Technical calculations blamed for unjustified disparity in spending

THREE massive investments in the transport networks of the South East are proving to be key factors in widening the huge divide between spending there and in other parts of the country.

The Crossrail project, which involves constructing an entirely new underground rail link running east to west across London; another major upgrade to the London Underground, and an expansion of the north-south Thameslink rail system, will together cost UK taxpayers billions of pounds, emphasising the disparity between spending in London and the South East and elsewhere.

But even without these major infrastructure projects, the IPPR calculates that transport spending in London would amount to £215 per head, compared with £135 per head in the North.

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The report concludes that the three largest projects “do not account for the general disparity – nor do they provide an adequate justification for it”.

Instead, the think-tank believes there is a more fundamental reason why London and the South East consistently win major public investment.

The system, the report says, is “skewed” in their favour.

This is because Treasury officials assess potential transport projects using a highly technical “cost-benefit analysis” (CBA), to decide whether each will deliver sufficient value for money.

According to the study, these assessments attempt to calculate how much money a transport scheme would save the economy, using calculations based around its users’ assumed earnings.

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The report states: “Put simply, the more people who will benefit from a reduction in journey time or cost, the higher value that will be attributed to the scheme.

“For this reason, areas of high population density with higher average wages are accorded particularly high CBA values.”

And as London and the South East continue to win investment, people continue to move there - and so the “cost-benefit” of further investment rises further.

The report concludes: “In sum, the current process for transport appraisal is skewed heavily in favour of those areas with the highest population density.

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“As a result, projects in London and the South East compare favourably in cost-benefit comparisons with other places. As London’s transport infrastructure and economy improves, so does its population density, and so the process becomes self-fulfilling.”

The report describes London and the South East as now being “locked into dependency” upon public subsidy to ease congestion - so holding back growth in other cities.

The IPPR is calling for the Treasury to fundamentally reassess the way it looks at transport projects, taking into account wider economic impacts and “long-term gains” such as the effects on investment patterns, wage levels and labour distribution.