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The Grand Challenge: making the case for investment

Thursday 11th April 2019

In both our Strategic Transport Plan and our Investment Programme, you’ll see references to our work being evidence-led. Jack Snape, Principal Data Analytics and Modelling Officer, talks about why that evidence is so important, and how we predict the impact that investing in transport will have on the North’s communities.

When I tell people I work at Transport for the North (TfN), and that our ambition is to use transport to connect the towns and cities of the North into a more productive economic area, I am often immediately asked why this hasn’t been done sooner. To most people, this sounds like a great idea, so what has stopped us in the past? Perhaps unexpectedly, I think the main reason for this is modelling and appraisal.

In case you’re asking, “what’s modelling and appraisal?”, first a quick intro. Before the Government makes a decision to spend money on a new project, it tries to assess whether that money could be better spent elsewhere. Transport schemes are not only competing with each other for limited public resources, but also with healthcare, education and other vital public services. The costs of the project are estimated by engineers, and the potential economic benefits to society are then estimated using computer models (the ‘modelling’ part). If the project is found to have benefits that sufficiently outweigh the costs, and is otherwise thought to be a good idea, then it will usually get the green light (the ‘appraisal’ part).

The first key issue for new transport schemes in the North of England is that they can be relatively expensive, sometimes requiring tunnelling through hills or sensitive engineering through national parks. The second is that the methods traditionally used to model and appraise schemes often don’t show the level of economic and societal benefits required to offset these costs.

This is partly because these methods are based on current and historical travel patterns, and in cases where geography and poor connectivity have held back travel for decades, these tools often just forecast a slight increase in travel between neighbouring cities. There’s also the issue of current low levels of economic productivity in the North, which typically leads to lower estimates of economic benefits. In other words, if you’re less productive to start with, economic models suggest the productivity boost you get from better transport will be smaller. The problem is that we are trying to increase productivity through transport investment, but the low productivity hinders our ability to make the case for investment. This is how modelling and appraisal has trapped the North in a vicious cycle of low investment and low productivity.

The Government has previously said that it wants to sort this out, by re-balancing the economy away from London and the South East to other parts of the country, including the North. This objective is based on the idea that the UK’s productivity challenge is largely a result of these areas significantly lagging behind the capital, and that a turnaround in the UK’s fortunes overall can only be achieved by correcting the imbalance and boosting productivity in these slower growing regions. Key policies available to do this include skills, local industrial strategy and transport investment. TfN’s role is to make the case for transformational transport investment that would enable the North to function as a single economic area, with productivity growth driven by easier commuting, trade and knowledge sharing both within and between our city regions. By pooling the economies of the North’s major towns and cities, job markets and trade networks should be expanded to a level that could begin to compete with London.

This sounds great, but it’s a bit tricky to represent in a computer model.

In TfN’s Transport Appraisal Modelling and Economics (TAME) team, we are focussed on developing new modelling and appraisal approaches and tools to show how this economic transformation could happen. We have new tools, like our Northern Economy and Land-Use Model (NELUM), that don’t rely on trend-based analysis and can represent more dynamic, structural changes in the economy as a result of transport investment. Our tools are also striving to capture a more comprehensive and rounded picture of economic benefits, looking beyond time savings and productivity to estimate improvements in welfare and well-being for different socio-economic groups. We’re also trying to develop more mission-oriented appraisal frameworks centred around the grand challenge of re-balancing, rather than appraising incremental improvements in isolation.

We need to ensure that these new tools are rigorously evidence based, so that the Government can be confident in using their outputs to inform spending decisions. We also need to keep working closely with the Department for Transport (DfT) on how we can develop cutting-edge, innovative approaches that become accepted as best-practice.

A key opportunity to shape this thinking came last year, when DfT launched a consultation exercise to gather views on the scope and priorities for a new Appraisal and Modelling Strategy to help ensure that their guidance, WebTAG, remains best practice and addresses the likely future challenges facing practitioners and decision makers conducting transport appraisal.

The Strategy aims to provide robust, flexible and easy to use modelling and appraisal tools that can be used to inform the critical policy decisions that will be made over the next five years. The DfT consultation sets out their initial views within five key themes and provides initial views on priorities:
• People and place
• Reflecting uncertainty over the future of travel
• Modelling and appraising transformational investments and housing
• Supporting the application of WebTAG and making it more user friendly
• Developing and maintaining modelling and appraisal tools to meet user needs

We worked with practitioners in partner organisations to coordinate this Northern level response to the consultation. Our response welcomes the draft Strategy as a further step towards an appraisal system that can better represent transformational investment and wider economic impacts. Whilst important steps have been made towards a more rounded approach to appraisal, there are still concerns that the system is skewed against investment in Northern transport schemes. Key areas where we think the Strategy could either be improved or strengthened include:
• recognition that current approaches do not adequately address the objective of re-balancing the economy;
• more work to integrate analysis across different modes of transport and long-term programmes of schemes;
• a greater focus on employment and skills; and
• continuation of efforts to realise a holistic view that recognises the interaction of transport with other sectors, including links to local growth, public health, energy, digital and housing.

Our response also covers some of the technical challenges faced by TfN and our partners in developing complex modelling and appraisal systems, and some suggestions on things the DfT could do to help, such as making key datasets more readily available. You can read more about this in a report on ‘Modelling and Appraisal Challenges’, published recently by Richard Bradley, our Head of Data, Modelling and Appraisal.

Putting the technical arguments to one side, what I really want from our models is a decent representation of what we experience in real life. When I moved back to the North from London a few years ago, I didn’t particularly care that I was moving to a less economically productive area, I wanted a better quality of life – more space, access to national parks and a lower cost of living. If we can develop modelling and appraisal tools that allow us to value these things, alongside the more concrete measures of productivity, then that will be a big step forward.