Taxi Quota Controls Harm General Public

Irish Times
(Dublin, Ireland)
10 January 1998

OPINION

TAXI LICENCE CONTROLS HARM
THE COMMUTER

by Dr Garret FitzGerald

Quantitative controls of the supply of goods and services have their place in emergency conditions when supplies of goods are artificially curtailed.

During and after the second World War many scarce goods were price-controlled and officially rationed, ensuring they were distributed equitably.

Inevitably, a black market emerged and there were prosecutions for black market trading. But, rightly, this was seen as a lesser evil than leaving distribution to the market system. That would have led to appalling hardship for those unable to pay the prices a straight supply/demand basis would have commanded.

Even so, the poor suffered. Urban infant mortality rose by two-fifths during the war, more than 20 times greater than today's figure.

But except in extreme circumstances, quantitative controls should be avoided unless their absence might harm the public interest. It is on these grounds that licensing systems involving quantitative controls apply to the provision of bookmaking and gaming and amusement machines, as well as to licences to retail alcohol. The merits of these controls can be debated. In particular, the manner in which they are exercised can be questioned. But their rationale is clear and, in principle, defensible.

Licensing also applies to activities such as brewing, distilling, the refining and sale of hydrocarbon oils and the manufacture of tobacco or table waters. But this is to safeguard revenue rather than to limit output.

Finally, there is licensing for safety reasons, for example ships and aircraft. This can also be applied to other vehicles used for public transport, such as hackneys and taxis, to ensure public comfort, safety and to provide for the needs of disabled people. And it is also reasonable that drivers be licensed to secure an efficient service for their customers.

The present system aims for these results, and if it were not for the artificial restriction of numbers, there would be a lot to be said for it. The corporation issues the licences using a points system regulated by the Department of the Environment. The points system favours people who hold public service vehicle licences (100 points per year of licences for those who have driven a taxi in the city previously and 10 points a year for those who haven't); five points a year for hackney licences; and five points a year, with a maximum of 50 points, for ordinary driving licences.

Presumably as a modest disincentive to multiple licence-holding, 30 points are deducted from anyone who holds or previously held a taxi licence.

The issue of taxi licences is also subject to checks by the Garda Síochána Carriage Office on the vehicle to be used and on the licence-holder's familiarity with the city.

This procedure was used to allocate 183 of the 200 licences authorised earlier last year, which relate to vehicles specifically designed for disabled passengers. Each new licence-holder must pay £15,000 for the licence, £7,500 when it is issued and £7,500 a year later. This payment raises two contradictory questions which demonstrate how unsustainable the licence limitation system is.

First, why is the cost of taxi services in Dublin artificially raised by charging new licence-holders such a fee on top of the cost of buying a vehicle suitable for disabled passengers?

AND why does the corporation effectively make a present of £65,000 to each new licence-holder by giving them for £15,000 a licence they may dispose of after five years in the closed market where such licences are worth about £80,000?

Why should there be any control of the number of taxis, as distinct from control over the safety and comfort of the vehicles and the efficiency of their drivers, thus creating this totally artificial market in licences?

The case for such a limitation of licence numbers is far from self-evident.

Left to themselves, the normal laws of supply and demand could be expected to provide an appropriate scale of service, as happens with other services. No one has suggested regulation of the supply of barristers or solicitors or house agents or hairdressers. Why then are taxi numbers regulated?

If there were strong reasons for this to be deemed in the public interest, surely someone would by now have presented this case in the newspapers. Since no such case has been made, the public is entitled to require its legislators, local and/or national, to take action to remove restrictions on taxi licensing.

Given that there are about 2,000 taxis, and that licences are stated to be trading among owners at £80,000 each, the value of the private monopoly profit that has been gratuitously created by the public authorities through their restrictions on the issue of licences is about £160 million.

This is an astonishing sum to have permitted, indeed encouraged, private individuals to create for themselves through restriction of supply. Many of those concerned, we are told, are not taxi drivers but wealthy individuals or companies who have cashed in on an aberrant aspect of public policy.

It seems some of these interests have come to regard this artificially created £160 million as their property, and could seek compensation if the issue of further licences reduces the market value of this sum that they have created for themselves at the expense of the community.

It must require considerable effrontery to create a private monopoly of this magnitude by objecting to the issue of licences to others, and then to propose compensation for the disappearance of this essentially temporary and totally artificial phenomenon, upon whose indefinite continuance they have chosen to gamble.

And to try then to enforce a "right" to this artificially created sum by illegally blocking the streets with taxis to oppose the allocation of more licences is an action no democratic government should tolerate.

All that said, there is a potential hardship problem for individual taxi drivers who may have gambled on the indefinite continuance of this unsustainable artificial monopoly by paying exorbitant sums for licences.

The public authorities which, by submitting to the demands of this lobby, share responsibility for the hardship that would affect individual taxi drivers if licences were liberalised, must have regard to this factor when they belatedly address this problem in the public interest.

Dr John Fingleton and colleagues in TCD have a suggestion worthy of serious consideration: all existing licences should be duplicated and full liberalisation should take place in five years. This device would enable existing licence-holders to compensate themselves to some degree by selling duplicate licences for use during the five-year pre-liberalisation period.

If the Taoiseach's initiative in referring the Dublin taxi problem to a study group has been motivated by a concern to minimise hardship for existing licence-holders while moving to liberalise the taxi market, it deserves support.

But if it were not to produce at least a phased elimination of this artificial monopoly, it would deserve to be excoriated by the Dublin electorate.

Politicians can no longer be under any illusion that the people of Dublin are prepared to suffer much longer the failure to tackle Dublin's traffic problem. And one component of this is the present taxi crisis, for the non-availability of taxis contributes significantly to the throttling of Dublin by its traffic.

As I type this I have been able to see from my window that our limited No 13 bus service is running 25 minutes late, enough to put anyone off relying on it. That's nearly as long as one has to wait for a radio taxi, if and when one can find one available. The taxi-rank system is much more reliable as to time: when there is a taxi at the Ranelagh rank, it arrives within minutes. But often there is no reply from the rank.

Of course this taxi problem represents only one small element of our traffic problem, but because it has been allowed to fester for so long, it has now become a significant political issue.

===========

Garret FitzGerald was born in Dublin in 1926 the youngest son of Cumann na nGaedhael Minister for External Affairs, Desmond FitzGerald. He obtained a B.A. from University College, Dublin in French and History and was employed by Aer Lingus as a research and analysis officer. From 1959 to 1973 he wrote a weekly column in the Irish Times and lectured in Political Economy at U.C.D. He later became the Irish correspondent to The Financial Times and The Economist.

He joined Fine Gael in 1964 and was elected to the Senate in 1965. He won a Dail seat in 1969 where he topped the poll in the Dublin South-East constituency. In 1973 he was appointed Minister for Foreign Affairs and was instrumental in consolidating Ireland's position in the EEC. He was determined to bring about progress towards a political settlement in Northern Ireland and was involved in organising the Sunningdale negotiations. This initiated the process of constructive dialogue between the Irish and British governments. In hindsight, it was thanks to FitzGerald's crusading commitment to Northern Ireland that future compromises were agreed.

FitzGerald was elected leader of Fine Gael in 1977 and initiated the reorganisation of the party giving it more professional structure. In 1989 he set up the youth wing of the party - Young Fine Gael. This organisation has gone on to be a highly successful instigtor of policy and has a degree of independence from the main party. He became Taoiseach [Prime Minister] in 1981 following Fine Gael's impressive electoral performance in that year. Between 1982 and 1987 his remarkable intelligence and foresight was responsible for a series of legislation that transformed Ireland into a modern, effective democracy. His unyielding search for reconciliation in Northern Ireland led to the establishment of the New Ireland Forum and the 1985 Anglo-Irish agreement. He retired from politics in 1992 and is a regular commentator in the Irish media.

Further Reading:

FitzGerald, G., All in a Life: An Autobiography (Dublin, 1991)


Back to the TAXI-L Regulation Page