An Interest in Profit
Page 51
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By JANUS
FOR a good time to come we shall have no news about the up-to-date revenue and the traffic of British Road Services. The figures published by the British Tra:nsport Commission every four weeks no longer show B.R.S. as a separate part of the undertaking. The official explanation is that the process of denationalization would make any figures about B.R.S. misleading and useless for the purpose of comparison. The argument is reasonable, but the effect is that the latest information available during a difficult period will show the position only up to the end of 1953.
The annual report has not yet been published, but some of the details have leaked through, notably the B.R.S. net revenue for the year of approximately £7m. Mr. Ernest Davies managed to bring this into the recent Parliamentary discussion on the 10 per cent. increase in railway charges, and he adumbrated what will very likely be an important item in the Socialist attack when the report appears.
The railways need more money just when the Commission are losing an important source of revenue in 13.R.S. Payment for the acquired businesses was made in transport stock, on which the Commission pay 3 per cent. interest. The latest profit of £7m. would represent 10 per cent. on the same amount of stock. Therefore, the Government is depriving the Commission each year of the difference between the three and the 10 per cent.
The argument is not easy to answer, if only because the financial experts who will be expected to pick holes in it may find difficulty in choosing words and phrases that the ordinary person can understand. Compensation paid to ex-hauliers (except in the case of the voluntarily acquired who were lucky enough to get cash) is represented by an equivalent amount of transport stock, and it is probable that roughly the same sum will be paid, with the help of the levy if necessary, by the buyers of nationalized road haulage -assets. On the strength of these resemblances, Mr. liavies is able to work his sleight of hand. The Commission, he points out, are giving up something which brings them in far more than the interest on what they paid for it.
To Better Purpose
The general public may suspect there is a fallacy somewhere, but fail to see how the trick is done. In fact, the net revenue of B.R.S., although it may legitimately be expressed as a percentage on the capital involved, has nothing to do with the interest on transport stock, which has been fixed by statute and has a present market value different from what it was at the date of issue. The previous holders of the acquired undertakings were making, before nationalization, an average annual profit of something like £10m., well above the figure for the best year of B.R.S. They have put to various uses the compensation they received. Some have been unlucky, but most of them would not be very happy if their money was earning only 3 per cent. When the Commission receive payment for the assets now being sold, they also may expect to use the money to good purpose, perhaps to better purpose than has been served by B.R.S.
Apart from all this, the £7m. net revenue of B.R.S. is a cause for reasonable satisfaction, and the Socialists do well to make the most of it. The Minister of Transport, in his reply at the end of the recent debate, decided to meet Mr. Davies on this ground. The figure of £7m. must not be considered in isolation, said the Minister. In the past six years, up to and including 1953, the total operating surplus of B.R.S. was £13,300,000, and from this amount £2m. per annum would be a reasonable Contribution to central charges, leaving a real surplus of £250,000 per annum, on the average. Whether B.R.S. would have continued to show a yearly net revenue of £7m. was "a wholly hypothetical question."
This is true, but most people will go on thinking that the future results of B.R.S., if left undisturbed, would have been more like the figures for 1953 than for previous years. There is no longer any point in trying to prove that B.R.S. have been a complete financial failure. The likelihood always existed that, in the favourable circumstances presented to them by the Transport Act, 1947, B.R.S. would ultimately show a profit. This does not greatly affect the issue between nationalization and free enterprise.
Main Objections
In the White Paper on transport policy published two years ago, the Government set out their main objections to the state in which the Socialists had left the road haulage industry. B.R.S., said the White Paper, "with the elaborate system of depots working under their direction, cannot give trade and industry the speedy, individual and specialized services afforded by free hauliers before nationalization, and could not stand up to competition from them."
Road haulage had been restricted in the past largely in order to avoid excessive competition between road and rail. "This process has now gone so far as to deprive trade and industry of the full advantages of modern road transport and has driven traders to provide their own road transport to an extent which would not otherwise have occurred."
Government policy is still based on these premises. Nationalization of road haulage had not won, and probably never would have won, the complete confidence of traders. The rates were not attractive. The service had improved, but still was not entirely satisfactory. The virtual monopoly of long-distance haulage for hire or reward was driving traders to use their own vehicles rather than into the arms of B.R.S. Had the latter been making in 1952 the same sort of profit as they made in 1953, the Government might have hesitated a little longer than it did before committing itself to denationalization; but the" decision would have been the same in the end; for the profit and loss account was not the only, or perhaps even a principal, factor in determining Government policy.
The suggestion that the railways have been the pensioners of B.R.S. is not true, neither is it relished by the Commission nor by the representatives of the railway workers. The Socialists will persevere with their criticism that denationalization will have a serious effect on the stability of the Commission. In doing so, they will make the most of the £7m. " profit " now being handed hack to hauliers at bargain prices. It remains to be seen whether the public will be taken in by. the clamour to the point of accepting the argument.