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24th June 1966, Page 69
24th June 1966
Page 69
Page 69, 24th June 1966 — NO GREAT LEAP FORWARD
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Which of the following most accurately describes the problem?

ONE can understand the note of chagrin which occasionally sounds in the report of the Transport Holding Company for 1965. This was to be the year of the great leap forward. After a long period of Conservative administration during which expansion was at the very least discouraged, the Minister of Transport in the Labour Government, Mr. Tom Fraser, had announced that the subsidiaries of the holding company might consider themselves free to add to their fleets, by freely negotiated acquisitions as well as by the ordinary process of growth, where they believed it would be to their advantage "in the normal

course of business."

In one important particular the results were not as anticipated. It is true that the number of road haulage vehicles, which had actually fallen by 300 during 1964, went up in 1965 from 15,765 to 18,201. The number of vehicle miles also increased substantially from 324m. to 362m. This rise of 12 per cent was no doubt reflected in the volume of traffic carried although the holding company's report is notably reticent on this point. At any rate the scale of the increase closely corresponds to that of revenue or gross receipts which went up from £71m. to £80m.


So far so good. Unfortunately the tale of progress ends at this point. When one examines the profits it is found that they have actually fallen slightly from £7.3m. in 1964 to a bare £7m. in 1965. This can only be regarded as a disappointing result in an organization which has otherwise shown every sign of healthy growth and higher efficiency. In its report, the format of which has symbolically shaken itself free from the traditional, dull, stationery-office pattern, the holding company feels bound to offer some explanation, just as if it were an ordinary public company giving an account of its stewardship to the shareholders.

We are left in no doubt about what went wrong. The Government which was so eager to confer freedom with one hand equally showed no hesitation in taking it away with the other. Loss of' momentum in the expansion of the economy, says the report, affected some of the traffic carried by the road haulage companies. But the main reason for the drop in profits lay elsewhere. There had been several increases in costs, of such a magnitude as to make it "essential to raise charges" in spite of increased efficiency. Unfortunately the increases needed were delayed many weeks and in some cases "became very difficult to obtain at all."

The reasons are particularly relevant this week. The intervention of the Government, followed by the investigations of the Prices and Incomes Board, led to delay and increased resistance from customers. In the special case of the parcels group direct Government action reduced the yield of the proposed rates by almost £250,000 a year, in addition to the loss caused by the long wait while discussions were in progress.

In spite of political changes, therefore, the holding company still finds itself unable to abandon its traditional posture of defence against the Government of the day. The only change is in the source from which the attacks are feared. In its first year 1963, when Mr. Ernest Marples was Minister of Transport, the report emphasized how vital it was that the operating companies should have a "full and proper commercial freedom." "Vitality and change are the hallmarks of a successful competitive enterprise." said the report for that year. The inference was that Conservative policy did not allow the full freedom that was necessary.

A further complaint reiterated the following year was that the Minister of Transport and the Exchequer were taking too much out of the holding company by way of interest on capital debt, profits tax and the special provision for handing over part of the remaining surplus to the Treasury.

EFFECT OF CHANGE OF GOVERNMENT Towards the end of 1964 a Labour Government took office and the holding company's report for that year shows clearly the effect of the change. There were rumours of a drastic reorganization of the country's transport. There was a growing but exaggerated impression, said the report, that the condition of transport in general was chaotic. There was an equally dangerous idea that the "chaos" could best be reduced by some single and instant solution based on an authoritative "blueprint study" covering all forms of transport.

Released from the shackles of the British Transport Commission, with its inevitable dominance by the railways, the holding company spoke out boldly, anticipating incidentally the reply to the present Minister, Mrs. Barbara Castle, at the annual dinner of the Road Haulage Association, by its chairman, Mr. A. R. Butt. There was no such single thing, said the holding company's 1964 report, as "the national transport problem." There was a railway problem and there was the problem of road congestion. But it was not possible to treat both problems simultaneously by a single measure such as banning heavy lorries from the roads. Moreover, the road-rail problem, which was "in reality the railway problem." should not be allowed to dominate the public thinking on transport.

In its introduction to the 1965 report the holding company changes its focus from the transport situation as a whole to its own place in the transport pattern. It is obviously concerned at the possible contents of,the coming White Paper and of legislation which might follow it. The report speaks of a purposeful management and direction throughout the diversified undertaking. The units composing it work within a framework of structure and policy which is governed by "philosophies of organization that are clear and simple and specially suited to the world of transport as it is today."

Earnings by the companies, the report adds, are achieved both in highly competitive industries and in regulated industries, but the greater the degree of competition the higher the return on book values. The holding company's profits "do not derive mainly from monopoly." The profits are some measure of the efficiency with which good services are provided and "these services are all the better for having to be provided on a competitive basis."

Encouragement was given to subsidiaries by flexibility and "a willingness to tolerate nonconformity." The holding company has not sought to establish itself as "a single or monolithic undertaking." It is indeed part of the very nature of road transport that the smaller unit "tends at least to hold its own so far as efficiency is concerned." "Economies of scale" do not operate there as they do in the railways. Supervision has to be local and immediate and capable of taking decisions.

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