We have just been told that the problem of public house monopoly licences is about to be tackled. However, predictably, this has immediately evoked opposition from publicans, including a demand for compensation for the loss of the artificial value attached to these urban licences. Before we get too excited at the prospect of liberalisation in this trade, which has always been politically influential, it may be instructive to look at what has been happening in the Dublin taxi business, where a similar liberalisation move was launched some time ago.
Unlike other countries, where taxi licensing has been employed to ensure high standards of vehicles and drivers and to control possible abuses - but not to limit supply - in Dublin the system has for several decades been used instead to prevent the supply of taxis matching the demand. This has been due to the success of the taxi business in lobbying politicians to limit entry. But as a result of rapid economic growth, this restriction has become a source of increasingly grave public inconvenience. Because the financial return from taxis was thus artificially increased, this in turn gave taxi licences an artificial value and led to these public authorisations being traded in, at £80,000 each in recent times. In some instances wealthy individuals have bought batches of licences and employed drivers to earn artificial profits for them.
Many people are asking why the clear public interest in an adequate supply of taxis in the capital has been frustrated by politically imposed restrictions on the supply of taxi services. In fairness it has to be said, however, that despite considerable pressure from the taxi business, Dublin Corporation has recently taken some steps to alleviate the problem. A total of 400 additional licences has been issued in the past two years, all for taxis capable of accommodating disabled people.
But the corporation has charged £15,000 for each of these licences, and as these vehicles cost about £27,500 each, this has pushed up to £42,500 the investment to be made in the acquisition and activation of a taxi licence. Clearly future taxi charges will have to be set by the corporation at levels that will yield a return on this artificially increased investment.
Why has the corporation decided to increase artificially in this way the future cost of taxi services? It cannot have been totally uninfluenced by the fact that this process has already netted it £6 million and is set to bring in tens of millions in the years ahead. However, it has justified these high licensing fees as the only way it can protect the existing monopoly value of a taxi licence while expanding licence numbers. If it did not charge £15,000 for new licences, the £80,000 that those seeking to drive a taxi have had to pay to an existing licence-holder would be greatly devalued. Here we come up against the argument that some publicans have started to deploy in relation to the deregulation of public houses - that there should be compensation for purchasers of licensed premises who have gambled on the existing restrictive licensing system being retained indefinitely. That's a gamble that in the past has led them to pay artificial prices for licensed premises.
I have a lot more sympathy for taxi drivers who bought licences from previous owners at artificial prices than I have for people who are well enough off to buy pubs in Dublin.
Two reports have been prepared on the taxi issue - a comprehensive study by Oscar Faber and Goodbody Consultants for the corporation, and a much slighter report by a working group, for the Taoiseach.
The otherwise excellent Oscar Faber and Good body report suffers from one defect: its terms of reference have not been published. We have no idea how the consultants were asked to balance the interests of taxi-drivers with those of the community.
One can judge what the report's terms of reference may have been only from the character of the consultants' recommendations - in particular from the fact that they felt constrained by concern for taxi interests to propose leaving Dublin without what they themselves assess to be an adequate taxi service until 2008.
Nevertheless, the report is a valuable source of information. From it we learn that because of Dublin's low population density, low public transport provision (subsidies for urban bus transport are a fraction of what they are in most other cities), and high level of tourist activity, the demand for taxis here is much higher than in cities elsewhere for which data are available.
The strength of demand can be seen in the fact that a severe shortage prevails despite the licensing of 2,374 taxis and 3,500 hackneys in Dublin - one vehicle for every 180 people. That ratio is over twice that for London and several other overseas cities for which figures are available, and is 20 per cent higher than the average for British provincial cities. Because of this exceptional level of demand, two out of every three taxis have a second driver, or "cosy".
Surveys by the consultants show that two-thirds of those under 50 are at least occasional taxi-users - a surprisingly high figure - and that in the city proper no less than three out of every five adults make some use of taxis. Moreover, occasional taxi usage is common to all social groups: over half of unskilled workers are occasional users. The report estimates that in order to satisfy current demand in Dublin it would be necessary to increase the supply of taxis by 80 per cent to about 4,300 - a process which would, however, considerably reduce the demand for hackneys. The monopoly profits generated by the present artificial restriction of taxi numbers are calculated at £30 million a year.
The second report, from the Dublin Taxi Forum established by the Taoiseach (the membership of which included two representatives of taxi interests but none of either the hackney operators or of consumers), recommends an annual increase of only 200 licences to 2002, with no proposal for increases beyond that date.
On the basis of the Oscar Faber and Goodbody estimates of demand, this would leave the city still 35 per cent short of its requirements in that year, with a potentially rising shortfall thereafter. This is not a serious proposal. The report makes no reference to the proposal by John Fingleton of TCD for an immediate issue of an additional licence to all existing licence-holders, to compensate them for earlier deregulation, at the end of 2001.
But it does mention another alternative that would have given Dublin a deregulated taxi service within five years, rejecting it, however, principally on the grounds that "in the first five years there is a need to restrict the issue of new plates quite severely - by 200 a year - so that supply is not increased as quickly as" under the 10-year scheme it recommends.
I have read over and over again the phrase in quotation marks above, but I have not succeeded in understanding what it is trying to say. Why is a short timescale seen as requiring a slower rate of licence increase? One might have thought that in order to arrive earlier at the point of deregulation a more rapid expansion of licences would be needed.
Unfortunately, no attempt has been made to assess the scale of the loss to the economy likely to arise from the shortfall of taxis which these reports propose should continue during the next decade - which is the other side of the taxi interests' annual £30 million monopoly, some £22 million of which comes from the rent they charge to their "cosies", who, if taxis were deregulated, could have their own vehicles. This shortfall must involve a large loss of both working and leisure time, and must also have a deterrent effect on business in Dublin.
What is likely to be the outcome of these two reports? In the absence of any effective public pressure on politicians in favour of earlier deregulation, the most likely outcome seems to be a decision in favour of a gradual annual increase in taxi numbers at a rate lying between 200 and 350 a year proposed in these two reports. This would postpone to around 2010/2011 an equation of supply and demand for taxis in Dublin.