Madam, - The payment by the Government of compensation to taxi licence-holders for the deregulation of the sector (The Irish Times, December 22nd) is an absurd piece of economics.
Taxi licences acquired a scarcity value because of super-normal revenues when new market entrants were restricted from 1978 to 2000. Those who bought licences from the incumbents over this period took a gamble that neither the Government nor the courts would ever deregulate the sector.
The financial institutions refused to accept taxi licences as loan collateral. There are three High Court judgments that licence-holders do not have a right to compensation when they lose their ability to prevent new market entry.
The restricted entry taxi system was a gift for licence-holders from the wider economy. The public owes licence-holders nothing in compensation for deregulation. The compensation decision of last Monday week, together with the announcement of a Commission for Taxi Regulation "charged with introducing a new regulatory regime", increases the risk that the present 11,000 taxi licence-holders under deregulation will seek to limit new entry. The compensation circus will start all over again with far greater costs than when the courts deregulated a taxi sector with 3,900 incumbents.
The wider implications of "compensation for deregulation" are even more appalling. Citizens now overcharged by a wide variety of producers, from publicans to pharmacists, can look forward to tax increases to compensate these sectors if governments ever decide to deregulate the restricted sectors in the wider national interest. - Yours, etc.,
Dr SEAN D. BARRETT, Department of Economics, Trinity College,
Dublin 2.