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PROVISION OF CABS: Why councils cannot simply cap taxi numbers to protect driver earnings
Restricting taxi numbers can sound like a straightforward answer to an overcrowded rank. Fewer vehicles should mean more fares for each driver, less congestion and less time waiting without income.
However the law asks a different question. It focuses first on whether passengers can obtain the taxi service they require.
Outside London, section 16 of the Transport Act 1985 allows a licensing authority to refuse a taxi vehicle licence to limit numbers only when it is satisfied that there is no significant unmet demand for taxi services in its area.
That power concerns taxis, also known as hackney carriages. It does not give councils an equivalent general power to limit private hire vehicle numbers. PHVs serve pre-booked demand rather than ranking or plying for hire.
An unmet-demand survey is normally used to defend a taxi cap. It examines whether the existing fleet supplies enough vehicles where and when passengers want them.
Rank observations are central to any discussions around caps being placed, but they cannot tell the whole story. A queue at 11am on a Tuesday says little about passengers waiting after the last train on Saturday night.
Department for Transport guidance says surveys should consider waiting times at ranks, street-hail delays and telephone, online or app engagement. Peak demand should not be dismissed as abnormal merely because it is concentrated into a small part of the week.
Latent demand is harder to measure. These are journeys people would make by taxi if vehicles were reliably available, but currently avoid because past experience tells them the wait will be excessive.
A survey based only on passengers already standing at ranks risks missing those who have given up using them. Consultation with disabled travellers, older people, women, people without cars, hospitality businesses and transport operators helps reveal that hidden market.
Wheelchair-accessible provision requires its own assessment. A town may appear adequately served in total vehicle numbers while still failing passengers who need a wheelchair-accessible taxi at particular times.
The Department recommends that demand surveys supporting quantity restrictions should be undertaken at least every five years and aligned with Local Transport Plans where possible. A council facing a legal challenge must be able to show that its conclusion remains reasonable.
An old survey becomes less persuasive when the market changes. Rail timetables, nightlife, population, vehicle costs, app-based competition and driver working patterns can all alter demand without changing the number printed on the council’s plate-limit policy.
Quantity controls can create a second market in licences. Departmental guidance notes that restricted plates can command premiums of tens of thousands of pounds. That value may benefit an owner selling a vehicle plate, but it also raises the cost of entry for somebody wanting to provide a taxi service.
Removing a limit can reduce that asset value. Drivers who bought into the restricted market may reasonably feel that the rules encouraged them to invest in scarcity.
That financial concern deserves some consideration, but it cannot replace the statutory passenger test. A licensing authority is not primarily maintaining a market price for plates. It is regulating local transport.
The Competition and Markets Authority has argued that quantity restrictions are unnecessary for passenger safety or reasonable fares and can reduce availability, increase waiting and weaken competitive pressure. The Department says most authorities do not impose them and regards unrestricted entry as best practice.
Removing a cap does not automatically produce a good taxi market. Rank space may remain limited, accessible vehicles may remain expensive and additional licences may attract drivers only during the most profitable periods.
Better ranks, targeted accessibility policy, regular tariff reviews and enforcement of illegal plying can be more accurate tools than keeping a fixed ceiling on the entire fleet.
Nor does an uncapped system guarantee that licence applications will arrive. If driver earnings are weak or vehicle requirements are unaffordable, the council may offer unlimited plates and still see taxi numbers fall.
The serious debate is therefore not “more taxis versus fewer taxis”. It is whether a restriction produces a measurable benefit for passengers that cannot be achieved through a less damaging intervention.
