Transport and the economy: full report (SACTRA)

1 1 Transport and the economy : full report (SACTRA) Contents Summary report ..6 6 Do Transport Improvements Lead to Increased, or More Efficient, Economic Activity? .. 6 Can Economic Growth be 'Decoupled' from Traffic Growth?.. 8 Are Economic Impacts Captured in Current Procedures? .. 9 Recommendations for 13 Concluding 13 Acknowledgements ..14 Chapter 1 - Terms of 15 Method of 15 Interim report .. 16 New Policy Context .. 16 Conceptual 18 Some General 19 Structure of the 20 Acknowledgements ..21 Chapter 2 - The Debate about Transport and the 22 The Need to Understand the Relationship between Transport and the 22 The Nature of the Debate about Transport and the 22 Transport and Economic Trends .. 23 Micro-Level Relationship between Transport and the 30 Spatial 32 Macro-Level Relationship between Transport and the economy .. 35 Conclusion .. 38 Chapter 3 - Key Concepts Explained ..40 40 Transport : Some Definitions.

2 40 GDP as a Measure of Economic Performance .. 42 Transport and the economy : full report (SACTRA) 2 Sustainable 42 The Sources of Economic Growth .. 43 Efficient Allocations of Resources .. 45 Applying the Principles of Marginal Cost Pricing .. 47 Social Cost Benefit 48 Transport Benefits and Final Economic Benefits .. 52 'More Productive' and 'Less Productive' Travel .. 55 Summary .. 58 Overview of Chapters 4 and 60 Causes of economic growth .. 60 Transport improvements considered as reductions to trade 61 Theoretical modelling of Transport effects in the context of imperfect 61 Freight and logistics .. 62 Labour markets .. 62 Local and regional effects ..63 64 Conclusion .. 65 Chapter 4 - The Linking Mechanisms: An Outline ..66 66 Transport and the economy .. 66 Transport infrastructure and growth .. 67 Robustness .. 80 Land-Use/ Transport Interaction Models, Imperfect Competition and the Evaluation of Economic Benefits .. 82 82 Chapter 5 - Linkages in a Spatial economy .

3 84 84 How Firms Respond to Transport Changes .. 84 How Labour and Housing Markets Respond to Transport 90 Agglomeration and Geography .. 98 Input-Output The Role Of Land-Use/ Transport Interaction Models .. 106 Conclusions: Implications for Research and Appraisal .. 109 Chapter 6 - Transport Transport and the economy : full report (SACTRA) 3 The Potential for 'Decoupling' Economic Growth from Traffic Growth .. 112 112 Transport Intensity .. 112 Price and other Policy-related Influences on Traffic Volumes .. 118 Conclusion .. 125 Chapter 7 - The Economic Impacts of Reducing Traffic ..126 126 Market Failures in Road Transport .. 127 Double-Dividends and Economic Growth .. 132 Compensation .. 135 Measures to Reduce Traffic and their Economic Impact .. 137 Implications for Appraisal .. 144 146 Chapter 8 - Implications For Appraisal ..149 149 The Context For Our Considerations .. 151 Implications for Appraising the Effects of Transport Interventions on the economy .

4 152 Appraisal Requirement 1: What is the Rationale for the Intervention? .. 153 Appraisal Requirement 2A: What are the Benefits/Disbenefits of the Intervention Calculated Using Conventional Transport Cost Benefit Analysis (Using Best Practice and on the Assumption of a Perfectly Competitive economy outside the Transport Sector)?.. 153 Appraisal Requirement 2B: What are the Total Economic Impacts of the Intervention?.. 158 Appraisal Requirement 3: What is the Pattern of Gains and Losses, in both Economic Activity and Jobs, which will arise from the Intervention? .. 159 Relationship with our Interim report Diagnostic 160 Interventions: Schemes and Projects, Regions and Corridor Strategies, and National Policies160 Chapter 9 - Current Appraisal Practice ..162 162 An Overview Of Current Appraisal Practice .. 162 The Content of this Chapter .. 165 Cost Benefit Analysis ..165 Appraisal at Different Levels .. 181 Chapter 10 - Recommendations for an Improved Appraisal 186 Emphasis and Structure of this Chapter.

5 186 Transport and the economy : full report (SACTRA) 4 Observations from the Consultees .. 187 Appraisal Requirement 1: What is the Rationale for the Intervention? .. 188 Appraisal Requirement 2A: What are the Benefits/Disbenefits of the Intervention Calculated using Conventional Transport Cost Benefit Analysis (Using Best Practice and on the Assumption of a Perfectly Competitive economy outside the Transport Sector)? .. 190 Appraisal Requirement 2B: What are the Total Economic Impacts of the Intervention?.. 200 Appraisal Requirement 3: What is the Pattern of Gains and Losses, in both Economic Activity and Jobs, which will arise from the Intervention? .. 221 Ex-Post Evaluation Studies .. 224 Equilibrium 226 Concluding 226 Chapter 11 - List of Recommendations ..228 228 The Nature and Significance of the Relationship between Transport and the 228 The Scope to Reduce the Transport 'Intensity' of the economy .. 229 Improvements to Current Appraisal Practice.

6 230 Appendix A - List of Members and Terms of List of Members .. 234 Members of the SACTRA Secretariat .. 234 Terms of Reference for SACTRA .. 235 Appendix B - Evidence Supplied to the SACTRA Section One the committee's request for 238 1) Chairman's letter of 3 march 238 2) Annex a of the Chairman's letter General Issues .. 239 3) Annex B of the Chairman's letter The Relationship Between Improvements In Transport Provision And Economic Growth .. 240 4) Annex c of the Chairman's letter Conventional Cost Benefit Appraisal Methods For 241 5) Annex D of the chairman's letter The Impact On Economic Growth Of Measures To Reduce Transport Intensity .. 242 Section Two Responses & contributions .. 244 6) Written Evidence .. 244 7) SACRA 8) Miscellaneous consultancy .. 247 9) Other submissions to 247 10) Attendees at seminar on the implications of imperfect competition for Transport appraisal248 Transport and the economy : full report (SACTRA) 5 11) Attendees of special meetings and/or additional advice to SACTRA.

7 248 Appendix C - Economic Effects of Transportation Appendix D - Interpretation and Analysis of Transport Analysis of Transport 250 Differences in 254 Appendix E - Benefits and Disbenefits of Traffic Reduction Measures ..265 General Appraisal Issues with respect to Traffic Reduction Measures .. 265 Urban Congestion 266 Parking Controls .. 267 Motorway Charging .. 268 Road Capacity Reductions or Roadspace 269 Bibliography ..271 Summary report .. 271 Chapter 1 Introduction ..271 Chapter 2 The Debate about Transport and the economy .. 271 Chapter 3 Key Concepts Explained .. 273 Overview of Chapters 4 and 274 Chapter 4 The Linking Mechanisms: An Outline .. 274 Chapter 5 Linkages In A Spatial 276 Chapter 6 Transport Intensity and the Potential for 'Decoupling' Economic Growth from Traffic Growth .. 279 Chapter 7 The Economic Impacts of Reducing Traffic .. 280 Chapter 8 Implications For Appraisal .. 282 Chapter 9 Current Appraisal Practice.

8 282 Chapter 10 Recommendations for an Improved Appraisal Practice .. 284 Appendix C .. 287 Appendix D .. 287 Appendix E .. 287 Glossary .. 287 Glossary ..288 Transport and the economy : full report (SACTRA) 6 Summary report Introduction 1 In 1996 the Standing Advisory Committee on Trunk Road Appraisal (SACTRA) was asked by the then Secretary of State for Transport to consider the effects on the performance of the economy which might be caused by Transport projects and policies, including new infrastructure, changing prices, demand management and measures to reduce traffic. Following the change in Government in May 1997, we produced an Interim report (December 1997) to assist preparation of the White Paper 'A New Deal for Transport : Better for Everyone'. We now submit our final report . 2 The report addresses four main questions: do Transport improvements lead to increased economic activity? is it possible to 'decouple' growth in traffic levels from growth in the economy , in order to obtain the positive benefits of greater wealth, while reducing some of the negative effects of congestion and environmental impacts?

9 Are economic impacts fully captured in the procedures for estimating benefits and costs currently used by the Department of the Environment, Transport and the Regions? what recommendations follow for the Department's procedures and practice for Transport appraisal? 3 Our terms of reference go beyond the specific question of trunk road schemes and, therefore, the Committee has aimed at a general approach which treats even-handedly all types of Transport investment or policy initiative, for all modes. The best balance among these will vary from time to time and place to place in accordance with specific conditions and strategic considerations, but the principles and factual basis of appraisal should always be consistent. 4 In considering the effects of Transport on the economy , we have borne in mind that Transport policy also has many other objectives, including the improvement of safety, environment, travelling conditions, accessibility, integration and social inclusion.

10 Provided that the successfully delivered benefits under these headings justify the costs, improvements may be well worthwhile even if they do not produce a positive effect on economic performance. 5 The Committee's conclusions in answer to the four questions are as follows. Do Transport Improvements Lead to Increased, or More Efficient, Economic Activity? 6 Theoretical considerations suggest that the main mechanism by which changes in Transport could have an effect on the economy is by a change in the costs of movement. We therefore defined a Transport improvement as any intervention - whether by infrastructure investment, more efficient Transport management, or otherwise - which successfully produces sustained reductions in Transport costs, or equivalent improvement in service delivered. Transport and the economy : full report (SACTRA) 7 7 These cost reductions accrue to different categories of traffic, some clearly contributing more directly to economic activity than others, which in some cases will be reflected in their higher valuation of savings in travel time.