Taxi Industry Inquiry

The Taxi Industry Inquiry is an inquiry being conducted in the State of Victoria, Australia by the Taxi Services Commission into the taxi industry and taxi services in that State. The Inquiry is headed by Professor Allan Fels, the former head of the Australian Competition and Consumer Commission. Professor Fels is being assisted by Dr David Cousins AM.

Contents 1 Announcement 2 Industry problems 3 Inquiry scope 4 Terms of reference 5 State of the industry 6 Setting the scene 7 Legislative basis 7.1 Minister's comments 7.2 Effect of the legislation 8 Magnitude of reform task 9 Industry reaction 10 See also 11 References

Announcement

The Inquiry was announced on 28 March 2011 by the Premier of Victoria, Ted Baillieu.^[1] Mr Baillieu said the Fels Inquiry’s key tasks would include improving disastrously low levels of public confidence, providing better security and support services for drivers and safety for customers, and ensuring drivers were properly trained and knowledgeable.

A media release issued by the Premier announcing the Inquiry reported him as saying -

“The state of the taxi industry has deteriorated under the former Labor Government, failing both passengers and the industry,”

“It is a troubled industry that needs significant reform to drive improvements in service.^[2]”

Industry problems

The key problems with the current Victorian taxi industry listed by Mr Baillieu in his announcement were -

• low customer satisfaction, with a sharp decline over the past five to six years
• safety and security for passengers and drivers
• insufficient support for drivers
• too many poorly-skilled drivers with inadequate knowledge
• a high turnover of drivers resulting in a shortage of experienced drivers;
• complex ownership and management structures
• lack of competition
• too much of the industry revenue not being directed to the service providers – the drivers and operators.^[3]

Inquiry scope

Mr Baillieu said in his announcement that Professor Fels would investigate every aspect of the current industry.

“It is obvious that the current industry structure and regulation has failed,” Mr Baillieu said.

“It has entrenched a lack of accountability for on-the-ground taxi services by the major industry participants.

“These issues are long-standing and deep-rooted and the Coalition Government has a responsibility to improve the level of service to customers who utilise the taxi industry.^[4]”

The Premier indicated that reforming the Victorian taxi industry would occur in two stages.

In the first stage, the Fels Inquiry will undertake a comprehensive inquiry into the service, safety and competition issues in the Victorian taxi industry.

In the second stage, following Professor Fels’ investigation, a Taxi Services Commission will take over the role of industry regulator, giving it the powers and tools necessary to reform the taxi industry. The Taxi Services Commission will be established as a statutory authority.

The Premier indicated that the current taxi industry regulator, the Victorian Taxi Directorate (VTD), will operate as normal until the Commission is established. During the second stage staff and resources from the VTD will move to the new body as it assumes the ongoing role of regulator.^[5]

Terms of reference

The terms of reference issued for the Inquiry are as follows -

"The inquiry will have broad scope to review the sector and its performance against the following principles:

• customer and service focus;
• safety for passengers and drivers;
• support for and training of drivers;
• integration with other forms of public transport;
• an outcomes-based and accountable regulatory framework;
• market design that is effective, efficient and promotes competitiveness; and
• sustainability, in economic, environmental and social terms.

The overall aim of the inquiry is to instigate major and enduring improvements to service, safety and competition to Victoria’s taxi and hire car industry. The inquiry should be wide ranging and consider all point to point transport services including taxis, hire cars and other demand responsive services with a particular focus on service outcomes.

The inquiry should conduct broad ranging consultation to determine the views at all levels, including consultation with the general public and expert industry and other key stakeholders.

The inquiry will report regularly to the Minister for Public Transport and make a final report and recommendations focusing in particular on the following:

• the appropriateness of the structure of the taxi industry including the accountability of the range of industry participants with a particular focus on commercial incentives to participants including licence holders to improve services to passengers;
• service delivery and employee conditions,in particular the working conditions, training, standards and remuneration of drivers, and how these contribute to service standards and outcomes;
• competition in the sector, in particular focusing on vertical integration, anti-competitive practices and incentives for innovation;
• the effects of regulation, particularly relating to entry to the taxi market through capped licence numbers and to price controls and taxi fare setting arrangements, and how these impact on customer service and innovation;
• the performance of the Multi-Purpose Taxi Program and wheelchair accessible taxis in providing service to people with disabilities and a broad range of mobility disadvantaged people;
• the current and potential role of taxis, hire cars and other demand responsive transport services in an integrated transport system, with a focus on the role of these services in social inclusion;
• options for reform including benchmarking safety and service standards, appropriate market-based, legislative and administrative solutions, and communication technology advancements that may be harnessed, to facilitate improvements in the safety, service and environmental performance;
• the appropriate regulatory and service model for long term regulation and operation of the industry, focussed on service outcomes;
• examine, evaluate and report on other models and new approaches in the taxi and hire car sectors both in Australia and overseas;
• transitional arrangements from the current regulatory and service arrangements to the recommended model; and
• any other related matters.^[6]"

State of the industry

Newspaper reports on 12 May 2011 reported major problems with the performance of taxi services in Melbourne, the capital of Victoria.

Under a headline "Customer satisfaction with Melbourne's taxi services hits all-time low" the Herald Sun newspaper reported that -

"MELBOURNE'S taxi service has hit an all-time low, with customer satisfaction plunging to its worst-ever result.

Public Transport Minister Terry Mulder said at 53.4 per cent, from January to March, it was the poorest result since the surveys began in 2005.

It was a dramatic decline of 6.5 percentage points from the previous three months.

Key problems were difficulty in getting taxis off the street and at ranks, lack of information about taxis and poor passenger experience.

“The survey results show the worst possible outcome. They’re at their absolute lowest,” Mr Mulder said.

The results were announced this morning when taxi inquiry head Allan Fels issued his first report.

Prof Fels said the customer service standards in taxis had suffered an apparent severe decline in recent years.

“The number of complaints has gone up from 1500 to 5000 per year in the last seven or eight years,” Prof Fels said.

The report released today poses 100 questions the Fels inquiry intends to investigate over the next year.^[7]"

The Age newspaper included a similar report on May 13, 2011.^[8]

Setting the scene

The Inquiry issued a issues paper on 12 May 2011 called "Setting the Scene".^[9] The paper sets out the background to the Inquiry and raises a number of issues about the performance and state of Victoria's taxi industry. The Inquiry has called for public submissions in response to the paper by 24 June 2011.

Legislative basis

The Victorian Government introduced legislation in early June 2011 to provide support to the Taxi Industry Inquiry including by establishing a statutory authority, the Taxi Services Commission, to give clear organisational separation to the inquiry and to provide the inquiry with sufficient powers to obtain information and report to Government.

Minister's comments

Introducing the Transport Legislation Amendment (Taxi Services Reform and Other Matters) Bill 2011, the Minister for Public Transport, the Hon Terry Mulder MP commented that the measure -

"... sets a course for major reform of Victoria's taxi services. The Bill establishes a new Taxi Services Commission as the first phase of a complex and challenging reform process. The commission will provide the legislative basis and the powers for the comprehensive inquiry into the taxi industry that is being conducted by Professor Allan Fels, AO.

The inquiry and its broad terms of reference were announced by the Premier in March and its work is already under way. Once the inquiry has been completed, the commission will take over as the independent regulator of commercial passenger vehicles including taxi and hire cars.

Major reform of the Victorian taxi industry and its regulatory framework is desperately needed to arrest the serious ongoing decline in the standard of taxi services. In the late 1990s under the Kennett government, Victoria's taxi services compared favourably with other jurisdictions. Now, however, a once-proud taxi industry is on a downward spiral after a decade of government inaction and regulatory failure.

Victorians are fed up with the never-ending problems in the taxi industry and the appalling reduction in levels of service over recent years. This has been highlighted by the latest report of the Department of Transport's customer satisfaction monitor, which saw overall satisfaction with taxi services fall to the lowest level since the surveys began six years ago.

While many taxi operators and drivers do a good job, the problems driving customer dissatisfaction are clear: the long queues for a taxi in the Melbourne CBD and other entertainment districts on a Friday or Saturday night, drivers who do not know where to go, taxis that do not turn up, drivers who will not accept a short fare, violent incidents and unsafe behaviour.

Victorians are embarrassed when a dirty taxi or a poorly trained driver gives international visitors an unfavourable first impression of Melbourne. They are angry when they hear that taxi licences cost up to half a million dollars while taxi drivers are earning less than the minimum wage.

The Victorian public supports the need for an inquiry and will be raising many issues that have been hindering the industry's performance.

Taxis have a unique and crucial role in the transport system. They are a vital link in the public transport network, providing a flexible, point-to-point mode of transport that fills the gaps in fixed-route train, tram and bus services. In particular, taxis are the only mode of transport available to a range of groups which cannot drive a motor vehicle and cannot access other public transport services due to factors such as age, disability or where they live.

Victorians simply want to be able to get a taxi when they need one. They want the driver to know the way to their destination. They ask that the cab be clean and safe^[10]".

Effect of the legislation

The resultant Act established the Taxi Services Commission as a body corporate under the Transport Integration Act 2010 along with the other central transport bodies. The Act has four parts. Parts 2 and 3 set out the two major stages for the Commission. In its first stage, the Commission is conducting a comprehensive inquiry, ie the current Taxi Industry Inquiry. Accordingly, the Act essentially provides the Commission with secure powers and authority to enable it to fulfil its task.

The Minister made a number of comments about the wide scope of the Inquiry -

"The Inquiry will cover the commercial passenger vehicle industry in its entirety. While taxis will be the focus of the Inquiry, this broad scope means that the commission is able to inquire into hire cars, restricted hire cars, special-purpose vehicles and public commercial passenger vehicles (including certain buses).

The Commission will be able inquire into the holders of commercial passenger vehicle licences, the operators of commercial passenger vehicles, providers of taxi network services, and ancillary matters such as the supply of relevant goods and services in the industry. This industry-wide approach will ensure that the commission can comprehensively address systemic failures in the conduct, performance and regulation of the industry. In its second stage, the commission will assume the role of the industry regulator and take responsibility for implementing the reforms decided by the government as a result of the Inquiry.

This Bill reflects the government's determination to ensure that Victoria once again has world-class taxi services^[11]."

Magnitude of reform task

Professor Fels has indicated that the reform task in the Victorian taxi industry is substantial. He has warned that the taxi industry required a "very deep review that looks at fundamental questions about how the whole system works^[12].

"Its not just about patching the system up with a little bit of regulation here and modification there," he said. "We need to look at an industry that is not performing well systematically^[13]."

Professor Fels said the Inquiry's "Setting the Scene" paper had received more than 140 submissions, with 40 from people with disabilities. He has reported finding disturbingly high rates of poor taxi services across Victoria. He has indicated the Inquiry would consider the cost of a taxi licence - currently about $500,000 - and whether this allowed enough access to the industry^[14].

The industry's regulatory body, the Victorian Taxi Directorate, is also in his sights. "The whole system of regulation is on the agenda and it is also true the Government has legislated already to set up a Taxi Services Commission to come into play after our report," he said. "The VTD at the moment is a separate regulatory body we are reviewing because regulation is part of the set of problems^[15]."

Industry reaction

The Victorian Taxi Association (VTA), which represents taxi networks and operators, has indicated "...support for an inquiry but not an inquisition".^[16] The Chief Executive of the VTA has commented that -

"...if the inquiry is to be of any value it has to look into the VTD/DOT (the Victorian Taxi Directorate and the Department of Transport), get on with it, keep it simple and output focussed (rather than process focussed), look after the industry participants, and respect those who have built the industry – and bingo, the public will be better off.^[17]"

However, the head of the Taxi Industry Inquiry, Professor Allan Fels observed that -

"This is an industry like any other that is there to serve a customer. We're not there to service them (the industry).^[18]"

See also

• Taxicab
• Taxi Services Commission
• Transport Legislation Amendment (Taxi Services Reform and Other Matters) Act 2011
• Victoria (Australia)
• Transport in Melbourne

References