Base UK transport investment priorities on more than just cost, says report

Existing cost-based criteria are useful to central government when deciding on marginal capacity improvements, but are less suited to local authority-led decision-making and "transformative" projects of wider economic benefit, according to the report (28-page / 898KB PDF) by PwC. Its findings were based on interviews with transport industry specialists, local authorities and LEPs conducted during a series of industry events hosted by PwC and the Smith Institute, an economic think tank.

Patrick Twist, an expert in transport projects at Pinsent Masons, the law firm behind Out-Law.com, said that the events had "clearly identified the need for a new approach". However, the existing system had some benefits in that schemes could easily be compared with one another using the same metrics, he said.

"It will be very important, especially as transport investment powers are increasingly devolved to more local control, that any new methodologies are adopted and applied on a consistent basis so that investment opportunities are capable of being judged against similar projects elsewhere in the country," he said.

"As devolution takes place it will be important that investment powers are allocated at the right regional level – for instance, to bodies such as Midlands Connect, which can take a view of benefits across a whole region rather than being constrained by reference to a limited geography only. Unless this happens, there is always the risk of parochialism in investment decisions, leading to a lack of a joined-up approach to transport," he said.

According to the report, participants in the industry events had some concerns that devolving transport powers fully to these city regions could lead to disputes over who was responsible for specific road or rail projects, particularly if not every area had an elected mayor. They warned that it would be difficult to divide authority without "institutional arrangement(s) and protocols to underpin collaborative transport deals", and cautioned against some places being "discriminated against because of their governance arrangements".

UK road traffic is set to rise by up to 57% between 2013 and 2040, while passenger miles on the rail network are predicted to increase by 46% between 2011 and 2033, according to the UK government's National Infrastructure Plan of planned projects. However, the UK's transport network is ranked poorly by international standards, coming at 27th place in the World Economic Forum's Global Competitiveness Index for 2014/15.

The UK government is currently pursuing a policy of regional devolution across England, through which it intends to cede more transport powers to 'city-regions' operating under a directly-elected mayor. Greater Manchester Combined Authority, which appointed an 'interim mayor' under the terms of November 2014's Greater Manchester Agreement with the Treasury, is expected to be the first of these, and is due to hold its first mayoral elections in early 2017.

Twist said that long-standing industry criticisms around the Treasury's standard transport infrastructure cost-benefit analysis centred on its failure to take adequate account of the "transformational benefits that can flow from such investments".

"It deals comprehensively with the benefits to transport users, such as time savings and impacts on safety and the environment," he said. "It also takes account of some benefits to the economy in terms of increased GDP. But a major flaw is that such assessment is premised on existing land uses and business behaviours and does not take account of transformational changes in economic activity that may accrue from transport investment."

Those interviewed for PwC's report recommended that a new approach to appraising schemes should take into account the transformational impacts of projects, particularly across multiple regions or sectors. The approach should also be rebalanced to consider impact on economic performance, rather than cost benefits, and have an increasing focus on issues relating to the environment and sustainability, they said.