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Two fare scales for Midland Red

2nd January 1970, Page 23
2nd January 1970
Page 23
Page 23, 2nd January 1970 — Two fare scales for Midland Red
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Which of the following most accurately describes the problem?

Keywords : Business / Finance


• An application by Midland Red to increase fares, with a steeper increase for those for rural services than the corresponding fares increase for urban services, has been granted in a written decision from the chairman of the West Midlands and East Midlands Traffic Commissioners. The decision follows opposition from 22 local authorities and 20 non-statutory objectors, although only eight of the former and two of the latter were present at the joint hearing on December 9 and 10, 1969.

The granting of dual fare scales marks a new precedent for many operators now within the National Bus Company (writes Derek Moses), and has been introduced in line with the argument that rural services are more costly to provide than urban services. Previously most rural services have been operated by the larger company operators on the basis of crosssubsidization—the more profitable urban services virtually paying for the non-viable rural services.

The new scales—introduced on Sunday (December 28)—are as follows: Urban services: Id on fares up to 9d; 2d on fares lOd to Is 4d; 3d on Is 5d to 2s 7d; 4d on 2s 8d to 3s 4d; and 5d on fares of 3s 5d and over.

Rural services: 2d on fares up to 9d; 3d on fares 10d to is 4d; 4d on is 5d to 2s 7d; 5d on 2s 8d to 3s 4d; 6d on 3s 5d to 4s 11d; 9d on 5s to 9s 11d; Is on lOs to 14s 11d; and Is 3d on fares of 15s and over.

In the long written decision, the Commissioners make the point that, at the hearing, when the objectors argued that higher rural fares would produce increased passenger resistance leading ultimately to the withdrawal of services, the fact that grants to assist such services could be made under Section 34 of the Transport Act had apparently not been considered by the local authorities concerned!

In granting the application, the Commissioners took into account that the Minister of Transport, when considering an appeal, had stated that all applications for fares increases should be considered on their individual merits. Summing up the decision, they also described considerations which had led them to the view that the application should be granted.

One of these was that Midland Red required additional revenue in the region of £720,000 a year to maintain the company in a healthy operational and financial condition. Three of the considerations which led to this view were: (i) The amount estimated to be available in 1970 for dividends and contingencies after paying Corporation tax was £473,000. Assuming dividends were paid at the level of the last two years, namely £274,000, the amount available for contingencies would be £199,000, which viewed against a turnover of £27m was not unreasonable.

(ii) After Corporation tax the estimated return on capital employed in 1970 was 4.12 per cent which compared very favourably with returns from other industries ranging between 8.6 and 9.3 per cent, (iii) The poor financial results of the company in 1967 caused a sharp reduction in its bus replacement programme in 1968 which was pot in the public interest.

The Commissioners also commented that it was a matter for regret that savings from o-m-o, once estimated to be in the region of Is per mile, had been so far eroded by rising costs as to stand at 6d a mile.


People: Derek Moses

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