Forthcoming change: base year update
Updated 28 November 2024
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Description: change of TAG default base year from 2010 to 2023
Unit: TAG data book, A1.1 (cost-benefit analysis), A1.2 (scheme costs), A1.3 (user and provider impacts), A2.4 (productivity impacts), A3 (environmental impact appraisal), A5.3 (rail appraisal) and TAG workbooks
Change announced: November 2024
Expected release date: May 2025
Description
This forthcoming change provides TAG users with notice of an update to the default base year recommended in TAG, which will be updated from 2010 to 2023. The change will become definitive in May 2025. A forthcoming change version of the TAG data book, which will be in a 2023 base year, will be released in November alongside 2023 base year versions of the TAG workbooks and common analytical scenario data book. Corresponding forthcoming change versions of TUBA, COBALT and WITA will be released shortly.
Detail
Background
TAG unit A1.1 – cost-benefit analysis sets out the recommendation of a default base year for both prices (the price level that monetised values are adjusted back to by default) and discounting (the year from which the discount factor starts accumulating). This aids the comparison of impacts across business case, and ultimately assists decision-makers in considering the monetised evidence presented to them.
The default base year in TAG was last updated in 2012, with 2010 adopted as the recommended base year. Over the intervening period, the monetary values presented in the economic dimension have become disconnected from current real-world prices, and this disconnection has accelerated particularly with recent high inflation. Consequently, presented 2010 values are more than 50% lower than if they were presented with a 2023 base year, making monetised appraisal results more difficult to conceptualise or interpret.
The recommended base year for both prices and discounting will therefore be updated from 2010 to 2023, to become definitive guidance in May 2025. 2023 has been selected as the latest year for which a full 12 months of inflation data is available from the Office for National Statistics (ONS).
Scale of the change
When changing solely the price base from 2010 to 2023, figures increase by 38.18% in line with the latest ONS GDP deflator figures (as per May 2024 TAG data book). When moving both the price and discount base year from 2010 to 2023, figures are expected to increase by 116.11%. This reflects the updated frame of reference for interpreting impacts. For example, a stream of costs and benefits that previously could be interpreted as being equivalent to a one-off monetary impact in 2010, would now be equivalent to a one-off monetary impact taking place in 2023.
These changes are purely presentational; there will not be any change in benefit-cost ratios, and hence value for money and the relative ranking of schemes, as both costs and benefits will increase in proportion. Net present values (present value benefits less present value costs) will increase by 116.11%, providing both the price base and discounting base change is implemented across all monetary impacts.
The above magnitudes of changes will also apply when applying to benefits using the lower health discounting rate (1.5% from appraisal year). For consistency of presentation, single-year tables in the TAG data book (e.g. A1.3.1) will also move from a 2010 ‘value year’ (the year that the economic variable represents) to a 2023 value year; for these tables, where both the price and value year change simultaneously, there is a 53.84% increase in the figures.
TAG appraisal tools
A forthcoming change version of the TAG data book (v2.0FC) will be published in November 2024 with all monetary figures updated to be in a 2023 base year (price and value year) by default. Users will (as at present) have the functionality to revert the price and value years to 2010, or another year of their choosing. 2010 will be retained as the initial forecast year for all forecast tables. The v2.0FC data book will additionally contain concurrent updates to operating cost parameters and marginal external costs, as set out in a separate forthcoming change notice.
The following workbooks will be updated to move the default base year for prices and discounting from 2010 to 2023. These workbooks will also be updated with the relevant inputs from the TAG data book to align with the v2.0FC data book, and will be published as forthcoming change versions in November 2024:
- air quality
- active mode appraisal toolkit
- cost proforma
- greenhouse gases
- landscape monetisation
- noise
- noise aviation
A new version of the CAS data book will be released, updating monetary values to a 2023 base year.
Forthcoming change versions of the relevant TAG software will be published shortly after this forthcoming change to reflect the updated base year. For TUBA, this will encompass an updated software version, plus economics files corresponding to the v2.0FC data book.
Guidance
Updated versions of all A1 units, A3 and A5.3 will be published as forthcoming changes in November 2025 to reflect the change in base year. The main changes are concentrated in unit A1.1 (cost-benefit analysis), which outlines the department’s approach to adjustments for inflation and discounting. These updates will take the form of changing references to the base year from 2010 to 2023 and updating worked examples to account for the change to 2023. Remaining, minor references to 2010 across units beyond those outlined above will be updated over a longer timeline.
Proportionate implementation of the base year update
The department recognises that the large majority of transport appraisals will currently use a default base year of 2010. Changing the default base year of appraisals can take time and resources; the proportionate update process in TAG allows judgments of proportionality to be made when considering to what extent appraisals need to be updated relative to the scope of decisions required and the surrounding risks.
The publication of a set date for when the change will occur (May 2025) allows users to plan their work appropriately. Where your work is due to report after this date, you should work to the updated values or guidelines if it is appropriate to do so, following guidance in the proportionate update process. The percentages referenced in the ‘scale of the change’ section can be used for a top-down adjustment to costs and benefits. However, given the scale of presentational changes in question, it is preferable that the change is implemented ‘bottom-up’ i.e. through applying the update to prices and discounting for the component parts of the appraisal, accompanied by suitable checks to ensure all aspects of an appraisal have been updated accurately.
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