TheOFT says quantity restrictions, which are currently imposed by 45% of local authorities, 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. 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.
In the OFT case studies of local authorities that have removed quantity restrictions, the supply of taxis increased on average by about 50%. This has led to a dramatic reduction in waiting times at peak times. 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.
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. However, the way that they are applied can impose unnecessary costs and hinder new entrants to the market – and the OFT specifically mentions some local authorities' requirements for London-model black cab criteria in this contect.
The Department of Trade and Industry and the Department for Transport now have 120 days to consider and respond to the OFT's findings and recommendations.