Department for Transport (Decision Making)

Wednesday 27th April 2011 Written Statements

[The Secretary of State for Transport (Mr Philip Hammond)]

I am announcing today reforms to the way decisions are made on which transport projects to prioritise. My Department’s business plan states we will

“reform the way transport projects are assessed and funding prioritisation decisions are made so that the benefits of low-carbon proposals are fully recognised”.

It specifies that in order to achieve this we will:

(a) review and revise DfT guidance on appraising transport projects, and

(b) review and revise DfT processes for assessing schemes and supporting ministerial decisions.

The rest of this statement explains how we have met these commitments.

DfT guidance on appraising transport projects

The evidence supporting decisions needs to be robust. Updates and changes that I am making to my Department’s guidance on appraising transport projects will recognise the benefits of low-carbon proposals more accurately.

Spending review decisions were informed by a value-for-money measure, used across Government. This measure incorporated the latest monetary values of carbon, published by the Department of Energy and Climate Change, which are higher than previous values. It also treated indirect tax revenues (such as fuel duty) in a way consistent with the Department for Transport’s “in-draft” benefit-cost ratio (BCR) formula. These changes tend to improve the BCRs of schemes that reduce carbon emissions and weaken the BCRs of schemes that result in higher carbon emissions.

Stakeholder groups have made representations that the Department should consider amending the value of time to reflect regional variations in earnings. We have considered these representations and have decided not to make any change at this stage, but we will keep the issue under review.

Over the coming days, my officials will update the appraisal guidance to incorporate the higher carbon values and new BCR formula that were used in the spending review. In addition, the Department will also release further changes to the appraisal guidance that reflect Government’s priorities and recent updates to values and methodologies. A full list of these changes can be found on the Department’s website (www.dft. gov.uk/webtag).

DfT processes for assessing schemes and supporting ministerial decisions

Today, my Department is publishing “The Transport Business Case” which sets out the Department’s approach to producing business cases that support ministerial decisions. This approach ensures decisions are made by taking account of all the relevant information set out in five cases, consistent with the Treasury Green Book, specifically, to show whether schemes:

are supported by a robust case for change that fits with wider public policy objectives—the “strategic case”;

demonstrate value-for-money—the “economic case”;

are commercially viable—the “commercial case”;

are financially affordable—the “financial case”; and

are achievable—the “management case”.

This means that there will no longer be a separate process called NATA.

Option development and presentation

My Department will revise the formats used to present information to support decision-making so that all the five cases receive appropriate consideration from an early stage in a clear and transparent way. Forthcoming changes to the guidance will set out to scheme promoters how to develop a range of innovative solutions to transport problems in the early stages of option development and a clear process for option selection that aligns with the subsequent appraisal process. Today, I am also publishing the “Early Assessment and Sifting Tool”, which will aid scheme promoters in comparing and refining options in those early stages.