Review of Taxi and Hackney Carriage Service
in the Dublin Area
in association with
Goodbody Economic Consultants
Irish Marketing Surveys
The demand for taxi and hackney services in the wider Dublin area has increased substantially in recent years. This reflects a number of factors including strong economic growth and the resultant increase in incomes and employment, the tourism boom and the tightening of the drink-driving laws.
While demand has risen significantly, there has been widespread concern that there has not been a corresponding increase in supply, particularly during the busier periods, e.g. at weekends and at Christmas. In this context, Dublin Corporation and the County Councils of Dun Laoghaire-Rathdown, Fingal and South Dublin commissioned Oscar Faber, in association with Goodbody Economic Consultants and Irish Marketing Surveys to undertake a comprehensive and independent review of the taxi and hackney carriage service in the Dublin taximeter area.
This report provides details of the existing structure and usage of the taxi and hackney carriage trade in Dublin and proposes a number of changes, both short and long term, to improve the system for both the users and providers of the service. The study considers the whole taximeter area which encompasses all four local authorities. It is intended that the results of the review will inform future policy in relation to the licensing and control of taxis and hackney carriages.
In December 1997, an Interim Report was prepared which provided a preliminary review of the survey results carried out to that date and, where possible, made initial recommendations on certain aspects of the trade. This included an initial review of the fare structure and supply of taxis.
Existing Structure of the Taxi and Hackney Carriage Trade
Existing legislation provides for two types of cab operation; taxis and hackney carriages. Taxis are entitled to engage generally in hire and reward services, including services contracted through standing or plying for hire in public places; they are subject to a maximum fare structure and are required to display a roof sign. Hackneys are restricted in the manner in which they provide hire and reward services. In particular they are prevented from plying or standing for hire and in effecting contracts for hire by means of telephones or radio communications within the vehicle in a public place, and are not permitted to carry a distinguishing sign on the exterior of the vehicle. However, they are not subject to a maximum fare structure.
During the 1980s entry in to the taxi market was restricted. Since 1991 this restriction has been somewhat relaxed and a further 550 licences have been sanctioned, 200 of these were sanctioned in 1997 and 200 will be issued during 1998 following the Interim Report. It is estimated therefore that there will be 2374 taxis in operation by the end of 1998. These restrictions have resulted in licence plates being traded in the secondarymarket at values up to K80,000.
A more liberal approach has been taken in relation to entry to the hackney market where, with the excepfion of some moratoria, the number of licences has largely been unrestricted.
As result the number of licences have increased from 200 in the mid 1980s to a current level of approximately 3,500.
The majority of taxi operators are in possession of one licence only and a significant proportion rent their licence and vehicle to a cosy . A minority of taxi operators have multiple licences and use drivers (cosies) to operate these vehicles. It is estimated that over 85 percent of drivers are affiliated to a radio dispatch service. Hackney licences are generally owned by single operators and are affiliated to a hackney office, which arranges bookings. It is estimated that there are 70 such companies currently operating in the Dublin area
Existing Usage of the Taxi and Hackney Carriage Trade
As part of the study, a comprehensive data collection exercise was undertaken extending from mid October 1997 to mid January 1998. The surveys covered the whole taximeter area and included; surveys at taxi ranks, household interviews, on-street surveys, mystery fares and business users surveys. In addition an extensive consultation exercise was carried out with interested parties.
Some 56 per cent of Dublin's residents surveyed used a cab within the last six months with younger people showing a greater tendency to use taxis and hackneys. Usage is evenly spread across socio-economic groups, with lower income groups being as likely to have used a cab in the last six months as those on higher incomes.
The surveys indicate that demand for cabs exceeds supply at certain times of the day and week, as follows:
excessive passenger waiting times were recorded at taxi ranks late at night for relatively long periods. Waiting times in excess of 90 minutes were not uncommon. Delays were also noted during the day, particularly during the peak commuter hours
some 45% of residents surveyed in the wider Dublin area disagreed that taxis/hackneys can be easily hired at busy times, and 20% stated they would accept higher fares for reduced waiting times
some 75% of people interviewed on-street considered that taxis/hackneys were not easily hired at busy times
over 46% of telephone calls to cab companies resulted in waiting times in excess of 20 minutes and a large proportion of operators contacted were unable to provide a vehicle within a reasonable timescale
some 55% of local businesses contacted stated that cabs were difficult to obtain after 4pm
In addition, those parties consulted, who do not have a direct interest in the taxi/hackney trade, considered that there is a lack of available cabs
The number of residents per cab in the Dublin area does not appear to be disproportipnal)y high in comparison to other major urban centres. However, for a number of different reasons, there is a more intensive use of taxis and hackney carriages in the Dublin taximeter area. This reflects the large tourist population, low population density, and the lack of a high quality public transport system. As a result, there is an unusually high demand for the service leading to problems of supply at particular times of the day and week.
The Economics of Entry, Fare, and Quality Regulation
Economic theory suggests that intervention in any market should be kept to a minimum as the market itself will ensure that the right goods are produced at minimum cost. However, there may be a number of imperfections in the market which can result in the system becoming unacceptable to either the users or providers. In relation to the taxi trade such factors suggest that the market would not operate optimally if it were completely deregulated.
It is generally accepted that restrictions on market entry should be avoided as regulatory authorities are unlikely to have sufficient foreknowledge as to provide the optimum supply of taxis. In the longer term, therefore, economic theory and experiences elsewhere support a policy of open entry in the taxi market.
However, a deregulated market in terms of taxi fares would lead to an upward pressure on fares. This suggests therefore, that price regulation is justified and that maximum fare levels should be maintained.
Since the quality of taxi services (both driver and vehicle quality) are not directly observable by users of the trade, there is potentially an incentive for operators to reduce quality in order to obtain a cost advantage. This would have both cost and safety implications. Therefore. theory suggests that quality regulation of the taxi market should be maintained and enhanced if entry into the market is more liberalised.
In summary, economic theory generally supports the view that a taxi market should have uncontrolled entry, but be subject to substantial fare and quality regulation.
Where entry deregulation has occurred elsewhere, it has generally resulted in a significant increase in the supply of taxis. Although evidence on the impact of the quality of service is limited, the increases in supply have been so significant as to ensure better service levels. This is confirmed by evidence which shows that taxi capacity rates inevitably fall after entry deregulation, implying an increased availability of taxis.
Generally fare deregulation has not tended to lower prices. There is therefore evidence from both theory and practice that fare regulation should be maintained.
There is clear evidence from experience abroad that where entry is regulated the number of taxis in operation is unduly restricted. We believe that this also applies to Dublin, where returns from taxi operation are very high and there are extraordinarily high values attached to the licence plate. The rapid rise in the numbers of hackneys supports this view.
Organisation of the Dublin Taxi and Hackney Carriage Market
The priority is to increase the supply of taxis to the market, to ensure demand is met during the busy periods. On the basis of our examination of both theory and practice relating to the taxi market, it is not considered that this should be effected within the context of a commitment to full market deregulation. In particular, the case for fare deregulation is considered weak, and therefore we are recommending no change from the current situation in this regard.
However, we believe that full entry deregulation of the taxi market would be beneficial in improving the level of service to the consumer, allowing the supply of taxis to adjust more quickly to demand.
There are economic and social reasons why deregulation of entry may not be desirable in the short term. There is some concern that full and immediate entry deregulation might lead to excessive entry into the market, which would then take some time to reach equilibrium. This could lead to low actual returns, followed by substantial level of exits from the market. A long lead-in period in which the number of licences was gradually increased would allow time for potential entrants to gauge the extent to which market demand remained unsatisfied as supply increases, and would permit the situation to be fully monitored.
Furthermore, entry deregulation would impact very severely on a minority of individuals who have recently bought licence plates on the open market. Some of these purchasers have invested life-savings or redundancy monies in a plate in the expectation thai the value of the plate would at least be maintained. Under full entry deregulation the market value of the plate will virtually disappear.
In the long term there are no strong arguments for the retention of a separate category for hackneys (other than specialised limousine services), especially if entry to the taxi market is deregulated. Any liberalisation of entry regulation to the taxi trade is likely to lead to an increase in taxi numbers over time. It is conceivable that the hackney carriage numbers may reduce to a level at which it would be reasonable for all licenses to be transferred to a taxi status; effectively allowing the market to produce a single category structure. However, given that a transitional period to full entry deregulation of the taxi trade is envisaged, during which the supply of taxis will be restricted, the existing distinction should be maintained for the foreseeable future.
As mentioned previously, entry to the hackney market has generally been uncontrolled apart from the imposition of occasional moratoria. In our view, the current moratorium should cease and entry to the market should be completely deregulated with immediate effect. This approach is consistent with entry deregulation for the taxi trade and is based on the same arguments. It is reinforced by the fact that whatever option is taken with regard to improving the supply of taxis, the latter will not keep pace with demand for the foreseeable future.
We have made strong arguments in favour of continued fare regulation of the taxi market. The question arises as to whether fare control should be extended to hackneys. In practice, most hackney operators base their fares on those prevailing in the taxi market. As they are in competition with taxis, they would have difficulty in raising fares above those for taxis, without losing market share. Given the continuation of the present distinction between services offered by taxis and hackneys, we recommend that the hackney fares should be continued to be deregulated thereby providing the opportunity for consumers to bargain for lower fares.
Options for Increasing the Supply of Taxis
It has been established that there is a shortage of taxis at particular times of the day and week. Demand for taxi and hackney services is growing strongly, a trend which is set to continue for the short term at least. All of these factors point to a current shortfall in taxi supply, which is likely to increase over time.
Measuring the extent of this shortfall in taxi supply is a difficult task. Essentially, it involves prediction of the number of taxis which would be licensed if controls on entry were relaxed. Our assessments suggest a shortfall in taxi supply of almost 2,000 at the end of 1998.
As has been noted, immediate and full deregulation of entry is not an attractive option. A transitional period is required. If a transitional period of ten years were adopted, then the number of new licences released each year would have to be sufficient to make up the shortfall by the end of the transitional period. As demand for taxi services in growing, the shortfall in the market is also increasing.
We estimate fhat the total demand for taxis at the end of the ten year period would be in the region of 5,900, giving a shortfall of 3,500. This indicates that something in excess of 350 licences would have to be issued each year, if the shortfall were to be eliminated over ten years.
Even with unrestricted entry to the hackney market, increasing the supply of taxis remains an urgent necessity. In the past year, the issue of 400 additional licences has been sanctioned. A continuation of this policy is obviously an option to be considered. However, it is important to put in place an approach which underpins, on an ongoing basis, the commitment to increasing the supply of taxis
Two broad approaches are possible. The first would entail a commitment, which would ideally be enshrined in legislation, that after a transitional period taxi licences would continue to be issued provided unmet demand was demonstrated. The second approach involves full entry deregulation, allowing the market to determine supply.
Within this context, and assuming unrestricted entry to the hackney market, we have identified three options for improving the supply of taxis as follows:
the issue of a minimum of 350 taxi licenses per annum over a ten year period at a licence fee of £15,000. At the end of this period, additional licences would be issued on the basis of the criteria of unmet demand.
A commitment to full entry deregulation with a long transitional period of, say 10 years, during which regular annual issues of 350 licences would occur at a licence fee of £15,000; or alternatively,
A shorter period to entry deregulation could be set, say 5 years, with a mechanism to compensate existing plate owners being introduced with the issue of 200 plates per year at no charge.
On balance, we favour Option B as it benefits consumers sooner, and allows the market to determine the appropriate level of supply.
Wheelchair Accessible Vehicles
It is anticipated that by the end of 1998, 450 wheelchair accessible taxi licences will have been issued, amounting to some 19 per cent of the total taxi fleet. In effect, any new licences issued since 1992, have been in respect of wheelchair accessible vehicles. This policy reflects a concern to make taxi services available to persons with disabilities. Taxis are seen as especially valuable for transport of persons with disabilities as they operate door-to- door and can be booked by telephone. There is concern that the policy of issuing wheelchair accessible licences has not been a success. Because the number of wheelchair accessible taxis is still relatively small, persons with disabilities are unable to acquire a wheelchair adapted taxi without excessive delays.
We do not consider that all taxis should be wheelchair accessible. The best means of achieving a balance between the needs of wheelchair users and other taxi users while ensuring a reasonable service to persons with disabilities is progressively to make a significant proportion of taxis wheelchair accessible.
If Options A or B are adapted, then it is recommended that all new taxi licences be in respect of wheelchair accessible vehicles. This will result in over 60 per cent of taxis being wheelchair accessible at the end of the transition period.
If Option C is adopted a more complex situation arises. Deregulation of entry over a short term period, would cause the margins on which the trade operates to fall dramatically. In such circumstances, to impose a requirement to use a wheelchair accessible vehicle would make the trade totally uneconomic. Taxi owners therefore would require some form of compensation to offset the extra costs involved.
Under entry deregulation, if Option C is adopted, 200 licences will be issued each year of the five year transition to full deregulation. These licences should be in respect of wheelchair accessible vehicles and VRT and VAT should be waived on such purchases. By the end of the transitional period to entry deregulation, over 40 per cent of taxis should be wheelchair accessible and a second hand trade will have deveioped.
Fare Structure and Levels
We were asked by the commissioning local authorities to undertake an interim reveiew of fare structures and levels in December 1997. The results of this review were presenting in our Interim Report.
In assessing the fare structure, we first examined whether any increase in fare levels was justified. This was done by:
investigating the costs facing the trade: lt was established that cosies have to put in excessive hours of work to earn a reasonable income, and that licence holders who choose not to operate a cosy would also have to work somewhat above average hours to earn the average industrial wage.
comparing fare levels with those obtaining in the VK: In general fares are lower in Dublin, however, additional charges are significant in the Dublin taxi market; and
assessing whether fares have kept pace with inflation levels and other trcinsport costs: It was found that increases in taxi fares have lagged behind increases in transport costs and the general cost of living.
As a result of our Interim Report
200 additional wheelchair accessible licences were issued.
the basic fare was increased by raising the mileage charge from 80p to 90p and the time charge from 10p to 15p per minute. The minimum charge thus increased from £1.80 to £1.90;
the unsocial hours charge was raised from 40p to 80p between 12.00 p.m. and 5.00 am, 40p between 8.00 pm and 12.00 pm and between 5.00 am and 8.00 am each day and all day on Sunday;
waiting time charges were raised from £6 to £9 per hour; and
a charge of £20 for soiling the taxi should be introduced.
It was considered that the limited increase in taxi numbers, together with the proposed fare increase, would help to increase the availability of taxis at critical time periods. These recommendations have now been implemented.
In addition to the changes outlined above, and to ensure further improvements in efficiency, the following amendments to the fare structure should be reviewed:
the night-time charge be increased further from 80p to 120p, thus giving taxi operators an additional incentive to work these unsociable hours;
there is no rational for charges for extra passengers/luggage etc. and based on structures in the UK we recommend that such charges should be dropped. This will also simplify the fare structure; and
in order to ensure a service to outlying areas where the probability of back-fares are low, and to serve areas that lie within the Dublin commuting area but are now outside the taximeter area, we recommend that maximum fares should apply to journeys originating within the current taximeter area and extending up to 20 miles in length, and a new higher journey length charge be introduced for distances over 10 miles.
To ensure that fare levels are kept in line with market conditions we recommend that fares be reviewed on a regular basis. In addition licence renewal fees should reflect the cost far local authorities regulating the industry and any facilities that they may provide for the trade (eg taxi ranks etc).
Driver and Vehicle Regulations
Given that quality of drivers and vehicles are generally unseen to consumers until they acquire the services of a taxi or hackney and that the safety of the consumer is paramount, regulations in relation to quality are very important. The public service role played by taxis/hackneys makes safety all the more important, particularly given the large number of tourists visiting Dublin. In addition experience elsewhere suggests that quality standards may be compromised in a market where entry conditions are relaxed. So to ensure that quality standards are maintained, a number of changes are required:
taxi and hackney carriage driver licence holders should be assessed on an annual basis;
to further improve safety, consideration should be given to the introduction of a tachograph system for all taxis and hackney carriages;
all taxis and hackneys should be inspected on an annual basis to ensure road- worthiness and improve quality. The inspection should incorporate an emissions test;
appropriate external vehicle identification should be a requirement of all hackney carriages (excluding limousines and funeral hire cars);
details of the fare structure should be displayed in both the front and rear of taxis;
alI taxis should be required to implement automatic receipting systems; and
improved facilities should be provided at taxi ranks, including shelters, seating, enhanced lighting. In addition, existing signage and road marking should be maintained and direction signs implemented.
To ensure that the taxi/hackney trade operates more efficient the following changes are recommended for the operation of the market:
hackneys should be permitted to operate in bus lanes.;
a pilot study should be undertaken to assess the feasibility of adopting a shared taxi rank scheme;
a detailed review of taxi ranks in the city centre should be undertaken to increase the number of spaces and spread of stands;
a detailed study of taxi ranks in the outlying areas should be undertaken to review the location of existing ranks and to provide additional stands in new areas;
hackney carriages should be permitted to use radios/telephones to both facilitate and initiate a hire;
hackney carriages should not be permitted to ply for hire or stand at ranks. More rigorous enforcement to ensure compliance with these restrictions should be implemented. Heavy sanctions, including loss of licences, should be imposed for failure to comply with these regulations; and
an effective complaints procedure should be introduced and responsibility for the same should be transferred to the local authorities.
In making the above recommendations it is recognised that some changes, eg fare structures and number of licensed vehicles, fall within the gambit of the local authorities' control. Other measures, such as those relating to driver and vehicle operations and the provision of taxi stands, will fall to the Department of Environment and Local Government and the Garda Commissioner to implement.
Summary of Recommendations
This section provides a summary of the recommendations under the relevant headings. It must be recognised that many of our recommendations would require enabling legislation. This applies in particular to recommendations relating to driver and vehicle standards. However, most of our recommendations which relate to entry and fare regulation can be implemented by the local authorities.
Entry to the Market
The current distinction between taxis and hackneys should be maintained. The moratorium on entry to the hackney market should be removed with immediate effect. There is a pressing need to increase the supply of taxis.
There are a number of ways in which the supply of taxis may be increased. We recommend that this be done within the context of a commitment to de-regulate entry within a ten year period, with 350 licences issued per year.
Taxi fares should continue to be controlled by means of a maximum fare structure. Fare levels should be subject to annual review.
Hackney fares should not be controlled. However, the local authorities should undertake periodic surveys to establish whether hackney fares are excessive.
Wheelchair Accessible Vehicles
If the local authorities adopt the proposals to deregulate entry within a ten year period to eliminate the shortage of taxis, then the 350 licences issued each year should be in respect of wheelchair accessible taxis.
All wheelchair accessible vehicles should be identifiable through external signage.
Fare Structures and Levels
Our Interim Report demonstrated that an increase in fares was justified. This was largely because some elements of the trade have to work long hours, and some relief of their situation was warranted.
It was recommended that the distance charge was raised from 80p per mile to 90p per mile and the time charge from 10p to 15p per minute.
Hiring, pick-up and airport charges remained unchanged.
The unsocial hours charge was raised from 40p to £1.20 between 12 p.m. and 6am. The charge for Sunday working was unchanged.
The wa!ting charge was increased from £6 to £9 per hour.
A £20 charge for soiling a taxi was introduced.
There is a strong case for the abolition of additional charges, so as to simplify the fare structure.
Maximum fares should apply to journeys originating within the current taximeter area and terminating within 20 miles of the city centre. In conjunction with this, two tier journey length charges should be introduced.
The proposals for abolition of additional charges, the unsocial hours charge and the two tier charge should be considered as a package at the next fares review.
The licence renewal fee should be based on the costs of regulating the trade and should cover all relevant costs, including facilities at ranks.
Driver and Vehicle Quality Regulations
Taxi and hackney carriage driver licence holders should be assessed on an annual basis to confirm the licence holder is a fit and proper person.
To further improve safety, consideration should be given to the introduction of a tachograph system for all taxis and hackney carriages.
All taxis and hackneys should be inspected on an annual basis to ensure roadworthiness and improve quality. The annual inspection should incorporate an emissions test.
Appropriate external vehicle identification should be a requirement of all hackney carriages, excluding limousines and funeral hire cars.
Hackneys should be permitted to operate in bus lanes.
Details of the fare structure should be displayed in both the front and rear of taxis.
All taxis should be required to implement automatic receipting systems. Consideration should be given to the introduction of a more flexible taxi meter.
Hackney carriages should be permitted to use radios/telephones to both facilitate and initiate a hire.
Hackney carriage licences should remain non-transferable, with the exception of deceased holders in which case it should pass to a relative.
A pilot study should be undertaken to assess the feasibility of adopting a shared taxi rank scheme.
A detailed review of taxi ranks in the city centre should be undertaken to increase the number of spaces and spread of stands.
A detailed study of taxi ranks in the outlying areas should be undertaken to review the location of existing ranks and to provide additional stands in new areas.
Improved facilities should be provided at taxi ranks, including shelters, seating, enhanced lighting. In addition, existing signage and road marking should be maintained and direction signs implemented.
The local authorities should be given responsibility for the development and operation of an efficient complaints procedure.