The Independent Competition and Regulatory Commission may well have a point when it argues for a taxi industry free from economic regulation. It has recommended that in an ideal world anyone should be able to apply for a taxi or hire-car licence and get it subject only to an administrative fee (of about $7000) and a safety and diligence test.
At present it is a criminal offence to operate as a taxi without a government licence which is granted on a rationing system according to what the government assesses are the market conditions. The licences are very expensive, selling at auction for between $160,000 and $240,000 at recent auctions and for similar amounts when sold on the open market. The market price is not driven by the usual economic factors of goodwill and stock (the car itself) but according to an artificial value created by the Government restricting the number of taxis in the territory.
The Government does not indulge in this sort of interference in a market in other spheres of economic activity. It does not limit the number of real estate agents, lawyers, sandwich shops or cinemas. Rather it imposes some overall standards on education, competence, health and safety for anyone who wants to enter the market, but other than that there is no governmental restriction to the number of people who can set up as a real-estate agent, lawyer or sandwich-shop operator.
With taxis, it is different. The Government sets a set limit to the number of taxi plates, even if there are many others ready, willing and able to take up the task.
In the long run the Government should aim for the economic deregulation of the taxi market, with strict regulation on driver and vehicle safety to ensure competence and safety.
The taxi industry argues for a limit to overall numbers in what it calls the public interest. But under that theory the government would also regulate the number of food outlets, dentists, builders and other providers of services of equal import to the human condition as transport. The control on the number of people who can operate a taxi is untenable. It just drives up the price of a plate which is passed on to the consumer. It creates a more limited supply, once again, to the detriment of the consumer.
But the Government cannot begin at Year Zero now. That would be unfair to existing licensees. Existing taxi owners have had to pay large amounts of money for their licences. It would be unfair to existing owners who spent good money based on existing legislation for their licences to allow anyone in immediately.
The compensation suggested by the commission is derisory and insulting. The commission itself has argued that the taxi industry is an unacceptable cartel. So it must also understand that the strength of the cartel sounds in the money need to enter it – and therefore should accept that to demolish the cartel will require heavy compensation if justice is to be done to existing plate holders who bought plate in good faith that the existing restrictive arrangements would continue.
The public interest demands that the present restrictive regime be dismantled. But fairness demands that existing plate-holders be properly compensated.
It is important to put everyone on notice that the present restrictive regime will end. But it should end gradually, perhaps with a gradual but steady increase in the number of plates sold at auction with the money raised going to existing plate-holders until plate values go to zero and the only regulation being for safety and competence.