Grouping as a Solution of the Road-Rail Charges Problem?
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THE crux of any post-war reconstruction proposals in the transport industry is undoubtedly the question of charges, particularly those relating to the railways. Prior to the advent of the internal combustion engine there was a long period of railway monopoly and, in consequence, railway rates and many other matters were regulated by Acts of Parliament. The classification of railway rates had its origin in the canal and turnpike charges, and the obligation to publish rates and schedules went back to a Railways Act of 1873. As is well known, under the Railways Act of 1921, the railways were amalgamated into four main groups, but the respective legal obligations upon the railway companies were continued because the threat to monopolistic conditions, as a result of the advent of the internal combustion engine, was still regarded merely as a threat.
Under the 1921 Act a new and more complicated gysiem of charges and of classification was devised but, by the time it came into operation, in January, 1928, the situation had been transformed, and the threat of road transport competition was not only a reality but a menace to the financial, stability of all the railway companies. In the absence of fresh legislation, that is largely going to be the position after the cessation of hostilities. As traders, we cannot remain indifferent to such a situation.
The Minister of War Transport, Lord Leathers, is fully alive to the serious position which must be faced. He has stated that, whatever the merits of competition in stimulating enterprise and efficiency, it is evident that if it be carried so far as to undermine the stability of services essential to the community and to .commercial ,interests, its effect will ultimately prove damaging to the national interests. For' example, it is pointed out that if railways on which coal and many other basic traffics depend, be deprived of their higher-grade traffics by the competition of road transport, they must, in the long run, either obtain compensating revenue by increasing their rates on traffic they can retain (largely traffic in Classes 1-6—coal, iron ore, pig iron, limestone, etc.), or sink into financial impotence.
Future Planning and Road-Rail Charges Schedule Lord Leathers remarked that, until this persistent road rail is solved, neither the railway companies nor the professional road hauliers can plan their own future with confidence. Trade and industry are, of course, just as vitally concerned.
Railway rates have, in the main, been based on " what the traffic will bear," although there have been other factors such as canal, coastwise and road transport competition. Parliament has always had a say in the question of rail rates and charges, indeed, an Act of Parliament was necessary before a railway company could function. To every initiating Act of Parliament was attached a schedule of charges, and it is interesting to recall that, from the outset, a different scale of charges was laid down for various classes of goods; 'in other words, a classification was considered necessary. Take the Stockton and Darlington Railway, established in 1825. It was authorized by Parliament to r.harge as follows:—
(a) Limestone and all sorts of manure—not exceeding 4d. per ton per mile. (b) Coal, coke, cinders, stone, marl, sand, lime, clay, ironstone and other minerals, bricks, tiles, slates and all gross and unmanufactured articles and building materials—not exceeding 4d. per ton per mile.
(c) For all lead in pigs or sheets, bar iron, timber, staves and deals and all other goods and commodities-not exceeding 6d. per ton per mile.
(d) For all coal for shipment at the Port of Stockton —not exceeding id. per ton per mile.
Two points strike one. First, the principle of equal mileage—the same or equal charge for every mile, whatever the distance. Secondly, whilst coal for domestic use is chargeable up to 4d, per ton per mile, the export rate must not exceed id. per ton mile. Was that a hidden subsidy for our exports of coal? The principle of equal mlleage was discarded for the tapering principle when the great revision of Parliamentary maximum charges took place in 1891-1892, following the Railway and Canal Traffic Act, -1888.
How Charges on the Tapering Scale Work Out The idea of the tapering scale, of course, is that whilst for a particular commodity the -charge is a regular one all over the country for a given distance, the charge per mile decreases as the distance lengthens. As an illustration, hardware was in the old Class 3, and the scale for conveyance ran as follows:—
For the first 20 miles--3.1d. per ton per mile. For the next 30 miles-2.65d. per ton per mile. For the next 50 miles-2.0d, per ton per mile. For -the remainder of the distance-1.8d, per
ton per mile.
The tapering principle is still applied in railway rate-. making, and is, obviously, a reasonable one. At the same time, by reason of competition from other forms of transport, the bulk of rail traffic is carried at exceptional rates, that is below the standard charges so that, for all practical purposes, the principle of equal mileage or a tapering scale has little bearing on the actual railway rate charged.
The railway companies maintain that it is impossible to fix rates on the basis of cost of service as they are unable to ascertain, with any reasonable degree of accuracy, how to allocate the various charges concerned. Eor example, passenger and freight trains use the same permanent way and both are signalled from the same boxes. Then, it is necessary to tranship some goods two or threetimes more often than a similar consignment travelling an equal distance to another part of the country.
Goods trains run to schedule, as do passenger trains and, whereas on some days a given train may be made up to its Maximum weight capacity, there are times when it is loaded up to perhaps only 33i per cent. Yet the cost of haulage and the wages of drivers, firemen and guards remain constant. Quite bluntly, there is no principle of rail-rate making, and the quantum of any rate is left, more or less, to the rates clerks in the respective chief goodsmanagers' offices.,
• rates clerk fixes the rate as high as he thinks the trader vill pay, and so we get " what the traffic will bear," It is only fair to say that the rates clerk is not left entirely without guidance in the matter. For example, he knows the classification in which a iven commodity is placed
in the general railway classification. He knows the corresponding rate for analagous traffic carried at exceptional rates, and .he is acquainted with the representations submitted by the trader as to competition from traders in other districts, and the possibility of the traffic passing by road or water, In the rates department of the chief goods-manager's office, different classes of traffic, e.g., iron and steel, are dealt with by one section, and the clerk in charge acquires, •in the course of time, an expert knowledge of the conditions of that trade.
His objective is to fix the rate as high as he thinks the trader will pay and, above all, to encourage traffic to pass, because all revenue is a contribution to offsetting the railway company's large overheads. The Railway Rates Advisory Committee, of 1920, in fixing the classification, said in its report:— .
" The problem, therefore, is to distribute the charges over the various classes of traffic, both passenger and merchandise, so 'as not.to restrict the flow of traffic. This can be done only by dealing with the problem as a whole, and placing upon the traffic which will bear it a high rate, whilst sparing, as' far as possible, the traffic which might cease to pass if rated too heavily."
The operative words are " as a whole." The present classification was arranged on the basis of the traffic available when road transport wasnot regarded as a serious competitor but, of course, there has since been a considerable diversion of highly rated traffic from rail to road and, moreover, this diversion is permanent. Generally speaking, the type of traffic concerned, quite apart from rate, is more conveniently and appropriately carried by road. Short of statutory restriction the advantages which road transport enjoys in respect of many categories of traffic is permanent. It follows, therefore, that the total pool of traffic likely to be carried by the railway companies in a normal year is substantially different from that of 1920. The railways, in consequence, are left with a classification based upon a pool which no longer exists.
The dilemma of the railway companies is that, to raise additional revenue they must look, in the main, to increased rates on low-graded commodities, but that would be quite contrary to the national interest. Taking pre-war figures, from start to finish, the cost of rail transport on every ton of steel delivered to inland destinations averaged 26s., which was a heaty percentage on a ruling price of £8 to £10 per ton.
Iron and Steel 25 per cent.
of; Rail Tonnage According to Mr. Impey, transport manager of Dorman Long and Co., Ltd., from the raw material to the finished product, iron and steel represented 25 per cent, of the total railway tonnage in pre-war days, and approximately 19 per cent. of the total receipts. Allied to the iron and steel industry was an enorrnoas coal and coke production and consumption of 30,060,000 tons annually. In addition, there were limestone and ironstone. These materials yielded 44,500,000 tons of traffic to the railways and £7,000,000 in carriage. Pig iron, semi-finished and finished steel, .represented another 24,000,000 tons and £10,000,000, making a total of nearly 70,000,000 tons of material and, approximately, £18,000,000 in receipts. These are enormous figures. All this traffic is properly conveyed by rail, much of it from private siding to private
siding.
I do not want to labour this question of low rates for basic raw material, but I would draw attention, for example, to the transport involved before a ton of bolts is available for transport to a buyer of bolts. For every ton of bolts marketed there has been the haulage of four tons of iron ore, coal, coke, lime, etc., to the blast furnaces, the transit of the resultant pig iron to the steel works, the billets to the re-rollers, and the bars to the bolt manufacturers. Such material is of small value for its bulk, the carriage equalling a high percentage of its delivered price. Moreover, most of the material is totally lost in the process of manufacture.
On a" cost of service " basis the railway'company could haul a wagon-load of bolts as cheaply as a wagon-load of 'iron ore, but I think I have said sufficient for it to be realized that no such basis could be entertained by the railway compapies. " What the traffic will bear " must be the guiding consideration for railway-rate making.
There is another aspect of the " cost of service " basis of charges. If applied strictly, the rail rate on similar traffic, conveyed the same number of miles where the traffic was dense, and better wagon loading and train loading obtained, would be lower than in districts where traffic was less dense. As I understand the matter, it is generally considered that, after the war, industry should be dispersed, and depressed areas 'liquidated, therefore, it would be in the national interest to continue the present basis of' charging rather than confer preferential rates on The areas where traffic is dense. Of course, it could be argued that the prosperous area was subsidizing the less prosperous area. And why not?
I think it will be generally agreed that our basic industries are vital to national prosperity, and-that " what the traffic will bear " is the only possible basis of charging.
Now we come to general merchandise, the traffic for which both road and rail compete. In fhis connection, whilst the railway companies have an elaborate classification, say, Classes 7 to 21, the professional road hauliers, apart from the factor of bulk, do not discriminate between one class of traffic and another. Taking all the traffic handled by railway companies the Ministry of Transport returns show, that on an average haul of 56 miles, the average receipts for all categories of traffic gave only 13s. 3d. -per ton, Why Rail Must Obtain Share of General Traffic ' These figures show the competitive ability of the railway companies if they were disposed to smash road competition. At the same time, the burden upon the low-rated traffic would be paralysing in its incidence because the average receipt per ton-mile on coal, coke and patent fuel is only 1.04d., and .99d. per ton-mile on other minerals in Classes 1 to 6. On every greund it is obvious that traffic in Classes 1 to 6 should remain on rail on substantially the existing basis of charges. If the railway companies be unable to obtain a reasonable share of general merchandise in competition with road transport we have all to face up to a serious situation: In November last, Mr. Noel-Baker, Joint Parliamentary Secretary, M.O.W.T., said that every competent person should now be facing the basic questions:—What kind of rates system did we want? What should be the basic principle for calculating charges? Should the system aim at diverting certain classes of goods traffic—slow, heavy, perishable, fragile—to the means for transport which can move them best? Could we, by such rate adjustments, get a proper division of function between the different means for transport? What method and what machinery of tribunals would be required to protect the interests of traders and the public?
Mr. Noel-Baker raises a series of fundamental questions to which the best brains in the carrying industry have not provided answers. To understand the complexity of the problems it is necessary to consider the constitution of the road transport industry. Of the vehicles on the road 70 per cent, are owned and operated by traders. Whether you attempt to stabilize local or long-distance rates, this is a factor in the situation which cannot be ignored.
Prior to the war, there was no restriction on the increase of the fleets of ancillary users. The more C-licence vehicles on the road the smaller the demands of traders for the services of professional road hauliers, hence it was incumbent an the Aor B-licence holders to make such charges and render such services as would induce the trader to refrain from increasing his fleet. One effect was to keep road transport charges on a competitive basis. I think this is a right the trader must retain. After all, on long-distance traffic the dice is loaded against him because of the legal enactment that he must not carry the goods of another trader.
The prbfessional hauliers own about 145,000 vehicles, split up amongst some 60,000 different operators. The A-licence holders operate entirely for hire, but the B-licence operators carry their own goods and those of other, people.
The latter vary considerably in their activities. Some operate transport largely for hire and are virtually A-licence • holders, but others are
scarcely distinguishable from C-licence operators.
In addition to a variety of owners there is an equally varied range of vehicles from 5-cwt: vans to multi-wheeled. lorries, to say nothing of tippers, tankers, refrigerator vans, furniture vans, and vehic:ei with various types of special body to carry goods such as glass and motorcar bodies. Then there are vehicles of the mechanical horse type which are suitable only for local work.
The fundamental factor in the situation is that, whilst . there is a number of road hauliers owning some hundreds
• of vehicles, by far the greater majority of professional operators consists of owner-drivers or the small-owner class,
• say, au average of three vehicles per owner. What a headache these people are to the planners and civil servants, • but what splendid service they have rend'ered to trade and industry! Frequently. these men are driver, mechanic, salesman and clerk all rolled into one. But for this multiplicity of ownership, I feel confident the railway companies would have bought up, or obtained a controlling interest in, the road haulage industry.
Roughly speaking, we can , divide hauliers into those engaged on local work, those using special types of vehicle, and long-distance operators. It is the last named who compete with the railway companies, and it is my opinion that a statutory schedule of charges is necessary if we are to achieve fair and just competition with the railways.
Grouping Would Not Interfere with Independence The first job is to induce the small hauliers to form • ' operational group of, say, 51 vehicles. The area involved should be small and all operators in the area concerned should be invited to join. Each operator would preserve his independence, and run his business in his own way. The group would agree to work together, and if any member of the group had more work than he could perform, he would pass it to the chosen head of the group to divide up amongst the other members of the group. The group sould arrange co-operative buying and •insurance. Every
• member would advise the group leader at the appointed zontrol office whenever he was short of work, whilst large sontracts could be accepted and ,divided amongst the individual operators.
• The basis of charging would be on cost of operation, plus an agreed percentage of profit. A rates schedule would be devised on this basis so that no operator would be obliged to carry any traffic at an uneconomic rate. Some form of classification would be necessary and factors like value, bulk, susceptibility to damage, etc., would have to be taken into consideration, The Ministry of War Transport introduced a schedule of charges according to the capacity of the vehicle, and the
technical journals have published average costs, so that there should be no insuperable difficulties in devising a rates schedule on a tonnage basis, and according to the size or„ bulk of the consignments. I favour group rates. A schedule of road transport charges has been in operation for small lots by , express carriers and, given goodwill, larger lots could be catered for hi a similar way. I am afraid exceptional rates would be necessary. Standard rates should be in existence for 12 months and . then the whole subject of freight charges, by road transport vehicles, should be considered by an enlarged Rates Tribunal appointed to consider rail, road and canal rates. In conjunction with the Road and Rail Central Conference, I do not see why the difficulty of correlating road and rail rates should not be attempted. The road rates would be economic and the rail rates, to a large extent, would correspond with them. Obviously, the railway classification of goods would need complete revision, and only time would show to what extent the railway companies could ' hold traffic on such terms in competition with road transport.
The Submission of' Evidence • to a Rates Tribunal It may be necessary, in the national interest, so to adjust road and rail rates that traffic is influenced to a • given form of transport This would be the function of the Rates Tribunal. The traders and operators of all forms of transport would submit evidence and make representations to this body, just as Was done before the war by traders and the railway companies to the Railway Rates Tribunal.
I think the new Tribunal should sit more frequently than the Railway Rates Tribunal. It should be an enlarged body with two representatives of the railway companies, two of the professional road hauliers, two of the traders '(one representing the fight trades and the other the heavy industries) and one canal carrier. Most traders in the past have considered that the Railway Rates Tribunal was not in a position to judge whether the railway companies were being operated economically and efficiently. The members of the • new Tribunal, in addition to their competency should, where considered necessary, have power to call for any documents and conduct any inquiries into railway operations. In this connection I am sure the railway companies would be only too glad to co-operate.
I think I have said sufficient for the purpose 'of discussion of this thorny question, the importance of which _cannot be exaggerated. After all, as traders, we pay' the piper and should call the transport tune. Let us, therefore, put our ideas into the melting-pot and see if we can produce a system of transport charges which will promote and foster general prosperity.