TARIFF DILEMMA: How should the taxi industry price themselves during an economic crisis?

Times are hard now, and let’s be honest, it’s about to get much harder for loads more households as new energy rates hit and higher rate mortgages are reluctantly agreed to.

These rising costs can be stomached if your own income rises in line with inflation. The problem comes when not all employers and sectors can afford the eye watering 10.1% inflation currently recorded. We’ve only got to look at the number of walk outs and strike actions taking place around the country to see there are some seriously concerned work forces.

Taxi drivers are no different. Given the high reliance on fuel to run their business, the industry is one of the most impacted sectors. Not only are cabbies fighting business cost rises, they are also battling household rises too.

Lucy Frazer, Department for Transport Minister, spoke recently on the topic too. Frazer said: “For taxis, which can be hailed in the street or at taxi ranks in the area in which they are licensed, local licensing authorities can set maximum fares. These should pay regard to the needs of the travelling public and what it is reasonable to expect people to pay, but also to the need to give taxi drivers the ability to earn a sufficient income.

“Regulated metered fares provide an important element of consumer protection as passengers do not pre-book the journey. Many authorities have been reviewing their maximum taxi fares this year in light of the increasing pressure on everyone’s finances.”

With all this in mind there’s a careful balancing act to be made across the UK when it comes to taxi tariff increases. Too much and passengers will be priced out of using the service, too little and the driver already working long hours can no-longer afford the cost of living. So, what are the options?

Do nothing or offer the bare minimum.

There are some out there hoping the war in Ukraine will pass, that fuel prices will stabilise, and inflation will drop. It’s all very unlikely though. In Nuneaton and Bedworth Borough, taxi representatives were refused a tariff review completely. In Glasgow, cabbies were handed the remarkably low figure of 0.83%.

In the short-term this outcome will help residents, but the complete imbalance will eventually cause drivers to leave the industry and make the job unattractive to new applicants. Heading back to Glasgow, cabbies are also being asked to invest in new greener vehicles. The eventual outcome will be a lack of cabbies servicing the local economy and community. This helps no one.

Meet halfway.

Some might see this as the fairest outcome, but it still points to longer-term problems as described above. In many regions demand for taxis remains high and a shortage of cabs exists despite the economic uncertainty. For example, in regions where foreign tourism is prevalent, the sector is booming due mainly to the weak pound and pent-up covid demand. Where demand is high, does the industry need to offer below inflation rises? Probably not. There are, however, regions which rely only on residential footfall rather than that of visitors too. If demand is dwindling now in the lead up to Christmas, then that’s when the balancing act becomes trickier.

Stay in line with inflation.

If demand for taxis is currently greater than the supply, there is an argument that work levels will not change much. There’s also an argument that even if demand falls, the taxi tariff service is priced at the correct level for when demand does return. Recessions and economic downturns do not last forever.

By taking less of a rise now, bigger increases in tariffs may be needed a year or two later which could cause even bigger issues. In Windsor, the starting taxi tariff was doubled from £3 to £6 during the day due partly to a lack of taxi reviews dating back to 2016. At some stage the taxi tariff must represent a fair job prospect, it’s however best not to place an ABOVE inflation fares increase on the public during a cost of living crisis!

Summary...

First up there is no ‘one size fits all’ outcome and it will vary from region to region. It’s equally important to not devalue the job and not price out the customers. It’s important that local authorities listen to the taxi industry as they will have that real life feel for costs and whether there’s enough demand to take on a price increase. And finally, if local authorities want fleets owners and cabbies to drive investment in new electric vehicles... they have to find the extra funds from somewhere.