HC Deb 08 March 1978 vol 945 cc1567-78

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]

11.1 p.m.

Sir George Young (Ealing, Acton)

Most hon. Members are now on their way home—most of them, I suspect, in their own cars, one or two enlightened Members by bicycles. Many hon. Members will be outside at the Members' Entrance, waiting for taxis to arrive to take them home. If they find that they have to wait a little longer than usual, and if their cab driver is a little less alert and cheerful than they might expect, the reason is that the 16,500 taxi drivers in London have been singled out by the Government for harsher treatment than any other section of the community. They bitterly resent the way in which the Home Office has handled their application for a tariff increase.

I spent a few nights in Ilford, North a few weeks ago, for obvious reasons. I met many taxi drivers there. The animosity they expressed about this matter was something I shall always remember. I am delighted to see in his place my hon. Friend the Member for Ilford, North (Mr. Bendall), who will represent not only taxi drivers but everyone else in Ilford, North for a long time. I am also pleased to see my hon. Friend the Member for Southgate (Mr. Berry), who has a large number of taxi drivers in his constituency.

Although the economics of the taxi industry are complicated, the basic case which I wish to put to the House tonight is reasonably simple. It is that the cost increases that the taxi drivers have had to bear over the past two and a half years have been far higher than the tariff increases that the Home Office has allowed. As a result, the fleet proprietors have had to go out of business. The owner-driver is having to work far longer hours even than Members of Parliament and insufficient funds are being set aside for future investment.

The responsibility for this state of affairs rests entirely on the Home Office. To substantiate my argument I go back to July 1975 when the last major tariff increase took place, based on a claim made in December 1974. Since then the drivers have had a lop interim surcharge, introduced in December 1976.

It was against that background that a claim was made last July for an increase of 28 per cent. That sounds a lot, but we have to bear in mind that the increase in Britilsh Rail fares from January 1975 to January 1977, a roughly comparable period, was 93 per cent., that London Transport but fares went up 126 per cent., in that period and that Underground fares rose 147 per cent. Those organisations have access to capital funds to help them invest and also have access to revenue subsidies. Both of these advantages are denied to taxi drivers.

Put in the context of the costs of other transport organisations the drivers' claim was a modest one, reflecting the fact that, for example, a taxi cab that cost £2,900 in 1975 cost £4,500 in 1977. The cost of fuel has risen by over 50 per cent. and the cost of all the other related goods and services have gone up likewise. The figure of 28 per cent. was not plucked out of the air. It was substantiated in a detailed memorandum sent to the Home Office on 11th May last year based on a formula for calculating costs and revenues of the average cab used by the 1970 Maxwell Stamp report. Since that claim was put in nearly a year ago, costs have continued to rise.

The approach of trying to justify a tariff increase on the basis of costs was in line with the Price Code operating at that time. I quote from a letter which the Home Secretary—whom we are delighted to see in the House—wrote to another London Member on 10th May last year: In fixing the appropriate scale of charges for London cabs I, as Home Secretary have to have due regard to the provisions of the Price Code. Under the Code fares may be increased to an extent sufficient to offset the increase in prices which has occurred since the base date for the Code which, in the case of taxis, is taken to be 30th September 1972. London's taxi drivers accepted that those were the rules, and they were quite happy to play the game by those rules. The country had a high rate of inflation and the Government introduced a policy to try to tackle it. Because taxi drivers suffer from inflation like everyone else, they supported the initiative and wished to stay within the limits allowed by the Price Code.

Now we come to the skulduggery, which is what has deeply upset the trade. Halfway through the game, when the taxi drivers felt that they were winning the argument, the Government changed the rules. This is set out in a letter dated 14th February from the Under-Secretary herself: However, at the end of our deliberations, the Government had had to conclude that under current counter-inflation policy it would no longer be appropriate to allow a straight passing-through of cost increases into price rises. As you will recall, earlier stages of the counter-inflation policy placed emphasis on allowable cost increases. Under the current stage less emphasis is placed upon cost increases and more on profit margins, return on capital, and the factors affecting these, such as the efficiency of the enterprise and the use of resources. That is a totally different game with a totally different timescale and totally different rules set up not by the Maxwell Stamp Committee but by the Price Commission.

The matter was referred to the Price Commission on 12th December last year, according to a parliamentary reply on that date: Following consultation with the Price Commission and the Director General of Fair Trading I have today directed the Price Commission to examine and report to me on prices, costs and margins in the provision of cab services. The examination will cover all of Great Britain, and will include both hackney carriages, such as London taxis, and certain other private hire vehicle services, as laid down in the terms of direction."—[Official Report, 12th December 1977; Vol. 941, c. 15.] We learn from the Minister's letter of 14th February that the Commission had been directed to report by 30th June.

By that time events had infuriated the taxi drivers and the matter had been made worse by the Secretary of State and the Price Commission. If the inquiry had been confined to London's taxi drivers, and if it had started work on 13th December and used the figures of the audited accounts of the taxi fleets and the owner-drivers, which were available, it might have been completed by now. But none of that happened. The questionnaires on which the report is to be based have not even gone out yet. The offers of audited accounts were refused and, three months after the inquiry was announced, very little progress seems to have been made.

My hon. Friend the Member for Hampstead (Mr. Finsberg) was provoked to wonder in Taxi of 2nd March. whether there was a conspiracy between the Home Office and the Price Commission to drive London taxi drivers so close to bankruptcy that the Labour Party proposals for the municipalisation of London taxis actually looks attractive. The red herring of hire cars outside London has been dragged across the stage, and it is quite irrelevant to the problems facing London's taxi drivers.

In the meantime, an increase of 10 per cent. came into being on 22nd December last year based apparently on the 10 per cent. maximum wage guidelines. This is an entirely inappropriate basis on which to treat the taxi drivers' claim. By all means give the police and the firemen 10 per cent., but they do not have to buy the police cars or the fire engines and run them. To treat this as a wage claim instead of a tariff increase is totally inappropriate.

I should like to try to set out in simple terms the problems now facing the average cab driver. The average cab driver driving, say, 24,000 miles a year, which is approximately 54 hours a week, and allowing him a 10 per cent. return on his capital and letting him put enough money aside to replace his cab after five years, would in July 1975 have earned £2,730. His total costs in that year would have been £3,171. That left him a deficit of £441 per year. That has two consequences: either inadequate funds are set aside to replace his vehicle, or he has to work excessive hours.

If the situation was bad in 1975, by January 1978 it was disastrous. The figures for that month were: income £3,430; total expenditure £4,587. It is not surprising that in the meantime firms have gone bankrupt. Since July 1975, five fleet proprietors, operating some 650 vehicles, have stopped trading. I calculate that to break even now a taxi driver would have to work an extra eight hours per week than he worked in 1975. This is before the impact on his take-home pay of higher taxation and inflation.

The taxi drivers are confident that the current inquiry will vindicate their claim, but they need the increase this summer. If the report is delayed, if the Government do not accept it or refuse to implement it on time and winter comes without another tariff increase, the situation will be desperate. I have had discussions with the Leader of the GLC, Horace Cutler, who obviously has an interest in an efficient taxi service, as it is part of the transport strategy for the capital. In a letter dated 7th March, I was pleased to hear from him: We hold regular meetings with representatives of the trade to ascertain their views and we support them in their efforts to operate economically. Basically, they want equal support from the Government.

It is against this background of growing financial problems and total exasperation with the Government that I put five specific questions to the Minister, of all of which I have given her notice. The answers may define the area of agreement, clarify the situation and perhaps demonstrate that the Government have some residual sympathy for the taxi trade.

First, will the Minister confirm that she and her Government believe that the capital city needs a flourishing and efficient taxi industry? Secondly, will she admit that the current level of tariffs means that a taxi driver working as hard now as he worked in July 1975 is substantially worse off on his vehicle operation, setting aside the ravages which taxes and inflation may have made on any take-home pay?

Thirdly, will the hon. Lady confirm that there is now no incentive to become a taxi driver, as a man who buys a new vehicle today, who makes the accepted provisions for depreciation, running costs and so on, will lose over £1,000 a year on his vehicle operation? Fourthly, will she give an assurance that the Price Commission will report on this matter, as requested, by the end of June? Finally, in view of the intolerable delay to date and the impossibility of back-dating any increase, will she accept and implement as speedily as possible the recommendations it contains?

I forgot to say earlier that there is present my hon. Friend the Member for Croydon, North-East (Mr. Weatherill), who shares the concern of other London Members about this matter.

Licensed taxi drivers are entitled, if they are entitled to nothing else, to some straight answers to the straight questions that I have put to the Minister.

11.13 p.m.

The Under-Secretary of State for the Home Department (Dr. Shirley Summerskill)

I welcome the opportunity provided by the hon. Member for Ealing, Acton (Sir G. Young) to discuss this matter and to put the record straight about London taxi fares. I thank him for giving me notice of the questions that he raised.

On the first one, about the general state of the industry, my right hon. Friend the Secretary of State always has in mind the requirements of the general public in London for an efficient taxi service with ready availability of vehicles for hire at reasonable rates. Over the last few years, the rates of increase and the number of taxis in use and of drivers to drive them suggest that the trade is growing and flourishing. The number of taxis in use increases by about 500 to 600 each year—last year by 614. I have the figures for the last seven years. The number of drivers increased by 300 to 400—last year by 322. The number of owner-drivers would also appear to be increasing. All this suggests a faith in the future of the industry.

London taxis and drivers are licensed by the Assistant Commissioner of the Metropolitan Police. Day-to-day licensing control is carried out by the Public Carriage Office of the Metropolitan Police. There are about 12,000 licensed taxis in London and about 16,000 licensed drivers. I should like to pay tribute to the work of the Public Carriage Office, which, with the support of the Metropolitan Police, has the very difficult task of maintaining standards in what is otherwise an unregulated business activity.

London taxi fares are determined not by the Commissioner of Police but by the Home Secretary. These fares apply to all taxi journeys in London, whatever their length, provided that they begin and end within the Metropolitan Police District. This responsibility has rested with my right hon. Friend for many years. I believe that the original purpose in regulating London taxi fares was to achieve uniformity, but over the years it has been necessary for various factors to be borne in mind in determining the appropriate fare scale.

We should appreciate that the arrangements under which London taxi drivers operate vary considerably. There are some drivers who own their own taxi. About a third of the drivers are in that position. About two-thirds of the drivers rent their taxis by the day, by the week or by a longer period. Those drivers pay either a fixed daily or weekly rental, or share the daily takings with the owner of the taxi in pre-determined proportions. It is, therefore, a rather complicated and varied situation. Any discussions on the scale of London taxi fares need to take into account the separate interests of the owners of taxis, the interests of drivers and the interests of the travelling public.

If fares are too low, there is insufficient incentive for the vehicle owners to invest in new taxis. Over a period that could lead to a decline in the number of taxis operating and a worsening of the service to the public. If fares are too high, that may lead to a reduction in the use of taxis by the travelling public, with a consequent falling off in takings by taxi owners and drivers.

Those were the considerations in mind when increases in London taxi fares were approved in July 1975, and again in December 1976. The application for a further substantial increase in London taxi fares was made in July 1977. The application was for an increase of 10p in the initial hiring charge of 30p and for the time and distance rate of 5p for each 450 yards to be doubled after two miles. Because of the combination of a fixed and a variable increase, the total effect of this claim, if granted, would have varied for different journey lengths. The increase for a short journey of half-a-mile would have teen 33 per cent. while the increase for a journey of four miles would have been 60 per cent. The fare increase on the typical two-and-a-half mile journey would have been 25 per cent.

In the vast majority of cases taxi drivers' earnings are directly related to the fares charged, and fare increases of the sort proposed would have led to very large increases in drivers' earnings. In our view, increases of the magnitude that I have mentioned were quite unjustified, bearing in mind that unless steps were taken to prevent them very large increases would have been obtained by London taxi drivers at a time when other members of the working population were being expected to keep their pay increases in line with the Government's 10 per cent. guidelines.

As for the hon. Gentleman's second question, fares have been substantially increased since the middle of 1975. There was an increase averaging 30 per cent. in July of that year. A further increase of 10p per hiring—that is, 13 per cent.—took place in December 1976. There was a third increase of 10 per cent. in December 1977. These increases represent a total increase of 61.6 per cent. over the early months of 1975. If the effect of inflation and higher taxation is set aside, the taxi driver must be much better off than he was in early 1975.

I turn to the hon. Gentleman's third question concerning the man who buys a new taxi and works it for 54 hours a week. I cannot confirm the hon. Gentleman's statement, but the London taxi trade is an entirely private enterprise operation and every driver has complete freedom to choose when and where to offer his cab for hire and how many hours he shall work each week. Each driver maximises his earnings by using his knowledge and experience of the pattern of business offered and earnings will vary accordingly. The number of vehicles and drivers increases every year, as does the number of drivers who buy their own taxi. This does not appear to indicate that there is a loss on the operation.

Nevertheless, the case put forward on behalf of the taxi trade was carefully considered at several meetings with my right hon. Friend and me and the point of view of drivers was carefully considered. The Home Secretary had an important meeting on the subject last November and it became clear that it was necessary to look more deeply into the basic cost structure of the industry. It was therefore decided that the Price Commission should undertake such a study.

It was also decided that this study should be extended to cover the costs and margins of both taxis and private hire cars not only in London but throughout Great Britain. This would provide a broad picture of the cost structure of the taxi and private car industry as a whole.

As my right hon. Friend the Secretary of State for Prices and Consumer Protection announced in December last, the Price Commission is now hard at work on this study and is collecting the required information. I am sure that the representatives of the London taxi trade will put before it all the relevant statistical information.

I hope that the Commission will be able to indicate what proportion of the metered fare and of extras—for example, for additional passengers and baggage—goes towards the maintenance of the vehicle, and how much is available for the driver personally. It will be important in future discussions on London taxi fares to be able to distinguish between these elements and to ensure that drivers' earnings are not artificially inflated as a result of increases intended to compensate for rises in vehicle operating costs.

The hon. Gentleman asked two specific questions about the Price Commission. He asked for an assurance about when the Price Commission would report. My right hon. Friend the Secretary of State for Prices and Consumer Protection has directed the Price Commission to examine the prices, costs and margins of the taxi and private hire trades and to report to him not later than 30th June. I have no reason to expect other than that it will report by that date. Obviously any assurance on this score lies with my right hon. Friend.

On the subject of the recommendation of the Price Commission, I can inform the House that the Secretary of State has already told the taxi trade representatives whom he met in November last that he will carefully examine the results of the examination and will take them fully into account when reaching decisions, but that he cannot enter into any commitments about implementation.

Sir George Young

The Home Secretary has given commitments in regard to other inquiries into wage matters which are the responsibility of the Home Office. Why cannot he do the same for taxi drivers?

Dr. Summerskill

That is a question for my right hon. Friend. Clearly, he does not wish to commit himself at this stage. I cannot say more than that. Perhaps the hon. Gentleman would like to question my right hon. Friend further on that point.

On 6th December 1977 my right hon. Friend the Home Secretary made an order increasing London taxi fares with effect from 22nd December last year. This represented an increase of 10 per cent. on metered fares. In the Government's view, such an increase was the most that could be justified in the circumstances and would enable owners to obtain a reasonable increase to meet rises in operating costs and to provide an increase in drivers' earnings in line with increases obtained by other members of the working population.

The Government believe that the continuing fall in the rate of inflation will be of significant benefit to the owners of taxis in London, as well as to the population at large.

We recognise that sacrifices have had to be made by all sections of the community, including taxi drivers, in the fight against inflation, but it now seems to be generally accepted that this fight has to be won. Individual sections of the community may claim that there are special circumstances affecting their situation. Most sections of the community seem to make that claim at one time or another, but I am sure that in the longer term the London taxi trade will recognise that its claim for increases of up to 60 per cent. in London taxi fares could not properly have been granted.

Sir George Young

Would the hon. Lady accept that, halfway through the negotations, the basic rules were changed? If they had been adhered to as originally set by the Price Code, the tariff increase would have gone through. Can she also confirm that her Department has had, for 10 months, the detailed figures on which I rested my case and which showed the deterioration in the financial position and that she does not accept them? My figures showed that a new cab runs at an annual loss of over £1,000, and she claims that that is a fictitious figure. Will she also answer my second question, which related to the position as from July 1975? She carefully did not answer it as from July 1975 but chose a month earlier in the year, which was not what I argued.

Dr. Summerskill

On the hon. Gentleman's first question, I can only reiterate that the basic reason why a greater price rise was not permitted was the principle of adhering to the Government's 10 per cent. guidelines. That is the principle to which the Government have adhered all through the talks, and it was not possible to go beyond it.

The hon. Gentleman's question about new taxis was hypothetical. It was based on hypothetical figures. I have shown that each taxi driver operates in his own particular way, driving his own number of hours a week, and choosing when and where to offer his cab for hire. Will the hon. Gentleman repeat his third question?

Sir George Young

I asked whether the position from July 1975 to now had not deteriorated. The hon. Lady did not answer it because she chose a totally different base month from which to work, namely, January or February 1975. Will the hon. Lady now admit that the current level of tariffs means that a taxi driver working as hard now as in July 1975 is substantially worse off in money terms on vehicle operation, setting aside the ravages which taxes and inflation have made on any take-home pay?

Dr. Summerskill

I would still say that it would seem improbable. As I have shown in the figures I have quoted, successive fare rises at intervals over the last few years have brought about substantial increases since the middle of 1975. Over the whole period, even if the effect of inflation and higher taxes is set aside, the taxi driver must surely be better off than in early 1975.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Eleven o'clock.