Reports:

The impact of congestion charging on specified economic sectors and workers

3: Economic Sector Research

3.1 Taxis and Private Hire

3.1.1 Introduction

This section of the research relates to three areas:

• Trade organisations / stakeholders;
• Fleet operators; and
• Drivers.

The responses from all three groups are broadly consistent, therefore to avoid repetition these three groups are being reported together. However, where differences have emerged, these have been highlighted and discussed separately.

It needs to be pointed out that a number of organisations we spoke to in undertaking this research commented that they had been contacted by a number of other research organisations:

'We've had too many people asking about this.'
Taxi Operator

Research method

The following table illustrates that 44 people were interviewed for the purposes of this research. Participants from these interviews were either stakeholders, operators or drivers. More Taxi drivers were interviewed than any other group and only one stakeholder was interviewed from the Minicab sector.

	Stakeholder	Operators	Drivers	Total
Taxi	2	7	14	23
Minicab	1	10	10	21
Total	3	17	24	44

Research objectives

This section of the report will provide:

• Detailed list of direct effects of the charge to the industry;
• Detailed list of the indirect effects of the charge (operators and drivers);
• Behavioural changes (already taken and those under consideration); and
• Structural changes (already taken and those under consideration).

3.1.2 Overall perceptions of congestion charging scheme

The research finds that whilst total support is relatively low for the scheme, so is outright opposition, particularly amongst the Private Hire trade. However, there are marked differences between the two trades. From the sample that were interviewed, less than one in ten of Private Hire participants were negative whilst almost a third of Taxi drivers and stakeholders were opposed to the scheme.

3.1.3 Industry structure

This research deals with the experience of congestion charging by both Taxis (Hackney Carriages / Black Cabs) and Minicabs (Private Hire). Historically there has been a wide gulf between these two groups of service providers, with Taxis being very highly regulated, whilst Minicabs were not being regulated at all. This situation is now changing with Minicab operators, cars and drivers now being brought under a licensing regime.

The impact of this change (which is only just beginning to be brought into effect) on this study is potentially significant. A number of interviews have highlighted the fact that Minicabs have historically had a very poor reputation and hence have not been considered by a number of potential corporate clients. Now that Minicabs are coming under regulation, the policy of a number of client organisations is reportedly being reviewed. This structural change appears to be reflected in the respective perceptions of the economic climate and trading environment:

'A city firm spending, say, half a million pounds on Taxis are now looking at contracting with Minicab companies and they can save £200K. That's straight to the bottom line.'
Taxi Industry Stakeholder

Structural changes of this nature will inevitably have a significant economic impact on the perceptions and views of both the Taxi and Minicab industries. A number of comments have been made to our researchers concerning the possibility of single companies operating both Taxi (Black Cab) fleets and Minicabs (Private Hire), something that is relatively common outside London but until recently 'unthinkable' in the capital.

3.1.4 Trading environment

Both Taxis and Minicabs reported a difficult trading environment. However, initial findings indicate that Taxis are reporting a far greater down turn than the Minicab trade.

Reasons given for the down turn in the Taxi trade go back a number of years and include a wide range of factors including:

• September 11th (international tourist and business travel);
• Foot and mouth (international and national tourist / business travel);
• Terrorist uncertainty (international and national tourist travel);
• Economic downturn (particularly in the 'City'); and
• Minicabs.

Specific comments include:

'At the moment cab drivers are really having a bad time out there . no tourists, no one travelling and no corporate work ... quite a lot is down to Americans not travelling .'
Hackney Carriage Driver Representative

'The double whammy with the economic downturn is hitting owner drivers with huge repayments on loans taken out to buy the Taxis.'
Taxi Industry Stakeholder

'The economic climate is affecting us more than the congestion charge . (REFERRING TO CORPORATE CLIENTS) .everyone is watching their costs.'
Major Operator

'The downturn last financial year was about 18% on the previous year... trips this year are down about 8%, but turnover is holding up.'
Major Operator

'It's [TURNOVER] dropped down, I don't think I will even get £15,000 this year as the passengers are not forthcoming. Where are they now?'
Taxi Driver

The picture appears to be different for the Minicab trade. Reports of a downturn are fewer and a number of the companies and drivers we spoke to report a growth situation:

'We're not much affected as a company.'
Minicab Operator

'We've had a 70% rise in revenue compared to this time last year.'
Minicab Operator

'(BUSINESS IS) likely to go up with the introduction, there's more people using Minicabs to get to work as they have to pay the charge plus parking.'
Minicab Driver

3.1.5 Industry structure and employment practices

The research has found that there are no large fleets of Taxis or Minicabs.

Taxis
According to the Public Carriage Office there are approximately 24,000 licensed Taxi drivers in London with a net increase of 39 licences in the 12 month period ending May 2003.

All Taxi drivers appear to be self-employed and each driver either owns or rents a vehicle. Three types of vehicle ownership exist:

• Ownership and vehicle leasing;
• Garage vehicle leasing; and
• Sub-leasing.

There is a descending level of 'commitment' for each of the methods. It should however be noted that this is counterbalanced by increased costs.

Approximately 70% of licensed Taxis are either owned or leased from a finance house. The remaining 30% of vehicles are owned by garages, which rent them out for a weekly charge.

In addition to the above there is a relatively small proportion of Hackney Carriage licence holders who drive another person's Taxi. These drivers pay a 'rent' for the vehicle in much the same way as 'Owner Drivers'.

This is an industry, therefore, dominated by a large number of 'small businessmen' - not employees.

Note: Qualitative evidence would suggest that whilst the number of licence holders remains relatively stable. A number of drivers are seeking alternative work to supplement their incomes.

The Public Carriage Office quote four 'Operators':

• Dial a Cab;
• Computer Cab;
• Radio Taxis; and
• Zingo.

These 'operators' are not 'employers', they may be more accurately described as 'bookings organisations' with 'memberships' comprised of individual Hackney Carriage licence holders. These organisations take responsibility for 'marketing' Taxi services.

Minicabs
As discussed in Section 3.1.3, the Minicab industry in London is presently going through major structural change. Drivers however will, for the most part, remain self- employed and use their own vehicles.

In comparison to Taxi 'operators', there are a relatively large number of Minicab operators . However it was noted that there are significantly more 'Trading names' than actual companies (the reason given is that 'Trading names' have a commercial value and both names and telephone numbers are sold as businesses come into and go out of existence).

3.1.6 Perceptions of congestion (before introduction)

Participants were asked what their perception of congestion had been, before the scheme was introduced. Perceptions were a combination of 'resignation' (it is seen as a symptom of modern society) and 'scepticism', i.e. whilst perceived to be a 'reality', it is something that many believe has been exacerbated by transport planning professionals and politicians 'operating to their own agenda'.

Two quotes sum up the general perception:

'Absolutely chronic.'
Major Operator

'Something had to happen, the traffic was just becoming horrendous in London. But as a capital city we must accept a certain amount of congestion.'
Taxi Driver Representative

These comments, however, need to be qualified by a high degree of scepticism relating to the perceived actions of the authorities before the congestion charge came in:

'I think the Mayor created more congestion by bringing forward road works and the traffic lights synchronisation.'
Taxi Driver Representative

This scepticism appears to be widespread. A director of one of the major Taxi operators echoes this comment, referring to 'road works' all being done before congestion charging came into effect:

'Being a cynic, I think it was pre-planned, the road works and the phasing of the traffic lights.'
Major Taxi Operator

Probed on this issue, which appears to be tarnishing perceptions of both TfL and the Mayor, participants were adamant that TfL made congestion worse than it needed to be in the period leading up to the introduction of the scheme:

'No one will convince me otherwise.'
Taxi Operator

Asked on what basis these perceptions are based the participants refer to primary sources (rather than the press):

'I've seen it for myself.'

and

'Complaints from drivers.'
Major Taxi Operator

Given the potential importance of this issue, the traffic lights situation was probed in detail:

'At many busy intersections, the phasing of the lights would be changed to give pedestrians priority, consequently holding the traffic up. One that comes to mind is Bloomsbury Street - absolutely horrendous. It was strange that the phasing of the lights was then changed when congestion charging came in.'
Major Taxi Operator

'I thought it was part of a calculated game to change the phasing of the lights and hold up the traffic.'
Minicab Operator

'Something really strange happened because all the roadworks finished and the phasing of the lights changed as congestion charging came in.'
Major Taxi Operator

3.1.7 Perception of congestion charging (post introduction)

Participants were asked how they viewed the congestion charge, now that it had been introduced. The charge is seen by almost all the Taxi and Minicab drivers and operators to have reduced congestion thus making journeys quicker:

'It is good for our business.'
Major Taxi Operator

This applies to both Minicabs and Taxis, as they can both potentially pick up more fares but Taxis could find their income hit by the 'faster' trips as average fares reduce:

'If there is less traffic on the road, then they can move faster, do more work, and cheaper.'
Major Taxi Operator

However, the initial headline figures of a 15-20% reduction in traffic are not seen to have been maintained. A number of comments were made that traffic levels are 'creeping back up' - as are the road works:

'For the first few weeks traffic was lighter but it's starting to get worse.'
Taxi Operator

'You see road works everywhere, gas works, water works, electricity and so on.'
Taxi Operator

Even given the above, the consequence of reduced congestion to both Taxis and Minicabs is that journeys are now faster. This has reduced journey time but has had differential effects on the two trades. Faster journeys mean reduced fares for Hackney Carriages. Minicabs, in contrast, do not appear to have reduced their fares.

These different experiences have led to attitudinal differences between these two groups of service providers:

• Taxi drivers and operators do not see the congestion charge as negative in its own right. However, it has come on top of a downturn in tourists, an economic recession, and changes to the fare tariff structure; and
• Minicab drivers and operators have seen a reduction in congestion, and therefore costs, whilst their pricing and customers have not significantly changed.

'We are in favour of it, it's absolutely brilliant.'
Minicab Operator

'We are 100% in favour of the congestion charge, it has worked and produced nothing but good results.'
Minicab Operator

'It hasn't increased our business, but it has cut the costs.'
Minicab Operator

'It is the best thing that's ever happened, it should have been done long ago.'
Minicab Operator

'We are 100% behind it.'
Minicab Operator

3.1.8 Conditions inside and outside the zone

Neither Taxi drivers nor Minicab drivers reported major disruptions outside the zone.

3.1.9 Commercial impact of the charge

A number of both Taxi and Minicab Operators pointed out that they did not pay the charge, and therefore it had 'no effect'.

However, further questioning indicates that this response is far from accurate, it is clear that there have been significant effects on both the Hackney Carriage and Minicab trades as a consequence of the congestion charge. These changes can be seen as both positive and negative, depending on circumstances, and the two trades.

On one level, for both Taxis and Minicabs the congestion charge has been very positive:

'The congestion charge has been wonderful because it has freed up that central area and it has allowed us to move, which is wonderful.'
Taxi industry stakeholder

However, probing more deeply, for Taxis this has resulted in reduced individual fares:

'Fares have dropped by about 30%.'
Major Taxi Operator

'It reduces my income - it's about 20% down.'
Taxi Driver

'The journey is now short (WITH) no traffic . the customers are not complaining but it reduces the amount that comes in . so for me it's negative.'
Taxi Driver

As already commented in the 'Trading Environment' section, the opportunities for taking advantage of this potential 'efficiency dividend' are limited by the fall in demand for Taxis due to the perceived economic downturn and the decline in the number of tourists visiting London:

'Hopefully people will become aware of how cheap we have become . clients have been told of the cheaper fares.'
Taxi Operator

'Come September, as people realise (HOW CHEAPLY) they can get around London, trade will pick up'.
Taxi Operator

'There is a probability that our earnings will increase slightly'.
Taxi Driver

A negative effect of this increased speed of journey is that (for Taxi drivers at least) the fares are lower. However, as the last quotation hints, if there are enough customers, there is the potential to increase earnings.

3.1.10 Taxis and Private Hire summary and comment

The congestion charge came into existence at a time of change for both Taxis and Minicabs and whilst these two groups of transport service providers have been grouped together for the purposes of this report, they are in reality very different types of organisations in terms of their:

• External Drivers: Customer Profile; and
• Internal Drivers: Organisation / Regulation / Pricing.

Overall opinion of the congestion charge
Both Taxis and Private Hire have mixed perceptions of the charge (just over three quarters of the sample for Private Hire and just over half of the sample for Minicabs). However the Taxis also have a significant number of negative responses (just under 30%, as opposed to just under 10% of Minicabs). Taxis, certainly at the time the study was undertaken, appear to be less positive about the scheme.

Customer profile

Taxis and Private Hire are both service industries. However their customer profiles are markedly different:

• Taxis have a high dependency on large corporate clients. They are also heavily reliant on both business and leisure travellers visiting London (picking up at stations / airport / hotels / tourist attractions); and
• Private Hire vehicles work extensively in the daytime for corporate clients, although at the moment these tend not to be the larger prestigious accounts, which are still the preserve of Taxis. Unlike Taxis, some act as Couriers and carry packages. At night they focus on passengers, transporting them to and from restaurants / bars, but are limited by the fact that they need to be pre-booked. The growth of mobile phones has however facilitated easier communication between passengers and the Minicab companies and thus reduced dependency on Taxis.

Organisation and regulation

The early months of 2003 saw changes in the regulation of both Taxis and Private Hire:

• Taxis have had a relatively small change to the tariff structure. Whilst not great, this has reduced income for some drivers; and
• The Private Hire industry is undergoing major reform with licensing of both drivers and vehicles.

Pricing

Both the Taxi and Minicab industries report shorter journey times. The different business models of the Taxi and Private Hire industries has led to differential effects on the two industries:

• Taxi fare revenue has declined as journey times have reduced. The precise amount is difficult to disaggregate from other factors and the estimates vary. One of the four Major Operators claimed that 'Fares have dropped by about 30%' whilst some of the drivers reported a total drop in income of around 20%. However, it would appear that these figures are 'general revenue' and include the decline in passengers; and
• Private Hire do not appear to have changed their pricing structure in response to shorter journey times.

Customer profile: Comment The introduction of the Congestion Charge took place against the backdrop of a combination of a medium term economic downturn and what would now appear to be a short term drop in both business and tourist visitors to the city (see 2.2). Given the customer profiles described above, Taxis have been disproportionately affected whilst, to date, there has been relatively little impact on the Private Hire trade. However market mechanisms may come into play to re-adjust the balance.

Income: Comment The congestion charge has effectively changed the pricing differentials between Taxis and Minicabs and this has coincided with a downturn in the traditional customer base for Taxis. The short-term effect has been to exacerbate an already difficult trading situation for Taxis. The great unknowns are how effectively market mechanisms will act to restore differentials and whether we are seeing the beginning of a structural change to the market in which the congestion charge (and its effect on pricing) is only one, relatively small factor.

Organisation and regulation: Comment The research indicates that the regulation of the Private Hire Industry that has coincided with the introduction of the Congestion Charge has already begun to improve perceptions of both drivers and vehicles with the general public and corporate clients. Interviews with Minicab Operators and the majority of drivers indicates that business in 2003 has been good, and contrasts starkly with comments coming from Taxi drivers and Operators. Given that it is unlikely that in the current economic climate business growth is due to market growth, we conclude that business is being gained at the expense of the Taxi trade. This contention is supported by the fact that some Taxi Operators are reported to be purchasing Private Hire vehicles.

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