Download Tom Worsley, CBE: How does the Government make decisions?

Institute for Transport Studies
FACULTY OF ENVIRONMENT
Research Day; the Art & Science of
Decision-making
How does the Government make
decisions?
Tom Worsley Visiting Fellow
15th April
The Question
Are the decisions made by Government;
• Transparent?
• Logical?
• Consistent?
• Accountable?
How does the DfT rate?
Outline
• Investment appraisal
• Well documented (Green Book, WebTAG) set of methods/rules
• What’s missing from documentation
• Evolution , extension and broadening of the documented processes
• Remaining scope for ministerial discretion
• Other types of decision
• Revenue spending
• Broader policy
• Research
Investment decisions
Investment decisions better codified than revenue spending or
other policy decisions;
• Irreversible, long lived, subject to externalities, inadequate
financial returns etc
• Treasury control over public spending - Green Book/CBA for
sifting and prioritisation
• Public inquiries require evidence of public interest
Evolution of the DfT investment
scheme decision-making process
CBA established for transport schemes since 1960s
1977 ACTRA Leitch Report – EIA/Framework
1998 White Paper “A New Deal for Transport – Better for
Everyone” – an integrated transport policy
AST – distillation of evidence provided to ministers on all
impacts – generally published
Mix of quantified/valued costs & benefits and qualitative
assessments; increasing proportion of valued impacts
Nellthorp & Mackie – influence of regeneration on selection
process
Policy is more than the BCR
Eddington showed the wide range of returns to recent projects
Why are decision-makers
deflected from the BCR?
Delivering an economically optimal solution is rarely the
minister’s only priority. Other influences are;
• The role of lobby groups
• The media, often influenced by lobby groups
• ‘Champions’ sponsoring a specific scheme
• The weakness of the option generation process- no one wants to be
associated with the rejected option
• Short-term solutions crowding out longer term strategy
• Other government ministers/departments
What matters to decision-makers but
is missing from transport appraisal?
DfT’s WebTAG is intended to be comprehensive but
• Some impacts are given a qualitative assessment and so weights on
these are judgemental
• Some impacts may be absent because of lack of data and research
• Some ministers remain unconvinced by welfare economics
• The welfare economic framework is under threat with more focus on
GDP
• Much of what government does is about inter-personal and interregional equity and transport policy should play its part in this overall
objective.
• Gainers and losers not separately identified.
What is being done to
augment the appraisal?
More impacts are now quantified and valued
•
Valuation of road reliability and resilience being trialled, but supply side remains a
problem.
•
Carbon, air quality (Nox and PM10s), noise all now valued
•
Fewer claims for regeneration.
Valuing the impact of a new railway through the Chiltern Hills will inevitably
remain subjective.
Some ministers remain unconvinced by welfare economics
• Wider Economic Impacts – agglomeration, labour supply and imperfect markets added
to CBA.
• GDP per £’s spend metric – identify ‘real’ impacts (eg business time/cost savings)- as
supplementary to BCR.
What is being done to
augment the appraisal?
Decision-makers’ concerns about regional and inter-personal
equity
• DfT is reviewing options for estimating the regional, sub-regional and
local economic impacts of transport schemes.
• DfT new guidance on social and distributional impacts addresses local
level incidence only.
• National average value of time savings (other than in TfL London
schemes) has been universal practice
But choices and decisions on local schemes increasingly
devolved to local authorities
DfT Value for Money
Guidance
A means of moving from the BCR (all quantified/valued
impacts) to Value for Money.
Value for Money Category
‘Adjusted’ Benefit Cost Ratio
Poor
Less than 1.0
Low
Between 1.0 and 1.5
Medium
Between 1.5 and 2.0
High
Between 2.0 and 4.0
Very High
Greater than 4.0
No projects with poor, low or medium VfM expected to be approved in present
economic circumstances.
Is the Decision-making Process
Becoming More Rational?
DfT Business Planning Input Indicator: %age of investment
spending on schemes in ‘high’ vfm categories 2011
Does the input indicator
ensure rational decisions?
Table restricted to investment schemes approved by ministers
Proposed projects omitted; eg
• Some of the 2007 HLOS schemes – average BCR of all schemes was
1.5:1
• Certain planned rail schemes – several proposals in Network Rail’s
Initial Industry Plan (2011) had BCRs of <2.0 – few are DfT schemes
Will the >99% be maintained in subsequent publications?
How might national VfM be reconciled with local
schemes/objectives?
Constraints on spending – strong discipline
The DfT 5 Case Business
Case Model
Economic case is only part of the HMT/DfT decision-making
process.
Financial (funding), management (planning, delivery,
governance) and commercial ( procurement, risks during
procurement) cases – basically binary decisions, with
possible interations.
Strategic case – fit with overall policy, consistency with wider
government objectives,
Checks and Balances on the
Decision-making Process
Transport Committee
• 11 MPs (chair Louise Ellman ) examines /challenges DfT ministers and officials
– spending, admin, policy
Public Accounts Committee
• 14 MPs (Chair Margaret Hodge) examines a sample of public spending
decisions – recent transport investigations include;
• HS1
• Funding local transport
• West Coast Franchise
Accounting Officer direction. HM Treasury – Managing Public
Money.
• If a minister wishes to approve a scheme which is ‘poor’ vfm, Permanent
Secretary, as chief accounting officer, must inform minister and HMT
Gaps in the logic
Allocation between modes and local/central now OK with
publication of VfM?
Weight on non-quantifiables, but proportion of unquantifiables
in total has diminished
Role of Strategic Case
LA scheme selection – scope of devolution
Trade-offs between policy and schemes – eg pricing
Fitness for purpose of WebTAG
Current or Resource Spending
No GB/Webtag mandate, although CBA increasingly used
•
Rail franchise increments/decrements. (Most of franchise renewal has been
concerned with minimum full life cost maintenance of existing service etc and so
no change in output)
• Rail fare increases RPI+3% reversed to RPI+1%
Some technical/modelling problems
eg spec of counterfactual – assn about revenue constraint
Assumption – policy easily reversible.
Political considerations remain significant
• Policy quick to deliver
• Free concessionary travel for >60s – ‘No assessment of the benefits’..’a political
decision’
How are Policies Decided?
Manifesto commitments
• On election, limited role for evidence
• Lobby groups
• Political commitment
• After time for consideration
• Eg NATA/WebTAG
New/changed policies while in office
• ‘Events’
• Hatfield crash/ Network Rail
• Pragmatism - head of the queue/ cannot be postponed
• HLOS
• HA route based strategy
• Fuel duty (not DfT)
Why do some policies fail?
Eg Demise of “Roads for Prosperity” (1989), failure of “Ten
Year Plan for Transport” (2000).
Both very ‘political’ policies – the great car economy, an
integrated transport policy (with targets).
Both very specific – n miles of road, x light rail schemes.
What changed?
• Events - recession, funding (rail maintenance backlog)
• Unrealistic expectations – LAs implementing local area charging,
• Public attitudes misperceived – to roadbuilding, to fuel costs/motorists’
perception of fuel prices
• Unanticipated effectiveness of lobby groups
DfT Research and decisionmaking
How does the Department decide on a research agenda?
• Pre 2010
• Rolling programme – VTTS, NATA refresh
• New policy concerns – reliability, p.t.crowding
• Curiosity – SACTRA Transport & the Economy
• Academic research – eg agglomeration
• Post 2010
• Reactive – eg VBTTS (prompted by HS2), international comparisons,
local economic impacts
• Gradually making good the backlog?
How might the DfT formulate a research programme and
prioritise projects?
Conclusions
Decision-making and investment/revenue projects
• Decision making process for investment increasingly transparent: some
progress on current spending
• Lack of transparency in weights on unquantifiables in economic case and on role
of strategic case open to challenge
• Evidence on criteria and weights will reduce ministerial discretion and increase
accountability
• Devolution/localism – accountability unclear
Decision-making and policy
• Patchy record of decision-making process
• Often evolutionary, making counterfactual difficult
• Hence focus on the details/projects, not the bigger picture