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OFT hails more taxis for consumers

Current restrictions mean longer waiting times and less passenger safety

PN 147/03     11 November 2003

Removing restrictions on the number of licensed taxis on Britain's roads would be good for the public says the OFT in a report published today. The report also confirms that quality and safety controls offer essential protection to the public.

Download The regulation of licensed taxi and PHV services in the UK (pdf file 538 kb)
See the taxi services page to download the annexes.

Quantity restrictions, which are currently imposed by 45 per cent of local authorities in the UK, mean that consumers have to wait longer for taxis, have less choice of forms of transport and are less safe.

Long waiting times create a gap in the market which is partly filled by illegal cabs – 1.8 million people used an illegal taxi in 2002. A limited supply of taxis can also add to difficulties faced by the police in dealing with public disorder in town centres late at night.

The OFT conducted a market study into the regulation of licensed taxis – which can ply for trade and be pre-booked – and private hire vehicles (PHVs) – which can be pre-booked only. The study looked at quantity restrictions, quality and safety controls and fare regulation in this £2.2 billion market. The study shows that people in the lowest 20 per cent of incomes use taxis and PHVs the most. Consumers in households without a car make an average of 30 trips per year compared with nine for car-owning households. Taxis and PHVs are also used 67 per cent more often by disabled people than by others.

The OFT recommends that the legislation allowing local authorities to limit the number of taxis in the area should be repealed. In the meantime, authorities that do have quantity restrictions should exercise their power to remove them. 

In the OFT case studies of local authorities that have removed quantity restrictions, the supply of taxis increased on average by about 50 per cent. This has led to a dramatic reduction in waiting times at peak times (see case studies). The OFT estimates that if quantity controls were removed across the country, there would be an additional 15,000 taxis available. 

Removal of quantity restrictions would also benefit businesses and individuals wishing to enter the taxi market. There are currently long waiting lists for taxi licences in areas that restrict numbers. There is also evidence that restrictions create an artificial premium on taxi licences when licensed vehicles are sold privately. This acts as a sizeable barrier to entry to the market. 

OFT research shows that there is latent extra demand for taxis if more were available.

The OFT also concludes that the quality and safety controls for taxi vehicles and drivers, and PHV vehicles, drivers and operators should remain in place as they offer consumers necessary protection from dangerous drivers and unroadworthy vehicles (see annexe). However, the way that they are applied can impose unnecessary costs and hinder new entrants to the market.

For example, the taxi vehicle specifications for the Metropolitan Conditions of Fitness, which tightly specify various aspects of taxi vehicle design including step-height and turning circle, were designed historically for the needs of London traffic. However, the conditions have been adopted by other authorities where the requirement may not be necessary. As the taxi models that meet this requirement are much more expensive than standard saloon cars, this imposes additional cost on taxi drivers. The OFT therefore recommends that the Department for Transport works with local authorities to share and implement best practice across different areas so that controls on quality are effective without imposing any unnecessary regulatory burden.

In addition the OFT recommends that local authorities throughout the UK should set maximum fare levels for taxis and allow freedom to set lower fares. A maximum fare cap is needed to protect vulnerable consumers but there could still be scope for taxis to compete on price. Most local authorities already operate a maximum fare system but few passengers are aware that lower prices can be set. Freedom and greater awareness could encourage some price competition between taxis to the benefit of passengers.

Announcing the findings John Vickers, OFT Chairman, said: 

'Taxis are an important form of transport especially for the disabled and those without cars. Quantity restrictions are against the public interest because they mean fewer taxis on the roads, longer waiting times, less choice and risks to public safety.

'At present, the public benefits from unrestricted supply of good quality taxi services in some parts of the UK but not in others. De-restriction, alongside essential quality controls, would allow all to benefit, and would free up growth of taxi services throughout the UK.'

The Department for Business, Enterprise and Regulatory Reform and the Department for Transport now have 120 days to consider and respond to the OFT's findings and recommendations.

Case studies
Removal of quantity restrictions in Sheffield led to an increase in the number of taxis from 300 in 1998 (which was the last unmet demand survey before de-restriction in 2000) to 457 in 2003. The proportion of people waiting over five minutes at a taxi rank fell from 27 per cent to 9 per cent. For further information on de-restriction in Sheffield please contact the licensing office on 0114 273 4005.

In Cambridge the number of taxis increased from 147 in 1999, before it de-restricted in 2000, to 215 in 2003. The proportion of people waiting over five minutes at a taxi rank fell from 20 per cent to 6 per cent. For further information on de-restriction in Cambridge please contact the licensing office on 01223 457887.

ANNEXE

Quality controls

Quality controls over and above the 'minimum specification' of MOT and driver compliance requirements vary between each local authority.

There are, however, three types of minimum specifications governing vehicle/ driver/ operator quality and safety:

Vehicle
The conditions attached to taxis and PHVs generally concern the basic characteristics of the vehicle (e.g. that it should have four doors), use of meters and its roadworthiness. Around half of local authorities also have an age limit for vehicles for both PHVs and Hackney carriages.

Driver
Criminal and driving licence checks as well as health check and minimum age/driving experience. Knowledge tests are also required in 48 per cent of Local authorities for PHVs and in 60 per cent for taxi drivers.

Operator
The local authority has a duty to check that an applicant is fit to hold a licence. Other conditions placed on the licence holder often include detailed requirements for maintaining of records of journeys booked and vehicles used, proof of planning permission and radio transmission licences where appropriate and, in the case of operators who invite the public to make bookings in person, that the operator's premises are suitable for carrying out a private hire business.

NOTES

1. Download The Regulation of Licensed Taxi and PHV Services in the UK (pdf file 538 kb)
To download the Annexes.

2. The OFT launched its study into the taxi market in August 2002 (see PN 50/02). This was widened in February 2003 to include private hire vehicles (see statements 2003).

3. In England and Wales (outside of London) the Town Police Clauses Act 1847 and the Transport Act 1985 allow local authorities to impose quantity restrictions on the number of taxis in their area. In Scotland the Civic Government (Scotland) Act 1982 has similar provisions. There is currently no legislation that allows local authorities in Northern Ireland or in London to impose such restrictions.

4. Government has 120 days to respond, rather than the standard 90 days, to allow for the Northern Ireland elections.

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