Policy instruments (1) - Transport Policy and Planning in Great Britain - page 189

sources of funding for these projects and the scope for private sector involvement in
their delivery, operation and finance (12.4). We go on to review recent government
policy on transport investment to identify important changes in its amount and
pattern of allocation (12.5). Cost-benefit analysis is a technical tool used to guide the
allocation of spending both within and between categories of investment and we outline
its main features in section 12.6. Detailed guidance by the Department of Transport
on the use of this tool is however deferred to Part 4 as part of the consideration of
planning procedures, whilst discussion of the Government's current investment plans
is contained in Part 5.

12.2 The nature of investment
' Investment' refers to expenditure in assets from which benefits are enjoyed over a
period of time. In a transport context it encompasses both physical infrastructure (track,
interchanges and signalling or other control systems) and vehicles. Infrastructure is
fixed at a particular location whilst vehicles for the most part are not. (Some vehicles
are designed for use on a particular route or network, such as the London Underground,
and are effectively fixed as well.)
The distinction is important in influencing how assets may be provided. Those
which are transferable can have their nature and volume determined by an ongoing
competitive market (as is the case with most road and rail vehicles). By contrast
investment in transport infrastructure is usually the product of a 'one-off' decision and,
in its particular locational context, possesses something approaching monopoly status.
Coupled with this is the fact that, like other utilities such as water, energy or sewerage,
the value of any individual facility is usually a product of the network of which it is
part. This and the associated economies of scale reinforces their 'natural monopoly'
characteristics and explains why systems are typically owned by a single agency, either
within the public sector or subject to a special regime of public regulation.
Initial investment in the land, track, buildings etc. needed to create a transport
facility has to be accompanied by on-going spending on maintenance and operation
to render it functional. These two types of expenditure are known as 'capital' and
'revenue' respectively and, as we will explain later, are funded in different ways. Once
a facility is in existence however further investment may be carried out:

1 in structural maintenance or infrastructure renewal (where the life of a facility is

being extended but its performance is essentially unaltered) and

2 in enhancements (where its capacity, safety, speed etc. or ancillary impacts are

being improved).

In a developed country like the UK with well-established rail and road networks,
most infrastructure investment falls into these two categories rather than into wholly
new facilities. In this chapter we will be focusing on enhancements since this is the
main area of policy choice. Structural maintenance and renewal are nevertheless
extremely important since they enable continued use to be made of the very large
asset represented by the inherited physical stock. Although 'unglamorous' as a form
of spending, they normally deserve to be treated as commitments or 'first calls' on
any investment budget even though - during times of financial stringency especially
- there is the temptation for decision makers to cut back on them so as to maintain a
programme of more visible 'improvements'.