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New CM tables show how operating costs have risen
Page 25
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• The total weekly cost of operating freight vehicles in the UK has risen by between 15 and 20 per cent since May last year according to Commercial Motor Tables of Operating Costs 1973, due to be published early next week. In the new Tables, average running costs are shown instead of presenting these at selected mileages as in the past. This has varied the comparison slightly, but the bulk of the increase has been caused by soaring insurance premiums, plus increased wages and National Insurance contributions, higher vehicle maintenance costs and fuel price rises.
The outstanding cost increase in the 12-month period was without doubt that of insurance premiums. In July, 1972 the majority of insurance companies imposed a swingeing 25 per cent increase and, because this was announced before the imposition of the Government's prices and wages standstill, it was certain that some operators would be unable to escape paying very much higher premiums. However, those with a large fleet and a good claims record might well have been able to resist the demand for such a large increase.
Just before the Tables were completed premiums rose again in many cases, as the result of Government agreement to an application for a further increase by the insurance companies.
The effect of escalating inflation was contained to some extent by the voluntary prices restraint adopted by some sectors of industry early in the period under review. However, inflation still continued at an alarming rate until the Government introduced a statutory standstill in November. This had the effect of slowing down the steadily rising cost of providing transport and both influences are reflected in the new Tables.
The introduction of Value Added Tax in April. 1973, involved hauliers in further complications. Because the majority are classed as taxable persons and can therefore claim what they have paid out in tax to carry on their business (inputs) against what they charge their customers in tax (outputs). the effect of VAT on transport costs has been ignored in the Tables, even though a marginal increase in administration costs may have been incurred by some.
Another factor which has been the subject of a considerable increase is wages. Though rising labour costs were minimized to some extent during the later months of 1972 and early in 1973, there is little doubt that wages had already risen quite considerably in some areas. To this must be added the increase in employers' contributions to National Insurance. In October 1972 and again in March 1973, the graduated pensions scale was extended and both these extensions involved the employer in additional expenditure.
Because an attendant has not been mandatory in the United Kingdom since 1970, the wage factor has been omitted from the figures shown for drawbar outfits in the Tables.
So far as running costs are concerned, tyre manufacturers relaxed controls over the retail price of their products during the 12 months covered by the review. This has meant that operators are now in a more favourable position to negotiate advantageous prices for the tyres they use but it has rendered the task of establishing a true average price for tyres for use in the Tables quite impossible.
The two major items of running cost still remain fuel and maintenance, however.
Fuel costs The oil companies have increased the price of both petrol and diesel fuel by more than lp a gallon since May last year. The latest increase was lp on petrol and fp on diesel on April 29 this year. Despite these increases, operators are still able to negotiate fuel prices according to the quantities in which they take delivery and those who use large amounts of fuel might have avoided paying the full increase.
The cost of maintenance has been estimated to have increased by 10 per cent. Though the cost of spares has undoubtedly been affected by VAT, this is recoverable and has been ignored in the Tables.
An example of the new Tables appears on page 60 of this issue, with averaged running costs instead of running costs for several selected mileages. Although this revised format makes comparison with last year's costs more difficult, it was felt that there was an advantage to be gained from the change. Most of the running cost factors remain constant no matter how far the vehicle is run. For instance, a vehicle having a fuel consumption of 10 mpg will incur fuel cost of 3p a mile, if the cost of the fuel is 30p a gallon, whatever its mileage. The provision of an average running cost has left space available for the inclusion in the freight vehicle Tables of data on which the various cost factors shown have been based.
This data includes the assumed cost of fuel, fuel consumption based on CM road tests, estimated cost of tyres (excluding spares), the mileage life of tyrcs, the cost of the vehicle less tyres and 10 per cent to represent residual value, and the estimated mileage life of the vehicle.
Also given this year is an average unladen weight for each vehicle on which the weekly excise licence cost is based.
It is felt that this information will enable the operator more closely to identify the actual vehicle which he is operating with the types used as examples in the tables.
One other change has been made. The 5 cwt 3-wheel vehicle has been dropped from Table 1 because of its declining popularity. In its place is a 10-ton tipper on Table 2, the first time that this type has appeared in CM Tables of Operating Costs.
Though average running costs have been shown in the remainder of the Tables, that is for electric vehicles, buses and cars, it was not possible to include the supporting data. It is hoped that this useful information will be available next year.