East Midlands and South West to be hit hardest when 20% VAT increases on private hire fares arrive

Recent research highlights the disproportionate impact that the potential introduction of VAT on private hire vehicle (PHV) fares could have on the East Midlands and the South West of England.

The Government's consideration to levy a 20% VAT on ride-hail, minicabs, and other pre-booked PHV services—excluding hackney carriage taxis—could significantly inflate prices across England and Wales.

The 'Stop the Taxi Tax' campaign's findings suggest that lower-income areas, particularly those with scant public transport options, would bear the brunt of such legislation. Vulnerable passengers, including the elderly and those reliant on pre-booked minicabs for door-to-door transport, stand to be most affected.

In the South West, where nearly a quarter of the population is over 65 years old, public transport travel times to town centres average at 36 minutes, the longest in England, with West Devon facing average journey times of 58 minutes. The East Midlands, with an average weekly income of £617—below the national average—coupled with a significant elderly population, is similarly poised for hardship.

Contrastingly, the South East, boasting the second-highest average weekly earnings in the country at £692, may be less affected by the fare increase due to its relatively higher income levels, although cost of living in the area is also higher.

Amid growing concern, Chancellor Jeremy Hunt announced a forthcoming consultation on the VAT treatment of PHV journeys in his Spring Budget. This announcement comes as MPs and over 70% of the British public, according to a YouGov poll, express opposition to the proposed tax increase, urging the Government to mitigate the potential financial strain on already vulnerable communities.

Gary Stephen Beck, a driver in Keynsham, Bristol, said: “This research is extremely concerning to hear as a driver. In the last 32 years in this profession in the South West, I’ve driven countless elderly, vulnerable, or low-income passengers. My regular passengers are those who need essential transport––journeys to school, town centres, or hospitals. A Taxi Tax will hit us drivers too, especially with the current cost of living. I cannot understand how the Government can think people will not be impacted by this. In ten years time, the Private Hire industry won’t look like one I’d like to work in.”

Ben Bradley, MP for Mansfield, said: “Our party has rightly put levelling up at the heart of our political agenda since 2019. Introducing a taxi tax now would clobber the elderly and vulnerable across the country, but particularly those outside the South East. As an East Midlands MP, I am calling on the Chancellor to step in and take urgent action to protect my constituents, and millions in the region as a whole.”

James Crawford, Green Party Councillor for Bishopston and Ashley Down, Bristol, said: “These findings from the Stop the Taxi Tax campaign reveal the weaknesses in the South West’s transport accessibility in areas such as Bristol. When increasing numbers of people are struggling with the cost of living, adding VAT to taxi journeys is the last thing that's needed. This city and this region experience major issues with public transport, and many people have to use taxis to plug in the gaps. VAT is already one of the most regressive taxes, and any increase will undoubtedly be passed onto passengers as the margin for journeys is so low in the South West.

“Regional and rural transport has always fallen to the wayside, exacerbating the isolation felt by many as they are increasingly unable to travel. Taxis are the South West’s transport lifeline––they must be protected from this unfair hike in fares.”