Ten Years of Rising Costs T HE survey which is being
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conducted by The Conz»tercitti Motor over the progress of road haulage since denationalization has emphasized recent comment from many quarters that present-day haulage rates are little, if any, above immediate post-war levels. In some instances, they are quoted as being below 1947 rates, but even when some increase has been negotiated-possibly between 5-10 per cent.-it has only been obtained in the face of strong customer resistance.
Whilst upward price changes in the cost of other services have caused only temporary public comment before being " absorbed and then forgotten, users of transport-whether passenger or goods-have always shown especial opposition to any increase. It is indeed ironical that this attitude should persist towards an industry which is so regulated and which has to pay a luxury rate of tax for its ,basic commodity-fuel.
Yet unless accurate costs of both past and present operation are kept, factual justification for increased charges cannot be presented. Moreover, the extent of the increase in total operating costs since the war tends to be obscured by gradualness with which each item of cost is affected by inflationary trends.
Whilst the full effect of the railways' new freedom has still to be realized, and with recent advocation of a re-assessment of traffic flows relative to the form of transport most economically suitable, it is opportune, as well as seasonably appropriate, for operators to review their costs and to make comparisons with previous years.
To form the basis for such a comparison, I have chosen to take the operating costs over a period of 10 years in three stages, namely 1948, 1953 and as at present. For this exercise two vehicles have been selected which have been consistently popular throughout that period, namely the petrol-engined 5-tonner and the maximum-load oil-engined rigid eight-wheeler, both with standard platform bodies.
For those unfamiliar with the system of vehicle costing detailed in '"The Commercial Motor' Tables of Operating Costs," t propose to deal with the 10 items of cost as applied to these two vehicles, and then to comment on the 1948 and 1953 figures, as shown in the accompanying tables.
Dealing first with the present-day cost of operating a petrolengined 5-tonner, licences have been based on an unladen weight of 2 tons 7 cwt. calling for an annual duty of £30. Allowing for two non-revenue earning weeks during the course of a year's operation, this first item of *standing expense would then amount to 12s. per week.
Wages also include an allowance for two weeks' holiday with pay, together with National Health and employer's liability insurance contributions, and amount to £8 18s. 7d. per week. Rent and rates have been assessed at 10s. per week.
During the past year, substantial increases have been announced in vehicle insurance premiums and, if anything. variation in rates offered by tariff and non-tariff offices has become even wider. The example quoted here is for a comprehensive policy applicable to areas . within what is termed District B, i.e., midway between maximum and minimum charges. For C-licence operation, the premium quoted is £31 plus 12s. 6d. per cent. on excess value over £1,000. As the current initial cost of this particular vehicle is £1,150, a total premium of £32 5s. is therefore payable per annum or 12s. 10d. per week, again over 50 weeks per year.
Standing cosa (per week) Licences.. .. ..
Wages.„ .
Rent and rates..
Insurance Interest .. .. ., Total per week .. ..
Total per hour .. ..
Running costs (pence per mile): Fuel .. ..
Lubricants Tyres ..
Maintenance ..
Depreciation ..
Totals .„ . ..
Standing cost per mile (500 in.p.w.)., „ Total operating cost (pence per mile) ..
Percentage increase t1948 =100)
The fifth and final item of standing costs-interest-is based on a rate of 3 per cent, and accounts for a further 13s. 10d. per week. Total standing costs therefore amount to £11 7s. 3d. per week or 5s. 2d. per hour when 44 hours per week are worked. Assuming an average weekly mileage of 500, total standing costs per mile would then be 5.45d.
Turning now to running costs, fuel expenses have been based on a consumption rate of II m.p.g. at a cost of 4s. 3d. per gal.. resulting in a cost per mile of 4.64d. Lubricants cost 0.21d. per mile.
This particular vehicle has 7.50-20 10-ply tyres. the current cost per set being £167 lls. Assuming a mileage life of 30,000, the tyres cost would therefore amount to I.34d. per mile. Maintenance is assessed at 1.95d. per mile.
To obtain the cost of depreciation, it is first necessary to deduct from the initial cost price of £1,150 the cost of the initial set of tyres and the ultimate residual value of the vehicle. These two items are estimated to total £250, leaving a balance of £900. Assuming a mileage life of 120,000 for this class of popular vehicle, the depreciation cost per mile would therefore be 1.80d.
The total of these five items of running costs is 9.94d. which, when added to the standing costs per mile of 5.45d. for this particular weekly mileage, gives a total operating cost per mile of I5.39d.
Turning now to the larger vehicle, because its unladen weight is 7 tons 12cwt. the annual duty payable will be £125, or £2 10s. per week. (Incidentally, in view of the heavy rate of annual duty for this type of vehicle-heavier, in fact, pro rata than the smaller vehicle-it is curious why the illusion is so commonly held in some quarters, both in this country and abroad, that the maximum-load vehicle is not taxed heavily enough.) Wages, again based on R.H.(62) and allowing the same additions are estimated at £9 12s. 4d. Rent and rates are arbitrarily assessed at 50 per cent. above those of the smaller vehicle. Because of the increased premiums, insurance is now a heavy item, particularly since the initial price of this vehicle is £5,100.
Taking a basic premium of £54 for a C-licence comprehensive policy for a 10-ton vehicle operating in the same District B, there would this time be two additional premiums to be paid. One, as before, would be chargeable at a rate of 12s. 6d. per cent, on excess value over £1,000, whilst the second would be chargeable at £5 per additional ton over IO. A total premium of £104 12s. 6d. per annum would therefore be payable on this particular vehicle or £2 is. 10d. per week. When operating under A or B licences the premium would be increased.
Interest, again rated at 3 per cent., would be equivalent to a weekly cost of £3 'Is. Total standing costs per week would therefore be £18 Os. 2ct, or 8s. 2d. per hour.
Fuel, based on a consumption' rate of 9 m.p.g., would cost 5.67d. per mile,' whilst lubricants are assessed at 0.27d. per mile.'
Tyres, both because of their size and number, are naturally a large item of cost on this particular vehicle, but since it is more likely to operate on long-distance runs than the smaller vehicle the mileage life has been estimated at 40,000, resulting in a tyre cost per mile of 3.85d. Maintenance is assessed at 2.47d. per mile.
Depreciation, in this instance, is based on a vehicle mileage life of 250,000, whilst £800 is deducted in respect of tyre cost and residual value, resulting in a depreciation cost per mile of 4.13d. Total running costs are therefore 16.39d. per mile.
Because of the type of vehicle, an average weekly mileage of 800 is assumed in this case, giving a standing cost per mile of 5.40d. and a total operating cost per mile of 21.79d.
Comparing the cost of operating these two vehicles, whilst the cost of licences remain the same for the three years 1948, 1953 and 1958 for the petrol-engined vehicle, the difference shown for the maximum-load vehicle in 1958 is because of a greater unladen weight and not, of course, because of any change in the licensing scale. There has, however, been the interim period when an additional levy also had to be paid. Wages for the three years are based on the respective regulations, namely, R.H.(24), R.H.(46) and now R.H.(62).
In addition to the alteration of rates, there have also been adjustments in the definition of areas, and, in the latest regulations, in the grading of carrying capacity. Nevertheless, the quoted figures for the three years are, for practical purposes, comparable.
Comparable Prices
Both interest and depreciation are naturally dependent upon initial costs, and it is interesting to note that the price of the smaller vehicle for the two earlier years is as follows-1948. £555; 1953, £816 plus £173 16s. purchase tax-total £989 16s.
Turning to the running costs, fuel shows a large increase, largely because of the introduction and increasing incidence of tax. Originally 9d. per gal. in 1948, successive tax changes have been as follows-1950, Is. 6d.; 1951, Is. 100.; and 1952, 2s. 6d.; at which figure it remains.
There was, in addition, of course, the temporary Suez increase to 3s. 6d. Over this period fuel priccs, and subsequent costs, have been further complicated by the changeover from Pool to graded petrol.
Because of the multiplicity of prices payable for one gal. of fuel at any one time, quotation of prices can be misleading. The following three prices, however, relate to Pool or, alternatively, its nearest branded grade purchased in the same area and at the same discount rate-1948, 2s. 2id.; 1953, 4s. 4d.; and 1958, 4s. 3d. Tyre costs have also increased and as a typical example the popular 7.50-20 10-ply cover (34 x 7) was listed at £12 19s. in 1948, £18 14s. in 1953, and is now £24 19s.
On the credit side, howeftr, operators generally are reporting increased mileages from modern tyres, and as a result the increase in tyre costs per mile as shown in the accompanying tables is not relative to the increases in initial costs.
Comparing the total operating costs over the 10 years, it will be seen that after five years there was a percentage increase of 45.90 for the smaller vehicle and 51.83 for the larger vehicle. In the second five years, the increase in costs continued, whilst not at the same rate, so that now the smaller vehicle is costing 75.29 per cent, more to run than 10 years ago and the larger vehicle 81.82 per cent.
Undoubtedly the two factors which contribute most to these increases are the items of wages and fuel. In the former case these have risen by more than 50 per cent., whilst fuel costs have more than doubled despite any economy in operation that manufacturers' efforts may have effected. during the past 10 years. Significantly the increases in total operating cost per mile over the past 10 years have not been relative to the
respective payloads of the two vehicles. S.B.