CEN/P2.2/ECO. Economic Case / Value for Money Summary Proof of Evidence Neil Chadwick

Transcription

1 Economic Case / Value for Money Summary Proof of Evidence Neil Chadwick

2 SUMMARY OF EVIDENCE NEIL CHADWICK ECONOMIC CASE / VALUE FOR MONEY CASE TRANSPORT AND WORKS ACT 1992 MIDLAND METRO (BIRMINGHAM CITY CENTRE EXTENSION LAND ACQUISITION AND VARIATION) ORDER INQUIRY NOVEMBER 2014 Page 1 of 4

3 1 Summary Proof of Evidence 1.1 My name is Neil Chadwick. I am a Director with Steer Davies Gleave, a consultancy firm specialising in the transport sector. 1.2 My academic qualifications are: BA (Hons) Natural Science (Physics), University of Oxford MSc Transport, University of London MA Public Administration and Public Policy, University of York 1.3 I have 25 years transport planning experience. In that time I have led and contributed to business cases for rail and rapid transit schemes in the UK and overseas. I have appeared at previous Transport & Works Act Order and Local Planning Inquiries, as well as inquiries of a similar nature in the Republic of Ireland. Scope of Evidence 1.4 The scope of my evidence is to establish the Value for Money (Economic) Case for the Scheme which would be implemented using the Midland Metro (Birmingham City Centre Extension Land Acquisition And Variation) Order, should it be granted. As such and alongside the evidence of Mr Adams [CEN/P1.1/SCH], my evidence addresses Matter 2 of the Statement of Matters. Relevant Guidance 1.5 HM Treasury requires an assessment of the value that public spending secures before a spending decision is made. This process is known as appraisal. The Department for Transport (DfT) produces detailed guidance on the appraisal of transport schemes such as that before this inquiry. This guidance has been developed to apply the Treasury s guidance to transport schemes and called WebTAG, a suite of documents that sets out guidance on the approach to demand, revenue and benefit forecasting and how, along with other inputs, the outputs from such forecasting work are used to appraise the anticipated impacts of a transport intervention. 1.6 The appraisal of the Scheme before this inquiry has been undertaken with regard to WebTAG and accordingly meets Treasury economic appraisal requirements. Reflecting the Government s devolution of funding decisions to a Local Enterprise Partnership level, the Business Case has also been developed with regard to the GBSLEP s draft Assurance Framework. 1.7 While WebTAG prescribes how the economic case should be presented and sets out a number of minimum requirements for the modelling and appraisal, it is important to note that underpinning the DfT s guidance is the proportionality principle. This states that the requirement for detailed modelling, collection of bespoke evidence and monetisation of benefits should vary with the scale and complexity of the scheme under consideration. In my opinion, the appraisal of this Scheme has been undertaken in a way that is proportional to the cost of the Scheme and the scale of its impacts. What is Value for Money? 1.8 A central part of the Economic Case is the Cost Benefit Analysis. Noting the proportionality principle, the DfT s guidance sets out that those costs and benefits that can be monetised in a consistent and comparable way should be included in the Cost Benefit Analysis. Its guidance also explicitly recognises that not all costs and benefits Page 2 of 4

4 can be readily monetised. Those costs and benefits that should be monetised are specified and the guidance also sets out methods for assessing non-monetised costs and benefits which can be done in either quantitative or qualitative ways, depending on the particular impact concerned. These other Value for Money considerations form an important part of the overall Economic Case. The Value for Money Assessment 1.9 The Scheme before this inquiry is for a section of the larger Birmingham City Centre Extension (BCCE) scheme. The value for money and economic case for the full BCCE and the section of BCCE that is the subject of this Order application has been considered periodically, with a view taken on the scheme s value for money at each key decision point in the Scheme s development In May 2013 Centro submitted a Programme Entry Business Case submission to the GBSLEP. Programme Entry status was secured in September The Transport & Works Act Order application was submitted in December 2013 that is Centro submitted the TWAO application after Programme Entry status had been secured from the GBSLEP As is usual practice, the Business Case has now been updated. In particular, a quantitative and qualitative approach has been used to assess the impacts of the Scheme. An economic appraisal has been undertaken, where the monetised costs and benefits of the scheme have been compared and a benefit cost ratio calculated in line with the approach set out in WebTAG. The social, environmental and distributional impacts have been assessed qualitatively, with each categorised as to whether the impacts are beneficial, neutral or negative For the purpose of this evidence two cases have been considered. These are: Reference Case: The Preferred Scheme is considered in comparison with a Do Minimum in which HS2 proceeds as planned by the Government and the Midland Metro is extended from New Street station to Eastside. This case reflects the strong policy commitment from Government to HS2 and the similarly strong policy commitment of the GBSLEP to the Eastside extension, which is seen as integral to the HS2 connectivity package. Alternative Case: The Preferred Scheme is considered in comparison with a Do Minimum in which HS2 does not proceed as planned by the Government and the Midland Metro extension to Eastside is not constructed Based on the inputs and assumptions outlined above, the benefit cost ratio of the Scheme before this inquiry has been calculated as: Reference Case 2.9: 1 Alternative Case 1.6: Beyond the economic implications of the scheme, it is also necessary to consider its wider impacts when coming to a view on value for money. Noise, emissions, landscape, townscape, heritage, biodiversity and water quality have all been considered and of these the schemes only has a notable impact on heritage. While details of this are addressed by another witness, for the purposes of the Business Case, using the established scale heritage impacts have been assessed as slightly negative. Page 3 of 4

5 Value for Money Statement CEN/P2.2/ECO 1.15 In my opinion and regardless of whether the Reference Case or Alternative Case is adopted, the economic performance the Scheme represents Value for Money. This view is derived from a consideration of the benefit cost ratio of the scheme, the additional wider impacts that do not form part of this benefit cost ratio, alongside the qualitative assessment of other impacts and the fact that this Scheme is a necessary precursor to further extension of Midland Metro to Edgbaston and to Eastside and the planned HS2 station. Route Alternatives 1.16 In its Statement of Case, VSH1 has proposed two alternative proposals that they believe should be compared against the Scheme: Option A via Hill Street and Option B via Navigation Street/Suffolk Street. A cost benefit analysis of the two proposed routes has been undertaken to demonstrate the cost benefit case for the two alternative routes. The same models have been used to assess the cost benefit case of the alternatives as have been used for the Promoter s Scheme The benefit cost ratio of Option A has been calculated as: Reference Case 1.0: 1 Alternative Case 0.4: The benefit cost ratio of Option B has been calculated as: Reference Case 0.9: 1 Alternative Case 0.4: Both of the alternative options proposed by this objector represent poor value for money and in my view would be very unlikely to achieve funding approval even should their engineering feasibility be confirmed. Witness Declaration 1.20 The evidence I shall give is true, given in good faith and represents my professional opinion regarding the Value for Money case of the Variation Order Scheme. Page 4 of 4