Secret report looks to NFC's future
Page 26
If you've noticed an error in this article please click here to report it so we can fix it.
A GOVERNMENT BILL will be brought in after MPs get back from their summer holidays to help the National Freight Corporation over its serious short-term financial problems.
But this move, announced last week, is only a stop-gap. For on a desk somewhere in Whitehall sits a secret report which probes into the Corporation's deep-seated troubles.
What it reveals and what action it suggests is known only to the firrn of consultants which undertook the review and a handful of top men at the Ministry of Transport and NFC.
However, looking back over the statements and events of the past few months it is possible to make a reasonable guess as to what moves will be made to put the NFC back on a sound financial footing.
The size of the problem first came to the surface last year, when a £12.3m loss was announced for 1974 after making profits in the previous three years.
The report said that the limitations imposed upon it made operation difficult. CM of May 9, 1975 reported: "There are obvious and direct limits to the slimming of the business by shedding labour in hard times.
"While the Government demands a full return on its capital investment the Corporation cannot — as a private or public company would do — cut back on dividends during lean years.
"This obviously rankles. The report lays stress on the £8m interest paid in 1974 and complains with some justification that while the railways have been relieved from pension escalation costs by the Treasury the NFC has been given no such relief on railway pensions it inherited with NCL.
"The cost burden of pensions, says the NFC, is 'now so big as to risk the financial well-being of the organisation and the job security of its present employees'."
Prophetic words, since by January of this year the Cor poration had to receive £8m in grants to keep it going and it announced that it was expecting to make a record loss of £30m for 1975.
Then just a few days before the 1975 annual report was published the Government was compelled to give the Corporation an extra grant of £11m (CM May 21).
It was announced in the Commons that the NFC faced severe cash-flow problems and the grant was being made to enable it to meet its financial obligations.
Mr Ken Marks, Under-Secretary DoE, said that the problems were based mainly on National Carriers and Freightliners and most of the other subsidiary companies within the group made a profit.
Big problems The size of the trouble was made clear when the report was published (CM May 28). The loss for the year was £31m, more than half of which came from National Carriers and Freightliners. The economic recession was also blamed.
Sir Dan and the Board complained that the corporation was under-capitalised and repeated the complaints made during 1975 — that the NFC had to carry financial burdens imposed by statute and by outmoded practices it inherited.
So last week the Govern ment announced that it would be introducing a Bill to help NFC over its money problems. The total of £19m in grants made earlier in the year came from a Contingency Fund and the Bill would give the DoE more statutory powers to provide a more permanent solution.
So that's the situation to date — but what happens now? Well, what the NFC wants was revealed in its answer to the Government transport policy Green Paper reported elsewhere in this week's CM.
Opening the battle which is bound to be fought over its future the Corporation said that if it was to survive as a commercial public enterprise there "was an urgent need for it to be financially reconstructed.
"It saw no merit whatever in handing over a controlling interest in Freightliners to the Railways Board, as is sometimes advocated."
And on National Carriers it saw no point in returning the company to the railways. "There is little wisdom in bringing the company and the other public sector parcels companies together unless through the medium of NFC's own strategies."
It is unlikely, however, to get all that it wants. For its future must be tied up with th( Green Paper which itself now in a state of flux.
If the Government intend t( redirect Britain's freighi transport policy obviously on of its biggest tools would b( the NFC. It should be remem bered that NFC has a duty t( use rail wherever this is "effi cient and economic" (Tran sport Act 1968).
Moves to transfer freighfrom road to rail woul( obviously be helped by actior taken by the NFC.
In the current spending cut: climate the Government wil want to pump as little monej as possible into the compan} and NFC's financial positior could be improved immediate ly by hiving off NCL at least t( the railways. Its annual rate o loss in 1975 was £9.8m and it total trading loss amounted t( £18.4m taking into accoun interest and pension charges.
Interpretation?
Again the Green Paper cast its shadow. "It is for consider ation whether, in the longe term, there might be scope fo integration of freight services This would provide an oppor tunity to review once agaii the suggestion that NCL and /oz. Freightliners be trans ferred to the railways."
But in the case o Freightliners it said a previou report had concluded that th arguments for returnin, Freightliners were not stroni enough, and indeel Freightliners only made £1.2m loss during 1975.
At a guess then what look like happening is that NFC wi hang on to Freightliners an that the NCL will either gt back where it came from oi more daringly and expensive ly, become part of a singl parcels and small freight ser vice.
On the financial reconstru( Lion of NFC the Governmer has no political option but t save the company and make work — at the cheapest poss ble price.
But the medicine may b -bitter and could be far mor wide ranging than the NF1 has so far envisaged.