Have your say on Private Hire Operator Licence Fees

Closed 16 Jun 2017

Opened 20 Apr 2017

Overview

On 17 March 2016, the Transport for London (TfL) Board approved new regulations that will raise standards in London’s private hire industry. One of the proposals that TfL sought views on was changes to the existing format of licensee fees for private hire operators. This consultation sets out our proposals for changes to the London private hire operator’s fees so they accurately reflect the costs to TfL of administering and enforcing a high quality service.

The consultation will close on 16 June 2017

Responses will be analysed and considered by TfL Board. Changes will be introduced from summer 2017.

Introduction

Transport for London (TfL) is a statutory body established by the Greater London Authority Act 1999 and is the licensing authority for London’s taxi and private hire industries. It is the largest licensing authority in the country, being responsible for licensing over one third of all taxis and private hire vehicles (PHVs) in England and Wales.

Private hire operators, drivers and vehicles licensed by TfL provide a range of vital services as part of London’s transport system which include minicab, chauffeur/ executive and specialist accessible vehicle services.

Owing to a number of developments within the private hire industry including advancements in new technology and an increase in the different ways people engage and share taxi and private hire services, we have undertaken a review of the current policies and processes that govern the licensing of private hire drivers, vehicles and operators.

The TfL Board agreed to consider changes to the existing licence fee structure to better reflect the way in which costs are generated.  

We now invite comments on our proposed changes to the fee structure.  Where possible, consultees are asked to provide evidence or examples in support of their comments and suggestions.

The following abbreviations are used when referencing the private hire regulations (“the PHV regulations”):

  • Private Hire Vehicles (London) Act 1998 – “the 1998 Act”
  • Private Hire Vehicles (London) (Operators’ Licences) Regulations 2000 – “Operators Regulations”
  • Private Hire Vehicles (London PHV Driver’s Licences) Regulations 2003 -     “Drivers Regulations”
  • Private Hire Vehicles (London PHV Licences) Regulations 2004 – “Vehicles Regulations”

Proposals

Taking account all the comments made during the Private Hire Regulations Review consultation, we are proposing that the fee structure for private hire operators be amended, with the existing arrangement of “small” and “standard” operators replaced. Whilst the length of licence will remain at five years in accordance with the current legislation, to better reflect the actual costs of licensing and compliance activities which we are able to recover lawfully, we are  proposing to separate Operator fees into a new five-tier structure. The proposed revised structure is set out in Figure 1 below.

Licence fees are kept under review to ensure that TfL is covering the costs of its licensing, compliance and enforcement activity.

Licensing administration and compliance costs
The total projected licence and compliance costs for the taxi and private hire trade over the next five years is £209m. This is apportioned between the fees received from the two trades based on the anticipated demand for resources to undertake the required compliance activities. This is forecast to be around 15 per cent of fees received from the taxi trade and 85 per cent from the private hire trade. Operator licensing administration costs of approximately £8m and TfL incurred operator enforcement costs are approximately £30m over a five year period. 

To offset the increases in the scale of charges that larger operators will need to pay in the future, and to not unduly present a barrier to entry for smaller growing operators seeking to move up (or down) between the various fee tiers over a five year period, subject to feasibility, we will consult on allowing operators in the largest three categories to pay their fees in annual instalments.

Figure 1: Proposed operator licence fee structure

 

Number of vehicles

Approximate number of operators

Current Fee (£)

Proposed Five Year Fee (£)

Proposed Fee as an annual cost (£)

PH Operators

0-10

1,126

1,488 (for 0-2 vehicles only)

 

2,826 (3+ vehicles)

1,988

N/A

11-20

511

5,190

N/A

21-100

877

22,014

4,403

101-1,000

113

166,518

33,304

1,001+ 

Allocated per vehicle

 

2

166,518 + 68 per vehicle registered

33,304 + 14 per vehicle registered


The licensing fee structure will remain in two parts (authorisation and grant of licence).  Operators will only be expected to pay the processing fee on application and if successful, to pay the grant of licence fee. The option will remain open for Operators to pay both fees at the same time, but on the basis that the costs of running and enforcement of the licensing scheme is refundable if the application is unsuccessful.  

It is proposed, that to encourage operators to manage their fleet as efficiently as possible, a flat per-vehicle fee is introduced for those operators with fleets over 1,000 vehicles.

Background

The Private Hire Vehicles (London) Act 1998 provided for the introduction of licensing of private hire operators, drivers and vehicles in London. The Private Hire Vehicles (London) (Operators’ Licences) Regulations 2000 were introduced and licensing of operators commenced in 2001.

Under the 1998 Act as originally enacted, the responsibility for private hire licensing fell to the Public Carriage Office (PCO), the section of the Metropolitan Police responsible for regulation and licensing of London’s taxis. Upon the establishment of the Greater London Authority and Transport for London (TfL) as the Mayor’s integrated transport authority in 2000, the PCO transferred into TfL, subsequently becoming part of TfL’s Surface Transport Directorate as London Taxi and Private Hire.

Since the introduction of operator licensing, it has been illegal to accept a private hire booking without a private hire operator’s licence. Operators must have at least one licensed operating centre and bookings can only be accepted at a licensed centre. Records of bookings, complaints and lost property must be held at the operating centre(s) together with details of drivers and vehicles used to fulfil bookings, including copies of documents to prove that the driver and vehicle are licensed for private hire work and covered by the appropriate insurance etc. All these records must be available for inspection by TfL staff.

There are two types of operator’s licence and both are normally granted for five years:

  • ‘Small’ – the operator has no more than two vehicles at any time (0-2); and
  • ‘Standard’ – the operator has more than two vehicles (3+) 

There are approximately 1,000 small and 2,000 standard operators currently licensed in London. Many of the small operators are one-person (often chauffeur) businesses in which the same person is licensed as an operator, driver and vehicle owner. We estimate that just under half of all private hire operators have less than ten vehicles in their fleet with a further fifth of private hire operators having between 11 and 20 vehicles. A third of private hire operators have between 21 and 100 vehicles with a much smaller proportion (approximately five per cent) of operators having large fleet sizes of over 100 vehicles.

The advent of new technologies and means of accepting and discharging bookings, for example via smartphone apps, has coincided with a large increase in the number of private hire drivers and vehicles licensed in London and there are now over 117,000 licensed private hire drivers and 87,000 licensed private hire vehicles in London.

Currently the Private Hire Operator fees have a two tier structure (0-2 vehicles or 3+ vehicles) which combines licensing administration and compliance/enforcement activities for a five year licence. The licensing and compliance cost for processing the licence differs in relations to the fleet size available to the operator and gets proportionally larger as the size of their fleet increases. 

Given the emergence of larger operators in recent years with, in a few cases, many thousands of drivers/vehicles working for them, it is clear that the current structure (where the most an operator currently pays for a five year license is just over £2,800) does not now, in any way, reflect the true cost of compliance activity for larger operators. To illustrate the scale of this discrepancy, the largest operator currently pays the equivalent of just £565 per annum (over five years) for a licence which costs over £500,000 per annum to enforce.

Purpose of the consultation

The purpose of this consultation is to set out our proposals for changes to the London private hire operator’s fees so they accurately reflect the costs to TfL of administering and enforcing a high quality service. We invite comments on the proposals.

Consultees are invited to comment on any aspect of the proposals or make other suggestions and, in particular, are invited to provide any evidence relevant to issues or proposals that are discussed.

Operator Licence Fees

Since the introduction of private hire licensing in London there have been two types of private hire operator licence:

  • Small (two or less private hire vehicles)
  • Standard (more than two private hire vehicles available).[1]

Operator licences are valid for five years. Licence fees for operators have remained broadly stable since the introduction of licensing.  A key element in both taxi and private hire licensing is that the licence fees can only be used to cover the costs of the licensing, compliance and enforcement functions, and cannot be used to fund other TfL activities.  It is a scheme that allows for applications for licences to be made on terms that the applicant must pay:

  1. on making the application, the costs of the authorisation procedures and formalities, and
  2. on the application being successful, a further fee to cover the costs of the running and enforcement of the licensing scheme.

The fee for a private hire operator licence comprises two parts [2]

Licence application fee
This is a non-refundable amount payable by all applicants on submission of an application.  It relates to the activities necessary to process an application.

Grant of licence fee
This is paid on issue of a licence. This relates to the compliance work (such as inspection of premises, records etc.) and enforcement work (such as proactive breach prevention initiatives e.g. the ongoing operation Neon, policing, investigations, prosecutions and on-street activity) necessary to support the licensed trades.

Only the licence application fee is required to be paid at the application stage and the grant of licence fee only becomes payable once the application is successful. Consequently an applicant unsuccessful at the application stage will not be required to pay the grant of licence fee. Although these fees are separated into two parts, the option will remain open for Operators to pay both fees at the same time, as operators in the past have chosen to do, but on the basis that the costs of running and enforcement of the licensing scheme is refundable if the application is unsuccessful.

The current costs are:

 

  Small

 Standard  

Licence application fee (non-refundable)  

  £838

  £838

Grant of licence fee(five-year licence)

  £650

  £1,988

Total

  £1,488

   £2,826


For short-term licences, the grant of licence fee is calculated on a pro-rata basis.

The fees are reviewed annually and approved by TfL Board.  

Costs
The nature of private hire operations has changed substantially since licensing of private hire services in London was first introduced and there has been an unprecedented growth in the number of private hire drivers and vehicles. The number of private hire drivers in the Capital has increased from a steady state of 65,000 in 2013/14 to over 117,000 as of January 2017. Similarly the number of vehicles has increased from around 50,000 in 2013/14 to around 86,000 in January 2017.

A consequence of this unprecedented rise is an increasing pressure on administrative costs as well as increased levels of enforcement and compliance activity, including enforcement activity outside London as London licensed vehicles are being used increasingly to fulfil bookings across England.

TfL can meet the costs of licensing, compliance and enforcement activity in full from licensees. However the current licence fee structure does not allow us to allocate the costs proportionately to those who are generating those costs.  This leads to the anomalous situation where, for example, a medium sized operator with 15-20 vehicles is paying the same licence fee as an operator with several thousand vehicles, despite the fact that compliance activity and consequent costs in checking operator booking, driver and vehicle records for an operator with thousands of vehicles is considerably higher.  Effectively smaller operators are cross-subsidising the enforcement and compliance work generated by the larger operators.  We do not believe this is fair.


 

[1] Regulation 7 of the Operators Regulations, as amended

[2] In practice most operators choose to pay the fee in one payment.

Have your say

We would like to know what you think about our proposals relating to the licensing of private hire vehicles in London.

Please give us your views by completing the online survey below by 16 June 2017.

Alternatively, you can:

Please reference 'Private Hire Proposals' in all correspondence.

Areas

  • All Areas

Audiences

  • Anyone from any background

Interests

  • Taxis
  • Private hire