THE COLLIERY GUARDIAN

AND

JOURNAL OF THE COAL AND IRON TRADES.

VoL- CIX. '	FRIDAY, APRIL 9, 1915.	No. 2832.

Retail Coal Prices.

REPORT OF DEPARTMENTAL COMMITTEE.

The report has been issued of the Committee appointed
by the Board of Trade to enquire into the causes of the
present rise in the retail price of coal sold for domestic
use. [Cd. 7866.]

The Committee consisted originally of the following,
viz., Mr. Vaughan Nash, C.V.O., C.B. (chairman), Prof.
W. J. Ashley, Ph.D., Mr. William Crooks, M.P., Mr.
John James Dent, Mr. Alfred William Flux, and Mr.
Stanley Machin, and the terms of reference were “ to
enquire into the causes of the present rise in the retail
price of coal sold for domestic use, especially to the
poorer classes of consumers in London and other
centres.” Mr. James Boyton, M.P., and Mr. James
Rowlands, M.P., were subsequently added to the
Committee.

The Committee have held 15 meetings. In addition
to obtaining information from other sources, they have
heard evidence from 33 witnesses, including representa-
tives of the Government Departments concerned, the
railway companies, the London coal merchants, colliery
owners, co-operative societies, the gas companies, and
the London trolley trade. While within the limits of
time at their disposal the Committee have taken account
of prices generally throughout the country, attention has
been concentrated mainly on London. With some
exceptions, the North and the Midlands have not suffered
from any very remarkable rise in the price of household
coal. In the southern counties, and apart from the
additional charges due to the railway rates on a longer
haul, prices are governed so largely by London condi-
tions that it has been unnecessary for the purposes of
the enquiry to deal with them separately. Speaking
generally, the Committee have no doubt that the causes
which have operated to raise prices in London are also
those mainly responsible for the increases in the southern
counties and elsewhere. There may, of course, be local
reasons for a quite unusual rise, but it would have been
impossible for the Committee to consider in detail
sporadic variations without . unduly prolonging their
enquiry. The Committee feel that their enquiry has
been conducted under one considerable difficulty* They
have been forced, at various points, to rely on the esti-
mates given by witnesses from their personal experience,
where it would have been preferable to use the results
of statistical enquiry. But they do not think that any
corrections in particular figures which might be made
if such results were available would materially affect the
broad general conclusions at which they have arrived.

The text of the report is as follows :—•

The Rise in Prices.

The amount and dates of the increases in London appear
to be as follows if or a typical coal of good quality (“ Best
Derbyshire ”) :—On June 16, 1914, the lowest summer price
was fixed, 26s. per ton. On September 26 the price rose to
27s.; on November 21 to 28s.; and on December 12 to 29s.
On December 19, January 7, January 28, and January 29
prices rose to the extent of Is. on-each date, making the
price on January 29 33s. per ton. On February 17 it rose
2s., to 35s. per ton. Tt may be noted that in the winter of
1913-14 the price of this' coal rose from 26s. to 27s. per ton
on September 6, 1913, and to 28s. on December 30. In the
winter of 1912-13 it rose on September 14, 1912, from 25s.
to 27 s.; this price was maintained until, on May 18, 1913,
the usual summer reduction occurred. The prices for other
descriptions of house coal during the past winter have moved
in almost exact correspondence with those specified above,
with one important exception. The prices of the lower
qualities were steadily levelled up until on January 29 the
price for all coal below “ Best Derbyshire ” was 32s., and
on February 20 34s. per ton. The difference in price between
“ Best Derbyshire ” and “ Stove nuts ” in June 1914 was
6s. per ton; on December 12 4s. 6d. per ton; on February 20
Is. per ton. To put it in another way, the rise from summer
prices was 9s. per ton for good, coal, and 14s. per ton for
the cheapest quality; the increase above normal winter.prices
was 7s. per ton for good coal, and Ils. for the cheapest.

It may be as well, however, to . explain here that this
phenomenon is not unusual. It has been represented to us

that in times of high prices the cheaper kinds of coal tend to
rise in price more than the better qualities. We have also
reason to believe that recently large quantities of inferior
coal which in ordinary times would find no market in London
have been supplied to the consumer under one designation
or another at very profitable prices.

We have had it given in evidence that those who are com-
pelled to buy their coal in small quantities are anxious to
secure the best quality. They cannot without serious incon-
venience use the inferior qualities, because the poor man’s
fire has (to serve all purposes, and, above all, it must light
quickly. One witness gave evidence to the effect that the
coal now being sold from trolleys is worse in quality than
usual, as well as higher in price; but the evidence of other
witnesses, including the representative of a leading London
firm doing a trolley business, was to the opposite, effect.
Moreover, a general rise in prices weighs more heavily on
the poor, and causes more suffering, because the greater cost
of distribution by trolley in small quantities is sufficient by
itself to keep the price of such coal above the general level.
Up to November 23 last, the trolley price of a high-class coal
sold by a leading firm was Is. 4d. per cwt., or at the rate
of 26s. 8d. per ton. On November 24 it -rose to Is. 5d. per
cwt., or 28s. 4d. per ton; on December 8 to Is. 6d. per cwt.,
or 30s. a ton; on December 19 to Is. 7d. per cwt., or
31s. 8d. per ton; on January 5 to Is. 8d. per cwt., or
33s. 4d. per ton; on January 26 to Is. 9d. per cwt., or 35s.
per ton; on February 1 to Is. lOd. per cwt., or 36s. 8d. per
ton; and on February 22 to Is. lid. per cwt., or 38s. 4d.
per ton. In certain cases even higher prices were paid, as
is proved, by the information which we have obtained- from
University settlements and similar institutions working in
poor districts.

. Deficiency of Supply.

Reverting to the main question before us, we have to
report that, in our opinion, the initial cause of the increase
of recent prices, ranging from 7s. to Ils. per ton, above the
winter prices of 1913-14 was a deficiency of supply as com-
pared with demand; and, in particular, a deficiency of supply
in London. The evidence before us showed that in August
there was a lairge and unusual demand for coal, which con-
siderably depleted the stocks accumulated by merchants, in
accordance with usual practice, to meet the winter demand.
It was stated by the merchants’ representatives that in the
middle of December these stocks had been reduced almost to
vanishing point; and although this statement is difficult to
reconcile fully with the returns furnished to the Board of
Trade by the merchants themselves,, the stocks were no
doubt below the normal. It was stated-, further, that at the
same time the railways were bringing up less than the usual
quantity for household consumption, and the apprehension
of a coal famine caused orders to pour in from consumers
who had any storage accommodation.

The effect of a temporary failure in the supply of any
commodity is normally that the price rises, and rises without
relation to the cost of production and distribution. In
theory at least such an increase, though apparently arbi-
trary, may be expected to perform three functions : it acts
as a danger signal, warning consumers to be careful of
their . stores; it ensures the distribution of the available
supplies to those who are willing to pay most, i.e., pre-
sumably to those who have the greatest need; and it auto-
matically attracts further supplies, thus providing its own
remedy. This system may work satisfactorily in normal
times, but the plain fact is that it has broken down m the
extraordinary circumstances of the present winter, so far as
household coal is concerned. It has no doubt enforced
economy among consumers, but it has not ensured distribu-
tion where supply Was most needed, because the poor could
not afford to pay the prices demanded; and it has not
attracted additional supplies with enough speed to prevent
much inconvenience and suffering, because either normal
supplies were not available, or they could not be brought up.

Sliding Scale Contracts and “ Rings.”

The mechanism by which prices are fixed and the sum
paid by the purchaser is divided between the merchant and
the colliery owner presents one curious feature peculiar to
London. Some of the best kinds of household coal coming
from the Midlands (Derbyshire and Nottinghamshire) are
largely sold by the collieries .to the London merchants on
what is. known as a sliding scale contract. A pit head price
is fixed corresponding to a fixed retail price in London; the

colliery owner never gets less than the fixed pit head price,
but when the retail price in London rises above that men-
tioned in the contract, he receives half the increase. For
instance, a contract is made at 10s. 9d. pit head price,
corresponding to a retail price of 25s. If the latter falls to
24s., the colliery owner still receives his 10s. 9d. per ton; but
he will receive Ils. 3d. if it rises to 26s., Ils. 9d. if it rises
to 27s., and so on. The colliery owner has, during the past
winter, automatically received 4s. 6d. per ton out of the rise
of 9s. from the summer price of coals sold under this kind
of contract. It is obvious that this arrangement gives coal
owners and merchants a common interest in high prices,
while there is no sharing of the loss if prices are low. The
merchant is not assisted to reduce prices, to the consumer
when supplies are abundant by any reduction in the price he
pays to the colliery for his contract coal. The arrangement
has, moreover, an important effect on the amount by which
London prices must be raised to recoup either colliery
owner or merchant for an increase in his costs. If they
rise 6d. per ton, -the consumer must be charged Is. per ton
extra; for the party whose costs have risen receives only
half the increased price. Such a system appears to us
indefensible.

We have come to the conclusion on the evidence before us
that the high prices of household coal are not attributable
to /the existence of definitely constituted “ rings ” or close
corporations among either coal merchants or colliery owners;
but, as in some other trades, there are evidently opportuni-
ties of conference among those chiefly concerned, which do
in effect commonly lead to concerted action with respect to
prices. In the case of prices under the sliding scale system
of contract (which a leading witness has told us is practi-
cally universal for the best kinds of household coal in
London), such conference appears from the evidence to work
out in practice on the London Coal Exchange as follows :—
A few leading firms decide upon increased prices, which,
without more ado, become the “ public prices ” of the day,
and are advertised next day in the newspapers. Sliding
scale contracts are made on the basis that the price to be
paid to the colliery owner varies, not with the retail price
actually received by the merchant to whom he supplies the
coal, but with these “ public prices,” as advertised. The
pit head price rises 6d. per ton on each Is. advance of the
“public price,” for all buyers alike; and does not fall for
any buyer until the “ public price ” falls. Thus, without
any system of penalties on undercutting, the leading mer-
chants in fixing prices are secured pro tanto against competi-
tion by the fact that any reduction made by’ an outside
competitor in his retail price gives him no corresponding
reduction in the price which he pays to the colliery owner
under the sliding scale contract.

Reduction in Output.

We have stated that in our opinion the initial cause of
the increased prices was a deficiency of supply; but our
enquiry would clearly be incomplete without some investi-
gation of the causes of this deficiency. The chief is the
general reduction of output, due mainly to the large number
of miners who have joined the Colours, estimated on good
authority at 130,000.

The reduction during February, as shown in the returns
made to the Board of Trade, was about 12 per cent, of the
output of February 1914. Some of the evidence given before
the Committee indicated that the reduction in January had
been greater than this percentage, but it appears doubtful
whether it was so large in earlier months. The output, in
and previous to November last probably fell off as much
owing to the reduced industrial and export demand for coal
as to the lack of capacity for production. In any event, the
reduced output would not by 'itself account for the abnormal
prices in London and some other centres of population; for
there had been, for a time at least, a decrease of consump-
tion, and in most centres of the North the rise above normal
winter prices has been a relatively small one. Even after
allowing for exceptional local causes, such as the powerful
co-operative organisations of consumers in some of the
northern towns, we do not think that the great difference in
favour of some large towns ’as compared with others could
have appeared if the only cause of the increase of prices had
been so obviously universal as a general reduction of output..

The London Market.

The shortage of supplies actually available or “ within
sight ” for London (and the same remark is equally appli-
cable to other centres, and perhaps even more to many .towns
on the southern railways) cannot be' measured by the
shortage of output at the collieries. During November and
December last, the scarcity of shipping and consequent rise-