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Welter of Fare Applications Throughou
Page 56
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Experts Disagree on Reasonable Return on Capital Investment
TRAFFIC Commissioners throughout Britain were in the midst of a
welter of fare increase applications, during this and last week, occasioned by the recent wages and conditions awards to municipal and provincial Company bus workers. The Commissioners have worked at high pressure to authorize fares revisions to meet overwhelming increases in operating costs.
Two financial experts differed in their opinions on what represented a reasonable return on capital investment in public transport during a fares application before the Western Traffic Commissioners, at Bristol last week. Devon General Omnibus and Touring Co., Ltd., and Exeter Transport Department were granted authority to increase fares to meet the cost of the recent national wages award.
A total of 18 Devon local authorities opposed the proposals on the ground that the increases sought were in excess of actual requirements to meet the new charges.
Cost of the increase to Devon General would be £75,850 in a full year, but certain economies, including the introduction of one-man buses and the use of larger buses, would reduce this to approximately £67,000, it was stated. Of this £66,000 would be obtained from higher fares.
For the objectors, Mr. Paul Clarke submitted that the company's scale of fares was generally higher than those of comparable operators in the south and west of England. Mr. S. W. Hill, a financial adviser to local authorities, said that the most notable feature about the accounts of Devon General was that over a period of years the profit position had improved considerably.
Passenger Reaction The return on capital was relatively higher than that of any other operator in the area. If the application were modified to "take up some of the worst features • of passenger reaction," the position would be improved, he thought.
Statistics submitted showed that the percentage of profit to capital employed for the year ended December 31, 1959. was 10.99. The net profit in 1959 was £153,134 compared with 1.117,976 the previous year, and 1.103,774 in 1957.
The capital of the company, said Mr. Hill, had been raised by about £250.000 in the last eight of nine years. Of the higher amount allowed for increased fuel costs, witness said all the transport journals had predicted that prices would come down. There should therefore be no need for this increase. He thought that some of the advances in the lower stage fares were "irregular."
Mr. Hill agreed with Mr. S. D. Herington, for the applicants, that the company should be treated as a commercial undertaking and were entitled to conduct their financial affairs in accordance with generally accepted commercial
principles. He considered that a fair return on capital employed would he between 6-8 per cent. "This company," he added, "is seeking to pass on to the travelling.public too great a part of the increased costs it has to meet."
Mr. John Prentice, a chartered accountant called by the applicants, produced figures, published recently in Economist, which showed that the average return on capital of 413 companies was 18.8 per cent. In his opinion the earnings of Devon General were below the general average of commercial undertakings.
Mr. S. W. Nelson, chairman, announced that both applications would be granted. Exeter's application was in respect of country services only, as town facilities had been dealt with recently. The Commissioners did not consider that the return on capital was unreasonable, he added.
Local Services Affected Fares on many local services jointly operated by Warrington Transport Department and other undertakings will be increased from July 11, following the grant of a fares revision application by the North Western Traffic Commissioners, at Warrington on Monday.
Mr. D. Binns, for the corporation and joint operators, Crosville Motor Services, Ltd.; North Western Road Car Co., Ltd.; St. Helens Corporation; Lancashire United Transport, Ltd. and Messrs. Naylors Motor Services, said that an estimated deficit of £34,000 at the beginning of the last financial year had been reduced by re-routing various services.
The present financial year had started with a deficit of £17,000, but the recent wage increase, which would cost £28,812, would result in an estimated deficit of some £40,000.
Before the corporation could be involved in any capital expenditure they must have more revenue, said Mr. K. Cook, borough treasurer. There had been a large decrease in the passengers carried and the last fare increase, designed to produce £23,000, had been in June, 1958.
Basic structure of the revision was a minimum fare of 2d., plus Id. for every additional mile and -id. for a fraction of a mile. Of a total of 418 fares, 241 would be unchanged, 117 would he increased by id., 50 by Id., six decreased by 1(1., and four decreased by Id. No fare would be increased by more than Id.
Workmen's concessionary fares would be increased from 9d. to 11d. and children's fares. would still be half the adult rate, with a minimum of 2d. It was estimated that the new fares would produce £31,100.
To meet additional costs totalling £16,650, the Stalybridge, Hyde, Mossley and Dukinfield Transport and Electricity Board successfully applied for increased fares to the North Western Traffic Commissioners, at Hyde, last week. The changes come into operation today.
Similar applications were made by the corporations of Ashton-under-Lyne, Manchester, Oldham and Stockport and the North Western Road Car Co., Ltd., who operate jointly with the board.
Since the award of a modest grant, in 1957, which produced additional revenue of £11,000, considerably increased expenditure had been incurred. If they were not allowed to increase fares the board would have drastically to reduce services, it was stated.
Higher Working Expenses During the year ended March 31, 1960, a net profit of £8,478 had been made, said Mr. F. C. Heywood, secretary of the board. This was carried forward to the surplus of £25,107, but it was estimated that the working expenses for 1960-61 would increase by some 119,200. The amount of increased revenue sought by the application was £12,500, which was the minimum requirement to meet the need of the undertaking.
Mr. A. Smith, traffic superintendent, said that 21-d. and Rd. fares would be re-introduced. Of the 1,725 single fares, 35 per cent. would be increased by Id. Of the through single fares, on joint services, 21.7 per cent. of the total of 1,747 would be increasad by Id.
On joint return services the principle Of doubling any increase of the single fare would be adopted. Childrens' fares, at half the adult fare, would not be affected.
At Leeds last week, four Yorkshire bus undertakings were granted increased fares by the Yorkshire Traffic Commissioners. They were the West Yorkshire Road Car Co., Ltd., who requested increases to produce £141,000; KeighleyWest Yorkshire Services, Ltd., whose application sought additional revenue of £20,966; York-West Yorkshire Joint Committee, who needed an extra £39,108; and S. Ledgard, Ltd., and associated companies, who sought increases to total £35,000.
Fare increases designed to recoup twothirds of the cost of recent wage awards, were granted to East Yorkshire Motor Services, Ltd., at Bridlington, last week. It was stated that the impact on the company of the award would be £62,000 in a full year. This was made up of 127,000 for extra pay and £26,500 which represented the cost of the shorter working week.
The three existing mileage scales were reduced to two, which would be common up to seven miles. There was a proviso