Thursday, June 07, 2007

Why Do We Plan To Lose Money?

Audit Scotland has been invited by the Government to review the procedures used to forecast costs for the proposed Edinburgh tram and airport rail link projects. The review will cover the approach, the methodology and the scope of the assessment used to identify costs.

Why not the Borders rail line? Are they convinced that everything is OK with the forecasts for costs and revenue? Has the cost crept up from £155M to £200M or not?

The economic case for the railway showed it making an operating loss even after five years. They say that the line will generate revenues of £6.17m after five years. This will mean it will make an operating loss. On current cost forecasts for building the railway that amounts to something over 35 years just to repay the capital costs of construction – without taking into consideration any running costs.

Why would we build something to lose money?

2 comments:

Eoin Purcell said...

Perhaps the capital costs are extreme and seem unreasonable but what other factors have been left out of that analysis?

What do you save in traffic congestion, time saved, environmental damage avoided and quality of life improved? These are hard to price rationally but are relevant none the less.

Still I think the review seems in order given the disparity!
Eoin

Eoin Purcell said...

Perhaps the capital costs are extreme and seem unreasonable but what other factors have been left out of that analysis?

What do you save in traffic congestion, time saved, environmental damage avoided and quality of life improved? These are hard to price rationally but are relevant none the less.

Still I think the review seems in order given the disparity!
Eoin