The way the Government has long made decisions about investment in transport could be changing. Here’s why two key initiatives could have a major difference on the North’s economic fortunes.
Mention the ‘Green Book’ and ‘transport appraisal’ to the person on the street and the chances are the phrases will mean very little to them, if anything. But ask them what they think about transport and their experience in the North and it’s likely they’ll give you a view.
The thing is, two seismic changes could be coming that unlock the significant investment Transport for the North has been calling for.
For decades the North has been in a straitjacket. The economic value per person (measured as GVA) has been consistently around 15% below the average for the rest of the UK, with the gap widening in recent years. Yet, it’s been argued the way in which investment decisions are made – such as those on major transport projects – only create a vicious cycle.
For example, the current system leans heavily on Benefit-Cost Ratios (or BCRs). It’s a way of measuring the relationship between how much something costs and the level of benefits you get as a result. For transport, that can include things like improved journey times, reliability, and the additional jobs and investment created.
Problem is, the comparatively low productivity in the North 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.
This is how modelling and appraisal has trapped the North in a vicious cycle of low investment and low productivity. These ‘rules’ are outlined in the Treasury’s ‘Green Book’, which guides appraisal methods for Government departments, including the Department for Transport (DfT).
“The Green Book – that methodology has held us back for decades, if not generations,” says Steve Rotheram, Transport for the North Board member and Liverpool City Region Mayor. He says changes to these methods – unveiled in November 2020 – could bring about change.
“If it includes an opportunity to genuinely level up by including things like social deprivation, wages and land value uplift and environmental considerations, we might be able to get business cases to a better standard so that they can genuinely compete with southern projects and that will be good for us.”
Whilst the proof will be in the pudding, there are two key things that could see 2021 be the start of a tide change.
We know, from our Strategic Transport Plan and the Northern Powerhouse Independent Economic Review, that the North could benefit from an annual £97 billion increase in GVA and 850,000 additional jobs by 2050 if we get the overall investment strategy right.
The changes to the Green Book have real potential to deliver change. From a northern perspective, things to get excited about include:
Tim Foster, Interim Director of Strategy and Programmes at Transport for the North, said: “The new rules could bring a fundamental change to the type and level of investment the North receives from central Government, focusing more on the benefits to our communities and the importance of key objectives such as decarbonisation and creating transformational change.
“The review of the Green Book method echoes what we have been saying since our creation in 2018 – that the way funding decisions are made is outdated and overly reliant on a formulaic cost-return calculation, actively undermining the ambition to “level up” our region.”
Tim says the changes open the door to greater acceptance of the innovative models that Transport for the North has been developing to capture long-term benefits for the North beyond traditionally constrained technical analysis. Read more about those here.
Just as important are potential changes to the timeframe on which transport projects are appraised. The DfT is currently consulting (deadline 14 January) on whether to change the maximum period of 60 years for projects that can show significant social costs or benefits beyond that point.
Put simply, the current method assumes by default that, 60 years from opening day, a transport project won’t deliver benefits.
But, as the Department points out, maintenance and renewal of projects can give them a much longer lifespan. Such a change could have significant impacts on the strength of business cases for new projects in the North, including Northern Powerhouse Rail.
Tim Wood, Northern Powerhouse Rail Director at Transport for the North, said: “We know Northern Powerhouse Rail will be transformational for the North of England and instrumental for the Government’s levelling up agenda. But we’re not only building for the future, we’re playing catch-up for the lack of investment in major rail projects in the North for decades.
“Any changes that help demonstrate the level of benefits to the UK need to be embraced wholeheartedly – including the length of time projects are appraised over. We’re working on new rail lines with a lifespan of upwards of 120 years. That the current system only counts benefits for half of that time means you’re not getting the full picture at the point where an investment decision is made.”
Tim says such a change, alongside a focus shift in the Green Book, could see braver choices made on Northern Powerhouse Rail route options: “The decision on which routes to build and which locations to service isn’t one for the next few decades, it’s one for the next century,” he added.
“That’s why we need to get the right decisions now about new line options, for instance to serve places like Bradford. In taking the critical decisions on the preferred NPR network, our members have considered a wide range of factors including regeneration and access to employment opportunities across the North.
“Value for money is a really important consideration but we need to take a much wider view of costs and benefits.
“If you take into account it’s a 100-year decision, and you have the evidence to support that decision, it not only justifies options that are initially more expensive, but will genuinely change lives in the North’s for generations to come.”
Making this come to fruition won’t be easy. There are mountains of complex technical work and modelling that sit behind these decisions and practices.
However, with the foundations for changed laid, this year could see a genuine leap forward that could put the North on a better footing for the future.