* The Economic case begins with a review of the critical success factors for the project. The first of these is ‘partnership strategic investment objectives’. These objectives are not defined and thus no basis is provided on which to evaluate whether any of the proposed solutions meet the investment objectives.
- The Critical Success Factors do not include an allowance for the mitigation of environmental damage. This has two components, an ecological component (loss of habitat) and a carbon emissions component. Failure to allow for the cost of the environmental damage in the figures given in Table 3.4 means that the costs of each option are understated and the benefit:cost ratio over stated.
- Given the inherent uncertainty in climate change models, is it appropriate to consider a scheme with such a long lifespan (100 years)? The risk that climate change models will be inaccurate is high. A scheme with a shorter term (20 years?) with the option for a second phase would greatly lower the financial risk of the project as well as increase the likelihood of achieving the desired return.
- In conducting any economic impact study it is usual to adopt a Business As Usual (BAU) case as the baseline against which interventions may be compared. However, the baseline scenarios (‘Option 1 - do nothing’ and ‘Option 2A-do minimum’ scenarios) assume a backtracking of current flood relief efforts which is unrealistic. The correct baseline is 'Option 2B-do minimum sustain. This means that the benefits of the other options are over stated.
- The economic cost of flooding in Oxford is assessed at £1.2 billion over 100 years. Option 2B which costs only £3.7 million reduces the economic cost to just £290 million – thus current flood mitigation measures already reduce the economic cost of flooding by 75 percent. Option 5B reduces the economic cost to £109 million but costs a whopping £97 million offering much poorer value than existing flood measures.
- The PV results are critically dependant on the probability of flooding in the future, which in turn, depend on climate change. The figures are based on the assumption that the risk of flooding more than doubles over the next 50 years – this is far from guaranteed.
- Current flood measures (Option 2c) have a capex cost of only £3.7 million – a figure we have certainty over. The final cost of Option 5b is still unknown. Given the very large scale of the project, the risk of a cost over-run is high. Costings appear to be indicative but may be much higher once fixed price contracts from actual contractors are sought.
- The cost benefit analysis should be prepared on the basis of the current flood risk which is known and quantifiable and not on the basis of an unknown risk in 50 years' time using climate change models which are inherently unreliable. Option 5b is certain to incur very large costs (and considerable environmental damage) while the benefits cannot be quantified with any degree of certainty.
- It would be financially much more prudent to invest in smaller scale flood defences until it becomes apparent that the flood risk has increased to an extent that would justify the level of expenditure implied by the project.
- The government (HM treasury) should assess whether greater economic benefits could be derived from this expenditure elsewhere in the country.
- The scheme should also be benchmarked against other similar schemes that have been carried out in the UK and Europe to ensure that it delivers value for money.