Private Hire Vehicles (London) Act 1998: operator licensing
Introduction
This assessment estimates the costs and benefits of the Private Hire Vehicles (London) (Operators' Licences) Regulations 2000. It takes account of comments received in response to the consultation document published in August 2000.
Issue and objective
The Private Hire Vehicles (London) Act 1998 provides for the regulation of private hire vehicles (PHVs - minicabs) and their drivers and operators in London. The primary aim of the Act is to give passengers in London the same protection already afforded by Statute in the rest of the country. In particular, the Act provides for applicants for operator licences to be assessed as "fit and proper" (taking account of such things as convictions, bankruptcy, compliance with health and safety, planning, radio licence etc requirements) and for the requirement to be "fit and proper" to continue once a licence has been issued; these provisions are in line with those which apply to PHV operators elsewhere.
The Act is being implemented in three stages, starting with the licensing of PHV operators. Driver and vehicle licensing will follow as soon as practicable.
The Private Hire Vehicles (London) (Operators' Licences) Regulations 2000 govern the licensing of operators; they set out procedures, fix fees, and provide for refunds in certain circumstances and the grant of licences; they oblige operators to maintain records relating to the hirings they arrange and the vehicles and drivers they use; and they deal with transitional arrangements.
Risk assessment
At present there are no controls on who can operate PHVs in London. This poses a risk to the users of PHVs of attack or of injury through accident.
The trade itself has endeavoured to achieve a degree of self-regulation through association membership schemes. But these are merely voluntary, and unscrupulous operators can inevitably be attracted to a trade where there is an absence of regulatory control; this can entail risks to the safety of passengers and other road users through lack of checks on drivers and vehicles (which will typically do high mileages), and can discourage passengers from using PHVs through concern about possible risks.
Options
The key decision that the London PHV trade should be regulated has already been taken by Parliament with the passage of the Act. It is now necessary to exercise the regulation-making powers in the Act in order to implement the Act. The present regulations make detailed requirements for operator licensing. The procedures essentially follow those which have been applied elsewhere in the country for many years; it was not thought appropriate to have a regime in London which differed significantly (in the direction of either greater relaxation or greater restrictiveness) than that elsewhere.
The Act provides for licensing of operators, drivers and vehicles, but it was not practicable to implement all three elements simultaneously. It has been decided to introduce operator licensing as the first phase because the operator controls his or her business overall and can be held accountable for it by the licensing authority.
The regulatory authority will be the Public Carriage Office (PCO), part of Transport for London, which in turn is part of the overall responsibility of the London Mayor. The PCO is already responsible for regulation of the London taxi trade. Taxi and PHV regulation is similarly exercised by the same local authorities outside London, and it was not thought appropriate to separate the two roles for London.
Benefits
The risks to the travelling public will be greatly reduced by the operators having to be assessed as "fit and proper", as elsewhere.
The regulations contain provisions which are principally designed to benefit consumers. The record-keeping obligations (covering bookings, as well as drivers and vehicles available to the operator) will enhance "traceability" in the event of passengers seeking redress, or an enquiry by the licensing authority or the police; the obligation on operators to quote or estimate a fare when asked will clearly benefit passengers in that they will know or have a good idea of the full cost before the journey begins; the setting up of a complaints procedure will also benefit passengers in approaching a licensed operator when the service has been less than satisfactory.
The trade itself should also benefit from the introduction of a system which confers on them a degree of legitimacy which they had previously not enjoyed. It may well be that people who had been reluctant to use PHVs because of the risks associated with an absence of regulation might turn to this mode of transport for the first time with the introduction of operator licensing.
Business sectors affected
The business sectors affected will be those whose activities fall within the definition of "operator" in section 1(1)(b) of the 1998 Act - "a person who makes provision for the invitation or acceptance of, or who accepts, private hire bookings". A "private hire vehicle" is defined in the Act as "a vehicle constructed or adapted to seat fewer than nine passengers which is made available with a driver to the public for hire for the purpose of carrying passengers, other than a licensed taxi or a public service vehicle". This definition encompasses more than the conventional minicab industry; it will also cover, for example, chauffeur services. (There is, however, an exemption for vehicles whose use as private hire vehicles is limited to weddings and funerals.)
There is no formal record of how many PHV operators there currently are in London. However, it is estimated that there are approximately 1500 operators. These range from large companies (some with more than 100 vehicles) to sole traders who use only one vehicle. The PCO estimate that some 200 operators use no more than two vehicles.
Compliance costs
The cost of an operator's licence under the regulations will be £1400 for a five year licence (£280 per annum) or £800 (£160 per annum) in the case of the 'small' operator with no more than two vehicles available to carry out private hire bookings. These were the figures proposed in the consultation paper. It will be for operators to decide whether to absorb the licence fee costs into their businesses, or to reflect them in the fares charged to PHV users. The consultation responses did not generate any useful indicators on this. Costs may arise for businesses in particular from the process of applying for licences, maintaining and keeping records or complying with the conditions once a licence has been issued. An approximate indicator of these is considered to be approximately double the cost of the licence fee. The consultation response did not suggest that this was an unreasonable basis. Indeed, the London Private Hire Car Association said that the costs of licensing would be entirely acceptable when compared to the benefits for the trade. The table below outlines what the compliance costs might be to an individual operator with no more than two vehicles, an operator with more than two vehicles and PHV operators in London as a whole:
|
Compliance costs (annual) |
For individual operator (no more than 2 vehicles)Assuming 200 operators |
For individual operator (more than 2 vehicles) Assuming 1300 operators |
For industry (Large and small operators combined) |
|---|---|---|---|
|
Licence fee |
£160 |
£280 |
£396,000 |
|
Running costs |
£320 |
£560 |
£792,000 |
|
Total |
£480 |
£840 |
£1,188,000 |
It should be stressed that a good number of operators already maintain comprehensive records of bookings, drivers and vehicles and already adopt the sort of practices required by the conditions of licence. For these operators, the impact of the regulations in terms of additional costs should not be great. The more considerable impact will more likely be felt by those operators who do little in the way of keeping records and other practices at the moment.
These regulations relate to operator licensing; the overall cost to the London private hire industry of complying with the requirements of the Act will be cumulative, with the implementation of driver and vehicle licensing.
Impact on small businesses
Some businesses have welcomed the passing of the Act as they consider the regulations will enable them to provide a better service to the public, and will no longer have to compete with what are seen as "cowboy" operators to do so. On the other hand, some owner-drivers have expressed concern that their costs will be increased, particularly because it is a requirement of the Act (which cannot be altered by the regulations) to accept private hire bookings only at an operating centre. This means that some of them will have to acquire premises from which to operate. There was considerable support for a reduced fee for the operator who has up to two vehicles available for carrying out PHV bookings, and the regulations make such provision.
Other costs
It is estimated that the overall annual cost to the PCO of administering and enforcing operator licensing will be some £900,000 out of a total cost of about £4m for administering and enforcing all the provisions of the Act (roughly twice the cost of regulating London taxis), reflecting the larger size of the PHV trade. The costs of administering and enforcing the licensing system will be met from fees charged under the Act and will not result in any significant increase in public expenditure.
A high degree of compliance is expected. The trade generally appreciate the benefits of regulation, and have broadly welcomed the regulatory regime; it is therefore envisaged that legitimate operators will wish to work within the system.
It is also to be expected that those operators who comply with the requirements of the Act and the regulations would be quick to report to the licensing authority any operators who attempt to avoid the licensing system or who fail to comply with their statutory obligations, and thereby represent unfair competition.
Sanctions
The offence of making provision for the invitation or acceptance of, or accepting, private hire bookings in London without an operator licence will be subject to a fine not exceeding level 4 on the standard scale. Any person who gives false or misleading information in order to acquire or vary an operator licence would be subject to a maximum fine of level 5 on the standard scale. Any operator who fails to keep the required records; who sub-contracts a hiring to a person who does not hold a London operator licence or an operator licence under section 55 of the Local Government (Miscellaneous Provisions) Act 1976; or who fails to produce documents when requested would be guilty of an offence subject to a maximum fine of level 3 on the standard scale.
The licensing authority will have power to suspend or revoke the licence of any operator who it considers is no longer fit to hold a licence or who has failed to comply with any conditions of licence, or any requirements under the Act. There is a right of appeal against a decision to suspend or revoke a licence.
Results of consultation
Following enactment of the Act, the Department and the PCO consulted jointly on the detailed rules and regulations which should govern operator licensing. In the light of the responses received, draft regulations were drawn up and a follow-up consultation exercise, incorporating the draft regulations and the draft regulatory impact assessment (RIA), took place in August/September 2000. The Department received 38 responses to the follow-up consultation. Very little comment was offered on the draft RIA. Generally, the proposals were well received; the principal trade associations in particular considered them to be acceptable.
The draft regulations have been amended in the following key respects in the light of the follow-up consultation:
- It was recognised that operators with no more than two vehicles might have plans to expand during the currency of the licence and might not want to have to apply for a new licence. Regulation 7 has, therefore, been amended to give such operators the opportunity to apply for a full licence even though, at the time of applying, they only had one or two vehicles.
- In Regulation 9(2), the obligation to display an insurance certificate against public liability risks at operating centres has been removed; this reflects advice from the insurance industry that such certificates are not issued.
- It was pointed out that, at the time of booking, an operator cannot normally identify the specific vehicle which would be used to carry out any given hiring. On that basis the obligation to inform the hirer whether the booking would be satisfied by a PHV or a licensed taxi (where an operator uses both) has been removed. The associated obligation to record this in Regulation 11 has also been removed. In the interests of consumer protection, the obligation on the operator in regulation 9(8) to calculate the fare in respect of a licensed taxi as if it were a PHV (unless the taximeter shows less) remains.
- It was recognised that operators might find it onerous to list a number of intermediate destinations in respect of a single booking; regulation 11(d) has, therefore, been amended to oblige operators to record the main destination.
Declaration
I have read the Regulatory Impact Assessment and I am satisfied that the benefits justify the costs.
Keith Hill
Parliamentary Under Secretary of State
Department of the Environment, Transport and the Regions
Date: 5 December 2000
Contact point
Buses and Taxis Division
Taxi Policy Branch
Zone 3/12 Great Minster House
Telephone 020 7944 2293
