Follow That Cab

Sydney Morning Herald

Friday November 9, 2007

Does Sydney have enough cabs? As Miranda Devine pointed out in her column yesterday, it does not seem like it as each year's holiday season approaches. Taxis become harder to find; would-be passengers spend long periods trying to hail them, or make bookings which are not honoured. Rain makes things worse; so does the sudden rise in demand after a big event finishes. Passengers may think that the problem could be solved by issuing more taxi licences. Unfortunately, matters are not so simple.

Taxi licences are costly - up to $320,000 each. Many holders have borrowed to finance their purchase, sometimes as an investment. Some will lease them to taxi owners at rates that will provide them with a return on that investment. Into this tight market no responsible government can suddenly dump large numbers of new licences, which would devalue these assets arbitrarily and unfairly for existing holders. Any change in the number of licences will have to be slow and incremental.

Moreover, the current value of taxi licences is based on the existing return on them. At present that return is averaged out over periods of low and high demand. Taxi driving is not a particularly lucrative occupation and margins are thin. Drivers often depend on the busy times to make enough in fares to tide them over in periods when business is slow. Time-restricted plates go some way to making more taxis available at peak times, but in doing so they are skimming off the best opportunities and leaving the routine, low-demand periods for full-time drivers. Taxi licence-holders, operators and drivers must be able to make a reasonable living from their industry, or there will simply be no taxis. But taxis are a vital service, which must be able to respond year-round to the varying demands placed upon it. The industry is not, and should not be, run for the convenience of those in it.

Passengers should be able to expect certain service standards: taxis should be clean; drivers should drive safely and know where they are going; when booked they should arrive on time. A report in June from the Independent Pricing and Regulatory Tribunal suggested standards there are indeed improving. But taxis should also be readily available - not necessarily at every change in the weather, but over predictable seasonal peaks. There, everyday experience suggests Sydney passengers are being let down. The challenge for the State Government is to devise a way to even out the peaks and the troughs.