Taxi rent seekers may get Uber compensation

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By Leith van Onselen

The SMH has reported today that New South Wales taxi plate owners could receive compensation from the Government for competition arising from ride-sharing services such as Uber:

A taskforce set up to advise on policies for taxis and ride-sharing will hand in its final report in October, but a discussion paper released on Friday outlines the changes now sweeping through the industry…

Professor Sturgess’ discussion paper does not suggest changing the Passenger Transport Act to legalise ride-sharing, though his final report might.

But Professor Sturgess indicated the owners of 5800-odd taxi licences, which are now trading for about $320,000, could be compensated to help lower taxi costs to compete with new entrants.

“The value that has been injected into the taxi licence over the years, that is going to have to be addressed,” Professor Sturgess said.

“We have been specifically asked to focus on the question of structural adjustment and transition arrangements.”

Let me be clear. Any compensation provided should be capped at the initial cost of the taxi plate (licensing fee) paid to the Government, plus interest.

In many cases, this amount will be a pittance since a lot of taxi plates date back decades to when they were sold at peppercorn prices to returned servicemen (e.g. RSL and Legion cabs).

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However, in no circumstance should compensation be paid for taxi plates acquired on the secondary market at inflated prices. The public never saw that money.

Anyone paying for a licence in a controlled market knows that there is a risk that effective supply may increase, be it via the issuing of more taxi plates or a new source of competition.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.