21/07/2015 - 07:05

A solution is needed, not quick fixes

21/07/2015 - 07:05


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Recent confusion at the political level and a philosophical discussion with some friends has prompted a revisit to the taxi debate.

A solution is needed, not quick fixes

Recent confusion at the political level and a philosophical discussion with some friends has prompted a revisit to the taxi debate.

I thought I’d written enough about Uber for a while, but with the company’s future in this state subject to a political process that may not entirely be transparent, I thought I’d offer further thoughts and … a real solution.

Discussing the issue with some friends the other night, we all agreed the problem with Perth’s existing taxi industry is that it has a superfluous, yet expensive, parasite in the form of taxi plate licence-holders.

Almost 1,000 taxis on the road owe their right to commercially exist to these plate owners, who charge fees to the drivers estimated to represent about 16 per cent of the fare. Apart from allowing the plate to be bolted on the taxi, they have no responsibilities whatsoever.

While some rail against Uber’s up-front lobbying and recruitment of Liberal Party figures to knead political will in its own direction, it is worth wondering who has held the political leash in Western Australia’s taxi industry since the plates were privatised in the early 1990s.

If ever there was an inept display of government policy, this was it; imagine selling a state authority without any responsibilities or any form of adequate government price oversight.

Various reports in the past 15 years show what a bad idea it was. The most recent, commissioned by the RAC last year, summarises them all.

In effect, the state cheaply handed over an asset and then was persuaded to block competition, effectively giving plate owners a windfall of several hundred million dollars. It was a tragic mistake; but then again, when it came to public transport policy in the 1990s, WA was asleep at the wheel for most of the time.

Here, quoted by the RAC report, are the awe-inspiring words of the then transport minister Eric Charlton, in 1995 complaining about Canberra’s attempts to interfere in the cosy arrangement to boost competition.

“ … experience had shown that in other parts of the world it had led to fares rising with no corresponding service improvements, or fares remaining static, but with a fall in service standards. There is also the issue of the massive investment in the industry by taxi owners that needs to be protected. It is crucial therefore that owners and drivers demonstrate a greater commitment to the customer to stave off any threat of deregulation.”

Protected indeed. I reckon the most telling fact is that the number of full-time conventional taxi licences remained completely unchanged between 1990 and 2004, a period when Perth’s population rose more than 63 per cent.

Additional taxis for that period were mainly restricted types, with numbers decided by bureaucrats dictating what the market needed while constantly increasing regulated fares, which further boosted the value of private plates.

Here’s how that ridiculous situation was described by the RAC report.

“The main indicator used in the past to determine administratively whether or not new licences should be released has been the ratio of licences to population,” the report stated.

It went on to say: “This ratio was first used in Perth in 1958. It continued to be used until 2008, during which time the increase in licences was severely constrained. The ratio varied at different times from 1:600 to 0.86:1,000, highlighting its arbitrary nature. No reference has been found which provides a detailed rationale for how the ratio cap was determined. Rather, it seemed to be made to fit other general perceptions, generally strongly influenced by plate owners, of how many taxis were in excess at the time it was set.”

Talk about opaque. Suggestions that Uber has captured the state’s governing Liberal Party need the above bureaucratic nightmare for context.

The estimated cost to consumers is around $70 million a year, the majority of which is transferred from them to plate owners.

So that background lobbying by plate owners has worked a treat.

Labor’s Alannah MacTiernan and later Liberal transport minister Troy Buswell tried to flush the system with more government-owned plates, but no-one who has used Perth’s taxi system could suggest they were remotely successful.

Only the arrival of Uber has worked, and now those dark forces are rising to shut down competition again.

They are throwing around issues such as safety, which is a big joke. Taxis are, in general, just regular cars adapted for commercial use. Taxi services have actually been exempted from some safety regulations by which every other driver must abide, such as restraining children.

The issue to me is simple. The plate owners need to go. However, no matter how much they or, more likely, earlier plate owners are to blame for creating the mess we have today, I don’t believe in governments destroying private wealth for ideological reasons.

That is a dangerous precedent.

The plate owners need to be bought out. That idea was raised by Labor in 2003 and shot down.

It needs to be resurrected.

The cost is high, potentially more than $200 million at today’s plate prices.

Nevertheless, the state should dispense with private plate ownership, offer a moderately priced taxi drivers licence that includes insurance, which all drivers – including Uber’s – must have.

It should offer taxi plate owners an immediate payout based on the low end of recent plate prices, and then have a surcharge on all paid car rides, Uber included, of around 5 per cent of the fare to pay it off.

At a dollar per average ride, even Uber customers ought to be able to live with the result. With around 13 million rides in licensed cabs it might seem like that debt will takes decades to pay off (I’ll leave it to some accounting whiz to do the back-of-the-envelope calculations), but with Uber meeting a lot of previously unmet demand, it is possible this solution could end the problem in less time than most of us have been living with it.


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