One of the bad practices of Tudor monarchs in the 16th century is to be repeated in the Albert Hall next week. The Tudors used to replenish their coffers every now and then by selling monopoly rights to engage in certain trades. Sometimes they would just give the monopoly rights to mates. It caused great agitation among the good traders of England, but to defy it could result in fines, imprisonment or death.
It was only with the arrival of the Stuarts that the traders and Parliament were powerful enough to get the Crown’s rights restricted with the passing of the Statute of Monopolies in 1623, which restricted monopolies to inventions, and even then only for about 15 years.
Since then, Crown monopolies have re-emerged in a different form … the licence. Parliament has allowed the Executive to licence some activities to the exclusion of other practitioners for a hefty fee.
There is nothing wrong with licensing for safety and competence to prevent mayhem being inflicted on the public, but licensing just to raise the money or to protect existing monopoly licensees smacks of Tudor arrogance.
Yet next week the ACT Government will grant 15 licences to run a taxi, joining 202 others. The 217 licensees together have the exclusive right to run taxis. Anyone else who tries … no matter how safe and competent … does so on pain of a jail or a fine.
Like most monopoly rights, this one is very valuable. Last year, eight licences were auctioned for an average of $241,000, $15,000 more than the previous year. The cost of these licences (or the interest paid to raise the money) is passed on to customers. If it was not, all taxi owners would go broke. The Industry Commission estimates that licence fees cause fares to be on average $2.50 higher. The $2.50 is a tax that goes from the customer to the Government through an acquiescent taxi-owner who is happy to be a tax-collector as part of a monopoly arrangement that gives him or her higher profits for less work because there is less competition.
The commission says taxi licences in Australia are worth a total of $2.5 billion. The only reason the licences are worth anything, of course, is the laws behind them that prohibit others from running taxis.
Governments argue that they are forced to ration taxi licences because it would be unfair to existing owners to swamp the market with new licences. That is true. It is hardly fair to auction a licence last year for $241,000 and make it worthless this year. So, twist my arm, the Government is “”forced” to auction only a restricted number and next week will be forced to levy a de-facto tax of about $4 million.
As it happens, the ACT Government is auctioning more than in previous years. And it plans to auction 15 more next year. But if it argues that its aims is to increase competition, it is being unfair to existing owners. If it argues that it is just maintaining the status quo to keep up with a growing city, it is being unfair to the public by continuing the de-facto tax.
No state government seems willing to devise a scheme fair to existing owners but which will eventually cut out the de-facto tax on taxi fares. To the contrary, each year things get worse, with taxi licences fetching more money and then the taxi co-operatives arguing they have to have higher fares to meet their higher costs.
You cannot deregulate in one hit and you cannot compensate in one hit. Government gradually got us into the situation and should gradually get us out. Over, say, 10 years it should slowly increase the number of licences so the price gradually falls to nothing. But the revenue in the meantime should go to compensate existing owners. Eventually, the licence fee would be reduced to the actual cost of supervising safety and competence in the taxi industry. Anyone who can demonstrate they know the business and can conduct it safely should get a licence which could be regulated to a higher standard than at present for a fraction of the present $240,000 fee. Safety and competence do not require a monopoly. The monopoly reduces the number of taxis, inflates fares and results in poorer service. It is for the convenience of taxi owners not users; that is why they defend it so rigorously.