Political fix  (14/4/2004)

Opinion: The Government's fudged and indecisive response to the OFT report will mean continued uncertainty and even more bureaucracy.

Words like 'fudge', 'horse-trading' and 'political fix' may be standard fare in the Westminster political lexicon, but this is not the kind of thing we normally hear spoken about when taxi matters are discussed nationally.  However, these terms are surely the most appropriate to use in relation to the Government's response to the Office of Fair Trading's recommendation to de-restrict taxi numbers throughout the UK.

For what is abundantly clear is that the Government does not like the concept of restricted numbers, and this was enunciated quite clearly in the Department of Trade and Industry's response to the OFT's recommendation.  It said: "The Government agrees that consumers should enjoy the benefits of competition in the taxi market and considers that it is detrimental to those seeking entry to a market if it is restricted. The Government is therefore strongly encouraging all those local authorities who still maintain quantity restrictions to remove restrictions as soon as possible."

So far, so OFT, but of course despite this condemnation the Government stopped short of actually ordering local authorities to lift quantity controls.  However, despite the triumphalist reaction of the Transport and General Workers' Union to the Government's response, it is also abundantly clear that this is not the end of the matter, and that there is a strong possibility of mandatory de-restriction in several years time.  Thus, after outlining how the survey process will be tightened up where local authorities want to continue to restrict taxi numbers, the Government said: "The Government itself will review in association with the OFT the extent of quantity controls in three years' time to monitor progress towards the lifting of controls. If necessary, the Government will then explore further options through the RRO or legislative process if insufficient progress has been made."

Thus the message seems to be that the Government doesn't like quantity controls, and is strongly encouraging local authorities to lift them, but if this does not happen within three years then the DTI will do the job for them.

Of course, this begs the question, why not de-limit now?  The most obvious answer is that the Government was not sufficiently confident that the necessary legislation would make it through Parliament, and instead concocted this fudge (presumably with some involvement of the vested interests in the trade and their representatives) which came as close to the OFT's recommendation as it possibly could without actually following it.  Thus opponents of de-restriction can claim victory (real or imagined), while at the same time the Government clearly intends making it as difficult as possible for authorities to maintain quantity controls, and this approach might be charachterised as 'de-limitation by stealth'.  In short, a fudge born of horse-trading, and a resultant political fix.

However, the important point is clearly not the Government's immediate decision to reject the OFT's recommendation, but how the process will pan out over the coming years.  Clearly, the T&G's 'OFT KO'd' response hardly squares with the Government's condemnation of quantity controls and the future threat of national de-restriction outlined in the DTI's statement.

Moreover, the Government's statement outlined proposals in relation to the quantity controls which will clearly make it substantially more difficult for restricting authorities to maintain their policies.  This will include a strengthened survey process to properly measure latent demand, a greater duty to consult and a requirement to justify restricted numbers in the Local Transport Plans that local authorities are required to submit to the Department for Transport, which are in turn related to Government grants - there will clearly be no hiding place for restricting authorities that currently do not undertake surveys, for example.

However, the proposed new process clearly raises many questions, and we must await the DfT's future guidance on the subject.  But one fundamental point is that the process does not envisage any immediate legislatory change, thus local authorities will be under no legal obligation to adhere to the DfT's new guidance.  Of course, the current unmet demand test in the legislation is fleshed out by case law, and to that extent the judiciary could use the DfT's guidance to amend the legal obligations of local authorities, but without new legislation only the courts can change the law, not the Government.

But even assuming that the courts fall into line and incorporate the DfT's new guidance into the law, this would first require a legal challenge if local authorities decide not to follow the guidance, and even then individual authorities could still choose to ignore the amended law, as some clearly choose to do currently, on the assumption that they won't be challenged in court.

Moreover, the proposed substantive provisions in relation to justifying quantity controls also raise a number of questions.  For example, the Government's statement envisages that benefits to the consumer can be used to justify quantity controls locally, so what is to stop local authorities using the usual misleading arguments about quality, fare levels and rank space, inter alia?  If these are deemed unacceptable then it is difficult to envisage any local matter that could be used to justify continued controls, and as a corollary it is difficult to think of any argument in their favour which wouldn't apply on a national basis.

But what is abundantly clear is that unless authorities de-limit, the current stultifying bureaucracy of the survey process will be made substantially worse under the Government's proposals, and that the uncertainty that consistently besets the trade (or at least the plate holder group therein) will continue for many years to come.

Reaction
Reaction to the Government's announcement has been predictable.  The T&G's Cab Trade News takes a triumphalist and self-congratulatory approach, and of course merely underlines the union's usual 'I'm alright, Jack (Dromey)' viewpoint.  As usual there is little in the way of substance beyond the usual anecdotes about drivers having to work longer hours under de-restriction (but no mention of drivers doing likewise in restricted areas to line the pockets of plate holders) and the 'greed' of those involved in the private hire tie-up at Watford Station, but no mention of the 'greed' (presumably) of the T&G involvement in the 'Unfree and Restricted Access' at Brighton Station.

While this usual 'do as I say, not as I do' attitude requires little further comment, there are a couple of interesting passages in the journal's 'Street Legal' column.  First: "The private hire trade has long resented what they see as special privileges accorded to the taxi trade".  Not to mention many taxi journeymen, of course, and others, whether in the trade or not, who recognise the injustice and inefficiency of restricting license numbers.   And the writer had clearly not read the opinion of the National Private Hire Association.  But the T&G's defence of 'special privileges' is baffling, particularly when it devotes a whole page on its website to the concept of equality, and the phraseology used is clearly a euphemism for 'inequality'.  But at least that comes close to an acknowledgement of the union's endorsement of inequality.

Secondly: "[The private hire trade] appear to want open competition with few standards to improve their trade and profit margins."  Quite what simplistic generalisations like this are intended to achieve is not clear, but a moment's thought demonstrates the superficial and hypocritical nature of such comments.  For a start, many in the private hire trade (not to mention taxi journeymen) merely want the same opportunity as taxi plate holders having reached or be willing to reach the same standards, and by rights this is no less nor indeed no more than they deserve.  Similarly, there is plenty of evidence of T&G bleating when any attempts to raise standards in the trade are mooted - indeed, taxi plate holders often seek to lower standards if this enables them to get more journeymen drivers into their vehicles.  As usual, as regards standards and taxi ownership, it's a case of 'do as I say, not as I do'.

Lastly: "The cab trade has argued that regulation, quality standards and mandatory fares has provided certainty and protection for passengers."  Ignoring the point about fares, who was arguing for no regulation and quality standards?  Answers by e-mail please, but it was certainly not the OFT.

True to form, these points seem to be made from a standpoint which knows little about the trade or the contents of the OFT report, and attempts to jumble a variety of issues that have nothing to do with restricting taxi numbers.  Likewise, the example of unrestricted London is conveniently ignored.

Equally fatuous are attempts to uncover who started the OFT ball rolling, for example in the National Private Hire Association's Private Hire and Taxi Monthly publication.  The issue is a 'no-brainer' for anyone with knowledge of the mainstream business and commercial world - it would be interesting to hear of any other trade and profession restricted in the manner of taxis.  Thus the question should be how the restrictions were implemented in the first place, not that anyone should question their validity.  Given that the Department of Transport had expressed reservations about restricted numbers when the legislation was passed twenty years ago, that the Government had proposed using a Regulatory Reform Order to de-restrict numbers nationally some time before the OFT investigation, and that the issue of quantity controls hardly came out of the blue at the local level, these attempts to apportion 'blame' for the OFT study and the consequences smack of some kind of witch hunt.

As usual on this issue, Mr Roland's so-called opinion column manages to say quite a lot without passing much in the way of comment at all, but he certainly demonstrates a significantly more intelligent and realistic standpoint compared to the T&G when he concludes that "[de-restriction] will become the norm", although he clearly disagrees with this.

Scotland
Of course, the Scottish Executive emphatically rejected the OFT's de-restriction recommendation, but this was hardly unexpected.  In this regard we can do no better than quote from our own Myth and Reality paper published before the official responses to OFT:

"...a few weeks before the launch of the OFT’s year-long trade study, focused primarily on taxi quantity controls, the Scottish Executive published a consultation document on the licensing legislation, which ignored things like the inequities and economic distortion of restricting taxi numbers, the illegally operating taxis in Dundee and elsewhere, and the fact that many local authorities seemed to have driven a coach and horses through the ‘no transfer’ ethos of the legislation, but instead proposed that numerical controls be extended to private hire, because the taxi trade and others wanted it.  Moreover, the proposal received no more than a passing mention in the document, and no detail was provided nor views sought.  Indeed, the proposal was effectively presented as a fait accompli.

"If students of economics are looking for a textbook case of ‘regulatory capture’, then perhaps they should consider examining the Scottish taxi trade!"

So no change there then.  Of course, it is easy to compare the utterances of politicians and others in relation to things like 'social justice' and 'dynamic economies' which demonstrates their double standards when it comes to the taxi trade, but the Scottish Executive has even gone to the trouble of providing a quotable trade-related quote just days after its OFT announcement; commenting on Cab Direct's winning of a contract to sell vehicles to Bermuda, Deputy First Minister Jim Wallace said: "This is an excellent example of Scottish entrepreneurism and how industry and public enterprise partners can work together to produce business success and employment opportunities."  While entrepreneurism is clearly considered a good thing as regards the supply of taxis to the trade, as regards the supply of taxis to the consumer the opposite is clearly the case.  However, the trade does see industry and public authorities working together, but this is more about cartels to restrict entry and consequently inflate plate premiums rather than to "produce business success".

The Scottish Executive certainly made little attempt to justify restricted numbers, excepting the usual superficial and misleading comments about quality and suchlike.  One passage in the Executive's response is particularly baffling: "Another aspect of our consideration was that there is a greater dependency on taxis in Scotland than in England and Wales. In the more rural parts of Scotland there is a higher level of dependency on taxis due to the relative inaccessibility of public transport. Consequently, the potential negative effects that changes in the removal of quantity controls would have, either in the short or long term, would likely harm the ability of the local rural population to access amenities and facilities."  This looks like a version of the 'more taxis mean...err...less taxis' argument, but if the Executive has to stoop to arguments like this then this just serves to demonstrate the extent of producer capture as regards the Scottish taxi trade.  In any case, figure 4.1 in the OFT's main report seems to demonstrate that the more rural areas of Scotland look suspiciously unrestricted.

Who knows what goes on behind the scenes with all this, but the Scottish Executive's 2002 consultation on the licensing legislation is perhaps telling.  The Scottish legislation does not allow for transfers, and the consultation appeared to endorse this when it said:  "The Task Group was alert to the fact that the Trade is critical of the legislative provisions that prevent the transfer of licence plates, particularly following the death of the licence holder.  The Task Group take the view that the provisions in the Act preventing the transfer of licences continue to be justified..."

However, since the corporate license scams operated in Glasgow and Edinburgh and elsewhere have comprehensively thwarted the intention of the legislation, it might have been expected that the Task Group would have at least mentioned this.  Of course, while many of these people probably have little clue about what is happening at the local government coalface, one of the Task Group members was Mr Robert Millar, an Edinburgh City Council solicitor who was presumably au fait with the council's devious and queue-jumping corporate license scheme, and thus the failure of the Task Group to even mention this issue is bizarre indeed.  At best, this smacks of gross neglect or a cover up.

Politics
Of course, the process was never likely to be about the issues, and instead matters like vested interests, back scratching and ignorance of the subject matter under debate were arguably always going to prevail.  The T&G's comment about "our one hundred MPs" merely demonstrates what we all knew already.

The T&G-dominated House of Commons Transport Committee saga was particularly pertinent in this regard.  This started with an 'oral evidence session', which even in its selection of witnesses demonstrated little in the way of impartiality.  Moreover, if the session had been a book, it would presumably have been called 'Taxi Regulation for Dummies', or suchlike.  Of course, we do not mean this in a pejorative sense, since the knowledge demonstrated by the MPs (not to mention some of the witnesses) was symptomatic of those who have not worked in the (provincial) trade or at least had close contact with it for a considerable period of time.  However, what is unsatisfactory is that a mere week or two later the Committee can produce a supposedly authoritative report which again demonstrated little knowledge of the trade other than the obviously partial evidence provided by those involved in maintaining these statutory cartels, and made little attempt to justify restricted numbers and concentrated more on undermining the OFT's report.

Similarly, there is no evidence that the so-called opposition parties in the UK have provided much input into the issue, at least as far as the public domain is concerned.  Indeed, any reported responses seem to have largely sided with the vested interests, again demonstrating the breadth and depth of producer capture.

For example, the Scottish National Party's transport spokesman in the Scottish Parliament, Mr Kenny MacAskill, led the opposition to OFT with an astonishingly ill-informed and misleading newspaper article.  Mr MacAskill should be well aware of the invidious effects of restricting taxi numbers; for example, Mr David 'two plates' Coutts, an ex-SNP councillor in Dundee who moved to Estonia for several years to run a pub there, held on to his plates to the exclusion of working Dundee taxi drivers.  Mr MacAskill is also involved in the Estonian licensed trade - it would be surprising if Mr Coutts and Mr MacAskill were not at least acquainted.

South of the border, when Conservative transport spokesman Theresa May visited Brighton she expressed concern about the detriment to safety that de-restriction might entail.  Perhaps she should have been told that safety ultimately depends on regulation, but it would be interesting to here her views on Brighton and Hove Conservative Councillor Ted Kemble's £35,000 plate premium, which of course depends on the continuation of restricted numbers.

However, ignoring the real arguments is clearly more convenient.  We e-mailed a summary of our Myth and Reality paper to all MSPs, several hundred MPs and our usual mailing list consisting of around one thousand taxi-related addresses, including many local authorities, and have received not one peep in response from politicians and officialdom.  Thus while the process may be about matters other than the substantive issues, the lack of response is perhaps telling, and perhaps represents something of a moral victory for Taxi Driver Online.  Indeed, our experience of the trade indicated that this was about as much as we could hope for.

OFT
With hindsight, even some of us opponents of quantity controls regret the involvement of the OFT in the issue.  With the OFT's evidence used to justify de-restriction largely consumer-oriented and based primarily on data obtained during the superficial unmet demand surveys required to maintain restricted numbers, the OFT's conclusions were always likely to be easily undermined by those with a vested interest in maintaining controls, and their associates.  To that extent the report undermined rather than strengthened the case for de-restriction.  Similarly, the OFT's recommendation for 'proportionate' quality controls hardly added much to the sum of human knowledge, and the related call for best practice guidance from central government merely endorsed a process that was already in train before the OFT started its study.  Moreover, the only other areas of concern uncovered by the OFT had been flagged for correction by Regulatory Reform Order long before the OFT became involved, as of course had the lifting of quantity controls.  Thus the report arguably achieved nothing.

Indeed, what was probably as telling as the content of the report was what was left out of it, such as unlicensed vehicles and the black economy - with perhaps the majority of drivers in some areas working 'on the side', it is astonishing that this issue was not even mentioned in a report of the best part of one thousand pages.  Similarly, the Knowledge of London was conspicuous by its absence, despite being the only aspect of trade regulation subject to comment in the national press in recent years, in The Times, The Economist and the Sunday Telegraph.  That is not to say that the KOL is undesirable, since it clearly has merit both from the trade's and the customers' perspectives, but that the issue was presumably deemed 'off-limits' is perhaps telling.

Similarly, with economic regulation like taxi licensing normally undertaken by specialists and as far away from the political arena as possible, and not entrusted to local politicians who often know next to nothing about the trade and often seem more concerned with kowtowing to vested interest groups and generating favourable (and avoiding unfavourable) newspaper headlines, the OFT's lack of mention of Ireland's new taxi regulator looks like another deliberate omission - if local authorities are considered to require the forthcoming extensive best practice guidance from the DfT (not to mention the highly prescriptive Disability Discrimination Act implementation), should councillors really be deciding policy in these areas, particularly as there is nothing to stop them ignoring the guidance, as they have done in the past.  Indeed, this Government has used the Enterprise Act 2002 to further remove aspects of competition policy from the political arena, thus further underlining the anachronistic nature of restricted taxi numbers and the process surrounding their implementation.

Thus the suspicion seems to be that the OFT deliberately avoided anything that would have required the passing of a full Act of Parliament, and instead the only problems 'found' were already well known, and amendable by 'fast-tracked' secondary legislation and DfT guidance rather than primary legislation which would eat into precious Parliamentary time.  Indeed, it is well know that the DfT consider, like almost everyone in the trade, that the taxi and private hire legislation could do with a 'rewrite', and a review of the Scottish legislation was already under way.

Thus it is regrettable that some 'blue-skies' thinking was not forthcoming from OFT, but the evidence perhaps suggest that this was never going to happen.

However, the one OFT proposal that perhaps did not fit this pattern was its call for greater fare competition in the trade, but again this could be done at the local authority level.  But while the OFT's recommendation was not wholly endorsed, it seems difficult to see how the resultant fudge can avoid some of the problems that we outlined last year, but a proper consideration of this issue must await further pronouncements.