The Mayor, Ray Mallon

MAYOR’S DELEGATED DECISION

TAXI DEMAND SURVEY

The Mayor, Ray Mallon

Ian Parker, Director of Environment

13 June 2008

PURPOSE OF THE REPORT

To report on the findings and recommendations of an independently commissioned Taxi Demand Study and reconsider Middlesbrough’s current policy of unrestricted issuing of Hackney Vehicle licences.

BACKGROUND AND EXTERNAL CONSULTATION

Middlesbrough Council is the Licensing Authority for Hackney Carriage and private hire operators, drivers and vehicles and specifies the standards required for operators, drivers and vehicles, regulates Hackney Carriage fares and enforces these standards. The Department for Transport Best Practice Guidance 2006 states :

“The aim of local authority licensing of the taxi and private hire trade is to protect the public”.

In Middlesbrough, licences have been issued for 300 private hire vehicles, 369 Hackney Carriage vehicles, 909 drivers and 9 operators (these figures are subject to change).

Under the Transport Act 1985 the Council can consider restricting the number of Hackney Carriage vehicles where it can be shown there is no “significant unmet demand”. Most local licensing authorities do not impose quantity restrictions on the number of Hackney Carriage licences they issue. They operate an Open Issue Policy and the Department for Transport Best Practice Guidance 2006 states this is best practice. The Guidance states that “ where restrictions are imposed, the Department would urge that the matter be regularly reconsidered“.
The Best Practice Guidance was revised in 2006 following an Office of Fair Trading Report which looked at the regulatory framework affecting taxis and private hire vehicles. This report concluded that “quantity controls were detrimental to consumers. They mean that consumers have limited access to services they desire, and the regulations also impede potential new entrants wanting to set up a taxi business”. The OFT report is in line with the overall thrust of encouraging competition as being in the best interests of both consumers as individuals and the national economy.
Rather than amend the primary legislation the Department for Transport dealt with this directive by strongly encouraging local authorities to review any quantity restrictions policies. The Guidance suggests that the quantity restriction policies matter should be approached in terms of the interests of the travelling public and what benefits or disadvantages arise for them as a result of having, or removing a Restriction Policy. The Government’s view is that quality controls should be removed unless a specific case can be made that such controls benefit the consumer.
Elements of the Hackney Carriage trade, which forms only part of the overall fleet, have been in favour of a restriction on the issue of more licences. In most cases where quantity restrictions are imposed, vehicle licence plates command a premium, often tens of thousands of pounds. This indicates that there are people who want to enter the taxi market and are prevented from doing so by the quantity restrictions. The Guidance states that “The Department of Transport finds this very hard to justify, or indeed to equate with the concept that there is no significant unmet demand”.
If a local authority takes the view that a quantity restriction can be justified in principle, a demand survey is required to be carried out to justify their reasons for restricting the number of licences issued and show that there is no significant unmet demand. This survey has to be carried out with sufficient frequency to be able to respond to any legal challenge – this is commonly regarded as every three years. The demand survey involves consulting with all those working in the market, consumer and passenger (including disabled) groups, groups which represent those passengers with special needs, the police, and a wide range of transport stakeholders, e.g. rail/bus/coach providers and traffic managers.
An authority must then publish its conclusions, including an explanation of the particular local circumstances which justify restrictions, what benefits they deliver to consumers and how decisions on numbers have been reached. Authorities are encouraged to make all the evidence gathered to support the decision-making process available for public scrutiny.
Recent consultation with the Department for Transport has identified their intention to issue further guidance and to carry out a survey of local authorities which impose Restriction Policies. This follows on from publication, in 2007, of an evaluation of the impact of the Office of Fair Trading report which stated that local authorities should not maintain the power to restrict. It can be expected that the revised Guidance will continue to encourage licensing authorities that have a limit on the number of licenses they issue, to consider removing this.

The Current Position in Middlesbrough

Between 1989 and 2001 Middlesbrough had a policy of restricting the number of licensed Hackney Carriage vehicles, resulting in a fleet of 190 saloon vehicles. In April 2001 the authority decided to license an additional 20 Hackney Carriages, but restrict these to wheelchair accessible vehicles only. At the time applications for in excess of 100 vehicles were received and in May 2001 the committee granted 20 licenses in chronological order. This increased the total number of Hackneys to 210 (of these 20 were wheelchair accessible).
Three of the unsuccessful applicants appealed to the Crown Court. This was upheld as the court was not satisfied that the needs of people locally with disabilities were being met and an additional 10 wheelchair accessible vehicles were granted licenses. The authority then amended the policy to permit open issue (Open Issue Policy) in respect of approved wheelchair accessible vehicles. There are currently 369 licensed Hackney Carriages of which 190 are saloon cars and the remainder wheelchair accessible. There are 271 licensed private hire vehicles and 870 drivers. (Please note the number of Hackney Carriage vehicles has increased from 368 to 369 since the information was provided for the Demand Survey Report in February 2008.)
Over the last few years the Hackney Carriage Association have expressed concern about the number of Hackney Carriage vehicles in Middlesbrough and the impact this of this on their working hours and income. In August 2007 the Association asked for the Open Issue Policy to be reviewed and for a demand survey to be carried out to demonstrate there is no significant unmet demand. It is normal continued practice for demand surveys to be carried out to demonstrate the need for a Restriction Policy, rather than the introduction of such a policy, which goes against the Department for Transport Guidance. The Hackney Carriage Association would like the Licensing Authority to revert to a Restriction Policy.
An independent consultancy “Transportation Planning (International)“ (TPi) was commissioned by the Council to carry out the study. The objectives of the study were set as :
To continue to promote and encourage improvement in the quality of the taxi and private hire car fleet and drivers;
To determine whether there is any significant unmet demand;
To explore whether the current specifications and availability is meeting the needs of the community and specifically the needs of those with mobility impairments;
To consider the provision of taxis in the context of the wider reviews being undertaken at local authority level (of social services and education transport); and
To explore how taxi policy can support the wider regional objectives within the Local Transport Plan (LTP), the community strategy, the Mayor’s vision and transport strategy.
A draft report from TPi was produced on 8 April 2008. The conclusions and recommendations are attached in Appendix 1.
In summary, the report concludes in relation to the demand issue that “significant unmet demand for Hackney Carriages in Middlesbrough does not exist at this time”. It also concludes that “as a result of their being no significant unmet demand we can conclude that market forces are working and that the balance of supply and demand is optimised; i.e. it is the policy of delimitation which is allowing this to occur. Therefore based on our analyses, Middlesbrough Council has the discretion to consider the following options:

Introduce a limit at the current level of 368 (currently 369) licences, or

Issue that number if Hackney Carriage licences as it sees fit, or

Maintain the current delimitation policy”.

The report also made a number of recommendations in relation to the standards of driving and low customer care, and to the improvement of ranks.

OPTION APPRAISAL/RISK ASSESSMENT

Middlesbrough has operated an Open Issue Policy since May 2001. The demand survey was commissioned at the request of the Hackney Carriage Association to consider whether there is no significant unmet demand for Hackney Carriages and to review the Open Issue Policy. In view of the survey’s findings the following options could be considered:

Option 1: To maintain the current policy of Unrestricted Issue.

This would in effect be maintaining the Council’s current Policy of Open Issue. The Taxi Survey concludes that the current policy is working effectively, it is in line with current government guidance and that this is likely to remain the case when revised guidance is issued in the summer of 2008. It is considered that the current policy has optimised the balance of supply and demand through market forces which is the option supported by the Department for Transport Guidance and the Office for Fair Trading.Since 2004, between 23 and 37 applications for new Hackney vehicle licences have been approved each year in Middlesbrough. In 2007/08, 21 applications were made, demonstrating there is a continued demand for the vehicle licences.

It is considered that this is the preferred course of action, with a recommendation to revisit once the revised national Guidance and the survey on Open Issue Policies are published by the Department for Transport later this year.

Option 2: Impose a Restriction Policy

The Council would refuse to grant any further additional licenses, provided the authority can demonstrate there is no significant unmet demand and that the policy is in the interests of the travelling public. This would mean that a limit on the number of vehicles would be set at a specific number of vehicle licences and no further applications would be considered. A Restriction Policy would require a demand survey to be conducted every three years as a minimum. It is not in line with the current national Guidance.
It is likely that imposing a Restriction Policy for Hackney vehicles would result in an increase in applications for private hire vehicle licences. It is also likely that there would be an increase in plying for hire offences by private hire vehicles operating as Hackney vehicles at times of peak demand.
To justify the Restriction Policy the Council must show there is no significant unmet demand and the demand survey provides some support for this. The Council must also demonstrate that a Restriction Policy is in the interests of the travelling public, that is the people who use taxis. Therefore, this option should be considered in conjunction with initiatives for improving standards. This could include raising the Hackney vehicle specification, and the development of a quality mark for operators and vehicle owners, which are in the interest of people who use taxis. Appendix 2 shows an action plan to improve the standard of vehicles and drivers based on the recommendations in the Taxi Survey.
The date for the implementation of a Restriction Policy could be delayed for several months as it is possible that once the policy is considered in a public forum there will be a rush of applications. Furthermore, this delay would allow applications for new vehicles which are already on order to be processed. It would allow the market to settle and reduce the likelihood of challenge to the Policy in the short term. Therefore, considering these issues, it is proposed that the Restriction Policy would be implemented on 1 September, 2008.
It is likely that this option will be subject to legal challenge should an application for a vehicle licence be refused. A delay in the date for implementing the Restriction Policy will reduce this risk. However, the risk of the council losing a legal challenge will increase with the age of the study.

Option 3: Introduce a temporary Restriction Policy.

The Council would issue no new licences for a specified period of time after which the policy would revert to open issue. A temporary Restriction Policy may be justified on the grounds that it is in the interests of the travelling public if the action plan of improvements to driver and vehicle standards in Appendix 2 will is progressed. It is proposed that the time period for the Restriction Policy to be in place will be based on the anticipated period of time required to work with the trade on improving vehicle and driver standards from September 2008 until September 2010.
The advantage of imposing a temporary Restriction Policy is that there is less likelihood of a legal challenge, and that the current Taxi Study will only be valid for a limited period of time to defend any legal challenges. Also, by agreeing to set a date to lift the temporary restriction this will remove the requirement for a further taxi survey to be carried out. A temporary Restriction Policy will not create a market for vehicle plates.

FINANCIAL, LEGAL AND WARD IMPLICATIONS

Financial

The current demand survey has been undertaken at a cost of £23,000. The cost of this has been borne through the income received through taxi fees which must be ring-fenced to the service. If the Policy is changed to limit the number of vehicles the annual income generated to run the service will be reduced. A Hackney vehicle licence costs £400 per annum so we would anticipate a loss of income of £12,000 each year, based on an average number of 30 applications. A reduction in income will have an effect on the number of enforcement exercises carried out and will restrict any future service improvements. This income would be required to fund any future demand surveys.
The potential cost to the Council of a successful appeal ranges from approximately £2000 in the Magistrates Court, with costs increasing up to £35,000 in the Crown Court. An appeal to the High Court could incur costs of £250,000 though at each stage in the process it would be prudent to review the merits of maintaining the restriction.

Ward Implications

All wards will be affected by this report as all resident have access to Hackney Carriages. All community councils were consulted as part of the demand survey and five community councils provided a response. Any restriction would have the effect of preventing a person who wishes to set up a new taxi business from doing so.

Legal Implications

The Department of Transport Guidance clearly favours an Open Issue Policy. Where restrictions are currently imposed on the number of licences, the Department of Transport is urging local authorities to reconsider their policies and whether the restrictions should continue at all. It is likely that the revised Guidance will reinforce this message. The conclusion of the Taxi Survey is that the current Open Issue Policy is working well.
If we revert back to a Restriction Policy, the need for this will have to be demonstrated at least every three years through a demand survey.
In 2007/08, legal action was taken against 85 taxi drivers and operators, with only two of these for plying for hire offences. Since the Restriction Policy was removed in 2001, the number of plying for hire offences by private hire drivers has reduced greatly as the availability of Hackney Carriage vehicles has increased, creating an element of self-regulation. If the market is changed to increase the number of private hire vehicles, it is likely that additional enforcement will be required, particularly for test purchasing exercises for plying for hire offences.

RECOMMENDATIONS

It is recommended that the current Open Issue Policy for Hackney vehicle licences is maintained, pending the publication of the revised Guidance in summer 2008 when the subject will be revisited.

REASONS

The Open Issue Policy is in line with the Department for Transport Best Practice Guidance. The current policy is working well to maintain a good balance between the supply of taxis and the demand by the public.
If it is accepted that the market is working well then it must be the case that numbers are optimised and so the value of introducing a restriction is questionable.
To introduce a restriction places the wishes of the trade who are currently licensed above both the wishes of those who aspire to be licensed in the future, and of the travelling public.

BACKGROUND PAPERS

The following background papers were used in the preparation of this report:

Taxi and Private Hire Vehicle Licensing: Best Practice Guidance, 2006
Middlesbrough Taxi Study, April 2008

AUTHOR: Judith Hedgley