The NATA refresh summary of responses - Executive summary

NATA - the 'New Approach to Appraisal' - is the analytical framework used to appraise major transport schemes seeking funding and/or approval from the Department for Transport. NATA was introduced ten years ago at the time of the Integrated Transport White Paper ‘A New Deal for Transport’.  The NATA framework comprises a body of advice, data and software used in the development of proposals. Based on cost-benefit analysis and environmental assessment techniques, it is used to assess all the impacts of transport schemes against the Government's policy objectives.

The Eddington Transport Study recommended various developments to these cost-benefit guidelines:

• in part to reflect the new evidence developed in the Eddington Study (on transport's role in supporting economic growth) and in the Stern Review (on transport's contribution to carbon emissions); and
• also to help more reliably compare different options and identify the most cost-effective solutions.

The NATA Refresh Consultation

In response to these recommendations, the Department launched a consultation in October 2007, titled 'The NATA Refresh: Reviewing the New Approach to Appraisal'. The consultation document was published alongside 'Towards a Sustainable Transport System'. The NATA Refresh consultation had five principal themes:

• better capturing the impacts of transport policies and schemes on productivity and competitiveness; particularly in relation to agglomeration and labour markets in cities, journey-time reliability, freight distribution networks, new housing development and international connectivity;
• better capturing environmental impacts, particularly valuing carbon emissions, landscape impacts and the effects of changes in local air quality;
• better capturing issues relating to equality of opportunity - in particular, social inclusion and regeneration.
• ensuring greater comparability across modes and between different types of intervention (e.g. taking proper account of the different taxation and financing structures faced by different modes and aligning the methods for investment appraisal and regulatory impact assessment); and
• better reflecting uncertainties - both in forecasting and in our understanding of valuations and behaviours - so as to aid robust decision-making.

The NATA Refresh consultation period closed at the end of March 2008. In total we received 101 written responses to the document from a wide-range of stakeholders including scheme promoters, statutory bodies, local authorities, campaign groups, academics, and transport planning consultants. We are delighted with the breadth and focus of the responses, and grateful for the considerable effort made by all those who took the time to set-down their views for our consideration.

Throughout the consultation process, we have adopted a pro-active approach to engagement and have arranged workshops, seminars and conferences to provide opportunities for our stakeholders to raise questions, debate and make suggestions for change. We will maintain this pro-active stance as we deliver a programme of changes over the coming months and in the future as we work to keep the NATA framework abreast of developments in appraisal and behavioural modelling techniques.

Emerging themes from the consultation

Respondents to the consultation were generally very supportive of NATA and recognised its importance in providing evidence-based tools to help get the best value from public and private investment in transport. But respondents also recognised the need to develop NATA to face future challenges, particularly those flowing from Eddington and Stern.

This document provides details of the written responses to the consultation and outlines our plans for further work to improve the appraisal framework. The following sections summarise the proposed developments. In planning and delivering a work programme to address the points raised in the consultation we will:

• ensure that our appraisal system closely reflects the goals and challenges faced by our transport system and the wider concerns of government as defined in 'Towards a Sustainable Transport System';
• strive to create a system that better discriminates between more and less effective options and hence helps secure better value from our transport spending; and
• aim to reduce the overall burden of effort associated with appraisal to ensure that the appraisal and decision-making process works efficiently for all involved.

We aim to deliver a number of improvements to the NATA framework over the next year. Some improvements can be made immediately, some will be developed over the coming months and be announced in autumn 2008, and others will be delivered as the NATA Refresh programme reaches its conclusion in spring 2009, following further opportunities for discussion.

We will also aim to minimise the administrative costs caused by changes to the appraisal guidance. In the past we have released changes to the appraisal guidance as and when they have been ready. We will now move to an annual update cycle for appraisal guidance to allow users to manage the risk associated with changes. New guidance will be formally introduced in April each year. It will be released in draft form at least three months in advance to provide analysts with an opportunity to familiarise themselves with any new techniques. Proposed developments will usually be issued in draft form at an earlier stage to enable discussion within the analytical community and amendment where required. We will also undertake an impact assessment for new guidance and will draw on this in deciding whether any specific transitional arrangements are needed.

Quick-wins

We are pleased to announce some immediate changes to NATA, which will become part of the definitive guidance from April 2009.

Taking account of carbon emissions: We have incorporated the latest DEFRA CO2 valuations into the NATA guidance and software tools.

New methods to capture the value of more reliable journeys: We are releasing new guidance to capture the impacts upon travel time variability of transport investment; both the Eddington Study and the NATA consultation emphasised the importance of reliability to travellers.

New guidance on appraising cycling and walking schemes: In accordance with our commitment in the Department of Health's Obesity Strategy, we are releasing new NATA guidance on appraising the health benefits of increased physical activity.

An e-community to develop modelling techniques for smarter choices: Meeting our commitment to support innovative solutions for tackling climate change, we are launching an internet-based forum that will allow us to work collaboratively with the modelling and appraisal community to develop new techniques for modelling smarter travel choice initiatives. If effective, we will extend the use of e-communities to the development of other areas of guidance.

Updating forecasts of long-term trends: We are releasing new data-sets, for use by analysts, that better capture expected long-term trends in a number of key drivers of transport demand:

• new projections of the volume and geographic-distribution of trip-making across the UK that reflect recent changes in population projections from the Office of National Statistics;
• new guidance on forecasting, joining up and updating existing materials and also introducing an approach to handling uncertainty in forecasts;
• new guidance and software based on the latest long-term oil-price forecasts from the Department for Business, Enterprise and Regulatory Reform; and
• guidance to integrate the latest forecasts of freight traffic, which reflect emerging patterns of global economic development and trade.

Further planned changes

Over the course of the coming year we plan to make further changes to the appraisal framework, to reflect issues raised in the consultation. Some of these changes will be released in draft, for discussion, in autumn 2008 and will become part of the definitive guidance in April 2009. Other changes will be released as discussion drafts in spring 2009 and will become definitive in April 2010. The planned changes will cover the following issues.

Climate Change

When the current values for the shadow price of carbon (SPC) were adopted, Defra announced that these would be kept under review. It was expected, in particular, that consideration would be given to adjusting the basis of the SPC such that it is brought in line with the level of marginal abatement costs consistent with meeting our emission reduction targets. We expect that review, therefore, to address some of the main comments in responses to the NATA consultation, about the shadow price of carbon.

Further to this, the appropriate SPC for transport appraisal will also depend on the scale of emission reduction expected to be achieved within transport, and the scale of any flexibilities that may exist to trade carbon across sectors. We should be better placed to address these issues in the light of the recommendations on carbon budgets from the Committee on Climate Change, due in December 2008, and the outcome of negotiations on the EU Climate and Energy Package. We will also, in coming months, give further consideration to the treatment of packages within appraisal, such that where some measures might lead to increases in carbon dioxide emissions, we also encourage full consideration of potential means to offset this.

Separate from mitigation efforts, the unavoidable impacts of climate change are likely to present challenges going forward for the transport system - with both gradual changes such as the vulnerability of coastal networks to rising sea-level and the need for rail to be engineered to cope with higher average summer temperatures - and also increasing numbers of severe weather events. In many cases these issues are part of the broader question of resilience and reliability, but we will consider how best to incorporate projected future changes in climate and the new UKCIP 21st Century Climate scenarios into the NATA framework.

Presenting evidence in the appraisal summary table

We will review the structure of the NATA Appraisal Summary Table so that the presentation of the evidence reflects the challenges and goals flowing from Towards a Sustainable Transport System. As part of this process we will examine the potential for presenting more of the detail underpinning the summary information. A particular focus will be to show where there are uncertainties in the evidence or where there are distributional impacts, which decision-makers need to be aware of. Where this might lead to an additional burden on the part of scheme promoters, we will upgrade appraisal software tools to minimise the extra effort. Guidance on completing the new Appraisal Summary Table will be released in spring 2009 to become part of the definitive guidance in April 2010.

Consideration of light-touch appraisal for small schemes

The Department recognises that advances in transport appraisal methodology over the last ten years have placed an increased burden of effort on scheme promoters, and that for smaller schemes there is the perception that this increased effort has become disproportionate.  Over the coming months we will explore the merits of moving to a simplified approach for the smallest schemes and consider what a new system might look like. The challenge will lie in determining how the appraisal approach can be simplified without weakening our ability to identify the most worthwhile schemes. Any new guidance that results from this work will be released in spring 2009 for inclusion in the definitive NATA framework for decision-making from April 2010.

Review of the benefit cost-ratio and the treatment of taxation

Concern was raised in some responses to the consultation document about the treatment of indirect taxation in the calculation of benefit:cost ratios. Under the existing system the net costs to the public sector of a scheme, including changes in indirect taxation are included in the cost element of the benefit:cost ratio. Some respondents argued that this, in some circumstances, created a bias in favour of spending on private road transport.

We have reviewed the treatment of indirect taxation in NATA. We are confident that our present methods correctly assess the overall balance of benefits and costs (the net value present value) for a proposed transport scheme. Our methods estimate the benefits and costs of the proposal to each sector of the economy and total these up. The sectors considered include transport consumers, the suppliers of transport services, other sectors of the economy, other people affected by transport activity (for example, noise or pollution) and the exchequer. In the latter case, increases in subsidies or capital funding are a cost to the exchequer, whilst increases in indirect taxes are a benefit (although there is of course a corresponding disbenefit to the consumers who pay these indirect taxes).

We have, however, concluded that there may be better ways of presenting value-for-money - the benefit:cost ratio - using metrics which do not suffer from perceptions of bias. We therefore plan to consider alternative metrics for presenting findings on value for money. We will work with key stakeholders over the coming months to choose a new measure from a range of options, and provide draft proposals for discussion in autumn 2008.

Wider economic benefits and international competitiveness

We have been working over the past three years to improve our understanding of the role that the transport system plays in supporting economic growth. Some of this work is now reaching fruition, and we plan to release draft guidance on the estimation of the wider economic benefits of transport interventions this coming autumn. This guidance will become a definitive part of the NATA framework from spring 2009.The new guidance will be supported by the release of a software package that will calculate these wider productivity benefits from the standard outputs of transport models.

We will continue to work towards the incorporation of the impacts of transport schemes on international competitiveness into the NATA framework. We will report on progress - and proposed changes to NATA - in autumn 2008.

Quality of life and the natural environment

The Department will ensure that quality of life impacts continue to be reported in transport scheme appraisals in a way that is objective and transparent. Especially important will be the most significant impacts which degrade environmental capital such as landscape, tranquillity, biodiversity and ecosystems. To build on the current approach, the Department is progressing research into the valuation of the impacts of transport schemes on the natural environment and journey ambience. Working with the Interdepartmental Group on Costs and Benefits (IGCB), the Department’s analysts have contributed to significant advances in the valuation of air quality and noise. Advances in this area mean that there are methodologies for estimating the health and environmental impacts of these types of pollution in monetary terms. Work is currently underway to map air quality values on to the outputs of our modelling.

The Department’s approach to valuation of environmental impacts in NATA will only use values that are based on robust evidence. Where schemes degrade environmental capital but the environmental resource in question is substitutable these valuations could also act as a guide for the level of spend necessary for mitigation measures. Where the resource is not substitutable, then other methods should continue to be used - in addition to valuation - to bring environmental impact information to the decision maker’s attention. The Department will review the way in which the qualitative assessments of environmental impacts are reported in NATA. The overall assessment against the environmental objective should seek to highlight whether the scheme increases or reduces environmental capital. There may be a role for greater involvement by independent experts in assessing whether the impacts are reported representatively and accurately. To ensure greater consistency of assessment the possibility of creating a database of environmental capital and small scale geographic based tools for assessing environmental and heritage impacts will be explored.

Appraisal of housing benefits

The Department has been working with analysts from the Department for Communities and Local Government to develop guidance on techniques for capturing the costs and benefits associated with new housing. We plan to issue this guidance in autumn 2008 in draft form, to become definitive in April 2009. The guidance will introduce new techniques that will aid the coordinated planning of housing and transport by (a) making explicit the impact of localised housing growth on the benefits accruing to transport schemes, and (b) identifying the contribution of improved transport connections to the facilitation of new developments.

Equality of opportunity

The distributional and social impacts of transport interventions have always been challenging for the appraisal framework, with a paucity of tools and data. However, there have been promising developments in the mapping of social vulnerability and in the analysis used by local authorities in the planning of accessibility. Within NATA, we would hope to capture some of these improvements in the future. The Department will explore the evidence that appraisal can provide on whether a scheme provides improved access to jobs, education or other key services. In addition, the degree to which we can disaggregate appraisal findings by key social groups will be assessed so that the impacts of schemes can be presented in a richer manner.

DfT contributes to the government’s objective to reduce, over the long term, the persistent gap in the economic growth of different regions. We will seek to develop evidence on where the benefits of transport investment fall. Investment on the M25, for example, has benefits for the West Midlands (and most other regions) as well as London and the South East. Such evidence provides information on the regional impacts of packages of investment decisions.

Over the coming year we will also update the current NATA guidance on the estimation of regeneration impacts. Regeneration impacts are attributable to the number of net additional jobs accruing to residents of regeneration areas. The update will consider three questions (i) what should be classed as a regeneration area; (ii) what is the size of the net employment impacts and (iii) what value should be put on the net additional employment in regeneration areas created by transport schemes.

Improved dissemination of guidance

We plan to restructure the WebTAG website to draw together the common assumptions that are widely used for strategic and scheme-level analysis into a single place. At the same time, we will approach regular users of the WebTAG website to help us design a new overhauled website for launch in spring 2009. Emphasis will be placed on improving the clarity and accessibility of the guidance. The new website will feature new sections that set NATA in the context of the wider funding, planning and decision-making processes, and feature improved signposting and search facilities.