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1Press F5 to launch the toolkit If you are seeing this message, you have opened the toolkit in PowerPoint.To launch it automatically, simply download the toolkit to your computer and double click on the file.Economic Insights Toolkit
2>> Introduction >> Transport and the Economy Option Section 1Section 2Section 3Welcome.>> Introduction >>Transport andthe EconomyAn introduction to howtransport affects theeconomyOptionDevelopmentDeveloping options thatmaximise economic growthOptionGenerationThe option generation process in the context ofeconomic growth>> Skip introduction >>
3Welcome to the Economic Insights Toolkit The Economic Insights Toolkit is all about transport and economic growth. The aim of this toolkit is to help you build your understanding of the key interactions between transport and economic growth and how to apply this to the process of transport scheme development. This toolkit is primarily aimed at transport professionals who are in the process of developing transport schemes.The toolkit is split into three sections. Each section has several parts.Section 1: Transport and the Economy. This is an introduction to the ways in which transport affects economic growth and the key “Drivers of growth” that transport can influence.Section 2: Option Generation. This covers the steps in conducting a thorough option generation process and how characteristics of the current situation translate into the Drivers of growth.Section 3: Option Development. This section provides an overview of the option development process and next steps through the lens of economic growth.This toolkit does not produce outputs. It is designed to help you think about how a scheme you are working on, or transport in general, can affect economic growth.Click the ‘next’ button to continue
4Although this toolkit focuses on economic growth, this is not the only criteria we have for transport, so please do not use this toolkit in isolation. Use it in conjunction with the full range of DfT guidance.This toolkit is accompanied by the Social Impacts Toolkit, which explores the role transport can play in social impacts and sources of evidence to explore this relationship further.This toolkit has been developed by DfT Strategy Unit. It may be updated from time to time to ensure it is consistent with the latest guidance. If you haven’t used it for a while, please download the latest version.We would welcome your comments and feedback. To send us feedback contactThis toolkit is intended to be used full-screen with a mouse. You don’t need to use the keyboard but you can exit at any time by pressing Esc. If you have accessibility requirements, please download the PDF version.
5How to use the toolkit Main menu Help You can return to this screen at any time by pressing this button.ReferencesLook up the source of data or evidence cited in the toolkit hereGlossaryLook up definitions of terminology hereExitIcons and colour coding:Hyperlink to an external websiteHyperlink to download a PDFHyperlink to download an Excel fileAvailable buttonInactive button Pop-up containing more detailed informationReferences are superscripted like this: 34You can find the citation by clicking the REF buttonMove between pages using the buttons at the bottom right:Next pagePrevious pageBack to section menuEnd of this part: Move to the next partEnd of the Section: Back to the main menuThis shows you which section and section part of the toolkit you are currently viewingThis shows you where you are within a section Click the Home button to go to the main menu and start using the toolkit
6Transport and Option the Economy Option Development Generation Section 1Section 2Section 3Transport andthe EconomyAn introduction to howtransport affects theeconomyOptionDevelopmentDeveloping options thatmaximise economic growthOptionGenerationThe option generation process in the context ofeconomic growthRelease version 1.1 – January 2014
9Transport and the Economy Introduction Transport Drivers of Growth Problems andObjectives
10Transport and the Economy Introduction Transport Drivers of Growth Problems andObjectives
11Transport and the Economy Introduction Transport Drivers of Growth Problems andObjectives
12Transport and the Economy: Introduction Section 1 has three parts.The key in the bottom left corner shows you where you are in the toolkit. Make a note of where you are if you want to stop and return to it later.The first part introduces economic growth, how it is measured and how we explain the relationship between transport and economic growth in this toolkit.The second part looks in more detail at what we refer to as “Drivers of growth”, which constitute the different elements of transport scheme appraisal.The third part looks at how we move from Drivers of growth to real world issues we observe with the transport system.Click on highlighted text in the toolkit to look it up in the glossary.Click the “next” button to begin.
13Transport and the Economy: Introduction What is economic growth?The amount of goods being produced and services rendered in the economy is economic output or economic activity.Economic growth is the rate of change in the total amount of economic output or economic activity in the economy. The level or rate of economic growth indicates how fast the size of the economy is changing. When the economy is growing, the rate of growth is positive. When it is shrinking, the rate of growth is negative.How do we measure economic growth?The most widely-used way of measuring the level of economic output is Gross Domestic Product (GDP) Economic growth is commonly expressed as a percentage change in GDP from one period to the next.The purpose of this section is to examine how transport affects economic growth and how transport interventions such as new infrastructure or improvements to the existing network can make a difference.Click for more informationHA
14Transport and the Economy: Introduction How does transport affect economic growth?The relationship between transport and the economy is very complex. In this toolkit, our explanation of this relationship is broken down into three sections:WaysDriversProblems & ObjectivesThe relative size of the sections reflects the number of variables in each. There are several “Ways” that transport affects economic growth. Some of these “Ways” can be assessed in more detail through a range of “Drivers”. The problems we observe in transport and the objectives we may have for it may be wide-ranging, but their impact on economic growth can be expressed or assessed through one or more of the “Drivers”.HA
15Transport and the Economy: Introduction Ways transport affects growth:Click for more informationTransport provides the connectivity that is essential for nearly all kinds of economic activityPrimary WaysTransport can facilitate economic growth by bringing businesses “closer” to each other, to their workers and their markets Transport can constrain economic growth if links are congested or unreliable, if firms cannot easily reach suppliers and markets in foreign countries, or if the cost of transport is too highThe transport industry is a major sector that supports millions of jobs and directly contributes billions of pounds to the economy Secondary WaysInvestment in infrastructure can provide a short term boost to the economy, but it can also have more profound effects…
16Transport and the Economy: Introduction What do we mean by Primary Ways and Secondary Ways?The Primary Ways rely on transport users to create economic activity, whereas the Secondary Ways constitute a source of economic activity.The main reason we use transport is because it is a means to an end: When we use transport, it is normally motivated by something that it enables, like going to the shops or going to work, rather than because we simply want to be transported. This is why transport is referred to as a “derived demand”.The “Primary Ways” is a term we use in this toolkit to cover all the things that contribute to economic activity which transport enables or facilitates.For example, improving transport connections can reduce firms’ costs and can facilitate interactions between different firms in a way that boosts productivity. One of the things this creates is agglomeration effects.Transport can also constrain economic activity, putting a brake on growth, if connections that are important for business or consumers are congested or unreliable.We’ve used the term Primary Ways because the vast majority of transport’s impact on the economy is through these Primary Ways. The Primary Ways can be expressed or assessed through a range of “Drivers”.
17Transport and the Economy: Introduction What do we mean by Primary Ways and Secondary Ways?The “Secondary Ways” transport affects growth include the money we spend on transport itself. This includes the contribution to economic activity of transport-related sectors and the short-term boost to the economy of investing in or developing transport infrastructure, systems, vehicles or rolling stock. Economists often refer to these as Keynesian effects.When we invest in infrastructure, we build a legacy that could have effects for hundreds of years. We capture the benefits of what the infrastructure enables through the Primary Ways. The benefit to the economy of its construction, however, and the ongoing cost of keeping it running, mostly only exist in the short-run.We refer to them as Secondary Ways because the impact they have on the economy is less significant than the Primary Ways and because investments we make in the transport system are motivated by what they enable. What transport investments enable is people and firms to create economic activity, which we have categorised under the Primary Ways and can measure through the Drivers of growth.
18Transport and the Economy: Introduction Geographic effectsWhen we improve transport, it can make an area more attractive for firms to locate, for example if the transport network now gives them access to a sufficiently large, diverse or skilled pool of labour to meet their needs. When a firm moves to a new location, it may be creating jobs in that area, but it may also be taking jobs away from another area. This is known as a displacement effect. It’s worth nothing that labour supply considerations are just one small aspect of a firm’s decision about where to locate its operations. The transport costs of other factors of production are another consideration but there are also numerous cost and non-cost factors a firm will consider. Whilst the transport system can potentially influence a firm’s location decision, demonstrating that their choice is due to the transport system can be challenging.Depending on the nature of transport interventions, we may create or extend agglomerations and this may result in a net gain to not only the number of jobs but also their relative “quality” in terms of skill level or productivity.The key point is that transport can boost economic growth in a particular area but it can also displace it from another. Promoting economic growth is a national aim that has local benefits and local dependencies. Delivering growth and new jobs at a local level is part of achieving this aim. When assessing the overall impact of transport schemes, we need to properly understand and convey the net gain to society, not just the benefits in a particular area.
19Transport and the Economy: Introduction Seeing the bigger pictureTransport interventions have the greatest positive impact on growth where the transport system is a major factor holding it back.As we’ve explained, the majority of transport’s effect on the economy relies on people and businesses to take the opportunities transport provides and engage in economic activity. However, simply building transport infrastructure or improving transport services will not necessarily generate growth. Other conditions must be met first. For example, providing a bus service might make it easier for people to get to a place of work, but there needs to be a job for them to go to.As we mention in the Primary Ways, transport can enable economic activity if other conditions for growth are met. It can also constrain growth, for example by preventing people from doing more productive things because they are stuck in a traffic jam. Relieving congestion can instantly boost the economy, because it’s very likely that the time that is freed up will be used for more productive activities. However, boosting productivity by enabling people to get a better job in which they will be more productive may take time and relies on people to change jobs, for example. This is why we distinguish between direct and indirect Drivers of growth, which we’ll return to in the next part of this Section.
20Transport and the Economy: Introduction Seeing the bigger pictureThe economic case is only one part of our assessmentEconomic growth by itself has many limitations as a means of decision making. It doesn’t consider value for money, for example. We assess it as part of the economic case for a scheme, which takes into account such issues. However, the pure ‘value of money case’, or ‘economic case’ is just one part of our assessment of whether to proceed with an intervention. In Government and in DfT, we follow a five-case model. We’ll return to this theme in the next section.Transport is only one part of the storyWe must consider how best to maximise economic growth as part of a wider strategy that considers a broad range of measures, not just transport.Any form of investment, including investment in transport, has what economists call an opportunity cost. Opportunity cost is a different concept to pure financial cost. Opportunity cost relates to the potential benefits of using the money instead for any other type of intervention or combination of interventions, that will be foregone under the proposed intervention. We should assess whether the benefits of other possible uses of the money would be greater, in absolute or relative terms, than those that the proposed intervention is estimated will yield. In the next section, we’ll cover the Drivers of growth. These give us a consistent basis against which to weigh up different options.
21Transport and the Economy Introduction Transport Drivers of Growth Problems andObjectives
22Transport and the Economy Introduction Transport Drivers of Growth Problems andObjectives
23Transport and the Economy: Transport Drivers of growth What are the transport Drivers of growth?So far, we’ve looked at five distinct “Ways” that transport affects growth. In this section we will look at the Drivers of growth in more detail. For any aspect of transport, its impact on economic growth can be assessed through these Drivers. For any transport scheme, regardless of the type of scheme or how big or small it is, the impact it will have on economic growth can be estimated using a certain number of these Drivers. Different types of schemes have different levels of impact through different Drivers.You will find links in other parts of the toolkit that allow you to refer back to the explanations of the Drivers in this Section.The Drivers play a vital role in providing us with a framework for assessing the impact of transport schemes.For each Driver, you’ll find a description, some examples and links to WebTAG -DfT’s appraisal guidance, which provides further detail on how we use each Driver in transport appraisal.
24Transport and the Economy: Transport Drivers of growth We assess the impact of transport schemes on the economy in order to help prioritise spending.The economic case considers the value for money of transport proposals. However this is just one of five “cases” we assess schemes against.For more information about the five-case model see DfT’s transport business case guidance which is compliant with the HM Treasury Green BookThere are different ways of assessing transport’s impact on the economy.This toolkit does not go into detail about transport appraisal methodology, but it is worth noting that there are alternative approaches to quantifying the impacts on economic growth. DfT’s preferred methodology is the PVB approach, but alternative approaches, such as GVA exist HA
25Transport and the Economy: Transport Drivers of growth The Economic Insights Toolkit relates to current DfT guidance. In October 2013, DfT published a set of documents . that bring together information on how and why DfT appraises transport investment options, the latest technical research to support development of DfT’s appraisal framework and methods, setting out the reasons for undertaking the research, the key findings, and our responses to them, plus our plans for developing our appraisal techniques.How do the Drivers help us understand the impact of transport interventions?The Drivers allow us to assess and quantify the impact of transport schemes on factors that affect economic growth in a consistent way. The impact on economic growth of any transport scheme can be assessed through one or more of the Drivers.The strength of the evidence surrounding each Driver varies. For some Drivers, the evidence of transport’s effect on economic growth is weaker and we can be less certain of its impact. Please read this toolkit in conjunction with the relevant section of WebTAG in order to fully understand the issues.
26Transport and the Economy: Transport Drivers of growth 8click the buttons to find out moreThe efficiency of the transport system for consumers, businesses, and transport providers.These are direct or first-round effects Journey timesThe reliability of the transport systemVehicle operating costsReliabilityTransport can also influencegrowth through a range ofwider economicimpactsThese are indirect orsecond-round effects Businessinvestment and innovationCompetitionLabour marketsRegenerationTradeAgglomeration effectsForeign DirectInvestment
27Transport efficiency: Journey times Reducing journey times improves productivity and wellbeingTime is money. How long it takes to get somewhere is the single most direct link between transport and the economy. For businesses, time spent travelling during the working day is a cost because the level of productivity whilst travelling is often lower than whilst at work.Improving transport connections in a way that saves time by reducing congestion or increasing speeds, allows the total amount of productive time for users of those connections to increase, which increases overall productivity.How do journey times affect wellbeing?Shorter commuter trips could increase working or leisure time. Increased leisure time helps to improve wellbeing and, in turn, productivity at work. Higher productivity makes the UK economy more competitive against others, which helps encourage companies to invest in the UK and create jobs.ExamplesA 5% reduction in travel time for all business and freight travel on the road system could reduce costs by £2.5bn6The A6 to Manchester Airport relief road is estimated to provide travel time savings of £776m7Each day in transit is worth between 0.8% to 2.2% of the value of a traded good8How do we calculate the benefit to the economy of saving time?For business users, we calculate the value of working time per person, which is the value of the time that is lost to travelling, as perceived by an employer. This is similar to the wage rate plus other costs such as national insurance and pensions. The value of time for transport users has been calculated in WebTAG guidance.TAG UNIT A1.3 ▪
28Transport efficiency: Vehicle operating costs Vehicle operating costs have a direct impact on business profitabilityHow much it costs businesses to produce goods or provide services affects their profitability and competitiveness. The cost of transport is an important part of business costs. Reducing costs for businesses helps to boost productivity and increase their competitiveness domestically and internationally. The effect on consumers also impacts on growth. Reducing the cost of travel can increase consumption of goods, services and leisure activities, which can boost growth and increase wellbeing.How does transport policy affect vehicle operating costs?Shortening distances by providing more direct or free- flowing routes, relieving congestion or smoothing traffic flows will not only improve journey times, but also increase fuel efficiency. Increasing fuel efficiency reduces costs for business and consumers. It also reduces CO2 emissions and can improve local air quality.ExamplesReplacing the Northern Road Bridge on the A394 was calculated to save over £4million in business user vehicle operating costs9Fuel costs can amount to nearly 40% of total vehicle operating costs for some HGVs10How do we calculate vehicle operating costs?Costs and benefits of fuel savings can be calculated by multiplying average fuel efficiency of vehicles by the price of fuel. Non-fuel costs should also be considered, including tyres, oil, maintenance and depreciation.TAG UNIT A1.3 ▪
29ReliabilityPoor reliability imposes costs on the economy and is a barrier to growthPoor reliability means unpredictable variations in journey times. It is generally caused by unexpected events such as spikes in traffic volumes, maintenance issues, extreme weather, accidents or security incidents. Routine, predictable congestion on the road network, for example, comes under the “journey times” Driver. We can influence reliability by improving capacity, safety, security, maintenance or resilience.How does poor reliability affect the economy?Business travellers must plan to avoid being late, often by simply allowing more time for journeys. This has an impact on their costs and reduces productivity. Manufacturers that use just-in-time production methods depend on reliable transport connections, as parts and materials must arrive when they are needed – not sooner and not later. Poor reliability means firms must hold spare inventories in case deliveries do not arrive on time. This incurs storage costs and makes firms less competitive.ExamplesThe upgrade of the A164 around the Humber bridge is expected to provide more reliable access to the International Hub & Humber Ports Complex11The new Northern road bridge carrying the A397 will enable more reliable journey times into Portsmouth12How do we measure reliability?The amount of unpredictable variance in journey time is calculated and combined with the value of travel time to create an estimate for the value of reliability, which can then be used in appraisal.TAG UNIT A1.3 ▪
30Wider Economic Impacts: Business investment and innovation Good transport links help businesses to innovateTransport improvements can provide direct savings to time or vehicle operating costs for firms. This can free up money for increased investment, which may lead to productivity increases, or economies of scale through increased production.How can transport improvements stimulate business investment?Just-in-time production is just one example of how aspects of the transport system can stimulate business investment and innovation. This method of production depends on a high degree of reliability in the transport system. If this can be achieved, manufacturers using this method can benefit from reduced storage costs, more efficient production techniques and greater competitiveness. This could enable them to reach larger markets and realise greater economies of scale.ExamplesIncreasing the maximum truck weight to 44 tonnes reduced annual truck kilometres by 292 million betweenTransport improvements over the last 20 years have facilitated the adoption of just-in-time production methods, which have saved UK businesses over £6bn per year14What are the benefits of business investment and innovation?Many of the benefits here can be monetised using the time and vehicle operating costs savings methods without being additional to benefits calculated under transport efficiency. However, changes in productivity may be more difficult to quantify.TAG UNIT A1.3WebTAG unit 3.5.6 ▪
31Wider Economic Impacts: Competition Good transport links are important for effective competitionAn effective and comprehensive transport system enables consumers to reach for example, more retail outlets, allowing greater choice of consumer goods. Firms can trade over a wider area and have access to a wider range of suppliers.Competitive markets make society better off because it can increase output and result in lower prices, which increases consumer welfare. Increased output will also increase employment and contribute further to economic growth.The UK generally has a competitive economy and the comprehensiveness of the transport system is a vital contributor to this. Where there are significant levels of imperfect competition, it is unlikely that transport is acting a constraint to the level of competition.ExamplesLow cost airlines significantly increased competition in the industry and had a major impact on leisure and tourism18The transport system in the UK is relatively comprehensive and markets are already relatively competitive. The Standing Advisory Committee on Trunk Road Assessment (SACTRA) Report, 2001, concluded that the competition effects from transport are difficult to measure and are ambiguousIt is difficult to measure the precise impact of transport on competition. Estimating the impact of new markets due to improved connectivity is also difficult.TAG UNIT A2.1 ▪
32Wider Economic Impacts: Labour markets Transport is fundamental to labour market operationTransport connects people to jobs. Improvements to transport can increase the labour supply and the gains from working by reducing the generalised cost of travelling to work. Furthermore, better transport links can facilitate a better match between jobs and workers by giving firms a bigger choice of workers and workers a bigger choice of jobs. This can generate an overall increase in productivity as people are more likely to be employed in the job where they are most productive.ExamplesCrossrail will bring an extra 1.5 million people within a 45-minute commute of central London15The Thameslink upgrade is estimated to provide wider benefits to the UK economy as a result of increased accessibility to key job markets, estimated to be worth £990m over the lifetime of the scheme16Does your transport scheme create jobs?It is necessary to estimate the net number of new jobs created resulting directly from a transport intervention. The value of new jobs must be estimated using the monetary benefit of each job created, which will depend on the types of jobs created. There are two WebTAG references that are relevant:TAG UNIT A2.1TAG UNIT A2.2 ▪
33Wider Economic Impacts: Regeneration Transport improvements are a major component of regenerationAreas classified as “Regeneration Areas” are characterised by poorer economic performance relative to other areas. Regeneration Areas are usually subject to a wide range of problems, only some of which can be addressed by transport measures. Transport measures must therefore be complemented by other measures if they are to succeed in contributing to regional economic goals.Poor accessibility is a common feature of underperforming areas. This makes it difficult for residents to find employment outside the area, whilst the pool of skills in the area may not be sufficient for firms to locate there. A transport scheme may reduce unemployment in the Regeneration Area by providing access to employment opportunities outside the area, or it may persuade firms to locate in the area if it contains a suitable workforce, access to consumers or access to suppliers.ExamplesTransport improvements formed a significant part of the regeneration of the Olympic Park in LondonThe Moss Side and Hulme partnership in Manchester combined transport improvements with new housing, green space, and youth centres23The assessment of the regeneration impact of a scheme forms a Regeneration Report. DfT’s chosen measure of contribution to regeneration objectives is the change in the number of Regeneration Area residents in employment. The Regeneration Report is not concerned with the economic impact at a national level, only the impact within the Regeneration Area and the surrounding region.TAG UNIT A2.2 ▪
34Wider Economic Impacts: Trade Transport costs are a major component of trade costsTransport costs can be seen as a barrier to trade. Reducing transport costs could help reduce the cost of exporting and importing goods. Cheaper exports could increase demand for UK goods abroad, which could stimulate economic growth in the UK. Firms importing raw materials and intermediate goods could benefit from lower costs, making them more competitive internationally. Cheaper imports can also lead to a greater choice of goods and a higher standard of living for consumers.There can also be indirect effects. Export growth enables firms to specialise and benefit from economies of scale. Import growth can stimulate further productivity gains through technological spillovers. Transport costs are especially important for today’s globalised, diverse, and far-reaching supply chains.ExamplesThe UK has one of the most globalised economies in the world. The extent of import and export activity is a key contributor to the overall economic growth of the UK19Constructing the London Gateway port will allow one of the UK’s largest paper exporters to cut 380,000 lorry miles from their supply chain annually20It is difficult to measure the precise impact of transport on trade as the level of trade is affected by a vast range of factors.This is likely to be a non-monetised impact pathway but may feature in a scheme’s strategic case. ▪
35Wider Economic Impacts: Agglomeration effects Transport can extend clusters and create agglomerationsAn agglomeration is a concentration of firms and workers which can enable higher productivity through connections with suppliers and markets (specialist inputs can be provided more efficiently), deep labour markets, knowledge transfers or more specialised leisure activities. Transport can increase the density of economic activity and hence create agglomerations by effectively bringing firms closer together through reducing journey times between them.There are two types of agglomeration benefits. Localisation economies are gained by firms in the same industry clustering together, and urbanisation economies are associated with a closeness of overall economic activity. Larger agglomerations enable higher productivity. Transport constraints can inhibit agglomeration economies as transport costs are a significant factor in determining the concentration of economic activity in a given area.ExamplesThe arc from Cambridge to Oxford via Bedford, Buckingham, Milton Keynes and Bicester includes five universities and a high concentration of innovative firms in precision engineering, motorsport, automotive design, medical equipment, electronics and professional servicesThe “Silicon Fen” is a concentrated cluster of over 1,400 high tech firms that has grown up around Cambridge University, and is home to firms such as ARM and IP GroupThe A6 to Manchester Airport Relief Road should deliver agglomeration benefits of £1.1bn17We first estimate how the scheme impacts the effective density of an area, which reflects the accessibility of firms and workers. We then estimate the productivity response from the change in the agglomeration level. For more information see WebTAG unitTAG UNIT A2.1 ▪
36Wider Economic Impacts: Foreign direct investment Good transport links can help attract Foreign direct investmentForeign Direct Investment (FDI) is a direct investment in a business in one country by an individual or business in another country. The benefit to the receiving country is increased capital investment, resulting in jobs and economic activity.Transport links, both domestic and international, easy access to markets, and the availability of qualified staff are just some of the things that a global business considers when deciding where to locate its operations. However, the importance of transport in this decision should not be underestimated.Businesses, capital flows and labour are becoming increasingly globally mobile. Attracting global firms to the UK can increase employment and bring new expertise. It may also contribute to increasing the size of agglomerations, which can lead to increased productivity.ExamplesIn 2010 inward foreign direct investment to the UK was worth $32.8bn21In the 2010 European Cities Monitor, good transport links is the fourth most important factor in firms’ reported location decision after easy access to markets, customers, and clients22This effect is very difficult to quantify as the quality of transport infrastructure will only be one part of a global firm’s location decision. However, the impact of attracting a large global firm can be significant within a particular sector.This is likely to be a non-monetised impact pathway but may feature in a scheme’s strategic case. ▪
37Transport and the Economy Introduction Transport Drivers of Growth Problems andObjectives
38Transport and the Economy Introduction Transport Drivers of Growth Problems andObjectives
39Transport and the Economy: Problems and Objectives What do we mean by “Problems and Objectives”?We use the term “Problems” to refer to any problem that we observe in relation to the transport system, led by current or predicted future problems. “Objectives” can refer to issues we observe in the transport system, but primarily concerns the aims or ambitions we may have to improve it. Many of the things we observe about the transport system could be having an impact on economic growth in some way. The Drivers of growth allow us to assess these impacts consistently.Problems we observe with the transport system include problems such as congestion and overcrowding. We can assess their impacts through the Drivers of growth.Improving connectivity, accessibility, resilience or local air quality are examples of objectives we may have to improve the transport system. We can also use the Drivers to assess the impact on economic growth of achieving these objectives.Problems and objectives essentially constitute measures of the effectiveness of the transport systemBefore we look at some examples of problems and objectives in more detail, it’s worth defining some of the terms we use to describe the effectiveness of the transport system.HA
40Transport and the Economy: Problems and Objectives The effectiveness of the transport system can be described in terms of:Connectivity, which is used to describe the general performance of the transport system. Connectivity can be assessed through journey times and wider economic impacts such as agglomeration effectsConnectivityCongestion, which is used to describe excess demand in the transport system that can be measured in terms of several of the Drivers of growthCongestionAccessibility, which we use to describe how easy or hard it is to access the transport system for users with different needsAccessibilityResilience, which we use to describe how susceptible the transport system is to unexpected events and how quickly it can recover from themResilience
41ConnectivityConnectivity measures the “quality” of the transport networkThe term ‘connectivity’, though not recognised or quantified in WebTAG, is generally used to describe a level of observed performance of the transport system, particularly in terms of the availability of transport and the extent to which it enables people and goods to reach a range of destinations at a reasonable generalised cost. Measures that improve connectivity for business and freight users and those that provide workers access to jobs can have a positive impact on growth. Enabling leisure users to more easily access a greater range of destinations also contributes to growth.Transport improvements will deliver the greatest benefit to the economy where there are current constraints on connectivity that are limiting economic growth. Therefore, there is a need to identify where these constraints exist.It is also important to consider displacement effects: a scheme improving connectivity between two urban areas may displace activity from one to the other. There may be a productivity gain in one, but it is not necessarily the case that this will be sufficient to offset the loss in employment and development in the other.Good urban connectivity is very important as a high proportion of employment is in core urban areas, and cities contribute more to economic growth than rural areas.HAAlthough not recognised in webTAG, some of the Drivers we may be referring to when we talk about “connectivity” include time savings, vehicle operating costs and potentially agglomeration effects and other wider economic impacts. Increasing connectivity between a cluster and its surrounding area, for example, could enable more concentrated economic activity by bringing the surrounding areas ‘closer’ to the centre of the cluster in generalised cost terms. This could result in a larger agglomeration than previously.“Connectivity” is not assessed in WebTAG but the benefits of improving connectivity may feature in a scheme’s strategic case. ▪
42CongestionCongestion is a result of excess demand and directly impacts on the economyAdverseEffects ofCongestionIncreased journey timesDecreased reliabilityLess comfortable journeysHigher emissionsHigher fuel costsWe use the word congestion in relation to the road network to describe the additional time spent driving due to having to slow down or queue as a result of the presence of other vehicles. It results in increased and more unreliable journey times. Congestion is relative to the maximum or ‘free flow’ speed the road permits and increases as traffic rises towards the capacity of the road. Congestion can occur at any time and may be due to insufficient capacity to meet the routine daily peak demand on the network, or when there is an unexpected peak in demand.Congestion on the whole road network in England is estimated to cost the country £19 billion every year24. Congestion will become increasingly challenging to tackle as traffic levels are estimated to be 43 per cent higher by with congestion forecast to increase by 61%. There are a wealth of road congestion statistics from the Highways Agency and Local Authorities on Gov.uk.Forecast congestion costs by area type29Road congestion and reliability statisticsTAG UNIT A5.4 –Marginal External Costs ▪
43AccessibilityAccessibility measures how easy it is to access goods, services and employmentIn terms of public transport, accessibility refers to how easy the transport system is to use for people with specific needs, particularly those that might find it difficult to use the transport system.This covers a wide range of factors, including journey times to reach key destinations, service frequencies, the physical accessibility of the transport system, such as provision of accessible boarding at stops and the accessibility of transport information.The level of accessibility determines people’s ability to participate in activities and access employment and services.Improving accessibility is vital for generating agglomeration benefits and deeper labour markets.By improving accessibility, more people may be able to access a broader range of jobs, which may reduce unemployment.Car availability is important, as public transport improvements will have a greater effect in areas with low car ownership. Those without cars will benefit more from public transport improvements than improvements aimed at car users. The level of accessibility for car users with accessibility requirements is primarily influenced by the availability and proximity of parking to key destinations.Calculating accessibility measures is complex, however there is a methodology set out in WebTAG which can be used. The calculation involves establishing the availability of car versus public transport and walking or cycling.TAG UNIT A2.2TAG UNIT A4.1 ▪
44ResilienceResilience is a key driver of the reliability of the transport systemResilience relates to the ability of the transport system to “cope” with and recover from accidents, security incidents or adverse weather.Poor resilience can severely affect the economy because when the transport system fails, it can prevent people from going to work and accessing goods and services as they would normally. It can also severely disrupt businesses’ operations. DfT estimates that the welfare cost of domestic transport disruption from severe winter weather is around £280m per day in England. The direct economic costs alone amount to £130m per day26.Some economic activity is “displaced” by such disruptions: The economy may be able to catch up later. However, some activity will be permanently lost, resulting in lower GDP. In Q the ONS estimated economic growth was 0.5% lower than otherwise due to bad weather27Schemes that improve resilience can help to reduce either the likelihood or extent of disruption and how long it takes to recover. Any improvement that is made to resilience will be beneficial for economic growth, however the effect is often very difficult to measure and will depend on whether events that would cause disruption actually materialise. For example, stockpiling road salt for the winter will have a positive effect if there are freezing conditions, but not if the weather is mild.FLICKR: JOHNTHESCONEHABTPResilience is likely to be a non-monetised impact pathway but may feature in a scheme’s strategic case. ▪
45Transport and the Economy: Problems and Objectives There are a broad range of problems and objectives we might have, and this list is not exhaustive, but it should cover some of the most common themes.Transport ProblemsTransport ObjectivesThere are various problems we may observe relating to the state of the transport system. The causes of these problems can be wide ranging. We’ll look at causes of observed problems in Section 2 of this toolkit as this is an important part of formulating the “rationale for intervention”. What we will explore here is the transmission of these observed problems, through the Drivers, to effects on the economy and consequently, economic growth. Click the buttons below to explore the problems.ChangesCausesFactorsObserved problemsEconomic ImpactsDriversCongestionOvercrowdingResilienceRoad condition & maintenanceSafety
46Congestion affects growth through the following Drivers: Problems: CongestionCongestion affects growth through the following Drivers:What do we mean by congestion? Refer back to the definition page here.Congestion impacts negatively on economic growth by increasing journey times, reducing travel time reliability and increasing vehicle operating costs. Also, congestion makes journeys more stressful, diminishing journey “ambience” and increasing the generalised cost of a journey. For commuters, this may have the effect of reducing their access to the labour market because there are fewer employers they can access with a tolerable generalised cost.Congestion also impacts maintenance budgets, the environment and wellbeing, which can have second-round impacts on economic growth.Decreased journey ambienceShallower Labour MarketsHACongestionReduced Economic GrowthIncreased Journey TimesHigher Transport CostsReduced Reliability ▫
47Problems: Overcrowding Overcrowding affects growth through the following Drivers:Overcrowding impacts negatively on economic growth because it can reduce travel time reliability, and because it increases the generalised cost of a journeys by making them more stressful and less comfortable, for example having to stand in cramped, crowded, hot or noisy spaces. It can also increase journey times when load factors exceed capacity. For commuters, this may have the effect of reducing their access to the labour market because there are fewer employers they can access with a tolerable generalised cost.Transport interventions that increase the capacity of public transport systems can mitigate the negative impacts of overcrowding and boost growth through these Drivers. For example, a transport system that is running close to capacity takes a long time to recover from disruptions because there is limited spare capacity available to catch up and clear the backlog. This often results in services having to be cancelled. Increasing capacity can therefore also boost reliability in this instance.FLICKR: ENDLISNISDecreased journey ambienceShallower Labour MarketsIncreased Journey TimesOvercrowdingReduced Economic GrowthReduced Reliability ▫
48Resilience affects growth through the following Drivers: Problems: ResilienceResilience affects growth through the following Drivers:What do we mean by resilience? Refer back to the definition page here.The Resilience of the transport system is a measure of its reliability in terms of its ability to keep working when there are unexpected and disruptive events, and its ability to recover afterwards. In certain circumstances, usually only for short periods, the transport system can be completely disabled. In such circumstances it can more severely inhibit economic activity and can also compromise welfare and safety.Transport interventions that enhance resilience can reduce the likelihood or extent of disruption to the transport system and how quickly it can recover. The potential for a policy to have negative impacts on resilience should be identified at the option generation stage so that mitigation strategies can be developed.Poor ReliabilityReduced Economic GrowthHAPoor resilienceUnavailability of transportBreaks in productionImpact on businessPeople unable to work due to transport problemsReduced income ▫
49Problems: Road condition & maintenance Poor road condition & maintenance affects growth through the following Drivers:Poor road condition can negatively affect growth by increasing journey times due to the need to reduce speeds and increasing transport costs due to increased wear and tear on vehicles and lower fuel efficiency. It can also result in reduced reliability due to increased need for roadworks to repair defects. Furthermore, a poorly maintained road is less resilient as cracks can develop into potholes in freezing conditions. Poor maintenance also decreases the asset value of infrastructure and further increases maintenance costs over the long-term.Schemes that improve road condition can therefore have a positive impact on economic growth.Increased Journey TimesHAHigher Transport CostsPoor road ConditionReduced Economic GrowthReduced ReliabilityReduced Resilience ▫
50Safety affects growth through the following Drivers: Problems: SafetySafety affects growth through the following Drivers:A safety problem or objective could be related to a specific issue that is observed, such as an accident blackspot, or an objective that meets a wider aim to improve safety. Poor safety on the transport network can impact on economic growth through road users and public transport users in different ways, but the main effect is through poor reliability that results from disruption. This aspect can be thought of as a matter of resilience. The impact on society of poor safety indirectly impacts on economic growth through casualty costs and accident costs. The casualty costs include lost output, human costs and ambulance costs. The accident costs include police, insurance and damage to property. A higher overall accident rate also results in higher transport costs for other transport users, usually through increasing insurance premiums. For more information see WebTAG unit A Measures to improve safety may be good for economic growth. However, it is important to consider whether any negative impacts on economic growth are likely. For example, imposing speed restrictions on a road could increase journey times. Alternative options could include redesigning the road to make it safer without having to reduce speeds.Impact to society of accidentsHAHigher transport costsPoor safetyReduced economic growthPoor reliabilityPoor resilience ▫
51Transport and the Economy: Problems and Objectives There are a broad range of problems and objectives we might have, and this list is not exhaustive, but it should cover some of the most common themes.Transport ProblemsTransport ObjectivesWe may have objectives to improve aspects of the transport system, with the aim of relieving a problem or making improvements. We’ll look at the source or potential compulsions of these objectives in Section 2 of this toolkit, as this is a fundamental part of the “rationale for intervention”. Here we deal with how objectives can have an impact on the economy and economic growth through the Drivers of growth. Click the buttons below to find out more.ObjectivesEconomic ImpactsDriversCompulsionsImprove accessibilityImprove connectivityPromote physical activityReduce CO2 emissionsImprove local air qualityImprove journey timesEncourage development & regenerationImprove safetyImprove public transport provision
52Objectives: Improve accessibility The accessibility of the transport system affects growth through the following Drivers:What do we mean by accessibility? Refer back to the definition page here.Having a transport system that is accessible for all is beneficial for economic growth through increasing access to goods and services and the labour market. It is also important for other welfare improving activities such as access to leisure facilities. Improving accessibility could involve:Improving public transport provision to make it easier to use for certain segments of the population, for example people with disabilitiesExpanding public transport provision so that access and egress times are improvedImproving the accessibility of public transport informationImproving accessibility for car users such as through parking measuresImproving accessibility can positively impact on growth through the following Drivers:FLICKR : TOMPAGENETIncreased labour market participationReduced unemploymentDeeper labour marketsIncreased growthAgglomeration effects ▫
53Objectives: Improve connectivity The level of connectivity of the transport system affects growth through the following Drivers:What do we mean by connectivity? Refer back to the definition page here.The level of connectivity in the transport system impacts on economic growth since it is a measure of end to end journey times and the generalised cost of reaching final destinations.In the UK, there is already reasonably good connectivity in most areas. Improving connectivity usually means improving existing links by reducing journey times or increasing capacity, rather than creating new links to places that aren’t already served by some form of transport.Improving connectivity can positively impact on growth through the following Drivers:HAReduced cost of transport (vehicles)Reduced generalised cost (public transport)Reduced journey timesImproved reliabilityDeeper labour marketsImproved resilience ▫
54Objectives: Promote physical activity Promoting physical activity can affect growth through the following Drivers:Promoting physical activity has primarily indirect impacts on growth. It can improve public health and wellbeing and where physical activity replaces trips by other modes, it can also alleviate congestion and overcrowding and contribute to improving local air quality.Measures to improve physical activity can therefore have positive impacts on economic growth. However, some measures may be detrimental for growth if they are poorly designed.For example, road user hierarchy systems, dedicated cycling infrastructure or traffic calming measures that are implemented to improve cycling or walking provision, could result in capacity reductions for other road users with costs in terms of increases in journey times or reduced reliability outweighing the positive impact of increasing physical activity.If cycling and walking infrastructure is poorly designed, it may fail to attract people to use it, resulting in a net loss. However, well-designed active or sustainable travel schemes can yield extremely high value for money, as they generally comprise smaller, low-cost schemes that can make a big difference to the relative attractiveness of walking and cycling.The impacts on growth of active travel are often less tangible as they are generally second-round effects, so their impacts may not be quantified in the economic case but could align with objectives in the strategic case.CHANDRA PRASAD / SUSTRANSHealth benefits (second-round impacts):Improved productivityReduced healthcare costsReduced sickness absenceIf mode-shift is achieved (first-round impacts):Reduced CO2 emissionsReduced congestionReduced overcrowding ▫
55Objectives: Reduce CO2 emissions Reducing CO2 emissions can affect growth through the following Drivers:The evidence that climate change will have significant effects on economic growth in the long-run is overwhelming. The Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report concludes that evidence of climate change is unequivocal and that human influence is clear. The UK government is committed to reducing greenhouse gases (GHGs) as part of the 2008 Climate Change Act.In the long-run, the benefits of multilateral international action on climate change may result in fewer environmental shocks and a more resilient economy.Transport schemes which aim to reduce CO2 emissions can have additional costs in the short-run, but yield potential benefits in the long-run. This is because the impacts of CO2 emissions and climate change is an impact that will be felt in the long-run, whereas the cost of reducing CO2 is immediate. In the short-run, cutting carbon emissions may require, for example, upfront capital costs which can potentially increase transport costs.Transport schemes setting out to mitigate climate change do not necessarily conflict with economic growth however. For example, improving fuel efficiency also reduces vehicle operating costs. Domestic policy that supports reducing CO2 emissions could stimulate the green economy, resulting in a first-mover advantage in low-carbon sectors. This can bring with it the benefits of knowledge spillovers and potentially more productive, higher-value jobs and a more skilled labour force.HA ▫
56Objectives: Improve local air quality Improving local air quality can affect growth through the following Drivers:Improving local air quality has both direct and indirect effects on the economy, through health and wellbeing, and benefits for businesses. Transport schemes that improve air quality, such as encouraging cleaner vehicles or promoting physical activity, can support economic growth through health effects. There may be upfront costs, but the benefits may be felt over a long period. For example, investing in improving air quality can also support jobs and skills in the green economy.Improving air quality may require major investment in new infrastructure or incentives to reduce the average age of vehicles on the road. New emissions standards for vehicles reduce the amount of local air pollutants they emit. However, emissions standards may reduce fuel efficiency, thus increasing vehicle operating costs and could increase vehicle purchase costs. Introducing a low emission zone could improve air quality but could increase burdens on businesses.Improving air quality does not necessarily conflict with economic growth, but in the same way as reducing CO2 emissions, the benefits of good air quality may take time pay off the upfront costs.The positive impacts on growth of improving air quality include:Reduced healthcare costsLonger life expectancyAn attractive area to live, visit and do businessImproved productivity ▫
57Objectives: Improve journey times Improving journey times can affect growth through the following Drivers:Improving journey times has a first-round impact on the economy through the Journey times Driver:The journey times Driver includes the benefit to the economy of the time saved. However this only captures a fraction of the potential benefits of cutting journey times.In the case of roads, improving journey times by building a new, faster bypass may also enable better local connectivity, for example taking into account the effects of relieving local roads and enabling better use of local network capacity, such as freeing up space for better public transport provision or promoting physical activity.In the case of intercity travel, cutting journey times could bring major conurbations within easier reach, which could have more profound impacts on growth such as through agglomeration effects.It is important to fully assess and maximise the potential benefits of a scheme that seeks to improve journey times.Journey timesNETWORK RAILAgglomeration effectsImproved reliabilityDeeper labour markets ▫
58Objectives: Encourage development & regeneration Encouraging development and regeneration can affect growth through the following Drivers:The interaction between transport and land use is a two way relationship: future travel demands will be shaped by future land uses, but changes in how land is used will be influenced by changes in the transport system. Quantifying land-use changes as a result of transport interventions is usually done through a Land Use Transport Interaction (LUTI) model, though such models are rarely used due to their complexity.The benefits from land development depend not only on transport investment but also land development schemes being realised.Again, it is important to consider the potential for displacement effects. The benefit to the local area of development or regeneration may not accurately reflect the net benefit.Some of the ways land development and regeneration can stimulate growth include the short-term stimulus to the construction sector, the increase in value of the land, the creation of new employment opportunities and the provision of new housing, which could improve labour market access. For more information on the benefits to the economy of regeneration and how we assess this in transport appraisal, see the Regeneration Driver.NETWORK RAIL ▫
59Objectives: Improve safety Safety affects growth through the following Drivers:A safety problem or objective could be related to a specific issue that is observed, such as an accident blackspot, or an objective that meets a wider aim to improve safety. Poor safety on the transport network can impact on economic growth through road users and public transport users in different ways, but the main effect is through poor reliability that results from disruption. This aspect can be thought of as a matter of resilience. The impact on society of poor safety indirectly impacts on economic growth through casualty costs and accident costs. The casualty costs include lost output, human costs and ambulance costs. The accident costs include police, insurance and damage to property. A higher overall accident rate also results in higher transport costs for other transport users, usually through increasing insurance premiums. For more information see WebTAG unit A Measures to improve safety may be good for economic growth. However, it is important to consider whether any negative impacts on economic growth are likely. For example, imposing speed restrictions on a road could increase journey times. Alternative options could include redesigning the road to make it safer without having to reduce speeds.Impact to society of accidentsHAHigher transport costsPoor safetyReduced economic growthPoor reliabilityPoor resilience ▫
60Objectives: Improve public transport provision Improving Public transport provision affects growth through the following Drivers:Improving public transport provision can have various positive impacts on economic growth, depending on the nature and location of the scheme. It can potentially help to increase labour market participation through improving connectivity and accessibility, reduce journey times and decrease generalised costs for transport users. However, the relationship between public transport provision and economic growth is complex and there may be winners and losers.An example of where improving public transport provision can have multiple effects on growth could be the introduction of a road user hierarchy system as part of a public transport upgrade in a congested urban centre. This could have positive impacts on journey times for public transport users, but it may come at the cost of increasing journey times for other road users. The net impact on journey times and reliability for all users (business, leisure, public transport, goods vehicles, pedestrians, cyclists and car users) should be properly understood in order to assess the impacts on economic growth.BAM NUTTALLJourney timesReduced generalised cost (public transport)Agglomeration effectsImproved reliabilityDeeper labour markets ▫
61Transport and the Economy: Summary That’s the end of the first section. This section provided an introduction into the relationship between transport and the economy.Here’s a quick overview of what we’ve covered in this section.Key points from Section 1:IntroductionThe economy grows when more goods and services are produced than previously. Transport is very important for the economy, it connects people to jobs, and customers and firms to markets. Improving the efficiency of the transport system can facilitate economic growthTransport Drivers of growthThere are a number of first-round transport Drivers of growth, such as travel times and vehicle operating costs. However, there are a number of more complex interactions in the wider economic impacts, which should also be considered and fully understood in order to assess the full impacts of transport schemesProblems and ObjectivesThere are various Problems we observe in the transport system and Objectives we may have for it. The Drivers of growth allow us to assess the impacts of transport interventions that seek to address these Problems and Objectives consistently, and show us how they have an impact on economic growth
62Transport and the Economy: Summary Section 1: SummaryNow that we have covered the relationship between transport and the economy, we can complete the diagram we showed in Part 1 of Section 1 in more detail.
63Transport and the Economy: Summary Section 1: SummaryImpacts on growthThe links between transport and Growth can be split into the Primary Ways and Secondary Ways. The Secondary Ways are where transport itself impacts on growth, such as through transport-related industries and the economic activity associated with investing in transport. These boost growth in the short-term.Secondary WaysTransport
64Transport and the Economy: Summary Section 1: SummaryImpacts on growthThe Primary Ways, which constitute the majority of transport’s impact on growth, rely on something else to happen, either in first round or second round effects, in order for there to be an impact on growth. For example, we rely on transport users to make more productive use of time savings gained by improving journey times.Secondary WaysPrimary WaysTransport
65Transport and the Economy: Summary Section 1: SummaryImpacts on growthThe direct Drivers measure first-round effects –things like cutting journey times immediately drives growth because it frees up time for businesses and consumers, enabling more productive use of the finite amount of time we have in a day.Secondary WaysPrimary WaysDirect DriversTransport
66Transport and the Economy: Summary Section 1: SummaryImpacts on growthThe indirect Drivers such as wider economic impacts measure second- round effects, where transport creates knock-on impacts, which may be in the medium or long- term, such as agglomeration effects.Secondary WaysPrimary WaysDirect DriversIndirect DriversTransport
67Transport and the Economy: Summary Section 1: SummaryImpacts on growthThe problems we observe in the transport system, and the objectives we set to improve it, can be measured through the Drivers.This completes the link between transport and its impacts on growth.Remember, the size of different segments in the diagram refers to the number of variables in each, not their relative impact on growth.Secondary WaysPrimary WaysDirect DriversIndirect DriversProblems & ObjectivesTransport
68Transport and the Economy: Summary Section 1: SummaryImpacts on growthIf you want to return to the toolkit to cover any of these topics again, you can click on any segment of the diagram on this page to go back to the relevant part of the toolkit.Secondary WaysPrimary WaysDirect DriversIndirect DriversProblems & ObjectivesTransport
69Transport and the Economy: Summary Section 1: SummaryWe hope you’ve found this section a useful introduction to transport and the economy.For more information on the concepts mentioned in the toolkit, click on the links to WebTAG in this section or look up the references cited using the REF button above.Click home to go back to the main menuThen go to Section 2: Option Generation to continue
72Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
73Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
74Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
75Option Generation: Introduction Section 2 has four parts.The key in the bottom left corner shows you which part you are in, and the page within that part you are on.The first part is an introduction to the option generation process for transport schemes.The second part takes you through the process of understanding the current situation, the future situation, and developing a rationale for intervention.The third part looks at establishing the need for intervention and setting objectives against which different options will be assessed.Finally, the fourth part looks at what it means to generate a full range of options with economic growth in mind, once a case for intervention has been made. It also highlights tools and guidance available to help develop options.Click the “next” button to begin.
76Option Generation: Introduction Where does option generation fit into the process of delivering a scheme?The Green Book sets out the process using the ROAMEF model:The option generation process covers the Rationale and Objectives stages in this process, but it is also very important to start considering monitoring and evaluation at this stage.HA
77Option Generation: Introduction What is option generation?Option generation involves properly considering a full range of alternatives to address a given situation. Generating a range of options should not be a case of coming up with a range of alternatives that are automatically ruled out because the preferred option is perceived to be a foregone conclusion. The best solution to a problem cannot be developed in the absence of a proper understanding of the current and future situation.Option generation does not mean coming up with a range of unfeasible alternatives to a preconceived solution that resolves an undefined problem.In practice, we seldom find ourselves starting from scratch with a blank sheet of paper. For some schemes, we may be working with options that have been generated over many years following various studies and inquiries. For others there may be compulsion to intervene due to international agreements or EU legislation. However, we should always go through a proper option generation process and ensure that we can demonstrate that we have done so. We should be able to show not only that there is a clear case for intervention, but also that the option or options under consideration meet a clear and consistent set of objectives better than any other intervention.HA
78Option Generation: Introduction Why does it matter?Option generation is a fundamental part of any government intervention.The Green Book states that: “Initially, a wide range of options should be created and reviewed with the purpose of developing a value for money solution that meets the objectives of government action.”Generating options challenges us to fully understand the underlying causes and trends behind observed problems. It helps to ensure that the best intervention is selected rather than the one that is easiest, most obvious, or preferred for some other reason. It can encourage innovation and lead to the consideration of more creative solutions. Furthermore, it ensures that all objectives from a transport scheme are fully considered, including the environment, safety, the economy, accessibility and integration.NETWORK RAIL
79Option Generation: Introduction What does the option generation process involve?Option generation is a process that starts with fully understanding the situation.A key part of a proper option generation process, prior to the production of the strategic outline business case is to thoroughly understand the current situation, both in a local and national context. Consider the underlying causes and how the situation could change in the future based on evidence such as demographic trends.This toolkit focuses on the economic growth potential of transport interventions. The purpose of this Section of the toolkit is to highlight that if we can better understand how situations and solutions interact with the economy, we can develop schemes that maximise the positive effects on economic growth, within the other constraints and objectives we may have.HA
80Option Generation: Introduction Early planning for monitoring and evaluationIt is important to consider options for monitoring and evaluation while scheme options are developed. This is because minor changes to scheme design can improve evaluation options and hence the quality of evidence that can be obtained.Some examples of ways in which delivery of a scheme can be adjusted to improve its evaluation are:Pilots, where the scheme is implemented to certain individuals, institutions or locations while equivalent comparison groups receive no scheme.Randomised control trials, where allocation to the scheme or a control group is determined by a random method.Phased introduction, a variation of the above approaches where some groups receive a scheme earlier than others.Transport interventions often cannot be implemented in these ways. However it may still be possible to adjust the delivery of schemes so that a more accurate estimate of the counterfactual situation can be made or the impacts of the scheme can be distinguished from those of other interventions.HA
81Option Generation: Introduction Early planning for monitoring and evaluationBaseline DataAnother reason for early planning of monitoring and evaluation is to ensure that appropriate monitoring data is put in place for a baseline period before the scheme is launched. The earlier such data is put in place, the stronger the evidence of the scheme’s impact will be.Monitoring and evaluation is covered further in Section 3 of this toolkit.HA
82Option Generation: Introduction The next stage is to be able to set out the case for intervention and set objectives against which all the options will be assessed.Finally, a range of options can be generated.This section of the toolkit is designed to guide you through this process in the context of considering the economic growth impacts of an intervention.If you would like a reminder of how problems and objectives impact on economic growth through the Drivers of growth, refer back to Section 1.
83Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
84Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
85Understanding the situation Initially we need to develop a proper understanding of the situation and how it may change in the future. We should be able to clearly state why intervention is necessary.The current situationDevelop an understanding of the local, regional and national policies affecting the area of concern, particularly land-use policies. Establish the levels of service/capacity offered by current transport networks and current demand. Identify the constraints and opportunities affecting the area.The future situationHow could the situation change in the future? Establish what is likely to happen on the demand side in the absence of intervention proposals. Consider different underlying growth and demand assumptions, as well as demographic change and the changing age structure of the population. Consider future committed land-use policies and changes to the transport system that could affect the choices of intervention available.The rationale for interventionAny government intervention should be backed by a sound rationale. In the case of transport schemes, this involves developing a body of analysis showing how the local problems/challenges establish a need for intervention. Evidence should demonstrate the scale and significance of the identified problem or issue.
86Understanding the situation The current and future situation might not be obviousThe remedy shouldn’t be taken as givenIf we have a better understanding of the underlying causes of problems we observe with the transport system, we stand a better chance of developing a good range of options to tackle the problems.Developing a thorough understanding of the current and potential future situation is crucial to generating a clear and well-evidenced rationale for intervention.We should also understand who the end user is early on in the scheme development process. What do they need to get out of the transport system? Who else will be affected by what we are doing? How can we make it better for both users and non-users of the scheme? This understanding should be present throughout the option generation process and throughout the design, build, operation and evaluation of the scheme.On the next pages we use some of the “Problems and Objectives” set out in Section 1 to give some examples of underlying causes and compulsions that could be used to develop the rationale for intervention.
87Understanding the situation Examples of causes and compulsions and their impact on economic growth through Problems, Objectives and DriversTransport ProblemsTransport ObjectivesThis is where we are addressing specific transport-related problems with potential underlying causes such as demographic changes and economic activity. It is important to have a thorough understanding of these underlying causes and how the situation is affecting economic growth through the Drivers of growth in order to generate an effective range of options. Click the buttons below for a brief look at examples of potential underlying causes.ChangesCausesFactorsObserved problemsEconomic ImpactsDriversCongestionOvercrowdingResilienceRoad condition & maintenance
88Congestion: Underlying causes This page gives a snapshot example of potential underlying causes of congestion that might be considered when developing options in this situation. When developing a range of options, some options could seek to address some of these underlying causes. Addressing the root cause of problems and better understanding the Drivers of growth can help to generate options that have the best possible net impact on economic growth.Insufficient maintenanceWeight/height restrictions on alternative roadsPoor road designHigh frequency of accidentsLack of alternative freight linksPoor road conditionLack of alternative passenger linksFrequent roadworks or low traffic speedsCongestionHigh HGV usageNew housing/commercial developmentLack of capacityRefer to Section 1, part 3 for the Drivers through which congestion negatively affects growthExpanding populationExcessive demandNew business activity ▪
89Overcrowding: Underlying causes This page gives a snapshot example of potential underlying causes of overcrowding that might be considered when developing options in this situation. When developing a range of options, some options could seek to address some of these underlying causes. Addressing the root cause of problems and better understanding the Drivers of growth can help to generate options that have the best possible net impact on economic growth.Congestion on other modesExcess demandMode shiftInsufficient capacityOvercrowdingDemographic trendsCuts to servicesRefer to Section 1, part 3 for the Drivers through which overcrowding negatively affects growthInsufficient off-peak demandInsufficient service provisionInsufficient revenue ▪
90Resilience: Underlying causes This page gives a snapshot example of potential underlying causes of poor resilience that might be considered when developing options in this situation. When developing a range of options, some options could seek to address some of these underlying causes. Addressing the root cause of problems and better understanding the Drivers of growth can help to generate options that have the best possible net impact on economic growth.Inadequate stockpilingInsufficient maintenanceIncreased vulnerability to accidents or severe weatherPoor designLimited range of alternative routes or modes for particular linksHigh dependence on a particular linkPoor resilienceRefer to Section 1, part 3 for the Drivers through which poor resilience negatively affects growthHigh threat of security incidentsSusceptibility to security alerts ▪
91Road condition & maintenance: Underlying causes This page gives a snapshot example of potential underlying causes of poor road condition that might be considered when developing options in this situation. When developing a range of options, some options could seek to address some of these underlying causes. Addressing the root cause of problems and better understanding the Drivers of growth can help to generate options that have the best possible net impact on economic growth.Insufficient maintenance budgetLack of alternative freight links and modesHigh load factorNew housing/commercial developmentPoor road conditionExcess HGV usageNew business activityRefer to Section 1, part 3 for the Drivers through which road condition negatively affects growthExcess demandExpanding population ▪
92Understanding the situation Examples of causes and compulsions and their impact on economic growth through Problems, Objectives and DriversTransport ProblemsTransport ObjectivesThis is where we have aims to improve aspects of the transport system. Transport may be one of a number of contributing factors to some of these objectives. Sometimes the source of these objectives may be compulsion by international agreements, EU legislation, budgetary pressures or other factors. We must understand the problem that is being addressed, even if the source of compulsion for action is external. It is important to be able to state the correct rationale for intervention in the business case for a scheme. For example, introducing a scheme to improve local air quality may be done in order to meet EU legislation and to avoid infraction. However, the problem being addressed, i.e. the rationale for intervention, is not the legislation, or the potential for infraction, it is the fact that local air quality is poor and this is damaging to people’s health. Refer to Section 1 Part 3 for an explanation of how different Objectives we may have for the transport system can have an impact on economic growth through the Drivers of growth.ObjectivesEconomic ImpactsDriversCompulsions
93Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
94Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
95Why set objectives?Setting objectives is a key step in the development process of any transport interventionThe process of understanding the situation that we set out on the previous pages, allows us to better and more clearly state the rationale for intervention.Once we have a good understanding of the situation, objectives let us formally set out what we are trying to achieve in clear and specific terms.The objectives set at this stage become the criteria against which all of the options generated will be assessed.Objectives should be set prior to generating options. They should be applied consistently to all options throughout the option development process and be assessed as part of a monitoring and evaluation programme.
96Setting Scheme Objectives Setting objectives is a key step in the development process of any transport interventionObjectives should:Be informed by stakeholder engagement and a reasonable appreciation of the issues and contextReflect the opportunities and constraints identified earlierReflect the underlying causes or Drivers of growth identified earlierAvoid identifying preferred solutionsBe consistent with wider local, regional, and national objectives (including economic growth), but focused on addressing the identified needEnable more specific targets to be developed in due courseBe sufficiently specific and measurable as to allow a monitoring and evaluation exercise to establish whether the objectives have been met
97Hierarchy of objectives Setting objectives is a key step in the development process of any transport interventionObjectives do not always necessarily align. Promoting economic growth may be one of a number of wider objectives being met through a transport scheme. Local Authorities, for example, may also have non-transport objectives that are being addressed by a transport intervention.It may be helpful to develop a hierarchy of objectives, such as:High Level/Strategic OutcomesThese generally express the desired end state, or the aims and ambitions of the area. These are generally objectives which transport contributes to but does not necessarily affect directly. How does your scheme help you achieve your policy objectives?Specific or Intermediate OutcomesThese represent the intermediate effects of the transport intervention, including the direct or short-term objectives which need to be achieved for the high level/strategic outcomes to be realised.Operational ObjectivesThese generally represent the desirable outputs which are necessary for the intermediate objectives to be achieved.
98Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
99Option Generation Introduction Understanding the situation Setting objectivesGeneratingoptions
100What is the purpose of Option Generation? The purpose of option generation is to develop a range of alternative measures or interventions that are likely to achieve the objectives that have been set. Before beginning this process, it is important to have gained a thorough understanding of the situation and to have developed and agreed a full set of objectives.We should aim to consider as wide a range of options as possible, including non-infrastructure solutions and non-transport interventions. Aim to consider what could ultimately be achieved with each option.Different modesMeasures involving capital spendNew infrastructureRegulationPricing/other ways of influencing behaviourRevenue optionsOptions should at least initially include measures that may not provide a complete solution to the identified problem but can make a contribution to achieving the objectives, as it may be necessary to combine options at a later stage.Options should represent reasonably discrete interventions.When considering options, we should also take into account a broad range of evidence, including evidence from evaluations of previous similar schemes, possibly drawing on evidence from other areas or internationally.
101Developing a full range of options We should use our understanding of the current and future situation, the causes and the Drivers that are impacting economic growth to help us generate a wide range of options. From the do-minimum that simply resolves the problem that exists today at minimal cost, to ones with a high degree of ambition and creativity that seek to create and leverage new opportunities. How can we boost growth whilst meeting our other objectives?High level of ambition – address underlying issues, create new opportunities and maximise positive effects on economic growth and other objectivesThe full range of options should include more ambitious options that take opportunities to improve the current situation and safeguard the future situationFull range of optionsOptionsIt is important to consider a realistic do-minimum option, as in the later stages of the policy cycle cost benefit analysis will be undertaken comparing the options with the do-minimum caseMinimal intervention – address the immediate problem at minimal costDo nothing
102How do the options interact with economic growth? How do the options affect the transport Drivers of growth?What opportunities are there within the options to add value and increase the impact of the scheme through the Drivers of growth?Transport Efficiency:Journey timesCost of transportTransport Reliability:ReliabilityWider Impacts:Businessinvestment and innovationCompetitionLabour marketsRegenerationTradeAgglomeration effectsForeign DirectInvestment
103Next stepsUse the Early Appraisal Sifting Tool (EAST) to compare your initial optionsEAST is a decision support tool that has been developed to quickly summarise and present evidence on options in a clear and consistent format. It provides decision makers with relevant, high-level information to help you form an early view of how options perform and compare.EASTEAST Guidance
104Option Generation: Summary That’s the end of the second section. This section provided an overview of the option generation process.Here’s a quick overview of what you’ve covered in this section.Key points from Section 2:IntroductionThe option generation process is a fundamental part of developing any transport intervention. It should not be treated as a checkbox exercise. Even if we are not starting from a blank sheet of paper, we must be able to demonstrate how the scheme meets the objectives better than any other option.Understanding thesituationIt is important that we understand the underlying causes of observed problems prompting us to act. If we are meeting objectives, it is important to understand the problem being addressed and state the rationale for intervention clearly. In doing so, we are more likely to develop options that meet our objectives.Setting objectives and generating optionsOnce the current situation is properly understood, objectives should be set and applied consistently across all options generated. A full range of options including alternative and innovative approaches should be generated. Tools such as EAST can help to perform an initial sift of options.Click home to go back to the main menuThen go to Section 3: Option Development to continue
110Option Development: Introduction Section 3 has 3 parts.Part 1 is an overview of the option development process for transport schemes.Part 2 takes you through the option development process through the lens of economic growth.Part 3 looks at next steps, monitoring and evaluation.Click the “next” button to begin.
111Option Development: Introduction What is option development?Option development is the principle of refining options from the option generation stage through to the final proposed scheme. The business case process followed by DfT and other organisations is a formalisation of the principles of option development.Different organisations take different approaches to the business case process, but the principle of developing and refining options should not be confined to the preliminary stages of the business case process.Option development involves making smaller adjustments or refinements to the options under consideration to test whether such changes would marginally improve the impact of the scheme.This is an opportunity to make changes before the design of a scheme is finalised and detailed appraisal takes place. It also helps us to identify a smaller set of options to take forward for full appraisal. Option development should involve a broad range of considerations that assess performance against each of the cases in the five-case model.HA
112Option Development: Introduction Where does option development fit into the process?The option development process fits between the objectives and monitoring stages in the ROAMEF cycle. You also need to consider at this stage the monitoring and evaluation of the scheme, which we’ll cover in part 3 of this Section.OptiongenerationOptiondevelopmentHA
115Option Development Option development: An overview of the processThe process of option development begins once the wide range of options initially generated has been sifted into a number of feasible options. As mentioned in Section 2 of this toolkit, the EAST tool can be used to assist with the sifting process. The appraisal of the sifted options is light-touch and should focus on available evidence, consultation, participation and gathering information. Options should be assessed against the five-case model criteria. There is often optimism about what options will deliver in terms of benefits. Therefore, at this stage, it’s best if decision-making on options is based on evidence which is as realistic as possible.The process of option development can help identify a smaller set of better-performing options that can be taken forward into more detailed appraisal. Options can continue to be refined and optimised at any stage of the option development process. However, at later stages detailed appraisal may have to be repeated if an option changes significantly. For this reason, it is worth being creative with refinements to options early on while it is easier to do so without having to repeat detailed and costly appraisal processes.HA
116Option Development Option development: Refining and adding valueSome of the processes you can consider in terms of refining options in the context of economic growth are:Value engineeringOptimising the design envelopeIdentifying and mitigating negative impacts on economic growthIdentification of innovative refinements to boost growthIdentification of strategic opportunities to leverage additional economic benefitsConsulting existing evidence and best practice, both locally and internationally, in relation to options under considerationEstablishing whether new and innovative approaches could deliver benefits that outweigh their risk or whether there are proven solutions that already existHA
117Option Development Option development: Maximising economic growthIt is important to identify how a scheme will interact with economic growth in order to maximise its positive impact. Identifying where there are positive impacts and maximising them is one part of this process. Another is minimising the negative impacts and leveraging strategic benefits to add value. Each option could be put through this “optimisation loop” to refine its properties in the context of economic growth.Part of the process of understanding how a scheme interacts with economic growth comes from the option generation process and understanding the current and future situation. It also comes from understanding the Drivers of growth, which of them are applicable to the scheme, and which of them are having a positive or negative impact on economic growth.Try to establish whether there are any trade-offs between objectives for the scheme and consider if there are ways to mitigate these trade-offs.HA
118Option Development Option development: Maximising economic growthThis process is best illustrated by use of a made-up example:In a congested urban centre, a scheme sets out to improve local air quality. A study reveals that goods vehicles constitute a high proportion of traffic at certain times on certain routes. An option under consideration is to restrict goods vehicles from problem areas at peak times.A consultation reveals strong opposition to the plans, so a refined option is developed involving a combination of a park-and-ride system for freight and a relaxation of restrictions around night-time deliveries. This option still achieves the objective of improving air quality but mitigates the potentially negative impact on growth of restricting goods vehicles at peak times. The relaxation of night- time deliveries helps to reduce peak time demand by goods vehicles and thereby helps to reduce congestion in addition to improving air quality.As the park-and-ride scheme requires capital investment and has ongoing costs, it must be commercially viable. A decision is made to pilot the scheme. The scheme also creates new jobs. Strategic benefits are increased by choosing a site within a Regeneration Area.HA
121Option Development: Next Steps What do you need to consider before and after a scheme receives the go-ahead?The option development process should result in a small number of better-performing options, including a low-cost solution, being taken forward for more detailed appraisal.At the same time plans for monitoring and evaluation should be being formed.A monitoring and evaluation programme would normally start with baseline data collection when the scheme receives the go ahead.Part 3 considers the steps to take in preparing and implementing the monitoring and evaluation programme.HA
122Option Development: Next Steps What is monitoring and evaluation?Monitoring seeks to check progress against planned targets. It can be defined as the formal reporting and evidence-gathering process that verifies spending and outputs are successfully delivered and milestones have been met. It also provides a valuable source of evidence for evaluations.Evaluation is the assessment of the effectiveness and efficiency of the initiative during and after implementation. It seeks to measure the causal effect of the scheme on planned outcomes and impacts. It also seeks to assess whether or not the anticipated benefits have been realised, and if so, how this was achieved, or if not, why not.HA
123Option Development: Next Steps Why is monitoring and evaluation so important?It is important to carry out monitoring and evaluation of transport schemes so that we can learn lessons about their effectiveness and provide a stronger evidence base for future investment decisions. We want to find out about what works or doesn’t work, the reasons why and whether value for money has been delivered. This will help ensure that good practice can be replicated and poor outcomes avoided. DfT has published a Strategy to guide the development of its monitoring and evaluation activity. A Programme has also been published and will be updated annually.Monitoring and evaluation is particularly important when the preferred option is new or unproven. Under DfT’s Monitoring and Evaluation Strategy, monitoring and evaluation work is prioritised where the scale of investment is high, there is a strong strategic imperative for the initiative, the degree of risk is high or the potential contribution to the evidence base is large.Government guidance for evaluation can be found in the Magenta Book Two methods guidance documents for transport evaluations are available, covering impact evaluations and logic mappingHA
124Option Development: Next Steps Where does monitoring and evaluation fit into the process?Monitoring and evaluation is an integral part of the ROAMEF cycleImplementationMonitoring and Evaluation planningHA
125Option Development: Next Steps What type of evaluation do you need?Different types of evaluation may be chosen according to the objectives of the scheme, the type of evidence that is required, and what it is feasible and affordable to measure. The main types are:Empirical impact evaluation. This uses quantitative data to empirically test whether the scheme caused significant changes to outcomes of interest compared with a counterfactual situation where no scheme was delivered. This involves controlling for other factors which might also affect outcomes so that a robust measure of impact is achieved.Theory-based evaluation. This involves systematically testing the theory of how a scheme’s activities will lead to impacts or benefits (i.e. its logic or benefits map). This may involve quantitative or qualitative methods.Economic evaluation. This involves calculating the economic costs associated with a scheme and translating its impacts into economic terms in order to provide a cost-benefit analysis.Process evaluation. This explores how the scheme was implemented, exploring the processes employed and obtaining assessments of their effectiveness from individuals who were involved or affected by them. This often uses qualitative data.HA
126Option Development: Next Steps What are the key steps in the monitoring and evaluation process? Page 1 of 3Setting out evaluation objectives: Setting out what you want to get out of the evaluation. The objectives should be broadly consistent with your original objectives for the scheme, and should ideally allow the effectiveness and efficiency of the scheme to be measured.Logic/benefits mapping: Rather like the flow diagrams in Sections 1 and 2 of this toolkit, you need a good understanding of how the scheme is expected to deliver outputs, outcomes and impacts (or benefits). A programme of monitoring and evaluation can then be designed to check how well each of these steps in the logic chain work in practice.Linking to the appraisal process: The detailed appraisal of the preferred option should closely align with the monitoring and evaluation programme for the scheme.This is where having specific objectives for the scheme that are measurable becomes important. If the objective is to boost jobs in the area, how many extra jobs would be considered a success? What kind of jobs are desirable? Where should the jobs be located? How are you going to show that the extra jobs are as a result of the intervention?HA
127Option Development: Next Steps What are the key steps in the monitoring and evaluation process? Page 2 of 3Identifying a research solution to meet the monitoring and evaluation objectives. The choice and level of detail, along with marginal costs and benefits of different levels of evaluation should be considered in the context of proportionality. Though not precisely defined in guidance, the concept of proportionality is that the level of analysis and cost involved in the monitoring and evaluation programme for the scheme should be relative to its scale and complexity.Setting out data collection – A key step is setting out what data you need to collect in order to meet the monitoring and evaluation objectives and how you will collect the data.Baseline data collection – When the scheme receives the go ahead, it’s important to be ready to start collecting data about the current situation, to enable you to compare it against the situation after the scheme has been implemented. What data will you need to collect? How will you go about it?HA
128Option Development: Next Steps What are the key steps in the monitoring and evaluation process? Page 3 of 3Delivery of the schemeAnalysis – completing the required analysis of the monitoring and evaluation programme. Depending on the types of methods used, this may allow an assessment to be made of the overall effectiveness of the scheme, its cost-effectiveness, and its level of impact.This evidence will inform:Decisions about the continuation of the scheme, or its roll-out if it is a pilot and whether any changes are required to the way that it is delivered.The evidence base for ‘what works’ in transport interventions of this type.The future development of transport appraisal and modelling assumptions for similar schemes.HA
129Option Development: Summary That’s the end of the last section. This section provided an overview of the option development process.Here’s a quick overview of what you’ve covered in this section.Key points from Section 3:IntroductionThe option development process is an opportunity to maximise the value and impact of interventions on economic growth. It takes place whilst there is flexibility to adjust the options before progressing to more detailed appraisal and delivery. The next steps in the process are an opportunity to learn lessons and contribute to the wider evidence base about transport interventions.Developing optionsThe option development process involves progressing options that remain after the initial sift through a light-touch, evidence-based appraisal. It enables significant changes to be made to options before the more detailed appraisal that follows.Next stepsOnce a scheme has received the go-ahead, it is important to be ready to start collecting data about the current situation in order to establish a counterfactual. Monitoring and evaluation are important because developing evidence about the effectiveness of different types of transport intervention can help inform and improve future investment decisions.Click home to go back to the main menu
130How to use the toolkit Main menu Help You can return to this screen at any time by pressing this button.ReferencesLook up the source of data or evidence cited in the toolkit hereGlossaryLook up definitions of terminology hereExitIcons and colour coding:Hyperlink to an external websiteHyperlink to download a PDFHyperlink to download an Excel fileAvailable buttonInactive button Pop-up containing more detailed informationReferences are superscripted like this: 34You can find the citation by clicking the REF buttonMove between pages using the buttons at the bottom right:Next pagePrevious pageBack to section menuEnd of this part: Move to the next partEnd of the Section: Back to the main menuThis shows you which section and section part of the toolkit you are currently viewingThis shows you where you are within a section Click the ‘back’ button to go back to where you were
131ReferencesONS input-output statistics: Gross Value Added of Transport and Storage Sector, 2010; updated using ONS Quarterly National Accounts, QInvesting in Britain's future, HM Treasury and Infrastructure UK, 27 June 2013 https://www.gov.uk/government/publications/investing-in-britains-futureCrossrail LimitedAction for roads: A network for the 21st century, Department for Transport, July 2013, p17 https://www.gov.uk/government/publications/action-for-roads-a-network-for-the-21st-centuryThameslink Programme Business Case, March 2012.ONS, UK Environmental Accounts 2013OBR, Economic and Fiscal Outlook, March 2013.SEMMMS A6 to Manchester Airport Relief Road Major Scheme Business Case, February 2012Department for Transport statistics TSGB0116: April-June 2012Winter Resilience in Transport: an assessment of the case for additional investment (2011) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/4557/an-assessment-of-the-case-for-additional-investment.pdfEddington Transport Study (2006), Volume 1, p32.ONS, Labour Market Statistics, March 2012.Eddington Transport Study (2006).Source: ONS Trade statistical bulletin, January 2013.SEMMS A6 to Manchester Airport relief road MSBC (2012), p56.DP World London Gateway News, August 2012:Time as a trade barrier, Hummels, D. (2001), Purdue UniversityQuarterly national accounts: Q4 2010, ONS, March 2011.Northern Road Bridge Business Case, August 2012.J. Laird, P Mackie, Review of Methodologies to Assess Transport’s Impacts on the size of the Economy, September 2010, Institute for Transport Studies.Freight Transport AssociationForeign Direct Investment involving UK companies, ONS, 2010 ReleaseEuropean Cities Monitor (2010), p4:A164 Humber Bridge to Beverley Route Improvement Scheme Business Case, March 2012.Manchester City Council (2013)DfT Road Transport Forecasts 2011 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/4243/road-transport-forecasts-2011-results.pdfEddington Transport Study (2006), Volume 1, p25
132Glossary A-FAppraisal – the process of assessing the worth of a course of action. It involves considering the impacts, costs and benefits of a proposal and providing Sponsoring Organisations with the information they need to determine whether or not to proceed with intervention.Access and egress – In this context, the word “access” refers to the time it takes to reach the transport system, such as the walking time from where you live to the nearest bus stop, and “egress” refers to the time it takes from the nearest transport terminus to the final destination, such as the nearest bus stop to the user’s place of work.Discount rate – The discount rate we use reflects an approximation of “Social Time Preference”, defined as the value society attaches to present, as opposed to future consumption. We adjust monetary values at different points in time to account for the fact that we prefer consumption now, rather than in the future.Connectivity – The quality or performance of the transport system measured in terms of the range and availability of destinations that people can access from a particular location and the generalised cost of reaching such destinations.Displacement effects – The possibility that transport can shift economic activity from one place to another, instead of, or as well as, helping to boost net national economic activity.Accessibility – In this context, accessibility refers to the public transport accessibility aspect of accessing employment, services and social destinations. This covers a wide range of factors, including journey times to reach key destinations, service frequencies, the physical accessibility of the transport system, such as provision of accessible boarding at stops and the accessibility of transport information.Demand – In economics, the quantity of a good or service that is bought any given time, given the price and availability of the good itself and the price and availability of complementary goods and substitute goods.Factors of production – Generally defined as labour, capital and land, where people and their skills count as labour.Design envelope – In this context, the impact of a transport scheme on its surroundings, both visually in terms of all the vantage points from which the scheme can be seen or heard, and optimising the more nuanced impact it has on the community, such as through severance.First-round effects – Effects that happen in the first stage after an intervention (see also “Direct effects”). Productivity increases from reduced transport costs are a first-round effect but further impacts on the economy resulting from how improved connectivity affects business investment decisions happen in the second-round.Agglomeration – A concentration of firms and workers which can enable higher productivity, increased innovation, knowledge sharing and specialisation through efficient connections with suppliers and markets, deep and specialised labour markets, knowledge transfers or specialised leisure activities.Direct effects – Effects that happen directly as a result of transport or a transport intervention, such as the direct boost to productivity and growth of reducing journey costs (see “Generalised cost”).
133Glossary G-SGeneralised cost – The wider “cost” of travel, as opposed to simply its cost in the narrow financial sense. It can include measures of convenience, comfort, time, and journey ambience.Keynesian effects – In this context, the economic activity generated by investing in transport, in terms of construction, architecture, etc. More generally, Keynesian economics is a school of economic thought named after John Maynard Keynes.Secondary Ways – Term used in this toolkit to describe the effects of the transport industry and investing in transport as a source of economic activity (e.g. see “Keynesian effects”). This is a smaller effect than other forms of economic activity that transport enables, described in this toolkit as the Primary Ways.Opportunity cost – the potential benefits of alternative options foregone in order to pursue the desired course of action.Green economy – The green economy can refer to new opportunities for growth through developing environmentally friendly technologies, or to an economy where growth and value are maximised while managing natural assets sustainably (Defra IGGEG Paper).Primary Ways – Term used in this toolkit to explain that the majority of transport’s impact on the economy is through the Drivers of growth, which measure things that transport does that enable people and firms to drive growth through economic activity. This encompasses both “direct effects” and “indirect effects”.Gross Value Added (GVA) – Measures the contribution to the economy of each individual producer, industry or sector in the United Kingdom. It is used in the estimation of Gross Domestic Product (GDP).Road user hierarchy system - where different road users are assigned different levels of priority on the highway, potentially with the aim of promoting or improving public transport provision or promoting physical activity.Indirect effects – Effects that rely on other things to happen before their impact is felt, such as the “wider economic impacts” Drivers of growth.Second-round effects – Effects that rely on something else to happen first, such as the productivity gain through agglomeration effects that can result from businesses re- locating physically closer together because of a transport investment which improves connectivity (see also “Indirect effects”).Infraction – Failure to obey or fulfil a law, contract, or agreement, which may carry fines.
134 Measuring Economic Output A simplified view of economic output is to think of it as everything that is produced in the economy, whether it is sold in the domestic market or exported to another country, be it physical goods, services or government spending - which are all forms of economic activity. Even things that are not bought and sold (so-called “non-traded” goods), in theory count as part of economic activity. Examples of non-traded goods include the work of the voluntary sector and charities.The most common way of expressing the level of economic activity is Gross Domestic Product (GDP). This comprises consumption (when people purchase goods and services), government spending, investment, and everything we export. We generally subtract from the equation everything we import because GDP is only concerned with domestic economic activity.One should be aware that GDP has some limitations as a measure of the level of economic activity. For example, it generally excludes non-traded goods and does not take into account the welfare or happiness of a nation. It is possible for a country to have high GDP per capita but low levels of welfare. GDP can be measured at market prices or basic prices. GDP at basic prices excludes taxes less subsidies on products (taxes on products include things like VAT and excise duties). Gross Value Added (GVA) is another term for GDP at basic prices.
135 Measuring Economic Growth Click to close the chart1973 oil crisisstock market crashWinter of discontent1980 global recessionMonetarism1990 global recession2008 global financial crisisMeasuring Economic GrowthEconomic growth is expressed in terms of the percentage change in a country’s economic activity from one period to the next. Positive growth is driven by various factors, including: population growth (resulting in more demand for goods and services and more workers), increasing employment, better education (resulting in a more productive labour force), business investment and improvements in technology (which can improve productivity and efficiency). If economic output decreases, economic growth is negative. If economic growth has been negative for two or more successive quarters, this is referred to as a recession.Historically, the UK economy has been on a long-run upward trend. Although this trend has been broken in the recent past, the UK economy has begun to see a return to positive growth. Around the trend, economic growth generally follows a cyclical pattern. This means that there are periods of expansion and periods of contraction.Click here for a chart showing UK GDP over time
136Transport connects people to jobs, giving businesses a workforce Transport connects people to jobs, giving businesses a workforce. It determines the cost (in terms of time, money and effort) of getting to work, and therefore, partly determines who will work where.It connects businesses with consumers in both domestic and international markets, allowing them to buy and sell goods and services at home and abroad. Transport is a major part of the cost of bringing goods and services to market, and is an important component of the final price of goods and services.It connects businesses with each other, allowing suppliers and manufacturers to trade in raw materials and components, add value and produce finished goods. Transport costs will be an important component of firms’ costs of production.
137Transport Services Gross Value Added Transport services’ contribution to economic output (GVA) is growing, reaching £63 billion in and growing quicker than many other sectorsTransport Services Gross Value Added(Office of National Statistics Input-Output)Transport taxes such as Vehicle Excise Duty, Air Passenger Duty etc. accounted for £40bn or 7% of total tax revenues in 20122,31.4 million people are employed in transport related industries4, representing 4.4% of the labour force5Proportion of adults in employment working in transport-related industries
138Developing capability Investing in transport can provide a short-term boost to the economy through the construction sector. However, there can be more profound effects, for example:Developing capabilityModern infrastructure projects require complex engineering, including design, architecture, materials and use of technology. The provision of these services is part of the stimulus that transport investments can provide beyond their construction. For example, Crossrail is a project that requires such advanced tunnelling techniques that a Tunnelling and Underground Construction Academy has been set up that is providing specialist training to around 3,500 people. Schemes such as this develop capability that can be exported to other countries around the world that need such services.Supporting industry, technology and the green economyInvesting in greener transport technology, such as through the green bus fund, developing the New Bus for London or incentivising the uptake of ultra low emission vehicles, helps to support industry and can boost exports.WRIGHT GROUP INTERNATIONAL
139There are two principal methods for estimating additional economic activity from transport schemes: Present Value of Benefits and Gross Value AddedPresent Value of Benefits (PVB) is DfT’s preferred approach for valuing the benefits of transport schemes. PVB essentially states the benefits that will accrue over a given time period, expressed in current prices and discounted according to the Green Book discount rates.These measures can vary due to displacement effects.A transport intervention in one region may attract economic activity from other regions. Productivity increases and agglomeration effects can result in a net gain to the national economy, but the size of a regional economy may decrease if it is relatively less competitive as a result of the intervention and this could result in displacement of economic activity28.GVA and traditional cost benefit analysis estimates should be seen as complementary, rather than substitutes that give a different answer to the same question. GVA can be a valuable approach to assessing the benefits of interventions at a local level, but it should be used in conjunction with a PVB approach to assess the national effects.
140Drivers that have “first-round” effects can directly impact on people and businesses, and therefore are only one step away from impacting on economic growth. Transport is still having an indirect effect, because we need Firms to actually create growth, but first-round effects are the most direct link between transport and growth as they directly influence things like firms’ cost base and productivity.
141Drivers that have “second-round” effects cause something that causes something else to have an impact on economic growth. The thing that transport does is at least two steps away from influencing economic growth. Transport interventions could, for example, help to increase competition, which helps drive productivity, which then boosts economic growth.