25/11/2014 - 05:35

RAC taxi report strikes balance

25/11/2014 - 05:35


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The learned professors behind deregulation recommendations for the state’s taxi industry were cautious not to go too far.

RAC taxi report strikes balance
CHANGES: David Cousins (pictured) and co-author Allan Fels recommend that most sorts of fee control be abolished.

True independence is hard to find when policy is reviewed.

Governments, it is said, only have inquiries when they know what the result will be. Industry groups naturally have an eye for their membership, and think tanks often come with their own ideological slants.

But motoring advocacy group RAC has gone pretty close to finding an independent outcome in asking two warriors from the world of consumer regulation to examine the regulation of Western Australia's taxi system.

While Allan Fels may have grown up in WA, he and fellow economist David Cousins are fairly well removed from the state in terms of business and lifestyle.

Certainly both have delved into the taxi industry in Victoria on behalf of the state government, which has acted on their review of the sector and introduced partial deregulation.

But that just means they have a greater understanding of the issues, which are similar across the jurisdictions.

Speaking at the launch of his co-authored report last week, Professor Cousins was scathing of the present system and the unnecessary cost it imposes on consumers; although he admitted WA's release of government-owned plates to compete with the private ones meant this state was more competitive than Victoria.

He believes WA's private plate system has probably cost consumers hundreds of millions of dollars. Private plate owners, who own the licence for a normal 'rank and hail' cab to operate, collect about $18,000 a year for doing nothing.

He described it as a scandal. And it is. Private plates currently sell for around $290,000, suggesting owners expect about 6 per cent return on their money. That is a small mortgage that someone has to pay for before they start earning anything for themselves. Given the nature of the job it attracts many unskilled (and skilled) immigrants who struggle to find the kind of employment to get a mortgage of their own, let own require them to pay off someone else's.

Professors Cousins and Fels recommend that there be no limit on the number of taxis allowed on the road, and that most sorts of fee control be abolished. They want plate leasing costs reduced and the removal of other restrictions that tend to discourage new competition at the dispatch level.

Vitally, the report does not recommend an expensive state buyback of the existing private plates, which license just under half of the traditional taxis on the streets.

It is all a good start and, maybe, it is digestible for the government, the industry and drivers – in part because it really doesn't go as far as it should.

Firstly, despite the welcomed attack on over-regulation, the pair recommended that new operators challenging the current system via smartphone applications – an example would be Uber – ought to be registered. This is another form of regulation, which flies in the face of reality because technology is moving miles ahead of any state efforts to control it.

More surprising to me was the recommendation that annual licence plates costs be capped at $10,000 a year, preferably, or at most $13,390, which is the current annual leasing price for government-owned plates.

This seems considerably high from a cost recovery point of view, to allow the state to recoup the cost of administration, especially when drivers will need separate licences that come with costs of their own.

Perhaps with the state government hurting on the budget front it is hard to conceive of a recommendation to reduce its annual income from this small (almost $16 million) but reliable source.

If the current system, with private plates imposing a cost of $18,000 per annum, is a scandal, it is hard to see how $13,390 or even $10,000 a year is really that much better.

The rest of us drive cars licensed at far less cost. Certainly taxi licences are special, but how much more so and for what reasons? Are state inspectors really chasing cabs about checking their roadworthiness or cleanliness? Surely, apart from a vehicle meeting the safety standards required for the rest of the road's users, it is up to the drivers and their dispatch systems to decide what level of service they will provide for the market?

Or, realistically, it is up to consumers to show what level of service they expect or will tolerate.

Adding even $10,000 a year to the cost of doing business seems set to make the business unaffordable for many potential entrants. In the end, driving a taxi ought to be a field where one person need only own a car. How will part-time drivers, using their own cars to drive short shifts, afford that? The Uber model doesn't have those start-up fees, yet it is these types of drivers who are needed to inject competition into the system and meet the peak needs that our full-time fleet can't seem to service.

Anyway, despite these criticisms, I am heartened by the approach of the report and its authors' belief that the current system can be substantially deregulated without the financial pain of a buyback. Potentially this is a politically astute report that just goes far enough to be acceptable, for now.

I look forward to seeing the state government react positively to this report. Implementing it will certainly be easier than 10 years ago – a taxi strike will hardly work when there is an alternative like Uber for passengers to turn to.


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