Taxi Driver Online

While the OFT’s report did not use the term ‘cartel’, these restricted numbers policies are essentially legal agreements between local authorities and local taxi license holders to restrict entry to the trade, and thus might reasonably be described as statutory cartels. Indeed, while Mr Vickers’ statement above refers to cartels operated dishonestly, a not unreasonable description of these taxi cartels might be as tantamount to institutional theft. A couple of examples from the UK taxi trade might lend some weight to this analysis:

I find the opening statement slightly confusing and perhaps misleading.

Restricted numbers policies are not essentially legal agreements, they are the policy of a local authority which has been elected democratically by the electorate.

Mr Vickers statement, if it was referring to the restricted numbers policy of local authorities is inaccurate.

Cartel;

an association of business firms to coordinate production, prices etc to avoid competition and maximize profits

A cartel therefore fixes prices, as you all know the local authority sets taxi fares.

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I find the opening statement slightly confusing and perhaps misleading.

Restricted numbers policies are not essentially legal agreements, they are the policy of a local authority which has been elected democratically by the electorate.


So they're not an agreement between the trade and the LA, an agreement that is perfectly legal?

I'm not sure how anyone could disagree with that.

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Mr Vickers statement, if it was referring to the restricted numbers policy of local authorities is inaccurate.


No, Mr Vickers wasn't referring to restricted taxi numbers, that should be quite clear from reading M&R.

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Cartel;

an association of business firms to coordinate production, prices etc to avoid competition and maximize profits

A cartel therefore fixes prices, as you all know the local authority sets taxi fares.


I'm not sure where your definition comes from, but the two examples given are clearly either/or, so a cartel does not have to be a price-fixing one. A cartel is essentially any agreement to rig the market in favour of the firms in it. Usually this relates to pricing, because it's the most obvious thing to rig, and probably the easiest to implement and maintain - it would clearly be difficult for firms to restrict access to a market in the manner of HCs, for example, and of course this would clearly be very difficult if the LA did not have a hand in it.

The OFT's website defines a cartel as follows:

What is a cartel?

In its simplest terms, a cartel is an agreement between businesses not to compete with each other. The agreement is usually verbal and often informal.

Typically, cartel members may agree on:

-prices
-output levels
-discounts
credit terms
-which customers they will supply
-which areas they will supply
-who should win a contract (bid rigging).

1, An individual is granted a taxi license (plate) at nominal cost in an area with restricted numbers. This plate can be rented out to working taxi drivers for perhaps £100 per week (say) for as long as the restricted numbers policy is in place and the license thus has a ‘scarcity value’. The license holder need not drive a taxi or even have worked in the trade – there are even cases of such plate holders living abroad. The working drivers may have been waiting many years for the grant of a plate;

2, An individual is granted a taxi plate at nominal cost in an area with restricted numbers. This ‘free’ plate can be sold on almost immediately for £40,000 (say), thus immediately cashing in on the scarcity value. Once again, the successful recipient may have never even driven a taxi. The payment is made by someone who cannot get a ‘free’ license because of the quantity controls in operation.

In response to point one. It does go without saying that this is not only the case in restricted areas, in delimited areas people purchase vehicles, license them and then rent them out to drivers, these people need not necessarily be taxi drivers or even connected with the profession other than have their names on the license.

The point is therefore slightly misleading, as in delimited areas there is no 'scarcity value'

The location of the owner is of what relevance? Surely the important issue is that the license is being worked.

In response to point two. It is almost contridictory, I presume that the authors refer to those local authorities whom issue a limited number of licenses per year.

The points raised regarding the potential to sell a plate immediatly upon license are correct. However, one would presume that the local authority would be aware of this and have in place a policy attached preventing such an occurance

Indeed, it my well be worth scrapping the waiting list system in favour of a lottery in such areas.

It is worrying that the most obvious way to obtain a license in a restricted area i.e. by purchasing one, has not been mentioned. Obviously the most worrying aspect to the trade in a limited area is to still be paying for a plate if delimitation occurs.

The OFT's website defines a cartel as follows:

What is a cartel?

In its simplest terms, a cartel is an agreement between businesses not to compete with each other. The agreement is usually verbal and often informal.

Typically, cartel members may agree on:

-prices
-output levels
-discounts
credit terms
-which customers they will supply
-which areas they will supply
-who should win a contract (bid rigging).

The problem I have with the document is that it claims to be written by taxidrivers on behalf of the taxi trade.

It is clearly written with bias toward derestriction, and as we are all well aware derestriction is something even a majority cannot agree upon, therefore the claims of the whole piece have got to be questioned as it is founded upon the authors opinion which is not shared by a majority within the trade.

I do believeand agree it is a well written informative piece, however due to the concerns expressed above, I would have to say that it presents one side of an argument but claims to represent both sides.

This is synonomous throughout discussion within the site itself.

B. Lucky

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1, An individual is granted a taxi license (plate) at nominal cost in an area with restricted numbers. This plate can be rented out to working taxi drivers for perhaps £100 per week (say) for as long as the restricted numbers policy is in place and the license thus has a ‘scarcity value’. The license holder need not drive a taxi or even have worked in the trade – there are even cases of such plate holders living abroad. The working drivers may have been waiting many years for the grant of a plate;

2, An individual is granted a taxi plate at nominal cost in an area with restricted numbers. This ‘free’ plate can be sold on almost immediately for £40,000 (say), thus immediately cashing in on the scarcity value. Once again, the successful recipient may have never even driven a taxi. The payment is made by someone who cannot get a ‘free’ license because of the quantity controls in operation.


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In response to point one. It does go without saying that this is not only the case in restricted areas, in delimited areas people purchase vehicles, license them and then rent them out to drivers, these people need not necessarily be taxi drivers or even connected with the profession other than have their names on the license.


Point one was was talking about the plate only.

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The point is therefore slightly misleading, as in delimited areas there is no 'scarcity value'
.

The point clearly stated that the area was restricted.


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The location of the owner is of what relevance? Surely the important issue is that the license is being worked.


The point is surely the unfairness of someone granted a license for jack, and living abroad, and controlling the plate to the detriment of working drivers.

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The points raised regarding the potential to sell a plate immediatly upon license are correct. However, one would presume that the local authority would be aware of this and have in place a policy attached preventing such an occurance
.

Clearly not, given practice evident in many areas. It could well be deemed illegal if challenged though. But I think Bournemouth prohibits transfers for 5 years from grant? Probably why the had a problem with hired plates (that was the scenario in point 1)

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Indeed, it my well be worth scrapping the waiting list system in favour of a lottery in such areas.


I thought it was a lottery just now But I'm not sure how a lottery would necessarily help.

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It is worrying that the most obvious way to obtain a license in a restricted area i.e. by purchasing one, has not been mentioned. Obviously the most worrying aspect to the trade in a limited area is to still be paying for a plate if delimitation occurs.


You might have also quoted the sentence after the two examples, which said:

We are not suggesting that such cases are the norm

The fact that the most obvious way of obtaining a license is by purchasing one is dealt with later in M&R.

As for those still paying for a plate on delimitation, this is dealt with at some depth in one of our frontpage pieces:

http://www.taxi-driver.co.uk/money.htm

Indeed, both these issues have been dealt with on the forum umpteen times in response to GA, so you should be aware of the site's stance on them

What a load of nonsense.

As Cap points out, it was never claimed to be the work of TAXI drivers, and as for being on behalf of the taxi trade, you must have been imagining thinks.

You are right, it does represent one side of the argument, but you must be lying about it claiming to represent both sides.

We are not suggesting that such cases are the norm. Indeed, it seems probable that most UK taxi plate holders do actually drive a taxi. However, while the cases above represent extreme examples, the basic principle remains the same in every local authority with restricted taxi numbers – each license has been issued by an arm of government at nominal cost to the recipient, but the ‘excess profits’ earned by current license holders is represented by the value of the plate – in Manchester, for example, this amounted to a collective value approaching £40 million prior to the OFT’s report.

This is a scurrilous statement to some within the trade.

It is fair to presume in a significant number of areas plates are no longer in the possession of the original licensees, this may date back a considerable period. It is equally fair to presume that the current licensee has paid a considerable sum of money for the license. This is obviously not the fault of the new licensee who will obviously have to repay the money often borrowed for the license.

It is difficult to understand the meaning of the excess profits to which the document refers. A taxicab is only able to earn a certain amount of money in any shift, it is often limited time itself.
Is it not therefore fair to equally presume that the monies paid for the license are to guarantee a set standard of income.

The value of plates in Manchester or indeed in any limited area are of little consequence to the service provided, if the service is poor or an unmet demand is found, then a local authority may issue further licenses.

Its claimed to be the work of "working drivers", if it wasn't intended to be taken for granted that it was written by "working taxi drivers" then the whole point of the exercise takes even less credibility into the whole debate.

So when it states it is written by "working drivers" what does that mean?

Its misleading and confusing before a reader even gets past that point.

The paper is well written as well as informative but it should be explained who wrote it and why they felt compelled to do so.

My bet is that it was written by a firm of solicitors in Manchester who have a "taxi" specialist who is also a member of this site.

B. Lucky

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We are not suggesting that such cases are the norm. Indeed, it seems probable that most UK taxi plate holders do actually drive a taxi. However, while the cases above represent extreme examples, the basic principle remains the same in every local authority with restricted taxi numbers – each license has been issued by an arm of government at nominal cost to the recipient, but the ‘excess profits’ earned by current license holders is represented by the value of the plate – in Manchester, for example, this amounted to a collective value approaching £40 million prior to the OFT’s report.


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This is a scurrilous statement to some within the trade.


If the cap fits....

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It is fair to presume in a significant number of areas plates are no longer in the possession of the original licensees, this may date back a considerable period. It is equally fair to presume that the current licensee has paid a considerable sum of money for the license. This is obviously not the fault of the new licensee who will obviously have to repay the money often borrowed for the license.


Again, this was dealt with later in the document.

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It is difficult to understand the meaning of the excess profits to which the document refers. A taxicab is only able to earn a certain amount of money in any shift, it is often limited time itself.
Is it not therefore fair to equally presume that the monies paid for the license are to guarantee a set standard of income.


Excess profits basically means more than normal. This can be quite difficult to calculate in a normal business scenario, but it's quite simple in areas with restricted taxi numbers - the excess profits are represented by the capital/resale value of the plate.

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The value of plates in Manchester or indeed in any limited area are of little consequence to the service provided, if the service is poor or an unmet demand is found, then a local authority may issue further licenses.


This was dealt with later in the document (the economic effects chapter - the point is that the excess profits come out of the pockets of consumers and journeymen drivers.

Your point about LAs issuing more licenses merely means that the service is less detrimental to consumers than it could be, it doesn't invalidate the point, and in any case some LAs simply don't bother with surveys and suchlike.

But the point is that even if an LA has adhered to all its legal requirements, then the service is still not as good as it could be.

Indeed, both these issues have been dealt with on the forum umpteen times in response to GA, so you should be aware of the site's stance on them

NUMERICAL EFFECTS

I fail to see the points being made in respects to an improved service to the customer. Therefore is the numerical argument relevent to either pro delimiters or pro limiters arguments? The customer is not particularly bothered who owns the vehicle, they want to get from A to B as efficiently as possible.

However, a simple three-stage hypothetical example demonstrates the often grossly misleading nature of any analysis of bare taxi numbers:

1, A town has 100 taxis driven by 200 drivers, with each taxi driven by one driver during the day and one driver at night.
The town de-restricts taxi numbers and each driver takes the opportunity to run his own vehicle. The number of taxis thus doubles to 200.

2, Shocked by the huge increase in the number of vehicles, the town’s licensing authority decides to re-restrict taxi numbers.

3, The town depends on one major employer, and this firm closes down, making thousands unemployed. Consequently, each of the town’s 200 taxi owners manages to recruit another driver.

Again, I fail to see the relevance, has part three been added to be a happy ending for the taxi trade?

It has been generally agreed that the majority of new licensees will switch from private hire to hackney carriage, if vehicle standards are in place, then this may not be as catastrophic as suggested by some elements of the HC trade, indeed, it would be astonishing if the former private hire drivers became hackney and removed their PH radio systems.

What the document is basically saying is the total number of licensed vehicles will not dramatically change and following from this, if numbers dont change, then job wise there is no difference. Which is true on the face of it.

However, the document fails to take into account human nature which is surely of equal relevence, for every action there is a reaction.