Transport projects have a beneficial impact on the economy by providing new or improved links between centres of economic activity, generating employment opportunities and opening new markets.106 Wider economic benefits include giving firms better access to (deeper and/or broader) labour markets and enhancing competition. Agglomeration benefits are particularly relevant to a large, relatively dense urban area such as London. Once these are added into a conventional scheme appraisal, the benefit-costs ratio can increase substantially. Crossrail’s benefit-cost ratio including wider economic benefits has been
estimated as 3.1:1.
For Crossrail, the overall public sector contribution has been around two-thirds of the total cost, with the remainder coming from user charges. For similar schemes, we might expect the private sector contribution to be marginally lower across the range of projects that we have considered. It would be reasonable to suggest that the public sector might contribute around half of the costs towards the projects in our portfolio, constituting around £500 billion of the £1,000 billion of transport costs over the plan’s period. With a benefits-to-cost ratio of 2:1, this would be expected to generate £1,000 billion of return for the public sector contribution; with a benefits-to-cost ratio of 3.1:1, this would be expected to generate in excess £1,500 billion of wider benefits.
3.5
Risks and uncertainties
Some projects that are planned for the next few decades are already in some stage of development. TfL holds detailed budgets for the period until the early 2020s. It is developing plans for Crossrail 2 and has outline budget plans for the period to around 2030. Furthermore, national rail has an established funding settlement for a new control period (2014/15 to 2019/20), High Speed 2 is planned to open in stages to 2033 and the M25 has a long-term PPP arrangement to 2039.
104
Percentage of DfT’s appraised project spending that is assessed as High or
Very High value for money, Department for Transport, August 2013. Available from:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/230918/vfm- indicator-jan-dec-12.pdf
105
See for example Crossrail, National Audit Office, January 2014. Available from: http://www.nao.org.uk/wp-content/uploads/2014/01/Crossrail.pdf
106
In theory, transport schemes with high ratios of benefit to cost could contribute to GVA growth beyond historical levels.
More uncertainty exists around the development of London’s aviation
infrastructure and the outcome of the Davies Commission. Furthermore, there is a broader related question over the extent to which London will be able to grow outwards. An estuary airport (or indeed one that put additional capacity into Gatwick) may shift London’s development towards its peripheries. Whatever the outcome of Davies, the overall cost of aviation capacity development will be very substantial. For example, before indexation the largest scheme – the Estuary airport - had a mid-point capital cost of £46 billion in real prices.
Some work has been undertaken by TfL on the additional costs of some Davies Commission recommendations; it is at a preliminary stage. Cost uncertainty in this area has a material impact on overall transport expenditure projections. For example a 10% increase or decrease of expenditure of £46 billion is equivalent to around one-third of the capital cost of Crossrail 1.107
Whatever the outcome of the airport review, not all of the costs of new and improved airports will be borne by London, as a large proportion of the cost of projects will be funded by the private sector. These charges will be passed onto airlines and passengers from across the UK and beyond.
Spatial planning scenarios themselves contain uncertainties. For new town development scenarios in which growth is accommodated beyond London’s boundaries and the Estuary airport (Heathrow new town) options, we have included the costs for a new rail link and stations (or in Heathrow’s case,
conversion of the existing), and for developing a local public transport (light rail and bus) system. The costs have been derived from planned TfL projects.
3.6
Links with other sectors
Significant progress has been made in London towards developing sustainable, green transport. For example, there are new walking and cycling routes in the Queen Elizabeth Olympic Park; the cycling network continues to expand. In future, London’s reputation as a world class place to live, work and do business may depend to a much greater extent on the successful delivery of such schemes than it has done previously. To account for these opportunities, we have factored in increased projected expenditure on ‘World city’ schemes from 2030, and offset this with lower expenditure on ‘Radial’ and ‘Orbital’ links after that point.
The Mayor’s Roads Task Force108 suggests that it will work towards providing “great places which contribute to the look, feel and reputation of the city”. Many of the Task Force’s recommendations (in particular the aspiration to provide greener, cleaner, quieter streets and a healthier more active city) could at least in part be considered as green investments. The additional cost of providing green “Quietways”, dedicated cycling routes, has been included separately in the green infrastructure category.
107
If Heathrow was to be decommissioned, there would no doubt be significant costs associated with transitional arrangements for moving to a new purpose built airport to the east. It is beyond the scope of this report to attempt to quantify them.
108
Roads Task Force Report, Transport for London, July 2013. Available from:
http://www.tfl.gov.uk/corporate/about-tfl/how-we-work/planning-for-the-future/roads-task- force?cid=fs086#on-this-page-0
The effect of the roll-out of electric car infrastructure and the demand that it will place on the grid requires careful consideration.109 If London’s achievement of rolling out 1,300 charging points is built upon, such that the city becomes a world leader in charging points and take up of electric cars, it would create significant additional demand for electricity from the grid. The impact of a faster, more intense roll-out of electric car infrastructure on the demand from the grid and the consequent required rate of power station building would affect substantially the energy sector.