Transport planners and economists in the UK and elsewhere have a long history of quantifying and valuing the impact of transport investment on economic, social and environmental outcomes. The work largely follows two distinct but inter-related approaches:
(a) Cost-benefit analysis quantifying the direct impacts of transport investment on transport-users and non-users, largely by considering changes in journey times and costs.
(b) Gross Value Added and productivity-based methods that seek to directly measure the impact of better transport connectivity on economic output and wages.
Appraising the potential economic impacts of transport investments requires consideration of what impacts are ‘net additional’ at a national level and what impacts are simply the result of displacement of economic activity.
The Department for Transport’s (DfT’s) approach to programme and project appraisal is firmly based on cost-benefit analysis with the option to incorporate aspects of productivity-based methods when investments are likely to lead to a possible reduction in ‘market failures’ and/ or involve the relocation of economic activity and changes in land-use.
The scale and scope of the economic, social and environmental impacts of transport investment are clearly context specific, varying by the type, scale and location of the intervention. It is therefore important to develop an ‘economic narrative’ that provides context-specific evidence about the local economy and a summary of how potential transport interventions might enable economic growth. This narrative needs to:
- Identify the expected economic impacts and describe of how these achieve the economic objectives.
- Justify why these impacts are expected to occur on the basis of economic theory and context specific evidence.
- Identify the welfare change associated with these impacts arising, for example, from market failures.
- Justify the methods to quantify and value the impacts.
The starting assumption is that the potential economic impacts of an intervention are captured by user and non-user benefits, with wider economic productivity impacts justified on a case-by-case basis.