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COMF5DENT1AL
3 DOCUMENT IS THE P R O P E R T Y OF HER B R I T A N N I C IvIAJESTY'S G O V E R N M E N T )
C(67) 122
5th July, 1967
C O P Y N O .
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Id
C A B I N E T
R O A D H A U L A G E P O L I C Y : P R O P O S A L S F O R T H E R E V I S I O N
OF T H E C A R R I E R S ' L I C E N S I N G S Y S T E M
Memorandum by the Minister of Transport
Introduction and Summary
In " T i m e for D e c i s i o n " the G o v e r n m e n t undertook "to c o - o r d i n a t e road and r a i l to use existing r e s o u r c e s to best e f f e c t " . In the White P a p e r on Transport P o l i c y (Cmnd. 3057, paragraph 99) published in July, 1966, the Government accepted the v i e w that the present c a r r i e r s
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licensing system for goods verucles was wasteful, ineffective and unduly complicated, but held that instead of abolishing licensing altogether it was n e c e s s a r y to devise a licensing system which v/ould be "an effective instrument of a modern, national f r e i g h t p o l i c y " . This paper d e s c r i b e s my p r o p o s a l s .
Discussion at the Economic P o l i c y C o m m i t t e e r e v e a l e d that some of my colleagues a r e concerned about certain features which are likely to be controversial. Hence this r e f e r e n c e to the Cabinet.
2. I a m proposing two main changes
(i) T o f r e e altogether f r o m c a r r i e r licensing the 900,000 goods vehicles under 30 cwt. unladen weight, and to apply to the remaining
600,000 a f o r m of licensing (quality l i c e n s i n g ) designed to i m p r o v e maintenance and operating standards for the protection of public safety.
(ii) T o f r e e f r o m all except quality licensing a further 140, 000 public haulage v e h i c l e s (including all those under 5 tons and a few over 5 tons) which are at present r e q u i r e d to hold ' A
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or ' B ' l i c e n c e s , but to apply to the remaining 40,000 public haulage v e h i c l e s and to 30,000 own account v e h i c l e s a new system of quantity control which will produce a more rational economic division of traffic between road and r a i l .
3. The White P a p e r (paragraph 98) stated that decisions about the recommendations of the Geddes Committee on the licensing s y s t e m should await the outcome of current r e s e a r c h into the r e l a t i v e costs of carrying goods by road and r a i l . Good p r o g r e s s has been made with this r e s e a r c h and it is already c l e a r that its findings w i l l not conflict with my proposals and in particular r e s p e c t s will validate them. It is t h e r e f o r e not n e c e s s a r y to await completion of this r e s e a r c h , which w i l l take another y e a r at l e a s t , before adapting the licensing s y s t e m as I propose to speed up the transfer of a comparatively s m a l l amount of traffic f r o m road to r a i l where there is spare capacity that can profitably be used to c a r r y it, with a consequential reduction of some £6 m i l l i o n in the deficit,
I have set out in g r e a t e r detail at Annex A the relationship between this r e s e a r c h into transport costs and my p r o p o s a l s .

The Existing C a r r i e r s ' Licensing System
4, Licensing of goods v e h i c l e s was initiated by the Road and R a i l
Traffic A c t , 1933, and the p r e s e n t s y s t e m which is d e s c r i b e d m o r e fully in Annex B i s substantially the s a m e as it was then. Its purposes w e r e to regulate competition within the road haulage industry, in v i e w of depressed conditions arising f r o m rapid unregulated expansion; to protect the safety of the public and of the d r i v e r s by providing sanctions against o p e r a t o r s of unsafe l o r r i e s ; and to give some protection to the r a i l w a y s by allowing them to object, along with other road hauliers, to the grant of l i c e n c e s to public haulage o p e r a t o r s .
But the system no longer e f f e c t i v e l y achieves these o b j e c t i v e s , and the objectives themselves need to be r e c o n s i d e r e d in the light of modern needs,
T h e
Objectives of Licensing
5. There is no need now for the regulation of competition between public hauliers. Road haulage is a strong and v i g o r o u s industry and likely to r e m a i n so. It has not suffered any noticeable economic damage from the ineffectiveness of the p r e s e n t s y s t e m and t h e r e is no sense in retaining a control which no longer has any meaning in p r a c t i c e ,
6, But the protection of public safety by the p r o m o t i o n of high standards of maintenance and operation within the industry i s even more important now that it was in 1933, Roads a r e m o r e c r o w d e d , vehicles m o r e powerful, and the incentives to break the lav/ for financial gain remain. Yet the existing s y s t e m allows no enquiries into the suitability and competence of intending o p e r a t o r s , and its disciplinary powers over existing o p e r a t o r s have p r o v e d totally inad.equate. We must change this situation r a d i c a l l y .
7. I have been under considerable p r e s s u r e f r o m the unions to renationalise the public haulage industry. One of their main arguments is that the industry is dominated by tne small o p e r a t o r , who3e standards of operation are substantially l o w e r than those of o p e r a t o r s in the publicly owned sector, who a r e as a consequence at a competitive disadvantage.
No less than 50 per cent of public hauliers operate only one v e h i c l e and
85 per cent operate f i v e v e h i c l e s or l e s s . I have r e s i s t e d renationalisation of the v/hole industry because I see serious disadvantages in establishing a freight transport monopoly. M o r e o v e r , as w e saw after 194-7, no r enationalisation v/ould be effective which left out the l a r g e r own-account fleets. I have maintained that the p r o b l e m of low standards in certain sections of the industry could and should be dealt with by licensing backed by m o r e vigorous enforcement.
8, There i s , I b e l i e v e , a second v a l i d objective of a licensing system. It is a p r i m a r y a i m of m y f r e i g h t p o l i c y that the fullest economic use should be made of the basic r a i l w a y network. The railways
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investment in liner trains and bulk d e l i v e r y s e r v i c e s i s giving thern modern f a c i l i t i e s for c a r r y i n g long haul and bulk traffics more efficiently and cheaply in many c a s e s than r o a d transport. On these s e r v i c e s the r a i l w a y s can offer competitive charges and still make profits. In the main, the new s e r v i c e s w i l l sell t h e m s e l v e s on their m e r i t s . But the understandable reluctance of some consignors to entrust their goods to the r a i l w a y is l i k e l y to delay this natural switch
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to r a i l , Meantime spare r a i l capacity w i l l be wasted. If this " r e l u c t a n t " traffic can be induced to switch to r a i l at an e a r l i e r date, without any additional costs being i m p o s e d on industry, there w i l l be a clear gain to the economy in t e r m s of optimum use of transport r e s o u r c e s , reduction of the r a i l w a y s
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deficit and l e s s congestion on the r o a d s , I, t h e r e f o r e , believe v/e should retain quantity c o n t r o l , but in a new and more r e l e v a n t f o r m in which it w i l l be l i m i t e d to that part of the road haulage industry where it can contribute to switching suitable traffic to r a i l .
P r o p o s a l s for a Mew System
9. I p r o p o s e , as a f i r s t step, to exempt f r o m a l l c a r r i e r s ' licensing the 900, 000 light v e h i c l e s of l e s s than 30 cwt, unladen weight - n e a r l y all operated on own-account and m o s t l y light d e l i v e r y vans and t r a d e s m e n ' s vehicles used for l o c a l runs only. T h e r e a r e no economic grounds for subjecting them to quantity c o n t r o l . A s r e g a r d s quality control, most of these v e h i c l e s a r e operated in towns and, though their accident rate is high, the accidents in which they a r e involved tend to be less serious than those involving heavier v e h i c l e s . Thus, the number of deaths f r o m fatal accidents per v e h i c l e - m i l e is 40 per cent higher for l o r r i e s over
30 cv/t. than for those below. M o r e o v e r , v e h i c l e s under 30 cwt n
will still be subject to the same annual tests as p r i v a t e c a r s and also at any time to roadside spot-checking by m y e x a m i n e r s . So v/e have a quality check on these v e h i c l e s . I have, t h e r e f o r e , decided to concentrate the controls of the new s y s t e m on the 600,000 heavier goods v e h i c l e s over
30 cwt. rather than dissipate enforcement effort o v e r the whole range of 1. 5 m i l l i o n goods v e h i c l e s .
Quality Controls
10. I p r o p o s e that the ba.sic instrument of control in future should be a new type of c a r r i e r ' s l i c e n c e . Such a l i c e n c e would be granted only if:­
(a) The L i c e n s i n g Authority w e r e satisfied that the applicant intended and was able to p r o v i d e adequate maintenance f a c i l i t i e s for his v e h i c l e s , to keep proper control o v e r their loads and to a r r a n g e satisfactory checks on the hours worked by his d r i v e r s .
(b) The Licensing Authority v/ere satisfied that the applicant's financial r e s o u r c e s v/ere c o m m e n s u r a t e with his proposed scale of operation and that he had sufficient business in p r o s p e c t to maintain reasonable financial stability.
(c) The applicant held a new type of p e r s o n a l l i c e n c e (a "transport manager's l i c e n c e " ) , entitling him to manage a transport undertaking, or employed the holder of such a l i c e n c e in a position of responsibility.
The licence would be r e v o c a b l e for m a l p r a c t i c e ,
11, These c r i t e r i a a r e designed p r i m a r i l y to uphold proper standards of conduct and operation in the industry and in particular to protect public safety. P o w e r to investigate the a p p l i c a n t s financial prospects is necessary because the most c o m m o n and i m m e d i a t e reaction of hauliers in financial difficulties is to n e g l e c t maintenance, o v e r l o a d v e h i c l e s and overwork their d r i v e r s . We should not continue to t o l e r a t e a state of affairs in which anyone can buy a second-hand l o r r y on hire purchase for a few pounds deposit and a p r o s p e c t of a f e w cut-rate contracts, neglect its maintenance and so b e c o m e a menace on the r o a d s ,

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Some of my colleagues on the Economic P o l i c y C o m m i t t e e e x p r e s s e d doubts about the feasibility of a s s e s s i n g an a p p l i c a n t s financial r e s o u r c e s and p r o s p e c t i v e business. I have discussed this again with some of my licensing authorities, and I a m convinced that the difficulties a r e e x a g g e r a t e d . The majority of applicants w i l l have been operating goods v e h i c l e s for a number of y e a r s and the licensing authorities w i l l have a g r e a t deal of information to a s s i s t them in their a s s e s s m e n t s and to pinpoint bad r i s k s . Under the present s y s t e m they seek to satisfy t h e m s e l v e s about an a p p l i c a n t s r e l i a b i l i t y and efficiency, and they see no serious difficulty in making this financial a s s e s s m e n t , which would enable them to deal m o r e effectively with an operator whose past r e c o r d in caring for his v e h i c l e s and o b s e r v i n g the other r e q u i r e m e n t s of road operation has been unsatisfactory. It is all the m o r e important that such enquiries should be made since o t h e r w i s e we should be opening the door for unscrupulous o p e r a t o r s out for quick profits to put unsafe v e h i c l e s on the r o a d , including, possibly, some who had been refused a l i c e n c e under the r e s e n t s y s t e m . This would go undetected until the v e h i c l e either c a m e up for its annual test or was caught at a random roadside test. But in between annual tests the v e h i c l e can do a considerable m i l e a g e , while the chances of its being examined in a random roadside test a r e about once e v e r y five y e a r s .
13. I p r o p o s e , h o w e v e r , to make these financial tests d i s c r e t i o n a r y and not mandatory and leave it to the licensing authority to decide when to apply them. T h e r e w i l l be a number of cases in which, they w i l l be c l e a r l y unnecessary. T h e r e w i l l be others in which it is not c l e a r whether the applicant has adequate financial r e s o u r c e s and the licensing authority w i l l then need to ask h i m for irtformation in this point. If it then t r a n s p i r e s that the applicant i s a man of straw, the licensing . authority can r e j e c t the application. In this way the m o r e obviously bad r i s k s can be eliminated f r o m the starts \7here the licensing authority does not f e e l justified in rejecting an application outright, he w i l l be able at his d i s c r e t i o n to grant what would in effect be a probationary l i c e n c e of short duration. Such a l i c e n c e would be given to many applicants new to the industry; it might also be granted, in a f e w c a s e s , to an operator already in the business whom the licensing authority has r e a s o n to suspect. Otherwise l i c e n c e s w i l l be given for a longer p e r i o d , (Another r e m e d y open to the licensing authority in doubtful c a s e s would be to license a s m a l l e r number of v e h i c l e s man that applied f o r . )
14. It has been suggested as an alternative that quality l i c e n c e s should be available on demand but be subject to r e v o c a t i o n for subsequent infringements, on the ground in particular that it would r e q u i r e l e s s manpower than my p r o p o s a l s . A p a r t , h o w e v e r , f r o m the safety objectives to this alternative it would involve a heavy i n c r e a s e in the number of enforcement staff. N o r w i l l rny proposals as a whole involve any substantial i n c r e a s e in the numbers now administering c a r r i e r licensing since the i n c r e a s e in enforcement and executive staff for quality licensing w i l l be l a r g e l y offset by the savings f r o m the exemption of a m i l l i o n v e h i c l e s f r o m l i c e n s i n g . T h e r e w i l l be a need
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for a higher proportion of senior staff in the T r a f f i c A r e a s , but the extra cost of this w i l l be m e t f r o m the c h a r g e s made f o r c a r r i e r s
T licences since I intend that the s y s t e m shall continue to be self-financing.
The staffing implications of m y proposals have been discussed with the
T r e a s u r y .
15. Once a l i c e n c e has been issued, there w i l l be two l i n e s of attack against a defaulting o p e r a t o r . F i r s t , w h e n e v e r there has been a breach of the law relating to v e h i c l e operation the licensing authority w i l l be required to consider suspending or cancelling the l i c e n c e d i s c s of the operator's individual l o r r i e s . Second, if an o p e r a t o r ^ offences a r e persistent or a r e of a r e c k l e s s character or l i k e l y to cause p a r t i c u l a r danger to the public, he w i l l be liable to have his o p e r a t o r ^ l i c e n c e suspended or cancelled. In either case the position of the holder of the
Transport Manager" s l i c e n c e in that organisation w i l l be called in question. T o escape r e v o c a t i o n or suspension of his own l i c e n c e he will have to show that he could not be held responsible f o r the state of affairs in the company. This w i l l g i v e h i m a powerful incentive to resist any p r e s s u r e by his e m p l o y e r s to break safety r u l e s . T h e r e will, of course, have to be p r o v i s i o n for appeals; I a m still considering the f o r m of these.
16. L i c e n c e s of ihis kind, which involve p r i o r examination of financial r e s o u r c e s , a r e a l r e a d y required in G e r m a n y and the Netherlands, and have recently been instituted in F r a n c e , M y officials have discussed with the Germans the working of their s y s t e m , which is c l o s e l y s i m i l a r to my own p r o p o s a l s t
and have been told that the financial tests p r e s e n t no serious difficulty, and a r e of value in securing safe operation. It is likely that l i c e n c e s on a s i m i l a r pattern w i l l eventually be introduced throughout the European Economic Community ( E E C ) . I know that in this country their introduction would be w e l c o m e d by both sides of the industry and I a m confident that they would make a worth while contribution to safety.
Quantity Controls
17. Under the p r e s e n t s y s t e m of c a r r i e r licensing an applicant f o r a haulier's licence has at l e a s t in theory to p r o v e a need for his proposed s e r v i c e . In p r a c t i c e he has little difficulty in producing c u s t o m e r s to support his case and the s y s t e m has b e c o m e a f a r c e . The T r a d e s Union
Congress ( T U C ) and British R a i l w a y s have p r e s s e d for a s y s t e m which will effectively support a national f r e i g h t p o l i c y . The T U C indeed have gone further and asked that all licensing shall be delegated to a reconstituted British T r a n s p o r t C o m m i s s i o n . I cannot accept this, but
I do accept the need f o r radical change. British Railways have represented that there is a quantity of traffic now moving by road which would be eminently suitable f o r c a r r i a g e by f r e i g h t l i n e r and assess the quantity at some 30 m i l l i o n tons per annum. T h e y b e l i e v e that the new s e r v i c e w i l l attract on m e r i t one-half of this traffic but have urged that a licensing s y s t e m i s essential to d i v e r t the r e m a i n d e r f r o m road haulage. I consider that this justifies a v e r y l i m i t e d f o r m of quantity licensing designed to d i v e r t this traffic to the f r e i g h t l i n e r s .
Licensing w i l l be needed to o v e r c o m e many c o n s i g n o r s
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convervatisrn and their prejudice against the railways d e r i v e d f r o m p r e - f r e i g h t l i n e r
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experience. It will also be needed to d i v e r t traffic in m a r g i n a l c a s e s .
There is a l a r g e amount of bulk traffic such as coal and m i n e r a l o r e s moving by road in circumstances in which it could, without d e t r i m e n t to the consignor and with benefit to the public interest and to the o v e r a l l rail deficit, be moved by r a i l .
18. I p r o p o s e , t h e r e f o r e , to apply a l i m i t e d f o r m of quantity control which will extend to all l o r r i e s , including those of own account o p e r a t o r s , of m o r e than f i v e tons unladen weight engaged either ( a ) in hauls of o v e r
100 m i l e s or (b) in carrying certain bulk traffics ( e . g . coal) o v e r
25 m i l e s .
19.
M y reasons f o r adopting a l i m i t of f i v e tons unladen weight a r e :
(a) L o r r i e s over five tons weight c a r r y about half the tonnage and account for half the t o n - m i l e a g e moving by road o v e r 100 m i l e s and thus include the v e r y traffic which would be suitable f o r the f reightliner s e r v i c e . T h e y a l s o c a r r y much of the bulk loads moving over shorter d i s t a n c e s .
(b) T h e r e a r e in all 100, 000 v e h i c l e s cf f i v e tons or m o r e (including
60, 000 own-account v e h i c l e s ) . The exclusion of those engaged on journeys of under 100 m i l e s , other than those carrying certain bulk l o a d s , w i l l bring the total to 70, 000 as compared with 180, 000 public haulage v e h i c l e s now subject to licensing (see table at Annex C ) . This w i l l enable m y enforcement staff to concentrate their attention on a. much s m a l l e r number of e a s i l y identified v e h i c l e s .
20. Applications for a quantity licence to operate one of these
70,000 l o r r i e s w i l l be open to objection by r a i l w a y o p e r a t o r s . The system w i l l , t h e r e f o r e , be biased in favour of r a i l transport but f o r the reasons set out in paragraph 5 above there is no point in allowing objections being raised by other o p e r a t o r s . In most cases the objector will be the freightliner division of the National F r e i g h t Organisation
( N F O ) , since the effective alternative to road w i l l be provided by the freightliner s e r v i c e s . Occasionally the r a i l w a y s might object to applications f o r bulk c a r r i a g e of coal and s i m i l a r traffic. The sole grounds f o r objection w i l l be that r a i l can p r o v i d e a s e r v i c e which overall is as satisfactory as that of the applicant, taking into account speed, r e l i a b i l i t y and cost; w h e r e such an objection is made the applicant w i l l have to satisfy the licensing authority that it is invalid.
Unlike the present system, c o n s i g n o r s
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p r e f e r e n c e s or prejudices w i l l not be taken into account unless they a r e substantiated with rational evidence in these t e r m s . T h e r e w i l l be p r o v i s i o n f o r appeals to an independent tribunal.
21. The extension of quantity licensing to own-account transport is new and w i l l g i v e r i s e to c o n t r o v e r s y . Own-account operators value their f r e e d o m to operate l o r r i e s without r e s t r i c t i o n for the c a r r i a g e of their ov/n goods. F o r the most part they w i l l retain this f r e e d o m , subject only to the new quality controls which they w i l l , I a m s u r e , find acceptable. But I do not think it is right to exempt them altogether f r o m the new quantity controls. A significant proportion (at least o n e - t h i r d ) of the traffic which is potentially suitable f o r r a i l now goes in own-account
C O M F f D E N T i A L

C O N Fl DE NTIAL. l o r r i e s ; the TUG have strongly r e p r e s e n t e d to m e the need f o r quantity control of own-account transport, as a l s o have British Railways? and to confine quantity licensing to public hauliers would be l i k e l y to cause diversion of the traffic p r e v i o u s l y c a r r i e d by h a u l i e r s , not to r a i l , but to new or enlarged own-account f l e e t s .
22. In considering contested applications licensing authorities w i l l need for comparison competing road and r a i l rates which r e f l e c t the full costs of each s e r v i c e . This w i l l not be difficult in the case of public road haulage, nor f o r the N F O f r e i g h t l i n e r s e r v i c e s , since the arrangements f o r the financial structure of the N F O w i l l ensure that no element of subsidy appears in t h e i r quoted r a t e s . But since no rates will be available in own-account c a s e s , the comparison w i l l have to be between r a i l rates and own-account c o s t s . Many own-account operators v/ill be quick to see the e c o n o m i c benefits of r a i l trunk haulage (and a number have a l r e a d y made the switch to f r e i g h t l i n e r s ) , but there are many who d o not even know what it costs them to run their own vehicles or a r e content to subsidise their l o r r y f l e e t s f r o m their manufacturing p r o f i t s . This c l e a r l y leads to an unjustifiable waste of national r e s o u r c e s . Undoubtedly one of the effects of applying quantity licensing to own-account operators w i l l be to stimulate them to examine their transport c o s t s , and to c o m p a r e them with r a i l c o s t s , with beneficial effects o:z national p r o d u c t i v i t y .
Effect of Quantity L i c e n s i n g on Established F l e e t s
23. Several of m y colleagues suggested that organisations with l a r g e established fleets might suffer e c o n o m i c loss if the quantity licensing system required transfer of traffic c a r r i e d by their v e h i c l e s to r a i l .
There will be cases w h e r e quantity licensing could make s e v e r e inroads into individual f l e e t s . But there a r e two mitigating f a c t o r s . The owners of these fleets w i l l have plenty of notice that quantity licensing is l i k e l y to affect them, not only because there w i l l be at least nine months between the publication of m y p r o p o s a l s in a White P a p e r and enactment of the Transport B i l l but a l s o because the introduction of the new controls will have to be spaced o v e r a p e r i o d of at least two to three y e a r s as existing licences f a l l in. A l s o the licensing authorities w i l l have to be given discretion to allow the continued operation of particular l i c e n c e s for a limited p e r i o d or to a l i m i t e d extent in individual cases w h e r e immediate rejection would cause undue hardship. In any event the basic criterion w i l l have to be satisfied, can r a i l provide as good a service ?
Refusals of Applications f o r Quality or Quantity L i c e n c e s
24. I intend that applicants should be f r e e as they a r e now to renew their applications at any t i m e . T h i s is the r e a l sanction against any failure of the r a i l w a y s to operate a r e l i a b l e s e r v i c e and much s i m p l e r than any indemnity s y s t e m . It v/ill a l s o be a healthy stimulus to the railways to keep their standards up. E v e n if it w e r e practicable an indemnity s y s t e m would be of doubtful v a l u e . On one of the freightliner routes, there is an a r r a n g e m e n t under which a consignor who pays a higher rate can r e c o v e r the freight charge if his consignment is delayed. In p r a c t i c e the c u s t o m e r s nearly always pay the l o w e r rate which c a r r i e s no such guarantee since the n o r m a l s e r v i c e is sufficiently reliable.
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Interdepartmental Consultation
25. A t the last meeting of the Economic P o l i c y C o m m i t t e e I was asked to arrange f o r interdepartmental consideration of certain f e a t u r e s of m y proposals and to report the outcome to the F i r s t S e c r e t a r y of State before reference was made to the Cabinet. I have done so and at
Annex D is a copy of my r e p o r t to the F i r s t S e c r e t a r y . It w i l l be seen that officials reached a g r e e m e n t on a number of the points r a i s e d by my colleagues, but failed to a g r e e on the possible effect of quantity licensing on industrial costs and efficiency, e s p e c i a l l y as r e g a r d s own­ account transport, I do not share the f e a r s e x p r e s s e d on this s c o r e and neither do my licensing authorities. They have long e x p e r i e n c e in comparing road and r a i l r a t e s , and in assessing the m o r e c o m p l e x issues arising f r o m proof of need f o r a new road haulage s e r v i c e , and their opinion on the f e a s i b i l i t y of m y proposals should not be lightly set aside. I would in any case seek p o w e r s in the new T r a n s p o r t B i l l to issue directions of a g e n e r a l nature for their guidance should this prove n e c e s s a r y .
The Common Market
26. In formulating these p r o p o s a l s I have kept in mind the p o s s i b i l i t y of our joining the E E C and the effect of this on our licensing arrangements. The Six have not made much p r o g r e s s in evolving a common transport p o l i c y , but they may do so in the field of haulage licensing during the next six to twelve months. I have a l r e a d y r e f e r r e d to the p a r a l l e l s between my quality licensing proposals and those being evolved by the E E C . Quantity control is applied in all
Common Market countries, though in different f o r m s , and the p r i n c i p l e of controlling "access to the m a r k e t " and of limiting road haulage capacity is f i r m l y entrenched. T h e y do not apply this control to own­ account transport, but there is already some Recognition that its exclusion is i l l o g i c a l and West G e r m a n y i m p o s e s a special d i s c r i m i n a t o r y tax on own-account o p e r a t o r s . I think our best course is to d e v e l o p our own licensing s y s t e m as best suits our domestic needs, but to keep it sufficiently flexible to p e r m i t l a t e r modifications in the E E C context if necessary; may be our initiative w i l l influence the still developing policies of the Six.
Alternatives
27. I have considered other proposals and rejected them. F o r example a v e r y substantial charge f o r long distance l i c e n c e s or f o r vehicles above a certain weight would no doubt lead to some d i v e r s i o n of traffic to r a i l . But it would be indiscriminate and would r a i s e costs of road transport hauls for which there was no effective r a i l alternative or indeed no r a i l alternative at a l l .
28. A second possibility would be to repeal the present l e g i s l a t i o n on c a r r i e r licensing and replace it with quality licensing alone. But this would mean foregoing the opportunity to utilise the spare capacity on the freightliner network and to reduce the r a i l deficit. T h e r e would a l s o be considerable c r i t i c i s m f r o m the unions if the limited right which the railways now have to object to haulage l i c e n c e s w e r e r e m o v e d a l t o g e t h e r .
A variant of this proposal would be to leave the present s y s t e m as it is but with quality licensing superimposed. But this would mean retaining a system acknowledged to be g r o s s l y defective and continuing to incur the waste of resources that it i n v o l v e s .

29. Another possibility is a quota s y s t e m like that in s e v e r a l E E C countries. But their e x p e r i e n c e does not suggest that a quota s y s t e m confined to public hauliers would be of any assistance to the r a i l w a y s ; the m o r e likely effect of any such s y s t e m would be to i n c r e a s e own­ account operation. And there is little point in developing a quota system m e r e l y to r e s t r i c t entry into the public haulage side of the industry.
Conclusion
30. T h e r e being no satisfactory a l t e r n a t i v e , I seek the approval of my colleagues to the p r o p o s a l s set out in this paper as a basis f o r m y road haulage licensing p o l i c y . I would consult further with the v a r i o u s interests concerned before framing proposals f o r inclusion in the forthcoming T r a n s p o r t B i l l .
B . A . C .
Ministry of T r a n s p o r t , S . E . 1 .
5th July, 1967
- 9 ­

ANNEX A
The r e l a t i o n of c u r r e n t ^ i ^ X ^ A V I ^ ^ ^ ^ h . i n t o t r a n s p o r t coasts to ia,y p r o p o s a l s f.or c a r r i e r JLicensing
I have e x p l a i n e d in p a r a g r a p h 3 of the Memorandum t h a t I do not think i t n e c e s s a r y to w a i t f o r the f u l l r e s u l t s of our research i n t o the r e l e v a n t c o s t s of c a r r y i n g goods by r o a d or r a i l and into c o n s i g n o r s ' p r e f e r e n c e s b e f o r e making changes i n the licensing system. The o b j e c t o f t h i s r e s e a r c h i s t o p r o v i d e information r e l a t i v e to r o a d and r a i l investment t o h e l p us assess the consequences of a number of p o l i c i e s w i t h economic i m p l i c a t i o n s . A l r e a d y i n f o r m a t i o n from t h i s r e s e a r c h h a s h e l p e d guide our t h i n k i n g i n f o r m u l a t i n g my p r e s e n t p r o p o s a l s b u t the programme i s not complete. I t i s p r o c e e d i n g by a s e r i e s of s t a g e s .
In the f i r s t s t a g e we a r e c o n c e n t r a t i n g on an examination of two typical trunk r o u t e s - between London and N e w c a s t l e and between
South L a n c a s h i r e and G l a s g o w , v/e a r e c o l l e c t i n g d e t a i l e d d a t a on the costs of a l l r o a d and r a i l t r a n s i t s which make use o f t h e s e routes or of any p a r t of them. Prom t h i s data we i n t e n d to b a i l d up a mathematical model ( t h e t r a n s p o r t c o s t s model) which w i l l enable us to examine the v a r i a t i o n s in c o s t s which would occur on these two r o u t e s i f the b a l a n c e of t r a f f i c between r o a d and r a i l on them were to be a l t e r e d i n v a r i o u s w a y s . At the moment we have c o l l e c t e d and a n a l y s e d a l a r g e amount o f i n f o r m a t i o n about road costs on the r o u t e s , and t h i s i s now in a form s u i t a b l e f o r use in the model. The c o l l e c t i o n o f r a i l data i s n o t so f a r advanced, but we expect to complete t h i s p a r t o f t h e s t a g e i n the next month o r t w o . The f i n a l r e s u l t s of t h i s s t a g e a r e l i k e l y to be a v a i l a b l e at the end of t h i s y e a r . The next s t a g e o f the model w i l l be to extend the methods u s e d i n the examination o f these two groups to cover a l l the major t r u n k r o u t e s i n . t h e countryj we expect t h a t completion o f t h i s work w i l l take some c o n s i d e r a b l e time. I t w i l l b e p u b l i s h e d at a p p r o p r i a t e s t a g e s .
2. Our r e s e a r c h a l s o s e t s out to d i s c o v e r why c o n s i g n o r s choose p a r t i c u l a r forms of t r a n s p o r t ( t h e " s h i p p e r s
1
s u r v e y " ) . P r e l i m i n a r y results show t h a t t h e r e i s w i d e s p r e a d i g n o r a n c e among c o n s i g n o r s of f r e i g h t about r a i l c h a r g e s . More than h a l f of the f i r m s i n the sample we have taken who a r e now f o r w a r d i n g t h e i r goods by r o a d clearly had l i t t l e knowledge o f r a i l f r e i g h t c h a r g e s . F u r t h e r m o r e , the r a i l w a y image i n r e s p e c t o f speed and r e l i a b i l i t y of s e r v i c e stems predominantly from p r e - f r e i g h t l i n e r d a y s . I t simply cannot be a s s e r t e d t h a t normal commercial f o r c e s , c o u p l e d w i t h w e l l ­ informed t r a n s p o r t management, w i l l i n themselves l e a d t o the economic a l l o c a t i o n o f t r a f f i c . Some a d d i t i o n a l s t i m u l u s i s c l e a r l y n e c e s s a r y ,
most
3. The r e s e a r c h i s a l s o l i k e l y to show t h a t s e v e r a l f a c t o r s such as the cost of a c c i d e n t s can on b a l a n c e be e x p e c t e d to emphasise the advantage of c a r r i a g e by r a i l r a t h e r than by r o a d .
4. ^ When the f i n a l r e s u l t s of our p r e s e n t r e s e a r c h become a v a i l a b l e they w i l l be v a l u a b l e in p r o v i d i n g c o s t i n f o r m a t i o n which w i l l h e l p to g u i d e the l i c e n s i n g a u t h o r i t i e s i n e x e r c i s i n g their powers to g r a n t o r r e f u s e l i c e n c e s . Por example, the research w i l l show on which p a r t i c u l a r r o u t e s d i v e r s i o n o f t r a f f i c to r a i l i s l i k e l y to be most b e n e f i c i a l b o t h to the c o n s i g n o r and to the n a t i o n a l i n t e r e s t . T h i s i n f o r m a t i o n w i l l h e l p l i c e n s i n g a u t h o r i t i e s to d e c i d e whether i n m a r g i n a l c a s e s a p p l i c a t i o n s f o r quantity l i c e n c e s should be g r a n t e d or n o t .
A .

5.
I t i s not n e c e s s a r y to a w a i t the completion of the r e s e a r c h before r e v i s i n g the l i c e n s i n g system in the manner I p r o p o s e .
One does not need to know the e x a c t r e l a t i v e c o s t s of c a r r y i n g t r a f f i c by r o a d or r a i l to j u s t i f y u s i n g the l i c e n s i n g system to speed up the t r a n s f e r of a c o m p a r a t i v e l y small amount of t r a f f i c from road to r a i l , 15m. tons out of a t o t a l o f 1,500m. t o n s carried by r o a d , w h i c h i s e x p e c t e d by the r a i l w a y s to make a contribution of £ 6 m .
to the r e d u c t i o n of the o v e r a l l d e f i c i t . \7e know that t h e r e i s spare c a p a c i t y on the r a i l w a y s t h a t c o u l d p r o f i t a b l y be used to c a r r y t h i s t r a f f i c . I a c c e p t t h a t i t would be f u t i l e to o b t a i n a r e d u c t i o n in the d e f i c i t at the c o s t of a h i g h e r burden on i n d u s t r i a l c o s t s g e n e r a l l y . But t h e r e i s no r i s k of t h i s . My p r o p o s a l s w i l l ensure t h a t no t r a f f i c w i l l be switched from r o a d to r a i l u n l e s s i t i s c l e a r l y e s t a b l i s h e d in each i n d i v i d u a l case t h a t the r a i l c o s t s would be no h i g h e r than the road c o s t s .

ANNEX B
The. "present system of c a r r i e r l i c e n s i n g
The present system of c a r r i e r s ' l i c e n s i n g i s s e t out i n
part IV of the Road T r a f f i c A c t , 1960 and i s l a r g e l y a
continuation of that i n t r o d u c e d i n the Road and R a i l T r a f f i c
Act, 1933. With c e r t a i n minor e x c e p t i o n s a l l goods v e h i c l e s u s e d either f o r h i r e or reward ( p u b l i c h a u l a g e ) or f o r c a r r y i n g goods in connection w i t h the o w n e r ' s t r a d e o r b u s i n e s s (own ,..c count operation) must be a u t h o r i s e d under a c a r r i e r ' s l i c e n c e .
2. Licences v..re i s s u e d b y t h e L i c e n s i n g a u t h o r i t i e s . I a p p o i n t o n e A u t h o r i t y f o r each o f the t w e l v e
T r a f f i c Areas i n G r e a t B r i t a i n , and a c t s i n d e p e n d e n t l y i n g r a n t i n g or r e f u s i n g l i c e n c e s , he i s s u p p o r t e d b y a s m a l l s t a f f o f executive and c l e r i c a l o f f i c e r s , who a s s i s t i n p r e p a r i n g c a s e s for d e c i s i o n and i n k e e p i n g r e c o r d s of o p e r a t o r s , b u t the a c t u a l decision on a l i c e n c e a p p l i c a t i o n i s made by the L i c e n s i n g
Authority p e r s o n a l l y or h i s a p p o i n t e d deputy.
3. Own-account o p e r a t o r s a r e e n t i t l e d to a l i c e n c e on demand, unless t h e i r p r e v i o u s r e c o r d as an o p e r a t o r i s such as t o d i s q u a l i f y them from h o l d i n g f u r t h e r l i c e n c e s . T h i s t y p e o f licence ( t h e ' C l i c e n c e ) i s b y f a r the most common- about
1.3m. out of the 1.5m. goods v e h i c l e s on the r o a d o p e r a t e under i t .
A, P u b l i c h a u l i e r s o p e r a t e under an
f
A r
l i c e n c e ( f o r p u b l i c
haulage only) or sometimes a ' B ' l i c e n c e (which e n t i t l e s an operator t o undertake b o t h p u b l i c h a u l a g e and own-account operation) . A p p l i c a t i o n s f o r these l i c e n c e s a r e p u b l i s h e d i n a weekly l i s t by the L i c e n s i n g A u t h o r i t y , and a r e open to o b j e c t i o n s from e s t a b l i s h e d h a u l i e r s and from the r a i l w a y s on the grounds that s u i t a b l e t r a n s p o r t s e r v i c e s a l r e a d y e x i s t to do the work which the a p p l i c a n t wishes t o u n d e r t a k e . Where' o b j e c t i o n s are
made, the L i c e n s i n g A u t h o r i t y w i l l u s u a l l y p r e s i d e at a p u b l i c
\hearing, at which the o b j e c t o r s attempt t o prove t h e i r o b j e c t i o n ^ and the a p p l i c a n t b r i n g s e v i d e n c e from p r o s p e c t i v e customers to
;show the need f o r h i s s e r v i c e s .
5. I f the L i c e n s i n g A u t h o r i t y g r a n t s an
,
A
I
l i c e n c e , i t s use i s r e s t r i c t e d mainly t o the type of work which the a p p l i c a n t s t a t e d
he intended to u n d e r t a k e . A ' B ' l i c e n c e i s u s u a l l y f u r t h e r r e s t r i c t e d by s p e c i f i c c o n d i t i o n s l a y i n g down p r e c i s e l y what the operator may or may n o t do under i t s a u t h o r i t y . B r e a c h e s o f conditions may l e a d t o w i t h d r a w a l o f the l i c e n c e .
6. ' A ' l i c e n c e s n o r m a l l y l a s t f o r 5 y e a r s , and ' B ' f o r 2 . The holder may have t o undergo the same p r o c e s s of p r o o f of need either on renewal or whenever he w i s h e s to i n c r e a s e t h e s i z e of his f l e e t .
7. L i c e n s i n g A u t h o r i t i e s a l s o have c e r t a i n l i m i t e d powers t o revoke or suspend a c a r r i e r
1 s l i c e n c e ( o f any k i n d ) i n t h e event of serious or r e p e a t e d o f f e n c e s a g a i n s t the l a w g o v e r n i n g v e h i c l e maintenance and observance of the l i m i t s on d r i v e r s ' h o u r s . They are^ served by s t a f f s of e n g i n e e r s and t e c h n i c a l l y q u a l i f i e d vehicle examiners who examine v e h i c l e s and r e p o r t cases of b a d maintenance both f o r p o s s i b l e a c t i o n a g a i n s t t h e c a r r i e r ' s l i c e n c e and f o r p r o s e c u t i o n i n the c o u r t s . S i m i l a r l y , t h e i r s t a f f of t r a f f i c examiners i n v e s t i g a t e b r e a c h e s of t h e l a w on hours of d r i v i n g and check observance of l i c e n c e c o n d i t i o n s .

8. The system i s i n p r a c t i c e f a r l e s s r e s t r i c t i v e than might
appear from t h i s b r i e f d e s c r i p t i o n . Only the 2 0 0 , 0 0 0 p u b l i c haulage v e h i c l e s are s u b j e c t to any kind of q u a n t i t y c o n t r o l , and i t i s not d i f f i c u l t f o r an a p p l i c a n t to produce customers who w i l l say they w i s h to use h i s s e r v i c e s . This i s f r e q u e n t l y s u f f i c i e n t to secure the g r a n t of a l i c e n c e , s i n c e the c r i t e r i o n of the adequacy of e x i s t i n g s e r v i c e s was r e l e g a t e d t o a secondary
place by an amendment to the l a w i n 1953 which p r o v i d e d t h a t the needs of customers s h o u l d be paramount i n the c o n s i d e r a t i o n of a p p l i c a t i o n s . M o r e o v e r , many o p e r a t o r s g e t what are v i r t u a l l y public h a u l i e r l i c e n c e s under an arrangement which g i v e s them an automatic r i g h t t o a l i c e n c e i f they
cm
produce a t w e l v e months' exclusive c o n t r a c t with a p r o s p e c t i v e customer. There a r e thus few r e a l r e s t r i c t i o n s on e n t r y to the i n d u s t r y t o a man who i s determined to g e t i n , and uny p r o t e c t i o n which the system may once have g i v e n t o the r a i l w a y s has v i r t u a l l y d i s a p p e a r e d . I t i s clear that the system not o n l y no l o n g e r a c h i e v e s many of i t s o b j e c t i v e s , b u t t h a t these o b j e c t i v e s themselves need to b e r e - a p p r a i s e d i n the l i g h t of modern n e e d s .

A1THEX C
StatjLs/cAcal, Cpjaparisoii^ ol e x i s t i n g and propos-yd
sjs. t e"m" of" ^ a r r J ^ r ^ f f c T n s ^ i j ^
(1.965.1
PRESENT SYSTEM
Public h a u l a g e v e h i c l e s r e q u i r i n g a c a r r i e r
1
s l i c e n c e and s u b j e c t to quantity c o n t r o l
Other goods v e h i c l e s ( m a i n l y "own­ account") r e q u i r i n g a c a r r i e r ' s l i c e n c e but not s u b j e c t to q u a n t i t y c o n t r o l
Total s u b j e c t to c a r r i e r l i c e n s i n g
180,000 v e h i c l e s
1,360,000 v e h i c l e s
1,540,000 v e h i c l e s
11217/ SYSTEM
Subject to q u a l i t y l i c e n s i n g o n l y s ­
( i ) goods v e h i c l e s
5 tons u . w .
( i i ) goods v e h i c l e s o v e r 5 tons u . w . engaged in s h o r t - h a u l t r a f f i c , not in c o m p e t i t i o n
0 570,000 v e h i c l e s
Subject to q u a l i t y and q u a n t i t y l i c e n s i n g : -
Goods v e h i c l e s over 5 tons u . w . engaged in l o n g - h a u l t r a f f i c and c e r t a i n s h o r t ­ haul t r a f f i c in c o m p e t i t i o n w i t h r a i l s ­
( i ) p u b l i c h a u l a g e ( e s t i m a t e d ) 40
( i i ) own-account ( e s t i m a t e d ) 30 70,000 v e h i c l e s
640,000 v e h i c l e s
^ J ^ J ^ i Q M CARRIER LICENSING ALTOGETHER: 7 900,000 v e h i c l e s

ANNEX D
Report on an i n t e r - d e p a r t m e n t a l meeting of o f f i c i a l s on 27th June
1. I was asked at the l a s t meeting of the Economic P o l i c y
Committee to a r r a n g e f o r f u r t h e r i n t e r - d e p a r t m e n t a l c o n s i d e r a t i o n of c e r t a i n f e a t u r e s of my p r o p o s a l s and to r e p o r t the outcome t o the F i r s t S e c r e t a r y of S t a t e b e f o r e the matter was r e f e r r e d t o the C a b i n e t . D i s c u s s i o n s have now been h e l d between departments on these f e a t u r e s as w e l l as on f u r t h e r p o i n t s r a i s e d by the
Parliamentary b e c r e t a r y , Department of Economic A f f a i r s , i n a subsequent l e t t e r to me. Their outcome was as f o l l o w s :
Quality L i c e n s i n g
2. There a r e now no important o u t s t a n d i n g p o i n t s o f d i f f e r e n c e between Departments on the p r o p o s a l s f o r a q u a l i t y l i c e n s i n g system. On the two s p e c i f i c p o i n t s r a i s e d at the Economic
Policy Committee m e e t i n g , i t was concluded t h a t : ­
( a ) i n the l i g h t of l i c e n s i n g a u t h o r i t i e s ' e x p e r i e n c e i n t h i s country and of the known e f f e c t i v e n e s s of the q u a l i t y l i c e n s i n g systems now o p e r a t i n g i n Yvest Germany and P r a n c e , i t would be p o s s i b l e t o e n v i s a g e a p p l i c a n t s b e i n g examined as t o t h e i r f i n a n c i a l r e s o u r c e s and b u s i n e s s p r o s p e c t s , a l t h o u g h the B o a r d of T r a d e a r e s t i l l d o u b t f u l whether such a p r o c e s s would be s u c c e s s f u l ; and the S c o t t i s h O f f i c e thought t h a t a d e t a i l e d examination of t h i s k i n d w o u l d i n v o l v e the
Government i n an unprecedented t y p e of i n v e s t i g a t i o n ;
( b ) a p a r t from i t s manpower i m p l i c a t i o n s , a system under which l i c e n c e s were g i v e n out on demand and subsequent enforcement was v e r y tough would be u n d e s i r a b l e on s a f e t y g r o u n d s .
3. A p o s s i b l e a l t e r n a t i v e system of q u a l i t y c o n t r o l was suggested, under which goods v e h i c l e s would be examined at s i x ­ monthly r a t h e r than annual i n t e r v a l s and l i c e n c e s i s s u e d a u t o m a t i c a l l y . The B o a r d of Trade saw advantage i n t h i s c o u r s e , but i t was p o i n t e d out t h a t i t would be e x t r e m e l y e x p e n s i v e .
Quantity L i c e n s i n g
k. O f f i c i a l s were a g r e e d on t h r e e of the p o i n t s o u t s t a n d i n g from the E, N. Committee meeting. They w e r e : ­
( a ) The q u e s t i o n of compensation f o r e x i s t i n g own-account o p e r a t o r s who were r e f u s e d l i c e n c e s . I t was c o n s i d e r e d that no c a s e c o u l d be made f o r such compensation, p r o v i d e d that s u i t a b l e t r a n s i t i o n a l arrangements were worked out and t h a t l i c e n s i n g a u t h o r i t i e s i n c o n s i d e r i n g a p p l i c a t i o n s t o o k account of the d i f f i c u l t i e s which might a r i s e i n a very few c a s e s .
( b ) The p o s s i b i l i t y of an indemnity on the p a r t of the r a i l w a y s a g a i n s t f a i l u r e s i n p r o m i s e d s e r v i c e s . I t was a c c e p t e d t h a t t h i s was i m p r a c t i c a b l e and t h a t the b e s t s a f e g u a r d was t h a t r a i l o b j e c t i o n s a g a i n s t i s s u e of c a r r i e r l i c e n c e s would not s u c c e e d i f the r a i l w a y s proved u n r e l i a b l e . r O W F i r i F N T I A I

( c ) The p r o p o s a l t o a l l o w an o p e r a t o r whose a p p l i c a t i o n was r e f u s e d to buy a l i c e n c e . I t was f e l t t h a t i f the p r i c e of such a l i c e n c e was l o w the whole purpose of the l i c e n s i n g system would be d e f e a t e d , while i f the p r i c e were h i g h enough t o a v o i d t h i s d a n g e r , the d e v i c e would be c r i t i c i s e d as w o r t h l e s s . Moreover to be e f f e c t i v e such a scheme w o u l d have to be accompanied by an e l a b o r a t e i d e n t i f i c a t i o n p r o c e d u r e .
5,
On the remaining p o i n t r a i s e d at the S . N . Committee, the S c o t t i s h O f f i c e and the B o a r d of Trade were u n a b l e to a g r e e that the p r o p o s a l s would not i n f l i c t s e r i o u s damage upon i n d u s t r y in S c o t l a n d and the o t h e r development a r e a s . These two departments c o n s i d e r e d t h a t even i f l i c e n s i n g a u t h o r i t i e s were given s p e c i a l d i r e c t i o n s about d e a l i n g with r o a d l i c e n c e a p p l i c a t i o n s i n these a r e a s , and d e s p i t e the s a f e g u a r d that licences would not be imposed u n l e s s r a i l p r o v i d e d a comparable s e r v i c e , i n d u s t r i a l i s t s would s t i l l be d i s c o u r a g e d from investment i n these a r e a s by doubts about t h e i r f u t u r e freedom to run t h e i r own t r a n s p o r t .
6. The meeting a l s o d i s c u s s e d c e r t a i n p o i n t s r a i s e d by the
Parliamentary S e c r e t a r y of t h e Department of Economic A f f a i r s .
These p o i n t s mainly concerned the p r a c t i c a l problems which would face l i c e n s i n g a u t h o r i t i e s i n the a d m i n i s t r a t i o n of the new quantity s y s t e m , and the d i f f i c u l t y of a s s e s s i n g and d e c i d i n g upon the needs of manufacturers t o o p e r a t e t h e i r own l o r r i e s .
O f f i c i a l s spent some time i n d i s c u s s i n g v a r i o u s a s p e c t s of t h e s e problems but were u n a b l e to a g r e e upon a common v i e w . Most departments were concerned about the degree of i n q u i r y i n t o own account o p e r a t o r s
1
c o s t s which would a p p a r e n t l y b e n e c e s s a r y i n considering a p p l i c a t i o n s f o r l i c e n c e s and about the d i f f i c u l t y of g i v i n g due w e i g h t t o customers' p r e f e r e n c e s about methods of transport w i t h o u t undermining the whole s y s t e m . I n g e n e r a l ,
Departments o t h e r than the M i n i s t r y of T r a n s p o r t - f e l t t h a t , w h i l e some doubts on p o i n t s of d e t a i l might e v e n t u a l l y b e r e s o l v e d , the proposals f o r q u a n t i t y l i c e n s i n g e s p e c i a l l y as a p p l i e d to own­ account t r a n s p o r t would have s e r i o u s e f f e c t s on i n d u s t r i a l c o s t s and e f f i c i e n c y . At the same time i t was r e c o g n i s e d that to a p p l y the system to p u b l i c h a u l i e r s a l o n e would be i n e f f e c t u a l .
M i n i s t r y o f T r a n s p o r t
Uth J u l y , 196"