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Press releases 2002 -

OFT launches taxi study

Cap on cab numbers comes under spotlight

PN 50/02    21 August 2002

A study into the UK licensed taxi services market, worth over £2 billion, was launched today by the Office of Fair Trading. (Download background paper  - pdf file 61 kb)

The study will look at the impact of existing regulations on the market for licensed taxis, examine how well the market is working for consumers and consider whether any action is necessary to improve competition in the market.

The main focus of the OFT's study will be the restrictions imposed by many local authorities on the number of taxi licences issued. The study will also consider other aspects of licensed taxi regulation – local authorities can also place qualitative restrictions on service provisions.

The number of taxi licences is currently restricted in almost half (45 per cent) of local authorities in England and Wales. The study will compare experiences between local areas where regulations differ to help assess how regulations affect the overall quality of service available to passengers.

John Vickers, Director General of Fair Trading, said: 'This is a large and growing market, which is highly regulated. We want to be sure that regulation strikes the right balance, so that passengers have the protection they need while reaping the benefits of effective competition.'

The study follows preliminary work and discussion with interested parties. It will be carried out by the OFT's Markets and Policy Initiatives Division and will report in summer 2003.

LEGISLATION

Regulations in England and Wales (outside London)
The Secretary of State for Transport is responsible for the broad policy (through primary legislation) but local district and borough councils administer the licensing laws.

Councils have a wide range of powers, eg assessing the fitness of drivers and vehicles to be licensed, setting fares and creating taxi stands. Since 1985, local authorities have been required to satisfy themselves that there is no unmet demand for taxi services before refusing any licence on the ground that limits on taxi numbers have been met.

Regulations in London
The Secretary of State for Transport is responsible for the broad policy (through primary legislation). Administration of the licensing laws is the responsibility of Transport for London (part of the Greater London Authority).

Since 1931, there has been no limit on the number of taxis licensed in London. However both drivers and vehicles are required to be 'fit and proper'. For drivers, this means they must pass 'the Knowledge' test, as well as satisfying other legal conditions as to age, character and health. Vehicles must comply with the Conditions of Fitness set by Transport for London.

Two types of taxi driver licence are available in London – (1) a 'green badge' that allows the driver to operate anywhere within the Metropolitan Police District (and the City of London), and (2) a 'yellow badge' that restricts the driver to specified suburban areas.

Regulations in Scotland
In Scotland local licensing authorities have powers over all aspects of taxi licensing including specifying taxi design, fixing taxi fares and limiting the number of taxis licensed. The Scottish Executive has reserve powers to impose vehicle design specifications on a licensing authority, but these have not been used. The Scottish Executive has devolved powers to legislate on taxi licensing.

In Edinburgh and Glasgow only purpose-built black cab style taxis are permitted for general hire. However, in Edinburgh an 'airport licence' exists which means only saloon style taxis can pick up from the airport but cannot accept any other hires. Black cabs can take customers to the airport but cannot pick up from the airport. All other areas of Scotland have a saloon or mixed fleet of taxis.

Regulations in Northern Ireland
In Northern Ireland taxi licensing is centrally controlled by the Department of the Environment (NI) which determines the roadworthiness of vehicles and checks the repute of drivers and/or owners. Two types of taxi licences are available – (1) 'public hire in Belfast' that allows taxis to operate within a 5-mile radius of the centre of Belfast, and (2) 'public hire restricted' that allows taxis to operate anywhere in Northern Ireland apart from the centre of Belfast.

The Northern Ireland Assembly has devolved powers to legislate in the taxi-licensing field.

NOTES

1.  According to 'Consumer Trends 2000', the market for licensed taxi services is worth £2.6 billion per annum.

2.  Private hire vehicles (PHVs, commonly known as minicabs) are not directly the subject of this study. They are not subject to quantity controls, comply with less stringent 'fitness of vehicle' tests and do not have fares fixed by the licensing authority. Unlike taxis, hiring a PHV must be organised in advance. Therefore only taxis can ply for hire on the street.

3.  The Markets and Policy Initiatives Division of the OFT conducts around five full studies a year. Possible outcomes include:

  • enforcement action by the OFT's competition and consumer regulation divisions
  • a reference of the market to the Competition Commission
  • recommendations that the Government considers changes in laws and regulations and to regulators, self-regulatory and other bodies to consider changes to their rules – the Government has agreed (in its White Paper 'Productivity and Enterprise: A World Class Competition Regime') to publish a written response within 90 days
  • campaigns to promote consumer education and awareness
  • a clean bill of health.

4.  The Markets and Policy Initiatives Division, which is headed by Jonathan May, complements the competition and consumer regulation enforcement divisions. It takes a broader perspective in reviewing markets that could work better for consumers. The division has three branches:

MPI1 – provides the central resource of specialist economic, statistical, and financial analysis advisors

MPI2 - is responsible for the OFT's enhanced role in investigating markets that might not be working well for consumers but where competition or consumer regulation enforcement action does not appear to be the immediate answer

MPI3 - co-ordinates with Government, other organisations (both national and international) involved in consumer protection and competition matters, manages a public information line on matters within the OFT's responsibilities, and handles preparations for OFT's role as regulator of payment systems.

5.  In this press release the functions of the Director General of Fair Trading (DGFT) under the Act are for simplicity described as the functions of 'the OFT'.




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