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Guidance documents: Project manager

Unit 2.8: Wider Impacts and Regeneration

There are two modules within this section:

2.8C: Wider Impacts and Regeneration - Consultation

2.8.1: Regeneration

TAG Unit 2.8.1: Regeneration

April 2011

Unit 2.8.1 (Adobe Acrobat - 44KB)

1. Regeneration and Wider Impacts
   1.1 Appraisal of Regeneration and Wider Impacts
   1.2 The SACTRA Report: Regeneration and Wider Impacts
2. Regeneration
   2.1 The Need for a Regeneration Appraisal - The Regeneration Report
   2.2 Guidance on Preparing a Regeneration Report
   2.3 Regeneration Areas
   2.4 Regional Development and Regeneration
   2.5 Models and Methodology for Regeneration Appraisal
   2.6 Structure of a Regeneration Report
3. Further Information
4. References
5. Document Provenance

1. Regeneration and Wider Impacts

1.1 Appraisal of Regeneration and Wider Impacts

1.1.1 The focus of regeneration and wider impacts (WIs) analyses differ, with the former focussed on distributional impacts with the emphasis on regeneration and the latter focussed on appraising the wider welfare impacts associated with market imperfections. The analyses are therefore not substitutes for one another and may both be required in certain cases.

1.1.2 This Transport Analysis Guidance Unit provides an introduction to the appraisal of transport schemes in regeneration areas. TAG Unit 2.8.2, Wider Impacts, provides an introduction to the appraisal of WIs. There are also separate TAG units providing detailed appraisal guidance on regeneration and WIs: detailed guidance on the appraisal of regeneration impacts is in TAG Unit 3.5.8 and TAG Unit 3.5.14 provides the detailed guidance for estimating the Wider Impacts (WIs).

1.1.3 Note that this TAG Unit was formerly called 'Wider Economic Impacts'. The title 'Regeneration' has been adopted for clarity and to avoid confusion with TAG Unit 2.8.2, Wider Impacts. The term 'regeneration' is also used in the revised Appraisal Summary Table (see In-Draft TAG Unit 2.7.2d). The title of TAG Unit 3.5.8 has also been changed from The Wider Economic Impacts Sub-Objective to Regeneration Impacts.

1.2 The SACTRA Report: Regeneration and Wider Impacts

1.2.1 It is generally accepted that, under conditions of perfect competition^[1] for both the transport and transport-using sectors, a properly specified Cost Benefit Analysis (CBA) of a transport scheme would accurately estimate all welfare impacts. In other words, at the national level, the conventional CBA would capture all the economic costs and benefits of the transport scheme.

1.2.2 In its report Transport and the Economy (DETR, 1999), SACTRA^[2] noted that there could be two circumstances where the CBA might not give an accurate or full estimate of the costs and benefits of a scheme.

1.2.3 First, the SACTRA report recognised that markets are often not perfect, and as such Wider Impacts (WIs), positive and negative, may result via direct user impacts being amplified through the economy. Appraising only the direct user impacts means that some economic impacts would be missing from the appraisal. The Eddington Transport Study (DfT, 2006) estimated these impacts and noted that in some cases they can be significant, and are therefore an important part of the overall cost benefit assessment.^[3] Such impacts would include productivity and welfare changes associated with the impact of transport on agglomeration and labour supply. Units 2.8.2 and 3.5.14 set out an appraisal framework that aims to capture these effects, positive or negative, that result from market failure^[4].

1.2.4 Secondly, SACTRA identified that benefits might not be evenly distributed across the population, and some people might gain while others might lose. Even if there were no overall effect at the national level, benefits such as increased employment might be gained in some areas while an equivalent reduction might occur elsewhere across the country. This latter point is especially relevant in areas classed as 'regeneration areas' (RAs). RAs will usually have a policy objective of increasing local economic activity and employment, and in such cases it may be desirable to introduce measures that bring local benefits even if this leads to costs arising elsewhere.

2. Regeneration

2.1 The Need for a Regeneration Appraisal - The Regeneration Report

2.1.1 The assessment of the regeneration impact of a scheme forms a Regeneration Report (RR)^[5]. This should be prepared by the promoters of a transport scheme seeking funding from the Department for Transport (DfT) in all cases where the proposal may impact on the economic activity of a regeneration area.

2.1.2 The RR has been designed so as to be consistent with the EGRUP (Evaluation Group on Regional and Urban Programmes) Review guidance on regeneration assessment, now referred to as 'The 3Rs Guidance': "Assessing the Impacts of Spatial Interventions: Regeneration, Renewal and Regional Development" (2004). It provides guidance on how to measure the economic impact, in the form of employment effects, of transport schemes on regeneration areas.

2.1.3 The Government attaches considerable importance to regional economic development. A transport scheme can support the aims of the Government's Public Service Agreement, namely to make sustainable improvements in the economic performance of all the English regions and, over the longer term, reduce the persistent gap in growth rates between regions. The regeneration of under-performing areas is potentially important to promoting regional economic growth because measures which improve the performance of such areas might encourage development at the regional level. Areas which are identified as regeneration areas are characterised by their failure to function as well as other areas. They are likely to be more prevalent in under-performing regions which often exhibit many different sub-regional problems which add up to a below average performance.

2.1.4 While the Guidance on the Preparation of a Regeneration Report (RR) introduced in this TAG Unit is mostly concerned with appraising defined schemes, in practice it is often necessary to begin by identifying potential schemes to solve problems in a particular location. It is intended that the Guidance can also be used to guide the design of potential schemes, by describing the ways in which transport schemes may be able to help stimulate economic activity.

2.1.5 SACTRA recommended that a Regeneration Report should be prepared by the promoter of all schemes. This recommendation has been accepted by DfT but only for schemes which may impact on regeneration areas. The main intention of preparing a RR, therefore, is to investigate the distribution of the impacts captured by the transport economic efficiency appraisal and the potential manifestation of those impacts in terms of changes in employment levels.

2.2 Guidance on Preparing a Regeneration Report

2.2.1 This TAG Unit introduces guidance which provides practical advice on the preparation of Regeneration Reports. It is a restricted version of the Guidance envisaged by SACTRA, in the following respects.

• It applies only to identifiable Regeneration Areas (RAs). This restriction has been made on the grounds that RAs are, by definition, places where reductions in unemployment would be given priority by policy makers. However, it also permits some methodological simplifications, as in the following point.
• The Department's chosen measure of contribution to regeneration objectives is the change in the number of RA residents in employment. An additional measure which may also be useful is the change in the number of jobs in the RA.
• It is not concerned with the economic impact at a national level, but only within the RA and the surrounding region. In particular, it is not necessary to demonstrate whether any new jobs generated by a transport scheme would otherwise have gone somewhere else in the country.
• It provides an indirect measure of regional impacts by focusing on under-performing areas that are themselves more likely to be part of under-performing regions.

2.2.2 This focus on economic activity (as measured through employment levels) is deliberate: the guidance is concerned with the economic impact of transport. There are other dimensions under which regeneration objectives might be set, such as quality of the built environment, but they are covered under other NATA headings informed, as necessary, by the 3Rs Guidance.

2.2.3 SACTRA recognised the difficulty of attempting to quantify, with confidence, the number of jobs that a proposed transport scheme will generate. However, analysis of the scale of the transport impacts, particularly patterns of accessibility, can be used to indicate feasible ranges for any associated increases in employment. The RR achieves this through analysis of how a RA's economy operates, why it is stagnant or in decline, and how the proposed transport improvements may contribute to reversing the decline, such as by improving access to existing employment opportunities, or reduced transport costs for businesses that allow them to expand their activities.

2.2.4 It should be noted that a RR need not always be prepared: TAG Unit 3.5.8, Regeneration Impacts, discusses how to decide if a RR is necessary^[6]. Furthermore, the impacts may not always be positive, and the RR will have to consider whether, by exposing an RA to increased competition, the scheme might lead to a reduction in employment. TAG Unit 3.5.8 discusses this further.

2.3 Regeneration Areas

2.3.1 There is no national designation of regeneration areas. However, in the majority of cases the notion of an identifiable RA can be equated with the designation as an area with a specific regeneration priority in achieving the objectives of the relevant Regional Economic Strategy. This is what is primarily meant in the rest of the guidance by the term "Regeneration Area". Other possible definitions (e.g. "Assisted Areas") are much cruder and should not form the definition of a regeneration area.

2.3.2 In the absence of a national designation promoters will need to demonstrate that the scheme falls within an area in which regeneration can be considered as a specific objective. An area meeting any of the following criteria will generally be considered as a regeneration area for the purposes of scheme appraisal:

a) Evidence of national/regional priority to regenerate is given:
   i) Sub-regions identified as priority areas for regeneration in RDA Regional Economic Strategies;
   ii) Sub-regions identified as falling under one of the EU Structural Fund Objectives;
   iii) Sub-regions containing a Housing Market Renewal Pathfinder^[7] area;
   iv) Sub-regions having benefited from the Single Regeneration Budget.
b) If condition (a) or (b) cannot be met, as there is only a local designation, then wards/output areas in the bottom 20% of the ID (Indices of Deprivation) 2004 will be accepted.
c) If any of the above conditions can be met then other areas can be included, which are in the bottom 20% of the ID 2004 employment domain.

2.3.3 The identification of a scheme as being within a regeneration area should be discussed at an early opportunity with the Department. It is possible that an area could be identified as a regeneration area without meeting the criteria above but this is likely to apply in a limited number of cases.

2.4 Regional Development and Regeneration

2.4.1 As noted earlier, the regeneration of under-performing areas can assist in the promotion of regional economic growth. However, there are limits on the extent to which the RR can assist in identifying schemes which promote regional development. Regeneration areas and under-performing regions are subject to all types of market failures and not all of these will be addressed by transport measures. Not all transport schemes in regeneration areas will promote regional development. For a transport scheme to succeed in promoting regional development requires either that poor transport infrastructure is as a barrier to growth or that the transport investment is part of a package of complementary measures which addresses a range of market failures.

2.4.2 In addition, regeneration is not the only objective of transport investment. The assessment of transport schemes within NATA is based on several criteria as well as regeneration. While meeting such criteria as the various environmental or road safety objectives can help to contribute to regeneration and hence regional growth targets, the RR focuses on the employment effects of transport schemes.

2.5 Models and Methodology for Regeneration Appraisal

2.5.1 SACTRA took the view that, for individual schemes whose impacts are likely to be limited, land-use/transport interaction models might not be the best tools for estimating new jobs and/or reduced unemployment. Regeneration Impacts (TAG Unit 3.5.8) does not require such models.

2.5.2 However, for very large schemes with an area-wide impact, SACTRA considered that such models might be able to help. Use of these models should not replace the analysis set out in TAG Unit 3.5.8, but supplement and support it. The underlying rationale for change should still be explained as described here. Information about commercially available land-use models is provided in Land-Use/Transport Interaction Models (TAG Unit 3.1.3).

2.6 Structure of a Regeneration Report

2.6.1 Much of TAG Unit 3.5.8 is concerned with the question of how transport interacts with the RA's economy, and the questions that should be asked when preparing a RR. However, the overall structure of the RR is also set out in TAG Unit 3.5.8, and a worksheet that can be used to summarise the key steps and conclusions is given in Worksheet for the Appraisal of Regeneration Impacts (TAG Unit 3.5.10).

Notes:
1: A perfectly competitive market is defined as a market where there are many buyers willing to buy a product at a certain price and many sellers willing to sell the product for a certain price; firms' products are very similar; there are low barriers to entry and exit; there is perfect information for both consumers and producers; and firms maximize profits (they sell at the point where marginal revenue equals marginal cost). Under these conditions, the market price of the product (which is taken as given to the firm) equals the marginal cost of producing the product.
2: SACTRA is The Standing Advisory Committee on Trunk Road Assessment. It is an independent committee appointed by the Secretary of State for Transport to advise on issues related to the appraisal of trunk roads. From time to time the committee is given specific terms of reference and in 1999 they published a report on Transport and the Economy.
3: See Eddington Transport Study (DfT, 2006) Chapters 3.1 and 4.1.
4: If market failures occur, free markets no longer give rise to an efficient production and allocation of goods and resources. Market failures can take a number of forms including market power (due to monopolies, cartels, etc), absence of markets for goods (e.g. no market for clean air) and imperfect information and/or knowledge.
5: The Regeneration Report was previously known as the Economic Impact Report or EIR.
6: Do not confuse the 'The Wider Economic Impacts Sub-Objective', (formerly TAG Unit 3.5.8, now renamed to 'Regeneration Impacts') with 'The Wider Impacts Sub-Objective', TAG Unit 3.5.14 (with information for the expert on Wider Impacts).
7: These "Pathfinder" areas are Birmingham-Sandwell, Manchester-Salford, New Heartlands (Merseyside); East Lancashire; Newcastle-Gateshead; Oldham-Rochdale; North Staffordshire; South Yorkshire, and Hull/East Yorkshire.

3. Further Information

The following documents provide further background on the New Approach to Appraisal, NATA.

4. References

DETR (1999) "Transport and the Economy" SACTRA (Standing Advisory Committee on Trunk Road Assessment)
[www.dft.gov.uk/pgr/economics/sactra]

Department for Transport (2003) "Guidance on Preparing an Economic Impact Report"
[www.dft.gov.uk/pgr/economics/rdg/guidanceonpreparingeconomi3069]

Department for Transport (2006) "The Eddington Transport Study - Main Report: Transport's role in sustaining the UK's productivity and competitiveness, Sir Rod Eddington", December, The Stationery Office
[www.dft.gov.uk/about/strategy/transportstrategy/eddingtonstudy/]

Interdepartmental Group on the EGRUP Review (2004) "Assessing the Impacts of Spatial Interventions: Regeneration, Renewal and Regional Development: The '3Rs' Guidance", Office of the Deputy Prime Minister, May, London
[www.communities.gov.uk/publications/corporate/assessingimpacts]

5. Document Provenance

This Transport Analysis Guidance (TAG) Unit on regeneration is partly based on Guidance on Preparing an Economic Impact Report prepared for the Department for Transport in July 2003. This revised TAG Unit was released in 'for consultation' form in April 2009 as part of Unit 2.8 and, as a separate unit, in February 2011.

Technical queries and comments on this TAG Unit should be referred to:

Integrated Transport Economics and Appraisal (ITEA) Division
Department for Transport
Zone 3/08 Great Minster House
33 Horseferry Road
London SW1P 4DR

Email: itea@dft.gsi.gov.uk
Tel: 020 7944 6176
Fax: 020 7944 2198

Updated: April 2011