TAG Unit 3.5.6 Values of Time and Vehicle Operating...

Values of Time and Vehicle Operating Costs

TAG Unit 3.5.6

January 2014

Department for Transport

Transport Analysis Guidance (TAG)

This Unit is part of a family which can be accessed at www.dft.gov.uk/webtag

Contents

1 Introduction 1

2 Values of Travel Time Savings 2

2.2 Values of Working Travel Time Savings per Person 2 2.3 Values of Non-Working Travel Time Savings per Person 6 2.4 Annual Rates of Growth in Values of Travel Time Savings 8 2.5 Values of Travel Time Savings per Vehicle 11

3 Vehicle Operating Costs 17

3.2 Vehicle Operating Costs – Fuel and Electricity 17 3.3 Vehicle Operating Costs – Non-Fuel 27 3.4 Public Transport Operating Costs 30

4 Further Information 31

5 References 31

6 Document provenance 32

TAG Unit 3.5.6 Values of Time and Vehicle Operating Costs

Page 1

1 Introduction

1.1.1 This TAG Unit provides the latest values of time, occupancy figures, purpose splits, GDP growth rates and vehicle operating costs recommended by the Department for Transport (DfT) for use in economic appraisals of transport projects in England, as well as the rest of Great Britain with the relevant Overseeing Organisation’s permission.

1.1.2 The values presented in this Unit are included in the TUBA computer program, for which further advice may be obtained from the DfT.

1.1.3 This Unit aims, as far as possible, to cover all modes of transport. However in certain parts of the Unit, notably vehicle occupancies and vehicle operating costs, a lack of available data means that not all modes have been covered.

1.1.4 Revision of the March 2001 TEN was necessary to allow implementation of the recommendations contained in the latest research for the DfT on valuation of non-working travel time savings (Values of Travel Time Savings in the UK, Institute for Transport Studies, University of Leeds, 2003).1

1.1.5 Important note for those using these values in modelling: In 2012, HM Treasury altered its GDP deflator to be based on the Consumer Prices index (CPI) rather than the Retail Prices Index (RPI) as used in the previous version of this Unit. This means that the annual GDP growth values in real terms in this unit are approximately 0.2 percentage points higher than they would have been in previous versions of the unit. Analysts should consider what implications this change has for their models. Some models, particularly those calibrated on historic GDP growth over more than one year, may need to be recalibrated or (eg rail models using the elasticities given in the Passenger Demand Forecasting Handbook) may require an adjustment to the GDP series used in forecasting, by reducing the GDP growth values given in this Unit by 0.2 percentage points per annum. For cross-sectional models (which are calibrated based on data for one historic year only), or on forecasts based primarily on population growth (eg NTEM), it should be possible to use the values of time given in this unit without adjustment. Note that the values of time used for appraisal purposes should not be affected, regardless of the type of model.

Methods of Cost Benefit Analysis

1.1.6 Cost benefit analysis aims to take account of all the ways in which a project affects people, irrespective of whether those effects are registered in conventional financial accounts. The method of cost benefit analysis for appraisal is the calculus of 'willingness to pay' using a market price unit of account. A full discussion of the methodology is given in Cost Benefit Analysis (TAG Unit 3.5.4).

Units of Account

1.1.7 The market price unit of account expresses prices in market prices. Market price refers to the price paid by consumers for goods and services in the market and therefore includes all indirect taxation (indirect taxation refers to taxation levied on a product and therefore includes excises, duties and VAT). Prices that do not include taxation (e.g. public transport fares) are still perceived by consumers in the market price unit of account.

1 The Department is consulting on the use of segmented values of time for road pricing and tolling studies only (see TAG Unit 3.12C) because, in those circumstances, there may be substantial changes in the monetary costs of travel. In all other circumstances the values given in Tables 1 and 2 in this TAG Unit should be used for project appraisal.


Page 2

1.1.8 The factor cost unit of account expresses prices in resource costs. Resource costs are costs that are net of indirect taxation. The prices paid by Government for goods and services are not subject to indirect taxation as any tax that is paid by Government bodies such as the Highways Agency is recovered by Government and thus may be ignored. Government expenditure is therefore in the factor cost unit of account. Business costs and benefits are also assumed to be in the factor cost unit of account as businesses are free of indirect taxation because they can claim it back. An exception to this is fuel duty, which businesses cannot claim back.

1.1.9 Costs can be converted to (or from) market prices by multiplying (or dividing) by the indirect tax correction factor, (1+t), where t is 19.0% - the average rate of indirect taxation in the economy. This rate is based on data from HMRC and replaces the previous value of 20.9%.

1.1.10 Perceived costs are those which are actually experienced by users. Perceived costs are different for work and non-work trips because businesses can claim back VAT on purchases. Businesses cannot, however, claim back fuel duty and therefore this is included in their perceived cost. (N.B. certain classes of PSV can claim back fuel duty. This should be treated as a subsidy). Note that business users perceive costs in the factor cost unit of account, while consumers perceive costs in the market price unit of account.

2 Values of Travel Time Savings

2.1.1 This section provides the latest values of time recommended by the DfT for use in most routine economic appraisals of transport projects. All items are expressed in average 2010 values and prices.

2.1.2 The Department accepts that different values of time may be needed in other circumstances, such as appraisal of strategic analysis, road user charging and toll roads. The Department will issue further guidance on appropriate values and methods to use for these appraisals. For most routine appraisals the guidance in this document is relevant.

2.2 Values of Working Travel Time Savings per Person

Estimating willingness-to-pay for working travel time savings

2.2.1 Businesses benefit from reduced travel times in a number of ways, including improved access to suppliers or customers, which increase productivity by lowering the cost or raising the quality of inputs and widening the market which a business can serve. Therefore, it follows that businesses should be willing to pay for quicker journeys and it is this willingness-to-pay which forms the basis of values of working travel time savings.

2.2.2 There are many real world situations where business travellers choose to pay more for a quicker journey when a cheaper, slower alternative is available. For example, surveys found that around one third of M6 toll road users are travelling on employers’ business and they stated that saving time compared to alternative routes was their main reason for using the toll road2.

2.2.3 Market prices are often used to represent willingness-to-pay in cost-benefit analysis. However, although examples exist where travellers trade travel time for cost, market prices for travel time are not easily obtainable and, in the absence of market prices, alternative techniques are required to estimate willingness-to-pay. There are a range of approaches

2 M6T Research Study – Stage 2 Utilisation Surveys, Faber Maunsell / AECOM (2008): https://www.gov.uk/government/publications/utilisation-surveys

https://www.gov.uk/government/publications/utilisation-surveys


Page 3

available and, while the techniques, assumptions and resulting values vary, all of the methods aim to estimate values that effectively proxy for willingness-to-pay.

2.2.4 Revealed preference evidence is the most direct way to estimate willingness–to-pay, and is based on actual business traveller behaviour (for example, surveys of users of the M6 toll road and alternative routes). However, it is difficult to collect revealed preference data of sufficient quality and quantity to estimate robust values and provide the detail needed to fully populate a framework of values. In the absence of revealed preference evidence of sufficient quality, it is necessary to use alternative methods and techniques to estimate values.

2.2.5 The Department’s approach is to take account of all the relevant evidence available and to seek to make reasonable judgments, in light of economic theory. This includes the information available on distance-weighted average hourly incomes of business travellers.

Evidence of willingness-to-pay for working travel time savings

2.2.6 The Department commissioned a review of the different methods, including a review of UK and international evidence on the values they produce: Valuation of Travel Time Savings for Business Travellers, by the Institute for Transport Studies, University of Leeds (ITS Leeds) 2013. Alongside revealed preference evidence and the Department’s current approach, this review considered stated preference evidence collected from survey responses to realistic hypothetical choices, and the ‘Hensher’ approach, which builds on the Department’s current approach with explicit assumptions about how travel time is used.

2.2.7 The review provides valuable insights on businesses’ willingness-to-pay for travel time savings, but also raised concerns about inconsistencies and uncertainties in the current evidence base. Figure 1 summarises values from this review along with the car driver and rail passenger values recommended for use in transport appraisal in this TAG Unit (labelled “WebTAG values”). The figure also provides ranges around the values to indicate the degree of confidence in the estimates.

2.2.8 The figure shows a wide range of values, with significant variation in estimates across the techniques, modes of transport analysed and study locations. The wide ranges around the revealed preference data result from the small number of available studies and reflect the difficulties in obtaining this data. The “WebTAG values” are towards the centre of the range of values and correspond closely with the average values from the available revealed preference evidence. Based on this summary of the current evidence, the Department is firmly of the view that the “WebTAG values” presented in Table 1 below, represent a reasonable estimate of willingness-to-pay for travel time savings in the course of work.


Page 4

Figure 1 – Values of travel time savings in the course of work resulting from different valuation techniques

0

10

20

30

40

50

60

70

80

90

100

Val

ue o

f tr

avel

tim

e sa

ving

s (£

/hou

r, 2

010

pric

es)

RP - UK all modes

RP - non-UK all modes

Car values

Rail values

UK High Speed Rail

WebTAG - car

WebTAG - rail

Revealed preference

UK stated preference

non-UK stated preference

Hensher approach

WebTAG values*

Sources: Valuation of travel time savings for business travellers, ITS Leeds, 2013; and DfT analysis Notes: * ITS Leeds’ report raised concerns over the approach taken in many UK Stated Preference studies to explaining how company travel policy should be considered and who should be assumed to pay for, and benefit from, travel time savings. There is therefore a concern that the values could reflect more personal, than business valuation, likely leading to a downward bias in the values shown in the chart. 1. The solid line error bars represent robustly calculated confidence intervals. The dotted lines are indicative representations of potential variability as the sample sizes are not sufficient to support calculation of formal confidence intervals. 2. Revealed preference data are taken directly from the ITS report, with the ranges based on the reported standard errors. 3. The Stated preference data for UK car and non-UK rail and car are derived by pooling the urban and inter-urban “valued” data from the ITS report. The mean values have been calculated on a travel time-weighted average basis, with 2008-10 National Travel Survey data, with the ranges calculated as the weighted average standard error. The SP data for UK rail are based on the mean and standard errors reported for inter-urban rail “valued” due to the very small number of UK urban rail studies. 4. The High Speed Rail values are based on the 3 reports covered by ITS Leeds most relevant to the UK domestic HSR market: Bates (2012), Atkins (2009) and SDG (2002). The range is based on the standard error of the mean of 5 values from these studies, meaning the sample is too small to be considered a robust, formal confidence interval. 5. The Hensher approach values are calculated using the parameters included in the ITS report and the values given in Table 1. The range represents the range of parameter values recommended in sensitivity testing in ITS Leeds’ report. 6. The WebTAG values have been calculated with data from the 2008-2010 National Travel Survey, 2009 Labour Force Survey and 2008 Labour Cost Survey. The range around them represents the +/-25% sensitivity testing recommended in this unit.

Recommended values and sensitivity tests

2.2.9 Table 1, below, provides the values of working travel time savings per person, by mode, that should be used in transport appraisal. In some circumstances it may be appropriate to make the simple assumption of a common working value of time for all travellers. Where this approach is followed, the average value for all workers should be used with sensitivity tests carried out using the values disaggregated by mode.


Page 5

Table 1 Values of Working Time per person (£ per hour, 2010 prices and values)

Vehicle Occupant Resource

Cost Perceived

Cost Market Price

Car driver 22.74 22.74 27.06 Car passenger 17.25 17.25 20.52 LGV (driver or passenger) 10.24 10.24 12.18 OGV (driver or passenger) 12.06 12.06 14.35 PSV driver 12.32 12.32 14.66 PSV passenger 13.97 13.97 16.63 Taxi driver 10.89 10.89 12.96 Taxi/Minicab passenger 21.96 21.96 26.13 Rail passenger 26.86 26.86 31.96 Underground passenger 22.08 22.08 26.28 Walker 17.54 17.54 20.88 Cyclist 17.47 17.47 20.78 Motorcyclist 19.42 19.42 23.11 Average of all working persons

22.75 22.75 27.07

2.2.10 The wide range of values resulting from different approaches presented in Figure 1 shows the uncertainty around the values of travel time savings in the course of work and analysts should undertake sensitivity tests to demonstrate the sensitivity of the appraisal results to the value used.

2.2.11 Where specific evidence is not available, or where business time savings form a relatively small proportion of total benefits, a sensitivity test of +/-25% of the values given in Table 1 may be used, based on the tests recommended in ITS Leeds’ report. While this does not encompass the full range of values resulting from ITS Leeds’ review, it is sufficiently wide to reflect the range of values resulting from the different approaches used to estimate willingness-to-pay.

2.2.12 For simplicity and proportionality, this test can be applied as an adjustment to the present value of time saving benefits for business travellers. As the key uncertainty around willingness-to-pay for travel time savings relates to business passengers, rather than professional drivers, time savings for goods vehicles and other freight modes should not be included in the sensitivity testing.

2.2.13 Where specific willingness-to-pay evidence is available, sensitivity tests should represent the uncertainty around the willingness-to-pay of business travellers most affected by the scheme. The tests should be developed with evidence from studies relating to the modes of transport and market (e.g. urban or long-distance trips) most relevant to the scheme. Useful sources of information for developing sensitivity tests may include ITS Leeds’ evidence review in Valuation of Travel Time Savings for Business Travellers or studies undertaken as part of development of the transport model used to assess the scheme.

2.2.14 Where specific evidence is used to inform sensitivity tests, both ‘high’ and ‘low’ tests should be developed (that is, using values both greater and smaller than those given in Table 1). In such circumstances, analysts should contact TASM division, DfT to agree the appropriate range of values to be tested.


Page 6

Box 1: Future development of values of working time

In their report Valuation of Travel Time Savings for Business Travellers, 2013, ITS Leeds set out a number of options for development of the values of travel time savings in the course of work. Due to the uncertainties and inconsistencies in the existing evidence, the Department believes that fresh empirical evidence on business travellers’ willingness-to-pay for travel time savings is required.

The Department plans to undertake research to collect new evidence of business travellers’ willingness-to-pay for travel time savings, which will improve our understanding of the current uncertainties and result in future revisions to the values and ranges provided in this Unit.

Before undertaking any new research, the Department will engage widely with stakeholders on the methods and valuation techniques which merit further investigation and the form this research should take.

2.2.15 The values in Table 1 apply to journeys made in the course of work and this excludes commuting journeys. Businesses perceive travel costs in the factor cost unit of account so the perceived cost and resource cost are the same for values of working time. The values in the market prices unit of account, which have been adjusted with the indirect tax correction factor, should be used in appraisal.

2.2.16 In appraisal, travel time savings on employer’s business are valued the same regardless of the stage of the journey, e.g. there is no weighting to take account of passengers’ reluctance to walk or wait. For staged journeys, the value of working time for the main mode (with the longest distance) should be used.

2.2.17 Using different values for each mode may appear to introduce inconsistency in appraisal since it suggests that those switching modes change their values of time. However, this is not the case because for any group (bus passengers, car drivers etc.) there will be a distribution of values around the average value for the group and the distributions for each group are likely to overlap. Therefore, the value of time for an individual within a group need not be the average value for that group and, when they switch mode, the individual will take up a different position in the distribution of values of time for their new mode, compared with that for their old mode. For example, a car driver with an above average value of time for car drivers could switch to rail, where their value of time might be below average.

2.2.18 Large changes between modes might alter the modal distributions sufficiently to significantly change the average values in the ‘without scheme’ and ‘with scheme’ cases. An alternative approach is to segment travellers by income group in the transport model, so that the average values of time for each mode are outputs of the modelling process, rather than inputs to the appraisal. This is discussed in more depth in Modelling (TAG Unit 3.1). In circumstances where switching is high compared to the number of existing users, analysts should contact TASM Division, DfT for further advice.

2.3 Values of Non-Working Travel Time Savings per Person

2.3.1 The majority of journeys do not take place during working hours, but in the traveller’s own time. However, people implicitly put a value on their own time, in that they will trade a cheaper, slower journey against a faster, more expensive one. It is therefore appropriate to take account of this value in assessing the impact of different transport strategies or plans.


Page 7

2.3.2 This ‘willingness to pay’ will vary considerably, depending on such factors as the income of the individual traveller, the value of the journey purpose and its urgency, and the comfort and attractiveness of the journey itself. Different values may therefore correctly be attributed to:

time spent on the same activity by different people, whose incomes and journey characteristics may vary; and

time spent by the same individual on different journeys or parts of journeys.

2.3.3 One important specific application of this second type of variability is that time spent walking to/from and waiting for public transport services is commonly valued much more highly than time spent actually travelling. There is consistent evidence that people will pay more to save walking and waiting time than they will for an equivalent saving in ride time. This approach should normally be adopted for multi-modal transport appraisal.

2.3.4 Time savings to travellers in their own time typically make up a large proportion of the benefits of transport investment. If values of time for appraisal are based on an individual’s willingness to pay (behavioural values) which are related to income, then strategies and plans will be biased towards those measures which most benefit travellers with higher incomes (which may favour some modes over others). Investment will then be concentrated into high-income areas, and the interests of those on lower incomes, who may already suffer from relatively lower mobility and accessibility, will be given less weight. For this reason, multi-modal transport appraisal should normally adopt the values for non-working time which is common across all modes and journey purposes.

Recommended values

2.3.5 The values for non-working time apply to all non-work journey purposes, including travel to and from work, by all modes. It is based on research conducted by the Institute for Transport Studies (ITS) for the Department for Transport, reported in 2003, and published as Values of Travel Time Saving in the UK. The values have since been re-based with 2008-2010 National Travel Survey data and converted to 2010 values and prices by uplifting tor reflect growth in the values with income (with a GDP/capita elasticity of 1) and changes in prices (using the GDP deflator).

2.3.6 ‘Commuting’ is travelling to and from the normal place of work. ‘Other’ is travel for other non-work purposes, for example leisure trips. There is no differentiation of ‘commuting’ and ‘other’ values of time by mode3.

2.3.7 The recommended values for all non-working trips are shown in Table 2. The values given in this table are averages which include retired persons in the calculations.

2.3.8 Individual consumers perceive costs in the market price unit of account and therefore the perceived cost and the market price are the same for ‘commuting’ and ‘other’ purposes.

2.3.9 The values for non-working time (‘commuting’ and ‘other’) spent waiting for public transport is two and a half times the ‘commuting’ and ‘other’ values.

2.3.10 Where walking and cycling is used as a means of access to, or inter-change between modes of transport, the non-working values (‘commuting’ and ‘other’) of walking and cycling is twice the ‘commuting’ and ‘other’ values.

3 Based on research conducted by the Institute for Transport Studies (ITS) for the Department for

Transport, reported in 2003, and published as Values of Travel Time Saving in the UK.


Page 8

Table 2 Values of Non- Working Time per person (£ per hour, 2010 prices and values)

Purpose Resource

Cost Perceived

Cost Market Price

Commuting 5.72 6.81 6.81 Other 5.08 6.04 6.04

Sensitivity tests

2.3.11 Further research by ITS Leeds, Advice on Statistical Confidence of Appraisal Non-Work Values of Time, 2012, estimated the statistical confidence intervals around the values for ‘commuting’ and ‘other’. The confidence intervals widen over time due to the impact of GDP growth. Analysis of applying the lower and upper confidence interval values to a wide range of schemes showed that the impact is approximately +/-25% of the present value of non-work time savings.

2.3.12 As with the values of working time, this range should be applied in sensitivity testing. This analysis should be carried out and reported separately from analysis carried out on values of working time.

2.4 Annual Rates of Growth in Values of Travel Time Savings

Forecast Growth in Real GDP, Population and Households

2.4.1 Table 3a contains forecasts of annual real GDP growth per head and real GDP growth per household. These are for use in appraisal across all valuations in WebTAG that are assumed to grow in line with income. Figures in Table 3a and Table 3b are percentage changes on a year earlier.

2.4.2 Important note for those using these values in modelling: In 2012, HM Treasury altered its GDP deflator to be based on the Consumer Prices index (CPI) rather than the Retail Prices Index (RPI) as used in the previous version of this Unit. Analysts using longitudinal models, based on time series and calibrated using the values given in earlier versions of this Unit, may need to recalibrate their models before using these values. Models validated using cross-sectional data for a single year should not be affected by this and can continue to use these new values in their models as normal.


Page 9

Table 3 a Forecast Growth in Real GDP, Population and Households

Year GDP

Growth (%pa)

Population

Growth (%pa)

Household Growth (%pa)

GDP Growth

per head % pa)

GDP Growth

per household

(% pa)

2003 3.95 0.39 0.41 3.54 3.52

2004 3.17 0.49 0.23 2.67 2.93

2005 3.23 0.66 0.78 2.56 2.44

2006 2.76 0.58 0.53 2.16 2.21

2007 3.43 0.66 0.77 2.75 2.64

2008 -0.77 0.68 0.90 -1.44 -1.66

2009 -5.17 0.64 0.56 -5.77 -5.70

2010 1.66 0.76 0.68 0.89 0.97

2011 1.12 0.71 0.50 0.40 0.62

2012 0.17 0.71 0.84 -0.54 -0.67

2013 0.60 0.71 1.00 -0.11 -0.40

2014 1.80 0.70 1.07 1.09 0.72

2015 2.30 0.68 1.06 1.61 1.23

2016 2.70 0.66 1.05 2.03 1.63

2017 2.80 0.63 1.03 2.15 1.75

2018 2.80 0.62 1.02 2.17 1.76

2019 2.80 0.60 0.98 2.18 1.80

2020 2.80 0.59 0.97 2.20 1.81

2021 2.40 0.58 0.96 1.81 1.43

2022 2.40 0.56 0.95 1.83 1.44

2023 2.40 0.54 0.94 1.85 1.45

2024 2.40 0.53 0.88 1.87 1.51

2025 2.50 0.51 0.87 1.98 1.62

2026 2.50 0.49 0.87 2.00 1.62

2027 2.50 0.47 0.86 2.02 1.63

2028 2.50 0.45 0.85 2.04 1.64

2029 2.50 0.44 0.78 2.05 1.71

2030 2.50 0.42 0.77 2.07 1.72

2031 2.40 0.41 0.77 1.98 1.62

2032 2.40 0.40 0.76 1.99 1.63

2033 2.40 0.39 0.75 2.00 1.64

2034 2.30 0.38 0.38 1.91 1.91

2035 2.40 0.38 0.38 2.02 2.02

2036 2.40 0.37 0.37 2.02 2.02

2037 2.40 0.36 0.36 2.03 2.03

2038 2.40 0.36 0.36 2.03 2.03

2039 2.40 0.36 0.36 2.03 2.03


Page 10

Year GDP

Growth (%pa)

Population

Growth (%pa)

Household Growth (%pa)

GDP Growth

per head % pa)

GDP Growth

per household

(% pa)

2040 2.50 0.36 0.36 2.13 2.13

2041 2.50 0.36 0.36 2.13 2.13

2042 2.50 0.35 0.35 2.14 2.14

2043 2.50 0.35 0.35 2.14 2.14

2044 2.50 0.35 0.35 2.14 2.14

2045 2.50 0.35 0.35 2.14 2.14

2046 2.50 0.35 0.35 2.14 2.14

2047 2.40 0.32 0.32 2.07 2.07

2048 2.40 0.32 0.32 2.07 2.07

2049 2.40 0.32 0.32 2.07 2.07

2050 2.40 0.32 0.32 2.07 2.07

2051 2.40 0.32 0.32 2.07 2.07

2052 2.30 0.28 0.28 2.02 2.02

2053 2.30 0.28 0.28 2.02 2.02

2054 2.30 0.28 0.28 2.02 2.02

2055 2.30 0.28 0.28 2.02 2.02

2056 2.30 0.25 0.25 2.04 2.04

2057 2.30 0.25 0.25 2.04 2.04

2058 2.30 0.25 0.25 2.04 2.04

2059 2.30 0.25 0.25 2.04 2.04

2060 2.40 0.25 0.25 2.14 2.14 2061 onward

2.40 0.25 0.25 2.15 2.15

Notes: 1. Real GDP growth per head between 2002 and 2010 is based on GDP per head growth as measured by the ONS, Table IHXW, August 2013. 2. Real GDP growth for 2011 and 2012 is based on ONS series ABMI, August 2013. For years from 2013 to 2017 real GDP growth is based on Office of Budget Responsibility Budget 2013 forecasts 3. Real GDP growth from 2017 onwards is based on long term Office of Budget Responsibility central projections as published in the July 2013 Fiscal Sustainability Report. 4. Population growth from 2011 onwards is based on GAD/ONS low migration projections for the United Kingdom, projection baseline year 2010 for 2011-2016 and baseline 2008 for years 2017 onwards. The value for 2061 onward is based on the annual average growth between 2060 and 2083. 5. Household growth values presented are based on 2008 household growth projections made by CLG. Beyond 2033, household growth has been extrapolated to grow in line with population growth, holding household size constant.

Annual Rates of Growth in Values of Travel Time Savings

2.4.3 The value of non-working time is assumed to increase with income, with an elasticity4 of 1.0, based on the in-vehicle time elasticity estimated by Abrantes and Wardman (2010). Working values of time are assumed to grow in line with income, with an elasticity of 1.0.

4 Elasticity is the relative response of one variable to changes in another variable. The phrase

"relative response" is best interpreted as the percentage change. In this context, the inter-temporal income elasticity of the value of time, is the percentage change in the value of time (over time) measured against the percentage change in income (over time).


Page 11

The measure of income used is GDP per head (see Table 3a). Forecast growth in the real value of time is shown in Table 3b.

Table 3b: Forecast Growth in the Working and Non-Working Values of Time

Year Work VOT

Growth (% pa)

Non-Work VOT

Growth (% pa)

Year Work VOT

Growth (% pa)

Non-Work VOT

Growth (% pa)

2003 3.54 3.54 2032 1.99 1.99 2004 2.67 2.67 2033 2.00 2.00 2005 2.56 2.56 2034 1.91 1.91 2006 2.16 2.16 2035 2.02 2.02 2007 2.75 2.75 2036 2.02 2.02 2008 -1.44 -1.44 2037 2.03 2.03 2009 -5.77 -5.77 2038 2.03 2.03 2010 0.89 0.89 2039 2.03 2.03 2011 0.40 0.40 2040 2.13 2.13 2012 -0.54 -0.54 2041 2.13 2.13 2013 -0.11 -0.11 2042 2.14 2.14 2014 1.09 1.09 2043 2.14 2.14 2015 1.61 1.61 2044 2.14 2.14 2016 2.03 2.03 2045 2.14 2.14 2017 2.15 2.15 2046 2.14 2.14 2018 2.17 2.17 2047 2.07 2.07 2019 2.18 2.18 2048 2.07 2.07

2020 2.20 2.20 2049 2.07 2.07

2021 1.81 1.81 2050 2.07 2.07 2022 1.83 1.83 2051 2.07 2.07 2023 1.85 1.85 2052 2.02 2.02 2024 1.87 1.87 2053 2.02 2.02 2025 1.98 1.98 2054 2.02 2.02 2026 2.00 2.00 2055 2.02 2.02 2027 2.02 2.02 2056 2.04 2.04 2028 2.04 2.04 2057 2.04 2.04 2029 2.05 2.05 2058 2.04 2.04 2030 2.07 2.07 2059 2.04 2.04 2031 1.98 1.98 2060 2.14 2.14

2061 onward

2.15 2.15

2.5 Values of Travel Time Savings per Vehicle

Vehicle Occupancies

2.5.1 Car occupancy figures are shown in Table 4. These figures were derived from the 1999 - 2001 National Travel Survey and show the sum of driver occupancy (always 1) and passenger occupancy. Occupancies in the top half of Table 4 are expressed in per vehicle kilometre and those in the bottom half are per trip.


Page 12

Table 4 Car Occupancies (2000)

Weekday Journey Purpose 7am –

10am 10am – 4pm

4pm – 7pm

7pm – 7am

Weekday Average

Weekend Average

All Week Average

Occupancy Per Vehicle Kilometre Travelled

Work 1.23 1.19 1.17 1.18 1.20 1.28 1.20 Commuting 1.16 1.15 1.13 1.13 1.14 1.14 1.14 Other 1.71 1.78 1.82 1.77 1.78 1.97 1.85 Average Car 1.37 1.59 1.45 1.47 1.48 1.88 1.58 Occupancy Per Trip

Work 1.26 1.19 1.20 1.21 1.21 1.30 1.22 Commuting 1.16 1.14 1.14 1.13 1.15 1.13 1.14 Other 1.72 1.70 1.76 1.71 1.72 1.96 1.79 Average Car 1.46 1.59 1.53 1.54 1.54 1.88 1.63

2.5.2 Occupancies for all other vehicles are shown in Table 5. These figures also show the sum of driver and passenger occupancy. Occupancies for different times of the day are only available for cars. For LGVs, different occupancy figures are available for a weekday and the weekend. For all other vehicles, only all week average occupancy figures are available. These should be used for all time periods. Values for heavy and light rail are not included as it is assumed that, if a public transport project is being appraised, a project specific public transport model will be used which will give appropriate details of passenger occupancy. Average PSV occupancy figures are given, as these are required for highways scheme appraisal.

Table 5 Vehicle Occupancies (2000)

Occupancy per Vehicle Kilometre Travelled Vehicle Type and Journey

Purpose Weekday Average

Weekend Average

All Week Average

LGV Work (freight) 1.20 1.26 1.20 Non Work (commuting and other) 1.46 2.03 1.59 Average LGV 1.23 1.35 1.25 OGV1 Work only OGV2 Work only

1.00 1.00

1.00 1.00

1.00 1.00

PSV Driver Passenger

1.00

12.20

1.00

12.20

1.00

12.20


Page 13

2.5.3 Table 6 shows the predicted decline in car passenger occupancies as an annual percentage until 2036, after which car passengers are assumed to remain constant. The occupancy of all other vehicle types should be assumed to remain unchanged over time.

Table 6 Annual Percentage Change in Car Passenger Occupancy (% pa) up to 2036 Journey Purpose Weekday Weekend All Week 7am –

10am 10am –

4pm 4pm – 7pm

7pm – 7am

WeekdayAverage

Work -0.48 -0.4 -0.62 -0.5 -0.44 -0.48 -0.45 Non – Work (commuting and other)

-0.67 -0.65 -0.53 -0.47 -0.59 -0.52 -0.56

Journey Purpose Splits

2.5.4 Data from the National Travel Survey (1999 – 2001) has been used to produce journey purpose splits for work and non-work travel (commuting and other), based on distance travelled and trips made. These purpose splits are necessary in order to calculate values of time per vehicle for the average vehicle. Journey purpose splits are assumed to remain constant over time.

2.5.5 The purpose splits based on distance travelled in work and non-work time are given in Table 7.


Page 14

Table 7 Proportion of Travel in Work and Non-Work Time

Weekday Mode /Vehicle Type & Journey Purpose

7am – 10am

10am – 4pm

4pm – 7pm

7pm – 7am

Weekday Average

Weekend Average

All Week Average

Percentage of Distance Travelled by Vehicles

Car Work 18.1 19.9 13.0 12.3 16.4 3.2 13.1 Commuting 46.0 11.4 40.8 36.2 31.0 8.5 25.3 Other 35.9 68.7 46.2 51.5 52.5 88.3 61.6 LGV Work (freight) 88.0 88.0 88.0 88.0 88.0 88.0 88.0 Non – Work (Commuting and Other)

12.0 12.0 12.0 12.0 12.0 12.0 12.0

OGV1 Work 100 100 100 100 100 100 100 OGV2 Work 100 100 100 100 100 100 100

Percentage of Distance Travelled by Occupants

Car Work 15.4 13.8 10.2 9.9 12.6 2.0 9.2 Commuting 38.3 8.1 32.2 29.1 23.9 5.1 18.0 Other 46.4 78.1 57.6 61.0 63.5 92.9 72.7 PSV Work 3.9 2.0 3.9 5.7 3.4 1.5 2.9 Commuting 30.0 11.1 36.6 38.1 25.5 6.4 20.5 Other 66.1 86.9 59.5 56.2 71.1 92.0 76.6 Heavy Rail Work 14.1 22.4 16.4 23.2 18.3 6.3 16.5 Commuting 51.9 10.2 55.9 53.1 43.7 4.3 37.8 Other 34.1 67.4 27.7 23.7 38.1 89.5 45.7 Light Rail Work 1.9 0.2 1.8 2.3 1.3 0.4 1.2 Commuting 82.4 8.5 75.7 28.9 50.1 23.3 45.8 Other

15.7 91.3 22.5 68.9 48.6 76.3 53.1

Note: The shaded areas in the table indicate a small sample, hence these figures should be treated with caution.

2.5.6 The purpose splits based on trips made in work and non-work time are given in Table 8.


Page 15

Table 8 Proportion of Trips Made in Work and Non-Work Time

Weekday Mode /Vehicle Type and Journey Purpose

7am – 10am

10am –4pm

4pm – 7pm

7pm – 7am

WeekdayAverage

Weekend Average

All Week Average

Percentage of Vehicle Trips

Car Work 6.8 8.3 5.5 3.6 6.5 1.7 5.0 Commuting 40.6 11.6 32.3 26.4 25.4 9.1 20.3 Other 52.7 80.1 62.2 70.0 68.1 89.3 74.7 LGV Work(freight) 88.0 88.0 88.0 88.0 88.0 88.0 88.0 Non-Work (Commuting and Other)

12.0 12.0 12.0 12.0 12.0 12.0 12.0

OGV1 100 100 100 100 100 100 100 Work OGV2 100 100 100 100 100 100 100 Work

Percentage of Person Trips

Car Work 5.2 2.2 4.1 1.2 4.7 1.1 3.4 Commuting 33.3 15.6 25.8 10.9 20.0 6.4 15.2 Other 61.5 82.2 70.1 87.9 75.3 92.5 81.4 PSV Work 1.5 1.2 1.8 2.6 1.5 1.0 1.4 Commuting 41.7 10.6 43.0 47.4 26.9 12.4 24.3 Other 56.8 88.2 55.2 50.0 71.5 86.6 74.3 Heavy Rail Work 6.7 13.6 6.7 8.8 8.3 2.8 7.6 Commuting 71.7 14.9 68.0 60.4 58.2 11.1 52.2 Other 21.6 71.5 25.4 30.8 33.5 86.1 40.3 Light Rail Work 2.8 0.7 3.3 5.3 2.4 1.2 2.2 Commuting 83.0 10.8 70.7 23.7 48.2 21.7 43.8 Other 14.2 88.5 26.0 71.1 49.4 77.1 54.0 Note: The shaded areas in the table indicate a small sample, hence these figures should be treated with caution.

Values of Time per Vehicle

2.5.7 The market price values of time per vehicle are given in Table 9. These values were calculated by multiplication of the appropriate figures from Tables 1, 2, 4, 5 and 6. Average


Page 16

car, average LGV and average PSV values also use the journey purpose split data from Table 7 as weights. The values are based on distance travelled.

Table 9 Market Price Values of Time per Vehicle based on distance travelled (£ per hour, 2010 prices and values)

Weekday Vehicle Type and Journey Purpose 7am –

10am 10am – 4pm

4pm – 7pm

7pm – 7am

Average Weekday

Weekend

All Week

Car

Work 31.56 30.81 30.34 30.58 30.99 32.54 30.99 Commuting 7.83 7.77 7.65 7.66 7.71 7.72 7.71 Other 10.06 10.46 10.74 10.48 10.49 11.61 10.90 Average Car 12.92 14.20 12.03 11.93 12.98 11.95 12.73 LGV Work (freight)

14.62 14.62 14.62 14.62 14.62 15.35 14.62

Non – Work (Commuting and Other)

9.15 9.15 9.15 9.15 9.15 12.72 9.97

Average LGV

13.96 13.96 13.96 13.96 13.96 15.03 14.06

OGV OGV1 Working 14.35 14.35 14.35 14.35 14.35 14.35 14.35 OGV2 Working 14.35 14.35 14.35 14.35 14.35 14.35 14.35 PSV (Occupants) Work 22.57 18.72 22.57 26.22 21.56 17.70 20.54 Commuting 24.93 9.22 30.41 31.66 21.19 5.32 17.03 Other 48.74 64.08 43.88 41.44 52.43 67.84 56.49 Total 96.24 92.02 96.86 99.32 95.18 90.86 94.06

2.5.8 Using the values in Table 9 above together with the national average vehicle proportions for 2002 taken from the COBA user manual, Table 8/1, the market price value of time for an average vehicle is £13.87 per hour, 2010 prices and values.


Page 17

3 Vehicle Operating Costs

3.1.1 The use of the road system by private cars and lorries gives rise to operating costs for the user. These include the obvious costs of fuel (or, for modern plug-in electric vehicles, mains electricity), oil and tyres, and an element of vehicle maintenance. The models for car and goods vehicle operating costs also include allowances for the purchase of new vehicles, as discussed below.

3.1.2 The distance-related costs to private households and business of car purchase are included in the car non-fuel operating costs by inclusion of an allowance for mileage related depreciation. In addition, for business cars, an allowance is also made for the decline in vehicle capital value (other than that accounted for by mileage related depreciation).

3.1.3 The costs to freight carriers of goods vehicle purchases are taken into account under goods vehicle non-fuel operating costs. As with private cars, it is assumed that the decision to purchase goods vehicles is independent of the transport policy option pursued. However, changes in congestion on the road system will influence the productivity with which any given fleet of goods vehicles can be used, and this element is taken into account in computing goods vehicle operating costs.

3.1.4 This section provides the latest vehicle operating cost (VOC) values recommended by the Department for use in economic appraisals of transport projects. VOCs are separated into fuel VOCs and non-fuel VOCs and are discussed separately within this section.

3.1.5 Values for cars and LGVs are split by energy source (whether petrol or diesel, fuel, or, at present in the case of cars only, mains electricity). The split is by energy source, not vehicle type – vehicle kilometres for a plug-in hybrid vehicle are split according to the energy source used. Some values are given for an average car or average LGV, but analysts are advised that these can give slightly different results, so it is preferable to use the separate values by fuel type.

3.1.6 The appraisal of electric cars is a developing area. It should be noted that, whilst VOCs for electric cars are considered in this unit, some of the other environmental impacts of electric cars, such as noise and air quality, are not considered at present.

3.1.7 Assumptions on the share of vehicle kilometres by energy source over time and projections of vehicle fuel efficiency take into account the impact of announced and committed policies only. For example, the car fuel efficiency projection reflects EU CO2 regulation which sets targets for average new car emissions in 2015 and 2020. As the policy has only been agreed up to 2020, the projection does not make assumptions about future, lower post-2020 target levels. Instead it assumes that the 2020 target level holds for all subsequent years. When further policy measures in this area are agreed the guidance will be updated to incorporate them.

3.1.8 Following the change in the Department’s model base year, values in this section are based on 2010 values and prices. However, some historic values are provided (back to 2006) to support recent historic models.

3.2 Vehicle Operating Costs – Fuel and Electricity

3.2.1 Fuel consumption is estimated using a function of the form:

L = a/v + b + c.v + d.v2

Where:

L = consumption, expressed in litres per kilometre;


Page 18

v = average speed in kilometres per hour; and

a, b, c, d are parameters defined for each vehicle category.

3.2.2 The revised fuel consumption aggregated equation for WebTAG vehicle groups was derived5 using the results from the New UK Road Vehicle Emission Factors Database that relates the rate of emission of a pollutant or fuel consumption to average vehicle speed. The results of the Database consultation, documents and spreadsheets can be found at: http://www.dft.gov.uk/pgr/roads/environment/emissions/ This function improves the relationship between speed and fuel consumption especially at low speeds (down to 5 kph). Figure 2 and Figure 3 show how fuel consumption varies with speed, using these functions. Similar graphs can be obtained at the link above by downloading the two spreadsheets Road vehicle emission factors 2009 – regulated and Viewer – Road vehicle emission factors 2009 and opening the second of these spreadsheets.

3.2.3 Evidence of the energy consumption of electric cars is currently limited. At present, it should be assumed that energy consumption is proportional to distance but independent of speed (ie, equivalent to a “b” parameter in the fuel consumption formula with the a, c and d parameters all zero). The appraisal of electric cars is a developing area and we expect to develop speed-related curves in the future. Electric cars should only be included in models/appraisals from 2011 onwards.

0

5

10

15

20

25

30

0 20 40 60 80 100 120 140 160

Speed kph

Litre

s/10

0km

Overall Cars

Overall LGVs

Figure 2 Fuel consumption rates at different speeds – Cars and LGVs

5 TRL unpublished report “Fuel Consumption Equations” dated 29 September 2008.

http://www.dft.gov.uk/pgr/roads/environment/emissions/


Page 19

0

10

20

30

40

50

60

70

80

90

100

110

120

0 20 40 60 80 100 120 140 160

Speed kph

Litre

s/1

00km

Overall OGV

PSVs

Figure 3 Fuel consumption rates at different speeds – OGVs and PSVs

3.2.4 The parameters needed to calculate the fuel/energy consumption element of VOCs are given in Table 10. The fuel consumption parameter values are based on a 2010 vehicle fleet (updated from the 2002 values in previous versions), whilst the electrical energy consumption values are based on 2011 values.

Table 10: Fuel/Energy Consumption Formulae Parameter Values

Parameters

Vehicle Category a b c d

Fuel Consumption Parameter Values (litres per km, 2010)

Petrol Car 0.964022581 0.041448033 -4.54163E-05 2.01346E-06 Diesel Car 0.437094041 0.058616489 -0.00052488 4.12709E-06 Petrol LGV 1.556463336 0.064253318 -0.000744481 1.00552E-05 Diesel LGV 1.045268333 0.057901415 -0.000432895 8.0252E-06 OGV1 1.477368474 0.245615208 -0.003572413 3.0638E-05 OGV2 3.390702946 0.394379054 -0.004642285 3.59224E-05 PSV 4.115603124 0.306464813 -0.00420643 3.65263E-05

Energy Consumption Parameter Values (kWh per km, 2011)

Electric Car 0.12564236

3.2.5 In Table 10a and Table 10b the VOC parameters have been converted into pence per kilometre by multiplying by the cost of fuel, calculated from Table 11. OGV1, OGV2 and PSV are assumed to be diesel driven and therefore parameters for these vehicles have been multiplied by the resource cost of diesel. The parameters for average car and average LGV are calculated as the average across different fuel/energy types. In the


Page 20

absence of more specific evidence it has been assumed that the proportions of traffic by fuel type are broadly equivalent to the proportions of vehicle kilometres by fuel type as shown in Table 12.

3.2.6 Table 10 no longer provides consumption values for an “average car”, as units for electric cars (kWh) differ from the units for petrol and diesel cars (litres). However, it is possible to convert the consumption values into costs (using the costs per unit given in Table 11a and Table 11b) and estimate the fuel/energy cost per kilometre for an average car. Examples of this are given in Table 10a (which gives 2010 values, excluding electric cars) and Table 10b (which gives 2011 values, including electric cars and a combined average for petrol, diesel and electric cars). Values for an average car are weighted using the petrol, diesel and electric car proportions given in Table 12. For more details about how the cost per kilometre by year changes, please see Table 14.

Table 10a: Fuel/Energy Cost Formulae Parameter Values (2010 values and prices)

Parameters

Vehicle Category a b c d Values excluding VAT (for vehicles in course of work)

Petrol Car 96.167 4.135 -0.00453 0.00020 Diesel Car 44.364 5.949 -0.05327 0.00042 Average Car 75.068 4.874 -0.02438 0.00029 Petrol LGV 155.266 6.410 -0.07427 0.00100 Diesel LGV 106.091 5.877 -0.04394 0.00081 Average LGV 108.974 5.908 -0.04572 0.00083 OGV1 (diesel) 149.948 24.929 -0.36259 0.00311 OGV2 (diesel) 344.145 40.028 -0.47118 0.00365 PSV (diesel) 417.720 31.105 -0.42694 0.00371 Values including VAT (for vehicles in course of other purposes)

Petrol Car 112.996 4.858 -0.00532 0.00024 Diesel Car 52.127 6.991 -0.06260 0.00049 Average Car 88.205 5.727 -0.02865 0.00034 Petrol LGV 182.438 7.531 -0.08726 0.00118 Diesel LGV 124.657 6.905 -0.05163 0.00096 Average LGV 128.044 6.942 -0.05372 0.00097

Note: In 2010 it is assumed there are no electric cars, so the “Average Car” is an average over petrol and diesel.


Page 21

Table 10b: Fuel/Energy Cost Formulae Parameter Values (2011 values, 2010 prices)

Parameters

Vehicle Category a b c d Values excluding VAT (for vehicles in course of work)

Petrol Car 102.650 4.413 -0.00484 0.00021 Diesel Car 48.525 6.507 -0.05827 0.00046 Electric Car 1.621 Average Car 79.367 5.312 -0.02779 0.00032 Petrol LGV 168.155 6.942 -0.08043 0.00109 Diesel LGV 115.619 6.405 -0.04788 0.00089 Average LGV 118.465 6.434 -0.04965 0.00090 OGV1 (diesel) 166.868 27.742 -0.40350 0.00346 OGV2 (diesel) 382.979 44.545 -0.52434 0.00406 PSV (diesel) 464.856 34.615 -0.47511 0.00413 Values including VAT (for vehicles in course of other purposes)

Petrol Car 123.180 5.296 -0.006 0.000 Diesel Car 58.230 7.809 -0.070 0.001 Electric Car 1.702 Average Car 95.240 6.374 -0.033 0.000 Petrol LGV 201.785 8.330 -0.097 0.001 Diesel LGV 138.743 7.685 -0.057 0.001 Average LGV 142.158 7.720 -0.060 0.001

3.2.7 DfT has developed recommended energy consumption rates by stock type for use in appraisal of rail schemes, which can be accessed by contacting the Department. Should practitioners decide to use alternative energy consumption rates, the supporting written documentation should report the rates adopted and make clear the business case impact of not using DfT’s recommended rates.

3.2.8 Standard assumptions for fuel and electricity prices are shown in Table 11a, including forecasts to 2030. Historic values are provided back to 2002, as these may be useful for the purpose of transport modelling.

3.2.9 Petrol, diesel and gas oil prices are annual average values. Values up to 2012 are observed, whereas values from 2013 onwards are forecasts based on the central scenario published in October 2012 by the Department of Energy and Climate Change (DECC). In Table 11a, ‘Petrol’ is a weighted average between Ultra Low Sulphur Petrol (standard unleaded) and Super Unleaded. Super Unleaded is assumed to constitute 10% of the petrol market by 2030. ‘Diesel’ comprises both Ultra Low Sulphur and Sulphur Free varieties. The ‘Gas Oil’ series is based on the DECC series for retail industrial oil prices.

3.2.10 The resource cost of fuel VOCs is net of indirect taxation. The market price is gross of indirect taxation and is therefore the sum of the resource cost and fuel duty, plus VAT (that is, market price = [resource cost + fuel duty] x [1 + VAT]). In work time the perceived cost of fuel VOCs is the cost perceived by businesses. Businesses are generally viewed as perceiving costs in the factor cost unit of account as most business costs are free of indirect taxation because they can claim it back. However, businesses cannot reclaim fuel duty and therefore the perceived value of fuel VOCs in work time is equal to the resource cost plus fuel duty. In non-work time, the perceived cost of fuel VOCs is the cost as


Page 22

perceived by the individual consumer. Consumers perceive costs in the market prices unit of account and therefore the perceived value of fuel VOCs in non-working time is equal to the market price.

3.2.11 Values for fuel duty and VAT in Table 11a take account of all changes announced in the 2013 Budget Report (HMT March 2013), including the decision to cancel the increase in fuel duty planned for September 2013. Fuel duty is assumed to increase in line with RPI on 1 April in all subsequent years.

3.2.12 Electricity resource prices are for domestic electricity based on tables produced by the Interdepartmental Analysis Group (IAG) at DECC, October 2012. As well as the wholesale cost of producing the electricity, these resource costs include the supplier margin and impact of policies. The only indirect tax relating to electricity is VAT, at a rate of 5%. VAT should not be applied for business users, including all rail operators, as they can claim it back.

3.2.13 The actual price of a unit of electricity may vary according to the type of electricity used (domestic, commercial or industrial) which in itself will depend on where electric cars are recharged. We would expect much of the electricity for electric cars to be charged at the domestic rate. At the same time, the rail industry pays a much lower price for electricity than domestic users. Therefore, it is assumed that:

for cars, the electricity price will be the DECC IAG domestic retail price to 2030;

for rail, the electricity price will be the DECC IAG industrial retail price to 2030.

3.2.14 Beyond 2030, the resource cost of electricity for both car and rail (which may be expected to include the damage cost of the carbon emissions that they generate) is assumed to vary according to the changing cost of carbon emissions for generating 1 kWh of electricity. These values are shown in Table 11b.

3.2.15 The values in Table 11a have been deflated to 2010 prices using HM Treasury’s GDP deflator. The GDP deflator is a much broader price index than the CPI, RPI or RPIX (which only measure consumer prices) as it reflects the prices of all domestically produced goods and services in the economy. Hence, the GDP deflator also includes the prices of investment goods, government services and exports, and subtracts the price of UK imports. The wider coverage of the GDP deflator makes it more appropriate for deflating public expenditure series. We therefore recommend the GDP deflator is used to deflate value for appraisals.

3.2.16 For petrol, diesel and gas oil beyond 2030, the resource costs are assumed to remain constant in real terms but duty prices are forecast to grow at a real rate of 1.17% per year. This is because fuel duty is assumed to grow in line with RPI inflation, which is forecast to exceed GDP deflator growth by 1.2% in the long-run6.

6 http://cdn.budgetresponsibility.independent.gov.uk/Working-paper-No2-The-long-run-difference-between-RPI-and-CPI-inflation.pdf

http://cdn.budgetresponsibility.independent.gov.uk/Working-paper-No2-The-long-run-difference-between-RPI-and-CPI-inflation.pdf

http://cdn.budgetresponsibility.independent.gov.uk/Working-paper-No2-The-long-run-difference-between-RPI-and-CPI-inflation.pdf


Page 23

Table 11a Fuel and Electricity Prices and Components (2010 prices)

Resource Cost Duty VAT rate

Petrol Diesel Gas Oil

Electricity Petrol DieselGas Oil

Electric Petrol Diesel Electric

Road Rail Road

Year

(p/litre) (p/litre) (p/litre) (p/kWh) (p/kWh) (p/litre) (p/litre) (p/litre) (p/kWh) (%) (%) (%)

2002* 20.29 22.34 16.67 55.64 55.64 3.85 17.5 17.5 2003* 22.26 23.91 18.28 54.69 54.69 4.63 17.5 17.5 2004* 24.70 26.13 20.15 54.42 54.42 5.04 17.5 17.5 2005* 30.49 34.11 25.51 53.15 53.15 6.08 17.5 17.5 2006* 33.72 37.09 29.98 51.76 51.76 7.27 17.5 17.5 2007* 33.91 36.02 28.29 52.41 52.41 8.90 17.5 17.5 2008* 42.64 51.53 43.49 52.60 52.60 10.04 17.3 17.3 2009* 33.13 36.97 32.59 55.90 55.90 10.67 15 15 2010* 42.57 44.31 40.49 12.34 6.87 57.19 57.19 10.92 0.00 17.5 17.5 5 2011* 51.89 56.08 51.50 12.90 7.10 56.87 56.87 10.82 0.00 20 20 5 2012* 53.07 58.04 52.70 13.59 7.34 55.83 55.83 10.52 0.00 20 20 5 2013 53.17 59.27 53.15 13.96 8.34 54.68 54.68 10.98 0.00 20 20 5 2014 53.61 59.75 53.64 15.26 9.44 54.11 54.11 10.99 0.00 20 20 5 2015 54.02 60.19 54.09 16.67 9.96 54.86 54.86 11.11 0.00 20 20 5 2016 54.46 60.67 54.58 17.15 10.63 55.83 55.83 11.27 0.00 20 20 5 2017 54.87 61.11 55.03 18.13 10.98 57.03 57.03 11.42 0.00 20 20 5 2018 55.31 61.59 55.52 18.29 11.15 58.14 58.14 11.55 0.00 20 20 5 2019 55.76 62.08 56.02 18.16 11.39 59.15 59.15 11.68 0.00 20 20 5 2020 56.20 62.56 56.51 18.46 11.60 60.04 60.04 11.79 0.00 20 20 5 2021 56.65 63.04 57.00 18.43 11.85 60.82 60.82 11.90 0.00 20 20 5 2022 57.09 63.52 57.49 18.77 12.30 61.47 61.47 12.00 0.00 20 20 5 2023 57.54 64.01 57.99 18.38 12.39 62.13 62.13 12.11 0.00 20 20 5 2024 58.02 64.53 58.53 18.57 12.67 62.86 62.86 12.21 0.00 20 20 5 2025 58.47 65.02 59.02 19.04 12.93 63.60 63.60 12.32 0.00 20 20 5 2026 58.95 65.54 59.56 19.13 12.95 64.35 64.35 12.43 0.00 20 20 5 2027 59.39 66.03 60.05 18.75 12.87 65.10 65.10 12.54 0.00 20 20 5 2028 59.88 66.55 60.59 19.30 13.19 65.87 65.87 12.65 0.00 20 20 5 2029 60.36 67.08 61.12 19.44 13.27 66.64 66.64 12.76 0.00 20 20 5

2030 60.84 67.61 61.66 18.98 12.88 67.42 67.42 12.87 0.00 20 20 5

* actual prices / rates


Page 24

Table 11b Resource cost of electricity from 2031 (2010 prices)

Year Road Rail Year Road Rail (p/kWh) (p/kWh) (p/kWh) (p/kWh)

2031 19.00 12.90 2066 18.99 12.89 2032 19.02 12.91 2067 19.00 12.90 2033 19.02 12.92 2068 19.01 12.90 2034 19.03 12.92 2069 19.01 12.91 2035 19.02 12.92 2070 19.02 12.91 2036 19.02 12.92 2071 19.02 12.92 2037 19.01 12.91 2072 19.03 12.92 2038 19.00 12.90 2073 19.03 12.93 2039 18.99 12.89 2074 19.03 12.93 2040 18.98 12.88 2075 19.03 12.93 2041 18.91 12.82 2076 19.03 12.93 2042 18.97 12.87 2077 19.03 12.93 2043 18.87 12.78 2078 19.03 12.93 2044 18.77 12.68 2079 19.03 12.93 2045 18.76 12.68 2080 19.03 12.93 2046 18.79 12.70 2081 19.03 12.93 2047 18.79 12.70 2082 19.03 12.92 2048 18.87 12.78 2083 19.02 12.92 2049 18.83 12.74 2084 19.02 12.92 2050 18.75 12.67 2085 19.02 12.92 2051 18.77 12.69 2086 19.02 12.91 2052 18.79 12.70 2087 19.01 12.91 2053 18.81 12.72 2088 19.01 12.90 2054 18.83 12.74 2089 19.00 12.90 2055 18.84 12.75 2090 18.99 12.89 2056 18.86 12.77 2091 18.99 12.89 2057 18.88 12.79 2092 18.99 12.89 2058 18.89 12.80 2093 18.98 12.88 2059 18.91 12.82 2094 18.97 12.87 2060 18.93 12.83 2095 18.97 12.87 2061 18.94 12.84 2096 18.96 12.86 2062 18.95 12.85 2097 18.95 12.86 2063 18.96 12.86 2098 18.95 12.85 2064 18.97 12.87 2099 18.94 12.84

2065 18.98 12.88 2100 18.93 12.84

3.2.17 Table 12 provides forecasts of vehicle-kilometre proportions for diesel and petrol vehicles, based on DfT 2010 fleet models for both cars and LGVs7. These forecasts are used in the TUBA program when subdividing the total number of cars and LGVs into petrol, diesel or electric. Values for years between 2005 and 2029 that are not shown in the table should be estimated using linear interpolation between the two closest years. Values for 2031 onwards should be assumed to be held at 2030 levels.

7 The DfT fleet models are also used to update the NAEI assumptions that were used previously. At the

time of writing the NAEI assumptions used in DEFRA’s fleet modelling did not include electric cars, but it is expected that they will be included in 2013. Note that in previous versions of this Unit car fleet proportions were used in this Table.


Page 25

Table 12 Proportion of Cars and LGV Vehicle Kms Using Petrol, Diesel or mains electricity (%)

Year Cars LGVs

Petrol Diesel Electric Petrol Diesel

2004 73.28% 26.72% 0.00% 11.07% 88.93%

2010 59.27% 40.73% 0.00% 5.86% 94.14%

2015 47.97% 51.87% 0.16% 3.64% 96.36%

2020 43.70% 55.33% 0.96% 1.89% 98.11%

2025 44.41% 53.05% 2.54% 1.04% 98.96%

2030 44.46% 50.23% 5.31% 0.79% 99.21%

Rates of Change in Fuel VOCs

3.2.18 There are two causes of changes in fuel VOC over time: improvements in vehicle efficiency and changes in the cost of fuel. For cars, changes in fuel VOCs also reflect changes in the proportion of traffic using either petrol or diesel (see Table 12).

3.2.19 Vehicle efficiency assumptions are shown in Table 13. These figures show changes in fuel consumption and therefore negative figures indicate an improvement in vehicle efficiency. As with the consumption values noted earlier, values for an average car are no longer provided as petrol and diesel cars no longer have common units. Table 14 shows how the parameters to calculate fuel/energy cost per kilometre changes through time for an average car and an average LGV. For maximum accuracy, for years not shown in Table 10b and Table 14, analysts are advised to calculate the average car and average LGV fuel cost from Tables 10, 11, 12 and 13, as the volatility of fuel prices is such that interpolation may not be appropriate.

3.2.20 Note that, although Table 13 shows growth rates from 2006 onwards, the base year for the fuel consumption parameters given in Table 10 is 2010. Analysts who need to obtain values for earlier years for older transport models should carry out the reverse year-on-year calculation to those forecasting forward (ie for each year i between the model base year and 2009 inclusive, divide the 2010 value by (1+gi,i+1/100), where gi,i+1 is the fuel efficiency improvement given in Table 13 below).


Page 26

Table 13 Assumed Vehicle Fuel Efficiency Improvements

Year Change in Vehicle Efficiency (% pa)

Petrol Diesel Petrol Diesel

Car Car Electric Car LGV LGV OGV1 OGV2 PSV

-0.42 -0.49 2006-2007 (actual) (actual)

-0.01 0.00 -1.23 -1.23 0.00

-1.05 -1.07 2007-20082 (actual) (actual)

-0.01 0.00 -1.23 -1.23 0.00

-1.78 -0.92 -1.35 -1.23 2008 - 2009 (actual) (actual) (actual) (actual)

-1.23 -1.23 0.00

-1.43 -1.63 -0.34 -1.80 2009-2010 (actual) (actual)

(actual) (actual)

-1.23 -1.23 0.00

2010-2015

-2.09 -1.71 0.11 -0.66 -2.07 0.00 0.00 0.00

2015-2020

-3.72 -2.22 -0.31 -1.38 -2.34 0.00 0.00 0.00

2020-2025

-3.63 -2.62 -0.71 -3.07 -2.19 0.00 0.00 0.00

2025-2030

-2.10 -2.10 -1.19 -2.95 -1.30 0.00 0.00 0.00

2030-2035

-0.74 -0.96 -0.26 -0.86 -0.57 0.00 0.00 0.00

Notes: 1. Petrol and diesel car values include biofuel energy penalty. 2. DVLA new car data used up to 2008, repeated from previous version of this unit. 3. Actual values for OGVs and PSVs are repeated from the previous version of this Unit. 4. Car values for 2009 onwards are consistent with EU emission targets up to 2020. LGV values for 2009 onwards are assumed to improve due to technology transferred from cars to LGV. Both car and LGV values are derived using DfT 2010 fleet models. OGV and PSV values are assumed not to change. 5. Values for growth prior to 2010 are shaded, as they are provided only for the purpose of backcasting for older models. Table 10 now gives fuel consumption formulae in 2010 values.


Page 27

Table 14: Average Car/LGV Fuel/Energy Cost Formulae Parameter Values (2010 prices)

Parameters Year

a b c d Average Car, excluding VAT (for travel in course of Work)

2010 75.068 4.874 -0.02438 0.00029 2015 69.227 5.160 -0.03087 0.00032 2020 60.772 4.850 -0.03091 0.00031 2025 53.750 4.320 -0.02724 0.00027 2030 49.736 3.997 -0.02443 0.00024 Average LGV, excluding VAT (for travel in course of Work)

2010 108.974 5.908 -0.04572 0.00083 2015 110.337 6.028 -0.04608 0.00084 2020 103.683 5.700 -0.04314 0.00079 2025 96.820 5.342 -0.04020 0.00074 2030 94.993 5.247 -0.03941 0.00073 Average Car, including VAT (for travel in course of other purposes)

2010 88.205 5.727 -0.02865 0.00034 2015 83.072 6.191 -0.03704 0.00038 2020 72.926 5.817 -0.03710 0.00037 2025 64.500 5.175 -0.03268 0.00032 2030 59.683 4.779 -0.02932 0.00029 Average LGV, including VAT (for travel in course of other purposes)

2010 128.044 6.942 -0.05372 0.00097 2015 132.405 7.233 -0.05529 0.00101 2020 124.420 6.840 -0.05177 0.00095 2025 116.184 6.410 -0.04823 0.00089 2030 113.992 6.297 -0.04729 0.00087

3.3 Vehicle Operating Costs – Non-Fuel

3.3.1 The elements making up non-fuel vehicle operating costs include oil, tyres, maintenance, depreciation and vehicle capital saving (only for vehicles in working time). The non-fuel elements of VOC are combined in a formula of the form:

C = a1 + b1/V

where:

C = cost in pence per kilometre travelled,

V = average link speed in kilometres per hour,

a1 is a parameter for distance related costs defined for each vehicle category,

b1 is a parameter for vehicle capital saving defined for each vehicle category (this parameter is only relevant to working vehicles).

3.3.2 Currently parameter a1 takes the same value for petrol and diesel vehicles. For electric vehicles, the evidence is very weak, but suggests that the costs are lower because there


Page 28

are fewer moving parts that are likely to wear out with mileage. There is currently no evidence to confirm whether the a1 parameter differs by trip purpose for electric cars.

3.3.3 There is also no evidence regarding the b1 parameter for electric cars in-work. For the present it will be assumed that the vehicle capital saving for electric cars will be the same as for petrol/diesel cars.

3.3.4 The parameters needed to calculate the non-fuel vehicle operating resource costs are given in Table 15. These parameters exclude indirect taxation. The parameters by fuel type are assumed to be constant through time; however, parameters for an average car vary through time (owing to changes in the proportion of electric vehicles) and are given in Table 16.

Table 15 Non-Fuel Resource VOCs, 2010 (2010 prices)

Parameter Values Vehicle

Category a1

pence/km

b1

pence/hr

Car Work Petrol 4.966 135.946Work Diesel 4.966 135.946Work Electric 1.157 135.946Non-Work Petrol 3.846 Non-Work Diesel 3.846 Non-Work Electric 1.157 LGV Work 7.213 47.113Non-Work (commuting and other)

7.213

Average LGV 7.213 41.458 OGV1

6.714 263.817

OGV2 13.061 508.525 PSV 30.461 694.547

3.3.5 Non-fuel VOC parameters for work and non-work cars (commuting and other) and private LGVs have been derived in accordance with previous methods outlined in Review of Vehicle Operating Costs in COBA (EEA Division, DoT 1990-91). Non-fuel parameters for all other vehicles have been updated from the Transport Economics Note (DfT 2001) by the ratio of average 1998 and 2002 Retail Price Indices.

3.3.6 The marginal resource costs of oil, tyres, mileage and maintenance related depreciation, are assumed to be fixed costs per kilometre and appear in the ‘a1’ term. The difference between the 'a1' term for work and non-work time non-fuel car operating costs reflects the difference in the composition of the vehicle fleet in work and non-work time. In work time, a large proportion of total mileage is by cars with large engine sizes and these cars have


Page 29

higher non-fuel VOCs. The ‘b1’ term in the non-fuel costs represents changes in the productivity of commercial vehicles and cars in working time, all goods vehicles and PSVs.

3.3.7 The time component of depreciation is excluded since it does not vary with distance or speed. For OGVs and PSVs depreciation is assumed to be totally time related; this is based on evidence from trade sources which suggest that factors such as obsolescence and condition are more important determinants of vehicle value than mileage per se. For cars and LGVs evidence from second hand prices indicates that part of their depreciation is related to mileage; and therefore this element is recorded as a marginal resource cost.

3.3.8 For demand modelling and the calculation of consumer surplus, costs must be expressed in perceived cost terms. The perceived cost of non-fuel VOCs differs for work and non-work time. In work time, the perceived cost is the cost perceived by businesses and is therefore equal to the resource cost. In non-work time, it is assumed that travellers do not perceive non-fuel VOCs, so the perceived cost is zero.

3.3.9 The assumption that those making non-work car trips do not perceive their non-fuel vehicle operating costs means that estimates of consumer surplus for non-work purposes, which are based on perceived costs, do not reflect changes in non-fuel vehicle operating costs.

3.3.10 However, changes in users' expenditure on non-fuel VOCs are included in the calculation of user benefits for non-work purposes - see Transport User Benefit Calculation (TAG Unit 3.5.3) for details. These calculations use non-fuel VOCs expressed in market prices. Non-fuel VOCs in market prices for non-work purposes may be estimated from the formula given above, using the parameters given in Table 15 plus VAT (that is, market price = resource cost x (1+VAT)).

Rates of Change in Non-Fuel VOCs

3.3.11 Non-fuel VOCs by fuel/energy type are assumed to remain constant in real terms over the forecast period. This assumption is made because the main elements which make up non-fuel VOCs are subject to less volatility than fuel VOCs.

3.3.12 However, non-fuel VOCs for an average car varies slightly through time, owing to the increasing proportion of electric cars. Table 16 shows how the non-fuel VOCs for cars vary through time. The average over Work and Non-Work purposes is based on the split of car kilometres in Table 7. Values for years between 2011 and 2029 that are not shown in Table 16 should be obtained by linear interpolation between the two nearest years; for 2031 onwards the values should be held at 2030 levels.

3.3.13 The non-fuel costs for an Average LGV given in Table 15 are assumed not to change through time. The costs for OGVs are also assumed not to change through time.


Page 30

Table 16: Non-Fuel Resource VOCs through time (2010 prices)

Year Work Car Non-Work Car Average Car

a1 b1 a1 b1 a1 b1

pence/km pence/hr pence/km pence/hr pence/km pence/hr

2010 4.966 135.946 3.846 0.000 3.993 17.809 2015 4.960 135.946 3.842 0.000 3.988 17.809 2020 4.929 135.946 3.820 0.000 3.965 17.809 2025 4.869 135.946 3.778 0.000 3.921 17.809 2030 4.764 135.946 3.703 0.000 3.842 17.809

3.4 Public Transport Operating Costs

Bus Operating Costs

3.4.1 In a simple highway appraisal, buses are treated as part of the traffic flow, and the operating cost formulae described above are applied, using the appropriate parameter values for PSVs. In a multi-modal study, however, different options may result not only in faster or slower running times for existing bus services, but in the need for more or different levels and patterns of bus service provision. In these cases, the impact of options on the costs of bus service provision have to be considered in more detail.

3.4.2 The bus operating model requires assumptions to be input on various operational characteristics, such as sickness rates, working days per week, holiday allowances, employers' costs, engineering spares etc and also unit cost rates for each grade of staff, fuel and tyres etc. Vehicle fleet requirements and costs are considered as capital expenditure outside the model and are included in option costs. The Overall Approach: The Steps in the Process (TAG Unit 2.1) gives an overview of how costs are covered in the appraisal process. The Estimation and Treatment of Scheme Costs (TAG Unit 3.5.9) provides further detail on estimating and treating costs for use in the appraisal process.

3.4.3 Bus operating costs vary by region and by service type. Information on the operating cost of local bus services, by area, can be found in Focus on Public Transport and in The Passenger Transport Industry in Great Britain Facts (Confederation of Passenger Transport 1999-2000). Where no other information is available, these costs should be used as default indicators of the operating cost of bus services. However, more detailed information on bus costs should be sought where bus based measures are likely to play a significant part in a strategy. Study consultants may be able to provide more detailed cost estimates using bus operating cost models. The validity of such costs should be cross-checked with other data sources, including the range of values given in the national statistics. Where possible, the co-operation and views of local bus operators should be sought. The Confederation of Passenger Transport (CTP) may also be able to provide assistance in estimating the costs of bus operation.


Page 31

Rail Operating Costs

3.4.4 Information on rail operating cost assumptions can be obtained by discussion with the Department.

4 Further Information

The following documents provide information that follows on directly from the key topics covered in this Unit.

For information on: See: TAG Unit:

The Appraisal Process

The Overall Approach: The Steps in the Process The Appraisal Process

TAG Unit 2.1 TAG Unit 2.5

Modelling

Modelling

TAG Unit 3.1

Estimating and Treating Scheme Costs

The Estimation and Treatment of Scheme Costs

TAG Unit 3.5.9

5 References

M. Wardman, R. Batley, J. Laird, P. Mackie, A.S. Fowkes, G. Lyons, J. Bates and J. Eliasson, Institute for Transport Studies, University of Leeds (2013), Valuation of Travel Time Savings for Business Travellers

Faber Maunsell / AECOM (2008), M6T Research Study – Stage 2 Utilisation Surveys

P.J Mackie, M. Wardman, A.S Fowkes, G. Whelan, J Nellthorp and J Bates, Institute for Transport Studies, University of Leeds (2003), Values of Travel Time Savings in the UK.

P. Wheat, M. Wardman and J. Bates, Institute for Transport Studies, University of Leeds (2012), Advice on Statistical Confidence of Appraisal Non-Work Values of Time

P. Abrantes, M. Wardman, Institute for Transport Studies, University of Leeds (2010), Meta-Analysis of UK Values of Time: An Update

Confederation of Passenger Transport (1999-2000), Focus on Public Transport.

Confederation of Passenger Transport (1999-2000), The Passenger Transport Industry in Great Britain Facts.

ITEA Division, Department for Transport (2001), Transport Economics Note.

EEA Division, Department of Transport (1990-91), Review of Vehicle Operating Costs in COBA.

Department for Transport (2005), Transport Statistics Great Britain.

HM Treasury (2013) Budget Report March 2013

ONS, Table IHXW, July 2013.

Office of Budget Responsibility Budget 2013 forecasts

Office of Budget Responsibility central projections (July 2013, Fiscal Sustainability Report).


Page 32

GAD/ONS low migration projections for the United Kingdom

2008 household growth projections made by CLG. http://www.communities.gov.uk/documents/housing/xls/table401.xls.

Office for National Statistics (2009) Population: national, 1971 onwards: Population Trends

http://www.statistics.gov.uk/statbase/ssdataset.asp?vlnk=9542&More=Y

http://www.gad.gov.uk/Demography%20Data/Population/2006/uk/wuk06cc.xls

6 Document provenance

This Transport Analysis Guidance (TAG) Unit was originally based on Appendix H of Guidance on the Methodology for Multi-Modal Studies Volume 2 (DETR, 2000), and the Transport Economics Note (DfT, 2001) and Netcen’s Carbon Emission and Fuel Consumption Parameters for the National Transport Model (NETCEN, 2005). Subsequently it has been updated regularly, usually once a year, in accordance with forecasts of population, GDP and fuel prices elsewhere in Government. For details of past issues, please see the Archive section of the WebTAG website.

The fuel consumption formulae were substantially updated in April 2011, and are now based on Road vehicle emissions factors 2009.

The unit has been further updated, For Consultation, in November 2011, to include vehicle operating costs for electric cars

The unit has been updated, In Draft, in May 2012. Monetary values have been converted to 2010 values and prices (previously 2002) and updated to include updated values following the Budget in March 2012.

A October 2013 'in draft' release included updates to the values of travel time savings using data from the 2008-2010 National Travel Survey; introduction of sensitivity testing around those values; a change to the non-work value of travel time savings elasticity from 0.8 to 1.0; and updates to other values and growth rates consistent with the Budget and accompanying OBR forecasts in 2013. This version of the Unit has now been released as definitive guidance in January 2014.

Technical queries and comments on this Unit should be referred to:

Transport Appraisal and Strategic Modelling (TASM) Division Department for Transport Zone 2/25 Great Minster House 33 Horseferry Road London SW1P 4DR [email protected]

http://www.communities.gov.uk/documents/housing/xls/table401.xls

http://www.statistics.gov.uk/statbase/ssdataset.asp?vlnk=9542&More=Y

http://www.gad.gov.uk/Demography%20Data/Population/2006/uk/wuk06cc.xls

mailto:[email protected]

TAG Unit 3.5.6 Values of Time and Vehicle Operating...

Documents

Transcript of TAG Unit 3.5.6 Values of Time and Vehicle Operating...