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The money game
LIKE MOTHS that fear the candle but cannot leave it alone hauliers return again and again to the subject of rates. Hardly a week passes without an announcement of an increase by one group of operators or another. They seem to take a fearful delight in testing how far they can go without attracting the attention of the Government.
They are probably safe enough. It is four years since the Prices and Incomes Board decreed that general rate recommendations were Wrong. During that time many items of cost have risen sometimes as a result of Government policy. Higher standards are made compulsory and are clearly more expensive to maintain.
The Road Haulage Association has a duty to bring these items to the attention of members and of trade and industry. Hauliers would be foolish not to act on the advice. There is nothing here to which the Government can object.
'Guidelines' Trade and industry may still be confused. There seem no longer to be what are described in the modern cant as "guidelines." Early this year the RHA chairman, Mr. Noel Wynn, sent a broadsheet to every member outlining the principal changes in costs since his previous message on the same theme.
In conformity with official policy he made no specific recommendation. Many customers would have preferred him to name a figure which would have given them a clue when considering a subsequent request from a haulier. Partly as a result of their inquiries a suggestion of 10 per cent was given general currency.
Nothing was done by the RHA to discourage the supposition—rather the reverse. Hauliers were bound in any case to seek a rates increase to meet their mounting costs. Many of them negotiated with reasonable success at a level of around 10 per cent.
The pattern was not general. Some operators settled at a lower figure with an indication that they would raise the subject again when the effect on their businesses of such items as plating and testing was more clearly known. Some waited until shortly afterwards the Chancellor of the Exchequer added 3d a gallon to the fuel tax.
For one reason or another the process has spread over several months. Announcements are still being made by large individual organizations and by local and functional groups of immediate or forthcoming increases of as much as 12+ per cent. It is almost impossible to determine whether the operators concerned last imposed an increase early in 1969 before the Budget or soon after the Budget; what was the amount of the increase; or what items of cost it took into account.
Fresh items are continually being added. Apart from the higher fuel tax the April Budget increased SET by lOs 6d a week. Although most hauliers can claim a return of this tax they lose the use of the money for six months or so. Garages are even less fortunate and for this and other reasons the cost of outside repairs must almost certainly
be going up. There have also been two increases this year in the price of tyres.
Further uneasiness arises from possible cost increases which have not yet taken effect. It would be astonishing if the new wage proposals were not confirmed. The reduction in drivers' hours next March will hit some operators and most of them will have to make the change well in advance so as not to disrupt their services. The financial consequences of operators' licensing and of the heavy goods vehicle driving licence are not easy to assess but will certainly not mean lower costs.
Reasonable estimate A reasonable estimate is that since Mr. Wynn's letter there have been cost increases of around 5 per cent and that other unavoidable changes will add perhaps another 2+ per cent by the end of the year. In other words there is already room for a new assessment. When it comes it will overlap individual or group demands which for the most part will have had their beginnings in the previous assessment.
The confusion can most easily and perhaps justifiably be blamed on the abandonment of specific rate recommendations. These were inexact in that they largely ignored—in effect although not in intention—the wide differences in the costs of individual hauliers. The principal merit lay in the orderly pattern which the recommendations imposed or at any rate seemed to impose.
There was a largely spurious historical continuity. It has been suggested that the process began with the statutory order at the end of the war limiting road haulage rates to 55 per cent above the pre-War level.
This was a typical piece of bureaucratic non-intervention to which the public had become accustomed through war-time controls. Rates varied even before the war or perhaps especially before the war so that there was no firm base on which to form a judgment. If a customer thought he was being overcharged it was more sensible to try another haulier than to take the matter to court. Any cases that may have been taken certainly did not succeed and the order was swept away with much of the other emergency legislation.
It had given some kind of lead. Hauliers may have reasoned that if rises in costs had allowed rates also to rise to an exactly specified level there ought to be no objection to further increases of the same kind when circumstances made it necessary. From this point, so the story runs, the practice arose of a periodical analysis of costs and a subsequent recommendation on rates.
At first trade and industry took little notice. Large and powerful companies who were in the habit of telling hauliers what they would pay continued in that habit. Other customers in not so strong a position continued to pick and choose. Only hauliers on general traffic with their own rates schedules made reasonable progress especially where they were to some extent protected from competition by the type of service they provided or by the licensing system.
R HA recommendations Gradually the RHA recommendations acquired credibility. At no time were they tamely and universally accepted. There were still some hauliers who got what they had asked and others who got nothing. But the periodical announcements at least brought the subject into the open and provided an opportunity for argument. All except the most intransigent customers accepted that the haulier had a right to put his case and to have a reasoned answer.
Some customers came to like the system. It protected them from sporadic complaints of inadequate rates. Each recommendation might produce a crop of applications for more money but once it had been settled the customer could feel safe until the next time. It was easier for him to explain the transport element in his own prices.
There are strong reasons for restoring a more orderly pattern to road haulage rates. It was encouraging to learn at the recent RHA conference that the cost and productivity scheme which is being carried out by the Centre for Interfirm Comparison has reached the stage when the first results may be expected.
These results are likely to provide a comparison between costs over two years which have already passed. They may seem to give no direct help to an operator who wants to put up his rates here and now. Clearly, however, a two-year history can be extended to take account of more recent changes.
For example, in a section of the industry where fuel represents 20 per cent of total cost the Budget increase of 3d a gallon or approximately 5 per cent adds 1 per cent to the operators' total costs. A similar assessment can be made of other cost changes and from this the individual operator can build up the right picture for his own organization.
The subsequent procedure is no different from what it was four years ago. Individually or in a group operators will still have to convince their customers that a rates increase is necessary. The new scheme should provide more exact supporting evidence than was available at one time from a single rates announcement by the R H A.