While the regulation of the safety of taxis and private hire vehicles and the suitability of drivers is clearly crucial for passenger protection, research by the Competition and Markets Authority shows that it can also restrict or distort competition so prices rise and service quality deteriorates. 

‘Private hire and hackney carriage licensing: open letter to local authorities’ draws the attention of heads of licensing departments to guidance designed to help them reach the right balance between protecting passenger safety and promoting healthy competition.

It also links to the guidance itself, which was produced by CMA following a review undertaken as part of CMA’s work on the impact of local authorities on competition. Key issues identified include

  • taxis’ right to ply for hire necessitates different regulation for taxis and PHVs
  • passengers are in a weak position to judge quality or compare prices of taxis so it is necessary to regulate taxi fares and service standards
  • passengers are better able to compare prices and quality offered by private hire operators so competition works well and licensing conditions should generally not go beyond ensuring public safety
  • app-based models can benefit passengers by increasing competition between taxis and PHVs so regulatory distinctions should not go beyond what is required by legislation or to protect passengers
  • some conditions may create barriers to entry and reduce operator numbers, thus weakening competition
  • quantity restrictions are not necessary to ensure the safety of passengers, or to ensure that fares are reasonable
  • the CMA takes the view that concerns around congestion, air pollution and enforcement costs can generally be addressed through measures less harmful to passengers’ interests than quantity restrictions