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. • . a price barrier is not a satisfactory substitute for a licensing barrier'
Page 92
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NY idea that the road haulage licensing system can
be satisfactorily replaced by instituting control over rate-cutting has been effectively scotched by its main supporters, the Bow Group. Their principal recommendation to the Geddes Committee was that haulage licences should be issued freely to anybody with the right qualifications and that on the same conditions traders also should be entitled to carry return loads for hire or reward. The one operating condition was that the rate should cover the whole cost of carrying the individual consignment.
Having deliberated on the complete picture put to them by the Bow Group, the Geddes Committee have come back with a single question: How is it possible to determine the proper rate? They cannot have expected a reply so devastating to the cause it purports to uphold. To arrive at what they call the "fully compensatory" rate for a single load, the Bow Group find it necessary to evolve a formula which looks complicated however much they try to simplify it and which in any case must be highly suspect as a reliable guide.
FORMULA HAS 11 COMPONENTS
The formula has no less than 11 components. They are the fixed direct costs, the variable direct costs, an overhead factor, the consignment trip time, the loading and unloading time, the productive hours per week, the consignment mileage, the consignment weight, the normal capacity utilization on outward journey, a return load factor and a seasonal factor. Each of these items would inevitably be the subject of argument. For many of them a separate formula might be needed, with variables requiring formulce of their own and so ad infinitum.
Although the Bow Group do not suggest that hauliers would need to use this procedure every time they were asked to quote a rate, they would obviously have to bear in mind that some other operator, or even the provider of some other form of transport might challenge the rate and force them to substantiate it. To protect themselves and to meet a possible inquiry, hauliers would have to keep records many times more detailed than most of them find necessary at present. There would be at least as much red tape and paper work as the licensing system demands.
Basically, in fact, the Bow Group proposal would merely mean another equally elaborate form of licensing. They may have believed that they were harking back to some golden age when competition in transport was entirely free. All they have done is to indicate that Parliament 30 years ago had the choice of several ways in which to regulate the growth of road transport. The possibilities included licensing restrictions on hauliers and control over rates. The first course was adopted and there would have to be compelling reasons before a change was made to another method designed to produce the same results.
The main advantages envisaged by the Bow Group for their suggestion is that it would make hauliers more costconscious and in conjunction with the intensified competition resulting from the elimination of licensing would make c52
them more capable of winning back traffic at present• carried under C licence. Hauliers might well benefit from an examination of their costs, but it is difficult to believe that in general the hopes of the Bow Group would be realized.
Most established hauliers are well versed in the technique of calculating the proper rate. Otherwise they would not have stayed solvent for so long. Even the most feckless haulier does not charge an uneconomic price from choice. Where he accepts a low rate, it is at the dictate of his customer, who will often carry the traffic or threaten to carry it in his own vehicles if he cannot get the proper terms in his sense of the word. in the normal way, it is true, the C licence holder does not necessarily regard cost as the main consideration when he decides to use his own vehicles, but it is almost always the main consideration when he wishes to use vehicles belonging to somebody else.
Hauliers might say that the Bow Group are concentrating too much on their shortcomings. The ignorance of their customers on transport costs and rates is at least as great as their own. It is not sufficient for the haulier to be sure that he is quoting a fair and "fully compensatory " rate. The customer must also be convinced that he would lose money if he handled the traffic himself. Control of road transport by rates would make little progress unless the C licence holder were brought in This is obviously impracticable as well as undesirable.
OTHER DRAWBACKS There are other drawbacks which take the proposals of the Bow Group possibly beyond the scope of the Geddes Committee. Every form of transport for hire or reward would be affected: road, rail, coastal shipping, air, and even pipelines and other methods as yet untried. Each form of transport would require a separate formula and each would present its own problems. It is not easy, for example, to imagine how the proper rate could be estimated for the carriage of a certain consignment by rail. The railways in any case, in common with all large-scale operators, must have a standard tariff which applies irrespective of the loading factor and other circumstances on a particular journey. Some rates for individual consignments under this system are bound to be uneconomic, but the same excuse would not be open to many road operators who might be accused and convicted of rate-cutting under the Bow Group plan.
It would be wrong to suppose that the Bow Group have not raised an important issue. They speak of the "almost blind plunging that characterizes so much of the rate-cutting that is the bane of the industry today ". They offer instead a "rational, closely-argued analysis of costs ". Perhaps their fundamental error lies in supposing that every rate which is not "fully compensatory" is a bad rate and must be eliminated. Certainly a price barrier is not a satisfactory substitute for a licensing barrier, and it is ironic that such a proposal should come out at a time when the 'Government are seeking to abolish resale price maintenance.