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s Disposal Going the Right Way ?

By. Bernard Winterbottom,

Past Chairman, Road Haulage Association

Return of Haulage to Private Enterprise Too Slow: Too Much Emphasis on Price: B.T.C. Retaining Traffic After Selling Vehicles

WHETHER the disposal of the undertaking of British Road Services is proceeding on the ht lines is a question on which ferent sections of the transport lustry hold opposing views. In itical circles, too, as one would )ect, opinions are strongly conting. The reason is mainly that aims and hopes of the various .rests are diverse, but it is also e that the progress of disposal has al slower than was expected.

t will be generally agreed that the tish Transport Commission are nplying with the Act only because y have no alternative. The Corn;sion never wanted denationaliza1, and although we now have a new faces among their members, ir outlook, and certainly that of men controlling B.R.S. vehicles, not have changed.

Surplus Vehicles n carrying out the provisions of Act it has been possibte to sell a number of surplus vehicles at It prices and generally to clean up fleet of B.R.S. without losing :..11 of the traffic. The special A nces have been the selling factor, 1 the vehicles sold at the time of ring have gone in the main to ling operators restricted by the mile limit. These operators were Dared to buy a small number of ides each to get a foothold in the ;-distance field.

'he Road Haulage Disposal Board, no power of disposal, are carryout their duties as laid down in Act. They have in no matter of ortance disagreed with the Corn, sion; and I cannot sec that they ever likely to do so, for they are nly concerned with price and sider it their duty, along with the .C., to obtain a high price before ;eing to the sale of any unit.

rice has become the paramount or in the success or otherwise of denationalization of long-distance !age. The chairman of the rd has made it clear on a number of occasions that he is not interested in the value of the vehicles on the books of the Commission. Their experts have advised them what the vehicles are worth, and to this a consideration is added for the special A licence, varying, we are told, not only with the tonnage offered but, to some extent, with the type and location of the unit.

Experts have, of course, been known to differ widely in the valuation of assets. Valuers acting foi the purchasers or those financing the purchase have, in many cases, held entirely different opinions from those employed by the Commission and the Board. Nevertheless, if the price fixed for a unit is not reached, it is not sold.

Price All-important Many people seem already to have forgotten the reason for the 1953 Act. It was necessary because in the opinion of the Government, the vast majority in trade and industry, and all in road transport outside the State organization, the country would benefit by a speedy return to private enterprise. The need for speed in disposal was mentioned over and over again in the debates in both Houses.

Now, because of the method of selling, price becomes the predominant factor. It is easy to justify the need for high prices in the eyes of the public, particularly when one is dealing with the assets of a Stateowned concern. It is seldom mentioned that the public and the Exchequer are not concerned, for the Commission are insured against any loss. The road transport industry pays the premium—the levy—and hauliers, at least, have not passed it on to the customer.

Are we not to have the denationalization provided for by the 1953 Act if the assets cannot be sold at a profit? Surely this cannot be so.

Nobody liked the levy, but it was justified in Parliament by Government supporters as a charge on the road transport industry to make good to the Commission the losses on selling back an undertaking which no longer had the value of the independent profitable concerns taken over. These independent businesses had been making average yearly profits, taken over a number of years, estimated at a minimum of Om.

British Road Services, in the first five years of their existence, made no profit and so to a large extent the amount paid as compensation for taking over profitable businesses had been lost.

In buying back small transport units, the position has been made infinitely worse for the potential Purchaser than was ever visualized. It was originally thought that some opportunity would be given to take over and carry the traffics or at least certain of them) previously transported by the vehicles purchased. The absolute opposite has been the case to date.

HoldingTraffic The Commission have done everything they can to hold all the traffic. As they become short of vehicles—it is just beginning to happen in one or two districts—they will, no doubt, continue to operate as a clearing house and sub-contract what their own vehicles can no longer carry.

All this is made easy for them by the slow progress of disposal and there is nothing in the Act to interfere with a State clearing house. The tragedy lies in the Act which allows a large number of vehicles over and above those in operation to be sold by the Commission with the right of a special A licence.

We in the Road Haulage Association estimated that at the time the Bill was before Parliament, at least 8,000 B.R.S. vehicles were surplus. The Commission's own report at the end of 1952 showed 4,836 vehicles and 877 trailers stored and a further 1,906 vehiclps awaiting repairs. At least 6,000 vehicles could be sold without having any serious effect on the carrying capacity of the State fleet.

Offering for sale what proved in the first lists to be the most unsuitable vehicles for long-distance haulage must have been a serious deterrent to many interested people. Yet if one -knew the numbers who had tendered for units (some three and four times over), and not just the number of vehicles sold, that would be a very different story. These figures were available for the first two lists and showed an average of over six tenders for every vehicleodly unit offered.

Notwithstanding all this, and the political threats of what will happen if the Socialists are returned to power, there has been, and still is, great interest in disposal and my hope is that success will finally be achieved. If it is, it will be despite, rather than because of, any effort of salesmanship.

Selling with the Brake On Has there been any drive to dispose of B.R.S. assets? The Commission, who are selling and displaying the vehicles, at the same time tell all their customers that they are still available to carry the traffic.

In addition, the Budget gave an investment allowance to those purchasing new vehicles, but not to the buyers of the used vehicles of B.R.S. This allowance is worth approximately a -tenth of the cost price of a new vehicle over its active life.

One other important matter which must he affecting the moneys available for buying back is the large amount which may be claimed by way of tax on balancing charges from those compulsorily acquired under the 1947 Transport Act. The amount is estimated to run into millions of pounds.

Now the Disposal Board act as umpires on the question of price, but obviously they must rely on the staff of the Commission to parcel up what is to be offered. No figures have been given to show how the prices obtained compare with the value in the books of the vendors.

The Ministry of Transport gave the amount received for the first 5906 vehicles at approximately £71m., but failed to disclose the figures at which these assets stood in the Commission's books. If the correct figures of written-down value were given, based on the method of depreciation in force before the 1952 FIS accounts were published, I am certain that even the Opposition in Parliament would be surprised at the profit on sale.

If well over £1,000 each has been paid for the first 6,000 vehicles sold— many of the petrol type and of an average age of at least seven years-the profit over the written-down value must be substantial indeed.

If the Commission's assets are transferred to companies before selling the shares, they must be at a net .value. Net value is the figure remaining after deducting depreciation, and if the Commission have departed to any substantial extent from the method of depreciating assets applied before 1952 they must adjust the figures to what would have been the correct net value under the original method.

Advantage for Share Buyers This means that the assets made over will be at an understandable figure for any potential purchaser of the shares. To that extent, such a purchaser will have a big advantage over buyers whose offers are based purely on sight, with the added unknown extra wear and tear to the date of handing over. The company method of disposal is not looked upon favourably by the vendors and it is interesting to speculate why this should be.

Before September 30 the Minister has to make a provisional estimate of any capital loss to be met by the levy. It will be interesting to know the figure and more interesting to know whether, in arriving at it, any account will be taken of the change in the method of depreciating the assets which has been adopted by the Commission in the past two years. Many vehicles stand much highbr in value at the date of sale than they would have done under the method of depreciating which was used in the first few years of B.R.S. operation.

It always seemed a reasonable assumption that the assets would be sold back at their real book value and that an additional consideration would be paid for the special A licence. The value of the licence depends entirely on whether or not profitable haulage can be obtained with the acquired vehicles.

If the State companies hold the traffic, whether to carry on their own vehicles or to subcontract after deducting a 10 per cent. commission, then in total the value of the special A licence issued is much reduced.

In the case of companies and selfcontained units, where from the date of acquisition much of the traffic rs change hands, something worthwh will be acquired.

As I write, however, the vendo having sold just over 7,000 vehicl with a large sum for the special licences, remain in control of nea, all the traffic, because the purchasi of an odd vehicle or two are unal to offer a customer the regular a frequent service to compete with t State organizaticin.

The method of sale has raised cc troversy in all transport circles, a hauliers and others who wished buy are now divided into classes: (1) Those who have paid 1 price to get in early.

(2) Those who have tender but have not been successful date because of the price.

(3) Those who are waiting negotiating for the larger units.

(4) Those hauliers who look January 1, 1955, to restore th A licences to normal conditions When a man has paid a cert; sum for a unit he does not norma complain in public that he has p: more than the actual value, althou he may have done so, but many In complained that the condition of vehicles when delivered was wo than they expected. Such purchas hope that the price will remain a similar level for others, otherw they will be at a disadvantage.

Decisions in the Dark The whole question of value is c torted by the amount to be added the special A licence and the short ing period of waiting until the mile restriction is lifted. Operat have had to make their decisii without sufficient knowledge of situation.

To prepare a catalogue of eve thing to be sold would have dela: the beginning of selling, but h much fairer it would have been all concerned.

Although every vehicle restored private enterprise is a small step the right direction, I am disturl by the slowness. The great mistake was in the Act itself, wh gave little power to the Dispc Board and left the selling back in hands of the Commission, who an continue to compete with buyers.

An independent selling ager warking closely with the B.T.C.; with full autonomy, could h achieved entirely different result!

What we need is more drive ; bold decisions, with all who are c cerned making the necessary ef to achieve a state of affairs in with the Government's policy.