Freight Charges (Increases) (Hansard, 11 April 1956)

HC Deb 11 April 1956 vol 551 cc183-91 183

§ 17. Mr. Ernest Davies
asked the Minister of Transport and Civil Aviation what advice he has received from the Transport Tribunal, following his consultation with them, regarding the application for an increase in railway freight charges; and what action he proposes to take in regard thereto.

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§ Mr. Watkinson
I will circulate in the OFFICIAL REPORT the advice which I have received from the permanent members of the Tribunal sitting as a consultative committee and have added certain comments. In their memorandum they give an objective survey of the financial position of the Commission since 1947 which shows the serious deficiencies of revenue in relation to expenditure. On this basis they recommend that regulations be made authorising the increases proposed by the Commission.
The Government, however, for the reasons which I gave to the House on 19th March, still consider that it is in the national interest to authorise for an interim period of six months lower increases than those recommended.
I shall therefore lay before the House regulations which will authorise the Commission, as from 23rd April, 1956, to increase the railway freight, dock and canal charges now in operation by 5 per cent. generally, but by 7½ per cent. in the case of railway freight charges for merchandise by goods train in consignments of under one ton and for merchandise by passenger train, and by 12½ per cent. in the case of railway freight charges for returned empties. This is on the clear understanding that these charges will have to be re-examined in the light of the circumstances that will exist in six months' time.

§ Mr. Davies
Do I take it from that reply that the Minister is setting aside the advice given by the Transport Tribunal? Is not it a fact that it has accepted the application of the Transport Commission for an increase of 10 per cent. in freight charges and he has decided that only the lower charges shall be imposed? What is the purpose of consulting the Tribunal and then ignoring its advice? Is not he making a rubber stamp of the Tribunal, and what has it to say about this?

§ Mr. Watkinson
The answer is that I have kept in close touch with the Tribunal. The fact is correct, as the hon. Gentleman has said. Both the Commission and myself are, in this instance, not taking the advice of the Tribunal.

§ Mr. Davies
Will the right hon. Gentleman answer my question? What is the point of consulting? Is not the Minister going beyond the terms of the 185 1953 Act in this respect where he is instructed to consult the Tribunal and consider its advice? What has led him to ignore the advice of the Tribunal?

§ Mr. Watkinson
The answer to the first part of the supplementary question is that I am responsible to the House of Commons and not the Transport Tribunal. That is, I think, a rather important point. The Tribunal gives me advice. I can take it or not as I think fit. As I have said, I am the responsible Minister and the Tribunal is not in any way responsible or answerable to the House.

Mr. G. Wilson
To get the matter in proper perspective, can my right hon. Friend give us, in money, the difference between the 5 per cent. authorised and the 10 per cent. proposed?

§ Mr. Watkinson
I think I can do that. I think the best figure, to put it in perspective, is this: the amount that the Commission and myself are sacrificing by deferring for six months what the Tribunal has recommended is £8 million, against a total turnover of the Commission of £700 million.

§ Mr. Callaghan
In view of the fact that the Minister accepts responsibility for what has been done, which will involve the Commission in a loss of £17 million a year, may I ask him what specific proposals he is putting for consideration as to the way in which the Commission can either hope to earn additional revenue or, alternatively, cut out uneconomic services?

§ Mr. Watkinson
The position, if I may make it plain, is that the Commission takes full responsibility for the passenger charges which they are not implementing and I, of course, can only take the responsibility for freight because, as the hon. Gentleman knows, the Commission need not now consult me about passenger charges at all; so we are both equally guilty, if that is the view.
What is much more important is what the hon. Gentleman asked, and that is what will be done in the six month period. I have already said, both in my statement and in answers in the House, that the Commission and I together are undertaking a major review of the financial and economic prospects. That will be pressed forward. It will certainly 186 have to include looking at all un-remunerative services and, in due course, the views which the Commission come to will be presented by me to the House.

§ MEMORANDUM FOR THE MINISTER OF TRANSPORT AND CIVIL AVIATION BY THE PERMANENT MEMBERS OF THE TRANSPORT TRIBUNAL ACTING AS A CONSULTATIVE COMMITTEE UNDER SECTION 82 OF THE TRANSPORT ACT, 1947

§ 1. We received on 20th March, 1956, Mr. Willis' letter of that day informing us that following upon an application made to you by the British Transport Commission on the 21st February you were minded in the exercise of the power contained in s. 82 (1) of the Transport Act, 1947, to make regulations authorising the Commission to make certain increases in their railway freight, dock and canal charges, and, in pursuance of the proviso to that subsection, asking for our advice with respect to the making of such regulations.

§ A copy of Mr. Willis' letter is for the purposes of record annexed hereto.

§ 2. By their application the Commission asked that regulations should be made empowering them "to increase their railway freight charges by 10 per cent., except in the case of merchandise traffic by goods train in consignments of under I ton and merchandise by passenger train, where the increase sought is 15 per cent., and returned empties, where the increase sought is 25 per cent.; and to increase their dock and canal charges by 7½ per cent." It was estimated that such increases would in a full year produce additional revenue mounting to £24.8m.

§ 3. The Commission's request was supported by an explanatory memorandum with three statistical appendices.

§ We have, as you will he aware, recently concluded an inquiry extending over 44 days into a Railway Freight Charges Scheme and have in addition had in December last and February of this year occasion to examine the financial position of the Commission in connection with applications made to us under s. 23 of the Transport Act, 1953. We have of course taken the information so gained into account in considering the memorandum and its appendices furnished to you by the Commission.

§ 4. The Commission are required by s. 3 (4) of the Transport Act, 1947, to secure that their revenue "is not less than sufficient for making provision for the meeting of charges properly chargeable to revenue taking one year with another" and by s. 92 of the same Act "to establish and maintain a general reserve" for the purpose (inter alia) of preventing "frequent fluctuations" in their charges.

§ The following facts demonstrate (a) the extent to which the Commission have fallen short of these statutory obligations and (b) that their failure to meet them is attributable to the insufficient earnings of British Railways:

(1) In only three out of the eight years, 1948–1955 inclusive during which they have carried on business, viz. in 1951, 1952 and 187 1953, have they been able to meet the "charges properly chargeable to revenue".
(2) By the end of 1955 their accumulated deficit was over £69m.
(3) British Railways form so large a part of the Commission's undertaking that it is essential if the Commission are to be able to perform their statutory obligations that British Railways shall, taking one year with another, "pay their way" in the sense of earning a sufficient surplus over their working expenses to provide a fair contribution to the central charges of the Commission.
(4) In only one of the eight years 1948–1955 inclusive, viz. in 1952, have British Railways paid their way in the sense stated above. Over the whole eight years they have fallen short of doing so by approximately £100m.
(5) Taking the last of the eight years, viz. 1955, by itself, according to the best estimate available the operations of the Commission as a whole resulted in a deficiency of £30.5m. while British Railways, treated as a separate undertaking, failed to "pay their way" by approximately £38m.

§ 5. The facts summarised in the preceding paragraph speak for themselves. They would be sufficiently grave even if it were possible to expect that the financial fortunes of the Commission would at all events be no worse in the immediate future than they have been in the past. No such mitigated hope can be entertained unless substantial relief can be afforded.

§ Among the tables appended to the Commission's application was an estimate of the net receipts of the Commission at current rates and charges in a "future year". This table neglected the increases in passenger fares sanctioned by us as a temporary measure under s. 23 of the 1953 Act in December last which are calculated to produce in the case of the London Transport undertaking £3.4m. a year and in the case of British Railways £0.5m. The question whether these temporary increases ought to be made permanent is a matter for our decision after the public inquiry prescribed by s. 23 has been held. Without in any way prejudging the results of this inquiry we propose for the purposes of this memorandum to treat the Commission's estimate of their financial prospects in a future year as improved to the extent of these provisional increases which are now in fact in operation.

§ Subject to this qualification we see no good reason for doubting any of the figures in the estimate. What it reveals, after allowing for the revenue from these provisional increases, is that in the absence of any further remedial measures—

(1) the Commission's deficit would by the end of this future year have increased by £55m. so as to make their accumulated deficit more than £124m.;
(2) that British Railways would in that year have failed to pay their way by approximately £55.5m.

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§ The further worsening of the Commission's prospects so revealed is attributable in the main to increases in prices and wages the cost of which to the Commission will be not less than £30m. a year.

§ 6. The Commission aim at reducing this more than alarming prospective deficiency by increasing their charges to an extent calculated to produce additional revenue amounting—

(1) in the case of British Railways to £31 m.
(2) in the case of Docks and Canals to £0.8m.
(3) in the case of the London Transport undertaking to £2.2m.
(4) in the case of British Road Services and the Provincial and Scottish Passenger Road Services to £3m.

§ It is to be observed that even were the Commission's aim to be fully attained the future year would still show a deficit of £18m. and British Railways would still be failing to pay their way by approximately £24.5m.

§ 7. Of the additional £31.8m. which the Commission hoped to be able to obtain from British Railways and their Docks and Canals £24.8m. were to be obtained by means of the increases for which they have sought your sanction and £4.2m. from increases in passenger fares for the making of which they do not require either your or our sanction. The receipt of the remaining £2.8m. was contingent upon the Postmaster-General agreeing to increases in the rates for mails and parcels post bringing in a further £2m. a year and upon our acceding to an application to be made to us under Section 23 of the 1953 Act for temporary increases in passenger fares calculated to produce £0.8m. a year.

§ 8. It is unnecessary to say more of the increases referred to under heads (3) and (4) in paragraph 6 than—

(1) that the obtaining of £0.7m. out of the £2.2m. to be sought from the London Transport services was contingent upon a further Order being made by us under Section 23 of the 1953 Act, and
(2) that the increased charges referred to under head (4) did not require either your or our sanction and are in fact already partly in operation.

§ 9. We are of course in strictness solely concerned with the question whether the Commission should be enabled by regulations to obtain a further £24.8m. a year by the proposed increases in their railway freight, docks and canal charges. It is obvious, however, that the expediency of affording them this particular measure of relief cannot properly be considered without reference to the other measures which are or can be made available to them.

§ 10. As we understand the statement made in the House of Commons on March 19th and Mr. Willis' letter of March 20th you are, as at present advised, of opinion that it is expedient—

(1) that the regulations you are minded to make should be so framed as to reduce 189 the amount sought by the Commission from £24.8m. a year to approximately £14.1m.
(2) that the additional revenue which the Commission hoped to secure from increased passenger fares by the measures indicated in paragraphs 7 and 8 above should be reduced from £5.7m. to £1m.

§ We have been informed by the Commission that if the other increases sought by them are scaled down to this extent it is unlikely that more than £0.6m. could be obtained by way of increases in the charges for the carriage of mails and the parcels post. In the result, therefore, the £37m. at which the Commission aimed would be reduced to £20.2m.

§ To reduce the additional revenue sought by the Commission to this figure will mean that in the absence of some radical change for the better their accumulated deficit will increase at the rate of more than £650,000 a week. And even if, after an experimental period of six months, they were enabled to bring into operation the whole of the measures they now propose their accumulated deficit would by the end of 1956 have been swollen by about £35m. and would stand at over £104m.

§ 11. We note from Mr. Willis' letter that in arriving at your provisional opinions you have taken account "of the signs which exist that renewed and strenuous efforts will improve the financial outlook on the railways through more efficient working arising from better relations in the industry" We of course share the hopes so expressed. We must, however, point out, first that the estimates put before you by the Commission allow for some improvements in efficiency and, secondly, that it is impossible to suppose that any conceivable improvement in efficiency could do more than reduce the gap of £18m. which would still separate the Commission from solvency even if all the measures proposed by them were put into full effect.

§ 12. We regret that we are unable to agree with the provisional decisions which you have reached. It may be that there are considerations not expressed in your statement to the House of Commons or in Mr. Willis' letter which are thought to make it necessary to disregard at all events for the time being the obligations and interests of the Commission. It is no part of our duty to discuss this possibility even if we considered ourselves competent to do so. We are expressly prohibited by s. 85 of the 1947 Act from doing anything which would in our opinion prevent the Commission "from discharging their general duty to secure that their revenue is not less than sufficient for making provision for the meeting of charges properly chargeable to revenue taking one year with another".

§ We think that in the light of the past history and present prospects of the Commission it is plainly necessary that they should be enabled to take all such measures as are available to stay the progressive deterioration of their financial position and that the increases for which they have sought your sanction are urgently necessary if this object is to be attained.

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§ We recommend accordingly that regulations be made authorising the increases proposed by the Commission.

§ HUBERT HULL.

§ A. E. SEWELL.

§ J. C. POOLE.

§ 3rd April, 1956.

§ COPY

§ MINISTRY OF TRANSPORT AND CIVIL AVIATION,

§ Berkeley Square House,

§ London, W.1.

§ RC.7/1/019

§ 20th March, 1956.

§ SIR,

§ I am directed by the Minister of Transport and Civil Aviation to inform you that the British Transport Commission have applied to him for authority under section 82 of the Transport Act, 1947, to make an increase of 10 per cent. in their railway freight charges, except (a) in the case of merchandise traffic by goods train in consignments of under one ton and merchandise by passenger train, where the increase sought is 15 per cent., and (b) returned empties, where the increase sought is 25 per cent.; and to increase their dock and canal charges by 7½ per cent. Enclosed are four copies of a letter and memorandum from the Commission.

§ The Minister is impressed with the importance of authorising some immediate increases in these charges. He is, however, of the opinion that, in determining what those increases should be, account should be taken of the signs which exist that renewed and strenuous efforts will improve the financial outlook on the railways through more efficient working arising from better relations in the industry and that it would be in the national interest that a reasonable opportunity should be given for the measures necessary to this end to be put in train. The Minister has consulted the Commission, who have expressed their desire to co-operate fully in this policy and have informed him that they will defer those increases in certain fares on London Transport services and British Railways for which they have made application to the Transport Tribunal under section 23 of the Transport Act, 1953.

§ The Minister considers, therefore, that while regulations should be made under section 82 with a view to ensuring a sufficient revenue to the Commission, it would be expedient that the increases which these regulations should authorise should for the next six months be limited to one half of those proposed by the Commission, except in the case of the dock and canal charges where the increase should in his view be limited to one of 5 per cent. instead of being 7½ per cent. as proposed.

§ I am accordingly directed by the Minister, in pursuance of the provisions of section 82, to ask the advice of the permanent members of the Transport Tribunal, acting as a consultative committee, with respect to the making of regulations under section 82 to the effect suggested in the preceding paragraph or otherwise.

§ The Minister would be glad to receive this advice as soon as possible.

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§ Copies of the statement which the Minister made in the House of Commons yesterday are enclosed for your information.

§ I am Sir.

§ Your obedient Servant.

§ (Sgd.) J. R. WILLIS.

§ Hubert Hull, Esq., C.B.E.,

§ Transport Tribunal,

§ Watergate House,

§ 15, York Buildings,

§ Adelphi, W.C.2.

§ Comments by the Minister of Transport and Civil Aviation on specific points in the Memorandum by the Permanent Members of the Transport Tribunal

§ It was the facts of the financial position of the railways, clearly brought out in paragraphs 4 and 5 of the memorandum, that caused the Government to take the view set out in the statement made to the House on 19th March and in the letter referring the matter to the Permanent Members of the Transport Tribunal acting as a consultative committee. Their memorandum is factual and does not seek to analyse the causes which have produced this situation. It is right to say that the Government do not regard the situation as in any way irremediable.

§ Whilst the Minister takes full responsibility for the opinion expressed that for an interim period of six months the increases authorised ought not in the national interest to amount to the full increase proposed by the Commission, he thinks it right in view of any possible misconception of the wording of paragraph 10 of the memorandum to make it clear that the decision in regard to passenger fares neither to use to the full their existing powers nor to seek additional powers from the Transport Tribunal was taken by the Commission as an earnest of their desire to co-operate fully in this matter.

§ The whole position must be re-assessed in six months' time in the light of the plans drawn up by the Commission during this period to improve their operating position. This is a vital factor in the attitude taken by the Minister and by the Commission and is of considerable importance in relation to paragraphs 10 and 11 of the memorandum.

§ As regards paragraph 12 the statement made to the House on 19th March was made with a full consciousness of the statutory duties imposed on the Commission and involves no disregard of their duties since it proposed only that, in present conditions and for a period limited to six months, the increases in charges should be on the lines indicated in that statement.