BHLR – REPORT FOR THE ALLIANCE ON ESCC’S ‘BEST AND FINAL FUNDING BID’ BY PROFESSOR ALAN WENBAN-SMITH

Bexhill to Hastings Link Road, ‘Best & Final Bid’ by East Sussex County Council, September 2011

 

 

A Review of the Transport Business Case

for the Hastings Alliance

 

 

14 October 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Urban & Regional Policy

48 St Agnes Road

Birmingham

B13 9PN

Tel 07977 859411

Fax 0121 247 4601

e-mail alanwenbansmith@pobox.com


Bexhill to Hastings Link Road BAFB – Business Case Review

Contents

            Section            Title            Page

                        Overview            ii

            1            Introduction            1

            2            Strategic Case: fit with public policy             1

            3            Economic Case: value for money             4

4                                 Commercial Case: viability 9

5                                 Financial Case: affordability 9

6                                 Management Case: achievability 10

7                                 Conclusions 10

Appendix 1: Reports considered 11

Appendix 2: Carbon costs 12

Appendix 3: Benefit Cost Ratios 14

 

Urban & Regional policy

Urban & Regional Policy was established by Alan Wenban-Smith in 1996, and specialises in linking urban and regional economic, spatial and transport policies.  Recent projects relevant to the present project include chairing TfL’s Peer Review Group for the London Land-Use & Transport Integrated model, recommending complementary actions to increase regional economic benefit from High Speed Rail, and a study of the integration of regional transport with spatial strategies for DfT.

Alan Wenban-Smith was previously responsible for planning and transport policy for Birmingham City Council.  In this capacity he led Birmingham’s first Unitary Development Plan, its first Economic Strategy and the policy direction of the Inner City Partnership.  He also chaired West Midlands planning, transport and economic development advisers at both regional and Metropolitan levels, leading the first Metropolitan Transport ‘Packages’, Regional Planning Guidance and the first integrated Regional Transport Strategy.

He is currently a member of the RTPI General Assembly and its Policy Committee.  He writes and speaks widely on planning and transport issues, has acted as witness and as adviser to Commons Select Committees on transport and economic appraisal matters and is Visiting Professor of Planning at Birmingham City University.

Bexhill to Hastings Link Road BAFB – Business Case Review

Overview

East Sussex County Council (ESCC) submitted its ‘Best & Final Bid’ (BAFB) for central funding of the Bexhill-Hastings Link Road (BHLR) in September 2011.  The Hastings Alliance commissioned Urban & Regional Policy to examine the economic, planning and regeneration aspects (complementing work by MTRU on compliance with DfT’s guidance on transport modelling and appraisal, and by Dr Judy Clark on Landscape).  In relation to DfT’s ‘5 Cases’ approach, this report concludes:

The Strategic Case

1.     Failure to follow DfT and Treasury Guidance on reviewing alternatives means that the choice of the BHLR is the result of a secondary objective (congestion reduction) taking precedence over the primary objective (regeneration). 

2.     The scheme does not form part of a coherent regeneration strategy for Hastings and Bexhill.  The transport capacity to meet the needs for regeneration, employment and housing can and should be met in other ways, more compatible with public policy. 

3.     The increase in carbon emissions and absence of mitigating measures would have disqualified the BHLR from further consideration in a properly conducted process.

The Economic Case

4.     Costs exclude elements necessary to achieving the claimed benefits, and also count as ‘sunk’ past costs which could be recovered.

5.     Costs are reduced by a large developer contributions for elements not forming part of the scheme appraised, and which ESCC itself recognises are unlikely to be forthcoming.

6.     Directly quantifiable economic benefits are small and uncertain.

7.     The additional fuel tax revenues from traffic growth are dwarfed by the cost of meeting statutory targets for reducing carbon emissions

8.     The impacts on landscape have been seriously under-estimated.

9.     After adjustments for these factors, the transport BCR is very poor, and on a wider basis negative.

Commercial Case

10.  The costs to the private sector of elements necessary to secure the development benefit are admitted not to be viable.

Financial Case

11.  The ability of ESCC to fund its share depends on a large developer contribution which should be disallowed on grounds both of extraneousness and uncertainty.   

Management Case

12.  The financial hole represented by  unidentified third party contributions is so large that no confidence can be placed in the scheme’s deliverability.


Bexhill to Hastings Link Road – regeneration issues revisited

1                  Introduction

1.1              We have been commissioned by the Hastings Alliance to review the submissions made by East Sussex County Council (ESCC) to DfT for funding of the BHLR from the Major Local Schemes Development Pool (Ref 27).  Although the timescale for comments is extremely short (one month), we have been able to review and update the analyses of earlier submissions that we carried out in 2004 and 2008 and work for the CPO Inquiry in 2009.  In addition, the Alliance has commissioned complementary reports on the transport modelling (from MTRU – ref 35) and on the landscape impacts (from Dr Judy Clark, UCL – ref 34). The full list of documents considered is given in Appendix 1, and references in the text are to the sequence numbers listed there.

1.2              The present report revisits the previous conclusions in the light of new information about the scheme and relevant changes in the wider policy context.  The main new material considered for the present report is the revised Economic Assessment Report (ref 28), the Appraisal Summary Table and related Worksheets (ref 30), which are based on new input data and transport model runs carried out for ESCC (Ref 29).  So that this report is free-standing, key points from earlier and complementary work are summarised or cross referenced.

1.3              This report is structured around the five headings of the Transport Business Case that is now DfT’s preferred approach to Ministerial decision-making on funding bids.  This requires “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’.” [1]

2                  The Strategic Case

National context

2.1              The predecessor to BHLR was the Bexhill and Hastings Bypass, which would have been part of a South Coastal route from Southampton to Dover right around both towns.  The strategic case was originally based upon the status of parts of the A259 as a Trunk Road, and the identification of Bexhill/Hastings in the Regional Spatial Strategy as a ‘secondary hub’ in a set of 30 strategic transport hubs and 50 ‘spokes’ across the South East.  A central part of the case for the by-pass from the start was that it would provide access to the proposed North East Bexhill Business Park (NEBBP) – and this has continued to dominate local thinking.

2.2              This by-pass was the subject of the first MultiModal Study (MMS) to be completed (2000, Ref) in the context of the national Transport 10-year Plan (2000-2010).  In spite of the generous resource context at the time, the weakness of the economic case (notwithstanding the NEBBP) plus serious environmental impacts led the then Secretary of State to reject the by-pass proposal in 2001 (Ref 2).  However, recognising the concentration of deprivation, the local partners were invited to put forward other (more integrated) ideas for the regeneration of Hastings/Bexhill (Ref 8).

2.3              The Transport Secretary’s response to the resulting Five Point Plan (see para 2.6 below) and the South Coast MMS (Ref 5, which reported around the same time) was to remit the proposed local transport improvements to the Local Transport Plan (LTP) process.  This was accompanied by reiteration of the general DfT guidance on the need to include demand management measures.  In particular, local authorities were asked to consider congestion charging as a way of funding local schemes (2003, Ref 8).

2.4              In the current submission (Ref 27, para 1.2) the objectives are stated as:

a)    Economic regeneration of Hastings and Bexhill
b)    Open up land for commercial and housing development
c)    Improve accessibility to and within Bexhill and Hastings.

Local context

2.5              The local partnership (SeaSpace) commissioned a report on a broad strategy for economic regeneration from DTZPieda (Refs 3, 4).  This emphasised that the key to regeneration was to grow the indigenous economic base, by:

a)    Developing new businesses that could capitalise on the area’s environmental potential while not being too much disadvantaged by the peripherality of the area within the South East;
b)    Revitalising the existing economic base, including retaining existing manufacturing and developing the traditional tourism activities.

2.6              The five strands of the strategy derived from this vision were (i) urban renaissance; (ii) education; (iii) business and enterprise; (iv) broadband and ICT; and (v) transport.  The transport priorities were to improve rail connections to London and Gatwick and develop a frequent Bexhill-Ore ‘Metro’ service with added stations on the local line, and with new and regenerated housing also focused on this axis.  Neither the BHLR nor the NEBBP had much to offer in terms of this strategy – indeed they could be seen as conflicting in terms of their environmental impact (Ref 16).  Neither was originally advocated by DTZPeida (Ref 3), but nevertheless emerged as components of SeaSpace’s ‘Five Point Plan’ (5PP, Ref 11):

a)    the NEBBP as an ‘inward investment’ opportunity; and
b)    BHLR because (like the earlier by-pass) it provided access to the NEBBP and also to potential housing sites in the same general area.

2.7              The reasons for the shift from renewal of the indigenous economic base to reliance on inward investment at a Business Park enabled by BHLR have never been set out.  It is apparent that a major attraction of BHLR to the local authorities was that it offered (like the previous by-pass) the relief of congestion and reduction of air pollution on the A259 at the Glyne Gap between Bexhill and Hastings.  In earlier funding submissions (in 2003 and 2008 – refs 7, 14, 15) this was described as a strategic benefit, and it has clearly dominated the thinking of ESCC over the last decade.  The support of other local partners for the shift of strategy (and their concomitant support for BHLR) seems to have been the result of a culture of reciprocal support for partners’ bids rather than reasoned consideration of the alternatives (Ref 16).

2.8              It should be noted in this context that only 3% of all traffic on the A259 crossing the Glyne Gap is not local (ie with origin and destination outside the two towns – Ref 31, Section 3.4).  Moreover, no part of the whole route along the south coast (A27/A259/A2070) is regarded by DfT as being ‘a route of Strategic National Importance’, and through Hastings the A259 itself is not classified as a Trunk Road (though it is in Bexhill).[2]  The transport benefits are therefore almost entirely the relief of local congestion rather than strategically significant regional or subregional access to Hastings and Bexhill.

2.9              As has been noted by property experts at various stages (Refs 1, 4, 6, 16), NEBBP must compete for inward investment interest with the rest of the South East, and its disadvantage of peripherality is not affected by BHLR.  This is reflected in the 2009 Regeneration Report (Ref 22), which suggests that only 200 out of the estimated 2020 additional jobs attributed to BHLR would come from inward investment (see below, para 3.20).

Consideration of alternatives

2.10           The Treasury Green Book (2004) and WebTAG 2.1.1 (2009) require as a first step “… generation of options to address a clear set of locally developed objectives which express desired outcomes. It involves generating a broad range of options, which reflect a range of modes, approaches and scales of intervention.”

2.11           The late shift from congestion reduction to regeneration as the prime purpose of BHLR has effectively meant that the step of generation and consideration of options in relation to regeneration has been omitted.  A careful analysis by Denvil Coombe (Ref 21) of the process adopted observed that the County Council failed to separate the traffic issues on the A259 from the development issues in north Bexhill.  The result, in his words, is “Anything other than the Link Road will not meet with favour because it would not be the Link Road. That the Link Road is the solution is embedded in the objectives … and in the reasons why non-road-based solutions will not work. These arguments are self-fulfilling”.

2.12           Thus while the main objective of the BHLR is stated to be regeneration of the Hastings-Bexhill area, the ‘side-effect’ of relief of congestion on the A259 has in fact dominated the consideration of options. The complementary MTRU report for the Alliance (Ref 34) covers this issue in more depth.

Strategic regeneration impacts

2.13           Perhaps for this reason, the new appraisals that have been carried out for the BAFB devote a great deal of time and effort to quantifying the transport benefits (overwhelmingly user time-savings), while the 2009 Regeneration Report (Ref 22) has not been revisited.  The BAFB identifies the two main impacts of BHLR as being to:

a)    “Open up a substantial area of land in North East Bexhill with considerable potential to assist the regeneration of the RA; and
b)    Provide essential traffic congestion relief along the A259 that would ensure both improved and consistent journey times that will in turn encourage increased public transport services, enhanced regional accessibility along the South Coast Corridor, reduce severance between Bexhill and Hastings and provide greater accessibility to important local projects.”

2.14           More recently opening up housing sites seems to have been promoted as a more major strategic objective.  The argument appears to be that achieving housing numbers for East Sussex requires the sites opened up by BHLR – and that there is no alternative.  However, since the housing targets are derived from the Regional Spatial Stategy which has been abolished by the Government, the status of such targets depends on the Local Development Framework (LDF) which is still in preparation. 

2.15           The Core Strategy for the Rother District LDF (currently out for consultation) states:

2.10 The South East Plan states that Bexhill is one of only a couple of areas of strategic scope for additional greenfield development in the Sussex Coast sub-region. This is reflected in the housing provision for the Rother part of the Sussex Coast sub-region, being 4,000 dwellings over the period 2006-2026, equivalent to an annual average of 200 dwellings.

2.11 The remaining, inland parts of Rother are identified as needing to accommodate 1,600 dwellings (80 dwellings per annum) over the same period. Hence, for Rother as a whole, the Plan requires 5,600 dwellings (280 dwellings per annum) between 2006 and 2026. It adds, at Policy SCT5, that there may be some flexibility in the precise split between the two sub-areas of the district.

2.12 Draft legislation in the Localism Bill proposes to abolish regional spatial strategies, including the South East Plan. Removing this regional tier of planning, and its associated “top-down” housing targets, is a strong commitment of Coalition Government.

2.13 However, at this time, the South East Plan remains effective, and a statutory part of the ‘development plan’, with which the Core Strategy should generally conform.

2.14 Even so, it is clear that there is increasing discretion for local planning authorities to re-consider their existing housing targets and to establish the right level of development for their area. Therefore, while evidence underpinning the preparation of the South East Plan is relevant background material, the Council has supplemented this through further examination of more recent information in order to determine the most appropriate future levels of development. Further details of this evidence can be found in the relevant background papers, with details on policies in the appropriate chapters of the Core Strategy.

2.16           It is clear that there is still a good deal of flexibility about how much land needs to be provided in any particular part of the District.  Moreover, whatever the desired quantum of land for new housing in the LDF, the issue of value for money in choosing appropriate locations cannot be avoided.  This issue is addressed in Section 3.

Carbon reduction targets

2.17           The Climate Change Act (CCA) and earlier non-statutory policy and guidance should have triggered a fundamental reappraisal of the options for dealing with strategic transport and regeneration issues in Hastings and Bexhill.  The options for the BHLR that were considered all implied an increase in traffic and in carbon emissions, while the targets set under CCA and reiterated in WebTAG 3.3. 5 (April 2011) call for a reduction of 80% by 2050.

2.18           Appendix 2 sets out the implications of the BAFB in terms of the cost of failing to meet these targets.  The model outputs given in the Assessment of Impacts (Ref 29, Table 8.3) show a cumulative carbon cost from road traffic in the modelled area of £123,259m over the appraisal period (NPV at 2002 prices).  No proposals have been put forward for mitigation on anything like this scale.  This result, on its own, should have been sufficient to rule out the BHLR from consideration at the options stage (had there been one).

Summary of strategic impacts

2.19           The inclusion of BHLR unbalances the package of regeneration action (the 5PP) and contributes little to the local economy, while continuing and increasing car-dependency.  Carbon emissions by the transport sector will therefore increase, while statutory carbon limits are reducing.  The transport proposals as a whole do not take seriously the need to reduce and rebalance transport demand.  The transport capacity to meet the needs for regeneration, employment and housing can and should be met in other ways (discussed at paras 3.19-24 below).

3                  The Economic Case

Costs

3.1              The cost of the scheme as stated in the BAFB is £85.916m.  The cost base is not stated in the documentation, but it is assumed that this is at current prices.  The figure of £50.499m given in the appraisal report is in discounted 2002 prices, and this figure is used for the comparisons in Appendix 3 with those quoted at previous stages.  There are several important differences, drawn to attention there, due to the inclusion or exclusion of significant elements (most importantly, pre-2011/2 spending, developer contributions to BHLR, and the cost of connecting development sites to BHLR).  These are discussed below.

Pre 2011/2 spending

3.2              Pre 2011/2 costs were estimated at £15.72m in the EOI and are stated to be £8.810m in the BAFB – the difference of £6.91m (all at current prices) is implicitly being treated as a ‘sunk cost’.  ESCC claims (Ref ) that these costs are properly excluded as ‘sunk’ preparation costs.  Treasury advice (Green Book, para 5.15) is that Costs of goods and services that have already been incurred and are irrevocable should be ignored in an appraisal.  They are ‘sunk costs’.  What matters are costs about which decisions can still be made. However, this includes the opportunity costs of continuing to tie up resources that have already been paid for.”  The points that arise are:

a)    Some of the preparatory cost may well be sunk (eg design, consultants, lawyers), but its sheer scale is a matter for concern.  An opportunity cost of nearly £7m in terms of what else it might have been spent on locally is serious, and would represent a high price for bad decision-making if the scheme does not proceed;
b)    The logic requires that the remaining past costs (£8.81m) are potentially recoverable (eg land).  Abandonment of the scheme would release these resources, which should therefore be counted in the cost-benefit analysis.

Developer contribution to BHLR

3.3              The BAFB (Ref 27, Section 4.7) reviews a range of possible sources of contributions to the cost of BHLR, including tolls, Tax Increment Finance, developers, and third party (through a wind-turbine development alongside the BHLR)  All these options are rejected on grounds of impracticality, revenue uncertainty and risk of delay.

Development link roads

3.4              In spite of that, the Public Accounts table in the Appraisal Summary Worksheets (Ref 29) allows for a contribution of £21.316m from ‘developer and other contributions’, reducing the cost to ESCC from £36.132m to £14.816m (all at 2002 prices).  ESCC responded (13 October) to the Alliance’s question on this point as follows:

“The £21,316,000 represents the discounted costs of the connections from the BHLR through the NE Bexhill development to a new junction on Wrestwood Road and a connection north from the development access junction on BHLR to a roundabout at Watermill Road and then on to another roundabout at Ninfield Road associated with the North Bexhill development in 2028. It has been assumed that these will be provided by the developers. Table 2-1 of the Economic Assessment Report details the undiscounted costs of the two developer funded link sections.”

3.5              The Table referenced is in 2009 prices, and includes two ‘Development connections’, so it appears from the above response that the £21,316m is the sum of these two schemes in 2002 prices:

a)    £14.31m (2009 prices) in 2013/4 for link South from BHLR to Wrestwood Road; and
b)    £23.30m (2009 prices) in 2021/2 for link North from BHLR to Ninfield Road

3.6              If so, these links are not part of the cost of the BHLR scheme for which ESCC is seeking DfT finance, but are contingent on the development that requires them proceeding.  It follows that the ‘Cost of the Scheme’ for appraisal purposes should not be reduced by this amount  – it should be £78.815m (the sum of ESCC funding £36.132m and DfT £35.683m at 2002 prices).  This is the view represented in Appendix 3.

3.7              If these elements were to be provided publicly, they would need to be appraised against the additional public benefits of the development they enabled.  As discussed later (para ), these are put at £6m for housing and 200 inward investment jobs.  This would not be a very good return for spending some £37.6m (2009 prices), suggesting strongly that other ways of meeting transport needs and/or other locations for development should be considered.

Greenhouse gases

3.8              There is an increase in CO2 output (compared with doing nothing), costed at £11.214m (Ref 27).  We have already pointed out that this is incompatible with national policy (paras 2.17 – 2.18) requirements.  In Appendix 2 we present calculations showing the NPV of failing to achieve these targets for the Hastings-Bexhill area would be some £123,259m.  While this is not itself part of the transport BCR, it does make a claim on ‘wider public finance’ benefit (£25.287m – see para 3.17), and inflicts major damage on the wider appraisal (Appendix 3).

Landscape costs

3.9              Although a major reason for the rejection of the original by-pass was that the landscape impact outweighed the economic benefits, relatively little attention has been paid to quantifying these impacts.  Appendix 3 shows that amounts have only been estimated very recently (perhaps because the lack of a centrally-approved methodology), and fluctuate wildly.

3.10           The BAFB estimate (£40.851m) roughly doubles ESCC’s own estimate of less than a year earlier (£21.5m), but is itself not much more than half the figure put forward by DfT itself (£76.133m – Ref 24, Section 1.6).  The work commissioned by the Alliance (Ref 35) suggests a negative impact of £121.356m – more than enough to confirm the appropriateness of the previous ministerial decision.

Economic benefits

3.11           The estimation of economic benefits arising from BHLR has undergone many changes, both local and national, since the scheme was first put forward.  The table in Appendix 1 sets out both costs and benefits as estimated at key stages, and forms the basis of the remainder of this section of the report.  The last column of this table sets out a revised assessment of costs and benefits, taking account of the analysis in this report.

Value of time savings

3.12           A large proportion of the economic benefits estimated at every stage has relied on time-savings (~£146m out of £175m, or 84% in the case of the BAFB).  This is a cause for concern about the robustness of the benefits claimed:

a)    Time savings are derived from the difference between projections of travel patterns with and without the scheme.  Not only are these small differences between large numbers, but the meaning of such differences is not plain (they may for instance suggest things will get worse, but more slowly).  Valuation of such virtual savings as though they are ‘clock time’ may not always be valid (in any case, but particularly if they are small);
b)    It is now generally accepted that the time-savings themselves are transient, and lasting value depends on their conversion into greater productivity or more valued locational choices by households and businesses.  In a perfect market such benefits would be of equal value to the time-savings giving rise to them.  However, the Regeneration Report could not identify a concrete form for more than about 10% of the time-savings values.

3.13           These problems are compounded by the very localised nature of the transport impact, which means that a high proportion of time-savings that are very short.  This poses particular difficulties concerning both their usefulness as time-savings and the credibility of their conversion to other forms of economic benefit[3].  Moreover, the volatility of the figures is demonstrated by the large differences in the breakdown of time-savings by length, between figures given at the 2009 PLI and those given now (AST worksheet, discussed in MRTU report).  This variability suggests that the figures are not robust, and since the risks are all on the downside a 25% reduction to the BAFB estimate is proposed in Appendix 3.

3.14           A further issue arising from the latest figures is the high level of small time-losses suffered by commuters (a net NPV of –28.816m for times <2 mins, compared with an NPV of +65.620m for times >5 mins).  This implies that local commuters will be particularly heavily affected, with all that this implies both for local regeneration and for the expansion of the local labour market that forms part of any wider economic benefit.

Wider economic benefits

3.15           The BAFB appraisal (Ref 28, Table 5.1) includes a further amount (equal to 10% of the value of business time-savings), intended to allow for imperfect market benefits which could result from improved accessibility, such as agglomeration and increased competition.  While this is permitted under WebTAG, such effects are particularly unlikely to occur in the very localised context of Hastings-Bexhill.  Previous guidance by DfT (WebTAG 2.8 and 3.5.14) stated that such an allowance was only likely to be valid in large urban areas (Functional Urban Regions).

3.16           Moreover, imperfect market effects may also be negative, if for example improved accessibility leads to greater dispersion (as is implied by the traffic modelling), or if local labour market access is reduced as indicated above (para 3.14).  The allowance is therefore inappropriate and has been disregarded in the final column of Appendix 3.

Wider public finance

3.17           There has been a long-standing criticism that road schemes are unduly favoured by allowing effects on tax take (eg increased fuel taxes from more car travel) to be set against public costs.  The latest version WebTAG 3.5.1 allows this instead to be counted as a new element of benefit.  There is of course a fundamental incompatibility with the need to reduce greenhouse gases in either formulation.

3.18           The carbon cost of growing road transport emissions in the Hastings-Bexhill area is much higher than the increase in tax income from traffic growth (£123.259m compared with £25.287m).  It follows that the increased tax revenues will be swallowed by the costs of mitigation, and that the tax benefit figure should therefore be disregarded.

3.19           This underlines the importance of the Strategic Case objection (paras 2.17-2.18), emphasises that the treatment of performance on CO2 targets should be rigorous (see above paras 2.17-2.18, 3.5 and MTRU report, Ref 34), and also adds weight to the Wider BCR compared to the narrower Transport BCR in Appendix 3.

Development benefits

3.20           The NEBBP development was the original raison d’etre for the scheme (and still features in its objectives), but the Economic Assessment Report for the BAFB does not even mention it.  The 2009 Regeneration Report provides an estimate of 2020 additional jobs resulting from the BHLR, of which 1500 would be located at the Business Park.  No monetisation is attempted, presumably because this would double-count economic benefits derived from time-savings, but the NPV in GDP terms would be of the order of £20m – a small fraction of the benefits claimed for time-savings, as already noted (para 3.13).

3.21           Indicative of the relative unimportance of the Business Park to economic regeneration, less than a quarter of the projected jobs (400 out of 2020) are thought likely to be new to the area: 200 from inward investment, and 200 from start-ups (Regeneration Report, ref 22).  Even if the Business Park accommodated all inward investors and all new start-ups (and start-ups are particularly unlikely to locate in such premises), three-quarters of the occupants would be vacating existing local premises.  It is notable that a major recent inward investment  has come from Saga Insurance bringing  800 jobs to One Priory Square in Hastings town centre.  This kind in investment does not depend in any way on BHLR or NEBBP, but rather on an attractive environment and good public transport – relatively neglected aspects of the 5PP.

3.22           In the SoCOMMS work (Ref 5) over 30 ha of medium sized sites were identified – a large supply for an area this size (equivalent to some 75 years’ supply at past development rates (~2.5ha/year)).  It is important also to recognise that in established urban areas like Hastings-Bexhill, most business needs are met by occupying existing premises vacated by others (‘churn’), and that a large proportion of new development takes place on recycled land (‘brownfield’).  Both processes are greatly assisted by well-targeted quality urban regeneration activity, such as is favoured by other aspects of the 5PP.

Housing

3.23           The net benefit associated with housing development is modest (£6.592m 2002 prices), but is made up of some very large numbers, which again raises issues of robustness.  The increase in land value (£98.5m) is reduced by an external negative environmental impact of £3.2m; and an external negative transport impact of £88.7m (all at 2002 prices).  The second of these figures is itself the difference between two very much larger numbers for cost of trips under Do-Something and Do-Minimum (both of the order of £10.5 billion).  Small changes in these numbers would have much larger effects on outcomes – and could even make them negative.

3.24           As discussed above (paras 3.4-3.7) housing and employment development depends on access between BHLR and the sites costing some £21.316m (2002 prices).  These links are not part of the scheme for which DfT finance is sought, and ESCC has also stated that development is not viable with this cost.  Therefore in the final column of Appendix 3 we have excluded both the cost of the link and the housing benefit dependent upon it.

Benefits from options involving smaller schemes

3.25           In the original MMS (ref) it was stated that the Bexhill North Approach Road (BNAR – the short section of BHLR on the former rail line), would provide a good quality direct access from the NEBBP to the A259 where it becomes a Trunk Road.  The cost at that time was estimated at £4m, and on the face of it would seem sufficient to overcome the Highway Agency’s objection to NEBBP, though the point does not seem to have been tested.

3.26           Contrary to WebTAG 3.16, no attempt has been made to address the question of how much housing could be developed with smaller/cheaper transport schemes).  Again, earlier studies (Refs 1, 6) suggested that up to 590 houses could be accommodated in the Worsham Farm location without any new road provision, and up to 1,660 houses with a link to Bexhill town centre (BNAR).  The failure to give weight to the amount of housing that alternative schemes might support demonstrates, again, the inadequacies of the option generation stage.

3.27           The current bid makes much of the possible need for further additional housing in the Rother District LDF.  However, as noted above (paras 2.14-2.16) this aspiration is still a matter for evidence, consultation and future decisions.

The need for an alternative approach to meeting access needs

3.28           Our earlier reports (especially Ref 36) emphasised that growth of travel demand depends a great deal more on the locational choices made by residents and businesses within the existing stock than on the amount and location of new developments.  In previous reports we have drawn attention to the significance of urban regeneration and environmental improvements as being critical to reducing growth in travel demand and thus increasing the capacity of the transport system to support economic growth.

3.29           The opportunity cost of BHLR is that it has diverted resources and distracted attention from such actions.  The scale of the opportunity cost in terms of money has already been referred to: the cost in terms of benefits foregone of better-directed and more integrated action are incalculable.  The transport capacity of the Bexhill/Hastings area to accommodate more housing and more economic activity depends far more on regeneration than on the presence or absence of the BHLR, and would be further enhanced by the demand management and public transport proposals reviewed in the MTRU report (Ref 34).

3.30           Better use would be made of the existing infrastructure by managing the growth in transport demand.  This arises both from new development and (more importantly) from the locational choices made by people and businesses within the existing stock.  Such a strategy has both transport demand management and spatial planning dimensions, and these which need to be integrated.  Regeneration and demand management are the missing pieces of an integrated approach that has not been properly considered.

Value for money

3.31           Appendix 3 sums up the value for money position, expressed as a Benefit: Cost Ratio (BCR) in two ways:

a)    On quantified impacts conventionally accepted as directly related to the transport intervention; and
b)    Taking into account externalities for which appraisal methods are less established (such as landscape) and distributional issues (such as regeneration).

3.32           This shows that while the components of both cost and benefit have been notably volatile, ESCC’s view of the BCR has remained resolutely in the ‘High Value’ bracket.  However, if a more sceptical view is taken of the benefits, and a more rigorous view of costs (as suggested in this report), the transport BCR is very poor, and the wider BCR is negative (ie spending the money produces a net detriment).

4                  Commercial case

4.1              The contribution of ESCC (£14.816m) to the scheme cost of £50.499m is reduced by a developer contribution of £21.316m (all at 2002 prices).  However, the developer contribution is to access roads which are not part of the BHLR scheme.  Moreover, the contributions are themselves highly uncertain.  ESCC’s response to the Alliance question on this issue (Ref 33) states that the link is expected to be provided by developers, though not necessarily by Section 106.

4.2              The implication is that development at North Bexhill is both uncertain and a long way off.  Without the development, much of the regeneration case for BHLR (such as it is) falls away.  Logically, either this access should be included in the total cost of the scheme, or both the access cost and the associated development benefits should be discounted.  In Appendix 3 we propose the latter course.

5                  Financial case

5.1              The BAFB already commits ESCC to contributing £28.866m of County funds to the cost of the BHLR at current prices (£14.816m at discounted 2002 prices).  The developer contribution should be disallowed both on the grounds that it is not part of the scheme being appraised, and on grounds of uncertainty.  Without this contribution, the cost to ESCC would become £36.132m at 2002 prices (or if the ratio above between discounted and current prices holds, about £72m in current prices).

5.2              Dependence on this resource seems, in the circumstances, an excessive risk in the context of extreme pressures on local authorities’ discretionary spending, and the possibly superior political attractions of other applications.  We consider that this hole in the funding represents an unacceptable risk to deliverability.

6                  Management case

6.1              The points made above concerning the funding and commercial cases means deliverability is critically dependent on funding which ESCC is extremely uncertain to have.

7                  Summary of conclusions

Strategic Case

7.1              Failure to follow DfT and Treasury Guidance on reviewing alternatives means that the choice of the BHLR is the result of a secondary objective (congestion reduction) taking precedence over the primary objective (regeneration).

7.2              The scheme does not form part of a coherent regeneration strategy for Hastings and Bexhill.  The transport capacity to meet the needs for regeneration, employment and housing can and should be met in other ways, more compatible with public policy.

7.3              The increase in carbon emissions and absence of mitigating measures would have disqualified the BHLR from further consideration in a properly conducted process.

Economic Case

7.4              Costs exclude elements necessary to achieving the claimed benefits, and also count as ‘sunk’ past costs which could be recovered.

7.5              Costs are reduced by a large developer contributions for elements not forming part of the scheme appraised, and which ESCC itself recognises are unlikely to be forthcoming.

7.6              The scheme is only of local significance, and because of this the economic benefits claimed are over-dependent on time-savings, over-stated and not robust.

7.7              Directly quantifiable economic benefits are small and uncertain.

7.8              The additional fuel tax revenues from traffic growth are dwarfed by the cost of meeting statutory targets for reducing carbon emissions

7.9              The impacts on landscape have been seriously under-estimated.

7.10           After adjustments for these factors, the transport BCR is very poor, and on a wider basis is negative.

Commercial Case

7.11           The costs to the private sector of elements necessary to secure the development benefit are admitted not to be viable.

Financial Cases

7.12           The ability of ESCC to fund its share depends on a large developer contribution which should be disallowed on grounds both of extraneousness and uncertainty.

Management Case

7.13           The financial hole represented by  unidentified third party contributions is so large that no confidence can be placed in the scheme’s deliverability.

Appendix 1: BHLR Reports and chronology

 

Report ref/date Title, source
  1. Nov 2000
‘Access to Hastings MMS’ – final Report + Appendices, SDG et al
  1. July 2001
DfT response to Hastings MMS (SoS letter to Chairman of SEERA)
  1. Aug 2001
‘Transport improvements and Regeneration of Hastings’, presentn DTZPieda
  1. Sept 2001
‘Prosperity for Hastings’, DTZ Pieda for SEEDA (Full report on above)
  1. June 2002
‘SoCOMMS Strategy Development Report’, Halcrow Fox for DfT
  1. Aug 2002
‘Hastings Strategy Development Plan’, Halcrow et al for GO-SE
  1. July 2003
‘Local Transport Plan: APR 2003’, East Sussex CC
  1. July 2003
SoS response to SE MMSs (inc SoCoMMS)
  1. Aug, Oct 2003
Hastings & Bexhill area investment framework.  Reports by Arup for SEEDA
  1. Nov 2003
‘Rother District Plan: revised deposit draft’, Rother District Council
  1. Dec 2003
Summary of Sea Space business plan.  Hastings & Bexhill Task Force
  1. Feb 2004
‘Bexhill & Hastings: future travel options’, consultation by E Sussex CC on routes for BHLR, ESCC, Hastings BC, Rother DC, HA, Sea Space
  1. June 2004
‘BHLR: selection of preferred route’ Report of Director of Transport and Environment to E Sussex CC Cabinet
  1. July 2004
‘Local Transport Plan Annual Progress Report 2004’, ESCC
  1. July 2004
‘Major Scheme Bid: Bexhill to Hastings Link Road’, ESCC, Mott Macdonald, Llewelyn Davies
  1. Aug 2004
‘BHLR – regeneration issues’, Urban & Regional Policy for E Sussex T2000
  1. Dec 2004
DfT letter: Provisional Acceptance of BHLR
  1. Aug 2008
‘BHLR – regeneration issues revisited’, Urban & Regional Policy for Hastings Alliance
  1. May 2009
BHLR Local Transport Plan Major Scheme Business Case, ESCC
  1. Aug 2009
LTP Major Scheme Business Case – updated information, ESCC
  1. July 2006
‘BHLR – Investigation of Alternatives’, Denvil Coombe for East Sussex T2000
  1. Oct 2009
‘BHLR Regeneration Report’, ESCC
  1. Nov 2009
‘BHLR PLI – 2nd Suplementary Proof, AWS’ Small time savings
  1. Dec 2010
‘LA Major Schemes Development Pool: Expression of Interest’ ESCC
  1. May 2011
BHLR Funding – ESCC Cabinet Report
  1. June 2011
‘LA Major Projects – Development Pool Schemes: Interim information’, ESCC
  1. Sept 2011
‘LA Major Schemes – Best and Final Funding Bid’, ESCC
  1. Sept 2011
‘BHLR/BAFB – Economic Assessment Report’, ESCC
  1. Sept 2011
‘BHLR/BAFB – Assessment of Impacts – Summary, ESCC
  1. Sept 2011
‘BHLR/BAFB – Appraisal Summary Table’, ESCC
  1. Sept 2011
‘BHLR/BAFB – Value for Money Summary’, ESCC
  1. Sept 2011
‘BHLR/BAFB – Landscape Values’, ESCC
  1. Sept 2011
‘Responses to questions from Alliance’, ESCC
  1. Oct 2011
‘Report on BHLT BAFB’, MTRU for Hastings Alliance
  1. Oct 2011
‘Comments on Lanscape Appraisal’, Dr Judy Clark for Hastings Alliance
  1. Oct 2009
‘Proof of evidence to BHLR CPO and Side Roads PLI’, Alan Wenban-Smith
 
 

Appendix 2: Carbon emissions – distance from target

 

Carbon emissions from road transport in Bexhill-Hastings area (with BHLR) compared with target

Year

1. Carbon  emissions with BHLLR (tons)

2. Target index (%) for 80% reduction 1990-2050:

3. Distance from target (tons)

4. Shadow price of Carbon (£/ton, 2002 prices)

5. Carbon cost (£’000)

6. NPV factor (3% discount rate)

7. Carbon NPV (‘000s)

2013

50069

78

11015

92

1,016

1.0000

1,016

2014

50258

77

11811

94

1,112

0.9700

1,078

2015

50443

75

12611

96

1,211

0.9409

1,139

2016

50562

74

13399

98

1,312

0.9127

1,197

2017

50680

72

14190

100

1,416

0.8853

1,254

2018

50795

71

14832

101

1,504

0.8587

1,292

2019

50910

70

15477

103

1,601

0.8330

1,333

2020

51023

68

16123

106

1,701

0.8080

1,374

2021

51597

67

16924

108

1,829

0.7837

1,433

2022

52170

66

17738

110

1,947

0.7602

1,480

2023

52742

64

18799

112

2,105

0.7374

1,552

2024

53318

63

19880

114

2,270

0.7153

1,624

2025

53882

61

20976

119

2,492

0.6938

1,729

2026

54473

59

22101

121

2,672

0.6730

1,798

2027

55062

58

23244

123

2,850

0.6528

1,861

2028

52941

56

23219

124

2,870

0.6333

1,817

2029

52894

54

24067

126

3,034

0.6143

1,864

2030

52846

53

24914

129

3,204

0.5958

1,909

2031

52827

51

25773

131

3,381

0.5780

1,954

2032

52807

50

26631

134

3,563

0.5606

1,998

2033

52787

48

27488

136

3,752

0.5438

2,040

2034

52769

46

28345

139

3,946

0.5275

2,081

2035

52749

45

29201

142

4,146

0.5117

2,121

2036

52729

43

30057

145

4,353

0.4963

2,160

2037

52710

41

30912

148

4,567

0.4814

2,198

2038

52690

40

31766

151

4,786

0.4670

2,235

2039

52672

38

32620

154

5,014

0.4530

2,271

2040

52652

36

33473

157

5,248

0.4394

2,306

2041

52633

35

34326

160

5,489

0.4262

2,339

2042

52613

33

35177

163

5,737

0.4134

2,372

2043

52594

31

36028

166

5,994

0.4010

2,404

2044

52574

30

36879

170

6,258

0.3890

2,434

2045

52556

28

37729

173

6,531

0.3773

2,464

2046

52536

27

38578

177

6,811

0.3660

2,493

2047

52517

25

39427

180

7,100

0.3550

2,521

2048

52497

23

40275

184

7,398

0.3444

2,547

2049

52478

22

41122

187

7,705

0.3340

2,574

2050

52459

20

41967

191

8,020

0.3240

2,599

2051

52440

20

41952

195

8,177

0.3143

2,570

2052

52421

20

41937

199

8,338

0.3049

2,542

2053

52402

20

41922

203

8,502

0.2957

2,514

2054

52383

20

41906

207

8,669

0.2868

2,487

2055

52363

20

41890

211

8,838

0.2782

2,459

2056

52344

20

41875

215

9,012

0.2699

2,432

2057

52325

20

41860

220

9,189

0.2618

2,406

2058

52306

20

41845

224

9,369

0.2539

2,379

2059

52288

20

41830

228

9,554

0.2463

2,353

2060

52268

20

41814

233

9,550

0.2389

2,282

2061

52249

20

41799

238

9,737

0.2318

2,257

2062

52230

20

41784

242

10,127

0.2248

2,277

2063

52211

20

41769

247

10,326

0.2181

2,252

2064

52192

20

41754

252

10,529

0.2115

2,227

2065

52173

20

41738

257

10,735

0.2052

2,203

2066

52154

20

41723

262

10,945

0.1990

2,178

2067

52136

20

41709

268

11,161

0.1931

2,155

2068

52117

20

41694

273

11,380

0.1873

2,131

2069

52098

20

41678

278

11,603

0.1816

2,108

2070

52079

20

41663

284

11,831

0.1762

2,085

2071

52060

20

41648

290

12,063

0.1709

2,062

2072

52041

20

41633

295

12,300

0.1658

2,039

Total cost of missing carbon targets 2013-2072 (£’000 NPV 2013, 2002 prices)

123,259

 

Notes

1. BAFB Impacts Summary, Table 8.3
2. Target reduction from WebTAG 3.3.5 (April 2011) – 2012, 2017, 2022 targets in bold, others interpolated
3. Reduction required (100-target)*(modeled emissions for area)
4. Carbon prices used by ESCC in Table 8.3
5. Column 3 x Column 4
6. Discount from 2013 (3% pa)
7. Column 5 x Column 6

[1] DfT (2011) ‘The Transport Business Case’ and Ministerial Statement, 27 April 2011

[2] DfT (2005) ‘Categorisation of core trunk roads in England’

[3] Mackie et al (2003) states that there is no evidence of effect from non-business time-savings under 5 mins (though they recommended that this evidence generally be ignored for a combination of theoretical and practical reasons).  The valuation of business time-savings at employment costs is a theoretical assumption which has not been tested empirically.

SEE TABLE BELOW-

BHLR – Costs and Benefits 2004 – 2011

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