Chapter 5: Cost–Benefit Analysis in Transport: Recent Developments in Rail Project Appraisal in Britain
Chris Nash and James Laird 1 Introduction The transport sector was one of the first in which the technique of social cost–benefit analysis became widely applied. In Britain, following the appraisals of the M1 motorway (Coburn et al. 1960) and of the Victoria line underground railway in London (Foster and Beesley, 1963), social cost–benefit analysis rapidly established itself as a routine part of the appraisal of government spending on transport. While one of the first applications of cost–benefit analysis in transport was to an underground railway, its application as a technique to rail investment was slower to develop, because although the rail system in Britain, and indeed in most countries outside North America, was publicly owned, it was run as a separate commercial organisation. Paradoxically it has been with the privatisation of the railway in Britain that cost–benefit analysis has become the norm. The reason is that passenger services in Britain are run under franchises, with service levels specified by government, creating a need to appraise alternative service levels both at the franchise specification stage and in considering alternative bids. Moreover, the government directly or indirectly finances rail infrastructure, creating a need to appraise alternatives in terms of quality, capacity and cost. There would, however, be no need for cost–benefit analysis (except perhaps to consider the distributive implications of schemes) if all goods in an economy, including transport, were produced under conditions of perfect competition and zero externalities. Economic efficiency would be ensured by simply...
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