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casebook by David
Spain
fs NBC surplus already doomed?
TRAFFIC COMMISSIONERS throughout he country generally appear to have lecided that the financial responsibilities of he National Bus Company are not their :oncern when considering applications from ts subsidiaries to increase fares.
Some are suspicious of the Transport viinister's requirement for the NBC to ichieve a surplus for both 1970 and 1971 of 8rri a year and feel that the only statutory -equirement for the NBC as laid down by he Transport Act 1968 is to break even.
A fares application and its subsequent public sitting is "lengthy and cumbersome", 3ays the NBC in its Annual Report for 1969, also complaining that "in many cases these applications are granted only in part, sometimes after further costly delays where re-hearings were required".
Be it good or bad, the respective chairmen of the Traffic Commissioners do not see it their duty to merely "rubber stamp" applications for fare increases by subsidiary companies of the NBC. This was how Mr John Else, chairman of the West Midland Traffic Commissioners, put it when hearing an application by Potteries Motor Traction Co Ltd early this July.
Miss Elizabeth Havers, counsel for the company, disagreed and said it was a subsidiary's statutory duty to meet its target of £250,000 set by the NBC. This did not satisfy Mr Else and his colleagues, however, and while welcoming a test case in a court of law, firmly announced that their decision would.be based purely on whether the fares sought were reasonable.
They obviously decided they were,because except for a few amendments the applica tion was granted, giving Potteries its first ever dual-fare system, based on remunerative and unremunerative services.
Mr Else may not have to wait too long for a ruling; Mr Fred MuIley, when Minister of Transport, had already based a decision to an appeal concerning NBC subsidiary targets and another appeal is pending.
The one heard concerned the North Western Road Car Co. who, in a fares increase application, had sought a return on its capital of 9.7 per cent whereas the objectors, a consortium of 27 local authorities, had said that the statutory duty of the NBC was to go no farther than to break even.
The Minister's inspector who heard the appeal found that the application was intended to do no more than maintain the viability of North Western in a healthy state and was within the limits of the NBC's statutory obligations.
The appeal pending concerns Crosville Motor Services Ltd, of Chester, who attempted to increase its fares in order to meet the NBC requirement for it of £800,000. Its recent application was granted in part by Mr Charles Hodgson, chairman of the North Western Traffic Commissioners. It was opposed by 50 local councils.
Mr E. Summerset Jones, representing 32 of the objectors at the public sitting, said that fare increases still rested with the Traffic Commissioners and not with the NBC. He thought it would be improper for the Minister of Transport to substitute the NBC for the Traffic Commissioners.
One point on which Crosville was unsuccessful was in its application to increase children's fares from half to three-quarters of the adult fare. Mr D. I. R. Muir, chairman of the Metropolitan Traffic Commissioners, viewed a similar application by London Country Buses in a different light, however.
Children's fares It was granted permission to increase children's fares from half to three-quarters of the adult fare, although this may well be because in the words of the general manager, Mr G. Fernyhough, London Country was "the poor relation" of the NBC. Mr Muir, in his written decision, went so far as to acknowledge that London Country had inherited the bulk of LTE's unremunerative routes, a fares structure which for given distances required lower fares than those charged on comparable NBC subsidiaries and an expenditure for the replacement vehicles which required London Country to undertake extensive borrowing, ultimately making its financial position worse.
The extra revenue that London Country's fares revision would yield — £1,030,537—would still result in a net debit for 1970 of £519,000 and for 1971 of £737,000.
Recently, in South Wales, the chairman of the Traffic Commissioners, Mr R. R. Jackson, thought the £170,000 revenue required from the Western Welsh Omnibus ' Co Ltd by the NBC was a "figure someone has picked out with a pin".
He chose to ignore the letter from the NBC chief finance officer setting out Western Welsh's financial requirements for 1970 and 1971 because to do otherwise, he said, would be to accept dictation from the NBC. Fare increases would be based on whether or not they were reasonable.
They obviously were. Western Welsh was granted its application to increase single fares by amounts ranging from Id to 3d.
Similar circumstances prevailed when Trent Motor Traction Co Ltd applied to increase its fares to meet its obligations set by the NBC. Mr C. M. Sheridan, chairman of the East Midland Traffic Commissioners, blasted the NBC for attempting to achieve an £8m surplus when, he claimed, it was required to do no more than break even, reflecting the claim of the 27 local authorities at the North Western appeal.
Trent's fares application to bring in a surplus of £78,000 in 1970 and £230,000 in 1971, falling short of the NBC target of £250,000 for both years, was granted.
It was argued by Mr Sheridan that Section 41 of the 1968 Transport Act required the NBC to break even. The relevant part states: "As to secure that the combined revenues of the authority and of their subsidiaries taken together are not less than sufficient to meet their combined charges properly chargeable to revenue account, taking one year with another."
Perhaps the biggest rise in fares in recent years was the 25 per cent increase granted in July to Midland Red. This company, the biggest in the NBC, has to provide it with £1,800,000 over the next two years. In their written decision the chairmen of the East and West Midlands Traffic Commissioners said: "The financial duties of the NBC are not the direct concern of the Commissioners when adjudicating on an application for increased fares by one of its subsidiaries though it is open to such a subsidiary to adduce evidence that the refusal of the grant sought, in whole or in part, would prevent it from charging to revenue account all proper charges, including, in particular, proper provision for the depreciation or renewal of its assets".
The costliest Perhaps the costliest fares application of all was encountered by Maidstone and District Motor Services Ltd. A Queen's Council, Mr Edgar Fay, his junior and their instructing solicitors toiled for two days at Maidstone putting the case for M and D before the South Eastern Traffic Commissioners to increase its fares by amounts ranging from Id to 64 in order to meet its total NBC target for the next two years of £420,000.
The application was rejected with the recommendation from the Commissioners that M and D try again, only with its total target reduced by £94,000.
What course is open to NBC if a fares increase is not forthcoming for one of its operating companies? The 1962 Act Section 19 states that the Board is empowered to borrow from the Minister such sums as it may require for meeting capital expenditure, acquiring another undertaking or lending money to an undertaking carried on by a subsidiary. Provided the aggregate amount outstanding in respect of the commencing capital debt and borrowed money does not exceed £130m then the NBC is working within the terms of the Act.
There is a statutory obligation on the NBC to establish and maintain a general reserve and if this reserve is to be considered profits. then there can be little doubt that the companies within the NBC should have a profit margin in their fees structure.