Transport Systems Centre
University of South Australia
The leasing of taxi licences has become a controversial issue since all restrictions on the practice were removed in 1991. In particular there were concerns expressed in parliament toward the end of 1996 about the perceived high turnover of lessees. There was also criticism of the “absentee landlords” who have no sense of responsibility toward the quality of service offered to passengers and who have been allowed into the industry through the relaxation of controls.
There has been a dramatic rise in the price of licences since the restrictions on leasing were first eased. There may be a number of other factors which have encouraged this, but evidence from Victoria and Tasmania point to the importance of leasing as a causal factor. Nominal lease rates have been constant from 1991 to 1997. However once inflation is considered the trend in lease values has been downward. This decline became much steeper over the past year, when the typical lease price fell from about $315 a week to about $275 now.
However even at the lower current level, the lease price dramatically indicates the cost burden imposed on the taxi sector by high licence values. However the identified problem of high turnover of leases appears to have disappeared during 1997, with only sixteen leases contracted in 1997 being terminated before the end of the year.
The main disadvantage of leasing is that is it has inflated licence values. The main advantage is that leasing encourages the cab to be put on the road more. But it could be argued that there are too many cabs on the road in quiet periods, depressing the returns for everyone. When combined with the fact that hire cars are now available to meet demand not adequately serviced by the taxi, there is a good case to be made against allowing unrestricted leasing.
This case is only strengthened when we consider the issue of drivers’ incomes. Leasing has created a situation in which it has become unrealistic for the average full-time driver to aspire to own a licence and if current trends persist we may well find that the taxi owner-driver will become a figure of the past.
However there are clear difficulties with measures designed to deal with the problems caused by leasing, and with the poor returns available to drivers. The discussion of possible options is grouped into two categories: those specifically dealing with the issue of drivers’ returns and those designed to reduce lease costs. In both cases the most effective measures are those which are likely to arouse the most opposition.
Given this, and given both the lower lease price and the apparent lower turnover of lessees
experienced this year, the ‘do nothing’ option would be understandable.
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