5. Financial and Economic Evaluation

5.1 Basis of evaluation 

An outline financial and economic appraisal of the strategic options outlined above has been carried out and includes the results from the following tasks:

• Assessment of rolling stock requirement and indicative outlays
• Assessment of infrastructure requirements and indicative outlay estimation
• Estimation of annual operating and maintenance costs
• Estimation of annual passenger demand and revenue effects
• Estimation of economic benefits to rail users and road users
• Calculation of Present Values and economic performance measures.

5.2 Estimated infrastructure capital outlays 

Table 5-A Summary of outlay estimates, risks and exclusions  

5.3 Ongoing operating and maitenance costs 

The costs in the evaluation include the relevant incremental costs affected by changes to the provision of services, rolling stock and infrastructure and do not include other existing costs which we would expect to be relatively unaffected by the route extension options; e.g. operations control, management, administration and other existing general overheads.

5.4 Annual passenger revenue 

Passenger demand and revenue assessment are based on a review of existing and historic revenue results of existing Island rail flows together with results from a Jacobs Consultancy rail demand spreadsheet model built specifically for this study. This model is primarily a trip rate model but also adjusts for changes to relative generalised costs for each option. The revenue included in the evaluation is based on overall UK rail revenue gain, Island revenue is also shown. We have assumed no underlying growth for the domestic intra-island flows nor for the cross-Solent rail demand in line with overall trends over the past seven years.

5.5 Results 

The economic value of each option comprises the incremental rail revenue to all operators plus unpriced benefits and costs incurred on the Isle of Wight. This approach is based on our assessment that the incremental demand (which is largely off peak) can be carried at no additional cost to mainline operators and that there are negligible unpriced impacts on the mainland (where most of the passengers new to the Island Line would have the same travel options as previously).

The economic impact includes unpriced User Benefits, which includes time savings to users of the proposed train services, and unpriced Non-user Benefits, which includes an assessment of the reduction in road traffic with resultant time savings, vehicle operating cost and accident cost savings to remaining road traffic. The values we have adopted are consistent with current values used for the Strategic Rail Authority, including the Island Line study, and are based DLTR recommended values. Economic benefit values are increased in line with forecast GDP growth.

The basis for our conclusions on the economic case for the options is the assessment of economic NPV. A variety of further evaluation measures may be adopted by potential funding bodies, for example the SRA, in their decision making which could include both quantified and unquantified factors (such as those representing integration and accessibility). Additional measures including, for example, Benefit/Cost ratio and NPV/ Subsidy may be used to enable benchmarking taking into account limits placed on the total subsidy available. The SRA Planning Criteria encompasses, in addition, unquantified benefits. In our view all the options for rail system expansion evaluated would contribute such benefits especially in the area of accessibility and integration.