Differences Between
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Town and Country Costs
"The Commercial Motor" Costs Expert Shows Why it is Impossible to Apply a National Rates Schedule, and Sets Out Figures for the Operating Costs of a 5-tonner in London and in the Country, as Well as Computing Average Expenses
WHEN denationalization has been effected, the road haulage industry will have escaped from monopolistic control for the third time in its brief history. The first occasion was at the time of the Szarvasy scheme, the second the "Book of the Eight," and the third, of course, the Transport Act, 1947,
The danger of denationalization is that it may result in yet another form of monopoly, but even if that does not come about there will be a period when the industry will revert to the conditions which prevailed between the two wars. The first development will undoubtedly be a rates war. Trade activities are at a low ebb and there will be more transport facilities available than traffic. Competition will be keen and hauliers will try to obtain loads at almost any price.
The Road Haulage Association will no doubt do its best to put a brake on such a tendency, but if the industry becomes too highly orgahized the formation of monopolistic groups will be facilitated and hastened. It is inevitable that we shall find ourselves dealing with the same
problems as in the period after 1933,and the R.H.A. may try to introduce a country-wide rates schedule. That will be likely to do more harm than good, for I am convinced that a nationally applicable charges scheme is not practicable. •
Bound to Fail •
If, as has been the case for some time, the Association confines itself to the scheduling of rates for local application, it will do a good job. If, however, attempts are made to apply what should be a •local matter to the country as a whole, failure is bound to result.
The difficulty is that conditions and costs vary between one part of the •country and another. Rates that suit one district are useless etar:where. Let us compare conditions in East Anglia with :hose in Devon and Cornwall, and B24 Lancashire and Yorkshire. East Anglia has good roads and is flat. Devon and Cornwall are hilly and their roads are narrow and winding. Lancashire and Yorkshire have fairly good roads but they are congested.
Operational costs in East Anglia are comparatively low because Of the easy conditions, but they are greater in the West Country and the north. Differences in costs between areas justify variations in rates. It may be thought that thesolution is to base rates on costs in an expensive area, assuming that the haulier in the less expensive district would not object to making extra profit. That might, be reasonable if the -extra profit were small, but it could, in fact, be great and make conscientious operators feel that they were robbing their customers.
5-Tonner's Figures I have always tried to emphasize this matter when considering The Commercial Motor" Tables of Operating Costs. To take an example, I will assume the instance of an operator with a 5-tanner running 500 miles a week and will make out three sets of figures—the first, averages from the Tables brought up to date; second, figures applicable to London-based operators; and third, figures for
rural hauliers, • .
Tax will be the same all over the country and I shall. assume th.at the vehicle incurs a duty of 14s. a week. Wages have risen greatly since the 'publication of the last edition of the Tables and the average can be takento be £6 16s. per week (assuming that the additional 5s., at present being negotiated, applies). In London, wages will total £7 5s. per week and in the country (Grade II area) £6 12s. These amounts include, provision for employees' insurance and holidays with pay. About I Is. per week is necessary for these to-day.
The average pfor ision for garage rent is 10s. The Londoner probably pays 12s., but the countryman would think he was being robbed if he had to pay more than 4s. Comprehensive insurance averages £1; in London it may be £1 2s. 6d.; but only 18s. in the country. Interest on capital outlay at 12s. a week applies to all three instances.
Totalling these items, I find the average standing charges to be £9 12s., those for London to be £10 5s. 6d.. and for the country £9. Note that there is £1 5s. 6d. per -week difference between the London and rural sums. It is not a lot of money and in the case of a vehicle carrying 50 tons will amount to about 6d. per. ton.
Variations in Running Costs
There are greater differences in running costs. The average fuel-consumption rate is 10 m.p.g. and as petrol costs 4s. 2d. a gallon that is 5d. per mile. That 4s. 2d. is an average figure. Fleet operators who buy in bulk can buy petrol• cheaper. Smaller hauliers must pay the full retail price of 4s. 3-id. or 45. 3fd., depending on the zone in which they are. In London, the vehicle will probably not do better than 8 m.p.g., and that gives a cost of .6.25d. per mile. In Devon and Cornwall, the fuel-consumption rate may be 11 m,p,g., which gives 4.540. Per mile. I will take an average cost of 0.20d, per mile for oil to apply in all-cases. I adjust the figure for tyres in the Tables, Id. per mile, to 1.30d. to bring it up to date.
Some people May have the idea that tyre cots in a rural area are likely to be more than in London. I do not agree. Roads in rural areas are not at all bad and there is less stopping and starting in a country district-than in a congested
city. .
Differences in cost are most apparent when we consider maintenance. First, maintenance (d), which provides for cleaning, greasing, painting and' Varnishing. The average is 0.30d. per mile; for London it. will be 0.35d. but for the country it could easily be 0.25d.. In connection with maintenance (e),' which relates to repairs and overhauls, the average is 1.50d,, the London figure 1.75(1., and the country cost 1.25d. . .
For depreciation, I shall take the same figure for London as the average-2.10d. per mile. It can be less in the country because obsolescence is not so important and as maintenance costs are lower operators are willing to keep their vehicles
longer. I shall assume 1.60d. • .
Now to add these figures.. The ,aveiage comes to I0.40d. per mile; the London cost 11.95d.; and the country total 9.14d. At 500 miles per week, these' account for .£21 13s. 4d. for the average; 124 18s. for London; and £19 Os. 10d. for the country.
Before assessing the total costs, 1 have to introduce another item which tells against the London vehicle. Traffic conditions in the capital do not allow a driver to cover 500 miles a week without a little overtime, and so 1 add 10s. a week to the London standing charges, bringing them to £10 15s. 6d.
For average conditions, I add £9 12s. for fixed charges to £21 13s. 4d. for running costs to give a total of £31 5s. 4d. The total of London operating costs is £10 15s, 6d. standing charges added to £24 18s. running costs, making £35 13s. 6d. For the country vehicle I add £9 standing charges to £19 Os. 10d. running costs, giving'inc £28 Os, 10d.
Criticism Forestalled
To conclude; I should like to mention that the last time I contended that it was impossible to apply a national rates schedule it was suggested to me that if the railways could work to such a system, the road haulage industry ought to be able to do the same. The answer is, of course, that there is a vast difference between the railways' methods of assessing rates and those which should be applied to road haulage.
The railways carry goods all over the country, so that even if there be a difference in the cost of transport between one part of the country and another it does not matter a great deal. A narrow margin of profit in one area can Oz. balanced by the profit margin in another. The railways are satisfied and the customer should be content because he appreciates that his competitor pays the same rates as he does.
Running costs rather than standing charges predominate in road transport expenses, whereas the reverse is the case in railway operation. Railway costs therefore do not vary much from one part of -the country to another.
I consider that rate-eutting • occurs only when a haulier deliberately tenders a price without there being any prospect of a fair profit being made. If an operator in the country quoted a rate that was lower than the standard that existed in the towns, that could not be called rate-cutting.
In my next article, I shall tabulate the figures calculated here and deal with establishment costs and profit. There are even greater variations among establishment expenses than among operating costs, and I shall compute the average, those applicable in London and those fOr a country area. . S.T.R.