Taxi services

Launched: August 2002

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Purpose of the study

To consider whether regulatory framework affecting licensed taxis and private hire vehicles (PHV) works effectively for consumers.

(Study followed in-house work.)

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Findings

The findings of the study showed:

1. Quantity regulation limiting the number of taxis reduces availability and lowers the quality of service to the public.

2. It is sensible to regulate quality and safety by means of driver and vehicle standards but any such regulation must be proportionate to the quality and safety goals to be achieved.

3. There are sound reasons to regulate taxi fares, for example, to protect consumers in vulnerable situations. But there could be greater freedom for beneficial price competition below regulated fare caps.

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Recommendations

The recommendations of the study were for the Government to:

1. Repeal regulation allowing local authorities to restrict the number of taxis in their areas.

2. Develop and disseminate best practice guidelines on driver and vehicle quality to assist local authorities.

3. Encourage local authorities to look at ways of encouraging fair competition on taxi services where appropriate.

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Action following market study

Government supported analysis and implemented recommendation for best practice guidance on driver and vehicle quality. Did not repeal quantity restrictions completely - but put onus on local authorities to justify maintaining them. As a result a number of local authorities were derestricted.

In November 2006 Department for Transport issued guidance on quantity restrictions. Individual licensing authorities are allowed to reach their own decisions on overall policies and individual licensing issues in the light of their own views of the relevant considerations.

OFT evaluation, published September 2007, found £2-5 million actual consumer benefit from quantity de-restriction, £5-13 million potential consumer benefit from future quantity de-restriction - but benefits would have been greater if regulated fares had moved closer to market clearing levels.

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Market study details and report

Download the OFT Report 'The regulation of licensed taxi and PHV services in the UK' (pdf 537 kb) November 2003

The annexes can be downloaded separately:

Annexe A: Legal framework of taxi and PHV licensing in the UK November 2003 (pdf 236 kb)
Annexe B: Statistical background November 2003 (pdf 226 kb)
Annexe C: Impact of regulation on taxi markets - consumer survey November 2003 (pdf 190 kb)
Annexe D: Impact of regulation on taxi markets - case study analysis November 2003 (pdf 204 kb)
Annexe E: Valuation of Hackney carriage licence premiums November 2003 (pdf 206 kb)
Annexe F: The consumer welfare impact of regulations on the UK licensed taxi markets November 2003 (pdf 108 kb)
Annexe G: Taxi markets literature review  November 2003 (pdf 193 kb)
Annexe H: Modelling the effects of taxi regulation November 2003 (pdf 374 kb)
Annexe I: Consumer survey report November 2003 (pdf 385 kb)
Annexe J: Impact of taxi market regulation - an international comparison November 2003 (pdf 549 kb)
Annexe K: Results of taxi Omnibus Survey: July 2003 November 2003 (pdf 129 kb)
Annexe L: List of consultees and consultants used November 2003 (pdf 50 kb) 

See press release 'OFT hails more taxis for consumers' 11 November 2003

Download OFT response to the Transport Select Committee report 'The regulation of taxis and private hire vehicles in the UK' 5 March 2004 (pdf 181 kb)

The Government published its response to the Office of Fair Trading report on the regulation of Licensed Taxi and PHV services in the UK. See the response on the Department for Business, Enterprise and Regulatory Reform website 18 March 2004.

Taxi numbers increased since OFT Report. Department for Transport consultation document on taxis licensing was welcomed by the OFT. See press release 3 August 2005.

Download 'Evaluating the impact of the taxis market study'  25 October 2007 (pdf 580 kb)

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Background information

Download the OFT's background paper 'Investigation into UK taxi services' 21 August 2002 (pdf 63kb).

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