Estimates of value for money

Using the demand and cost information for the M2 preferred scenario, the estimated Benefit Cost Ratio of the project (on an annual basis as per standards) is in the range 1.4 to 1.5 (depending on the cost assumptions used).

In terms of sensitivities, the M4 scenario reduces this to 1.2, although to further complicate this scenario there is a significant impact on VAT which would accrue to UKG rather than SG without full [and accurate] VAT assignment in place. Accounting for this would reduce the BCR for SG alone to 1.1 although it is general practice to look at the overall impact rather than that solely to Scottish Government.

Thus, a prudent range for the value for money is between 1.2 and 1.5 – benefits of between £1.20 and £1.50 for each £1 spent.

HMT Green Book guidance also suggests that “Distributional weighting” may be undertaken to account for the income levels of those who are benefiting from the intervention. See The Green Book (2022) - GOV.UK (www.gov.uk). Given that rail users are on average of higher than median income this weighting reduces the impact by around 17% (using income data from the Scottish Household survey). This results in a Value for Money range (in terms of Benefit Cost Ratios) of between 1.0 and 1.25 or between £1.00 and £1.25 of benefits for every £1 spent.

Extent of demand impacts, Mode Shift and Carbon savings

In terms of numbers of passengers, the Pilot resulted in up to around 4 million extra rail journeys over the 9 months from October 2023 (based on the 6.8% demand figure) of which half of new passengers switched from private car (from both the TMfS and Survey results). This removal of around 2 million car journeys over 9 months is in the context of around 5 billion private car journeys annually in Scotland.

There was some shifting from bus but discussions with bus operators suggested that this was not significant and was more than outweighed by growing demand from the U22 concessionary scheme. The modelled scale of abstraction from bus was small (around 1 million bus journeys which represents around less than 0.25% of bus journeys) and was overshadowed in reality by an ongoing increase in patronage from the U22 concessionary scheme.

The value for money analysis includes around £1.5 million of monetarised CO2 savings (from reduced car use). This represents less than 0.1% of car emissions (around 5 Mt in 2022).