Wider Economic Benefits in the NATA Refresh - Summary of Discussion Seminar

On 21 February 2008 DfT held a seminar to discuss the appraisal of Wider Economic Benefits (WEBs). The seminar formed part of the NATA refresh stakeholder discussion programme. Around 100 people attended the seminar which generated an excellent level of participation and discussion.

There were many useful and interesting ideas and points made throughout the day’s discussion. We are considering these points in the draft guidance on wider economic benefits that we are developing. This note is a write-up of the external stakeholder event and aims to report some of the most common themes of the day.

A. Application of WEBs appraisal to different schemes.  Evidence for the appraisal of WEBs.

I. It was generally accepted that appraising WEBs was a sensible way forward, and that this was an important (currently missing) part of the overall cost benefit case. There was general agreement that, as with all cost benefit estimates, it would be important to test out the robustness of the cost benefit case and decisions to variability in key WEBs parameters and the final estimates.

II. There was some discussion over the appropriate distances over which agglomeration economies would occur. Many asked if the focus should only be on very local central business districts. It was noted that the agglomeration calculation factors included a parameter to reflect the fact the agglomeration interactions decay over distance. Many attendees recognised that Dan Graham’s work to estimate the form and range of the ‘agglomeration distance decay’ parameter would ensure that the decay of agglomeration over distance is factored in to the agglomeration estimate in appraisal.

III. The point was made in a number of the workshops that the objectives of the scheme needed to be well understood. It was generally felt that if the objectives of a scheme were clear it would be more obvious whether the scheme would lead to a WEB. A number of attendees highlighted that WEBs would be particularly relevant in cases where the scheme was relieving a capacity constraint.

IV. It was also felt that research should continue to evaluate any cases and evidence of dis-aglommeration, and that the forthcoming guidance should ensure that it allows for the possibility of dis-agglomeration in the appraisal framework.

V. There was some discussion over the appropriate appraisal requirements for smaller schemes and whether they could/should be required to undertake the analysis.  Some attendees noted that exempting smaller schemes from WEBs analysis would lead to a bias towards larger schemes.

VI. There was a general interest in the potential implication of appraising WEBs for DfT spending patterns. There was some agreement that this could imply the case for spending in urban areas was improved, relative to the current position/baseline. It was however noted and generally recognised that spending decisions were taken on a basis of a number of factors and not just the ‘value for money’ of the scheme.

VII. There was a general interest in researching further the question of ‘how WEBs happen’ and understanding better the interaction and micro relationships that lead to the aggregate WEBs that are measured. This was felt to be an important area of ongoing research to strengthen the robustness and credibility of WEBs appraisal over the longer term.

VIII. Some attendees questioned whether transport’s role in supporting agglomeration and productivity was less relevant given the rise of information technology and remote working. Other attendees discussed evidence contrary to this highlighting some of the key reasons that, even with greater ‘virtual’ access, agglomeration would still be important for many industries and firms. One attendee reported discussions with London’s financial experts on the benefits of clustering. Observed data and behaviour for agglomeration was also reported with a number of examples: Cambridge’s science clusters, clustering of IT services, and the continued relative growth of many UK cities.

IX. It was noted that transport schemes that lead to WEBs could have second round impacts such as on congestion or other social implications such as crime. It was recognised that the appraisal of these wider impacts should be considered in the NATA refresh.

B. DfT working with appraisers and others.

I. There was general agreement that there would need to be a balance between how prescriptive and firm the guidance should be in terms of methodology and modelling requirements, and the extent to which there should be flexibility to tailor analysis to the scheme in question. There was some disagreement as to where the precise balance should lie – and that this would differ for different stages of the analysis. It was felt DfT would need to consider this carefully.

II. A number of attendees noted that DfT would need to take a positive role ensuring the robustness of the analysis, considering the necessary adherence of analyses to a level considered necessary for analysis to feature in decisions.

III. Some attendees noted that there would an important role for DfT in sharing good practice.

IV. Those who had undertaken WEBs appraisal found that it was helpful to engage DfT early to ensure consistent analysis that used the latest evidence, in line with DfT expectations.

C. User friendly guidance

A number of points on user friendly guidance related closely to working with DfT.

I. A number of people said that they would appreciate greater clarity on whether the appraisal should be based on GDP or welfare estimates – and identifying where the overlaps exist.

II. In terms of presentation it was felt that clearer names could be given to the impacts (rather than WB1, WB2 etc).

III. In relation to disseminating best practice, it was felt that some case study examples would be helpful within the guidance.

IV. Those with experience of WEBs appraisal indicated that more advice on which data sources to use, and how to match data across different levels of aggregation, would be helpful.

V. It was also generally agreed that the guidance should be written in a style more suitable for transport appraisal analysts rather than simply economists.