It is fantastic news that the Queensland Government will, finally, legalise Uber, as reported in both the Courier-Mail and Brisbane Times this morning, although the option the Government apparently prefers is somewhat less than full deregulation, as taxis will continue to have exclusive access to the rank and hail market. Also, it is reported in the Brisbane Times that:
Many expect the government to follow the example of New South Wales and add a levy to rides undertaken on services such as Uber to help compensate the established industry.
This would be unfortunate, as consumers have been getting ripped off by the taxi industry for decades and the industry arguably does not deserve compensation. The total compensation bill could be very large, certainly at least several tens of millions of dollars, if not $100 million or more, as the introduction of Uber has massively reduced the value of taxi licences by reducing the monopoly profits that were being earned as a result of the supply restriction. Any compensation would, of course, be for political purposes, and would not have an economic justification (although it may be politically necessary in order to get Uber legalised).
In a very popular post, and one that was assigned as a reading in a QUT Economics course, regulatory economics expert and former Productivity Commission economist Rod Bogaards argued strongly that taxi licence owners should not be compensated:
Rod noted in his guest post that:
The purchase of a taxi plate is an investment like any other financial investment. Investors in taxi plates should have been aware of the risks associated with the relatively large investment they made. Similar to other investments, due diligence was required to assess whether the risk-return trade-off of owning a taxi plate was a sound investment. Taxi plate ownership was never a risk-free investment since there was always a risk that technological change or regulatory reform would reshape the taxi industry.
If compensation is paid in such circumstances it would set a very expensive precedent. There are many industries experiencing rapid technological change and many investors in these industries will not recoup their investments.
Rod makes some other excellent points in his guest post, which I very much recommend to readers, particularly any in Queensland Treasury who may end up having to fight against excessive compensation for the taxi industry.