First Wages Now Insurance Premiums
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Less Than a Fortnight After R.11.(70) Became Operative Many Hauliers Are Faced With Demands for Increased Insurance Premiums; Revised Costings for Four Rigid Oilers are
Given Here
ON December 16 I gave sample operating costs for five types of goods vehicles, ranging from a 10-cwt. van to a 16-ton " artic " oiler, inclusive of the wage increases as laid down in the Road Haulage Wages Regulations R.H.(70), which came into operation on December 19. To facilitate direct comparison with the corresponding costs when wages were calculated on the basis of R.11.(68), no adjustment was then made to any of the other nine items of operating costs, although it was known that increases in insurance premiums had been announced to take place as from January 1, 1961.
When preparing standard tables of operating costs, as distinct from specific calculations relative to individual vehicles, difficulty can arise when endeavouring to determine what would be a fair and reasonable average cost. This applies particularly to vehicle insurance. Here variations can arise because of the geographical location of the operator as a result of insurance practice of dividing the country into three or more categories of areas, relative to the element of risk. In addition to differences in the premiums paid relative to the carrying capacity of vehicles, there may also be excess premiums to be met because of high initial values, often calculated above a maximum standard valuation of £1,000.
" Standard " Costs
Superimposed on any combination of these two variables is the substantial difference in the amount paid by A-, Bor C-licence operators respectively. For example, an A-licence operator may have to pay 21 times as much as an ancillary user for insurance cover on two similar vehicles. Alternatively, a C-licence operator may be able to get comprehensive cover for an amount similar to that paid by a haulier in the same area for third-party insurance cover only.
More recently insurance companies generally have been paying increasing attention to the accident record of individual operators, with subsequent adjustments to premiums. Selection of a " standard" insurance cost has therefore become more difficult, and in the case of the two larger vehicles of the four chosen as examples in the following costings, namely, the 9and 164on rigids, alternative premiums have been included. The other two vehicles are a 2-ton van and a 4-ton lorry, both with oil engines.
For the purpose of wage calculations, the basic minimum rates of remuneration in Grade I areas as set out in R.H.(70) will be used. These are as follows: For adult drivers of vehicles with a carrying capacity of up to 5 tons--£13 18s. Od.; over 5 10 10 tons-£9 55. 6d.; over. 10 to 15 tons---£9 I ls. 9d4 over 15 to 18.tons-£9 19s. 3d.; over 18 tons-£10 8s. 9d.
Irrespective of any additions due to overtime payment, 1316 employers will also have to meet National Health contributions in respect of adult workers of 8s. 3d. a week, whilst many operators find it prudent to provide for employers' liability cover, costing approximately Is. per week per employee. An adjustment also has to be made to allow for two weeks' holiday with pay during the course of the year.
The total cost to the employer for the wages of a driver in Grade I areas, even when no overtime working was undertaken, would therefore be: For vehicles up to 5 tons capacity1.9 14s. 8d.; over 5 to 10 tons-£10 2s. 5d.; over 10 to 15 tons -£10 9s.; over IS to 18 tons-£10 16s. 10d.; over 18 tons£11 6s. 9d.
Dealing first with the 2-ton van, the unladen weight when fitted with oil engine would be around 2 tons 4 cwt. With a resulting annual licence duty of £27 10s., the equivalent cost per week would be us. This calculation, incidentally, is made on a 50-week-year basis to allow for two weeks when the vehicle may be off the road for either major overhaul or driver's holiday.
As just calculated, the cost of weekly wages for the driver will amount to £9 14s. 8d., assuming an adult driver is employed. Rent and rates in respect of garaging the vehicle are reckoned to cost 9s. 3d. per week. Prior to the pending increase in insurance premiums, the standing cost in respect of this item as shown in The Commercial Motor Tables of Operating Costs was calculated as equivalent to 9s. Id. per week. This was based on an annual premium of £22 10s., which was considered appropriate to C-licence operation in Grade I areas when comprehensive cover was required. It has now been announced that increases in premiums as from January 1, 1961, may range from 10 to 50 per cent., according to the accident records of individual operators.
We will assume here that the proposed increase amounts to 20 per cent, resulting in a revised annual premium of 127, the equivalent of 10s. 10d. per week. Assuming an initial outlay of £945 was incurred in the purchase of the vehicle, interest charged at a nominal rate of 3 per cent, would add Ils. 5d. per week. The total for these five items of standing cost would thus be £11 17s. 2d. It would be reasonable to suppose that the average weekly mileage for this type of vehicle would be comparatively low, say 200, with a resulting standing cost per mile of 14.22d.
With oil fuel purchased in bulk at 3s. 101d, per gal., the fuel cost per mile would amount to I.9511., assuming a rate of consumption of 24 m.p.g. Lubricants are reckoned to add 023d. per mile. With a set of tyres costing around £85, from which'a life of 30,000 miles was obtained, the tyre cost per mile would amount to 0.68d.
Inclusive of washing and servicing, maintenance is calculated to cost 1.$111., whilst depreciation adds 1.9911. per mile. To obtain this latter figure, it is first necessary to deduct the cost of the original set of tyres from the initial price of the vehicle, with a further deduction in respect of the anticipated residual value. The resulting balance is then divided by the assumed vehicle mileage life-100,000 in this instance. However, because of the low mileage this vehicle has been assumed to average, some allowance must be made for obsolescence, which will be reckoned to amount to a 10 per cent. increase in the cost of depreciation.
11 per cent. Up On 1956
This gives a total running cost of 6.6611. per mile and a corresponding running cost per week of 15 1 ls. Total operating cost per mile is 20.88d. and the total operating cost per week £17 8s. 2d. These figures compare with 20.16d. per mile and £16 16s, per week which applied prior to the operation of R.H.(70) and the increase in insurance premiums. It is pertinent to note that, compared with the total operating cost per mile of 20.88d. which will be applicable on January 1, 1961, the corresponding figure as shown in The Commercial Motor Tables of Operating Costs dated September, 1956, was 18.72d., an increase of over 11 per cent.
The 4-ton oiler would weigh, unladen, around 2 tons 14 cwt. with a resulting annual licence duty of £32 10s., the equivalent of 13s. per week. Wages remain the same as in the previous example, namely £9 14s. 811., whilst rent and rates are increased to 10s. 3d. per week.
Prior to the coming increase in insurance costs, comprehensive cover for an ancillary user in Grade 1 areas would have cost £25 10s. per annum. Allowing for a 20 per cent. increase as before, the weekly cost of insurance will then become 12s. 211. Interest charged on the initial outlay of £1,115 would add 13s. 4d. per week, with a resulting total for these five items of standing costs of £12 3s. 5d. Assuming 400 miles per week were averaged with this larger vehicle, the standing cost per mile would be 7.30d.
With fuel purchased in bulk, as before, at 3s. 10/d, per gal.. the fuel cost per mile would be 2.23d., when the rate of consumption averaged 21 m.p.g. Lubricants are reckoned to add 0.24d. and tyres 0.95d. per mile. This latter calculation is on the assumption that a set of tyres will cost 19 and average 30,000 miles.
Maintenance is increased to 1.84d. per mile. Depreciation, however, is decreased to 1.39d., despite the higher initial cost compared with the smaller van. This is caused by a combination of two factors. Because of the higher mileage there is now no allowance in respect of obsolescence and, additionally, the estimate of vehicle mileage life is raised to 150,000.
Total running cost for this 4-ton oiler is thus 6.65d., giving a total operating cost per mile of 13.95d. When the weekly mileage was 400 the total running cost per week would be 1:11 Is; 8d. and the total operating cost £23 5s. Id. These totals compare with a total operating cost of 13.5811. per mile and £22 13s. per week prior to the increases in wages and insurance costs.
The example of the 9-ton rigid goods vehicle, with oil engine, is selected from the quality dm., range and will cost approximately £2,890. With an unladen weight of 4 tons 15 cwt. the cost of licence duty would be £65 per annum, the equivalent of £1 Os. per week.
Drivers' wages will now come within the category of 5 to 10 tons, so amounting to £10 2s, 5d.
as already calculated for a minimum remuneration for 44 hours.
Rent and rates arc again increased, this time to 12s. 3d. per week.
In contrast to the two previous examples, it will now be assumed that this vehicle operates under A licence, with alternative costings for insurance appropriate to this class of operation and relative to either third party or comprehensive cover. Inclusive of the assumed increase in rates of 20 per cent., it is reckoned that the insurance cover providing third party cover would cost the equivalent of £1 9s. 4d. per week, whilst a comprehensive policy would cost £2 10s. 5d. per week.
With interest charged at a nominal rate of 3 per cent, as before, a further £1 14s. 8d. is added to the standing costs. making a total of £15 14s. 811. It will now be assumed that 800 miles per week are averaged, with a resulting standing cost per mile of 4.72d. Where comprehensive insurance cover was provided, the standing cost per week would be £16 15s. 911.
Fuel cost will now be based on an average of 12 m.p.g. with a resulting cost per mile of 3.9011.. whilst lubricants add 0.2611. A set of tyres will now cost around £304, but with the mileage life increased to 40.000, the tyre cost per mile would be 1.8211. Maintenance is estimated to cost 2.4611. per mile.
Calculating depreciation by the same method as before, but now allowing for an estimated vehicle mileage life of 300,000 for this quality class vehicle, the cost per mile becomes 1.81d. Total running cost for this 9-ton oiler thus amounts to 10.2511. per mile, or £34 3s. 4d. per week. Correspondingly, the total operating costs would be 14.9711. per mile and 149 18s, per week when only third party cover was provided, or 15.29d. per mile and £50 19s, Id. per week inclusive of comprehensive insurance cover,
Eight-wheeler Costs The rigid eight-wheeler would have an unladen weight of around 7 tons 10 cwt. with an annual licence duty of £120, the equivalent of £2 8s. per week. Wages would now cost a minimum of £10 16s. 10d. per week, while rent and rates are assessed at 13s, 4d. Assuming, as in the previous example, that this vehicle is operated under A licence, the cost of insurance per week would he £2 9s. 711, for third party cover and 15 4s. For comprehensive insurance.
Based on an initial outlay of £4,075, weekly interest charges would now amount to £2 85. 10d., giving a total standing cost per week, with third party insurance cover, of .118 16s. 7d. or 5.6511. per mile, again assuming an average of 800 miles per week. Inclusive of comprehensive insurance cover, the total standing cost would amount to £21 1 Is. per week.
With an average rate of consumption of 9 m.p.g., fuel cost per mile would be 5.19d. Lubricants cost 0.28d. and tyres 2-.5411. per mile, based on a cost per set of £424. Maintenance is now reckoned at 3.0I11. and depreciation 2.5611. per mile. again assuming a vehicle life of 300,000.
Running costs for this eight-wheeler thus total 13.5811. per mile or £45 5s. 4d. per week, and operating costs 19.2311. per mile and £64 Is, 11d. per week. With comprehensive insurance cover, the total operating cost per week, when averaging 800 miles, becomes 166 16s. 411., or 20.0011. per mile. S.B. R19