asked the Minister of Transport and Civil Aviation whether the British Transport Commission has yet applied for his authority to increase freight charges in order to enable them to meet increased costs, including the cost of recent wage increases.
§ Mr. Boyd-Carpenter
Yes. I have received such an application from the Commission and have under Section 82 of the Transport Act, 1947, referred it to the permanent members of the Transport Tribunal, acting as a Consultative Committee, for their advice. As recommended by the members of the Tribunal, I propose to make regulations authorising the Commission as from 5th June, 1955, to increase the railway freight, dock and canal charges now in operation by 7½per cent. generally, but by 15 per cent. in the case of railway freight charges for merchandise by goods train in consignments of under one ton, and for all merchandise by passenger train other than perishables or traffic carried at the loaded van scale.
I will circulate in the OFFICIAL REPORT a memorandum containing the advice I have received from the members of the Tribunal.
Following is the memorandum
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. By a letter dated 12th April, 1955, you asked for our advice upon a request made to you by the British Transport Commission on 7th March, 1955, that they should be authorised under Section 82 of the Transport Act, 1947, to increase the railway freight, dock and canal charges now in operation—
(1) by 15 per cent. in the case of—
- (a) merchandise by goods train in consignments of under 1 ton:
- (b) all merchandise by passenger train other than perishables or traffic carried at the loaded van scale:
(2) by 7½per cent. in the case of—
- (a) merchandise by goods train in consignments of 1 ton or over:
- (b) perishables and traffic at the loaded van scale by passenger train:
(3) by 7½per cent. in the case of all dock and canal traffic.
2. As you may be aware we have at present under consideration an application by the Commission under Section 23 of the Transport Act, 1953, for an Order enabling them to increase certain of the charges at present regulated by the British Transport Commission (Passenger) Charges Scheme, 1954. The material supplied to us in support of this application has served to supplement and explain the memorandum which accompanied the Commission's present request.
3. In the case of British Railways the Commission's request rests on the assumption that they ought to "pay their way," i.e. that their net receipts should be not less than their fair share of the central charges of the Commission. Upon this assumption which we think unexceptionable the capital questions are:
- (1) What sum would represent a fair share of the central charges of the Commission in the "future year" which is the subject of the Commission's estimates, i.e., a year beginning in mid-1955?
- (2) What, as matters now stand, are the net receipts of British Railways likely to be in that future year?
- (3) What remedial action can be taken to bridge any gap between this fair share and these estimated net receipts?
4. In our report of the 26th January, 1954, upon the last request of this kind put forward by the Commission we discussed in some detail the apportionment of central charges between British Railways and the other revenue-earning activities of the Commission. We see no reason for modifying the views then expressed. The central charges for the "future year" then under discussion were, after deducting interest receivable by the Commission, estimated as£55.5 million. Our conclusion was that British Railways might fairly be expected to contribute£39.5 million towards this sum. The central charges of the Commission in the "future year" now under discussion will, after again deducting interest receivable by the Commission, be of the order of£58 million. The same considerations which in January, 1954, moved us to put the British Railways' fair share of£55.5 million as£39.5 million lead us now to put their share of£58 million at about£41 million.
5. The next question is what upon a prudent estimate the net receipts of British Railways are likely to be in the "future year" on the assumption that no remedial measures are taken.
The view of the Commission is that on this assumption the working expenses of British Railways would exceed the gross receipts by£10 million, i.e., that they would fall short of being able to make their fair contribution to the central charges by£51 million.83W
We can see no reason for doubting the substantial accuracy of this forecast.
The deterioration in the financial position of British Railways considered as a separate activity can we think best be seen from the comparison made in the following table between the present forecast and figures taken from the latest published accounts of the Commission, those for the calendar year 1953.
— 1953 Future year Gross receipts £m. £m. Passengers 114.8 117.2 Freight, parcels, mails and miscellaneous 318.3 333.0 433.1 450.2 Working expenses (including depreciation or renewals) 400.1 461.7 33.0 -11.5 Revenue from advertising and letting of sites 1.6 1?6 1.5 1.5 Total net receipts 34.6 -10.0
The increase in the working expenses (£61.6 million) is attributable almost entirely to (a) the successive increases in wages and salaries amounting in all to about£36 million per annum and (b) increases in the maintenance costs charged against revenue (£23 million).
6. It is manifest that every practicable step must be taken to prevent a situation arising in which British Railways would be failing to pay their way by as much as£51 million per annum.
7. The Commission hope to be able to improve the financial prospects revealed by the above calculations by—
- (1) the introduction of what are described as "special measures of economy" designed to effect a saving of£15 million per annum:
- (2) increases in passenger fares producing additional revenue of the order of£4 million per annum:
- (3) obtaining the agreement of the Postmaster-General to such modifications in the rates for mails and post parcels as will produce additional revenue of the order of£1 million per annum.
8. The remedial measures described in the preceding paragraph would by themselves do no more than enable the railways to produce a surplus of£10 million over their working expenses. They would still, that is to say, be failing to carry their fair share of the burden of the Commission's central charges by as much as£31 million. We think it is plain that such a gap must be at least greatly reduced and that the only available means of doing so is by an increase in freight charges.84W
9. The particular increases for which authority is sought differentiate between consignments of under 1 ton and those of 1 ton or more. The previous increases authorised under Section 82 of the 1947 Act have not taken this form. As, however, such a differentiation in fact reflects a considerable difference in the actual costs of handling the two classes of consignments we think it is in principle justifiable.
10. The Commission estimate that the increases would produce additional revenue of the order of£17 million per annum and so reduce the true deficit of British Railways to about£14 million. In our view the necessity for increases of this magnitude is obvious and inescapable.
Docks and canals
11. The increases sought in these charges are justified as consequential upon the wages increases since the financial position of these activities was last reviewed in January, 1954. In the case of the docks it is estimated that the yield of a 7½per cent. increase (£0.6 million) will nearly offset the increase in wages. In the case of the canals it is said that the estimated yield (£01 million) will do no more than offset half this increase.
We entertain some doubt whether these estimates will be fulfilled. It seems to us nevertheless that the Commission should be enabled to seek to recoup themselves for these wage increases.
12. For the reasons indicated we advise that Regulations be made as soon as possible authorising the increases specified in the Commission's request.
A. E. SEWELL.
J. C. POOLE.
26th April, 1955.