Could recent developments at the OFT mean that a UK taxi tsar and 'Offtaxi' are a (small) step closer?

In 1998, Dr John Fingleton, an economist at Trinity College, Dublin, co-authored a lengthy report on the city’s taxi market which condemned the policy of restricted numbers then in operation and was also critical of the decision-making process with regard to taxi licensing.

A later court case led to the derestriction of taxi numbers in Dublin, and this was welcomed by Dr Fingleton in a 2002 co-authored article in the Irish Independent, where he said that the change had benefited consumers, increased employment in the industry and meant that cosy (journeymen) drivers were better off as they no longer had to pay rent on a taxi plate.  The article also recommended a radical overhaul of the system more generally, and in particular the appointment of a national taxi regulator ('tsar') which would end political interference in the licensing process and also encourage the pooling of trade expertise and knowledge.

By this time Dr Fingleton had been appointed Chairperson of Ireland’s Competition Authority, which is roughly equivalent to our own competition watchdog the Office of Fair Trading (OFT).

Of course, as we all know the OFT subsequently conducted a lengthy study of the UK taxi and PHV market, and in November 2003 it recommended that restricted taxi numbers in the UK should be ended.  While the Government stopped short of ordering local authorities to lift restricted numbers, it did ‘strongly encourage’ them to do so in its response to the OFT.

Back in Ireland, by the time of the OFT’s study and report the Irish Government had acted on Dr Fingleton’s recommendation and announced the establishment of an Office of National Taxi Regulator, to be responsible for things like setting fares and quality control in the trade.  Thus at Taxi Driver Online we thought that there might be some mention of this internationally important development in the OFT’s report, but in fact the document did not mention the issue at all.  Our own perhaps rather cynical explanation of this was that the omission of the issue was politically inspired, since the Government clearly preferred to tinker with existing UK taxi licensing law rather than radically overhaul it, because the latter would have required new legislation, which would have eaten into scarce Parliamentary time for passing new laws.

However, earlier in July this year it was announced that Dr Fingleton would take over as Chief Executive of the OFT later this year on the retirement of the current incumbent Sir John Vickers.

When the Government responded to the OFT’s report it said that they would both look again at restricted numbers in 2007 to “monitor progress towards the lifting of controls”.  Thus, since Dr Fingleton will be at the OFT helm by that time, this fact will provide little succour to supporters of restricted taxi numbers.

As regards the possibility of a taxi regulator, given Dr Fingleton’s advocacy of this in Ireland it would be interesting to hear any views he has regarding the OFT’s non-mention of the issue in its 2003 report, when he takes office in the autumn.

However, with over 400 UK local authorities involved in taxi licensing, and the obvious mishmash of rules, standards and enforcement procedures, the need for a national taxi regulator seems self-evident.  While of course the OFT’s report cannot be rewritten, perhaps Mr Fingleton’s presence at the OFT may be the first step towards a taxi tsar and ‘Offtaxi’ for the UK.

Some words of wisdom from John Fingleton:

Before derestriction of Dublin taxi numbers:

The political economy analysis of regulation recognises the importance of economic vested interests in determining political outcomes. One solution is to have a regulator that is independent from the political process (but answerable to politicians). Given this independence combined with transparency, the regulator can implement measures that are good for society. Moreover, the industry has less incentive to lobby because it knows that it is less likely to be successful. Politicians quite properly appoint the regulator, and insist on transparency of process but they are removed from the day-to-day decisions.

The taxi market exemplifies these political economy arguments. The suppliers in the market are a relatively small, focused and highly vocal group whereas consumers comprise a large and diffuse population. A system of regulation based on decision-making by elected representatives is likely to give rise to a large amount of lobbying and inevitably decisions that reflect the interests of taxi suppliers. Thus good regulation necessitates political independence and transparency

After derestriction of Dublin taxi numbers:

...there are several problems with the current regulatory process. It is highly fragmented. The many agencies responsible include local authorities, the Garda, the NCTS, and the Department of the Environment. Elected representatives vote on fare levels. There is a history of regulatory capture, whereby the system favours the interests of suppliers of taxi services over consumers. 

These problems can best be addressed by handing responsibility for regulating all aspects of the taxi market to a single politically-independent agency, preferably one with responsibility for regulating transport generally. A single agency could better co-ordinate and manage fare regulation, setting quality standards, awarding licences, and enforcing regulations. It would be more accountable to both consumers and suppliers because it could not blame another agency for its failings.

Removing direct political involvement would increase transparency and enable appropriate technical expertise in setting fares and standards. As in the telecommunications, electricity and aviation sectors, such a regulator would be accountable politically in implementing policy and legally for its decisions.

On 'deregulation':

Calling this deregulation is misleading. Regulatory reform is a better description, because only one element, entry, is liberalised, while fare controls are maintained and quality standards improved.

Controls on fares protect passengers from exploitation. Enforcement of quality standards and fare controls is essential if the benefits of new entry and competition are to be delivered in full.

Scare stories abound regarding disastrous deregulation abroad, where controls on fares and quality standards were abandoned. On the contrary, unrestricted entry works well in the London market where regulation focuses on fares and quality standards.

Click here to read views on this topic or post your own