Opinion:  The Office of Fair Trading's recommendation to encourage price competition in the taxi trade will make an unsatisfactory situation even worse.

While the trade's reaction to the OFT's report has focused on its recommendation to remove quantity controls on taxi licenses, a less discussed issue is its recommendation to encourage price competition in the market, which in the trade's terms might be more usually described as fare discounting (at least as regards taxis which generally charge the local authority set tariffs).

While all trades and professions obviously like to raise their prices where this is economically viable, the situation in the taxi trade is obviously different insofar as the fares chargeable are generally limited to the regulated tariffs.  However, while control of tariffs obviously stops upward pressure on fares, by the same token it arguably stops downward pressure as well, irrespective of whether drivers can legally charge anything below the set maximum.  This lack of downward pressure on fares is arguably because the set tariffs generally become the accepted norm - fares are effectively fixed, despite the fact that drivers can offer discounts if they want.

Indeed, we know that discounting is generally frowned upon in the trade.  For example, last year a Blackpool newspaper reported telephoned death threats to an operator who was offering below-meter fares.  Slightly less unsatisfactorily, discounting often leads to trade resentment, not to mention bickering and abuse.

To that extent it is worrying that the OFT recommended that local authorities facilitate price competition in the market - this can only lead to greater conflict within the trade.  Indeed, Annexe D of the OFT's report pointed out that allowing customers to choose vehicles on the rank in Worcester (albeit in a different context) led to altercations between drivers.

As is often characteristic of the report, the OFT make several rather naive and contradictory comments in their commentary on fare regulation.  For example, they say that there is more scope for price competition in the hail market where there are lots of cruising taxis, whereas earlier they effectively dismissed that sector as 'take it or leave it' in terms of customer choice - do they really expect customers to hail a number of taxis before they get the price they want (or perhaps decide that they should have taken an earlier one), however many cruising cabs there are?  Similarly, they suggest that price competition at ranks can be facilitated by taxis displaying the fare for a standardised trip, but earlier had dismissed this technique as not conveying sufficient information to consumers to prevent them paying over the odds.

Likewise, the OFT implies that it should be made clear on tariff cards that taxis can compete on price.  Leaving aside the point that tariff cards are rarely looked at, it must be assumed that this information will come to the attention of the passenger after the commencement of the journey, in which case the driver is unlikely to offer a discount.  Thus what is the point of including this on the card?

Indeed, this kind of thing could fuel customer resentment if they are encouraged to think they should be getting discounts where in fact none are available.  Those of us who have worked in areas where discounting is widespread may have experienced resentment from customers who think that all taxis charge identical prices, and are miffed when they may be charged a higher fare than they expect.  The OFT's proposals can only lead to greater public confusion over taxi fares, with the consequent potential for more disputes and conflict.  These problems are likely to be worst late at night with the drunks who constitute a large proportion of taxi work.  Even where taxis charge similar prices there are already enough conflicts over fares without government encouraging it.  And fights at taxi ranks among these people waiting for taxis are likely to worsen if they are just not waiting for any taxi, but for a cheap taxi as well.

If the OFT consider that customers are paying over the odds then perhaps they should have addressed the reasons for this rather than trying to patch on this element of price competition to make up for deficiencies in other aspects of regulation.  For example, lax standards in many areas allow those with substandard vehicles and committing tax and benefit fraud to offer cheaper prices - more scrupulous elements of the trade cannot hope to compete.  If fares and quality are set at reasonable levels then there should be little scope for fare discounting.

Set rates are good for both the trade and consumers - they provide a level playing field for the trade and certainty for consumers.  By contrast, fare discounting leads to conflict and uncertainty, and less transparency for consumers.

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