Spirals and See-saws
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Page 67
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IN announcing in the April 10 issue the abolition of purchase tax on goods-vehicle chassis, The Commercial Motor explained the effect on initial prices and subsequent operating costs. Another concession included in the Budget was the reduction of the Excise duty on public service vehicles.
The Road Haulage Wages Council have since agreed to recommend an increase of 5s, a week for adult road haulage worker., whilst in the passenger field it has been mooted that the addition of 15per cent. on basic wages at present paid 1.0 drivers of one-man-operated buses should be raised to 50 per cent. It is appropriate, therefore, to consider the effect of these further changes on operating costs by making a comparison between pre-Budget costs, present costs and those which would apply if the proposed wage increases take effect.
I will first briefly repeat the three examples already given of reduced operating costs brought about by the lower prices of goods vehicles. The vehicles concerned are a 5-ton petrolengined lorry averaging 500 miles a week, a 10-ton articulated oiler (800 miles) and a rigid eight-wheeler (1,200 miles).
With the price of this particular 5-tonner reduced from £1,190 to £996, the cost of operating 400 miles per week drops from £26 17s. to £26 10s., the equivalent of 16.10d. and 15.69d. per mile respectively.
Correspondingly, the 10-ton "artic " now costs £2,800 instead of £3,170, with a decline in weekly operating costs from £53 1 ls. to 151 I Is. (16.07d. to 15.46d. per mile). With a big reduction in price from £4,890 to £3,950 for the eightwheeler there are large savings in operating costs. These now become £95 17s., instead of £100 9s., when 1,200 miles per week are averaged.
Purchase Tax Drop
Let us now consider two more examples-a petrol-engined 15-cwt. van and a 9-ton platform-bodied oiler. In the case of the van, removal of purchase tax results in a drop in price from £620 to £535 for the model chosen. With an unladen weight of 1 ton 7 cwt., annual duty payable will be £20, or 8s. per week. Wages, based on R.H.(64) Grade I, amount to £8 19s., inclusive of allowances for insurance contributions and holidays with pay. Rent and rates are nominally assessed at 7s, 6d. Insurance is reckoned at 8s. 5d, per week, assuming an annual premium of 121.
Interest will be assessed first on the pre-Budget price of £620. Based on a nominal rate of 3 per cent., the cost per week will amount to 7s. 5d., making the total for the five items of standing costs 110 10s. 4d. As this is the type of vehicle used on retail delivery, I will assume a lower average weekly mileage of 200, giving a standing cost per mile of approximately 12.62d.
Fuel cost per mile is reckoned at 2.47d., calculated on an estimated consumption rate of 20 m.p.g. with a 10 per cent, increase to allow for stop-and-start work. Lubricants are e30 assessed at 1.08d. per mile and tyres at 0.60d. Vehicle maintenance is calculated at 1.23d. per mile.
Still dealing with the pre-Budget price of £620, and after making allowance for the initial set of tyres and ultimate residual value, a balance of approximately £500 would remain to be written off. Probable vehicle mileage life could vary widely. Assuming, in this instance, it is mid-way between 75,000 and 125,000 miles, and allowing a 10 per cent, increase as an element of obsolescence because of the low mileage, depreciation cost per, mite becomes 1.41d. Total running costs per mile are 5.89d. and the operating cost is 18.51d.
When averaging 200 miles per week the corresponding weekly expenditure on these five items of running costs would be: Fuel, £2 Is. 2d.; lubricants, 3.; tyres, 10s. maintenance, £1 Os. 6d.; depreciation, £1 3s. 6d.; total, £4 18s. 2d. Total operating cost for the week becomes £15 Rs. 6d.
What Interest Costs
With the reduced post-Budget price of £535, interest costs 6s. 5d. per. week. There is, however, no reduction in the cost of insurance, because an additional premium becomes payable under the policy used for these calculations only when the price of the vehicle exceeds £1,000. Total standing costs are, therefore, reduced from £10 10s. 4d. to £10 9s. 4d., or from 12.62d. to 12.56d. per mile.
The first four items of running costs-fuel, lubricants, tyres arid maintenance-remain the same. The balance remaining to be written off, however, is now reduced to £420, with a resulting depreciation cost of 19s. 10d. per week and 1.19d. per mile. Total running costs thus amount to £4 14s. 6d. per week (5.67d, per mile) and operating costs to £15 3s. 10d. (18.23d. per mile).
When the proposed 5s. increase in haulage wages is put into effect, nine of the 10 items will remain unchanged, but wages will rise from £819s. to £9 4s. 2d. This slight addition to the basic increase of 5s, results from standing costs being calculated on a 50-week year to allow for two non-revenue-earning weeks when the vehicle may be off the road under major repair.
Total operating costs per week will become £15 95. and the proposed wage increase will raise the operating costs even higher than before the removal of purchase tax. The incidence of wage costs is, of course, highest in the category of small • vehicles.
The selected 9-ton oiler cost £3,580 before the Budget. With an unladen weight of 44 tons, annual licence duty amounts to £60, or 245. per week. Wages are £9. 16s. 3d. per week. Rent and rates are reckoned at 11 s. and vehicle insurance (based on the pre-Budget price) at £1 2s. id. per week. Interest is estimated at £2, making the total standing cost £14 5s. 4d. a week. The average weekly mileage willbe
assumed to be 1,000, 'giving a standing cost per mile of 3.42d.
• With a consumption rate of 12 m.p.g., fuel cost per mile is calculated at 3.83d. and lubricants at 0.26d. Tyres and maintenance add a further 2.56d. and 2.43d. per mile respectively. Depreciation becomes 4.11d., making a total running cost per mile of 13.19d. and an operating cost of 16.61d. The total running cost per week before the Budget was 154 19s. 2d, and total operating costs, £69'4s. 6d.
With the vehicle now costing £3,000, the weekly cost of insurance is reducedto ft and interest to £1 16s., making the total weekly standing cost £13 19s. 3d. As before, four items of running cost remain the same, but depreciation is reduced to 3,37d. per mile, or £14 Os. 10d. per week. This now gives a total running, cost of 12.45d. per mile, or £51 17s. 6d. per week. Correspondingly, -total operating costs become 15.80d. per mile or £65 16s. 9d. per week.
With the same basic increase of 5s., wages would become £9 us. 5d, per week, making the total standing cost 114 4s. 5d. and the total operating cost £51 17s. 6d. per week. Total operating costs would be I5.86d. per mile, or £66 is. 11.d, per week.
As was to be expected, compared with the example of the 15-cwt. van, wages amount to a smaller proportion of the total costs. As .a result, the total costs do not vary in direct proportion to those of the smaller vehicle. Whilst the original total operating costs were £69 4s. 6d., decreasing to £65 16s, 9d. after the removal of purchase tax, they will rise to £66 ls..11d. if the wages proposals are effected.
Wage Reservations As with all hypothetical examples, however, some reservations must be made regarding the item of wages. As explained in " ' The Commercial Motor.' Tables of Operating Costs," it is not practicable, when preparing standard tables, to incorporate estimated overtime payments, and the same principle has been applied in these two examples. Individual operators may, however, wish to calculate, in addition, the effect that overtime working will have when superimposed on a basic wage increase of 5s, per week.
Here are five examples for a 55-hour week in Grade I areas, the present rates being given first, followed by the proposed rates: Vehicles up to 5-ton capacity, f10 18s. 7d. (ill 5s. 3d.); over 5 and up to 10 tons, £11 7s. lid. (£11 14s. 8d.); over 10 and up to 15 tons, £11 16s. (£12 2s, 8d.); over 15 and up to 18 tons, £12 5s. 5d, (£12 12s. Id.); over 18 tons, £12 17s. 5d. (£13 4s. 2d.). In considering the effects on operating costs of the proposed alterations in wages paid to drivers of one-man buses, a 26-seat oiler averaging 400 miles per week will be used as an example. Before the Budget, annual Excise duty amounted to £48 and, making allowane'e for the cost of a public service vehicle licence and certificate of fitness, the total cost was El Is. 11d. a week. In contfast to the wages determined for drivers of Aand B-licence vehicles, there is some variation in the pay of bus drivers. It will he assumed that the basic average is 18 13s.
Allowing a 15 per cent. addition for one-man operation, the rate amounts to 19 19s., • or £10 8s. inclusive of insuranCe contributions. Making a further adjustment to allow for two weeks' holiday with pay, the total becomes £10 16s. 3d. Rent and rates are assessed at 13s. 6d., insurance at 11 14s. 5d. and interest at fl 13s. 10d. per week, making the total standing cost, at 400 miles per week, £15 19s. I 1 d., or 9.60d. per mile.
Fuel and Lubricants Fuel is reckoned at 2.07d. per mile, assuming an of 15 m.p.g. Lubricants add 0.27d. per mile and tyres 1.04d. Maintenance is assessed at 2.56d., and depreciation. after allowance for thc cost of the original set of tyres and residual-value, at 2.27d., making the total running cost 8.2W. a mile, or £13 13s. 8d. a week. Total operating costs are £31 6s. lid, a week; or 18.81d. a mile.
Since the Budget, the Excise duty on a 26-seater has become £15, or 8s. 9d, a week, reducing the total standing costs to E15 6s. 9d., and the total operating costs to £30 13s. 9d.
Should the • addition for one-man operation be increased from 15 per cent. to 50 per cent., the item of wages in this example will amount to £14 (inclusive of insurance contributions and allowances for holidays with pay), making the total standing costs £18 .10s. 6d. and the total operating costs • £33 17s. 6d., still assurning. that 400miles per week are averaged. So, once again, the slight benefit derived from the Budget concession would be far outweighed by the proposed higher wage rates.
Where one-man operation does not, apply, some addition in overtime payments may still have to be met, although they could usefully be estimated only in individual circumstances, The following reductions in the amount of Excise duty would,however, have general application: 14-seater, £12 saving; 26-seater, £33; 31-seater, £38 10s.; 41-seater, £45 18s.; 44-seater,
£48; 60-seater, £59 4s., and 70-seater, £66 4s. S.B.