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Transport Economics by C. H. Sharp (auth.)

By C. H. Sharp (auth.)

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These are then discounted to give the 'present value' of the streams of costs and benefits. Given the discount rate that is agreed for all similar exercises in the public sector, the costs and benefits for the first year after the base date for the comparisons are reduced by the factor 1/( 1 + r). Cost and benefits for the second year are reduced by 1/(1 +r)l, those for the third year by 1/(1 + r)3 and so on. The net present value (discounted benefits less discounted costs) is then divided by the capital cost of the scheme, and the schemes with the largest positive ratios are selected.

The British Treasury has traditionally opposed the 'hypothecation' of taxes, the allocation of taxes to cover a particular form of expenditure, but when a tax falls exclusively on the users of a service supplied 'free' by the State then clearly the yield from this tax should be taken into consideration when the case for making a charge for this service is examined. Road users can thus be said to con- 47 tribute towards the cost of supplying road space to them when they pay fuel tax and licence duty.

See M . G. Kendall, A Course in Multivariate Analysis. Griffin, 1957. 57 to Modena. 1 The explanatory variables were the differences in journey times and costs (assumed to be equal to the autostrade tolls) on the two pairs of routes. From this and similar research work certain general points about the value of leisure time can be deduced. Most studies showed that there is a relationship between the valuation put on time savings and income. Thus Beesley found time savings to be valued at 30-50 per cent of hourly income, Quarmby at 20-25 per cent and Lee and Dalvi at 15-45 per cent.

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