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Why councils should not wait for a taxi fare crisis before reviewing tariffs
A taxi tariff left untouched for years may appear to protect passengers. In practice, it can quietly reduce the number of drivers willing to work, particularly during evenings, weekends and other difficult shifts.
Outside London, licensing authorities can set maximum fares for taxi journeys within their areas. They cannot set private hire vehicle fares, which are agreed through the operator or booking platform. A taxi tariff is a regulated ceiling, not a guaranteed level of income. Drivers still carry the commercial risk of waiting without a passenger, returning empty after a journey and losing working time to traffic.
Fuel or electricity is only one element of the calculation. Insurance, vehicle finance, servicing, tyres, cleaning, licensing fees, card charges and vehicle replacement must all be recovered from the journeys a driver completes.
When those costs increase but the tariff remains frozen, the meter does not absorb the difference. The driver does. Some may extend their hours, defer investment or concentrate only on the busiest periods. Others may decide that the work no longer produces an acceptable return and leave the industry altogether.
The Department for Transport recommends regular tariff reviews and says councils should consider a simple formula for deciding fare changes. The value of a formula is not that it removes judgement. It makes the judgement visible.
A credible formula might track representative vehicle costs, insurance, servicing, fuel or charging, licensing expenses and an earnings component. It should reflect the local fleet rather than rely on a generic motoring index designed around low-mileage domestic cars.
Automatic increases are not necessarily the answer. Costs can fall as well as rise, while affordability and local economic conditions still matter. The formula should inform the decision, with consultation testing whether its assumptions remain realistic.
Waiting times provide another useful measure. The Department cites Competition and Markets Authority guidance suggesting that councils monitor waiting times and consider adjusting fare caps where supply and demand have become mismatched.
That does not mean every shortage can be repaired with a higher tariff. Rank locations, licence numbers, working patterns, enforcement, driver recruitment and competition from PHVs can all affect availability. Fare levels are just one lever, but they are an important one.
Time-based tariffs also deserve a more grown-up discussion. A higher evening, weekend or bank-holiday rate is sometimes presented as an unfair premium. It can instead be the price required to persuade enough drivers to work when demand is high and the social cost of the shift is greater.
Passengers benefit from affordability, but an inexpensive taxi that is unavailable is not much of a service. The purpose of regulation should be to balance the price of a journey with the commercial conditions required to provide it.
Long gaps between reviews make that balance harder. Costs accumulate until the trade requests a substantial increase, which can alarm passengers and become politically difficult. Smaller, evidence-led adjustments are less disruptive than one overdue jump.
Councils should also explain that the tariff is a maximum. Pre-booked taxi services and intermediaries may advertise discounts, although the Department advises against encouraging fare negotiation at ranks or during street hails because of the potential for confusion and security problems.
For proprietors, regular reviews provide greater confidence when planning vehicle purchases and other investment. For passengers, they reduce the likelihood of sudden fare shocks. For councils, they offer a way to address availability before a shortage becomes embedded.
A tariff review should therefore be treated as routine transport management, not an emergency concession to the trade. The best time to examine whether a fare still works is before drivers disappear from the rank.
