jasbar wrote:
As an aside, can anyone explain why the council is going to all this bother over the issuing of licences?
I mean, what do they get out of it, other tham of course protecting a vested interest?
Surely it is in their public interest to provide the best possible taxi service for local communities?
I think there are a number of reasons, for example:
- They don't have a clue about the market and believe the rubbish spouted by the doom-mongers;
- They know that it would cause a lot of flack from the trade, and basically they don't want the bad publicity, because they're politicians;
- In particular, they created the market in plates, so if they pool the rug out then they'll be seen to have U-turned, which politicians don't like to do;
- As you say, there's a vested interest group, and they are closest to the levers of power. One or two of the reports to the DfT have basically said that they don't want to upset the taxi trade by derestricting, which is a bad enough reason not to do things as it is, but that councils are naive enough to say these things publicly speaks volumes.
But in general it just comes back to our good old friend regulatory capture. In his Dublin taxi study a few years back Dr John Fingleton said:
For the taxi market, the regulator might need to have information about costs in order to regulate price or entry. If the suppliers of taxi services convinced the regulator that costs were higher than they really were, then the regulator might implement a higher fare structure, giving the industry some monopoly profit or rent. Capture could also occur with regard to entry, where the interest of the industry to restrict entry would conflict with the consumer interest in having free entry.
The possibility of regulatory capture means that regulation may not improve on the free market. This does not mean there should be no regulation. Rather, regulation should only be used where strictly necessary and, in such cases, the institutions of regulation should be designed so as to minimise the possibility of capture. Several features of the institution would reduce the possibility of capture. First, the regulator should be given a clear objective: for example, to regulate price in the interests of consumers. Second, the process of regulation should be completely transparent. Thus any arguments presented to the regulator by the industry should be public, and any decisions of the regulator should be accompanied by published reasoning that explains how the decisions relate to the stated objectives.
A third issue that has implications for the political independence of the regulator is the political economy of regulation. Consider a regulatory measure that results in less profits for an industry but gains for consumers that, on aggregate, outweigh the losses to industry. An example might be a reduction in local telephone charges. Such a measure would be in the common good and so it is desirable that it be undertaken. However, if market variables are determined by the strength of political or lobbying power, then it is unlikely that the correct levels will be chosen. This is because the industry always consists of a small, focused and well-organised group, whereas the consumers who benefit are typically a large and diffuse group. Each firm in the industry has a lot to loose from tighter regulation and will exert great effort against the regulation. Each consumer, by comparison, has only a small gain and, because consumers are less organised, the greater aggregate gain of consumers will not be reflected in any lobbying. Moreover, such lobbying is socially wasteful, and a system of regulation that encourages it would compound the problems.
And it's good to see that Dr Fingleton is now safely ensconced as CE at the OFT, which augurs well for when they come to re-examine taxi numbers in a couple of years:
Link to OFT
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