Free Market regulation of the cab trade?
The views expressed in this article are not those of the National Taxi Association
By
Wayne CaseyOne day in the early 1970’s, the staff of British Leyland – those who weren’t on strike, sat around the table thinking about making a brilliant new car. After a few scribbles on the back of a fag packet, one bloke said to another, “you know, this car is fabulous, but there’s just something missing”. They sat around for another couple of minutes, probably smoking pot and thought…hmm the steering wheel, it’s a little too round, what do you think about a square one? BL went on to launch the Austin Allegro, arguably one of the worst cars ever.
The question still remains as to whether the steering wheel ruined the car – or – if the car ruined the steering wheel.
I don’t know, but I get a funny feeling similar events happen deep within the basement of the Department For Transport (DFT), without the pot obviously.
“You know those taxi laws…..they’ve been around since 1847……I think it’s about time we got them changed, there’s a few cranks up in the North East moaning about them”I get the general feeling the law commission have been given a task of doing something those poor designers at British Leyland were faced with in the Austin Allegro. They know they have a bit of a pig on their hands, but they must come up with something that’s seriously going to change the public perception, I get the horrible feeling that they’ll come up with a square steering wheel.
As the Law Commission consider massive changes to the taxi and private hire trade, the study that “engages economic and regulatory theory” will seemingly have at least one end product. The aim is to stop the current ‘lawful’ practice which allows local authorities to limit taxi numbers. However, the free market to which they aspire is anything other than free and the thing is…they must surely know it.
As long ago as 1846, one year before taxi legislation was extended to the provinces, the following was stated in Parliament;
“For instance, you limit the number and regulate the fares of hackney coaches and hackney cabs. All the arguments in favour of free trade tell against such an interference. On a rainy day few cabs are to be met with on the stands, but there are plenty of persons possessed of cabs who would bring them out for hire on such occasions, if they were permitted to charge what fares they liked; but the Legislature interferes to prevent this. Can there then be a more striking instance of interference with the principles of free trade? In conformity with these principles, you should not regulate the charges for hackney carriages; but on good ground of police the State steps in and regulates the fares of 1032 public carriages in the metropolis.” Mr Thomas Macaulay, Created 1st Baron Macaulay, of Rothley in the County of Leicester (1857)Strange how all of those years ago our forefathers realised the ‘free market’ needed regulation.
This is perhaps why the 1847 act – which came out the following year – had numerous bits of legislation preventing a driver from effectively holding customers to ransom over fares. Section 55 is one example, and like swathes of the act still law. It’s there purely to prevent a driver from making agreement with passengers to pay more than the prescribed fare. After all – we wouldn’t want a customer with lots of money going to the front of a cab rank and promising to pay the driver more to get a cab quicker!
However, irrespective of the above this appears to be one of the largest pieces of government interference in the taxi market for over a quarter of a century, they are on the brink of deleting section 16 of the 1985 transport act…….. something that Mrs Thatcher, the bastion of the free market, never actually succeeded in doing.
So who is pushing this thing? Is it private hire operators, is it cab drivers who want ‘free’ plates, is it staff within the DFT, is it Henry the mild mannered janitor?
The title I have chosen for this article is in itself an oxymoron, after all how can a market be truly free if it is highly regulated?
The argument about taxi numbers has been here since time immortal. At numerous times through the years even the trade in London requested parliament to suspend the issue of cab licenses. And yes, Taxi plates have also been horse-traded for many years. We are told the type of regulation that permits this is against the public interest – we even had an OFT study costing some £250K just to underline the point. Yet arguably, the current system, which employs demand surveys, ensures the public are regularly consulted and gives a local authority an independent assessment of the taxi trade is surely a more responsible way to license a trade it is responsible for.
Such planning and foresight obviously has echoes of those rather socialist 5 year plans (incidentally such state planning was also a fascist and **** trait) – and we could never have something like socialism (or indeed fascism) interfering with the free market. Except of course we already appear to have 5 year plans for local transport – otherwise known as Local Transport Plans (LTP).
This compares to the ‘free market’ approach, as espoused by best practice guidance and office of fair trading, which relies on the forces of the market to determine the number of taxis that will cater for demand.
Of course supply and demand is the basic principle of the free market. However, the theory seems to break down when it comes to taxis because as any person with half a brain knows as supply increases the price should drop, as demand increases the price should rise.
As stated above, the oversupply of the market should in theory lower prices – if a there is an oversupply of labour then labour costs should reduce – if there is an oversupply of rented properties then rents should lower – if there’s an oversupply of oil……naa your pushing it now Casey.
The clear theory is that 76% of local authorities (the percentage that doesn’t limit taxi numbers) can’t be wrong. Unfortunately those that suggest the above theory don’t seem to see the whole point. We are not saying councils must limit taxi numbers, we are saying they should have the right to do so – if there is clear evidence the over abundance of cabs are creating problems.
My take on what the law commission is doing – is that they are looking to leave certain local decision making to local authorities – but some decisions – such as numbers control will be taken away from them. This is a little like taking a knife to a gunfight.
The judge in Royden, R (on the application of) v Metropolitan Borough of Wirral [2002] EWHC 2484 (Admin) (08 October 2002) stated at 153:
It is also to be noted that the policy decision in the present case is taken in the context of the Act of 1847, as amended, which provides that there should be no numerical limit on hackney carriage licences unless it is established there is no unmet demand. Even then, under the Act, the licensing authority is under no obligation to maintain a numerical restriction. The policy choice as between “a free market” and a restricted market has, therefore, already been made by Parliament, and the Licensing Authority has to exercise its discretion within that statutory context.So we have two types of local authority, firstly those that choose to survey demand then issue licenses accordingly, secondly, we have those that simply don’t limit taxi licenses.
We work in a tightly regulated system. No matter where you are licensed, you will be subject to form filling, tests of your fitness and propriety, tests of your physical fitness, vehicle tests, and minimum vehicle standards. We have all become accustomed to being told it’s in the public’s best interest.
Is the delimited taxi market actually free though? Of course it isn’t. You must have a vehicle of a certain type, you often told how old it must be (or what emissions it should emit) and then you are told what you must charge. All points, whilst it is argued are put in place to protect the public, simply go against the ethos of a truly free market.
The most recent bit the taxi trade should have been arguing about, but it didn’t, was the Equality Act which took over from the DDA. The Equality Act is a well intentioned piece of legislation, going through with all party support.
Anyone questioning this bit of legislation would be construed by mealy mouthed liberals as a neo fascist, it was victory for fine government, looking out for the most disadvantaged in our society.
However, in respect of the hire and reward industry the act completely fails to encompass the one industry where it really could and arguable should have made a positive difference to the disabled, by this, I refer to the private hire industry. As I have written previously, private hire were actually included in the Equality Bill, yet I suspect in a fine example of collusion between private-hire lobbyists, bungs to political parties and the neglect of [edited by admin] poor MP’s, private hire simply disappeared before the Bill became an Act.
One elephant in the room the cab trade has ignored, usually for reasons of either its own neglect, or for the fact we would be ostracised for even mentioning it, is the real fact we have to compete with our services with private hire. (many of the less tolerant believe this isn’t the case) But in order to compete we must very often purchase a vehicle that immediately puts us at a competitive disadvantage through its cost.
But let’s ignore the Equality Act for the time being, many of you are already driving wheelchair accessible vehicles and therefore seemingly don’t give a toss anyway. But I won’t drop the subject of the vehicle you have been mandated to drive.
In the majority of areas, when a council decides it no longer wants to control the number of taxis, it brings in a series of policies described as ‘quality control’. Many of these policies are brought in to negate the effects of a ‘full on’ free market to the market incumbents (the existing cab trade) and grandfather rights are often extended (you see, whilst they hate you, there is a little love).
In other words, deregulate the number of taxis but regulate entry in another way.
Very often we are subject to vehicle age policies, a maximum age for the vehicle to be first licensed and of course an upper age limit on subsequent (although a new method of control is the much more politically correct emission standards, but more on that later). Whilst some might describe such good intent as an ‘investment’ in a person’s business, I would contend to those saying, that you are not the one purchasing the vehicle and you are in fact a complete idiot who doesn’t actually know that an “investment” should in fact mature in price, not lose the majority of its value within months.
Furthermore, the fact that a person has been forced to buy a rather expensive vehicle does mean they need to recoup the investment in the future, they are competing with not only other hackney carriages (if you could define “compete” as sitting behind another taxi on a rank, charging the exact same fare and refusing to be hired unless you’re at the top of a cab rank) but also elements of private hire.
Let us consider the ‘what if’s’, because I have had numerous people get into my cab and tell me they are considering getting their own cab and starting up. My usual response is to warn them that the job is in fact sh*te and they should do something a little more rewarding, like stacking shelves at Tesco. I digress. What if one of these people do in fact join our ranks. They sign up for a nearly new cab and discover after three or four months that they absolutely hate the job – which many do. They hate the drunks, they hate the hours, they hate giving up a Saturday night when they could be down the social club.
In a regulated system they should be able to sell their cab and plate within a relatively short period of time and not lose a tremendous amount of money. In a deregulated system they have years of debt looming.
The free market approach comes to a sudden stop when it arrives at the thorny issue of fares. Perish the thought if at a time of high demand the cab driver could effectively charge (or make agreement with a customer to pay) a higher fare than would be considered the norm. This is where the principle of supply and demand collapses. After all, it’s their free market, not yours.
The best practice guidance, quite correctly, points out that a vehicle which is beyond a certain age is quite capable of being a licensed vehicle. However, this single positive has been swallowed up by a massive double negative;
“Local authorities may, for example, wish to consider setting vehicle emissions standards for taxis and PHVs.” This has been the green light for local authorities to bring in vehicle age limits by way of stealth, with numerous local authorities now licensing vehicles according to Euro emission standards.
Ironically, many local authorities fail to provide enough ranking space, when drivers complain and request more they are told to ply the streets for hire until a rank space becomes available, thus creating further pollution problems. Indeed, if we refer to the ‘Button book’, auld Jimmy boy, ever the advocate for delimitation states:
“The arguments in relation to overcrowding are difficult to translate into reality. Even if a local authority experienced an increase in hackney carriage numbers of some two or three hundred vehicles, in terms of the actual traffic flow in most town centres, that would represent a very small percentage increase.”So what we appear to have is one advocate of delimitation telling us the congestion created by issuing an infinite number of taxi licenses doesn’t create a problem, the police in both Liverpool and Cardiff saying it does and the DFT suggesting local authorities consider emissions standards and delimit anyway.
Is the cab trade over regulated? You bet your a*se it is, but not by the cab trade.
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needless to say that put a stop to my desire to learn to drive for quite some years
