A well-aimed blast-off by the THC
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COINCIDING with the historic moon landing by the United States astronauts the publication of the Transport Holding Company's final report this week (page 16) deserves to be given a powerful spotlight of publicity in itself. Though not of world-shattering proportions it is highly relevant to the politics and organization of transport in this country. The indictment of undue government interference made by Sir Reginald Wilson and his colleagues will not be popular in every quarter. Doctrinal politicians of right and left are not readily persuaded to don neutral-coloured trousers.
The occasion for this article is the chapter headed "A Retrospect—Instabilities of Legislation", in the report. It is a review not only of the political vicissitudes experienced by the THC in its relatively short life but of the earlier attempts of politicians to shape the structure and pattern of the transport industry. In the context of three massive reports on Ministerial Control of the Nationalized Industries by a Select Committee of Parliament, to which a Government reply has just been published, and in the run-up to the next election, the THC's comment "on the close connection that is observable between the efficiency and financial viability of publicly owned road and rail undertakings on the one hand, and on the other the consequences of their special political environment", is particularly topical.
The highly condensed summary does not pretend to be entirely neutral. Some of us could have wished it had been said 10 years or more ago. As it is, politicians of both main parties will wonder if they are wearing the dunce's cap. Some may even wish it were possible to promote Sir Reginald to the Presidency of a World Space Agency—and consign him on a prolonged voyage to Saturn!
Since 1948 roughly 13 years out of 21 have been spent waiting for major Transport Acts of Parliament, whether good or not-so-good, and in re-organizing after them. That, in brief, is the cri-de-coeur of transport management in the public service. Many who are not politically well disposed to nationalization or public enterprise will applaud the implicit prayer for stability.
Says the report: "The years 1948 and 1949 were occupied with the vast job of acquisition and rationalization, and if possible of reconciliation, which had to be undertaken as a result of the Act of 1947 setting up the British Transport Commission. The years 1952 to 1954 were spent either in a state of deep-freeze prior to the Act of 1953 or in cleaning up subsequently. The next period of organizational and developmental stages occurred over the four years prior to the Act of 1962. Finally there was the period 1966 to 1968, to which unfortunately the year 1969 must presumably be added, since it is confidently asserted that a different Government, if and when it came to power, would probably upset a great part of the basis of the Act of last year.
"Thus there has been an almost continuous process of legislation throughout the post-war life of transport. Moreover each Act has represented another swing of the political pendulum. There has also been, over the 21 years, a whole series of lesser Acts, Statutory Instruments and White Papers, not to mention the reports of Committees of Enquiry. Each of these has given rise in turn to the usual political exchanges, and whatever may have been the effect of the mutual attacks and counterattacks upon the fortunes of the parties concerned, the British Transport Commission (or its successors) was thereby exposed to a form of severe crossfire which certainly did not improve its public image or its effectiveness".
Considerable burden All this would be bad enough, but State transport managers have also had to contend with a considerable burden of political intervention and control. Backbench politicians, Press and public have not hesitated to stir up political controversies in the interests of partisan policies.
It might have been thought that with the progressive maturity of the Ministry of Transport, buttressed today by a whole new breed of economists, cosi/benefit research teams, etc., the need for Ministerial intervention would have eased off. But the report stresses that the restraint exercised in the early years—when the Public Corporation was adopted by the Act of 1947 as a workable substitute for nationalization, and managers were generally left to get on with their job—has not been a recent feature.
The BTC's working environment was seriously affected in 1955 /56 as a result of changes in its statutory constitution. The attitudes of staff within the organization and of people outside were confused. Finance through its own Loan Stocks at infrequent intervals, though with Treasury guarantee, gave way to Treasury borrowing via the Minister who was involved in small and frequent advances and became in effect both banker and creditor. Small wonder, implies the report, that deficit-financing policies by the then Minister, who in the interest of a general "restraint" over-rode a judgment of the Transport Tribunal—thus denying the railways £17m on coal freights alone —opened the door to the massive rail deficits of later years. "The Commission's railways were now on the slippery slope of rising cost—of all kinds—but delayed and restricted price adjustment". We all know where this trend led to—rail losses of £130m a year and the writing-off of £1,200m of rail capital debt in the recent Transport Act.
The THC suggests that the Commission should have resisted these developments more strongly. There were, of course, other reasons for the railways' troubles, though it is salutary to be reminded that between 1948 and 1954 the BTC had earned a working profit (i.e. before financial charge on capital) of some £300m to which the railways by themselves had contributed about £180m of profit "which seems almost unbelievable in these days".
As the railways went rapidly downhill financially, Government intervention became ever more detailed and the Commission's road transport and other activities became implicated as well. How far, asks the THC Board pertinently, was the un happy position which justified this detailed Government intervention "the product, at least in part, of what had happened earlier in the way of formal legislation and informal intervention"?
Fortunately the jurisdiction of the Traffic Commissioners in the field of fares was not interfered with. "Road Haulage was not sophisticated enough, and was too competitive, to brook 'regulation' of its charges. Thus the 'nationalized' bus companies and road haulage companies have continued solvent and efficient to this day."
But, the report goes on, there was a 1966 intervention into the parcel company's charges by the Department of Economic Affairs and in 1968 there was an unfortunate suggestion that the fares of the Holding Company's Bus undertakings should be referred to National Board for Prices and Incomes as well as to the Traffic Commissioners.
With the era of the "managed economy" calling for frequent interventions -all attempts at the detailed settlement of prices, and of wages and conditions, and at an integrated control of things from the centre" must bear more harshly on a Public Corporation than on private business. Prolonged discussions with Government on wages. prices and on investment criteria threaten to sap the energies and morale of top-level managers.
Yet, despite these handicaps the THC earned £90m profit in its short life of six years! The THC report—some swansong! —says baldly that with a greater degree of freedom. higher Profits would have been earned and the interests of customers, and of the public, would not have suffered. (The cynic might say that the very large private sector of road haulage could have coasted along comfortably, as usual, under the umbrella of commercially prudent rate levels charged by the BRS companies.) Unsettling A further consequence of continuous legislation and seen or unseen political intervention is that the public are subjected to a barrage of information and propaganda. much of it distorted. "The resulting attitude, sometimes hostile and frequently muddled, is not only unsettling but it damages the environment in which the undertakings must work."
The report contains a valuable, though excessively brief, discussion about the anatomy of a Public Corporation. The public are "kidded" into believing that they possess the rights of transport users as well as of ownership—very different things. The socalled "owners" are encouraged to ignore their obligations to make the State companies financially viable by the false suggestion that nationalized transport must be hopelessly inefficient in itself since it has never made a profit, never can and never will. There is also the suggestion that these public undertakings are a drain on the taxpayer for capital finance as well as the financing of losses.
Because the Public Corporation is in form rather like a Public Trust there are no owners, says the THC, which goes on to stress that publicly owned transport on balance has a pretty good profit record save for London buses and the railways. It is doubtful whether capital borrowings from the Minister are always met directly out of taxation in the THC's view; certainly "the revenue profits of the Holding Company which go back to the Exchequer by way of taxation, interest and dividend have almost equalled the whole of its capital borrowings over the years, including the very large and non-recurring investment in the last year in acquiring the BET bus shares". Because these suggestions are constantly repeated and rarely denied the public and publicly owned services are put at cross-purposes, with detrimental effects on efficiency.
The contrast between a "nationalized industry" with monopoly of a complete field and a "public corporation" operating as part "of an indivisible industry located mainly in the private sector" is discussed. "A publicly owned road haulage company cannot be subjected to the Procrustean requirements and workings of the public sector proper, unless it is to be seriously inhibited and damaged. The idea that a Public Corporation can be treated as a mere creature of Government—to use a famous phrase—ignores its separate Act, its corporate nature and its statutory duties and responsibilities. The annual balance sheet is signed by the Corporation; it is the Corporation which is accountable."
Another useful discussion touches on the classification of "commercial" and "social" transport services. At one extreme a public transport service may be entirely commercial with the aim of maximizing profit or at the other extreme it could be entirely social with users paying little or nothing towards its cost. Many licensed, regular and scheduled passenger networks operating at controlled fares have some aspect of both, "because while the whole network must inevitably be run on a business-like basis, the richer routes and timings are expected to help to carry the poorer, and so forth. Between the `commercial' and 'social' extremes there is thus a broad intermediate area that is by no means easy to define."
The THC says it is neither easy nor wise to try to make a given network truly "commercial" in the full sense by arranging that all the less economic aspects of its public duties, plus any extreme cases, shall be subsidized from outside. -The disentangling will usually be technically very difficult,
The point is hammered home: ". .
moreover, the well-known difficulty of getting rid of the uneconomic elements once they are directly subsidized from outside may perhaps make it desirable to leave (and even to prefer) certain controlled degrees of cross-subsidy within the Corporation which provides the services concerned. To be successful, the concept of the regular public service (as distinct, of course, from public ownership) will usually imply a measure of balance and sophistication that is absent from the more elementary and black-andwhite economic concepts that have somewhat overlaid it--probably to the public detriment—during the quasi-political arguments of recent years".
The Holding Company takes a further swipe at the current tendency to regard MPs not only as "Ombudsmen" but also as responsible for the efficiency of Public Corporations. Some go further by arguing that Parliament or Government can be thought of as a kind of board of directors for nationally owned enterprises. Any such analogy is regarded by the THC as very dan gerous, given that a public corporation needs to compete on level terms to survive. There follows the briefest possible concession to political sentiment: "Not, of course, that the Holding Company is unconscious of the very great importance of ensuring public accountability, and of securing a proper place for public policy and a due measure of public control."
In stressing that it is necessary for efficiency and success that a Public Corporation should possess proper financial and technical resources, a modern and effective approach to questions of structure, organization. internal relations and management, an energetic and resourceful way of business, and a sound instinct for the right working policies the THC would be generally supported; indeed, their own record of success has stemmed from these qualities.
"But the constitution and the public environment are just as important if the undertaking is to have a proper chance. And since to have the right men is the most important factor of all, and since the right men will not stay, or be recruited, unless they see some hope of being allowed this proper chance, the present trend of things is a matter for real anxiety."
Mr. Aubrey Jones is one prominent Conservative who has said publicly that an incoming government should not waste time tampering with legislation that, whatever its defects, has got onto the statute book. The THC trumpet blast to the heavens in the week of Man's first landing on the moon could be interpreted as a plea to Mrs. Thatcher to go easy with her cutting-out scissors. Messrs. Fraser and Marsh and Mrs. Barbara Castle must wear the cap or the bonnet if they accept the THC's strictures. Being politicians it is likely that this swansong will echo in the corridors of Whitehall for some time to come.