What shall it profit a busman ?
Page 41
If you've noticed an error in this article please click here to report it so we can fix it.
DO not think that public transport today is an appropriate medium for profitmaking." So said the Minister of Transport during the course of a transport debate in the House of Commons on July 18.
Less than three weeks earlier, the Minister had decided a series of appeals relating to the refusal, by the Traffic Commissioners of the South Wales Traffic Area, of applications for increased bus fares lodged by two big South Wales companies—Western Welsh and Rhondda Transport. The applications had been opposed by about 30 local authorities, most of whom had strenuously fought against earlier applications for increases during what has come to be called the South Wales 15-year fares war.
The application of Western Welsh was designed to produce an extra £144,000 a year, giving a return of 5.08 per cent on capital employed; but because the proposed increased fares could not be applied on certain jointly operated routes, the real yield would have been, not £.144,000, but £105,000, representing a return on capital of just over 2 per cent. Rhondda Transport's application, had it been granted, would have converted a loss of 0.27 per cent into a yield of 4.27 per cent.
Guide to reasons
An idea of the reasons which led the Commissioners to refuse the applications can be gauged from these extracts from their verdict announced at the end of a Public Sitting on December 19, 1966: "The expected period of severe restraint is not yet entered; we are still only in the period of standstill, and this application (Western Welsh) was formulated and submitted before the criteria laid down in the White Paper, Command No. 3150, relating to the period of severe restraint, •was published. Under normal circumstances this is an application which we think we would have granted as applied for, but in view of paragraph 7 of Command Paper 3150, which states: 'Throughout the period of severe restraint until the end of June, 1967, just as in the standstill period to the end of 1966, the criteria for increases in prices or charges must necessarily be much more stringent than those set out in the White Paper' and paragraph 10 of the White Paper, which states in part: 'There may also be exceptional circumstances in which without some increase in price the receipts of an enterprise are not adequate to enable it to maintain efficiency and undertake necessary investment', we have, therefore, had to consider this application purely in accordance with this criteria. We find that the application does not fulfil these requirements, and very regretfully we must refuse this application. We can find no exceptional circumstances." At the `same time the Commissioners referred to economies in operation (one such being co-ordination between Western Welsh and Red and White Services Ltd. in Monmouthshire), and in later observations commented that "in many cases two-man buses were a luxury the public could not afford".
Opposite view
The Minister's inspector who heard the companies' appeals against the refusals recommended that the applications should be granted. "Both companies," he said in his report, "have demonstrated that without increased fares their receipts are not sufficient to enable them to maintain efficiency and undertake necessary investment."
The Minister took the opposite view, however, and added that the evidence did not show that the companies lacked sufficient reserve resources to enable them to meet their commitments (including investment called for by their vehicle replacement programme) during this period (i.e. the period of severe restraint).
Many peculiar features of these cases are disclosed when one examines them.
It will be noted, for instance, that the Commissioners, in their own words, said that they "had to consider the applications purely in accordance with this criteria" (the criteria in the White Paper). But the Minister's decision letter expressly says that the Commissioners' duty under the Prices and Incomes Act to have regard to the criteria for price increases set out in the White Paper was "in addition to • and so far as consistent with the other matters which they were required to take into account", those being the matters set out in section 135 of the Road Traffic Act, 1960, and also, presumably, as the appeals inspector pointed out, the criteria of that Act as interpreted by Ministers of Transport on earlier appeals.
Reasonable sum
One such batch concerned fares of the very same companies; one sentence in the decision letter then said: "The Minister considers it proper that fares should be so fixed as to produce a revenue which will allow a reasonable sum to be distributed to the shareholders and that the reasonableness of that sum should be judged against the capital employed in the business rather than the nominal capital." Yet the Minister (a) rejected the inspector's recommendation;
(b) failed to refer the cases back to the Commissioners for consideration of the criteria they had not taken into account; and (c) overlooked or ignored the earlier appeal conclusion just quoted.
Another feature which merits comment is the Commissioners' reference to two-man buses. It is one thing for Commissioners not concerned with day-to-day management of a bus business to press for one-man operation in order to keep down fares; it is quite another to get one-man operation introduced. The evidence was that, in the case of Rhondda Transport, the company had been trying for three years, against trade union opposition, to introduce one-man operation. Western Welsh had got one-man operation on a million miles of running, but "local authorities (presumably some of those objecting to increased fares) have been against it because of redundancy.. . ."
While in May the TGWU told Mrs. Castle that it resented pressure by Traffic Commissioners for more one-man operation as an antidote to applications for increased fares, and asked the Minister to curb the Commissioners from exercising this pressure, the Minister for her part, only two months later, was complaining to the union about its slowness in honouring national agreements governing one-man running!
Co-ordination
The same sort of frustration crops up in other fields of productivity. Take the coordination of services in Monmouthshire which Western Welsh and Red and White Services Ltd. were trying to attain. This again was a measure the Commissioners commended, but reports from South Wales indicate that only a few weeks ago the co-ordination led to an unofficial overtime ban by Western Welsh crews at Cwmbran, Mon. Union officials, it was stated, failed to get the ban lifted. As a result, "chaos spread rapidly through the Eastern valley area of Monmouthshire, with up to 20 per cent of the services cut".
So curious
Then there is the curious Ministerial attitude towards profit. In the Western Welsh case, the return sought on capital (and refused by Mrs. Castle) was just over 2 per cent; in Rhondda Transport, 4.27 per cent. Yet less than a month later (July 20, 1967) another Minister (the President of the Board of Trade) announced that he is setting the British Overseas Airways Corporation a financial objective of an average rate of return of 12.per cent on net assets over the four-year period ending March 31, 1970.
Finally, there is a question of confidence in the road service licence appeals system. Can a Minister charged with the duty of acting impartially in an appellate capacity, make statements of the kind quoted in the first paragraph of this Casebook without risk of forfeiting the confidence of bus operators?