• Revised Milk Rates are Disappointing
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ON January 16 there appeared in "The Commercial Motor:" a statement that "A resolution expressing .general dissatisfaction with the level of rates paid-. to hauliers by the Milk Marketing Board was passed by a recent meeting of milk hauliers. in London."
I have for the past five or six years been telling hauliers and the Milk' Board that the rates were uneconomic and inadequate. The hauliers . have agreed, but the Milk Marketing Board has not, and the latter being the stronger there has been little improvement. On the contrary, the tendency throughout has been to depress rates.
It is the primary duty of the. Board, as I understand it, to control the distribution of milk and to arrange for that to be done in the most economic manner so thatja) the farmer gets a fair price for his milk and .(b) the public does not pay too muchifor it.
In carrying out that duty the Board, quite naturally, has to deal with the cost of transport of the milk and again; in fulfilling that duty, it must take reasonable steps to ensure that the best terms possible are obtained -from the hauliers who • render that service. The important word is "reasonable." • •
M.M.B. Unfair to Hauliers
My contention has always been that the Board is not reasonable or fair in, its dealings with hauliers. It takes advantage of its strong position to browbeat the small haulier and year by year to cut the price which is paid to him for his haulage. The Board adopts the policy of setting one haulier against another and frightens individuals into accepting terms which they would not otherwise even consider.
More than that, if the haulier even suggests that he shall appeal to a tribunal which has been set up—the Joint Haulage Committee—he is faced with the possibility that either the rate will be still further reduced or the Board will put on its own vehicles and carry the milk, thus putting him out of this particular business, The result, in nine cases out of 10, is that the operator, who in ail probability is by the terms of his licence limited in his activities to the carriage of milk, accepts the terms offered.
Upon reading the paragraph in "The Commercial Motor," 1 took immediate steps to try to discover what had been the outcome. I found that there had been a meeting between members of the •R.H.A. and the Milk Marketing Board and that a certain agreement had been arrived at, but the essential part was secret.
I thereupon set myself the task of ferreting out the essential information. The fact that this article has been so long delayed, following my reading of the original announcement, is due to the time taken to unravel this secret tangle.
Before I come to deal with that, however,, some general comment upon the situation and an indication of-a reasonable way of arriving at a.solution should be made.
Let me state at once that, I do not believe that it it possible to agree upon a national rate per gallon for the haulage of milk. Conditions, vary too widely for that to be practicable. To one haulier fd. per gallon ,might be ample and show,a good profit.To his neighbour lid. per gallon might be insufficient ao cover his costs.
I have dealt often enough with this prohlem and have demonstrated,! hope, that the main factors in determining a rate are gallonage. per mile first and cost per mile second. Some operators collect ,three times, as much milk per mile as others, and if the cost per mile be the sarne.it means that one of them must have a rate three times more than that of the other if profit is to be made
• Agreement on Costs . . .
The only practical way to' deal with,the subject is for agreement to be made On'a common basis of cost relating to each of the principal elements, especially maintenance and overheads, and that a 'reasonable percentage of profit should also be agreed.
There has for some time been a formula of that description in existence, but it has not been an agreed one. It has been arbitrarily laid down by the Milk. Marketing Board. The assessment of the elements of cost is not one which is fairly applicable to the general run of small operators; there Is no provision for profit, or at least -what provision there is is farcical. It would be so even if the assessment of the basic elements of cost was fair, and, as I have stated, it is not.
I have pointed out that the method of negotiation which the Board adopts is that of tackling the haulierindividually and negotiating with him alone. Couple that with the fact that from 75 to 85 per cent, of milk hauliers are "small men," having no more than two or three vehicles, and the reason why the Board prefers to deal with the haulier in this way will be understood, as also Will be the attitude of the Board during the recent conference. The R.H.A., I have gathered, made a valiant attempt to protect the operator from the machinations of the Board's officials. The suggestion was made that on those occasions When the Board Was pressing for a' revision of a rate, the R.H.A. should take a hand in the negotiations and put the case for the operator. The Board refused, pointing out that each contract was one between the individual and the Board and that negotiations with such a body as the R.H.A. would therefore be out of the question.
After some deliberation, a formula somewhat on the lines suggested was devised and, after some demur as to the terms, was perforce agreed.
This formula is to be applied to those cases in which the operator has not suitable audited figures for his costs, upon which he may base his claim for a rate higher than that which the Board proposes. The rate will be calculated on the basis of the formula and will have to be accepted by the operator. The formula, however, must not be circulated or made public. If there be a dispute and the haulier happens to know there is a formula he may at least ask for it to be applied. Presumably, if he does not know of it the Board will carry on the negotiations in the same old inimical way. it is easy to see why the Board insists on secrecy.
I have, fortunately, many milk carriers among my friends so that the formula, so far as 1 am concerned, is no longer secret nor will it he so to readers of "The Commercial Motor?'
Operators' Figures May be Ignored It can best be dealt with by reference to and comparison with the previous one which has been current now for some years. That is set out in Table 1, which shows the essential portion of a stereotyped request for information which the Board presents to an operator whenever his rates are to undergo revision. It is sent out, of course, blank, and the haulier may fill it in to the best of his ability. It does not, however, follow that the figures he puts forward are -accepted by the Board, which has its own particular and peculiar standards.
The figures I have inserted are typical of those of a small haulier A point to note is that the operator is expected to base his fuel costs on the bulk price of petrol. The allowance for cost per mile of tyres is decided by the Board, not by the operator, whose tyre wear -experience does not mean a thing to this omnipotent body.
The same rigid attitude is taken in respect of maintenance and depreciation, and Is. I0d. is allowed as the maximum for the maintenance of a vehicle weighing 3 tons unladen and carrying 5-6 tons of milk and churns. Depreciation is based on 150,000 miles, whatever may be the make of vehicle or the operator's experience as to its potential life. The 'final item is, perhaps, the most absurd of all, inasmuch as it allows lid. per mile to cover the operator's overheads and profit.
The New Formula I have previously dealt at length with the figures given in this formula; pointing out their inaccuracy and the insufficiency of some of them. 1 may return to that subject again.Meantime let me relate what has happened and describe the new formula.
It is set out in effect in Table 11. The first item to note is the separate provision for overheads. %These for the future are to be assessed at -£100 per annum per vehicle of the type mentioned.
The next thing to note is that there is specific provision for an amount to be allowed for hired haulage. This is an inevitable item in the accounts of a milk haulier whose vehicles are in operation seven days a week for 52 weeks a year, and who must, therefore, at times have substitute vehicles while those regularly employed are undergoing repair and maintenance.
The best that can be said of the provision now made is that it is an acknowledgment of the need for it. The operator is to be allowed 5 per cent. of the total of his standing charges and overheads to pay for hired haulage.
Now we turn to the running costs. Some concessions have been made here, but the operator also is compelled to give something in return First, the allowance for cost of fuel. In view of the fact that the operator may charge only at bulk rates for the petrol he uses, the R.H.A. has been able to obtain a grant of id. per gallon on account of cost and maintenance of the pump and tank. The allowance for tyres (34-in. by 7-in.) is less than before, being. 1.15d. as against 1.22d. That, perhaps, might have been expected had the 1.22d. been fair. As it is, the former injustice is almost, if not quite, perpetuated. There is an out-and-out acknowledgment of the made.34 quaey of the previous amount for maintenance in the new figure, which is 1.50d. per mile as against I.10d.
In assessing depreciation, the Board deducts the cost of a set of tyres from the first cost of the vehicle, in order to arrive at the figure upon which depreciation, still assessed over. 150,000 miles, is calculated.
There is, from now on, an acknowledgment of the fact that the operator does expect to make some profit. That is provided for by an allowance of 0.6d. per mile. This provision for profit needs to be considered from tsvci angles. First as to whether, assuming that all the other items in this "secret formula" be fair and reasonable, the profit is sufficient. Secondly, if, in the circumstances, this concession of 0.6d. per mile is, in fact, a concession at all.
Before dealing with the matter from these two aspects, look at the absolute profit as set out in Table IL This is 1153 for the operation of three vehicles for a year, vehicles engaged in one of the most arduous and difficult tasks which hauliers have to face. The net gain to the operator is less than £1 per week per vehicle. Is it fair?
Now consider this 0.6d. per mile from the point of view of a percentage profit on cost. I have -always stated, and it is generally agreed, that the profit percentage in the case of a regular contract may be less than is usually to be expected in other branches of haulage, and a fair allowance is 15 per cent. per annum on the actual cost.
The cost of operation of the three vehicles, according to the agreed figures in Table II, is £3,266 per annum. Fifteen per cent. on that is £490, and 1 maintain that it isnot unreasonable for an operator of three vehicles to expect to earn £500 per annum as the result of his operation. That would be equivalent to an allowance for profit of 1.43d. per mile, not 0.6d. per mile. Actually this £153 of profit is equivalent to barely 4.7 per cent. per annum on cost.
Next it is appropriate to consider whether this new arrangement be in reality a concession to the milk haulier or once more a sham and a delusion. The previous allowance was 1 id..per mile, to cover overheads and profit. The allowance for profit, and profit only, is now to be taken as 0.6d. per mile, thus leaving 0.9d. per mile to cover ,overheads, according to the old arrangement. We want to know if that be more or less than it was before.
The answer depends upon the mileage which the vehicle is running, per annum. H £100 be treated as an allowance 'of. 0.9d. per mile, the vehicle must cover 26,666 miles to juitify, the allowance of £100, so that if the vehicle runs 26,666. miles Per annum or over, the "concession" is any • thing but a concession. In other words, the operator is worse off than he was before.
If the vehicle runs fewer than 26,666 mites the operator is getting more, but a• very little more, than his former allowance for overheads and profit.
An average distance for a milk haulier's vehicle is 22,000 miles per annum. The average allowance, therefore, of £100 per annum for overheads is equal to 1.09d, per mile instead of 0.9d. per mile. The total allowance for overheads, and profit is 1.69d. per mile instead of 1.5d. per mile, an increase of 0.19d, per mile, which is barely one-fifth of a penny or less than q per cent, on his operating costs.
' There are two .matters which must be placed on record before I conclude this article. First, if it be thought that the benefit accruing as the result of this recent conference between the Milk Marketing Board and the Road Haulage Association be meagre, it should be pointed out that this is not the fault of the R.H.A., which is considerably handicapped by the fact that at these conferences there are not two but three parties.
Representatives of C licensees, that is to say of dairy companies which run their own transport, are also present. They are not interested in earning a profit on their haulage, or, at least, if they are, they are also interested in keeping rates for haulage at a minimum, because there are few such companies that do not at some time employ haulage contractors to supplement the capacity of their own fleets. . If they were to be on the side of the haulier they would be at a loss in their, dealings with operators, Secondly, I have alreaqy pointed out that this formula is supposed to.be secret, and that unless the operator knows about it he may still be handicapped in his dealings with the Beard. The R.H.A., however, has been successful in obtaining yet another concession with regard to these milk haulage
rates. In the negotiations between the Board and the individual haulier, the haulier may have the assistance of an expert who may either be an experienced milk haulier member of the R.H.A. or an adviser.
Incidentally, if the milk haulier has properly audited accounts of his operating costs, neither the secret formula nor the other considerations apply. His rates are based on his audited costs plus, presumably, 0.6d. per mile for profit.
S.T.R