Economic, Environmental and Social Impact of Changes in Maintenance Spend on Roads in Scotland Summary Report
6 Discussion of Results
6.1 Key Conclusions
The analyses and reviews undertaken during the study have generated a considerable amount of data and information and there are a number of resulting issues that could be discussed and investigated further. This Section highlights the key conclusions that are most significant to the original aims of the study and highlight the major assumptions and sensitivities that might affect those conclusions.
There is an overall disbenefit to society of reducing road maintenance expenditure on the Scottish road network. The qualitative review of each criterion highlights the various impacts, almost all of which are negative. This supports the traditional view held by highway engineers that reductions in road maintenance lead to long term disbenefits for developed road networks such as those in Scotland. The quantitative analyses, which have only addressed certain aspects of the qualitative analysis, further support the qualitative conclusions and show that for every £1 reduction in road maintenance, there is a cost of £1.50 to the wider economy[7]. If figures were available to quantify aspects not currently included in the quantitative analyses, it is expected that these would only enhance the conclusion. For example:
- Impacts of any increase in road closures due to unforeseen events
- Costs of delaying major repair work on significant structures leading to possible closures, weight restrictions or more extensive maintenance work
- Wider economic disbenefits such as reduced tourism or local economic activity
It should also be noted that the two funding reduction Scenarios considered only reduced budgets below the Base Case Scenario in the first 10 years and already allow for a future attempt to restore road network condition and improve the network beyond 2020. If the budget reductions were continued for longer or the increases in funding were at a lower rate, the conclusions would be strengthened further.
It is often thought that road maintenance only impacts on vehicle journeys. However, the review shows that there are wider impacts on society. Remote communities will be affected by poorer lifeline links. Pedestrians and particularly older people and those with disabilities will be affected if footways deteriorate. Cyclists will be affected if traffic calming measures are reduced and if the conditions of cycle-tracks and the edges of roads deteriorate. Communities in general will feel less secure and the quality of the public realm will deteriorate as road network conditions deteriorate, lighting is reduced and streets are cleaned less. Based on the literature review, the user group most affected by a reduction in road maintenance would be pedestrians, especially those with mobility and visual impairments. Pedestrians would be affected in every aspect including noise and vibration, global air quality, visual amenity, cultural and landscape, physical fitness, accidents, security, community and comparative accessibility.
For the same proportional budget reductions, the effect on road users of reduced local road maintenance budgets is greater than the effect of reduced trunk road maintenance budgets. From the quantitative analyses, the Net Present Value for both networks is negative. But (for the 40% funding reduction Scenario) for every £1 saved there is a disbenefit on local roads of £1.67 and on trunk roads of £1.12. The qualitative assessment shows that the types of the disbenefits are also different for each network. For the local road network, comparatively greater disbenefits will be realised in the form of social impacts on pedestrians, cyclists and local residents. For the trunk road network, the impact of the reductions will be more focused on vehicle users of the network and the associated economic impacts.
It should also be noted that the quantified disbenefits take no account of the effect of changes on any wider economic activity (e.g. the loss in income from businesses and visitors deterred from Scotland, or a local area, due to poor road network condition).
There is limited published evidence of many of the disbenefits arising from the reduction of road maintenance budgets and few have been quantified in economic terms. The literature review has highlighted that there is a considerable amount of information available which recommends good road maintenance practice and discusses the implications of a lack of road maintenance. However, there is much less information available which provides evidence based information of the impacts of changing the levels of road maintenance undertaken. Of this information, only a small proportion attempts to quantify the impacts. The majority of quantifiable impacts described in the literature are associated with the effects of carriageway maintenance on vehicle users. There is limited published evidence of any quantifiable impacts due to changes in conditions of non-carriageway assets on road networks.
The most significant quantified impact of reduced road maintenance budgets is the increase in vehicle operating costs. Vehicle operating costs represent the cost to road users (e.g. from fuel consumption, vehicle repairs, tyres, maintenance and depreciation). For the Scenario with a 20% maintenance funding reduction, the increase in vehicle operating costs is 40% more than the savings in road works expenditure on the trunk road network and more than double the savings for the local road network. By comparison, increases in each of the other quantified impacts are significantly less than the savings in the maintenance works expenditure. However, the vehicle operating cost increases in themselves are small compared to the total annual vehicle operating costs on the network (for the 20% maintenance funding reduction Scenario, the increase in vehicle operating cost is around 0.5%).
Road conditions are predicted to deteriorate even with no reduction to maintenance budgets. For the Scenario based on retaining 2010/11 maintenance funding levels, the asset values of both networks are predicted to be lower at the end of the analysis period than in 2010/11, and the reduction in value increases as maintenance budgets reduce further. This effect is a monetary representation of the predicted deterioration in carriageway condition and reflects, in some way, the cost to return the network to the current (2010/11) conditions at the end of the analysis period.
Public dissatisfaction with road conditions is likely to increase. Results of public satisfaction surveys for both Transport Scotland and Local Authorities confirm that road conditions are important. For trunk roads, surveys have suggested increased dissatisfaction with road conditions although it was not possible to assess this in any rigorous way[8]. Local Authority public satisfaction surveys have also shown similar concerns with many surveys showing increases in dissatisfaction over recent years. However, surveys have also shown improvements in satisfaction in some aspects (e.g. levels of street lighting). This may have been where an Authority has directed a higher proportion of funding to meet a particular local need and so is not necessarily a reliable indicator of improved overall satisfaction.
6.2 Key Assumptions
The results are considered to represent the most likely outcome of the impacts investigated. However, a considerable number of assumptions were made in order to complete the quantitative analyses and the most significant issues are described in Appendix B.
One of the most obvious effects of some of the assumptions made is in the variation of the Net Present Value for each Scenario. In particular, the variation is different for trunk roads compared to local roads. For the local road network, the NPV is predicted to become more negative as maintenance expenditure is reduced. However, for the trunk road network, the NPV for the Scenario with a 40% funding reduction is predicted to be marginally less negative than the NPV for the Scenario with a 20% funding reduction. This effect is not considered realistic or significant in practice as the differences are within the expected error of such modelling analyses. The effect is explained further in Appendix B. The key conclusion is that all Scenarios with funding reductions show an overall disbenefit (i.e. a negative NPV).
Based on an understanding of the key assumptions, sensitivity tests were undertaken to assess the robustness of the conclusions. The results of these analyses are shown in Table 6.1.
6.3.1 Time profile of cost and benefit streams
The effect of road maintenance on road conditions (and hence user impacts) is long term. The effect of timing on costs and impacts has therefore been considered by reviewing the results of the trunk road analysis for a reduced analysis period of 10 years (i.e. before budgets in Scenarios 2 and 3 are increased).
The analysis showed that the NPV becomes positive (i.e. maintenance expenditure savings outweigh user cost increases) for both Scenarios based on reduced maintenance funding when the shorter analysis period is adopted. This is due to the long term effects of budget reductions on network conditions and shows that the budget savings in Years 1 to 10 are not realised as increased costs to road users until Years 10 to 20.
|
Net Present Value1 for different assumptions (£m 2002 Prices) |
Trunk roads | Local roads | ||
|---|---|---|---|---|
|
Scenario 2 (20% cut) |
Scenario 3 (40% cut) |
Scenario 2 (20% cut) |
Scenario 3 (40% cut) |
|
| Base analysis (20 years, standard growth2 and indexing assumptions) | -107 | -79 | -524 | -974 |
| Reduced time period analysis (10 year analysis period) (Section 6.3.1) | 112 | 263 | - | - |
| Higher inflation rates on works costs (Section 6.3.2) | -62 | 44 | - | - |
| Varied assumptions on vehicle operating costs (traffic growth and projected fuel price increases removed)(Section 6.3.3) | 307 | 983 | 332 | 743 |
| Different scaling up methodology for local road sample to network effects (Section 6.3.4) | - | - | -447 | -806 |
(1) For clarity, only the Net Present Value data for each Scenario is brought forward from Table 5.1. The purpose of the table is to show how NPV varies with different assumptions. All footnotes for Table 5.1 are applicable to this table where relevant.
(2) Base assumptions are for traffic growth rates as per national transport model.
6.3.2 Inflation on maintenance works costs
Inflation of road maintenance costs has been up to 8% per annum in recent years, which is higher than general rates of inflation (Audit Scotland, 2011). Even if current maintenance budget levels are maintained, if the same inflationary pressure continues in future, road authorities will be able to buy less maintenance work than they can today for the same level of budget.
The effect of differential inflation on maintenance works costs was explored in this study by projecting an annual increase in works costs for each of the Scenarios. A differential rate of 4% was used which is consistent with the rate that has been experienced in recent years (see Appendix C).
The results show that the NPV of each funding reduction Scenario becomes less negative compared to the case with no differential rate for road maintenance costs. This result implies that it becomes more attractive to consider reductions to road maintenance budgets if there is high inflation for maintenance works, since the cost of delivering the benefits of road maintenance will increase during the analysis period.
However, with higher inflation for maintenance works costs, it is more beneficial to invest now in maintenance than to defer spending to a time when road authority buying power is reduced (i.e. the case not to reduce the current levels of maintenance budgets is strengthened).
6.3.3 Vehicle operating costs
The dominant influence on the quantified economic impacts of road maintenance funding reductions has been shown in the study to be vehicle operating costs. A significant number of assumptions were made which contribute to the assessment of vehicle operating costs. A 'lower bound' sensitivity has been undertaken by changing some of the key assumptions.
From the analysis of vehicle operating costs using the HDM-4 model, fuel can make up nearly half of the total vehicle operating cost. Fuel cost impacts are affected by assumptions on fuel price increases, traffic growth and predicted improvements in vehicle efficiency. The base analysis assumes fuel price increases, traffic growth and improving vehicle efficiency with time. If fuel prices are instead considered to remain static and there is no projected increase in traffic, then this could be considered a potential lower bound on the impact of fuel on the results.
The test showed that with the new assumptions, the conclusions in the original analysis were reversed and it became economically advantageous to reduce road maintenance budgets. The impact of the change was most significant for trunk roads. In summary, with no increase in fuel costs and no traffic growth, there would be benefits in terms of reduced overall cost to society with reductions in the maintenance budget. With fuel increases and traffic growth assumed in the original analyses there is an increased overall cost to society (i.e. a disbenefit) if the maintenance budgets are reduced. Therefore, it is reasonable to assume that if the fuel increases and/or traffic growth are greater than assumed in the original analyses the effect of reducing the maintenance budget will be a bigger increase in the overall cost (i.e. disbenefit) to society.
6.3.4 Scaling methodology for local roads
To calculate the costs for the whole local road network based on the analyses of the 8 sample Local Authorities, the results of the analyses for the sample Authorities were scaled to the whole local road network. For the sensitivity test, because the dominant cost in the overall analysis is the vehicle operating costs, the sensitivity of only that aspect of cost was considered in the sensitivity analysis.
For scaling up the results in the base analysis, the percentage of the network (for each road type) in need of repair within one year (i.e. categorised as red in the SRMCS report for 2009/10) was used for each Authority not in the sample of 8 Authorities analysed. However, an alternative assumption that may better reflect the overall condition of the network would be to scale the results based on the percentage of the network (for each road type) showing signs of deterioration (i.e. as categorised red or amber in the SRMCS report for 2009/10).
The revised scaled values continue to show a worsening in the overall NPV if maintenance funding is reduced but the worsening is less severe.
6.4 Overall conclusions on quantitative analysis after sensitivity testing
The sensitivity tests show that the most significant influence on the quantified impacts is from the vehicle operating costs. If some base assumptions are changed to reduce the impact of vehicle operating costs then the effect of reducing road maintenance budgets, for those aspects that were quantified, was shown to be an overall economic benefit. A similar change to the conclusion was also reached if a shorter analysis period was used.
The results show that reductions in road maintenance budgets considered in this study lead to an overall disbenefit to society. The effect is long term and the conclusion could change if different assumptions are made to calculate vehicle operating costs. However, based on standard assumptions adopted for transport investment appraisals in Scotland, there will be an economic welfare disbenefit if maintenance budgets are reduced, compared with retaining the 2010/11 levels of maintenance funding.