The Problem of ti
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Owner-driver in Rates Stabilization
Solving the Problems of the Carrier
Does He Justify Further Differentiation in Rates to be Charged for Local Haulage ?
LAST week, in my article, I showed how, as the result of differences in. operating costs and establishment expenses, more particularly the latter, there was A considerable difference in the total expenditure of hauliers engaged on local traffic. As a basis for argument, I cited two examples of rates for the carriage of traffic, namely, 5s. per ton for a 10-miles haul ant Ss. per ton for a 20-miles haul. These rates have actually been agreed and standardized for the commodity I have in mind.
I showed, that fox an operator, in a Grade I area, paying full wages, carrying 24 loads per week over a 10-mile's haul and 18 16ads per -week over the 20-miles haul, the profit earned at the standard rates was' just sufficient. Actually, it was a shilling or two less than what I would have stipulated as a minimum.
An operator in a Grade III area, however, working with much lower overheads than his competitors, paying lower wages, having advantages in respect of expenditure on garage rent, insurance, and repairs charges, must find these standard rates amply remunerative. He can earn a net profit of £9 5s. 7d. per week when working over a 10-miles haul and E10 10s. 7d. per Week over a 20-miles haul.
It might well be that some operators would regard that as a fair and reasonable profit. On the other hand, there are many hauliers in 'country districts who would think that it was more than reasonable and, although they might not cut the rates deliberately because they considered the price to be excessive, they woifld have at the back of their minds the knowledge that, in the case of any competition, there is ample margin to cut and, in case"of necessity, the rate would be cut, will be cut and, in fact, has been cut.
Call for Differentiation In Rates
It does seem, therefore, having in mind these facts, that there should. be some differentiation in rates for standard traffic, when carried locally. This will be the. case even if the present claim being. put forward by labour that the GAde III schedule of wages should be eliminated, because there are other ways in which the operator in a rural area is able to cut his costs.
It is of interest to pursue the argument a.little farther and to consider the case of that pre-war thorn-in-the-flesh of the industry, the owner-driver. What is going to be his .position if local haulage rates be standardized on a national basis at a level which will show no more than a reasonable profit to the operator in industrial districts?
The owner-driver, notwithstanding all arguments to the cont-ary, 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 E5 per week he is (so far as many owner-drivers are concerned) content.
Tlae owner-driver in a Giade I area, for example. carry a.22 ., . ing the same traffic as that to which reference was made in thsprevious article, and requiring the assistance of a mate in order to do the work, will have a bill .of costs something like the following:
For fixed charges per week he will have his licence expenditure at 14s.; the wages of his mate, at statutory rates, working 64 hours per week at £5 3s. 31d.; provision for National Unemployment Insurance, National Health Insurance and insurance under the Workmen's Compensation Act, together with provision for holidays' with pay for the mate, amounting to 4s. /Aid.; garage rent at, say, 10s. ; vehicle: insurance, probably confined to third-party only, 10s..: interest on capital outlay, 10s. ; establishment costs,. El.
Low "Establishments" of the Owner-driver
It must be appreciated that an Owner-driver is put to very little expenditure for establishment costs, especially in connection with a more or less standard traffic, such as that I have in mind, where it is not even necessary for him to have his own billheads. Even if he does have billheads they are scrappy and most inexpensive, probably not involving him in an expenditure of more than 10s. per annum. He has no offices, and nothing to debit for heating and lighting. He has no staff, no travelling expendi-. tore; in fact, El per week is, probably, an outside figure for many owner-drivers. His total of fixed charges is, thus, £8 12s. 3d. 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 for these three items may be taken to be the same, in pence per mile, as those set out in the previous article, namely, 2.40d, for petrol, 0.18d. for oil, and 1.00d. for tyres. On maintenance and repairs his actual expenditure will, drdoubtedly, be less than that of the operator running a fleet of vehicles, no matter how small it may be, and having to pay to have the work done. The owner-driver spends his Sundays executing repairs suet doing maintenance, and his expenditure, except in the case of major overhauls which he cannot do altogether by hinIself, is confined to the cost of materials only. If i put down id. per mile for maintenance I am probably exaggerating the expenditure.
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 mot-he is of an economical turn of mind and makes the vehicle last longer than the average owner. I put down, therefore, id. per mile for depreciation. The total of these running costs is 5.58d. per mile.
The owner-driver in a rural area, a Grade III district, is.. at even less expense in operating his vehicle. His fixed charges per week are:-Licence, 14s.; mate's Wages, £4 10s. 9d, ; provision for employees' insurances and holidays with pay, 4s. 8d. ; garage rent, 5s..; third-party insurance,' 8s. ; interest, 10s. ; establishment costs, 10s.; a total of £7 2s. 5d. For his running costs per mile he has :Petrol, 240d.; oil, 0.184.; tyres, 1.00d. ; repairs, 0,804.; depreciation, 0.90d.; total, 5.28d,
Notv, see how the expenditure of the owner-drivers on the 10-miles and 20-miles hauls compares tbith the revenue at the standard rates. Over the 10-miles journey he will complete 24 journeys per week, running, therefore, 480 miles and carrying 144 tons.
Taking, first of all, an owner-driver in a Grade. I area. His outlay on running costs will be 480 Braes 5.58(1., Which, is £11 3s. 3d. Add the £8 12s. 3d. for fixed. costs and we get a total expenditure of £19 15s. 6d.
The revenue from the conveyance of 144 tons at 5s. per ton is £36, so that this operator makes a net. profit of £.18 4s. 6d. per -week. Actually, left to himself, he Will probably adjust the rate to earn about £5 per week net profit, say, £5 5s., in which case he would be agreeable, to do the work for 3s. 6d. per ton, instead of 5s., and a cut of 1s. 6d. on a rate of 5s. per ton is very considerable. Now take the owner-driver in a• Grade III area. • He covers 480 miles at a cost of 5.28d. per mile, which is £10 us. '3d. Add his fixed costs of £7 2s. 5d. per week and we get a total expenditure of £17 13s. 8d., leaving him a profit of no less than £18 6s. 4a. per week, more than 100 per cent. of his expenditure In a. rural area the owner-driver would probably be quite content with £4 10s. per week profit, in which Case he could carry this traffic at the rate of Sc. Id; per: ton, as against 5s.
Similar figures worked out for the 20-miles lead give corresponding results-. They shoW that an owner-driver in a Grade 1 area could earn a profit of £17 16s. 11d, •per week and in a Grade HI area no less than 420 4s. 94. per
week. Actually, on the sort of profit owner-drivers in pre-war days would have expected, the traffic could be carried by these operators in a. Grade I area for 5s. 8d. and in a Grade III area for 5s. id., as against the agreed rate of 8s. per ton.
The conclusions from the previous article and those given -above are set out in Tables 1, II and III.
Obviously, the owner-driver rates would be ruinous if applied to the ordinary operator. As regards a haulier in a Grade I district, if he had to come down to owner-driver rates, his revenue would be, in the case of the 10-miles' haul, £25 Os; 6d. per week, as against an expenditure of £30 7s. id, Over the 20-miles lead his revenue would be £30 12s, 14. per week, as against an •expenditure of £36 11s. id.
Similarly, in the case of a haulier in a Grade III area. If he •had to accept the rates Which are sufficient for an owner-driver in hie area; his revenue, over the 10-miles haul, would be £22 3s. 8d. per week; as against an expenditure of £26 14s. 54. Over the 20-miles haul his revenue would total E27 9s. 3d. per week, as against an expenditure of £32 13s. 5d.
.. "Average" Rates Not the Answer Briefly, if the ordinary operator had to accept rates which would suffice to meet the requirements of the ordinary driver he would be operating at a loss all the time.
Suggestions have been made that an average figure should be taken when assessing what rates should be, with a bias towards the lower scale, on ,the assumption that a man who can operate at low cost is the more efficient -worker. Obviously, that suggestion will ilot meet the requirements of such cases as are exemplified in this one. The term " average," in any case, is one which is not
well understood; it has many meanings. Probably, its best interpretation with regard to this case would be as follows :-Assume that out of every 100 operators engaged in local haulage, 75 are in Grade I areas and 25 in Grade III areas. (I am. at the moment, leaving Grade II out of
consideration.) Out of those there are 10 in each area who are owner-drivers, so ,that We have, altogether, 65 ordinary establishments and 10 owner-drivers in a Grade I area, and 15 ordinary establishments and 10 owner-drivers in a Grade III area.
Accepting those figures, we must take, then, an average calculated on . the rate per ton Which figures in the last line of Tables II and III. Over the 10-miles lead we have to..take 'an average comprising 65 at 5s. id, 15 at 4s. 6d., .10 at 3s. 6d. and 10 at Sc. id. The average of that is 4s. 84, -which, if we accept this basis of calculation, is the rate per ton which should be standardized.
Similarly, over the 20-miles lead there would have to he 65 at 8s. 24., 15 at 75. 4d., 10 at 5s. 8d., and 10 at .5s. 1d., giving us an average-of 7s. 6d. per-ton.
Can the Disparity be Reconciled?
Clearly that is not the solution, because it has already, in the previous article, been demonstrated that the 5s. and 8s. rates are. barely sufficiently yemunerative to operators in a Grade I area. To ask them to accept rates of 4s. 84. and 7s. 6d, is, therefore, out of the question.
To weigh the average in favour of the ordinary establishment in a Grade I area would not meet the case, because that woald be almost certain to bring us back to the original figures of 5s. and 8s. pier ton, 'and we should be where we were when we started and no nearer the solution. • It seems, therefore, giat the disparity between owner• drivers' figures and those of ordinary operators is too great to allow a reconciliation. The moat obvious conclusion is that it is impossible to have any regard to ownerdrivers' 'figures when compiling any schedule of stabilized rates.
The problem seems, a difficult one. It is, however, capable of solution and certainly does not involve what I might call " big-stick " methods. What I consider the solution to be I propose to leave for some fixture occasion.