Current debates on the cost-benefit analysis of transport proyects in Great Britain

Abstract

Britain was one of the first countries to adopt cost-benefit analysis for use in transport projects, and now has a state of the art approach, which nests the cost-benefit analysis in a multi-criterion framework linked to the objectives of transport policy. But despite this a number of heated debates about the a p p roach used continue. This paper outlines the current approach used and the debates going on. Regarding valuation of benefits, despite decades of relevant research, the value of time savings remains controversial, particularly in the context of small time savings and of savings in working time, where the current approach is based on theoretical considerations rather than empirical evidence on willingness to pay. The other big uncertainty in measuring benefits is in relation to wider economic benefits. For many years the official position on these was that they were unlikely to be significant, but recent research has led to proposals to incorporate them into the standard analysis. The current British approach to decision criteria relies on the calculation of benefit cost ratios, in which the benefits are the net impact on all other than the government budget and the costs are the cost to the public budget. However, there is a strong case for introducing an explicit shadow price of pub lic funds into the appraisal. A further weakness in current British transport project appraisal is the lack of detailed attention to the distribution of costs and benefits. Overall, appraisal is seen too much as a purely technical analysis to obtain a single indicator of value for money rather than a consideration of the robustness of the project to alternative future scenarios. JEL Classification: G31, H40, H54.