Thorns in the Flesh
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Page 57
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IT has been pointed out to me that, in the previous article, 1 made no reference to that allegedly persistent ratecutter, the owner-driver. Not all owner-drivers cut rates. Some of them have the sense to see that so long as they can get the standardized rates they are making good profits, and are quite content to take them. 1 know many who take that line and am personally acquainted with families of owner-drivers who make quite a good thing out of stabilized rates.
There is one kind of scheduled rate which is never cut, and that is the one which is Government-imposed. Even the veriest simpleton amongst owner-drivers does not ask a Government department to give less than it offers him. However, there is no doubt that in rural areas in particular the owner-driver is in a class by himself. He rarely has any idea of the economic aspect of the problems, and so long as he can earn the equivalent of the driver's wage, is quite content. He assesses his rates accordingly.
I showed in the previous article that if rates were based truly on cost plus profit, it was possible for the haulier who operated in a rural area to quote rates which were less than those of the townsman, without laying himself open to a charge of rate-cutting, He may, and often does, justify his action by claiming that if he were to ' apply the townsman's rates he would be overcharging his customer.
There is thus a third class of operator, represented by this body of owner-drivers, who must be discussed if I am to thrash out this matter of varying rates to the fullest extent. There is no doubt that many of them are content to regard the equivalent of a driver's wage as all the profit they
need make. In that they are foolish, even considering the matter from its most mundane aspect, namely, that they are throwing away opportunities of making good money.
. To put the case more or less
academically. The owner-driver, notwithstanding all arguments to the contrary, will persist in disregarding the item "driver's wages" as one of his expenses. He runs his vehicle and if it shows him a profit of anything over £7 10s. per week, is satisfied.
The owner-driver in a Grade I area, for example, carrying the same traffic as that to which reference was made
in the previous article, and requiring the assistance of a mate, will have a bill of costs something like the following:. For fixed charges per week he will have his licence expenditure of 14s.; wages of his mate, at statutory rates working 64 hrs. per week, £8 Its. 10d.; provision for national insurances and holidays with pay for the mate, 10s.; garage rent, say, 10s.; vehicle insurance, almost certainly confined to third-party risks only, I2s.; interest on capital outlay, 18s.; establishment costs, £1.
As regards this last item, it must be appreciated that an owner-driver is put to little expenditure for establishment costs. It is not even usually necessary for him to have his own billhead. Even if he does have billheads they are scrappy and most inexpensive, 'probably not involving him in an expenditure of more than'£I per annum. He has no offices and nothing to debit for heating and lighting. He has no staff, no travelling expenditure, infact £1 per week is probably an outside figure for many owner-drivers. His total of fixed charges is thus £12 15s. 10d. per week.
Turning now to running costs, he cannot make much of a cut in his expenditure on petrol, oil and tyres, and the figures of these three items may he taken to be the same, in pence per mile, as those set out in the previous article, namely
3.15d. for petrol, 0.20d. for oil and 1.41d. for tyres.
For maintenance and repairs. his actual expenditure will undoubtedly be less than that of an operator running a fleet of vehicles and having to pay for work done. The owner-driver spends his Sundays executing repairs and maintenance, and his expenditure, except in the case of major overhauls, which he cannot do by himself, is confined to the cost of materials only. If 1 put down 1.24d. per mile for maintenance I am probably exaggerating the cost.
Similarly with depreciation, the owner-driver does make his vehicle last. Even if he buys a new one in the first place-and in many cases he does not-he is of an economical turn of mind and makes the vehicle last longer than the average owner does. I put down, therefore, lid, per mile for depreciation. The total of these running costs is 7.50d. per mile.
The owner-driver in a rural area is at even less expense in operating his
vehicles. His fixed charges per week are:-Licence, 14s.; mate's wages, £8 8s.; provision for insurances and holidays with pay, 9s. 9d.; garage rent, 5s.; third-party insurance, 10s.; interest, I8s.; establishment costs, 10s. Total, Ill 14s. 9d. For his running costs per mile he has:-Petrol, 3.15d.; oil, 0.20d.; tyres, 1.41d„maintenance and repairs, 1.10d.; depreciation, 1.24d. Total, 7.10d.
The next step is to see how the expenditure of these owner-drivers on the 10-mile and 20-mile hauls compares with the revenue at the standard rates. Over the 10-mile lead the operator will complete 24 journeys per week, running, therefore, 480 miles and carrying 144 tons.
Taking first of all an owner-driver operating from a town, his outlay on running costs will be 480 times 7.50d., which is £15. Add £12 15s. 10d. for fixed costs and we get the total expenditure of £27 15s. 10d.
The revenue from the conveyance of 144 tons at 7s. per ton is £50 8s., so that the operator makes a net profit of £22 12s. 2d. per week. Actually, left to himself, he will probably adjust the rate to earn about £7 tOs. per week net • profit, in which case he would be agreeable to do the work for 4s. 8d. per ton instead of 7s. and a cut of 2s. 4d. on a rate of 7s. per ton is great indeed.
Now take the owner-driver in the country. He covers 480 miles at a cost of 7.10d. per mile, which is £14 4s. Add his fixed costs of El 1 14s. 9d. and we get the total expenditure of £25 18s. 9d., leaving him a profit of £24 9s. 3d. per week-nearly lop per cent. of his expenditure. In a rural
area, an owner-driver would probably be quite content with £7 per week profit, or less, in which case he could carry this traffic at a rate of 4s. 5d. to 4s. 6d. per ton, as against the standard of 7s.
Similarly, the figures worked out for the 20-mile lead give corresponding results. They show that the, ownerdriver operating from a town can earn a profit of £20 8s. 2d. per week and in a rural area £24 9s. 3d. per week. Actually, on the sort of profit owner-drivers might normally accept, the traffic could be carried by these operators in the town area for 7s. 10d., and in a rural area for 7s. 4d., as against the agreed rate of 10s. 6d. per ton.
Conclusions and the data from the previous article and those given above are set out in Tables 1, II and III. Obviously, the owner-drivers' rates will be ruinous if applied to the ordinary operator. As regards the haulier in the town area, if he had to come down to owner-drivers' rates, his revenue would be, in the case of the 10-mile haul, from £33 to £35 per week, 'as against an actual expenditure of £41 18s, 9d. Over the 20-mile lead, his revenue would be about £42 to £45 per week, as against an expenditure of £50 8s. 9d.
It is obvious, therefore, that the disparity between ownerdrivers' figures and those of ordinary operators is too great to allow a reconciliation. The most obvious conclusion is that it is impossible to have any regard to the owner-drivers' figures in compiling any schedule of stabilized rates.