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Nov 24

Taxi Fares Consultation – The UCG Submission

Taxi Fares and Tariffs Consultation
Transport for London – Taxi and Private Hire
25 October 2012

For and on behalf of the United Cabbies Group

The United Cabbies Group wish to express our thanks for the invitation to respond to this document.
Our response shall address each item heading as applicable and include our proposals to each of these issues.

3.4. The increased tariffs in the evenings, at weekends and at night are intended to encourage drivers to work at these times, when the supply of available taxis has been poor. Although the supply is improved in many areas at night at the moment, this is largely the consequence of the current depressed economic climate and it is appropriate to maintain the present differentials.

The UCG agree that the current differentials should remain in place.

 

3.5. The current proposed average fare increase of 1.8% is below the latest Consumer Prices Index (CPI) and Retail Prices Index (RPI) figures of 2.2% and 2.6% respectively4. The average taxi journey length is about 3 miles but approximately 7% of taxi journeys are over 6 miles5. To help ensure that drivers benefit from the average fare increase it has been suggested by some taxi trade associations that the average fare increase should be frontloaded onto the tariff rates for journeys under 6 miles, with tariff rates for journeys above 6 miles kept at the current rate.

The RPI which includes fuel as a basis should be used this year as it is a low figure and an average 3 mile journey would equate to *approximately 27p on a Rate1 Journey, 29p on a rate 2 Journey and 32p on a rate 3 journey. Insurance costs have risen well above the RPI; Tyres which are heavily dependent on oil price in their manufacture have also risen well above RPI. All other operating costs have risen above RPI.

We entirely disagree that CPI should be used in the calculation of Taxi Fare tariffs as it excludes many items that we incur as operational expense. The CPI is considered a cost of living index and although may be applicable to those on a fixed income who work for an employer, cannot be used for Taxi Fare Tariffs as we are small businesses and are affected by a more true inflation index as measured by RPI.

I enclose the ONS guide to the differences between CPI and RPI and how they treat motoring costs differently.

We in the Taxi trade experience far higher “Motoring” costs than any personal or individual and thus it is of paramount importance to us that an index used gives due consideration to these differences. The CPI does not adequately cater for our real life expenditure as Vehicle operators. Below I include the weighting ratios of transport (Motoring) as described in both CPI and RPI, as you will see the CPI gives a much lower consideration to “Motoring costs” than does the RPI.

CPI Measurement and weighting apportioned to Motoring costs. (Weighting – 81)

07.2 Operation of personal transport equipment 81
07.2.1 Spare parts and accessories 6
07.2.2 Fuels and lubricants 43
07.2.3 Maintenance and repairs 24
07.2.4 Other services 8

RPI Measurement and weighting apportioned to Motoring costs. (Weighting – 137)

Motoring expenditure 137
Purchase of motor vehicles 45
Maintenance of motor vehicles 20
Petrol and oil 46
Vehicle tax and insurance 26

As you can see from the above the CPI gives a far lower weighting to Motoring costs, Motoring costs are our main cost line item. We cannot agree to the use of CPI as a measure of Taxi operating costs.

The UCG therefore make the formal request that the full RPI rate of 2.6% be applied to 2013 fare increases. Especially as other fares under TfL governance (bus and tube) will rise by an average of 4.2% how can TfL sustain an argument that tubes and buses need an operation increase of 4.2% while the Taxi trade only require 1.8% ? The taxi trade cannot continue to bear the full brunt of these operating costs even in straightened times.

 

4.1. Since July 2008, special provisions have been in place to allow an extra charge to be added to taxi fares if rising fuel costs make this appropriate. Fuel prices can vary rapidly and unpredictably, and a high increase during the year would result in additional costs for drivers which they would not be able to recover from passengers.

4.2. The extra would be authorised if fuel prices reach a threshold and if this was reached then an extra charge of 40 pence, added by the driver to the metered fare, would be applied to every taxi journey. The threshold represents the price at which the overall increase in taxi costs would be in proportion to the increase in the average fare, represented by the fuel charge. To illustrate, if the fuel charge were a 4% increase on the average taxi fare, the threshold would represent a 4% increase in the total costs; and if the fuel costs represented 10% of the cost index elements, this would correspond to a 40% increase in fuel prices. The current threshold level for diesel fuel prices (as measured by the Arval index) is set at 179.7 pence per litre and the new threshold figure would be calculated in late December 2012.

The UCG welcome the “Authorised Fuel Extras” however, the detail contains a number of fundamental errors, firstly it is not identified in any detail within this document how the “extras” will be triggered. Let us imagine that the “extras” are triggered by Arval index figures, these have latency and are historic not real time. Therefore we could potentially have an issue where in a given month the price of fuel triggers the Arval index, the following time period whilst the trigger is in place sees a large fall in fuel prices thus Taxi drivers could be putting extras on for historic fuel prices, how would a Taxi driver explain that to a customer? This has not been given sufficient consideration, with volatile fuel prices it needs to be a real time trigger not an historic one.

However we seek to identify below why this is not an issue for TfL, we in the UCG do not believe that TfL will ever permit this “Extra” as the bar has been set so high it is unlikely except for a 1970s style fuel shock that this will ever be implemented.

Below we provide our case and a suggested alternative in the form of an escalator triggered earlier and stepped in 20p increments per journey.

What remains is for TfL to implement a real time fuel “extras” monitoring system and communication system.

Below we reproduce fuel prices December to November (the chosen consideration periods in the TfL consultation paper)

We accept the figures used in the TfL document that are within 0.3% of our figures.
Below we introduce the price at the pump experienced throughout the 1970s, regarded are the fuel shock era. These are petrol prices; in the 1970s Petrol was the primary fuel of motor vehicles and thus was recorded as the official price index.

3.96% * Average fuel price increase throughout the 1970’s, excluding shock year 1974 to 1975

12.17% * Average fuel price increase throughout the 1970’s, including shock year 1974 to 1975

* Source House of Commons Standard Note SN/SG/4712 Petrol and Diesel Prices 2nd Nov 2012

Current Avg Price of Diesel at 23rd November 2012 is £ 141.8 per Litre

Proposed Trigger for Fuel extras is: (set to rise higher) £179.9 per Litre

To trigger Fuel extras an increase in price at the pumps is 21.18%

Such an increase has only been breached once in the year 1974 to 1975. 73.91%

The Average fuel shock increase through the 1970’s was 12.17%

Accordingly the UCG request that the fuel extras are triggered at anything exceeding 12.17% increase on the previous year average at any given measurement point (which should be real time).

The Average price for Diesel in 2012 was £142.61 per Litre

Therefore the trigger level should be: £159.9 (142.61 + 12.17%)

As the current provision is written, there would be a step increase that would appear very steep; we suggest that you explore a staged increase to fuel extras EG.

159.9  +20p
179.9  +40p
199.9  +60p

 

5.3. TfL currently has no plans to increase the Heathrow extra and feels that the current level of £2.40 per trip remains sufficient given the reduction in the charge for entering the feeder park.

5.4. TfL invites your comments and suggestions regarding the Heathrow extra and whether this should be kept at the current level or changed – if you feel the charge should be higher or lower then please include your reasons for this.

The UCG feel that the £2.40 is not unreasonable BUT we do feel that the £6 levied by BAA is, we feel that the focus here should be on putting pressure on BAA to reduce the feeder park charge and this is something that the Mayor and TfL could and should assist in. The issue is not that we should charge customers more but that BAA should charge Taxi drivers less. We ask TfL and the mayor’s office to make interventions on behalf of the taxi trade to limit BAA abusing its monopolistic position over taxi drivers.

 

6.1. For taxi journeys made between 20:00 on 24 December and 06:00 on 27 December or between 20:00 on 31 December and 06:00 on 2 January there is an extra charge of £4.00. This extra charge must be added to the metered fare manually by the driver at the start of each journey during the period covered.

6.2. There are no plans to change the level of this extra charge but there have been requests for it to be automatically added to the fare, as opposed to the driver having to add it to the meter manually at the start of each journey.

6.3. Having the extra automatically added to the fare instead of manually added would remove the driver’s control over whether to include this extra in the fare or not.

6.4. However, drivers would still be able to charge less than the metered fare if they so wished and automatically adding the extra to the fare may help militate against potential conflicts and passengers questioning why their driver is adding this extra charge to the meter.

6.5. TfL invites your comments regarding the Christmas and New Year extra being automatically added to the metered fare instead of being added manually.

The UCGs position on this remains unchanged from last year. The UCG request this automatically be added to the flag fall, individual drivers are free to remove this from the fare if they wish to do so.

 

7.5. TfL invites your comments regarding card payments for taxi journeys and whether you agree TfL should not mandate card acceptance in taxis at this time.

The UCG feel that mandating card acceptance for all Taxis is a mandate too far. No other private sector trade or retail business is mandated as to the form of payment they have to accept. We resist strongly that Credit cards should be mandated. We do agree that individual drivers should consider the impact their decision could have on their earnings; however this must remain their own choice.

 

8.2. In December 2011 the Government announced plans to ban businesses from charging excessive surcharges and the Department for Business, Innovation and Skills has recently consulted on the Government’s proposals to introduce this ban through the early implementation of a provision of the European Union’s Consumer Rights Directive6.

8.3. This will put in place legislation to ban businesses from imposing excessive surcharges but businesses will remain able to add a charge to cover the actual costs of processing any particular form of payment. This could see the ban on excessive surcharges being introduced before June 2014 and any change to surcharges could affect taxi drivers.

Taxi drivers do not benefit from excessive charges being applied to card transactions, the card clearing companies are the sole beneficiary of this practise, and in fact it is less likely that a driver will receive any gratuity when excessive card charges are imposed. We would support any move to make the charges levied upon customers paying by card to be brought more in line with actual costs incurred by the card clearing companies. We are mindful that we also need to resist card clearing companies trying to pass the cost of doing this to the individual driver in system rental or transaction charges.

 

8.4. TfL invites your comments regarding the surcharge for card payments for taxi journeys including on the following points:

The current card payment surcharge

The UCG feel that 12.5% does not represent the true cost of processing payments; typically it costs just a few pence to process these transactions.

The impact on surcharges for paying by card if no mandatory requirement to accept card payments was introduced

If it is not mandatory, the card processing companies will be forced to become competitive and charge fairer rates over time as they will not be able to impose high equipment charges on taxi drivers. The driver will have a choice not to use the card clearing facility if it is uncompetitive to do so.

The impact on surcharges for paying by card if a mandatory requirement to accept card payments was introduced

The converse to the argument above is true, Card clearing companies will, when forced by the EU to cut their charges simply pass the cost of lost revenue to drivers equipment rental charges.

This concludes the UCG submission for the 2012/2013 tariff review.

We invite the other Taxi trade organisations to display their submission.

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