Values of time for road commercial vehicles

INTRODUCTION The purpose of this note is to review the report of Accent/HCG (1994), referred to here as AHCG, and other sources, and make recommendations regarding future official Values of Time for road commercial vehicles. This note starts by discussing current DTLR practice, as set out in its Transport Economics Note (TEN). Section 3 presents a digest of the AHCG findings. Section 4 looks at the findings of other studies. Although these are very mixed, carried out for a variety of purposes and presented in a variety of forms, they can serve as a partial check on the AHCG work. Section 5 presents interim conclusions

Principles of valuing business travel time savings

OVERVIEW There are two approaches to valuing travel time savings to business people. The first is that which has formed the basis of UK policy for about 30 years, and which is set out in Section 2. This takes the value of travel time savings on employer’s business as equal to the gross wage rate plus an allowance for other costs that the employer saves. These might include such things as desk space, computer, tools, uniform, protective clothing, travel expenses. These were investigated in studies for the UK Department of the Environment around 1970 (Fullerton and Cooper, 1969; Rubashaw, Michali, Taylor and Key, 1969; Harrison, 1969; Harrison and Taylor, 1970; and Makrotest, 1970). The underlying rationale was that if employers were actually seen to be saving a certain amount of cost (through the gross wage and these various add-ons), then this was the value to them and, subject to any taxation related adjustments, should be the value to society. The approach is sometimes called ‘The Cost Saving Approach’, though it is also sometimes referred to as the ‘wage rate plus’ approach. Clearly, it was believed by the UK government that the economy was sufficiently competitive that average wage rates, for the employment groups concerned, reflected the value to employers. The approach can (but need not) be underpinned by appeals to the neoclassical theory of the firm and the labour market. This gives the equivalence of the marginal (revenue) product of labour to the marginal cost of employing labour, implying that a marginal minute saved will result in a marginal output increase valued at the wage rate for that minute. It is sufficient for this to be true on average, rather than for each individual employee involved. The process may also be ‘indirect’, such that employers receiving sufficiently big travel time savings, via their employees, might release resources into the labour market, where their value should be the marginal wage rate paid by employers for labour of this type. There is clearly room in this argument for small edge effects, but in general it does provide credible support for the Cost Saving Approach. However, its value is undermined by the possibilities it gives for objections to its assumptions, and this process ultimately leads most students of this area to at least wish to consider the more detailed ‘Hensher’ method to be considered in Section 3. This note then proceeds in Section 4 to review what AHCG did. Section 5 looks at the matter from the point of view of the employer. Finally, section 6 gives our conclusions

Stated Preference Experiments Concerning Long Distance Business Travel in Great Britain

Stated preference techniques are now widely used in transport economics as an experimental tool for gathering data on consumer preferences to derive, amongst other things, estimates of demand elasticities and values of travel time, service frequency, service reliability and other deteminants of travel behaviour. However, these techniques have not to our knowledge been used in research on long distance business travel behaviour. This forms the subject of this paper. In particular, results of a stated preference experiment answered by two samples of long distance business travellers are presented. Disaggregate mode choice models are calibrated with this data; and the results are used to derive estimates of the value placed by long distance business travellers on savings in business travel time. The design of the stated preference experiment means that these values can be interpreted as leisure values of time. The results that long distance business travellers place a high value on travel time savings. It is demonstrated that this can largely be explained by their high incomes and long work days, and the unsociable hours at which time savings occur. It is our view that the value of time estimates reported in this paper are not appropriate for use in forecasting exercises, rather they can be used to construct a value of business travel time for evaluation purposes

Rail privatisation in Britain - lessons for the rail freight industry

Until 1994, the rail industry in Britain – as in most of Europe – was organised in the form of a single integrated state owned company providing passenger and freight services, and the infrastructure on which they ran, throughout the country. It is true that significant reforms did take place in the 1980s, grouping rail services into a number of sectors (Inter City, London and South East and regional passenger, and trainload, distribution and parcels for freight) with their own objectives, management and accounts (Nash, 1988). Also activities such as hotels and rolling stock manufacture were hived off and privatised. However, by the early 1990s the government was determined to go further and privatise the entire rail network. After much debate about options they determined on a pattern that had come to be seen as the norm for network industries – a regulated monopoly infrastructure provider with competitive operators using it. The infrastructure was placed in the hands of a new infrastructure company, Railtrack, which levied charges to cover its costs and was subsequently privatised. Operations were divided into a number of separate companies and also privatised. However, for a mixture of good and bad reasons they were not willing – at least initially – to leave the question of what passenger services would be provided at what charges up to the market. Thus passenger services were franchised out, with franchise requirements as to minimum levels of service and regulation of some fares. In the case of freight services, the approach of the government had long been that services should be run on commercial principles, with specific subsidies for flows of traffic which would otherwise use road and where this would impose sufficient social costs that the subsidy was justified. This was essentially the approach carried through into privatisation. Thus the policy for freight was to implement complete open access for any licensed train operating company, and to seek to create a number of competing freight operating companies by splitting up and privatising the former freight business of British Rail. This paper will proceed as follows. First, the history of rail freight privatisation in Britain will be charted, sector by sector. It will be seen that there has been relatively little entry into the industry, and the reasons for that will then be explored. The particular issues of the price and availability of track access, and of the availability of government grants will then be discussed. Prospects for the rail freight business in Great Britain are then considered. Finally we draw together some lessons which may be learned for other countries embarking on the privatisation and/or deregulation of rail freight. An appendix presents detailed estimates of trends in rail and road freight in Great Britain

Sample Size Determination to Evaluate the Impact of Highway Improvements

This paper was prepared for the Department of Transport, as a support document to a main report on the feasibility of measuring responses to highway improvements. The paper discusses the statistical issues involved, particularly as regards the determination of suitable sample sizes. Worked examples are provided, using such data on ambient variability and adjustment factors as were available to us. Some of the data is included as an appendix where it was felt to be otherwise not easily available. The note asks two sort of questions. Firstly, what is the minimum sample size to take to be a certain percent confident that a given quantity lies in a range of a given width. Secondly, what sample sizes should be taken in Before and After studies so as to be a certain percent confident that a change in a quantity by a given amount will be detected as a statistically significant difference at some chosen significance level. Three sorts of quantities are discussed: - total flows past a point, which may be counted by loops, tubes or manually; - partial flows, such as a particular 0-D flow, which require roadside interviews; - journey times over particular links

A Novel Macroscopic Dynamic Loading Model and its Properties

Existing macroscopic dynamic loading models (Linear travel time, Divided linear travel time and Point-Queue models), which are based on representation of link properties as a whole and fully comply with the requirements of the dynamic traffic assignment (DTA) procedure, are widely used in many DTA studies. This is because of their lower implementation and computational costs. DTA literature consistently suggesting alternative models but many of them do not comply with the required properties for their use in DTA and if the model fulfils these requirements, the computational and implementation issues in these models are such demanding that their general use is very limited (e.g. Cell Transmission model). This paper presents a novel model (Adnan-Fowkes model), which utilise the similar modelling framework through which Point-Queue model was developed and at the same time addresses the drawbacks exist in the Point-Queue and Liner travel time models which are due to their simple mathematical formulation. The proposed model is developed with a simple mathematical construction and it is as easy to implement as Point-Queue and Linear travel time models. The paper comprehensively discusses the properties which are desirable for the use of any model in DTA and analytically illustrates that the Adnan-Fowkes model is successfully fulfilling all these requirements. Numerical experiments are also conducted for comparison of the behaviour of the Adnan-Fowkes model along with the Point-Queue and Linear travel time models. The results of these experiments provide more useful insight for the Adnan-Fowkes model and support the characteristics of this model which are mentioned analytically in earlier sections of this paper

The track and external costs of road transport

1.1.1 The purpose of this study is to review: i) Developments in methodology and data regarding issues such as vehicle delay, accidents, overloading and valuation of environmental effects. ii) The likely effect of harmonisation of taxes within the European Community. iii) Future prospects regarding the level of spending on roads. iv) Alternative methods of dealing with social costs, including lorry routing, regulation and subsidy. v) Experience elsewhere in Western Europe and in North America. 1.1.2 We review the theory behind the allocation of road infrastructure costs, finding a number of items on which the current British approach can be criticised, in particular the treatment of capital costs on a pay-as-you-go basis. Comparisons with other countries suggest that the British system is relatively sophisticated, but this and other evidence suggests that the proportion of capital costs of new roads allocated to heavy vehicles is too low. 1.1.3 A spreadsheet model of the current British track costs allocation system is constructed, and the effects tested of proposed increases in road spending, of overloading, of the allocation those items of cost currently allocated on a vehicle km basis in accordance with pcu km and of the allocation of the external costs of accidents. It is found that, even without adjusting the treatment of capital costs, an increase in taxes on the heaviest lorries of some 30 % is justified, and on buses 60%. Evidence on the values of vehicle delay and environmental costs is examined but it is considered that these factors are not yet sufficiently well quantified to test the adequacy of the current 30% margin to allow for them. More work in this area is recommended. 1.1.4 The possibilities for harmonisation of vehicle taxation within the European Community are considered. Since Britain has a far higher level of taxation than most other European countries, any move towards harmonising tax levels would reduce taxes in Britain at a time when they should be increasing. Such moves should be resisted, but if they come then there would be a case for compensating action to relieve competing modes of part of their infrastructure costs

Valuing the Attributes of Freight Transport Quality: Results of the Stated Preference Survey

This paper presents the results of a survey of fifty firms transporting ten commodity groups, using an interactive stated preference game to obtain values of the rate reduction necessary to compensate for longer transit times, poorer reliability and the use of intermodal systems. Generally, the pattern of results is as expected, with the quality of the transport service being less important for low value products in industries with high levels of stockholding, and vice versa. Quality requirements are also generally less stringent when products are moving to depots than to customers. In a critique of the method, some reservations are expressed both about the reliability of the results, andabout the high cost and time of the survey method. Nevertheless, we conclude that overall the approach has worked reasonably well, and yielded much valuable data; we know of no alternative method which could have yielded quantitative valuations in these circumstances

The value of business travel time savings

The value of time savings for business travellers forms a sizeable part of the benefits from trunk road, rail and air transport improvement schemes. It is therefore important to possess appropiate values to place on business travel time savings for evaluation purposes. The normal approach in practice is to adopt the wage rate of the workers in question plus an increment for overheads and non-wage payments. In this paper criticisms of this approach are discssed and the implications of these criticims for the development of alternative methodologies for valuing business travel time savings are considered. Data fron two surveys of long distance business travellers and one survey of employers, which were carried out as part of an SERC financed project on business travel, is used to estimate values of business travel time savings for each of these different methodologies. Unlike previous studies considerable use is made of data obtained from stated preference experiments. Revealed preference data is also used to obtain value of time estimates. The results show that, for forecasting purposes, a value a little above the conventional 'wage rate plus' vaue may be appropriate. Although no empirical support is found for the assumptions on which present valuation conventions are based, the empirical results suggest these conventions yield values which are approximately correct, for our samples

Taxation of Road Goods Vehicles – An Economic Assessment

This paper reviews the current position, recent research and potential future areas of research relating to road track costs, with particular reference to Heavy Goods Vehicles. It opens with a theoretical discussion, which concludes that the appropriate basis for changing is long run marginal social cost, but casts some doubt on whether the existing cost allocation procedure achieves this. The main reason for this is the likelihood that the marginal capital cost per unit of traffic of coping with an increase in traffic volumes greatly exceeds the average capital cost per unit of traffic at the present time. The DTp method of allocating track costs is then outlined, and the sensitivity of the results to variations in a number of the key assumptions is tested. The results show that the DTp method may only be allocating HGVfs as little as half of their costs. Hence instead of covering their allocated costs by some 30% to allow for environmental effects, as the DTp. claim, it may be that these lorries are only meeting 65% of their allocated cost. The sensitivity tests that yield the above results reflect the following concerns: (1) FUEL CONSUMPTION DTp measures lorry mileage and deduces fuel used and hence fuel tax paid. However, their fuel consumption figures look implausibly high. We have used FTA figures instead. (2) TRAFFIC FLOW DTp currently allocate many costs to vehicle kilometres (e.g. drainage, winter maintenance, traffic signs etc.), but accepts that the demand for a new road arises in proportion to PCUs (passenger car units), i.e. giving more weight to lorries. Our view is that once a road is opened any general costs involved in its continued use should also be allocated by PCUs. (3) LORRY WEIGHTS DTp use lorry weights as reported on a self completion questionnaire, which naturally omit any overloading. We have used observed values from a large study in Cheshire. (4) CAPITAL EXPENDITURE DTp charge only what is currently being spent. Following cutbacks in all government expenditure, this amount is now some 50% lower than in the early 1970s. Since capital expenditure was roughly 60% of total road expenditure, this implies that cost allocations have fallen by 30% on this account. Our view is that even this understates the true long run marginal cost of road traffic. Although the precise figures are subject to much doubt, in every case there seems good reason to suppose that the proposition is broadly correct. Taken cumulatively, they would be sufficient to convert the existing overpayment by HGVs (which presumably is intended to reflect unquantified environmental costs) into a substantial underpayment. If the increase in road haulage taxation which these figures would imply is politically unacceptable, then there is a good case for corresponding action to relieve the rail and water modes of part of their infrastructure costs