Economic, Environmental and Social Impacts of Changes in Maintenance Spend on Local Roads in Scotland
5 Funding Scenarios
5.1 Budgets
Section 1.3 defined the funding scenarios considered in this study. Scenario 1 represents continuation of the 2010/11 maintenance funding for all of the 20 years analysis period, Scenarios 2 and 3 represent budget reductions for 10 years followed by restoration of the budgets to the 2010/11 level over 5 years in equal annual steps. For these 2 scenarios there is an annual 2.5 percent increase in the budgets for the last 5 years of the period. These are illustrated in Figure 5.1.
The effect of Scenario 3 is to suffer a bigger cut in maintenance budget for 10 years and therefore, in the following 5 years, to have a higher rate of funding increase than Scenario 2, so the budget is restored to the 2010/11 level in year 15 for both Scenarios 2 and 3. The annual budgets for Scenarios 2 and 3 in the last 5 years of the analysis period are the same but the network condition is different because of the pattern of funding in the first 10 years.
Over the first 10 years the effect was more deterioration in network condition with Scenario 3 than with Scenario 2. Although the rate of increase in budget was higher in the next 5 years, the budget was still lower with Scenario 3 than with the other scenarios and network condition remains worse for Scenario 3 than Scenario 1 or 2 in year 15 (i.e. 2025).
5.2 Applying funding constraints in practice
A road Local Authority has to consider numerous aspects when considering how to apply budget cuts across its range of activities. As well as any overall strategic aims, consideration also needs to be given to legislative requirements, contractual obligations and the need to react to unforeseen circumstances. It is not possible to account for all such issues in a study of this type and scope, and given the focus on long term impacts, the approach adopted in the study has been to apply spending reductions in a way which will minimise the impact on typical long term aims of a road Local Authority.
The nature and extent of the economic impact of reductions in the total maintenance budget depend on how the funding reduction is allocated across the various maintenance activities. Each activity has a different focus in terms of its relative contribution to overall corporate objectives and economic impacts. For example, the objective of maintaining directional road signs is primarily to enable reliable and predictable travel for the road user, whereas the objective of maintaining road barriers is to enable safe travel for road users, including pedestrians.
Identifying how best to minimise the impacts of road maintenance budget reductions requires a view on the relative importance of each of the various objectives and the contribution made to those objectives by the different maintenance activities.
For the trunk road study, use was made of the Transport Scotland Road Asset Management Plan (RAMP) to identify the key objectives which drive road maintenance activities (Transport Scotland, 2007). The corporate objectives are stated in the form of a number of asset management drivers: safety, accessibility, reliability, condition, sustainability, value for money and customer care. Whilst each local road Local Authority will have different specific local needs, it is reasonable to assume that the objectives of each Local Authority can broadly be described in terms of the six objectives in the RAMP. In order to achieve consistency for the trunk road and local road analyses, it was therefore decided to make use of the same six objectives in the analysis for local roads.
For each funding Scenario, the revised budget was allocated across the different activities, depending on the contribution to the asset management drivers:
- For each activity in the road maintenance budget, a subjective assessment was made of which driver(s) the activity contributes towards, and the relative balance of the contribution. For example, it was assumed that the safety maintenance and emergency patching activity is carried out 90% for safety and 10% for customer care;
- The activity spend was proportioned by each of the drivers. In the above example, 90% of the current safety maintenance and emergency patching budget would be allocated to safety and 10% would be allocated to customer care;
- After allocations to the activities, the total current budget was shown as a summation of notional allocations to each of the asset management drivers;
- For each scenario, the notional allocations were reduced based on their perceived relative priority. For example, for Scenario 2 (a 20% overall budget cut), 13% of the reduction is attributed to the condition driver notional allocation, 2% to the sustainability driver notional allocation and 5% to the customer care notional allocation;
- The proportional reduction required from the notional allocation for each driver was assessed. For example, the 13% of the overall budget being taken out of the condition driver represents a significantly higher proportional reduction on the condition driver allocation in itself (in this case, the proportion is 15/28 or 54% - see Table 5.1);
- Reductions were then apportioned through each activity and the new budgets available for each activity determined for the reduced budget.
In reality, as the effect of spending cuts is realised over time, a Local Authority might adjust its strategy for managing its allocation. For example, it may choose to invest spending in a number of customer care focused activities after a long period of reduced spending on such work, at the expense of another corporate driver. However, this effect has not been considered and the proportioning of spending reductions across different notional allocations has been assumed consistent over time.
5.3 Predicted activities under different scenarios
The allocations derived for Scenario 1 (current expenditure) and Scenarios 2 and 3 for reduced funding across all local roads are shown in Table 5.1.
| Contribution to overall budget by asset management driver | |||||||
|---|---|---|---|---|---|---|---|
| Scenario | Safety | Access | Reliability | Condition | Sustainability | Customer care | Total |
| Scenario 1 | 32% | 7% | 10% | 28% | 9% | 15% | 100% |
| Scenario 2 | 32% | 7% | 10% | 16% | 6% | 9% | 80% |
| Scenario 3 | 32% | 7% | 10% | 4% | 4% | 4% | 60% |
Note: The value for money driver was excluded from the analysis as it was assumed this would apply equally across all activities.
The rationale for the above reductions was that:
- Safety, accessibility and reliability are all primary impacts that would be protected from cuts as long as possible
- Minimising long term whole of life costs (through the condition and sustainability objectives) and softer customer care outcomes (e.g. appearance of the network maintained by landscaping or graffiti removal) would be sacrificed first in order to maintain the funding for the primary impacts
- In practice, no driver would receive no funding so a minimum apportionment (4%) was used if necessary.
The process provided more immediate clarity on where the real impacts would occur when budget reductions are applied (see Table 5.2). The analysis fits with experience of how a Local Authority might be forced to reduce activity, in that:
- As budgets reduce, capital expenditure is reduced by a greater extent compared to revenue expenditure. This reflects the need to prioritise operations for the users before considering longer term capital outlay
- Activity focused on safety is most protected
- Winter operations are targeted as a key priority
- Experience of most Local Authorities is that when faced with budget cuts, spend on carriageway maintenance is where most of the reduction inevitably has to be focused.
The process was applied to the total local road budget, and also to each of the 8 individual sample Local Authorities considered in this study. Further details are included in Appendix E. The results for each Authority varied. For example, in the case of Scenario 3 (40% reduction), structural maintenance reductions varied between 58% and 63%[3].
The analysis was based on one budget year only and when disaggregated to each individual Authority, in some cases this resulted in relatively small budgets. At such levels, it was expected that there might be considerable year to year variation in specific budget heads. As the purpose of the study was to assess long term impacts it was possible to undertake the overall local road analysis for all of the 8 sample Authorities applying the same results of the subjective analysis to each Authority.
For this study, it was assumed a 20 percent reduction in the overall maintenance budget would result in a 35 percent reduction in the pavement maintenance budget (Scenario 2) and a 40 percent reduction in the overall maintenance budget (Scenario 3) would result in a 69[4] percent reduction in the pavement maintenance budget. The same budget reductions were assumed for all the Local Authorities in this study.
| Budget Head | Activity spend as % of current activity spend | |
|---|---|---|
| Scenario 2: Overall 20% cut | Scenario 3: Overall 40% cut | |
| Capital | 75 | 50 |
| Traffic Calming | 96 | 92 |
| Road Safety | 96 | 92 |
| New Road Schemes | 89 | 77 |
| Lighting | 92 | 85 |
| Structural Maintenance | 65 | 31 |
| Other | 81 | 63 |
| Revenue | 83 | 66 |
| Road Construction | 89 | 77 |
| Structural Maintenance | 65 | 31 |
| Environmental Maintenance | 73 | 47 |
| Winter Maintenance | 96 | 92 |
| Lighting | 89 | 77 |
| Safety Maintenance and Emergency Patching | 96 | 92 |
| Routine Repairs | 67 | 33 |
| Total Overall Budget (%) | 80 | 60 |