Source · Select Committees · Transport Committee
Recommendation 5
5
Paragraph: 34
The Government must utilise accurate, sensitive analytical tools to ensure that the projects that best...
Recommendation
The Government must utilise accurate, sensitive analytical tools to ensure that the projects that best support connectivity, growth and productivity are the ones that get built. In that context, benefit-cost ratios are useful, but they fail to capture regional inequalities and environmental and social factors. The Government must replace benefit-cost ratios with a “benefit-cost plus” system, which not only takes account of costs and benefits and therefore ensures value for money for the taxpayer, but captures regional inequalities and environmental and social factors.
Paragraph Reference:
34
Government Response
Acknowledged
HM Government
Acknowledged
The Government accepts this recommendation. Our appraisal framework aims to provide as full a view as possible about the wide range of impacts transport investment has on the economy, environment and society. The Department for Transport’s Transport Analysis Guidance (TAG) and Value for Money Framework provide advice and tools for conducting robust and proportionate transport appraisals which are consistent with HM Treasury (HMT) Green Book guidance. TAG recommends that transport appraisal should include a robust assessment of the social welfare impacts of the scheme. This includes economic (e.g. user benefits, productivity, jobs and housing), social (e.g. physical activity, accessibility and personal affordability) and environmental impacts (e.g. noise, air quality, carbon and landscape). TAG provides detailed guidance on appraising and valuing this full range of impacts. This specifies how value for money should be assessed robustly, and sets an expectation that impacts not captured in the Benefit Cost Ratio (BCR) (because they cannot be robustly valued) are still assessed and reflected in the value for money assessment. TAG also provides advice on how to estimate potential distributional impacts in scheme appraisal, to ensure that potential adverse impacts on vulnerable groups are identified. Our programme of work embedding the findings and recommendations of HMT’s Green Book Review is supporting a wider assessment of how projects contribute to the Government’s strategic goals, including levelling up and decarbonisation. In line with the Review, economic analysis in transport business cases should be consistent with, and support the analysis in, the strategic case which sets out the wider social and economic context and the case for change. To support place-based analysis and help address regional inequalities, we have published case studies which demonstrate how scheme promoters can capture the local context in appraisal and we are reviewing our guidance in light of new Green Book annexes on place-based analysis and transformational impacts. We are also considering the implications of the Review for the assessment of carbon impacts across the business case, with the aim of ensuring that all carbon impacts of transport investment are robustly assessed and presented to decision makers.