DfT’s approach to landscape value
DfT have developed an assessment of the landscape cost of the first phase of HS2 (London – West Midlands). Applying their assessment process they value landscape loss at just below £1bn.
DfT apply a methodology developed by Department for Communities and Local Government (DCLG). DfT’s application is defective in how it deals with discounting, land type values, and mitigation. These defects have caused the resultant landscape valuation to be considerably too low.
By far the largest defect is the assumptions about future values and discounting that has a massive effect on the assessed value. While the DfT analysis adopts the ‘in perpetuity’ framework for its ‘central’ case (the results of which appear in the January 2012 economic analysis2), Web Tag (and Treasury Green Book) assumptions are not used consistently.
Using WebTag assumptions to assess the ‘in perpetuity’ landscape value gives an infinite cost. Using the fix of the ‘default’ discount rate gives landscape costs of about £100bn, which would have reduced the BCR by 7.3 (from 1.7 to -5.7) for the London West Midlands phase of HS2. Instead DfT adopt assumptions that produce a much lower figure, only reducing the BCR by -0.1 (from 1.7 to 1.6).
DfT’s assertion that £1bn is an ‘upper limit to the impact’ is plainly incorrect. It is implausible that the DfT analysis was prepared without appreciation of the issues with negative discount rates. The absence of any discussion in the methodology note is concerning. Given WebTag assumptions about discount rates and economic and income growth produce negative net discount rates, such a situation is the natural ‘central’ case.
The other defects in the approach concern the land type values (that give no recognition to national parks or AONBs), and the subjectivity of the values used for the impacts of HS2 (cuttings, tunnels etc) and the extent to which the landscape is already compromised eg by roads.
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