SPIRAL IN REVERSE
Page 81
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NTIMELY from the point of view of most hauliers is the reminder in the latest report of the Prices and Incomes Board that although prices ought not to go up there is nothing to stop them from coming down. Taken literally the popular metaphor of the freeze implies that prices and incomes should remain exactly as they are until the appointed time for a thaw and this suggestion of stability has had some small effect although nobody has assumed that it should be followed exactly.
The report does not propose a general reduction. It merely says that to maintain the present level, price increases in some cases need to be offset by price decreases in others. Reductions should be sought in firms or industries where output per man is rising faster than in industry in general, where costs in general are falling and where, in the words of the original White Paper on the subject published over a year ago, "profits are based on excessive market power".
CONDITIONS DO NOT APPLY Except for possible improvements in productivity in individual cases none of these conditions is to be found in the road transport industry. This will not prevent some customers from taking the hint from the Prices and Incomes board that they would be performing almost a patriotic duty by depressing road haulage rates. At the moment the temptation must be particularly strong.
The appointment of the Board was one step in the attempt to check the inflationary spiral. Industries faced with higher costs, or even the possibility of higher costs, had developed the habit of putting up their prices thus increasing costs in other industries. The prices and incomes policy is intended to halt this process in its tracks. Costs will no longer rise so that there will be no excuse for putting up prices or demanding higher wages.
In spite of this theoretically perfect device it is possible that many traders and manufacturers will still find the margin between costs and revenue diminishing, especially if the economy slows down and there is a decline in the demand for their products. They will be looking more closely than ever for some way of cutting costs.
This development also is part of the Government's plan. The expectation is that management and men, deprived of the easy resource of giving themselves more money all round, will seriously examine how to improve productivity. There are other possibilities. One of them which has seldom failed in times of adversity is to cut transport costs either by reducing the rate paid to the contractor or by finding another operator to do the work.
There may be little difficulty in carrying out this policy. If public demand falls off and the volume of production follows suit there will be less traffic for hauliers and the railways to handle. Past experience has shown what happens in these circumstances. The operator finds his revenue reduced because there is less to carry. Too many carriers are chasing too few goods. The heightened competition thus created leads to a rate-cutting war. Revenue is still further reduced and so the process continues. It is the inflationary spiral in reverse.
In the past the haulier has weathered this kind of situation owing to the fact that t has seldom become general. Where rates for one category of traffic have declined rates elsewhere have improved. Although there have been peaks and troughs in industrial production the overall picture had been one of continual and even steady increase. The railways have been less fortunate but the demand for road transport has continued to rise. Productivity measured in terms of ton-miles per vehicle is higher than it ever was.
FORTUNES TIED TO PRODUCTION The process may at last come to a halt. The fortunes of transport operators are to a large extent bound up with the index of national production. Better vehicles and techniques have enabled them to carry the larger volume of traffic offered. They have often been able to do this without increasing their rates. In a period of inflation this is equivalent to a price reduction. Individuals have been known to complain or boast that some of their charges have remained unaltered for 10 years or 20 years or even longer.
Documentary proof is usually lacking but the claim would not be made unless it bore some relation to the course of events. Most customers are willing to admit that their transport costs have not been a serious problem. The main difficulty has usually arisen from increases in taxation and one c two other items which it has hardly bee possible for the operator to absorb in mediately.
The Prices and Incomes Board seems ur willing to forgive the road haulage industr for causing it such a lot of trouble. Th failure of operators to complete and retur the notorious questionnaire is given as on of two instances in which full co-operatiol was not given to the Board in its inquirie Road haulage is an example of an industr: where there is a small basic wage on whici is "piled a superstructure of supplements'. The accusation is repeated that in its fates statement on costs the Road Haulag Association appeared to be trying to compl: with the letter of its earlier decision "whit circumventing its spirit".
el BOARD SHOULD LOOK AGAIN Perhaps the Board should have anothe look at the industry, distasteful though tht task may be. Some operators, no doubt tit( most efficient and bold, were able to reach t. satisfactory rates agreement with their cus tomers before the freeze closed down ir earnest. Others less skilled in negotiatior were able to make no progress in view of tht anathema of the Board, the disapproval a the customer and the absence of the customary encouraging noises from the RHA Small operators with few resources may soon be finding themselves in serious difficulties.
Those in need of capital are already finding the sources of credit drying up. Those with overdrafts find the banks pressing for settlement. Perhaps they are to blame for running their businesses in this hand-tomouth fashion. It may still be true that they have been giving an excellent service and that steps should be taken in the national interest to ensure that they can continue to do so.
There may be no easy way in which their plight can be drawn to the attention of the authorities. The small operator who goes out of business leaves scarcely a ripple behind and will usually settle down in some other occupation. There may still be some loss from the withdrawal of his services and it may be appreciable if the pattern is repeated all over the country.