Institute for Transport Studies (ITS)

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In this section, members of ITS reflect on a topical issue in the transport sector, giving their condensed take on a complex subject.

A system dynamic approach to planning of resilient urban systems

Chandra Balijepalli, Christian Berretta, Martin Dallimer, Gordon Mitchell, Simon Shepherd and Judith Wang. University of Leeds

Introduction

Urbanisation and transport infrastructure development has resulted in increasing coverage by impervious surfaces. The consequent higher volume of runoff, due to reduced infiltration and evapotranspiration, poses serious challenges in urban areas, particularly in the context of climate change, which is changing the timing, duration and intensity of rainfall events. There are risks to infrastructure - buildings, transport networks, and critical infrastructure such as power generation and community assets (e.g. schools, hospitals), and the risk from built infrastructure to the natural environment through erosive flooding, combined sewer overflows, and diffuse urban pollution. Some 28% of UK rivers are designated as heavily modified water bodies, with 91% of these affected by urban water (Ellis et al., 2012). Highways are particularly notable pollutant sources, and with around 143,000 km of urban roads in the UK (Dept. for Transport, 2014) and c. 1500 km2 of impervious surface, it is evident that urbanisation and associated transport system development changes both the quantity and quality of urban storm-water, with consequent risk to both existing infrastructure and the receiving environment.

Urban Systems
Figure 1: Overview of the urban systems

We propose to study the dynamic relationship between built infrastructure and the natural environment, with a focus on the inter-relationship between urban transport infrastructure and storm-water management (including SuDS) – See Figure 1 for an overview. The mutual influence of these systems, previously considered in isolation, may be examined taking a long term, scalar approach to developing strategies to address the impact of urbanisation on resilience. This is a complex dynamic system, hence a systems analysis approach to planning and decision making is proposed. Systems thinking in ecology has a long history, stretching back to when the term ‘ecosystem’ was first defined by renowned British ecologist Arthur Tansley in 1935 to mean “the whole system, ... including not only the organism-complex, but also the whole complex of physical factors forming what we call the environment".

A key feature of both transport infrastructure and storm-water management is the need for space. In an urban area that comes from re-tooling existing ‘grey’ land uses (buildings, roads, hard surfaces) or, when a city is expanding, by converting green space to newly built infrastructure. However, doing so can have unintended consequences for the city and its residents through the pathways illustrated in Figure 1. Green spaces, such as parks, domestic gardens, playing fields, allotments and even road verges, street trees and brownfield land, play a vital role in making urban living more amenable through their delivery of ecosystem services (e.g., providing places for outdoor recreation, habitat for biodiversity such as birds and pollinating insects, storing and sequestering carbon, improving physical and mental health of city residents and mitigating air and noise pollution; Elmqvist et al 2013; Dallimer et al 2012a,b). Green spaces can also be very important in reducing the risks to infrastructure from natural hazards, such as flooding, and, similarly, mitigating the impact of transport infrastructure on water run-off volumes and quantity.

We therefore also wish to quantify the value (both financially and non-monetarily) of explicitly accounting for and including the roles of green spaces – the ecosystem of the city – when planning transport infrastructure and storm water management. We wish to develop an understanding of risk in the combined system over the long term relevant to spatial planning and climate change, and by developing an improved model for risk-based decision-making, this will contribute to more complete appraisal of investment impact on resilience in these sectors.

Objectives

Our research aims to enhance the resilience of urban transport and water systems, both in terms of “engineering resilience” and “ecological resilience” (Wang, 2015) by:

  • Determining the interdependency between the urban water management and transport systems in the context of changing climate;
  • Developing a systems dynamic approach integrating the urban storm-water and land use/transport systems;
  • Assessing the impact of different strategic plan options (land use, transport, storm-water), on resilience and combined system performance, and so inform investment decisions.

The system dynamic approach to the combined transport-water system is a key innovation of the project that offers scope for rapid co-appraisal of a wider range of strategic plan options, potentially addressing different transport modes, development plans (location, land use), green infrastructure (SuDS, permeable surfaces), and storm-water storage. We anticipate investigating (a) options in isolation and in combination, (b) the influence of different level of implementation of strategies, and (c) new and, in particular, extant build where greater physical, economic and social constraints limit scope for single issue solutions, and hence where planning for resilience must take a more integrated systems and geographically broader approach.

Previous research by the team

Land use transport model

Land use
Figure 2: Land use and transport interactions

Land-use transport interaction (LUTI) models deal with the interdependencies between the land-use (residential, workplace locations) and transport (e.g. road, rail, terminals, stakeholders – users, operators, planners) systems (See Figure 2).

We use the MARS (Metropolitan Activity Relocation & Simulation) model for Leeds (Pfaffenbichler et al 2010), using system dynamics methodology, recently extended to the wider West Yorkshire conurbation, and this can be used to test options such as road pricing, strategic infrastructure decisions like Metro rail, and can simulate future location of residences/work in response (Balijepalli & Shepherd 2015). We intend to use MARS as the basis of a case study investigating the impact of climate change on the uncertainty associated with infrastructure investment decisions.


Water management system model

SuDS are an important way of controlling not just urban flooding, but discharge of pollutants that build up on urban surfaces, including roads, housing and commercial areas, and are then washed to river. These so called non-point source discharges are one of the main reasons rivers now fail to meet their water quality objectives. SuDS are increasingly implemented in new build developments, but are essential in existing built areas too, if problem discharges are to be tackled. Knowing where retrofit SuDS are needed most is a problem tackled in an urban diffuse pollution model (Mitchell, 2005), driven by land use and traffic data, and an associated probabilistic database of pollutant loadings. The resulting maps (Figure 3) show non-point source hot spots where SuDS are most needed, and have also been integrated with models of point source and agricultural area inputs, and river dispersion models, in whole catchment ‘source apportionment’ analysis, to inform integrated catchment management (Crabtree et al., 2008). The impermeability analysis function of the urban diffuse model has also been used in with the MEPLAN land use transport model, together with a battery of other environmental models, to understand the impact of urban form strategies on issues such as flood risk, atmospheric emission, energy use, and land take (Echenique et al., 2012).

SuDS
Figure 3: Non-point source hot spots needing SuDS (Reproduced from OS digital map data, all rights reserved)

Storm-water management strategies

In this research we propose to integrate the land use transport interactions and the resulting diffuse pollution analysis to assess strategies to improve the overall resilience of the joint infrastructure system of transport and water management system.

Several research studies investigated strategies for storm-water management in urban areas that aim at reducing runoff volume and controlling diffuse pollution. The findings of these studies will inform the analysis tool implementation and application. The performance of SuDS to control pollutants associated to different land uses (e.g. permeable pavements, adsorptive and absorptive-filtration systems) have been investigated through laboratory and field tests (e.g. Kuang et al., 2007; Berretta et al., 2008; Liu et al., 2009; Berretta and Sansalone, 2012). The long term effect of the implementation of structural (storage tanks) and non-structural solutions (e.g. maintenance practices, mechanical removal of pollutants) on diffuse pollution control was investigated at the catchment scale through a hydrological model with pollutant build-up and transport module that aimed at supporting decision making in storm-water management in urban areas (Berretta, 2006). The hydrological performance of green roofs has been studied through monitoring programmes. The results informed the development of modelling approaches to predict the long term performance (30 years) of green roof systems in different climatic regimes (Stovin et al., 2013) and to simulate the effect of different land use conversion scenarios at the catchment scale (10%, 20%, and 100% impervious to green roofs) (Palla et al., 2008). Commercial hydrological models like the EPA Storm Water Management Model - SWMM (Rossman, 2010) in the recent version (v. 5.1.007) include a SuDS module. SuDS can be assigned to selected sub-catchments by defining the correspondent areal coverage.

Outputs, expected impact

The outputs of the research will include a sketch-planning model of the system to facilitate relatively rapid assessment of the impact of strategic scale investment in infrastructure (housing, transport, drainage/SuDS, urban green infrastructure) on transport and urban water system resilience, performance and cost-effectiveness.

  • A supporting database for the case study area, built in collaboration with partners and stakeholders;
  • An understanding of combined system-infrastructure resilience under climate change and urbanisation, generated through application of the tool to stakeholder agreed scenarios.
  • A more complete understanding of the costs and benefits associated with urban green spaces and their role in the urban water and transport systems, including their additional functions as providers of multiple ecosystem services.

The results of this proposed research could support additional research on addressing complexity in urban systems. Indeed, a key advantage of systems dynamic modelling is the ability to provide a model simulation environment around which multiple stakeholders can come together to conduct rapid evaluation of a wide set of stakeholder generated planning scenarios.

This proposed research considers the urban sub-systems of transport and storm-water management, but we invite expertise across other areas, which could be readily exploited to develop a more integrated model of urban systems resilience, relevant to a wider set of stakeholders.

Authors

  • Chandra Balijepalli. Institute for Transport Studies, University of Leeds e-mail: N.C.Balijepalli@leeds.ac.uk
  • Christian Berretta. Water@Leeds, School of Civil Engineering, University of Leeds e-mail: C.Berretta@leeds.ac.uk
  • Martin Dallimer. Sustainability Research Institute, School of Earth & Environment, University of Leeds e-mail: M.Dallimer@leeds.ac.uk
  • Gordon Mitchell. School of Geography, and Water@LeedsUniversity of Leeds e-mail: G.Mitchell@leeds.ac.uk
  • Simon Shepherd. Institute for Transport Studies, University of Leeds e-mail: S.P.Shepherd@its.leeds.ac.uk
  • Judith Wang. Institute for Resilient Infrastructure, School of Civil Engineering and Institute for Transport Studies, University of Leeds e-mail: J.Y.T.Wang@leeds.ac.uk

References

Balijepalli, N.C. and Shepherd, S.P. (2015) Cordon tolls and competition between cities with symmetric and asymmetric interactions. Journal of Transportation. online April 2015 DOI 10.1007/s11116-015-9620-3.
Berretta, C. (2006). Assessment of stormwater runoff impact on receiving water bodies in densely urbanized areas. PhD Thesis, University of Genoa, Italy.
Berretta, C., Gnecco, I., Molini, A., Palla , A., Lanza, L.G., La Barbera, P., (2008) On the efficiency of catch basin inserts for storm water runoff treatment, Proceedings of the 11th International Conference on Urban Drainage, 11ICUD, Edinburgh, 31 August – 5 September 2008.
Berretta, C., Sansalone, J., 2012. Fate of source area runoff phosphorus in a direct adsorptive-filter subject to intra- and inter-event phenomena. Journal of Environmental Management, 103, 83-94.
Crabtree, R W., Kelly, S., Green, H., Mitchell, G. and Squibbs, G. (2008) Cost Benefit Analysis of potential solutions for point and diffuse source pollution to achieve WFD good status: Ribble SIMCAT Pilot Study, UKWIR report WW17C205, 127pp
Dallimer M, Irvine KN, Skinner AMJ, Davies ZG, Rouquette JR, Armsworth PR, Maltby LM, Warren PH, Gaston KJ. (2012) Biodiversity and the feel-good factor: understanding associations between self-reported human well-being and species richness. BioScience, 62, 47-55.
Dallimer M, Rouquette JR, Skinner AMJ, Armsworth PR, Maltby L, Warren PH, Gaston KJ. (2012) Contrasting patterns in species richness of birds, butterflies and plants along riparian corridors in an urban landscape. Diversity and Distributions, 18, 742-753.
Department for Transport (2014). Road lengths in Great Britain: 2013 data tables, https://www.gov.uk/government/statistical-data-sets/rdl02-road-lengths-kms
Echenique, M., Mitchell, G., Hargreaves, A., and Namdeo, A. (2012). Growing cities sustainably: Does urban form really matter? Journal of the American Planning Association, 78:2, 121-137
Ellis, J.B., Revitt, D.M., Lundy, L. (2012). An impact assessment methodology for urban surface runoff quality following best practice treatment. Science of the Total Environment, 416 (2012), 172-179
Elmqvist et al., 2013. Urbanization, Biodiversity and Ecosystem Services: Challenges and Opportunities: A Global Assessment. SpringerLink, The Netherlands
Mitchell, G. (2005).Mapping Hazard from Urban Non-Point Source Pollution: A Screening Model to Support Sustainable Urban Drainage Planning. Journal of Environmental Management, 74, 1, 1-9
Kuang X., Sansalone J.J., Gnecco I., Berretta C. and L.G Lanza. (2007). Cementitious Permeable Pavement as an LID Practice Hydrologic and Particle In-situ Control. The World Environment & Water Resources Congress – EWRI, May 15-19 2007, Tampa, Florida (USA), 243, 37 (2007)
Liu B., Berretta C., Gnecco I., Ying G., Sansalone, J. (2009) Control of Highway Stormwater during Event and Inter-Event Retention in BMPs. Transportation Research Record: Journal of the Transportation Research Board, 2120, 115-122.
Palla A., Berretta C., Lanza L.G. and La Barbera P. (2008). Modeling storm water control operated by green roofs at the urban catchment scale. ICUD 2008, 11th International Conference on Urban Drainage, Edinburgh, Scotland, UK, August 31 – September 5 2008.
Pfaffenbichler, P., Emberger, G. and Shepherd, S.P. (2010): A system dynamics approach to land use transport interaction modelling: the strategic model MARS and its application. System Dynamics Review vol 26, No 3 (July–September 2010): 262–282.
Rossman, L. A. (2010). “Storm water management model User’s manual, version 5.0.” EPA/600/R-05/040, U.S. Environmental Protection Agency, Cincinnati, OH.
Stovin, V., Poë, S., Berretta, C., 2013. A modelling study of long term green roof retention performance. Journal of Environmental Management, 131, 206-215.
Wang, J.Y.T., 2015. “Resilience thinking” in transport planning. Civil Engineering and Environmental Systems 32(1-2), 180-191 open access to 16th June 2016 http://www.tandfonline.com/r/gcee3212

Rail industry costs, open access, Labour’s plans for rail, and overseas perspectives on the UK – interview with Professor Chris Nash

Interview of Professor Chris Nash by Lorna Slade of Rail Professional.
(Interview first published at railpro.co.uk and reproduced with permission).

As the first speaker at a recent forum on developing the UK rail network, Professor Chris Nash proved to be one of the highlights in a day of bland PowerPoint explanations marked at the half way point by an ultra-safe discourse from Clare Moriarty.

Nash’s talk was titled Competition, contracts and setting out a future roadmap’ and relaying some conclusions based on research he and his colleagues have done at the ITS, Nash began by informing us that the main problem in the industry is that costs are too high.

'For all of my career' said Nash, 'I've taught my students that rail has big economies of density, so if you have a massive expansion of traffic on an existing network you can expect unit costs to come down. Actually of course they have gone up – since 1997 costs per train km have risen in real terms by 25 per cent, which given that train kms are growing is not what would be expected.'

Speaking to me in our subsequent interview, Nash points out that a big part of that has been infrastructure costs, and that's all mixed up with the failure of Railtrack and then Network Rail's costs being above European best practice, 'although they are coming down and that will continue'.

What is more surprising to Nash is that competitive tendering hasn't reduced train operating costs. 'One would be hard pushed to make the case that franchising has failed to deliver good services, but in almost every other field, competitive tendering gets costs down, in almost every other country I've looked at it gets costs down. However in our case costs per train kilometre is a bit above what it was when the first round of competitive tendering finished.'

Some new evidence for the reasons why has come from Nash's colleagues Phil Wheat and Andrew Smith who did some econometric work which suggests that actually our franchises are typically too big, and that the medium-sized ones have been more successful in controlling their costs. 'In that context it's interesting to know that on average our franchises are ten times the size of those in Germany and Sweden in terms of train kilometres,' points out Nash. 'We know about the problems of managing franchise failure, and I think the lesson has been learned that negotiated management contracts are a way of losing control of costs. We also know there have been totally exogenous factors but there are two big issues; the rise in staff costs, where real costs per train km are 30 per cent above where they were at the completion of the franchise process, and the trade unions, which have done very well out of privatisation – fragmentation has made them stronger I would say.'

Franchise lengths are also a key issue, he believes: ‘My impression is that train operators really tend to want results for anything they do within four or five years, which is not surprising given our current franchise lengths, so when it comes to investment for instance, where the train operator is responsible for choosing rolling stock, what they really want is something they know they can rely on to work immediately, rather than looking at innovations that will reduce life-cycle costs. If you’re on a seven year franchise you’re really not interested in what happens beyond the next four or five years, and that’s a disastrous approach to rolling stock.

'I see something of the same argument applies with working practices, if changing them is going to mean a big struggle and the results only really show in the longer-term, then there’s no incentive for the current franchise holder, so that's why I would advocate longer franchises.'

Another factor that affects costs is a lack of alignment of incentives between infrastructure and operations according to Nash, who was part of a team which did some econometric work for the Community of European Railways looking at data for the past 20 years for all the countries of Europe and some in Asia, including Japan and Korea. 'Our work suggested that this is a serious problem when we looked across the countries. What we found was that on more densely used networks, vertical separation tended to raise costs, and it's not surprising this happens because these networks are where the integrated planning of operations and infrastructure matters most. We did some interviews that showed that while to some extent access charges and performance regimes and so on do give the right incentives to the different partners, there are lots of respects – despite all the efforts that have gone into sophisticated track access charging systems and a sophisticated performance regime – in which the partners don’t have an incentive to work together for the best solution, and simply pursue what's best for them.'

Nash believes the South West Trains/Network Rail alliance with its sharing of changes in revenue and costs is something to be held up as a model that overcomes the misalignment problem, 'except, because of the length of the franchise it's still too short, but with longer franchises you can have much longer alliances as well.'

While acknowledging that alliances 'are not necessarily the solution where there are a lot of different operators and where you can't design franchising regimes to avoid that,' Nash would like to see some arrangement to try to bring the incentives on different operators together.

Open access not the answer

Open access competition is not the answer believes Nash, and he is forthright about his scepticism. ‘We increasingly hear the argument: 'If franchising didn’t control costs surely allowing much more open access will', and that for intercity franchises maybe we don't need a franchise at all, that everything could be open access. But there are some significant disadvantages.

'The DfT is concerned that where it competes with franchises it reduces their profitability and increases the total subsidy bill for the railway, and I think there's an argument that it makes wasteful use of track capacity, but maybe that could be countered by higher track access charges, particularly where capacity is scarce. More importantly I think it fails to produce a well-integrated timetable; Network Rail recently produced a paper on improving connectivity in which it has gone for the ideal solution which costs a lot of money in infrastructure investment. We did some work at the Institute that suggested that if you accepted less than ideal you could still get a lot of benefits through a more systematic approach to timetabling.

Nash continued: 'Despite having some criticisms of how it's been done I think the principle of franchising – profitable services and unprofitable – is the best way of introducing competition, however open access competition is certainly a growing trend around Europe and the European Commission seems to favour it for commercial services but with not much evidence of a financially sustainable system of on-track competition, and most of the entrants have lost money.

'So I think the answer overall lies in looking further at how we franchise, particularly at the length and size of franchises. We definitely need longer franchises, where the train operator is in the lead on planning and marketing, and Chiltern of course is the model, I think everyone agrees it’s a success.'

Labour's plans

Labour's plans regarding franchising are well-documented, and Nash is thoughtful on this. 'They've spoken of allowing a public sector operator to compete with the private sector for franchises, which is the case in Sweden, Germany, Netherlands and Denmark, and it seems to work. So I don’t think it’s as silly an idea as some people are saying. It provides a public sector comparator and ensures competitive bidding, although we generally have had fierce competition for franchises so I’m not sure that it's necessary from that point of view, but it is some sort of a safeguard.

'The other thing Labour has spoken of is an enhanced role for Network Rail although I'm not too clear what this would be. Certainly in some respects if Network Rail did have a bigger role things would work better, for example it recently carried out a study of East Anglia on improving connectivity which concluded that if the timetable were planned as an integrated whole you could provide a lot of benefits, to smaller flows in particular. So if Network Rail played a much more forceful role in the timetabling that could improve the system.'

Overcrowding and fares

The industry is perceived by many to be mostly foreign-owned, feeding profits back to countries' native rail networks and paying hefty amounts in dividends to shareholders. How can that image be altered? 'I think to a degree the Rail Delivery Group, by providing a voice for the industry is doing something to alleviate that needless to say distorted view. Generally satisfaction with the rail industry is quite high and on the whole we do now have good services, but I think the two big causes of dissatisfaction are overcrowding and fares. The latter partly because people think they're high and partly because the system remains very complicated. If there was more of a common framework for fares between the different operators that would help – currently we have things like off peak returns but they mean different things for different operators and it just confuses people.'

Rail Professional columnist Andrew Meaney of Oxera recently pointed out that regulated fares are no longer serving passengers in a transformed rail market, especially in the area of consumer protection. I wondered if Nash believes they should continue to be regulated? 'I think they should, but with changes in how it’s done.' There are currently strong incentives on Toc's to market all their cheaper offers as advanced purchase tickets for specific trains, and if walk-on fares became extremely high that would be a significant disadvantage for consumers who don't always want to tie themselves to a particular train or who have to travel at short notice. So I think some regulation is needed although it’s currently working to create artificial peaks and that needs to be avoided.'

One possibility, he suggests, 'would be to regulate a basket of walk on fares rather than simply the saver fare – for the longer distance services. For shorter distances there are major issues involved regarding transport and land use planning as a whole. To what extent do we want to encourage rail commuting into large cities? To what extent do we want flexible ticketing covering bus and rail? I think it’s sensible for the franchising authority particularly where the franchising is devolved, to set the fares, not just regulate them but actually set them.'

Widespread activities

Nash has had a long and illustrious career in transport economics, much of it connected to the University of Leeds where he started in 1975 as British Rail Lecturer in Rail Transport. He became a professor of transport economics in 1989 and then a research professor at the University’s Institute for Transport Studies in 2008. Now semi-retired he plays more of an advisory role but in outlining his activities, by most people’s standards he is extremely busy.

In terms of current research, one of Nash’s big interests remains railway reform, and what works best in different circumstances, and there are plans for further work on this with Japanese and Korean colleagues. He continued: ‘I am also contributing with colleagues to an examination of the effectiveness of track access charges in encouraging efficient design of rolling stock, as part of the SUSTRAIL project for the European Commission which is just reaching its conclusion. The wider SUSTRAIL work also involved carrying out a business case appraisal of the proposed technical innovations, as well as new work to understand the marginal wear and tear costs of rail infrastructure usage, combining econometric and engineering methods.’

Nash also recently prepared a review for the International Transport Forum with colleague Andrew Smith of the measurement of rail efficiency, ‘an area in which ITS has done a lot of work both relating to infrastructure and operations.’

He serves on the HS2 advisory panel and also a Transportation Research Board committee in the US which is examining high speed rail as a part of a general review of intercity transport. ‘That keeps me involved on the debate on high speed rail, where the work of my colleagues on demand forecasting and valuing time savings is playing an important role.’

As well as that he is still does some teaching, including leading a short course on rail economics for staff of the DfT’s Rail Executive in the near future.

Speaking of the Rail Executive, I mentioned that I had interviewed Peter Wilkinson, head of its Passenger Services directorate, who is disappointed at the lack of true market liberalisation across Europe, with countries ‘spending nearly all their time resisting and fighting it’, as he put it, despite having their national operators here. Without overtly agreeing Nash observes that although British Toc’s such as National Express are making some gains in Germany, ‘either they’ve not been bidding or they haven’t been successful even where they have had the opportunity, which is a bit surprising given the experience they have.’

An overseas view of us

I wondered what Nash’s doctoral students think about UK rail? ‘That’s an interesting question. A lot of them are from overseas and very often they find it hard to understand how such a fragmented system could work; for instance when I talk with Japanese doctoral students and other academics, the Japanese view is absolutely that track and services need to be provided by the same company. I would say the same with North America – almost all North American transport economists believe vertical integration is absolutely essential to a railway. That’s certainly one thing that comes out.’

Our rail regulator is well-regarded though: ‘I have a foreign student working on regulation and can say that in terms of the role of the rail regulator Britain tends to be looked upon as a model of how to do it. I’ve criticised some of the things we’ve done but in terms of regulation I think we’ve pretty well got it right in terms of independence and in terms of putting pressure on the infrastructure manager, which in many countries the regulator doesn’t do and has no powers to do.’

In his free time, Nash enjoys hiking and is chairman of the ‘rather unusual’ Dales & Bowland Community Interest Company, which procures the Sunday Dales bus network – ‘we get funding from various sources and contract out the actual operation but we plan and market the services, so I’ve got a foot in the bus industry and that’s an area that’s harder than rail, certainly in terms of funding.’ Needless to say, I’m certain Nash will put his mind to a solution.

www.its.leeds.ac.uk/people/c.nash

What is time worth? - Professor Richard Batley comments

It's 9.06 am. You're standing on Platform 4 awaiting your train, due in just a few minutes. Will it matter if it’s running late? How much will it cost you – or your employer – if your journey is delayed? What if you get on and have no seat? Does overcrowding have a cost too?

For more than a decade, researchers at the Institute for Transport Studies have been trying to answer abstract questions such as these. Collaborating with government and business clients, our economists, statisticians and mathematical modelling experts analyse data to come up with monetary values for ‘non-market goods’. These goods include time, comfort and punctuality – aspects of travel that benefit people, but which they cannot buy or sell in the market place.

What difference does it make to know how much a minute is worth?

Although our valuations of time, punctuality and crowding might appear abstract, they have a huge impact on UK public policy. These numbers – the output from years of rigorous data collection and analysis – make an important contribution to transport policy decisions and large public infrastructure investments in road and rail.

Economic assessments are critical to all public transport development schemes. The Department for Transport (DfT) has developed a standard set of appraisal procedures for transport projects, known as WebTAG. The time valuations from Transport Systems Hub researchers are integral to this appraisal process. Cross Rail, HS2, the M6 toll around Birmingham – all these large-scale investments followed the WebTAG protocols and used our numbers to calculate the economic value of journey time savings.

Of course, investment decisions do not rest solely on economic assessments. However, monetary calculations provide significant input into the decision process. Indirectly, our research has helped to release huge sums of public investment into the economy. Moreover, improved infrastructure and faster journeys subsequently deliver additional economic gains, opening new markets, creating jobs, and benefiting citizens and businesses with greater connectivity.

The Office of Rail Regulation (ORR) has worked with us to link forecasts of passenger demand and revenues with time valuations. Our modelling and valuation work in this context has helped to inform ‘Schedule 8’ calculations that set compensation rates, known as transfer payments, for late-running trains. In 2013-14, Schedule 8 accounted for £85 million in compensation.

Entering new times

Our researchers continue to support the work of DfT investment appraisal schemes. In 2013, the DfT published several reports undertaken by the Institute for Transport Studies (ITS). The two main reports examined the latest evidence on the value of travel time savings for business and commuting and leisure journeys.

Crucially, the researchers found that circumstances had changed dramatically since the previous time valuations were first used as a standard in WebTAG. ‘Since our first time valuations nearly 10 years ago, society has changed a lot’, explains Richard Batley, Professor of Transport Demand and Valuation at ITS. 'Back then, people saw travel time as wasted time, because they could not work and generate wealth on the move. Now, with mobile technology and WiFi on buses and trains, this is no longer the case. It is high time that we revisited this question.'

The 2013 reports recommended that the DfT update its values to account for the many social, economic and demographic changes over the past decade. The study also suggested a range of additional research projects that could improve models of the combined employer/employee value of travel time savings.

The reports also highlighted some important gaps in valuations of commuting and leisure travel time savings. ‘Here we found that valuations needed to account for the effect of more reliable transport systems’, Professor Batley remarks. 'We compared several valuation exercises conducted in other countries, such as the Netherlands and Sweden. We concluded that the UK needed a comprehensive nationwide study using similar modern statistical modelling methods.'

Responding to these recommendations, in 2014 the DfT commissioned ITS, working with Arup and market research company Accent, to re-estimate national average values of travel time savings. The new study will investigate the factors that cause variation and uncertainty in these values. The research team will also provide values for the benefits derived from improved reliability or reduced overcrowding.

This article is reproduced from the University of Leeds’ Transport Systems Hub: http://tsh.leeds.ac.uk

What London’s bike hire scheme can learn from other cities - Stephen Parkes comments

London’s cycle hire scheme has become a prominent fixture in the capital’s transport network since it opened in 2010. Known as “Boris Bikes”, it is Barclays Bank that has provided commercial sponsorship for the scheme from the beginning, a relationship that is due to end in 2015. So the search is now on for a successor with deep pockets, one that is willing to play a role in shaping the future of the scheme.

boris_bike

Many bike hire schemes begin small, with the number of bikes initially in the hundreds rather than thousands. But in London, helped by a swelling population of more than 8m people and the support of the city mayor, the scheme opened with 5,000 bikes and has gradually expanded to 11,200. It is now the second largest scheme in Europe, after Paris. The financial support pledged by Barclays (£25m over five years) was certainly a factor that enabled the scheme to open at this scale.

The end of 2013 saw a decline in the number of journeys made, in comparison to the same period in 2011 and 2012, before picking up again in 2014 to hit a milestone of 30 million journeys. A study of the scheme’s users found they were disproportionately male and from more affluent areas of the city. Hopefully this issue will be addressed by the extension of the scheme to other parts of London, encouraging access to a wider spectrum of the city’s population.

For many schemes, including London’s, private sponsorship is an important element of the business model. JCDecaux and Clear Channel (both outdoor advertising companies) are involved in many European schemes. They typically manage the scheme and supply capital for the start-up and running costs in exchange for rights to a proportion of the advertising boards across the city. The London scheme differs here in that the sponsor’s investment provides advertising of their brand, as opposed to increasing the share of the market they operate in.

For London, this external sponsorship is vital – Transport for London are looking for £37.5m – and the scheme has not yet shown to be profitable. As Barclays withdrew their financial support, the scheme’s expansion into southwest London in 2013 was taxpayer funded. Nearby councils were reported to have jointly paid around £4m towards the £10m cost.

Schemes have sometimes relied upon an individual to champion the policy and ensure its success, especially in the early days of a scheme. London mayors Ken Livingstone and Boris Johnson have had important roles for London, but a champion will continue to be needed to prevent the scheme from faltering.

As the London cycle hire scheme reaches a crossroads, what can be learnt from other schemes? The Paris scheme is seen as a great success but it relies upon high user numbers to offset the expense of sustaining it. Smaller schemes – for example those run by Nextbike– offer a greater likelihood of financial sustainability, but lower running costs are a key factor in this. Crucially, in many cities cyclists benefit from wider roads and more defined space. In contrast, one of the most pressing issues for London is the safety of cyclists, which is a problem for the city as a whole, including those using the bike hire scheme.

Busy, narrow roads and insufficient or absent cycling infrastructure dissuade many from using the scheme. Data suggests that a London hired bike is used far less frequently over the course of a day than a bike would be in many schemes elsewhere. Infrastructure problems are seen as a key factor in this, and this raises the issue of value for money. Resolving the safety and infrastructure problems are of course not easy tasks, and real change in authorities’ attitudes towards cycling is occurring very slowly. But concerted effort and change here may well be the key to reigniting the initial success of the scheme.

The importance of a suitable sponsor for the scheme cannot be underestimated as their financial support will be essential. Public funding will undoubtedly continue to be needed but to a lesser extent if the scheme prospers. It has been contested that Barclays’ decreasing interest in the scheme may be the result of the growing cycling safety issues in London. This is perhaps the most difficult hurdle that the scheme, and whoever its new sponsor will be, must overcome in coming years. Bikes that aren’t used are no use to anyone, whoever pays for them.

Stephen Parkes, July 2014. www.its.leeds.ac.uk/people/s.parkes

Road safety performance: is Britain as ‘SUNny’ as we think? – Professor Oliver Carsten comments

Oliver Carsten
The three countries in the world that do best in terms of road safety performance - Sweden, the UK and the Netherlands - are collectively termed the SUNflower countries based on the fact that their initial letters spell SUN. The name was first applied in a report from SWOV by Matthijs Koornstra and others in 2002 entitled SUNflower: a comparative study of the development of road safety in Sweden, the United Kingdom, and the Netherlands. Since then, these countries have continued to perform rather well with Great Britain often ranking as the best in the world. The International Transport Forum's Road Safety Annual Report 2013 rates the UK as a top performer and the Daily Mail proudly announced on 10 September 2010 that Britain was first in the world in road deaths per 100,000 population. Even the Americans are envious as evidenced by a recent report from the University of Michigan Transportation Research Institute with the title Why is road safety in the U.S. not on par with Sweden, the UK, and the Netherlands?

It is also noteworthy that, we along with the other SUN countries, have continued to improve over the years. The accompanying chart shows road deaths per million population for the three countries from 2000 onwards. It can be seen that all three have improved, but in the last few years Great Britain and Sweden have improved considerably more than the Netherlands, and that, compared to Sweden, British performance has been one of steady gains.

But are we really as good as we claim to be? We are continually being told that we don't exercise enough and that we should walk and cycle more. The latest pronouncement was a 2013 report from the Ramblers and Macmillan Cancer Support stating that being more active - moderate physical exercise for just 150 minutes a week - could save 37,000 lives a year. It can be argued that our comparative lack of exercise and disdain for walking and cycling makes the country look good in terms of road safety performance. For travel on foot or by bicycle is far more dangerous than travel in a car. That is why we talk about "vulnerable" modes.

So how would our national performance look if the average Brit had the modal split of the average Swede or Dutch person? I have done a little bit of rooting around in the travel statistics of the three countries in order to answer this question. My assumption is that the British safety performance stays as it is in 2012, but that we travel as much or as little as the Swedes and Dutch.

So first of all, let's become Swedes. Per head of population, they walk about 1.6 times as much as we do and cycle 2.6 time as far each year. On average, they motorcycle just a little more than we do and travel by car a little less (approximately 91 percent of our car travel). The average Swedish truck travels somewhat less than the average British truck (true for both light and heavy trucks), but the average Swedish bus covers twice the annual mileage of a British bus. If we then adjust the British fatalities to each group of road users by the ratio of Swedish to British travel, we end up with considerably more pedestrian and cyclist deaths than we have now: 1,002 a year as compared with 538 now. Our overall number of road deaths per million population increases from 28 to 34, which puts us well behind Sweden, Denmark and Norway. So it does appear to be true that our reluctance to walk and cycle makes us look unduly good.

Then we can do the same calculation and become Dutch. The Dutch walk about the same amount as we do, but it's no surprise that they cycle far more - on average 10.9 time as much. We cycle 85km per person per year and they cycle 923km a year. But - and this was more of a surprise to me - they motorcycle far more than we do: 8.8 times as much per person. Admittedly in the Dutch case that is mainly on mopeds and scooters whereas we tend to ride big bikes. But any kind of motorcycle use is inherently risky. If we adjust only for motorised vehicle travel by vehicle with four or more wheels and for walking and cycling (and ignore the difference in motorcycling), then the British performance in road deaths per million population falls from 28 to 46. That puts our performance below that of the Netherlands itself as well as below that of Ireland, Spain, Germany and Japan.

If we include the motorcycle travel in the calculation, then we come out far worse. We are now at 87 road deaths per million population which is equal in performance to Latvia. So from being top, we have moved to being one of the worst in the EU.

This exercise should stop us from being so self-congratulatory. If we aspire to being best in the world, then we should have world-leading safety performance in the vulnerable modes too.

Oliver Carsten, Professor of Transport Safety
www.its.leeds.ac.uk/people/o.carsten
March 2014

Will it be ‘all change’ on UK railways after Dawlish? – Professor Greg Marsden comments

Greg Marsden

With the collapse of the line at Dawlish in Devon cutting off railway services to Plymouth and the southwest for months, Secretary of State for Transport Patrick McLoughlin MP and Network Rail chiefs were brought before the Transport Select Committee to answer questions about the implications.

In terms of future investment, while losing a railway line or road undoubtedly inconveniences some, the two questions to answer are over the economic impact of such a loss, and how often losses of such severity are expected.

Within hours of the news, calculations adorned the backs of hundreds of envelopes, producing seven, eight or even nine-figure sums of economic turmoil. Any transport economist would first calculate the cost to the system's users, following a well established tradition which shows that users value loss of their time during a disruption at around three times the rate that they value time saved on a journey. Typically these are for disruptions over the course of a day, not over a month or more as will be the case due to repairs at Dawlish. There are also well understood penalties for travellers that have to change between modes of transport - the dreaded replacement bus services do not score highly.

So these costs can and will be quantified. As a rough measure, Plymouth station serves around 2.6m passengers per year and Penzance another half a million, so the costs generated by these comparatively quite modest passenger numbers (London Underground carries 3.36m passengers a day) won't take us close to vast sums bandied about by the back-of-the-envelope economists.

Figures to lay foundations on

The really big figures are derived from the effects on the wider economy, as put forward by the Local Enterprise Partnerships , town and county councils from the southwest appearing before the select committee. They provided figures that claimed losses to tourism, trade, and potential investment of £4m-£5m a day to the Plymouth economy and £8m to Cornish tourism.

Can it seriously be argued that losing a train service alone has led to a 75% drop in tourist bookings? Clearly any research based on self-reporting by the local chambers of commerce is limited, and the impression given at the hearing by the councillors and executives was that the collapse at Dawlish was also an opportunity to argue for a reversal of historic underinvestment in the region.

So while there will certainly be economic losses, we don't know what or how much, nor how to disentangle the short term effects such as tourism bookings from the long term effects, for example of major businesses not locating to the region. To me, the figures thrown about are not credible, but to quibble is to miss the point: the effects of major transport disruptions on the wider economy are not well understood, and are not properly accounted for in the decisions that underpin infrastructure investment.

The implication is that those areas that are particularly vulnerable to severe damage and disruption from events like Dawlish will have been short-changed in terms of past investment.

Doing nothing may be the right thing

The second question is how often this scale of service outage is likely to occur. Network Rail and the Met Office have concluded that the combination of high winds, high seas and rain had led to a scale of damage not seen before - but the past is not necessarily a good guide to the future. While it was good news for the representatives of the southwest that it had opened up discussion around proposals for alternative bypass routes, or additional breakwaters around the Dawlish stretch of the line, that was as far as the good news went.

Network Rail's chief executive reeled off tales of weather-related woe: flooding at 250 sites across the network, and more than 50 landslips in Kent alone (compared to the usual three) at an estimated cost of £170m. Such extreme weather has led to calls for investment from areas besides just the southwest, and while £170m is a significant spend, the demand for investing in network resilience will surely force some re-evaluation of priorities.

The problem is that we don't know how often these types of events will happen - and that information is a major factor in whether to carry on with business as usual, or to call "all change", and launch a much greater programme of investment in resilience measures throughout the network. New investments are assessed over a 60-year period: if we think another Dawlish-level-event will remain a rare, it makes little sense to spend heavily on preparing for it - however inconvenient it may be if, or when, such a severe event happens again. And if we should adopt some kind of precautionary principle, the question is what it would look like, and how much would we (the passenger or the taxpayer) be prepared to pay?

When the water recedes and attention moves on elsewhere, I believe that in the absence of any clear evidence the purse strings will close and it will be business as usual. History is full of examples of major events that fail to bring significant change to policy, despite initial interest - security incidents on US domestic flights before 9/11 are a prime example, and the largely unfulfilled calls for institutional change in the UK after the MP's expenses scandal another. This is a phenomenon Jones and Baumgartner call the Politics of Attention.

The UK's limited infrastructure spending is allocated on the basis of what benefits the user, primarily time savings on journeys that affect thousands of passengers every day. The recent passenger satisfaction surveys suggest that many louder voices will reassert themselves, each with arguments for different investment priorities. But it's difficult to see an under-used emergency rail bypass around Dawlish making much headway against demands to tackle overcrowding on trains servicing London and the southeast.

I hope to be wrong in some of what I have written above. I believe that the UK does not invest enough in its existing infrastructure, instead focusing on the promise of what economic growth new infrastructure might bring. In the absence of better evidence or perhaps a sudden lurch towards a more risk-averse attitude towards resilience, Dawlish will most likely be consigned to history as a particularly memorable storm in a tea cup.

www.disruptionproject.net

New runways to support leisure even as transport at home is cut – Professor Greg Marsden comments

Greg Marsden

The interim report of the Davies Airports Commission published this week presents an in-depth analysis of aviation's value to the UK economy and suggests the country will need a new runway by 2030, and a second by 2050.

The report examines various future predictions and possible plans of action to cope with what could be a doubling of flight demand by 2050. Even with significant carbon emission limits and capacity constraints, the report estimates that by 2030 runways will be operating so close to their capacity that major reliability issues will emerge. Yet despite these strong words, the report will take another two years to come to a conclusion on which of the two contenders - Heathrow and Gatwick - will get extra runways. Shouldn't we just get on with it?

I was fortunate to work in Parliament at the time the 2003 Airports White Paper was produced. I saw the reports and arguments that underpinned the last policy statement, which ultimately failed to achieve what it set out to. At the time it seemed clear that the majority business interest and the strongest economic case was for a third runway at Heathrow. Gatwick was then out of the question as there was a moratorium on further development until 2017. Expansion of Stansted was supported, although ultimately that seemed more like the option with the least collective opposition rather than one which had logic behind it and buy in.

The politics of expansion was huge then and it clearly has not diminished now, with the commission's final report not due until after the next election (check the constituency maps near the airports for further details).


Economic vs environmental concerns

Those against airport expansion question the growth figures and the government's proposals as a "predict and provide" approach. They claim it is inconsistent with our environmental commitments. This line of argument is important to explore.

The Davies report examines flight demand worldwide as well as in the UK. Demand for flights from emerging economies is growing (more than doubling in the past 20 years) and this is beyond the control of UK policy makers. Heathrow retains a globally leading status as an international hub airport, but faces competition from Paris, Amsterdam and Frankfurt.

From an environmental perspective it doesn't matter much if the demand is truly global (it matters of course for those under the flight path). So does UK Plc benefit more from having these flights going through London and making it a more accessible city than we lose from not having those flights? The report suggests it does and a failure to act will cost the UK economy between 48 and 65 billion pounds over the next 60 years.


Demands of business vs leisure

What about overall demand? The report relies heavily on models based on the past decades, with grown driven by rising disposable income. In London the average person takes 2.7 flights a year, almost double that of a resident of the West Midlands. From that it's clear that there's room for demand to rise not only with a growing population, but with growth from areas of the country where demand is currently low.

But dig a little further and you see that even in London, fewer one sixth of the flights are for business, with this being around one ninth for the whole of the UK. The real question is why we are travelling so much more for leisure or to visit friends and relatives, and whether this is sufficient to justify expansion.

If expansion is driven by the needs of business, then there is surely plenty of capacity to expand business use of existing flights by pricing some leisure trips out of the market. Any debate on proposals that would imply a significant environmental impact must include a discussion on changing patterns of business travel, and whether supporting leisure travel is the best use of resources. This is not just about which proposal brings about the most value, but what sort of society we want our transport system to support.

Are we also happy for a different logic to apply to aviation than to other parts of the transport system? This is also the week where further cuts were announced to local authority budgets. The subsidised evening and weekend bus network continues to shrink as we prioritise education and social care over transport. What are essential transport services for some are being lost, while we debate not whether, but where to expend resources that will mainly support leisure travel. That is something worth talking about.

Professor Greg Marsden, 19 December 2013

High speed rail (HS2): 6 key questions - Professor Peter Mackie comments

Peter Mackie

It is a feature of many big transport projects that they go through massive wobbles. The Third London Airport, the Channel Tunnel, HS1, Crossrail are all examples and the very name Thameslink 2000 is a reminder of the syndrome which HS2 is now experiencing.

My overall position having had the benefit of membership of HS2's Analytical Challenge Panel until March 2012 is that HS2 is not a stupid ill-conceived vanity project but neither is it a game changing transformational project for the economy. It is best viewed as a major transport project with wider economic, social and planning impacts. It is worth doing provided the price is right, and that is not yet clear. It absolutely must be considered on its merits and the starting point for doing that is the costs and benefits to the transport system, and then to the spatial economy. It is actually pretty implausible that HS2 on its own could fundamentally change the North/South divide. That would require some bigger decisions such as relocating Westminster to Birmingham! But that is not to deny that HS2 could make a very useful contribution to improving the connectivity of the core cities which are the best prospects of engines of growth we have got.

Britain has a lot of infrastructure challenges not just in the transport sector but in energy, water, flood protection and urban renewal. Those who say we would be better off with an Infrastructure Planning Commission to help mediate these choices are undoubtedly right, but in its absence the best we can do is to imagine that the x billion committed to HS2 would otherwise be committed to useful public infrastructure, some but not all in the transport sector, with a decent social rate of return. So therefore the fundamental requirement ahead of the Hybrid Bill is to assess the case for HS2 starting from the bricks and mortar of the transport business case. One of the strengths of the Public Inquiry system is that the scheme promoter is required to state its case and be subject to cross-examination. With that in mind, here are six questions on which clarity is going to be required.

Question 1 - what has happened to the costs and what can reasonably be expected to happen?

My appreciation is that the costs were based on the unit costs for HS1, the most expensive railway in the world, and then loaded with a further 66% mark up for optimism bias. That produced the 32bn number. Then on top of that there were some subsequent specification changes, for example the link to Crewe, which pushed it up further, maybe to 35bn. Then it was decided that we wanted the 95% probability value of the costs rather than the central 50 th percentile pushing the headline number up to 42 bn. But there are questions about this-surely if you move to the 95th percentile you should reduce the optimism bias mark up because you are taking a far more conservative position. In any case for the cost-benefit analysis central case, what is required are the central values-the expected 50th percentile costs, revenues and benefits-- with a risk analysis around the central case. This needs explaining very clearly : the system seems set up to produce a very high cost forecast which the contracting system will then magically just manage to achieve.

Question 2 - how robust are the traffic splits between classic and high speed rail at equal fares?

There seems to be a bit of a conundrum about HS2. In some ways it serves some places off the line such as Newcastle, Liverpool and Preston better than several of the places on it. We seem to be unable to connect HS2 properly to the main stations at Birmingham, E Midlands, Sheffield or Leeds. Realistically this is going to be a middle class project so where potential users live is important. How will the respectable burghers of Ilkley, Bingley, Dore, Fulwood, Bingham, Edgbaston, Wilmslow, Prestbury and so forth choose to get to London and how is a bracing walk from say New Street to Curzon Street on a February day with a suitcase reflected in the choice process?

Question 3 - How does HS2 scrub up in financial appraisal terms?

There are numerous aspects to this. One is what the trade off is between revenue and benefits in the fares policy. There seems to be a curious dichotomy here. On the one hand the value of a step change in journey times is stressed. On the other, when it comes to converting that into revenue through a premium fare, the analysts seem to run into modelling problems. I can accept that representing yield management systems in models is difficult, but if we are unable to say how much of the user benefit from reduced journey times we could convert into additional revenue, we are in trouble. More generally, we just have to know the expected impact on the finances of the railway industry as a whole. If the Government cannot build HS2, endow it to the industry and operate the industry within the same financial envelope as without HS2, that is an acid test failed in my book. The crucial financial test is not what the HS2 franchise can be sold for as a job lot - Lord Heseltine has suggested £10bn-it is the impact on the rail financial envelope as a whole. Obviously answering that question implies the need for the Government of today to take a view on the future organisation of the railways in terms of infrastructure, franchise and open access.

Question 4- What is the social and economic value of increased capacity delivered by HS2?

I think a big criticism of Government as opposed to the DfT, still less HS2 Ltd, is the siloed approach to the strategic case for this scheme. It is very difficult to evaluate the benefits of more capacity on the WCML without a plan describing how that capacity will be used. My appreciation is that we have a national problem of accommodating serious population growth in South-East England without much idea how the infrastructure is going to deliver it. HS2 has the potential to help solve some serious social problems but no-one seems to dare to think of HS2 as more than a transport project. Surely a more prescriptive less dirigiste approach to planning is required in which we say for example that we are going to exploit HS2 by building Milton Keynes 2, and developing the areas around Old Oak and Park Royal in London and Birmingham International in certain ways. It is really difficult to make the strategic case for HS2 without a spatial strategy.

Question 5-What exactly is not yet in the HS2 Benefit : Cost Ratio and when and how will it be decided if the Value for Money category of HS2 is affected by the omitted items?

The promoters have made much of the delays to users of existing lines under maintenance if HS2 is not built. It is not yet clear how many of those delays will happen anyway but it is also unclear whether the HS2 BCR yet includes delays during construction of the scheme itself, particularly but not exclusively at Euston. More generally we hear that the Environmental Statement will run to 55,000 pages but more interesting is how and when that will be summarised and brought into the overall assessment of social value for money according to Green Book guidance.

Question 6- What weight can be attached to GVA methods in general as indicators of strategic impact?

The details of the methodology used in the KPMG report have been the subject of evidence to the Treasury Select Committee by KPMG and Professors Overman and Graham. Without entering the detailed fray, there are some general points about this which have an importance far beyond the HS2 project.

The cost-benefit analysis framework, represented in the Green Book and WebTAG, has a history of forty years behind it. It is not to everyone's taste (see for example letter of Alan Wenban-Smith to Local Transport Today of 15/11/13). But it has some strengths :

  • It provides a coherent framework within which the assessment of transport projects takes place
  • It provides a basis for taking the results of models required for traffic forecasting and using those results in an internally consistent manner for project appraisal
  • It operates within a defined set of assumptions relating to the macroeconomy which are debatable but are at least a level playing field
  • It relies on values for travel time, safety, overcrowding etc which are evidence based even if, just like all the other parameters in the process, the quality of the evidence is open to challenge
  • It starts from the proximate impacts of projects on travellers and transport operators and then works out from that to the spatial and additional wider economy impacts
  • It should be comprehensive in nature and provide the basis for bringing together the economic, social and environmental impacts in one place.

My appreciation of Gross Value Added metrics in general -as opposed to particular applications-is:

  • They are relatively new and there is limited experience of using them
  • They focus on the GDP effects of an intervention but actually in a sector like transport this is inherently difficult to forecast. For example, how do business travel time savings, commuter time savings, overcrowding, reliability and safety benefits convert into GDP effects? This is not an easy question because these things overlap the 'real' and 'wider' economy but unless it can be answered, the changes in accessibility at zonal level cannot be relied upon
  • The implicit macroeconomic model on which the results are based is not highly transparent. For example, where improved accessibility is expected to increase output at regional, local or even national level, it is not clear how the net value of the increased output after taking account of input costs and displacement from other sectors is computed
  • They clearly omit impacts which are non-market but included in the CBA

Overall, if GVA methods are to find a place as a reliable component in transport assessment, work is needed to build the appraisal rules within which they can be used. In the particular context of HS2, the obvious question is ' How could the GVA impact of HS2 be of the order of ten times the benefit impact in the CBA?' Some degree of sense-checking and rationale needs to be brought to this. For the moment, the combination of the direct user and operator benefits, the induced land use change impacts and the additional wider economy impacts is likely to provide a more robust appraisal metric.

Peter Mackie

Professor of Transport Studies

www.its.leeds.ac.uk/people/p.mackie

Rail fare hikes hurt more than just commuters - Professor Chris Nash comments

Chris Nash

Considering how many of Britain's rich and powerful take the train to work, it seems odd to describe rail commuters as hard done by. And yet some undoubtedly are. Last week the government announced the latest round of fare increases: an average rise of 4.1%, rising to as much as 9.1% on some routes.

This comes as successive governments have tried to increase the proportion of the costs of the rail network paid for by passengers rather than taxpayers. According to the Office of Rail Regulation, the taxpayer contributed £4 billion towards the costs of the rail system in 2011/12 compared with £7.2 billion from rail passengers. To address this, fares have been allowed to rise by more than inflation.

The measure of inflation used is the Retail Price Index (RPI), based on the price of a basket of goods. This year the government is permitting an increase of RPI plus 1% (a total of 4.1%). The additional money is passed through to the government, so the train operator does not directly benefit.

As part of its franchise agreement with train companies, the government regulates certain fares: season tickets on commuter routes and off peak returns on longer distance journeys. Regulated fares account for roughly half the passenger revenue of the rail system, and it is these that have been increased. Other tickets, including advanced purchase tickets and first class fares, are unregulated.

Who takes the hit?

Train operators in London and the South East earn around half of the UK's overall rail revenues, mostly from commuters. This figure reflects the expensive season tickets, long journey times and high rail usage among commuters in the area. Of the rest of the revenue, more than two thirds comes from users of long distance services. A comparatively small amount comes from commuters into other cities.

Increasing rail fares is a relatively progressive way for the government to raise revenue. London commuters tend to be better off than most, while long distance services are heavily used by business travellers. Leisure trips are the other main long distance journey purpose and these are optional; if people cannot afford the trip, they can simply not take it.

However, these figures are averages. What about people working in London in low paid jobs? Many commute considerable distances because they cannot find a job locally, and they cannot afford to move closer to the centre. These are the people who will really be hit hardest by these increases.

We do not yet know what the actual increases will be station by station. Train operators are allowed some discretion in the amount by which they increase individual fares, provided that the average increase does not exceed the regulated level.

But passengers from stations like Reading, Brighton, Luton and Chelmsford currently face an annual season ticket rate of £3500-£4000 for a London commute, suggesting that they are likely to end up paying £150 or more per year. Some will face an even steeper increase.

Feeling the squeeze

Increases in rail fares are nothing new, of course, even when adjusting for inflation. But the current economic climate is the key difference this time round.

The normal trend has been for disposable incomes to rise faster than inflation, meaning that an increase of RPI plus 1% would typically lead to rail fares actually taking a smaller share of people's incomes than in the previous year.

However, the current recession has seen disposable incomes rising by less than the rate of inflation. According to the Office of National Statistics, real average hourly earnings have fallen by 8.5% since 2009.

As people are able to buy less and less with their wages, so rail fares are taking a steadily increasing share of commuters' incomes. We can expect these latest increases to hurt far more than those in earlier years when real wages were rising.

There is another aspect to steadily rising rail fares. Partly because of decisions the government has taken to hold down increases in fuel tax, the overall cost of motoring has risen far more slowly than rail fares in this period. This relative price rise has not stopped rail continuing to gain traffic at a time when road traffic has stagnated.

This leads us to the key question of what our rail policy is actually for. Do we want fares to encourage rail traffic to divert to road, rather than vice versa, with the resulting consequences for congestion, carbon and the environment more generally?

Unless rail fares policy is carefully thought through as part of a policy for pricing all modes of transport, commuters will not be the only ones hit by high fares; the whole country's transport system will suffer too.

Professor Chris Nash

www.its.leeds.ac.uk/people/c.nash

23 August 2013

Learning lessons in local transport planning - Professor Tony May comments

It is now forty years since the then Department for the Environment published its proposals for Transport Policies and Programmes (TPPs).  The TPP, uniquely in Europe, provided local authorities with the encouragement to adopt an integrated approach to local transport planning and the powers, guidance and finance to facilitate this.  Sadly, as is often the way in the UK, successive governments could not resist tinkering with a successful system. 

By the 1980s TPP funding was only available for “roads of more than local importance”, while the deregulation of bus services had severely constrained local authorities’ ability to plan public transport.  The Package Approach of the mid 1990s went some way to redress this, but was limited to the larger conurbations, and funded separately.  By 2001 the TPP process had been replaced by Local Transport Plans (LTPs) with a wider remit and a five year cycle.  However, the requirements were overly prescriptive, with objectives, indicators and requirements for targets specified by central government.  Informed by research by Atkins and the DISTILLATE consortium, central government gradually relaxed these requirements, and by the third round of LTPs, in 2009, was providing guidance to local authorities, while giving them full flexibility to specify their objectives, indicators, timescales and policy instruments.  Yet only two years later the new government had indicated that it would neither consider these LTPs nor issue further guidance on such Plans.

This has implications not only for local transport in England, but also more widely in Europe.  The European Commission has recently accepted the need for cities to develop Sustainable Urban Mobility Plans (SUMPs) and is currently developing guidance for them.  In doing so, it has looked to the UK, which has the longest experience of such Plans, for evidence of good practice. 

Its research and that by Atkins and DISTILLATE identifies eight requirements for an effective local transport planning process:

  1. a partnership between central and local government;
  2. the effective involvement of stakeholders and the public;
  3. the development of a vision and set of objectives which reflect local needs;
  4. the establishment of a set of performance indicators which reflect those objectives;
  5. the identification of a set of policy instruments which most effectively satisfies those objectives, and the power to implement them in an integrated manner;
  6. the wider integration of transport plans with land use plans, the policies of other sectors and, as appropriate, with regional plans;
  7. the availability of finance in ways which support the most cost-effective policies; and
  8. the regular monitoring and evaluation of the policy as implemented.

In a paper published last month (May A D, 2013) each stage in the development of TPPs and LTPs is assessed against these requirements, as summarised in the table below.

Performance of the English local transport planning process against requirements

Process

TPP

Reduced
TPP

Package
Approach

LTP1

LTP2

LTP3

Current

Requirement

1974

1980

1995

2000

2005

2009

2013

Partnership

•••

••

•••

Stakeholders

•••

•••

•••

••

Objectives

•••

••

••

•••

••

Indicators

•••

•••

•••

••

•••

••

Instruments

•••

••

•••

•••

•••

••

Integration

••

••

••

•••

Finance

•••

••

••

••

••

Monitoring

•••

•••

•••

••

•••

Key:     •••       Effective in meeting requirements
••         Some limitations in meeting requirements
•          Poor in meeting requirements

It is clear that the third round of LTPs was a high point in the development of the local transport planning process.  Its only significant weakness was the continuing separation of capital and revenue funding which, as Phil Goodwin has demonstrated (LTT 575), discourages investment in the most cost-effective policies.

Sadly much of this has now been lost.  Central government has abrogated its responsibility for local transport at a time when the cuts which it has imposed have reduced the skills available at a local level.  Local authorities can still establish stakeholder groups, set objectives and indicators and specify policy instruments, but with much depleted resources for doing so.  The National Planning Policy Framework has seriously eroded the ability to plan land use and transport together.  Regional planning has been discontinued and replaced by the continuing confusion over Local Economic Partnership remits and boundaries.  At a time when finance is severely constrained, the new Local Transport Bodies have a focus on capital spending, while revenue funding has become even more restricted.  Thus the scarce funds available are even less likely to be spent in the most cost-effective way.  Meanwhile, central government’s withdrawal from consistent, country-wide monitoring will make it harder to identify the problems which will inevitably result.

The one certainty in all of this is that it will not be long before the basis for local transport planning in England has to be changed yet again.  Let us hope that whoever is responsible will reflect fully on the successes and failures of previous governments.  In the meantime, the European Commission’s SUMP consultants can learn valuable lessons from the intentions of the final round of Local Transport Plans.  Sadly they will need to look elsewhere for evidence of a consistent, long term approach to local transport planning.

Reference: May A D (2013) Balancing prescription and guidance for local transport plans. Proc ICE 166 TR1 pp36-48.

Tony May is Emeritus Professor of Transport Engineering at the University of Leeds and President of the World Conference on Transport Research Society.  He has been involved in urban transport policy for over 45 years since his first appointment with the Greater London Council in 1967.

March 2013

The Climate Change Act and Transport: 4 Years On - Dr Greg Marsden comments

Greg Marsden
http://drgregmarsden.wordpress.com

The Climate Change Act (2008) celebrates its fourth birthday today. The Act sets a world-leading target for reducing emissions of carbon dioxide (CO 2) by 80% by 2050 compared to 1990 levels. Four years on I reflect on what this has meant to the transport sector drawing on an on-going research project (http://www.its.leeds.ac.uk/transport-carbon/). Much more detailed analysis is available through the Committee on Climate Change website.

Transport is described as the sector that is most difficult to tackle, being so dependent on fossil fuel as its primary input. The evidence at least bears the lack of apparent progress out, with only a 1.7% reduction in emissions since 1990 despite quite significant improvements to vehicle fuel efficiency. These have, until recently been offset by traffic growth and by upsizing of the vehicle fleet. But has the Act galvanized new sorts of action and thinking in the transport sector?

To answer this we need to look at what the Act actually means. When it was first introduced, the then Labour government set about establishing departmental budgets as well as a series of interim overall carbon reduction targets. The Conservative-Liberal coalition has dropped sectoral targets and instead gone for a 'Carbon Plan' which provides indicative assessments of the impacts of a series of proposed policy tools. Of course, when set badly, targets have the potential to corrupt policy making, forcing actions to chase the end goal whatever the cost. That is not good policy. However, targets also provide a strategic focus which draw organizations together to meet common goals. Does it matter that the Department for Transport does not have a target for CO 2 reduction?

This question has been explored through interviews with 59 governmental and non-governmental stakeholders in four city regions in England and Scotland joint with colleagues at the Universities of Sheffield, Glasgow and Lund. There seems to be little coherent or comprehensive action towards carbon reduction at a local level and, whilst the 80% by 2050 target is clearly known, there is a lack of clarity about what is expected locally. Even where local carbon targets are set they are deemed to be more a statement of hope than true intent.

Have local authorities failed then in their mission to support carbon reduction? This is complex. In part, they are muddling through on the back of limited evidence and significant uncertainty. For example, if there are major technological breakthroughs in decarbonising the car fleet then their role in reducing vehicle miles is diminished. No-one knows what will happen or how fast. Nonetheless, it seems that the imperative of economic growth has demoted discussion of travel demand reduction policies relative to that of promoting travel demand growth, albeit with some emphasis on public transport.

Our research found little difference in the ambition or effectiveness of carbon reduction policies across the different case study areas or countries. Although the Climate Change Act promises legally binding targets, it seems that it has done little to really stimulate a step change in thinking in the transport sector. Carbon certainly is not yet acting as a constraint in any meaningful way and it appears to have lost traction as an agenda since the downturn.

We will be meeting regional and national stakeholders in the coming months to develop policy recommendations and we would be happy to hear from any interested parties. Events will be held in:

  • Leeds (29th November)
  • Manchester (28th February)
  • London (5th March)
  • Glasgow or Edinburgh (9th April)

If you want to find out more or get involved please contact me g.r.marsden@its.leeds.ac.uk

Why urban air quality hasn't been improving - Dr James Tate

Dr James Tate

Air quality in European towns and cities hasn't been improving as expected. The evermore stringent EU vehicle emission standards were perceived to deliver cleaner air, but levels of a key pollutant in our busy streets haven't been falling. As concentrations of the pollutant in question, nitrogen dioxide (N02), are often above EC air quality standards (limit values) in European urban areas, nations are exposed to potential infraction fines for non-compliance with EU law. There's also stronger evidence of the health effects of N02 emerging, with the World Health Organization classifying diesel engine exhaust as carcinogenic to humans in June 2012.

So why hasn't air quality been improving? Modern diesel vehicle emission controls underperform in urban driving conditions when exhaust gases from the engine are relatively cool, inhibiting the operation of catalysts and filters. Such stop-start traffic motions are commonplace in the streets of our towns and cities, but aren't adequately represented in the legislated vehicle emission standard test conditions.

By surveying the emissions from large numbers of vehicles as they drive through a testing station, research at the Institute for Transport Studies (ITS) has highlighted the deficiencies in diesel vehicle emission controls in urban driving conditions. The remote sensing approach scans the exhaust plume trailing a vehicle as it drives through the measurement station, whilst accounting for fluctuating background levels. Knowing the vehicle's specification (e.g. 2008, diesel car, 2.0 litre, Audi A4) from its number plate allows the emission performance of individual vehicles and fleet averages to be assessed. By amassing a large database of more than a quarter of a million remote sensing measurements with corresponding detailed vehicle information, the oxides of nitrogen emission performance of diesel cars and vans in urban driving conditions have been shown to have changed little in the past 10-20 years. As it is now expected that future EU measures and vehicle emission standards are also likely to under deliver, the task of improving urban air quality is going to be significantly more challenging than was envisaged.

Worryingly from a local air quality perspective, diesel cars are more popular than ever. In 2010, sales of diesel cars overtook those with petrol engines for the first time. European Commission and UK policies are encouraging the purchase of new diesel cars over their petrol-driven counterparts, due to their lower carbon dioxide (C02) emission ratings. Whilst this shift in purchasing behaviour is helping motor manufacturers meet their average car CO2 rating targets (gC02/km) in place from 2012 onwards, the trade-off has been a halt in urban air quality improvements. Motor manufacturers face a similar trade-off between CO2 and emissions of local air quality pollutants, but at a vehicle level as they optimise the operation of the engine and emission controls. Motor manufacturers are complying with the emissions legislation by developing exhaust after-treatment technologies and configuring their operation for the test conditions. The accelerations in the artificial test cycle are, however, slight in comparison with those of 'normal' driving.

Real-world driving with prompter accelerations demands more power from the engine. At higher power demands more emphasis is given to vehicle performance than the emissions of local air quality pollutants. As the complexity and sophistication of engine management and exhaust after-treatment systems have increased, so has the potential for motor manufacturers to optimise their operation for the legislated test conditions to a greater degree, at the disregard of 'normal' on-road operations. There are also concerns about how the performance of the complex, multi-component diesel emission control systems will degrade with time and usage.

Routes to cleaner air: If urban air quality is to improve and standards are to be achieved, it is of the paramount importance that the next generation of Euro 6 diesel vehicles emit considerably less NOX and NO2 in urban driving conditions. The Euro 6 legislation will be extended to reflect emissions under 'normal conditions', but the testing methodology is not yet defined. Defra and DfT should ensure that the Euro 6 testing and evaluation methods extensions do deliver reductions in NOX emissions on the road, in line with the standards.

The development and putting in place of Low Emission Strategies that incentivise and support the innovation of cleaner vehicle technologies will benefit both the global and local environment. Improving the resolution and reliability of vehicles' CO2 and fuel-efficiency ratings, for example, providing figures for both urban and motorway driving conditions would help consumers select the cleanest energy-efficient vehicle for their needs.

As the current testing procedures don't adequately represent real urban driving conditions with its frequent stop-start motions, the benefits of hybrid drive systems that recover and re-use the kinetic energy that would have otherwise been lost under braking are currently under sold. As modern petrol and petrol-hybrid cars emit NOX at very low levels in urban driving, measures that promote these as city cars, over those with diesel engines, would be beneficial.

The balance of air quality research effort and funding has historically been focused on studying the problem, not its source. Vehicle emission assessments from independent laboratories are sparse. If the recent gulf in understanding between the perceived and actual emission performance of vehicles is not to be repeated, more effort should be directed at investigating vehicle emissions, whether in a laboratory or on the road. The emergence of the remote sensing as a cost-effective tool for independently assessing the on-road emission performance of thousands of vehicles now offers an opportunity to:

  • Get an early evaluation of Euro 6 diesel vehicles as they penetrate the operational fleet, greatly enhancing projections of vehicle emissions and air quality levels for future years;
  • Study whether vehicles engines and their emission controls degrade with age and usage as expected; and
  • Identify high-emitting vehicles.

Vehicle emission research at ITS: as well as maintaining and operating the only vehicle emission remote sensing facility currently in the UK, ITS has also developed, validated and demonstrated the next generation of coupled traffic - vehicle emission modelling tools that are better able to consider urban stop-start driving conditions, driver behaviour, road gradient, etc.

Dynamic modelling of the whole vehicle fleet of light and heavy-duty vehicles, both old and new, provides improved environmental assessments of traffic networks, management strategies, local sustainable transport initiatives and vehicle technology developments. This well-specified traffic-vehicle emission modelling approach is currently providing the most reliable assessments hitherto of policies such as Low Emission Zones, which are being given serious consideration across Europe as a key policy to combat worsening air.

Dr James Tate
September 2012


West Coast Main Line: is the Firstgroup bid realistic? Professor Chris Nash comments

Chris Nash
Announcement that the franchise to run the West Coast passenger services between London, Birmingham, Manchester and Glasgow for the next 13 years 4 months has been awarded to Firstgroup on the basis of a bid of £5.5b (in net present value terms) will arouse misgivings amongst those who recall the recent history of the East Coast Main Line, where two successful winners of franchise competitions (Great North Eastern Railways and National Express) won on the basis of ambitious bids and then withdrew early in the life of the franchise on finding they were making heavy losses. Will this franchise go the same way? The runner up in the competition, Sir Richard Branson of Virgin, certainly thinks so. He has branded the decision 'insanity'.

As against this, it should be remembered that there are significant differences between this competition and the earlier East Coast ones. At that time franchises were shorter and less flexible, giving less room to react to, and recover from, unexpected events. The National Express franchise, in particular, was severely affected by recession, and at that time franchise agreements left the company bearing the whole risk of a revenue shortfall in the early years of the franchise. There is now at least some protection in the event of GDP falling significantly short of the expected level, in that the franchise payments are adjusted so that the government bears most of the risk.

It has often been argued that the penalty for putting in an unrealistic bid and then withdrawing when it fails is too small. In fact, there have always been penalties in the form of a bond which has to be surrendered, and the National Express East Coast franchise agreement included financial guarantees of support from the parent company. It is understood that both the level of the bond and the financial guarantees have been greatly increased this time, to make it more difficult financially for the winner to subsequently withdraw. But there are further penalties in terms of the loss of credibility of the company in future franchise bids (National Express has not won a franchise since it withdrew from the East Coast).

Over the last 10 years, revenue on West Coast has grown by 10.2% per year. Whilst Virgin bid on the basis that the growth would slow down to 8.5%p.a., Firstgroup actually expect to raise it to 10.4%p.a. Given that the speed and frequency of services has massively improved over the last 10 years, to a far greater extent than anything foreseen in the course of the franchise, this is ambitious, even if economic trends are more favourable. Given the cost and disruption caused when a franchise fails, we can only hope Firstgroup have got it right.

Chris Nash
Research Professor 
August 2012


Value for Money in the Rail Industry: where next? - Dr Greg Marsden comments

Greg Marsden
http://drgregmarsden.wordpress.com

The benefits of the radical reforms to the rail market in the UK are much debated. Whilst the period since privatisation has seen growth in passenger and freight markets, continued improvements to safety, an overall increase in customer satisfaction and improved operations this has been delivered at a significant cost to the public purse.

Both rail infrastructure costs and train operating company costs have risen sharply; the former from roughly £15bn to £30bn when comparing the second 5 year period after privatisation to the first 5 year period. Train operating company unit costs are now nearly 20% higher than at privatisation. This experience contrasts sharply with the experience of other industries which have seen privatisation and the introduction of competition.

In May 2011 Sir Roy McNulty published a report for the Department for Transport on Value for Money in the rail industry. Here I review the contribution of Dr Andrew Smith, Professor Chris Nash and Phillip Wheat to identifying and quantifying the level of inefficiency in the rail industry before looking at the key barriers to efficiency that McNulty identified. Andrew and Chris offer their reflections, one year on, of some of the bigger challenges that remain to be addressed.

One of the key research challenges to be overcome when considering how to establish whether the management of the UK rail infrastructure is efficient is to establish what to benchmark it against. There was only one privatised Railtrack and subsequently one Network Rail. The research work first therefore developed innovative econometric techniques which sought to unpick the different drivers of rail infrastructure costs over time to allow the performance of different global infrastructure managers to be benchmarked. A lack of international benchmarking was an important gap in previous regulatory reviews. This work is particularly complex as infrastructure operators are structured differently and often divided into several business sub-units.

Two separate, new econometric studies were therefore developed. The first used national data over a long-time period to generate estimates of Network Rail's efficiency performance relative to best practice and also track progress over time. Flexible panel data stochastic frontier techniques were applied; to our knowledge for the first time in a regulatory context. The second quantitative study was applied to a dataset for several countries whilst also extending the dataset by incorporating disaggregate data for different regions within each country. New methods were developed which allowed the persistent element that applies across the company (external inefficiency) and the part that varies at sub-company level (internal inefficiency) to be separated.

The outputs of the first econometric study was used by the Office of the Rail Regulator as the central piece of evidence on Network Rail's relative efficiency performance in the 2008 Periodic Review of the company's finances. The second study was used as corroborating evidence. An efficiency gap, estimated at 37%, resulting from the econometric model was directly used to derive a funding settlement for Network Rail covering the fourth control period (2009/10 to 2013/14). In line with regulatory best practice, whilst using the ITS study as the core evidence, ORR also commissioned a wide range of engineering, bottom-up studies, that also indicated a substantial efficiency gap.

In addition to the work on rail infrastructure costs, ITS has also done new work to compute and then explain changes in train operating company costs since privatisation and the introduction of competitive tendering in 1997. Our research showed that unit costs are roughly 20% higher than at privatisation, which is a disappointing result compared to the experience of rail tendering elsewhere in the world and indeed the results of tendering in other sectors. This work was quoted in the McNulty review and formed part of the recommendations, namely that operators should at least get costs back to pre-privatisation levels, before then also targeting further cost savings.

Our research showed some of the key drivers of unit cost growth, including a very substantial increase in real wages of rail staff, far above average earnings growth in the wider economy during this period. The work also showed that the franchising authority's decision to place a large number of distressed TOCs on management contracts for an extended period led to a substantial deterioration in efficiency relative to other TOCs. Specifically, following the shift to management contracts, the affected TOCs were found to be 23% per cent more expensive than industry best practice. Whilst the use of management contracts may have been a useful expedient - the franchising authority faced a situation where half the sector ran into trouble - it was nevertheless a costly decision, particularly given that the contracts persisted for several years (the latter, to allow the franchise boundaries to be re-drawn prior to the next round of re-franchising).

The McNulty report draws on the evidence from the research described above and presents an analysis of the main barriers to efficiency. These are many, complex and interrelated:

" fragmentation of structures and interfaces, the ways in which the roles of Government and industry have evolved, ineffective and misaligned incentives, a franchising system that does not encourage cost reduction sufficiently, management approaches that fall short of best-practice in a number of areas that are key cost drivers, and a railway culture which is not conducive to the partnership and continuous improvement approaches required for effective cost reduction ." (p5, McNulty Review)

I asked Andrew Smith and Chris Nash for their take on some key issues that remain to be addressed one-year on from McNulty. Andrew identified two key points which suggest that there is still a need to understand the causes and not just the differences, although work remains to be done here too:

" Firstly, whilst there is or was a substantial gap between Network Rail's efficiency and European operators, continuing to collect and share good quality, comparable data remains a challenge, as does modelling heterogeneity between railway systems. It does also need to be remembered, however, that we are comparing Network Rail against state owned infrastructure managers, so the efficiency potential as compared to private firms could be even greater, given the general evidence on the impact of privatisation in other industries across the world. The splitting up of Network Rail into ten routes now offers the prospect of domestic, comparative competition, as used in other regulated sectors, which will at least help target internal inefficiency.

On the train operations side, in contrast to rail infrastructure, McNulty relied entirely on top-down trends-based evidence to set the efficiency challenge. There was therefore no absolute efficiency comparison between British TOCs and their global comparators (more precisely, some was carried out, but it was inconclusive). So, the argument was as follows: British Rail was inefficient, so unit costs should have come down but did not, and should therefore fall, at least to pre-privatisation levels. Costs should then reduce further, in line with the experience of competitive tendering in rail elsewhere in Europe and the wider evidence on the impact of competitive tendering in other sectors. There was also little or no bottom-up evidence that might explain the gap in terms of the working practices that need to be adopted to get costs down. McNulty rather relied on faith in harnessing the incentives of the private sector, combined with competition for the market, through the use of longer franchises, combined with less tightly defined franchises. This may be the right answer, but it is far from proven. "

Chris Nash reflected on the on-going misalignment of incentives:

" McNulty quotes the work of one of our PhD students, Rico Merkert, as showing that the additional transactions costs of vertical separation of infrastructure from operations are not great as a proportion of total systems costs, but the bigger issue he raises is misalignment of incentives. Despite having sophisticated track access charges, to reflect the damage done by different types of rolling stock, and penalties for poor performance, train operators and infrastructure managers still lack sufficiently strong incentives to work together to reduce costs. A number of new forms of alliance are being tried, but achieving appropriate incentives whilst not disadvantaging other operators remains a challenge."

For me, this research is an excellent example of the best type of impact that can be delivered when academics work closely with industry, government and regulators to bring independent analysis to a problem. It is interesting to note that the Department for Transport has yet to issue its response to the McNulty Review. This serves as a reminder of the challenge of keeping important agendas under the spotlight and the rather more difficult task of changing policies and practices in a highly complex governance environment. These findings also cast a shadow on the presumption that greater private sector involvement in managing our strategic road network will necessarily be a good thing, as the Prime Minister suggests. Rail is a different sector for sure, but the scale of the complexities and unintended consequences of privatisation suggest that any propositions which emerge from the current Treasury review need full and honest scrutiny.

This blog was put together with the assistance of Dr Andrew Smith and Professor Chris Nash. This is part of a monthly blog on research projects at the Institute for Transport Studies by the Director, Dr Greg Marsden

Stimulus spending and transport - Dr James Laird comments

James Laird

Transport, as a classic intermediate good, has many long reaching tentacles that touch on all aspects of life - social, environmental and economic. This has two important consequences. Firstly the impact of transport on any one facet is typically diluted because it is very hard to 'lock-in' the benefits to a particular target audience - e.g. lorries. Secondly it means that proponents of new transport projects/policies can re-cast their proposal in the lexicon of the day. Today that lexicon is the economy, but given the fact that transport touches so many facets of society, it is important to look closely at any economic arguments to justify spending on transport as a means to stimulate the economy.

The transport sector contributes approximately £54billion to the UK's GVA - a contribution of just under 4.5%. But its economic importance extends far beyond such stark numbers. Cities are regarded as the economic powerhouses to a service based economy and such city economies are fundamentally dependent on people commuting to work. Tourism is important if not essential to peripheral economies and the easy movement of goods is relied upon by export based industries. Long distance travel is needed to sell products into new markets and to maintain share in existing markets. It is for these reasons that the contributions of transport to the economy have been argued to be much larger than a simple 4.5%. It has for example been argued that the air sector itself contributes 3.6% of total GDP through direct, indirect and catalytic effects. Similarly it is argued that rail freight contributes more than 6 times its direct turnover to the UK economy. Extrapolating these arguments further and one could argue that the majority of the economy is in one way or another dependent on transport.

These are impressive statistics, but are not in themselves a justification for investment. In the Candlemakers' Petition, a famous 19th century French economic satire, the candlemakers petition government to prohibit a foreign competitor with an unfair advantage - the sun. Economic benefits would flow as a consequence, as output of the candlemaking industry and in its supply chain expands. The reality of course is that economic resources would be directed from productive sectors to less productive sectors and some economic growth would be crowded out. Transport is not candles but both are (or were in the case of candles) facilitators to a functioning society and economy. Expenditure on such goods is a necessity, but in an ideal world we would have a cohesive society, a vibrant economy and high mobility with minimal transport expenditure.

It is important therefore that investment, with an economic goal, focuses on creating long lasting effects that improve business performance - what economists term improving the supply side. Investment that drives down the costs of production is desirable. Transport investment can undoubtedly do this, and it can do it at a number of levels. At the local level it can ease market frictions that prevent unemployed workers accessing employment, at the city level it can increase the role of the city centre giving agglomeration productivity benefits and at the national level it can reduce barriers to trade and enhance competitive effects. It is not though necessarily a universal panacea for an economy in strife. At the local level, unemployment cannot be eased unless there are jobs for the unemployed to travel to - so careful economic analysis is needed to identify such locations. Transport projects also deliver their benefits gradually over a very long life time and aside from the direct impacts during construction are unlikely to grow the economy sufficiently in the short term to ease unemployment. Other supply side mechanisms for economic growth in the short term are therefore needed (e.g. skills training) - which transport investment could potentially support.

Whilst in the short term the main impact of transport investment will be the construction related jobs, a substantial investment in transport infrastructure will have a long lasting impact on the supply side of the economy - lowering costs of trade, improving productivity, etc. For this reason it is superior to other 'stimulus' type spending on projects with only a short life - or which have little use value. Similarly within the transport sector investment in useful infrastructure will have a longer lasting effect than revenue support of transport services. Of course transport investment that benefits business also benefits others. This can both strengthen the case for investment and weaken it - if it leads to, for example, excessive commuting as people move house and locate further from their workplace and/or leads to a further shift away from more sustainable forms of travel.

Similar arguments can also be extended to other intermediate goods: the digital economy and renewable energy to name but two. Both have long lasting effects and will improve the supply side of the economy. High speed broadband is also a substitute for some travel - the gas lamp/electric light bulb to the candle! Additionally within the transport sector the argument is not constrained to just transport infrastructure. This is because the ideal of behaviour change in transport is that we can achieve the same or more with less. That is investment in travel behaviour change (of say business trips) could also bring about supply side improvements.

As candidates for stimulus spending transport infrastructure and behaviour change are potentially stronger than comparable investment in other intermediate goods. This is because the direct impacts of the transport stimulus (the construction/implementation costs) will mainly occur in the UK. Buying in new digital technologies from the US or wind turbines from Denmark, whilst improving the supply side of the UK economy in the long term, may not have the stimulating effects desired in the short term (apart from the US or Danish perspectives!). A similar 'leakage' argument can be extended to the purchasing of new train/LRT rolling stock from Germany. For stimulus spending therefore a balance has to be struck between long run supply side improvements and short term economic goals.

Stimulus spending on transport can certainly lead to short term economic impacts during the construction/implementation phase, as other forms of capital investment would. Importantly it can also deliver long term economic growth. Unintended consequences of new infrastructure on behaviour and lifestyles can weaken the case for investment and some transport investments may also result in leakage out of the UK economy. It is therefore important to treat all transport investment proposals uniquely. In determining appropriate candidates for stimulus spending careful economic analysis is necessary to identify those proposals that contribute most to the short and long term economic and social goals of government and society more generally.


Dr James Laird

20 March 2012


Bridging the Digital Divide - Dr Greg Marsden comments

Greg Marsden
http://drgregmarsden.wordpress.com

On my travels today I was invited to connect my linked-in network to my flight so I could see who else it might be interesting to talk to on the plane. Ignoring the value I might place on travelling as a bit of space and time for me, it is a reminder of how far and fast mobile computing is moving. However, even in this age of apparently ubiquitous mobile communication and enhanced personal computing in the UK 10 million people do not have access to the internet and of these, 4 million are the most socially and economically disadvantaged in the country. 1 in 4 adults have never used the internet. 39% of people over 65 do not have internet access and 70% of people who live in social housing aren't on-line (data from the Royal Geographical Society).

The BRIDGE (Building Relationships with the Invisible in the Digital Global Economy) has been a three year collaborative EPSRC research project between the Institute for Transport Studies and partners in the Product Design and Engineering Department, Middlesex University and the Engineering Design Centre, University of Cambridge. It started with the premise that over time, non-participation will lead the excluded to become invisible. They will have little influence on the design of new services and will therefore not be able to become part of the potential future market. Reflecting back on the statistics once more, 80% of government transactions are with the 25% of the population that are worst off and least engaged with the internet. It will be difficult to transition to fully automated systems unless the demand and supply side is planned in an integrated manner.

The research at ITS looked at the acceptance and potential for three different types of technology. The first, more automated driving assistance, was used to establish some basic contentions about technology acceptance amongst users of computers versus non-users. Sometimes the obvious result is a relief! Whilst both groups were sceptical this was far more so with the non-computer users. The next two tests were more practical applications. The first of these looked at the role of in-car information systems which gave warnings about speed limits, accidents ahead, congestion and facilities such as pubs and rest areas. This appeared to add to the driving experience even for non-users of computers although less critical information such as rest area location was deemed to be distracting.

The final experiment looked at the role of technological aids for walking such as digital maps, information about buildings, shops and buses, and video contact with friends. Participants walked local areas whilst using tablet computers. The study has found that the social organisation and specialisation of roles within the home have a significant impact on learning to use these technologies; that usefulness is informed by the penetration of social media and technology within their social networks; and that there are indications of positive impacts on physical connectivity in both familiar and unfamiliar surroundings. Participants who are currently not using digital technologies expressed both their desire to learn how to become a user, as well as the obstacles preventing them to do so. Further work has been looking at the interface design issues and how it maps to people's expectations.

So, some new technology appears to have the potential to add to the travel experience of those that are currently digitally marginalised. It is not the case that they don't use these technologies because they don't want to. Different design concerns do emerge for these users although it is not possible from this study to separate out fully the effects of age or income and experience. This is one of many strands of technology acceptance research on-going at the Institute and it looks set to be a growth area. Innovations will continue to be pushed out into the market place and research has an important role to play in anticipating those, shaping them and ensuring they are as compatible as possible with a sustainable and equitable transport system for the future.

The BRIDGE project is led at the Institute for Transport Studies by Yvonne Barnard.

This is part of a monthly blog on research projects at the Institute for Transport Studies by the Director, Dr Greg Marsden
(G.R.Marsden@its.leeds.ac.uk).


Winter Weather Disruption – Dr Greg Marsden comments

Greg Marsden
http://drgregmarsden.wordpress.com

Britain and much of Europe has been under a blanket of freezing weather, bringing snow and ice across much of the country for an extended period. The severity of the weather has not reached those seen in late 2010 but it was still significant enough to see Heathrow airport drastically cut capacity earlier in the week and to witness renewed levels of public anger at the inability of the UK transport system to perform well in extreme weather. One estimate of the costs of the disruption on just one day was £280m.

Simon Calder, writing in the Independent, earlier this week suggested several easy remedies. These included more rights for train travelers affected by delays, penalizing transport companies that do not get their staff in place in anticipation of the bad weather, lower speed limits and construct extra capacity. These are all things that can be done at a system level. Reports by Begg and Quarmby following the events of last year provide a few more. Many of these suggestions will have merit and be taken forward – but there is not the space here to discuss them further. Instead, should we ask a more fundamental question about our own travel patterns, the expectations we have and the expectations that are put on us?

The Disruption project www.disruptionproject.net is studying the extent to which travel patterns are actually more adaptable than we currently anticipate. We change job, home and the types of activities over time and we make much more frequent re-evaluations of where and at what time we do things. Our choices are often influenced by the actions of other household members. One example would be the knock on impacts of a school age child being ill or a school closing for training or bad weather if there are no full-time carer roles in the household.

We make assumptions about the availability and quality of transport services when we make our location decisions and it is here that the problem may lie. Over time, as transport networks have expanded, then the ability to commute longer distances have increased. Distance though brings vulnerability to adverse events such as accidents on the network or weather. Typically, the further out from cities we are the less choice of alternative ways of travelling we have.

This brings us back to thinking about the winter weather problem. The current default policy position is to attempt to keep transport networks operating as fully as possible for as long as possible. As Heathrow have found, where the network is built around operating at or near capacity, this can quickly break down. On the roads, even when roads can be kept clear, conditions can be treacherous and accidents are commonplace, leading to additional jams in conditions which are difficult to tackle. There are very significant costs in the machinery, manpower and chemicals required just to maintain the operation of the core network. There is however, little guidance as to how we should use this precious resource. People struggle in to work because they think they should. For some jobs this is unavoidable but for others it is possible to reschedule and restructure. Could we embrace this further and have both a plan for the use as well as operation of the network in extreme conditions? If, for example, a reduced size and frequency public transport network could be guaranteed to operate who should use it? Could there be differential pricing or some sort of “priority card”? Should it be made clear to people that if you live within walking distance of these priority routes that you will not be penalized for failing to reach work on time? Would it be more cost-effective to have winter weather travel planning? One of Norman Baker’s remits in the Department for Transport is to consider alternatives to travel – this seems like an opportunity to put this into practice.

This article might lead to a sustained period of the warmest winters on record. However, all of the policy prognoses are for climate change to bring more extremes of weather and, therefore, one might expect more weather related disruptions. For now, it is back to looking out of the window, checking the websites and hoping that the gritters have done their stuff. Maybe in future we will have learnt some different lessons and also be reacting to the potential disruption by working smarter. That might have financial gains and safety benefits as well as distressing the winter disruption experience. If you are interested in further findings on the Disruption project please contact Dr Greg Marsden. The research is funded by the Engineering and Physical Sciences Research Council and involved partners at the University of Aberdeen, Brighton University, Lancaster University, University of West of England, University of Glasgow and the Open University.

This is part of a monthly blog on research projects at the Institute for Transport Studies by the Director, Dr Greg Marsden (G.R.Marsden@its.leeds.ac.uk)

http://drgregmarsden.wordpress.com

 

Can Transport Help Cities in the Fight for Economic Growth? – Dr Greg Marsden comments

Greg Marsden
http://drgregmarsden.wordpress.com

The recent economic downturn has focussed attention on the role of city policies in generating growth. In January 2012 the Centre for Cities published updated statistics showing that unemployment is a particular problem in urban areas. Whilst in general towns and cities in the north have performed worse than those in the south, the pattern is uneven. Why has Bradford performed worse than the rest of the Leeds city region and why has central Manchester fared better than Leeds? Does transport policy have any impact on this?

The evidence is not as strong on this as it could be. Work in the US suggests that transport is one of a series of factors which can influence the relative growth of cities. Certainly the UK government sees transport infrastructure as one of the main means of bolstering growth, underlined by the Chancellor's major new road, rail and local public transport investment plans announced in late 2011. In addition Mary Portas' report on the future of the high street for the Department of Communities and Local Government highlighted how sensitive high streets are to parking pricing policies.

So, does what types of transport projects and policies should cities adopt to give themselves the edge? Should they, as Portas argues, eschew more significant demand management policies or should they, as Stockholm and London have done, adopt major new charging schemes and trade on the dual benefits of an innovative image and a revenue stream for future investments? These questions are part of a multi-disciplinary project on 'Competitive Cities' being led by Dr Simon Shepherd at the Institute for Transport Studies.

Early work has looked at the motivations of decision-makers in local government in different towns and cities of four major city regions in England. It showed that towns and cities both compete and collaborate to maximise their own competitive position. The major cities are seen as the main powerhouses of growth, with other towns and cities trading on particular distinctive skills sets or tourist offers and spill over effects from the major cities. Working together they can act as a more powerful voice to argue for investment from central government.

Underneath this collaborative veneer however exists a series of strong competitive forces which clearly influence the policies adopted.

  • For parking policy, the principal concern is over the strength of the retail offer. Whilst major cities typically have a strong and distinctive offer which can compete with out of town centres they still price to limit the loss of trade to these malls. For smaller towns the potential loss of trade to other towns and sub-regional shopping centres has a major impact on pricing. Here, Portas' analysis seems to overlook the limited role that towns and cities often have over parking policy, with much being held in part or in full by the private sector.
  • For potential congestion charging policies the main cities will be the leaders with the minor towns and cities acting as a potential second tier of follower cities. It appears that the main rationale for major cities to consider adoption is the step-change in government investment in alternatives to the car prior to the scheme opening as well as the on-going revenue stream to fund future investments. The major cities here seem to focus on investment packages that work for them rather than worrying about the price in other major cities - at least within limits.

Whilst much of the competition focuses on economic growth and attracting high value GVA jobs to their areas, the environment remains an important concern in what makes a city attractive. Similarly, the types of investment that are felt likely to attract new jobs are not the same as those that will get the long-term unemployed back to work.

Whilst this snapshot of the early findings is interesting in its own right, it is only one part of the research programme. The remainder of the work is trying to understand how we can predict the likely responses of cities and towns to different potential future scenarios where there is increased use of parking charging or congestion pricing. Work by Andrew Koh, David Watling and Simon Shepherd has begun to flesh out the likely responses of local authorities if charging is adopted. Consider for example if Nottingham adopted a congestion charge - what might Leicester and Derby do? Would they be able to get more out of jointly planning an approach to charging or should they act in isolation? Who wins and who loses? This work is adopting game theoretic techniques to look at the bi-level problem of leader and follower cities and it is extending existing understandings by allowing for the potential for the interaction between several leaders. This work is complex but could provide an understanding of the strategies that might unfold between cities. There is then a question as to how these strategies might play out if we allow the transport and land-use system to adapt over time also - a further stage in the project.

It is too early to provide definitive answers to how cities might behave and what the impacts of working in collaboration or in isolation might be. It does seem clear however that city decision-makers see themselves as acting in competition and they see transport investments and transport demand management as important tools in that competition. Given this, we need to move beyond existing transport modelling approaches. We can no longer treat the decision-maker as an isolated individual seeking to optimise some kind of welfare function for the citizens of the city. The decision-making criteria vary significantly with different policy decisions and there is clear evidence that decisions are not being taken in isolation from those in other towns and cities - even those at some distance.

There simply isn't enough evidence to inform city decision-makers about how best to set their policies for economic advantage so much of the current decision-making must be viewed as experimental. What we can say from the work to date is that competition between cities does matter to decision-makers and to the decisions they are taking - this work should open the door as to how to ensure that this leads to the best possible outcomes.

If you are interested in further findings on the Competitive Cities project please contact Dr Simon Shepherd (S.P.Shepherd@its.leeds.ac.uk). The research is funded by the Engineering and Physical Sciences Research Council.

This is part of a monthly blog on research projects at the Institute for Transport Studies by the Director, Dr Greg Marsden (G.R.Marsden@its.leeds.ac.uk)

http://drgregmarsden.wordpress.com

 

The Case for High Speed Rail - Professor Chris Nash comments

Chris Nash
Studies of the case for high speed rail between London and the north stared with the study produced by the Strategic Rail Authority in, which examined numerous options and concluded that the best case was for a line between London and the West Midlands, branching east of Birmingham to serve Leeds and Manchester before ultimately extending to Edinburgh and Glasgow. This is broadly what the government has now announced will go ahead. A Y shaped network serving Leeds and Manchester has been estimated to have a benefit-cost ratio in the range of 2.2 – 2.6, although   we do not yet have a confirmed detailed route and station locations north of Birmingham so there is a higher margin of error in these estimates than for the first phase to Birmingham. 

Of course, building high speed rail lines is an enormously costly business, and particularly so in Britain. Whilst the density of development and extensive use of tunnelling are obvious reasons for this, studies have also concluded that there is an element of inefficiency in our costs which it should be possible to drive out, whilst our cost estimates also include an adjustment for appraisal optimism which may not be justified when the initial estimate is so high. At 90m euros per route km the estimated cost of HS2 is twice that of the most expensive lines built in other countries to date. Inevitably also as with any transport infrastructure its construction and use will bring noise and disruption to some areas, including in this case an area of outstanding natural beauty in the Chilterns.

The two big benefits of high speed rail according to both the earlier study and those undertaken by the HS2 time are time savings and additional capacity. There is extensive research on the value people place on time savings, and this is used to inform the valuation of leisure time savings. But for business travel time savings, the valuation is based on the wage rate plus overhead cost of employing labour, on the assumption that this is the cost saving resulting to the employer. This approach has been widely criticised for inter city travel by train, where travellers may work on the train. On the other hand there is nevertheless evidence of a high willingness to pay for time savings by employers, perhaps because of other benefits, such as the ability to undertake more meetings in a day and save repeat journeys or overnight stays. More research on this is needed. Clearly improved reliability and reduced crowding are also of particular benefit to business travellers; both should be effects of high speed rail.

The increased capacity provided by high speed rail will not simply benefit passengers on the line itself. Even the first phase from London to Birmingham will also carry trains to North West England and Scotland, relieve the southern part of the West Coast main line of most of its fast services, and freeing up capacity for commuter and freight trains. The extension to Sheffield and Leeds will also provide relief for the Midland and East Coast main lines. How important this relief is depends very much on the growth of rail traffic. Before the recession both passenger and freight traffic were growing rapidly; whether and when growth returns to those levels is a key uncertainty in the case for high speed rail.

Two other benefits that are often cited for high speed rail are savings in carbon and wider benefits in the form of promoting economic growth. Regarding carbon, whilst high speed rail remains more energy efficient than air, and than all but the most efficient cars, it uses a great deal more energy than existing trains. There is also energy used in its construction, and it generates travel that would not otherwise have taken place. The result is that there is no great energy saving from high speed rail. There may be carbon benefits in the long run as electricity production is decarbonised, but with existing and projected mix of fuel to generate electricity this does not appear to be a very great benefit.  

Wider economic benefits come if projects actually raise labour productivity (beyond that already accounted for in time savings), reduce distortions due to monopoly power or attract extra people into the workforce. Existing practice in Britain assumes that such effects are confined to major urban areas, so the only wider economic benefits attributed to high speed rail in the official appraisal are the result of improvements to commuter services into the cities by the freeing up of capacity on existing tracks. Whether there are in fact wider economic benefits from improved inter urban transport remains hotly debated. There is some positive evidence from schemes elsewhere, but such effects do not seem always to occur, and in any event it is very difficult to tell whether what has happened is simply relocation of growth in output that would have occurred anyway as opposed to truly additional benefits. A better understanding of the likely impact on the UK economy of bringing five of our city regions closer together is needed so as to move beyond unsubstantiated claims about employment generation and the North/South divide.

In short then, those who argue that there is no business case for HS2 are exaggerating. On the basis of reasonable assumptions the social cost-benefit case looks good, although it will not come close to commercial viability so in times of severe constraints on government spending the alternative uses of the funds must be carefully considered. But there are very big uncertainties surrounding it, and to the extent that these uncertainties could be reduced by further research, it would seem prudent to undertake that research before committing to such a huge level of expenditure.

Prof. Chris Nash
Research Professor 
January 2012