,317.1
Present Value of Costs (PVC) -2087.4 -1,911.4 -1967.7 -1,397.3 -1,574.9 -2,172.2
Net Present Value (NPV) 2568.2 2,744.2 3,335.3 4,628.8 4,451.1 4,144.9
Benefit to Cost Ratio (BCR)* 2.23 2.44 2.70 4.31 3.83 2.91
The preferred option did actually have the highest BCR (cable stayed bridge).
However, other options (at an earlier stage) and within the work show (e.g. tunnels)
were primarily discounted on environmental grounds.
Example – Edinburgh Tram Line 1
The full Standing Advisory Committee on Trunk Road Assessment (SACTRA) report
can be found at:
http://www.dft.gov.uk/stellent/groups/dft_econappr/documents/page/dft_econappr_02
2512.hcsp
SACTRA conclusions
‘At this stage, the evidence available to us
suggests that a fully-specified and properly
executed cost-benefit analysis, of the kind
traditionally undertaken for transport
projects, will often provide a sufficiently
good approximation for the size of the total
economic impacts…’
Market linkages
Transport market:
Change in Transport Change in Transport
demand supply
Change in Transport
Direct utilisation
J: Commuting K: Migration
response response
O: Change in
P: Increased labour N: Change in M: Competition L: Agglomeration G: Change in labour
housing
Market area land-values effects effects productivity
demand
K: Migration
response
O: Change in
Capital market
N: Change in
housing
land-values
demand
Labour market
E: Changes in
leisure / B: Changes in
Commuting time business
Travel time
J: Commuting K: Migration
response response
Q: Change in real
wages
and employment
C: Inward
D: Location of firms
Investment
M: Competition L: Agglomeration
Land market effects effects
Labour market
Agglomeration
• The methodology is based on the observed correlation between
density of employment and productivity.
• where EjX is the employment in zone j and gijX is the generalised cost of
travelling between zone i and j in situation X, and the parameter α
represents the importance of distance in determining access to markets.
• This notion of generalised cost is given by a weighted average over:
• The weights used in these steps are the numbers of trips (persons or goods
vehicles) by mode and purpose in the base case. These weights are based
on the numbers of trips between the pair of zones considered in each
calculation.
• A detailed transport model, such as Transport Model for Scotland (TMfS),
can be used to produce a value of agglomeration benefits using the
methodology outlined above.
Agglomeration Productivity
Aggregate Response Calculator
• The basic principle of the approach is to define a single zone for the purposes of the
calculation.
• and thus, the terms in g represent the ratio of the generalised cost of travel in the
base year versus the do-something and do-minimum respectively.
• This is useful as it means that the precise form of generalised cost is not important -
what is important is the proportional change of both the do-minimum and do-
something over the baseline.
• This method has the advantage in that the modelling resource requirements are kept
to a minimum - any transport model should, in theory, be able to generate a change
in total generalised cost.
• It is worth noting that gijX as originally defined is a distance based measure - two
zones are clearly a physical distance apart as the crow flies although new
infrastructure may mean the distance that needs to be travelled may change. The
generalised cost measure in the aggregate case is not distance based in the same
way.
BCR under WTP and Public sector
cost
• Under the WTP framework the BCR is sensitive
to Public Sector Cost rather than cost to society.
• As such, the BCR can be influenced by indirect
tax revenues. The NPV of a scheme does not
change (indirect tax is a transfer payment – if the
government gains tax, then the private sector
will lose benefits (by paying the tax)
• A scheme that generates tax revenue will have a
higher BCR than a scheme that doesn’t.
• As such the BCR can be a distorted measure.
BCR and Public sector cost
"Poor" project "Good" project
1 2 3 1 2 3
5
BCR -Poor
BCR - Good 4
0
-2000 -1500 -1000 -500 0 500 1000 1500 2000
Reduction in indirect taxation -1 Increase in indirect
taxation
-2
-3
-4
-5
BCR solution
• Can use BCR to society measure or Cost
to Funding Agency (which can get around
UK taxation issues in a devolved
administration………).
• It is much harder to deal with developer
contributions. These are treated as a cost
to the private sector and a benefit to
government but for a poor scheme make
the BCR worse…….
"Poor" project "Good" project
Capital Costs -1500 -1500 -500 -500
User benefits (TOTAL) 1000 1000 1000 1000
Developer contribution 0 -250 0 -250