Value for money evaluation
Overview
Before construction, an economic appraisal is undertaken to assess whether a project represents value for money and to support investment decisions. The appraisal compares the expected costs and benefits of a project over its appraisal period (60 years). These are used to calculate a Benefit-Cost Ratio (BCR), which alongside non-monetised impacts determines the project's overall value for money (VfM) category.
This page summarises the project's value for money five years after opening and explains any differences between the evaluation findings and the original appraisal forecast.
Did the project deliver value for money?
At appraisal, the M1 Junction 45 project was forecast to deliver ‘poor’ value for money. This was because the estimated monetised benefits, primarily journey time savings, were lower than the expected costs of the project. However, the project was expected to support development and growth within the Aire Valley, and many of these wider economic benefits were not fully captured within the value for money assessment. As a result, the project was considered worthwhile despite its forecast poor value for money category.
Five years after opening, the evaluation indicates that the project remains on course to deliver the value for money category forecast at appraisal. The assessment produced a reforecast Benefit-Cost Ratio (BCR) of 0.2 (poor), compared with an appraisal core scenario BCR of 0.8 (poor) and an optimistic scenario growth forecast BCR of 1.8 (medium).
The evaluation found lower realised journey time benefits and higher construction costs than anticipated. However, the overall value for money category remains consistent with the original forecast.
The value for money assessment is also subject to some limitations. Journey time benefits were the only benefits that could be robustly reforecast using observed evidence. The findings should therefore be considered alongside the project's wider contribution to supporting development, employment and economic growth within the Aire Valley.
| Measure | Appraisal | Evaluation |
|---|---|---|
| Value for money | Poor | Poor |
| Benefits | £7.6 million | £2.2 million |
| Costs | £9.2 million | £10.0 million |
(All monetised values are provided as present values in 2010 discounted to a 2010 price base).
Why do the evaluation results differ from the original forecast?
At appraisal, journey time benefits were forecast to be £7.6 million. When compared with the forecast construction costs, the project was expected to deliver poor value for money. This assessment reflected both the M1 Junction 45 improvement works and the subsequent Lakeside Way and signal improvements that were assumed as part of the project.
When considering only the National Highways improvement works, the appraisal indicated a higher value for money category of medium.
Five years after opening, journey time benefits have been reforecast at £2.2 million, compared with £7.6 million at appraisal. Construction costs were also higher than forecast, increasing from £9.2 million to £10.0 million. Despite these differences, the project is still expected to deliver poor value for money, which is consistent with the original appraisal forecast.
The differences between the appraisal and evaluation are likely to reflect changes in travel demand and network conditions since the forecasts were prepared, including changes in travel patterns following the COVID-19 pandemic.
Evaluation of costs
The project was delivered at a construction cost of £10.0m, which was higher than the anticipated cost of £9.2m (both in 2010 prices).
Evaluation of benefits
Journey time is the only benefit monetised at the appraisal stage and as such, is the only benefit considered for this evaluation. Other benefits, such as vehicle operating costs (VOC), indirect tax revenues, journey reliability, safety and environmental benefits are either assumed as forecast or considered qualitatively.
| Measure | Appraisal (£ million) |
Evaluation (£ million) |
Commentary |
|---|---|---|---|
| Journey Time | 7.6 | 2.2 | Assessed as lower than assumed at appraisal. |
| Vehicle Operating Costs (VOC) | 0.0 | 0.0 | Assumed as forecast. |
| Journey time and VOC during construction and maintenance | 0.0 | 0.0 | Assumed as forecast. |
| Wider and local impacts on the economy | N/A | N/A | The project has enabled major residential and commercial development in the Aire Valley, supporting up to 7,700 jobs and wider economic benefits that were not fully captured in the value for money appraisal. |
Note: Some values are presented as 0.0 when rounded to one decimal place. This does not indicate that no benefit was recorded; the underlying values are greater than zero.
Other benefits
The value for money assessment focuses primarily on monetised impacts, such as journey time savings. However, the M1 junction 45 project was also designed to support non-monetised benefits which are not directly included in the assessment.
One of the objectives of the junction improvement was to accommodate traffic growth from within the Aire Valley development area. Since the project opened significant residential, commercial and employment development has taken place in the surrounding area including (but not limited to) the development at Skelton Gate, a new community residential-led development of around 1,800 dwellings located to the south of the junction, and PLP Gateway 45 a major fulfilment centre for Amazon equating to circa 185,000 sqm of employment space.
Additionally, the project has enabled the development of the Leeds City Region Enterprise Zone (Aire Valley), which covers 142 hectares of development land across four sites including:
- Veolia’s £150m recycling and energy recovery facility
- Thornes Farm Connex 45 for circa 7,400 sqm of employment space.
- Logic Leeds which has permission for circa 148,600 sqm of employment space
- Temple Green, which has permission for circa 278,000 sqm of employment space.
Combined, these developments are expected to deliver circa 620,000 sqm of employment space. At a high level, and based on the assumption that 80sqm of warehousing / distribution development could generate one job, it is estimated that the development which has been unlocked by the enhancements to M1 junction 45 have delivered up to 7,700 jobs. The project has helped provide the transport capacity needed to support these developments and accommodate increased travel demand associated with growth in the area.
The opening of the Leeds Skelton Lake motorway services area has also provided additional facilities for road users and operational benefits for the strategic road network. These wider economic and transport benefits are not fully reflected in the value for money calculation.
Impacts of COVID-19 and freight journey benefits
Our analysis indicates that changes in travel patterns following the COVID-19 pandemic has delayed traffic growth on many routes. Initial analysis suggests these projects could experience around six additional years of uncongested operation compared with original forecasts. This change in demand may help explain why some projects are currently achieving lower benefits than expected, as congestion-related benefits are realised later than anticipated.
A further important consideration is the value placed on freight journey time savings. Historically, the value of time for freight was undervalued, these have recently been updated to better reflect the economic importance of freight movements. Applying these revised values alters the value benefits of projects. In most cases, earlier appraisals may have understated the economic benefits delivered to freight users.
