A SACRIFICIAL ALTA DR THE INDUSTRY
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I DEALT, in 'la issue dated April 30, with the hire charges which are to be put into, force in connection
with the new M.0 W.T. Haulage Scheme. That article, for reasons of time and space, was short and did not cover all the ground, so I now propose to deal with the same subject at greater length.
In the first of the two tables which accompany this article are two sets of figures; one of them shows the earnings which accrue to the opesator whose vehicles are hired by the Ministry and paid according tt the official hire charges; the other gives data for what I term minimum commercial earnings. These• figures are arrived at in a way of which I .will now give details. First, as regards the revenue from the Ministry. Take the figures relating to a 5-tonner. A -vehicle of that capacity, if hired by the Ministry and working, is paid for as follows.-Each week there is a fiat rate of £5 12s. 11d., to which is added 2.10d. for each mile run. That is 17s. 6d. per 100 miles, or Al 15s. per 200 miles. Therefore, in 'a week in which the vehicle covers 200 miles, the revenue accruing from the Ministry is £5 12s. 11d. plus £1 15s., which is £7 7s. lid. For 300 miles add 17s. 6c1., .thus making £8 5s. 5d., and so on down the scale The corresponding figures for the other sizes of vehicle tre calculated in the same way.
Commercial Ideas of an Operator's Minimum Earnings Now for the other figures, which indicate the minimum which an operator should earn as calculated according to commercial ideas of what is right and proper. The basis is "The Commercial Motor " Tables of Operating Costs, in which the rates quoted are generally regarded as reasonable. .Under current conditions, I am told they do not show that Minimum fair profit which should be earned.
In taking the figures in The,Tables as a basis for the data in Table I, I am, therefore, weighing the balance in favour of the Ministry, in that the profits which are left from the earnings are less, rather than more, than what operators consider to be reasonable. As will appear, I have gone farther than that in trying to bt. more ;than fair to the Ministry. '
In making these calculations, the data from the Tables have to be corrected, in view of the fact that the.Ministry, in its dealings with operators who hire their vehicles to it under this scheme, is responsible ffir paying the Road Fund licence, the cost of " operating permits " (expendi-. hire on A and B licences and so on), insurance both for the vehicles and for goods-in-transit policies, wages, employees' insurances, and expenditure on fuel. I make those corrections in this way.
From the standing charges: in The Tables I take the amounts quoted for rent and rates, and interest on first cost. In the case of a 5-tOnner that is 10s. and 8s. 6d. respectively. To the total of those two (18s. 6d.) I must add the establishment charges. In my earlier article, already referred to, I dealt with this item fairly extensively. demonstrating that, for long-distance haulage, a fair allowance was at the rate of 15s. per week per ton of pay-load. •
Allowing for the fact that, while employed by the Ministry„a proportion cf that expense might be saved, at least after .a time, I considered that 12s. 6d. per week per ton of pay-load was' a fair allowance. In the case of a 5-ton lorry that is £3 2s. 6d. per week, which amount must be added to the 18s. 6d. already provided for in the way of standing charges, making £4 Is. in all for what I might term the fixed costs.
Let us turn now to the running costs. In "The Commercial Motor" Tables recognition is duly taken of the incontrovertible fact that routine maintenance (maintenance d) diminishes progressively as the weekly mileage increases and that depreciation; reckoned, as it should be, aS &mileage charge, also falls, in its incidence per mile, as the weekly mileage grows.
Eliminating the item "fuel " as paid for by the Ministry, the following are left:-Lubricants, tyres, maintenance (d), maintenance (e), and depreciation. Of these, lubricants, maintenance (e) and tyres are fairly constant, whatever the weekly mileage may be. In the case of the ' 5-tonner the figures are 0.17d., 0.80cL, and 1.17d. per mile respeotively, totalling 2.14d.
. At 200 miles per week,. figures for the variable. itemsmaintenance (d) and depreciation-are 0.65d. and 1.96d. respectively, so that the totat running costs per mile for a 2007mile week are 4.75d., and that is 43 .19s. 2d.' per week. The total costs per week-fixed charges, plus running costs-are thus. £8 Os. ficl. That is actually more than the payment which the operator will receive from the Ministry. A minimum fair profit to the liaulier should be calculated at the rate of 15 per, cent, on his costs. That is approximately 41 3s., so that the minimum commercial revenue. ,should be £9 3s. 2d., as set down in Table I.
Ministry Rates and Losses They Will Force Upon the Haulier
The other figures in Table I, -giving minimum commercial earnings, have been arrived at in ,precisely the same way. In Table It are set" out, side by side, the losses which the operator will have to endure, if he works at the Ministry rates, and, the very meagre amounts of piofit which he would earn if he were to be paid the minimum commercial rates suggested in Table I. There is a point which I should like to make here with regard to those minimum profits. The addition of 15 per cent. is made on the bare costs of operating the vehicles, plus establishment charges.In the ordinary way, reckoning on his complete costs, i.e., including taxation, wages. insurance and fuel, the operator would be justified in expecting and, to-day, would obtain a percentage of prbfit reckoned on a much larger amoUnt of expenditure.
In, the case of a 5-tonner, for example, running 200 miles per week (an absurdly low mileage, of course, for a vehicle `on long-distance haulage)," his expenditure would be: Standing charges £6 6s.: establishment costs, £3 15s.; running costs, £6 2s. 2c1.; total, £16 3s. 2d. The minimum profit on that expenditure would be calculated at the rate
of 15 per cent, and the amount would be £2 8s. 6d. ' It is more likely that the operator would budget for, and obtain, at least 20 per cent, on his outgoings, which would.
be £3 .4s. 8d. per week. Compare these figures for the operator's reasonable commercial profits with the meagre £1 Ss., which is all that I have allowed in Tables I and 11.
The question may well be asked and, indeed, is on the lips of almost every haulier, why this discrepancy? Why this attempt to make the haulier work for nothing? That attitude has not been adopted in the Government control of any other industry. Indeed, as regards some industries, the profits made available seem to be considerably in excess of those which would have been earned without control.
Little enlightenment is to be got from a comparison of the figures for Ministry payments with those which represent commercial experience. The rate offered per mile run is much less, in respect of every size of vehicle, than the bare running costs per mile, as exemplified in the commercial data.
Depreciation Is Regarded as a Standing Charge To some extent that may be due to the fact that the Ministry, in making its calculations, has regarded depreciation as a standing charge. A correction, made to bridge that gap, was given in my earlier article, when it was made clear that the difference was too great, in most cases, for an amendment on that 'account to correct it. Moreover, if an allowance for depreciation be added to the commercial figures, the total of fixed charges then exceeds the Ministry weekly payment.
In any event, no juggling with the figures can obviate the fact that the commercial data given in these two tables is as nearly accurate as can be.
It may be, and very likely is, that insufficient allowance has been made in the Ministry figures for establishment costs. That is a point which has arisen before, in the course of attempts by the R.T.C.'s, to determine rates and fares during the war.
Sir Arnold Musto, for example, in assessing what he asserts are reasonable hire rates for motor coaches in the West Midlands, sees no reason why he should make any allowance at all for establishment costs. Again, the late Sir Haviland Hiley, when discussing rates for the haulage of sugar beet, expressed the opinion that the allowances which I make for establishment costs are too high.
The contention of the former is so absurd that it might be deemed to be unnecessary to give it further publicity, but for the somewhat significant fact that the results of Sir Arnold's calculations, in so far as the remuneration of the operator is concerned, agree very closely with those which come from the application of these figures from the Ministry.
As to the accuracy of my allowance for establishment costs, I am in no doubt whatever; 15s. per ton of pay-load per week is fair and reasonable, and to diminish that amount to 12s. 6d., to provide for such economies as may be possible while working for the Ministry, is stretching a point.
There is another possihle explanation, which I have not seen or beard discussed; it is this. The weekly payment for " laid-up " vehicles, when the whole of the fleet is laid up, will show the operator a handsome profit if he can, during the period in which the fleet is laid up, close down the whole of his establishment. The object of paying for vehicles thus out of commission is, we are given to understand, to ensure that road-transport facilities shall be available in case of need. Is it possible that those whose vehicles are laid up are being subsidized by those whose machines are working? There may be something in that, and, if it be not the real reason, I present the idea to the Ministry as being a good basis for a plausible excuse.
Have Labour Reactions to the Scheme Been Considered?
One point more. Has the Ministry, or anyone in authority, considered what are likely to be the labour reactions to the operation of the scheme? For some time past hundreds of drivers have been accustomed to a weekly wage of not less than E7, rising, in many cases, to as much as £10 per week. They will now earn £4 8s. 6d. That is going to create a considerable amount of dissatisfaction, which will not be dispersed so easily as the objections which the industry has to this scheme.
It is true that something has been said by the Ministry to the effect that drivers are to be found alternative occupation, but that applies to those whose vehicles are laid up. It will in no way alleviate the position of those drivers who, because their vehicles are now to operate for no more than 48 hours per week, will find their earnings reduced to E4 8s. 6d. per week. S.T.R.