Cracking down on Uber would come at a high cost to the Qld community

Yesterday’s Sunday-Mail reported that Katter’s Australian Party (KAP) will introduce a bill into the Queensland Parliament to increase penalties for Uber drivers. Regarding the taxi industry that he is intending to defend, Robbie Katter notes: “They move a million wheelchairs per annum at no cost to the Government—it’s cross-subsidised from other routes.” Mr Katter considers this an argument for defending the taxi industry, but it actually illustrates the poor design of our current taxi industry policy. The cross-subsidy that Mr Katter is talking about comes at a cost to other consumers of taxi services, and it is not transparent, which is typically considered poor form in policy design.

From the community’s point of view, it may be better for the Government to deregulate the taxi industry and develop an explicit financial support program for Queenslanders with disabilities to help them meet any additional costs associated with their transport. They could use this support to help pay for a taxi or Uber ride. I cannot see any barriers to Uber drivers purchasing an appropriate vehicle and catering to this market segment. While there would be a cost to the Government budget from the explicit financial support, it is not a new cost to the community as a whole, because consumers are already paying for this support through the cross-subsidy that Mr Katter has referred to.

The benefits to the community that would come from a deregulation of the taxi industry and through allowing Uber to flourish are so large that we should resist attempts such as KAP’s to protect the taxi industry. As has been argued by commentators such as my friend Brad Rogers in the past, the current restriction on supply in the Queensland taxi industry imposes high costs on consumers (see Queensland taxi licences and drunken violence). This cost has been recently quantified by the Economic Policy Group in the Queensland Department of Premier and Cabinet at $40 million per year (see this ABC News report).

The Government must realise that the current protection of the taxi industry comes at a high cost to the community through higher fares than otherwise (and through a shortage of taxis at peak times) and this is what makes Uber so attractive in comparison. Consumers are highly supportive of Uber, and government regulation should change so that it is in line with community views.

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9 Responses to Cracking down on Uber would come at a high cost to the Qld community

  1. David Loosemore says:

    Über does have a disability program I’m told

    Sent from my iPad

  2. People with severe or profound disability have access to a subsidised taxi scheme that gives them 50% discount of their fare up to $25.00. This scheme operates in a number of towns throughout Qld but not everywhere. There is scope to design a system that includes Uber as part of the mix that will cater for people with disability and I should think a better and more efficient system than that which exists currently.

    • Gene Tunny says:

      Stephen, thanks for the comment. I suspected there might have been a scheme like this already and should have looked for it. It means that the KAP argument is even less convincing.

  3. Jim says:

    With the exceptions of vehicle safety and driver credentials, there is very little need for regulation of taxis etc. As your readers have pointed out, Uber and co are already providing specialist services for the disabled, while direct subsidies for the genuinely needy are already in place. Problem solved!

    It seems to me that much of the anti-Uber sentiment is a result of whinging from owners of taxi licences that want to protect their investment (an investment that only has a value due to Government restrictions on licence numbers). Owners have a direct interest in restricting competition to protect their investment.

    The existing licence system also provides the State a revenue stream for nothing every time they tender a few more licences. These revenues will be based on the price of licences being traded on the open market (about $500K each). So the regulator (Dept of Transport) has a direct vested interest in restricting competition also.

    No wonder reform in this area is moving at a glacial pace…..

  4. Jen says:

    I have had some nasty experiences in taxis over the years, but have had only positive ones with Uber drivers so far. Both Brisbane taxi operators need to lift their game if they want regular users to believe what they say about the safety of their drivers and vehicles.

  5. Michael Willis says:

    As usual, you courageously shine the light of economic truth on poor policy proposals. I wonder if we might find some political reasons why Robbie Katter is promoting such a policy, with a few questions that should be asked. For example:
    • Is Mr Katter or his party being subsidised by or receiving donations from the taxi industry? Is his proposal a result of some generous taxi industry support for the KAP, or is he really speaking for the interests of Queenslanders? This question must be asked again and again inside parliament and in the media, until the truth is known.
    • Is the taxi industry leveraging its funding and support of Mr Katter – who just happens to be in the powerful position of keeping a minority government in place – to ensure its rent-seeking objectives are achieved?
    It might be a good political tactic for the taxi council, but you rightly explain that it makes for poor policy for Queenslanders and our tourism industry. And I suspect that the many small business operators who work under the Uber umbrella will be unimpressed with Mr Katter’s attempts to destroy their jobs.
    • How many constituents in Mr Katter’s electorate would lose their jobs, would pay more for taxis and would see poorer service as a result of the shutting down of Uber? None, in fact, as Uber does not yet operate in his Mount Isa electorate. So it costs him no votes in his own electorate to make his claims about Uber, but he may stand to gain a great deal of profile and perhaps some much needed campaign funding, from his support of the taxi council agenda.
    Unlike the tourism industry, and the many small owner drivers, who stand to lose their jobs, and the many happy passengers of those Uber ride sharing drivers who would have to pay more to subsidise the taxi owners.
    Perhaps they need to speak to their local members in the many marginal seats in South-East Queensland.

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