M.M.B. "As You Were"
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Hauliers are Warned of the Devices Employed by the Milk Marketing Board to Force Down Rates. Complete Records of Costs are the Only Safeguar I Against Exploitation
MILK hauliers will no doubt have read the letter headed, "M.M.B. Not So Generous," in the issue of "The Commercial Motor" dated May 26. It po:nted out that I had erred in my article entitled "Light Dawns on the M.M.B." (May 12), in ascribing to the Milk Marketing Board the third of three forms, which had in fact been prepared by the Joint Haulage Committee. My mistake ssas in assuming that the M_M.B. had, at long last, come to appreciate the expense involved in running a fleet of vehicles on milk haulage. In this third form there was adequate provision for maintenance and overhead expenses, whereas in the past the Board has not made suitable allowance for either.
Unfortunately. my belief was wrong. So far as the Board's appreciation of costs is concerned, we are back where we were in 1944, the approximate date of the first issue of the form now current. Provision for maintenance is still inadequate in amount. and that for overheads is fa rcica I. r The real purpose of that form (published, in m), article, in two parts labelled Cl and C2) is to show the milk haulier how to put together his figures for expenditure, so that in the event of an appeal to the Joint Haulage Committee, those who present the haulier's case will have data to justify any claim for increased rates or to rebut any claim by the M.M.B. for a reduction. It is, therefore, still important that hauliers should study that form.
Hauliers Played Off Against Each Other I have always appreciated that it is part of the -duty of the M.M.B. to arrange for milk to be carried at as low a cost as possible, but I disagree with many of the methods adopted by the Board to achieve that otherwise laudable end. I have in previous articles referred to the way in which agents of the Board approach hauliers in a district and set one against the other by stating that reductions have been accepted by one, thus putting the other in such a position that he thinks that perhaps the offer by the M.M.B. is a reasonable one. Here is a strong argument in favour of the operator having precise figures of cost. If he has that information he will know, beyond a shadow of doubt. whether the rate is fair or not. Without it he becomes an easy victim of these blandishments by the M.M.B. agent.
The need for figures of actual costs, which cannot be disputed. becomes even more essential when a haulier,
instead of accepting the reduction in rate which is offered, determines to make a stand and puts his case in the hands of the Joint Haulage Committee.
It is in this connection that another practice of the M.M.B.
• which I deprecate begins to operate. In a case of this kind the ordinary individual might be persuaded to take average figures and argue the matter on them. He would be most ill-advised to try to do so. If an operator lacks certain figures the M.M.B. tends to use as the basis for argument an actual cost item from a haulier's accounts which is less than the average in the Board's experience. If the haulier's figure for another item be higher than the M.M.B. costs, the Board uses its own figure. The M.M.B. penny is doubleheaded.
Figures Manipulated to Fit the Case
Assume that the M.M.B. has gathered from its experience of its own pilot fleet, that the cost per mile for tyres for a particular type of vehicle is 0.6d. In examining cases before the Joint Haulage Committee, a haulier presents figures which indicate that it is possible to run vehicles of that type at an expense of 0.5d. per mile for tyres. Having acquired that information, the M.M.B. in future takes as a basis for argument not its own figure of 0.6d., but this haulier's . especially favourable figure of 0.5d. If the M.M.B.'s experience of cost of maintenance per mile for a particular type is 1.85d., but the Board has been presented with figures from an operator which show a cost of 2.05d., it takes the figure of I.85d.
This method applies only when the information supplied by the haulier whose case is being dealt with is lacking in certain items. If the haulier's figures be complete in till essentials, those who are pleading for him before the Joint Haulage Committee can insist on that authentic data being taken as basis of assessing the claim.
To ensure that full and accurate data in respect of all essential items arc presented, the Road Haulage Association. through its Milk Carriers' Functional Group, has circulated the form in question, and I strongly recommend any operator who has not yet received it to apply for a copy to the secretary of that group in the area in which he operates.
Hauliers should keep day-by-day figures of hours worked and mileages covered, for it is just as much in relation to those matters, as in respect of costs. that. a case may be won or lost. If no figures be available and a case is about to
be considered, the M.M.B. will-send down a bevy of inspectors to check times and mileages. Before the inspectors arrive, the Board takes care to advise farmers and dairymen that the check is to be made.
Both farmers and dairymen are interested to ensure that haulage rates are kept to a minimum. Given warning, the farmer takes care to have his churns ready at the appointed place, so that no delay occurs, and the dairy company provides extra staff to deal with the milk as it arrives. In consequence, the figures, as calculated by the inspectors, show minimum times and often minimum mileages. Those figures are taken as standard.
for example, on such a cheek, the time happens to be four hours and the mileage 40, the M,M.B. multiplies four and 40 by 365 and those are the figures for time and mileage which will be suggested shall apply to that particular round. In fact, of course, four hours is a minimum period and in practice may easily be extended to 51 hours.Similarly, the mileage at any time, because of traffic diversions or for other reasons, may exceed the figure quoted on that particular day. Without evience to rebut these particular figures, the haulier may in a year incur a large loss in respect of both items, hence the recommendation to keep, day by day, a record ofthe time and mileages of every vehicle employed on milk haulage.
, Inside Information
Milk hauliers are also at a disadvantage in dealing with the M.M.B. in that they have not any accurate knowledge of the trends in milk production and on occasion this may be important. Assume that an operator has asked for an increase in his rate. The trend of production, which is probably well known to the M.M.B., but not to the haulier, may be upward. If the discussion or ultimate hearing of the ease before the Joint Haulage Committee be delayed, then the haulier's gallonage, at the time of hearing, will be greater than when his original application was made and his case will be weaker_ A year may elapse between the putting forward of this claim and its actual hearing, and whilst by the end of that year, the rate, by reason of the increased gallonage, is fair,' it is usually insufficient during nearly the whole of the 12 months. The haulier will, therefore, stand to lose as the result of that delay. What to do in a case of this sort must be decided by noting the attitude of the Board. If there be a tendency to delay, and it is reasonable to assume that the Board is playing for time, the haulier should take the opposite line and have his case brought forward at once.
I heard of an example in which the M.M.B. took the initiative and, with three months of a contract still to run, tried to persuade the operator to accept an immediate reduction of his rates. The haulier was suspicious and refused to accept any variation until the period of his contract was up. He was fully justified in the event_ At the period when the Board wished this reduction to take place, milk production was up, but a drought was in prospect. At the end of the prescribed 12 months of the contract, milk production was down and the M.M.B. did not ask for a reduction.
Before the Budget I must now refer again to Form Cl and C2, which appeared in "The Commercial Motor" on May 12. The data given were taken from actual cost records of a milk haulier, and although the article appeared after the addition of 9d. per gallon to the price of fuel and the imposition of 33-1 per cent, purchase tax on goods vehicles, I did not alter the figures. A footnote at the end of the article made it clear that the new taxes were not provided for in the cost figures given. It is now opportune to bring that information up -to date.
The cost prices of the three vehicles named in that form were £1,245, £1,340 and £560, but I do not know when they were paid. If it were a long time ago, perhaps the prices immediately before the Budget would have been much higher than stated. In that case, the calculations which 1 am about to make will be inaccurate on that account.
Assuming.that the prices named were the amounts which would have to be paid for new vehicles immediately before the Budget, the prices of to-day, because of purchase tax, would be £1,590, £1,750 and £716 respectively. As at present, the M.M.B. will not accept, as an item of operating c8
cost, interest on capital outlay, although I am absolutely firm in my conviction that it should do so, this increase in vehicle cost prices affects only depreciation. 1.12 the previous calculations the vehicles were depreciated over seven years, and the total was £435. Taking the new prices as a basis for the calculation of depreciation, the amount will be £575.
The question whether depreciation should be calculated on the cost of the vehicle in existence, or on the price of a new one when the existing vehicle has to be replaced now arises. The idea that depreciation should be based on replacement cost is generally accepted. I have myself always insisted that depreciation should be looked upon as the provision of a fund for the purchase of new vehicles and, if that view be accepted, it must inevitably be calculated on replacement value.
It has been unfairly suggested that as many milk hauliers are using vehicles which were purchased more than seven years ago, depreciation must have worked itself out, so that the operators have been making extra profit. Vehicles—and particularly those engaged on the arduous task of milk haulage—Which are kept longer than they should be inevitably cost more for maintenance as time Wears on. Moreover, thc allowance.for maintenance, according to M.M.B. standards, is low, so that any operator who has had his Vehicles for a long time is subject to a loss on maintenance. Therefore, it would be unfair to put thatargument forward against mine, that depreciation should be calculated against replacement value.
Costs Increased
Expenditure on fuel, given earlier, as £532 per annum, will now become £722. Another point which I must make here is that there have been successive increases in tyre prices since the figures in Table Cl and C2 were made out. There must, accordingly, be some allowance, although the quality of tyres has improved and offsets part of that rise in costs. The figure for tyres in the May 12 article was £470; this time I am going to assume an increase of about 10 per cent., making £520.
In what follows the figures are complete. I give first the amounts as they are to-day, and as l have just calculated them. Where there is any difference I give the old figures in brackets. They are taken out annually and are quoted to the nearest pound:—Tax, £120; wages, £1,580; insurance, £70; hired haulage, £620; fuel, £722 (£532); oil, £33; tyres, £520 (£470); maintenance, £957; depreciation, £575 (£435).
The total vehicle operating cost for the three vehicles is thus £5,197 (£4,817). To that sum must be added overheads of £957, giving a total of £6,154 (£5,774). The number of gallons carried is 824,960, so that the cost per gallon to the operator is 1.81d. (I.7d.). Assuming a profit of 15 per cent. on cost-0.26d (0.25d.)—the rate should be 2.07d. (1.95d.) per gallon The increase is approximately 61 per cent.
I want to refer again to the matter of overheads, and I feel sure I need make no apologies for doing so. In the May 12 article 1 mentioned that it was the habit of the M.M.B. to offer to the haulier lid per mile to cover overheads and profit—I repeat, and profit—which, in the present instance, with an approximate mileage of 73,000 per annum. for the three vehicles employed, would mean an allowance of £450 per annum for those two important items.
Recent Innovation
Recently, I understand, that practice has been revised. Nowadays, in order to cover overheads and profits, the allowance in some cases is being made at the rate of 0.6d. per mile plus £100 per vehicle_ Again applying those figures to this instance, the total allowance would be £483.
It should be appreciated that the total amount will vary in accordance with the mileage run. It would be more with a greater mileage, and less if the mileage were below the 73,000 mentioned as applying to this case. Compare, however, this £483 with the amount—nearly £957—actually ser down as being overheads alone on the operation of these three vehicles, and the absurdity of. the M.M.B. figures stands clear_
I recommend every milk haulier to maintain close contact with the Milk Carriers'. Functional Group of the R.H.A., to attend meetings and to take a personal interest in what is going on. By doing so he will help himself—and he badly needs help—and will give some small satisfaction to that minority of milk-hauliers whe selflessly devote so 'much of their time to helping the industry generally. S.T.R.