Goods Vehicles More Than Cover The lack Costs, R.H.A. and MLA. Tell Geddes
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AFLAT assertion that road goods vehicles more than cover their track costs, and a complete reject:on of British Railways' figures for the proportion of roadbuilding costs attributable to heavy vehicles, are key statements in the evidence on track costs which the Traders Road Transport Association and the Road Haulage Association have submitted separately to the Geddes Committee. Both associations also advocate the use of vehicle-miles instead of passenger car units as the basis for allocating capital costs, over and above the actual amount required for stronger roads to carry heavy vehicles.
The T.R.T.A.'s 18-foolscap-page document was submitted last week, while the R.H.A.'s 32 foolscap pages went to the committee this week. Both are answers to the British Railways track costs study ("The Commercial Motor", June 26), which was followed by the Ministry of Transport's own study (" The Commercial Motor ", August 21).
Each—class of goods vehicle pays in taxation substantially more than the costs to which it gives rise; in aggregate, goods vehicles pay a surplus of £82 m. a year, or 63 per cent., over and above track costs; and road transport as a whole pays in taxation double its road costs. These are the three most important conclusions arrived at by the Traders Road Transport Association in its memorandum on track costs submitted last week to the Geddes Committee on licensing. The T.R.T.A. rejects the findings of the British Railways costs study submitted to Geddes and, while largely supporting the. Ministry of Transport's road costs study, it suggests that even this should be modified to show a better case for goods vehicles.
The T.R.T.A. starts from the assumption that the main objectives of vehicle taxation should be to recoup public money spent on the road system, to spread the tax burden equitably so that each road user pays his fair share of road costs, and to take account of the need for fairness of competition between road and rail so that under no circumstances is taxation used to discriminate between road and rail.
Total road-user taxes show a substantial surplus over total costs, says the T.R.T.A., which gives the railways a substantial competitive advantage over and above that which comes from their running at a loss. According to the Ministry, total track costs are £348 rn. while total road tax paid in the relevant year was £745 m.—and even if car purchase tax is excluded the total paid was £585 m.
Tax Road ?—Tax Rail I
The T.R.T.A. argues against such " surplus " taxation, as it increases transport and living costs, but says that if, as a matter of national policy, it is felt necessary to raise general Exchequer revenue from road transport, then equivalent taxation must he levied on the railways. Only thus can fair competition—and a rational transport policy —be achieved.
The British Railways' comparison of motorway or dual-carriageway road costs with new rail track costs (from which it was argued that on trunk routes the road operator paid only one-third to one-half of his road track costs) is considered by the T.R.T.A. to be fundamentally A24
unsound. The main reasons given by the Association are: that it is unrealistic to argue on the basis of building newrail routes, which are extremely unlikely to appear; that the B.R. costing method assumes that the overall level of taxation paid by heavy lorries should be related to the use of first-class trunk roads, and this ignores the fact that most of the trunk road system is not modernized to this standard and that only a third to a half of the work of heavy lorries is on trunk routes—the remainder being on cheaper roads.
A tax system which charged selectively for different types of road and different classes of vehicle would be complex and unwieldy and would, in any case, have the undesirable effect of subjecting road transport to a more inflexible system than the railways enjoy, says the T.R.T.A., since the railways only have the obligation to pay their way as a whole, and can discriminate as it suits them commercially in order to obtain optimum use of track, Road Traffic Undervalued The T.R.T.A. feels that these major points of principle invalidate the whole basis of the railways' study. But, says the Association, the B.R. document also suffers from other major defects. Traffic is assumed at present levels and the railways argue, rather oddly, that traffic volumes are approaching or exceeding the designed road capacities; this implies that M1 and M6 are used to capacity when in fact the official "design capacities" are minimum capacities justifying the building of such roads. The Association quotes figures to show that in fact daily traffic flows (in passenger car units) are at present 20,000 on a two-lane dual carriageway road where the design capacity is 25,000 and the actual maximum capacity is 40,000; similarly, a three-lane motorway with a present volume of 36,000 p.c.u. has a design capacity of over 33,000 and an actual capacity of 75,000. The significance of these figures is that, because traffic volumes will increase over time, the road costs calculated by British Railways will fall. The Hall Report suggests that a doubling of traffic will be reached in 15 years. But, says the Association, there is little reason to expect such an expansion on the railway side.
A further criticism of the B.R. study
is that results are expressed in terms of cost per capacity ton mile on the trunk haul whereas it is utilizadon of capacity which affects actual costs. Over the longer distances (200-300 miles) there is unlikely to be enough traffic to guarantee utilization of capacity, so spreading track costs over actual prospective rail traffic instead of over hypothetical capacity would result in much higher costs per ton.Also the assumption that c. and d. costs would be the same—whether the trunk was by road or rail—is unrealistic, as the same road vehicle would carry door-to-door.
The Association says it has been unable to make a detailed check of the RR. assessment of railway costs but comments that such an examination would need to answer questions like: " Is the estimate of £550,000 per route-mile for a fourtrack route realistic?" and "Why is the total cost of track and signalling maintenance and operation, at £9,800 per route-mile, so much less than the figures quoted in the Beeching Plan?" In any case, it feels that such investigation would serve no useful purpose when the fundamental point at issue is whether road vehicles pay their fair share of track costs. But rail costs become relevant when considering how road and rail should be taxed on a fair basis.
Two alternate methods of treating the capital costs of road construction (which form a major part of road track costs) were used by the Ministry of Transport in, its track costs submission to Geddes. These are "pay-as-you-go ", which charges against current traffic the capital costs actually incurred in the year of extending and improving the road system; and the "historical cost" system, which computes the historical capital invested in the road system and applies to it an annual return of 10 per cent to cover interest, depreciation, higher cost of future replacement, etc. The T.R.T.A. then argues a strong case for using 6 per cent rather than 10 percent, which has the immediate effect of reducing the annual capital charge to road users from £145m. to £87m, and cutting by 17 per cent the total annual road costs computed by the Ministry. But the most crucial point in many ways, says the Association, is to consider the rate of interest at which the railways are being financed: for example, application of the "historic cost" system to the railways at 10 per cent would about double their already large deficit!
Others Benefit, Too The T.R,T.A. draws on American experience of cost allocation in arguing that, in any event, a reasonable allocation of road costs must take account of the benefits enjoyed by other than actual road users: e.g., owners of adjacent land or shops, undertakings using the " way " of the roads for drains and main services, public authorities to whom roads are important as defence or public safety systems, and non-paying users such as cyclists and pedestrians, all of whom derive benefit. In the typical U.S. case, less than 65 per cent of road cost is allocated to the direct road user.
Also, points out the Association, there is strong evidence to show that a large part of capital road expenditure is to meet the peak rush-hour and holiday demands of the private car and logically the car should bear a greater share of the capital cost. This is a vital factor in computing shares of the cost.
After dismissing the B.R. estimate of the increment of road-building costs attributable to the need to cater for heavy commercial vehicles (£500,000 per mile, or 70 percent, on a motorway costing £700,000 per mile) the T.R.T.A. implicitly accepts the Ministry "increment" figure of £124,000 per mile, The Association also disagrees with the way in which passenger car units (p.c.u.) arc used by Ministry and by B.R. so that a goods vehicle over 30 cwt. is counted as equivalent to three private cars: the railways go further and equate a 10-ton lorry with 4 p.c.u. and a 16-tonner with 5 p.c.u. Since the extra road-building cost needed to cater for heavy vehicles (stronger sub-structure. bridges, etc.) has already been allowed For, the T.R.T.A. suggests that the balance of capital costs should be allocaled on a vehicle-mile basis, rather than by charging a heavy vehicle three, four ar five times the cost for a car on a r'ormuIa intended for the approximate rieasurement of traffic flow.
If vehicle-mile replaces p.c.u., then the :.apital costs charged to goods vehicles wer 30 cwt. drop by 20 per cent—from :102 m. to £81 m. This would be 'educed even further if (as the Ministry itudy shows to be reasonable) the telministrative costs were correspondingly tdjusted. The T.R.T.A. then deals with 'oad maintenance, policing, lighting and issociated costs, agreeing largely with he conclusions of the Ministry (but idvocating the use of the lower of two titernative estimates), and examines the elevance of " social cost "—noise, fumes, .tc.
A T.R.T.A. table shows how, even on he less favourable of two Ministry estimates, every class of goods vehicle pays much more in tax than it incurs in costs, though the margin of surplus declines as vehicle weight rises. The table also shows the effects of some of the modifications to the Ministry memorandum suggested by the T.R.T.A. and discussed earlier. Column 2 shows the effect of substituting vehicle-miles for passenger car units, column 3 the use of 6 per cent instead of 10 per cent as a fair return on capital. The combined effect of these two main alterations is shown in column 4 and leads to the conclusion that each class of goods vehicle pays in taxation at least double the road costs it occasions.
The R.H.A.'s View
The R.H.A. document, although nearly twice as long, is based on broadly similar lines to the T.R.T.A. document. The R.H.A. contend that the railways were wrong on four main points:
First, in stating that a motorway for light vehicles could he built for £200,000 per mile, Dr. Beeching's assumption was contrary to expert evidence. "Nothing like a fast motorway can be built at anything like this cost", says the RI-LA. Not more than 15/20 per cent of present costs could be avoided by building motorways specifically for light vehicles.
Secondly, goes on the R.H.A., the Ministry does not accept the Railways' assumption as to what statistical weighting should be given to heavy vehicles. The weightings used by Dr. Beeching were designed for measurement of traffic flow; they were useful for certain purposes, but were largely irrelevant for allocating costs on new, uncongested roads.
Thirdly, says the R.H.A. document, the Railways' report only considered the cost of the new roads. "The proper level of capital charges to be imputed to the road system can only be determined . . . when the overall aims of charging policy have been decided and, in particular, whether road/rail competition is an important factor to be taken into account ", the R.H.A. concludes.
The fourth main point of the case is Dr. Beeching's assumption that traffic should be taken at present levels, with no allowance for future expansion. " Broadly speaking ", says the document, " it may be said that, as road system costs are likely to rise more slowly than the expansion of traffic, the costs imputed to each vehicle unit will fall over time. under the present system of cost a I location."
Inappropriate Formula The R.H.A. has, additionally, commented at length on the " total road operating costs" used by Dr. Beeching. and compared them with figures given in his famous " Reshaping • of British Railways" report. "The general conclusions we reach here are that :he arbitrary collection and delivery formula adopted is itself inappropriate, and that its use compounds the already inflated system costs estimated by British Railways so that the resulting final costs (10 not bear much relationship to actual experience ", states the Association.
The R.H.A.'s final comments are on some of the Railways' own system costs when compared with those given in the original Beeching Pjan. "There is possibly a measure of underestimation of the rail costs ", comments the R.H.A. 'They go on to point out that the Railways have almost no experience of building new rail lines, and none at all of constructing four-track trunk routes and have perforce, therefore, had to estimate these costs.