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Amended May 2010

NATA, the New Approach to Transport Appraisal, has recently been refreshed. The Cost Benefit analysis for public transport schemes that is advocated compares net costs with the cash values of social benefits such as time and accident savings etc.  The net costs are the resource costs of building and running the proposal minus the (incremental) fares.

However, that approach leads to the logically “absurd” conclusion that altering the economic boundaries of a scheme may dramatically change the net costs and hence the benefit to cost ratio upon which scheme justification depends.

For example, if the economic boundary of Crossrail were the scheme itself, then the incremental fares would be the fares in total, namely some £13 billion.  However, since it is TfL that proposes the scheme, the economic boundary embraces all TfL’s rail and bus operations.  The estimate of the fares that would be lost to existing services amounted to £7 billion.  Hence Crossrail’s incremental fares were set to £6 billion.  Taking that a step further, imagine that TfL ran the entire economy then the incremental fares that could be claimed would be zero since any fare spent by a Crossrail passenger would be lost to the rest of the empire.

The plain fact is that if a scheme does not pay for itself out of income then it has to be subsidised by the taxpayer.  That subsidy will inevitably damage the wider economy.  If it were otherwise the NATA approach could be used to justify subsidising every loss making burger bar in the land.
In addition to that, such schemes are now calling on vast benefits from agglomeration and the wider economy. E.g a report on Crossrail by Buchanan and partners dated July 2007 provide overwhelming “welfare benefits” in the range £(10 to 28)  billion  plus GDP benefits in the rage £(17-64) billion – all with a straight face.

We comment, if agglomeration were a benefit then London should be able to fund its own transport systems.  However, £39 billion of Government money over 10 years is required to fund TfL (including Crossrail).  Furthermore, the national rail system takes £5 billion per year from the taxpayer.  Since 50% of rail journeys have one end in London it follows that London should perhaps fund 50% of that bill.

Those huge subsides illustrate the scale of the loss that may be attributed to overmuch agglomeration, let alone the damage to the wider economy caused by high taxes and the draining of population and talent from north to south.  As an example of the devastating effect of that we have from Neil Scales, Director General of Mersey Travel, that Liverpool is designed for one million people but only contains 440,000.

Certainly, without incremental fares, or the supposed benefits from “agglomeration” and to the “wider economy”, no railway project is ever likely to pass the cost benefit test.  The fact that such schemes are accepted is one reason that the nation is bankrupt.

All that is made worse by the length of the evaluation period, now set to an astonishing 60 years. That is far beyond the 30 year horizon for which passenger forecasts can reasonably be made. Further, often at least half the benefits arise from the second half of the evaluation period. Hence, even supposing the calculations are valid, and we do not think they are, benefits would not exceed costs until long after most of us are dead.


Pity about the burger bars, let alone the wider economy.

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