Ultimately, the general thrust of the report of commissioner Paul Baxter of the Independent Competition and Regulatory Commission is right. The taxi industry – at the economic level — must be deregulated. It was the same with the milk industry. But the lessons of the deregulation of the milk industry must be learnt and the same mistakes not be made as the taxi industry is deregulated.
Fundamentally, milk and taxi serices are no different from the retailing of meat or petrol or the provision of dental or optical services. There is no need for the government to determine how many providers there should be. There is no need for the Government to limit the number the providers with a monopoly licensing system. And there is no justification for the Government to charge a huge sum (whether by auction or otherwise) for permission to enter the market. Market forces driven by public demand should be the determinant of how many providers there are in the taxi industry. The Government should concern itself only with safety and competence. Once a person has proven the safety of the driver and the vehicle and the competence of the driver to drive it and to navigate it, they should be granted the licence to ply the taxi trade. In the building trade, for example, the Government does not limit the number of builders. Anyone who can demonstrate the competence to be a builder, electrician, plumber or whatever gets a licence and is beholden to an authority to work competently. There is no “”plate” system under which the Government limits the numbner of practitioners. In an ideal world anyone who can prove competence and safety should as of right get a licence to run a taxi – just like the surveying, architecture, surveying or any one of a dozen other activities.
That said, there is a critical issue of transition. The Government having controlled the highly regulated monopolist taxi industry has created an artifically high entry price to the industry – so high, indeed, that many taxi plate owners are paying huge sums to service debt to pay the entry price (up to $300,000 a car). If the Gvoernment were to deregulate immediately, these people would face bankruptcy unless there were proper compensation provisions. When the milk industry was deregulated (as it should have been), the Govenrment did not provide adequate let alone fair compensation.
The Govenrment should move to deregulate the taxi industry so anyone can enter the market, provided they can demonstrate they are safe and competent. But in doing so, the Government – which created the artifical monopoly in the first place, should err on the side of generosity when compensating existing plate owners for the loss of their monopoly rights. The Government did not do this with the milk-delivery industry.
At present almost the total value of a taxi plate resides in a piece of legislation which allows the Government to limit the numebr of taxi plates. There is no inherent value in the plates. The Government could sweep that value away at a stroke of a pen. Value created by legislation can be destroyed by legislation. But fairness demands that the Government pay out existing owners at present market rates. They would be able to return imemdiately to an economically deregulated market faced only with a licence system for competence and safety, at which they would get an initial advantage becaue others coming from outside would have a harder job satisfying competence and safety demands.
The taxi industry will no doubt argue that the public interest demands regulation of taxi numbers. Well, if that is the case, the Government should regulate the number of butchers, bakers and candlestick-makers. In that environment, comsumers suffer. The question is not whether to deregulate, but how to compensate existing players.