Guidance

Forthcoming change: supplementary economic modelling

Updated 17 April 2025

Description: updates to dependent development guidance

Unit: M5.3 (supplementary economic modelling)

Change announced: April 2025

Expected release date: May 2025

Description

This forthcoming change comprises a major revision of TAG unit M5.3 on supplementary economic modelling (SEM). The changes incorporate findings from externally commissioned research and internal discussions about improving the currency, clarity and consistency of the guidance on SEM. To ensure the unit is correctly and consistently referenced, minor changes have been made to TAG units A2.1, A2.3, A2.4 and the value for money (VfM) framework.

The forthcoming changes announced in April 2025 will become definitive guidance in May 2025, alongside the forthcoming changes announced in November 2024, in line with the TAG orderly release process. We do not intend to publish forthcoming change versions of any guidance units or the TAG data book to accompany the changes announced in April 2025.

Detail

Summary of the changes

TAG unit M5.3 has been revised to provide improved guidance on selecting, specifying and testing supplementary economic modelling (SEM). The revisions reflect latest developments in advanced modelling techniques, specifically land use-transport interaction (LUTI), spatial computable general equilibrium (SCGE) and quantitative spatial economic (QSE) models.

The update comprises:

• revised opening sections of the unit with clearer explanations of the rationale and the application of SEMs in appraisal
• detailed and more comprehensive descriptions of advanced modelling techniques based on research reports that the department recently commissioned
• substantially expanded guidance on selecting different types of SEM for appraisal
• clearer guidance on model specification, validation and reporting in accordance with TAG requirements
• an updated and expanded list of references and relevant literature in the appendix

The structure of the unit was revised to render it more legible and succinct, setting out clearly the purpose and rationale of applying supplementary economic modelling in appraisal. Sections 1 to 3 provide an introduction and clearer description of the rationale for and basic requirements of using SEM. They are written for a broader audience who may wish to understand the purpose and salient characteristics of SEM at a high level.

The more technical sections 4 to 8 offer detailed information on the most relevant types of SEM. The sections are written for modelling practitioners, specialists and model peer reviewers. A distinction is now made between 바카라 사이트˜basic SEMs바카라 사이트™ (additionality models and reduced-form models) and 바카라 사이트˜advanced SEMs바카라 사이트™ (LUTI, SCGE, QSE models), the latter of which comprise models that simulate economic decisions or land use change explicitly.

After an introduction to the sub-section (4.1), each subsequent sub-sections focuses on one type of SEM. The previously separate sub-sections on 바카라 사이트˜additionality models바카라 사이트™ and 바카라 사이트˜reduced-form바카라 사이트™ models are now grouped into one sub-section called 바카라 사이트˜basic supplementary economic models바카라 사이트™ (section 4.2). This section is followed by 3 focussed sections, each on one advanced SEM바카라 사이트“ LUTI (4.3), SCGE (4.4) and QSE (4.5) models. Each of these subsections consistently provide information on:

• the salient characteristics of each model
• economic principles that underpin the models, including represented agents, their approach to equilibrium and market clearing
• model types, functionality and minimum data requirements
• the most promising uses in appraisal, likely cost and required expertise

The guidance on model selection (section 5) has been significantly expanded to include a wider set of characteristics, which are summarised the new table 1. The table compares all 5 models against 15 criteria pertaining to model attributes, selection criteria and main strengths and weaknesses. All 15 criteria are described and explained in the text of the section.

The previously lengthy section on 바카라 사이트˜model robustness criteria바카라 사이트™ is now split into 2 sections reflecting different phases of model development: on model specification in accordance with TAG requirements (section 6) and expected practice of model validation and assurance (section 7). Section 8 brings together in one place all aspects related to reporting model functions and results in the business case.

All references to literature and external sources have been checked and updated. An updated and expanded list of further readings on all types of SEM is provided in appendix B.

Minor changes to TAG units A2.1, A2.2, A2.3 and A2.4 and the value for money framework are made to reflect the new content and structure of the TAG M5.3, where the latter is referenced. Alongside, a small number of minor edits have been made to correct typographical or formatting errors and improve clarity where this seemed appropriate.

Anticipated scale of change on appraisal outcomes

The main goal of the revisions is to facilitate decision-making on supplementary economic modelling at different stages in the appraisal process. The update will be most relevant to appraisals of schemes for which wider economic impacts (WEIs) are expected to have a significant impact on the VfM assessment. Since the results of SEM are only included in the indicative benefit cost ratio (BCR), the impact on appraisal outcomes will be limited. Instead, it is intended that the revised guidance will increase the ease of and confidence in selecting appropriate modelling techniques for the estimation of WEIs and support more consistent and robust appraisal practice by scheme promoters, modelling and other stakeholders.

Contact

For further information on this guidance update, please contact:

Transport Appraisal and Strategic Modelling (TASM) division
Department for Transport
Zone 2/25 Great Minster House
33 Horseferry Road
London
SW1P 4DR

tasm@dft.gov.uk