George Young – 1978 Speech on the Taxi Trade in London

Below is the text of the speech made by George Young, the then Conservative MP for Ealing Acton, in the House of Commons on 8 March 1978.

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 British 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.