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Review of taxi fares & taxi fare structure Options analysis for Northern Ireland's taxi tariff structure and maximum fare 11 August 2011

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Corporate headquarters 123 Buckingham Palace Road London SW1W 9SR United Kingdom Tel: +44 20 7730 9000 www.paconsulting.com Prepared by:

Charlie Henderson (PA Consulting Group) David Clancy (PA Consulting Group) Dr James Cooper (Transport Research Institute, Edinburgh Napier University) Ursula Borowski (Transport Research Institute, Edinburgh Napier University)

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Executive summary The objectives for introducing a regulated maximum tariff in Northern Ireland were agreed with the Department of Environment (DoE) as follows: • To promote the use of taxis in Northern Ireland, specifically: – To increase consumer confidence in the taxi industry in Northern Ireland as a professional, wellregulated and safe service – To provide greater transparency to users of taxis in Northern Ireland as to the maximum likely fare for any single journey – To enable taxi drivers in Northern Ireland to generate a reasonable income from taxiing – To encourage adequate supply for all types of demand • To create a tariff structure with operational integrity, specifically: – To create a maximum tariff structure that is understandable to both taxi drivers and the users of taxis – To create a maximum tariff structure that can be updated on an annual basis – To create a maximum tariff structure that is evidence-based • To be cognisant of implementation constraints, specifically: – The tariffs have to be in line with existing legislation (e.g. equality, competition, rural proofing) – Enforceability, with a view to not exacerbating compliance and enforcement issues – Having reasonable implementation costs – Legacy compatibility, meaning the tariff can be implemented using existing taximeters. The development of a Northern Ireland tariff was based on evidence collected from research (including a postal survey of 2,000+ taxi licence holders) and a consultation exercise. This showed three broad cost categories for operating a taxi in Northern Ireland: • Fixed costs: those costs that generally do not change based on mileage. This includes vehicle purchase costs, insurance, the annual license costs, road tax etc. On the basis of the survey these were estimated to be £7,020 per annum per driver • Running costs: including those costs which will change depending on mileage, notably annual fuel and vehicle maintenance costs. On the basis of the survey these were estimated to be £9,194 per annum per driver for the average mileage driven (25,940 miles) with a fee paying passenger in the vehicle • Labour costs: drivers must also be able to make a return above the fixed and running costs, i.e. a fair return for their labour. In the absence of this, it is unlikely that drivers will be able to remain in the sector. On the basis of income data from the Office of National Statistics for this sector, these were estimated to be £24,470 per annum per driver. • On this basis, the total cost of operating a taxi in Northern Ireland is £1.57 per live mile, i.e. for the average taxi driver to cover their labour and vehicle operating costs, the tariff rate would have to be set at an equivalent of £1.57 per live mile. The survey also showed no evidence to support different tariff rates for urban and rural areas. Following the review of individual tariff elements and possible combinations, the analysis concluded the Northern Ireland's proposed taxi tariff structure should include the following elements:

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• A distance tariff, which reflects the vehicle operating costs and a return for labour • When the vehicle is stationary, or moving at very low speeds, a waiting time tariff should be engaged • A flag drop charge, which includes an allowance for a set distance and waiting time • An unsociable hours premium, whereby a flag drop is applicable for: – (Tariff 2) Monday - Thursday: 20:00 -06:00 – (Tariff 3) Friday 20:00 – Monday 06:00, and bank holidays from 20:00 on the day preceding to 06:00 the following morning • An extra passenger allowance for the fifth and subsequent passengers, to a maximum of the vehicle's passenger seating capacity • A separate soiling charge, set at a level that will encourage compliance by customers, and reflect at least part of the costs of having a vehicle out of service for cleaning due to a customers actions • The ability to collect direct journey costs in addition to the metered fare (e.g. airport car parking). The table below presents the maximum proposed fare rates based on the analysis undertaken. Tariff 1 Monday - Friday: 06:00 - 20:00

Tariff 2

Tariff 3

Monday - Thursday: 20:00-06:00

Friday 20:00 – Monday 06:00 bank holidays (20:00 on the preceding day to 06:00 on the following day)

A flag drop of £3.00

A flag drop of £3.40

A flag drop of £4.20

This covers the first 880 yards (0.5 miles) of the journey

This covers the first 880 yards (0.5 miles) of the journey

This covers the first 880 yards (0.5 miles) of the journey

£0.20 every subsequent 224 yards

£0.20 every subsequent 224 yards

£0.20 every subsequent 224 yards

£0.20 for every 73 seconds or part thereof, whist the vehicle is stationary

£0.20 for every 73 seconds or part thereof, whist the vehicle is stationary

£0.20 for every 73 seconds or part thereof, whist the vehicle is stationary

The following additional charges may be payable in certain circumstances only: • Additional passengers: £1 for the fifth (5th) and each subsequent passenger in a vehicle • Direct costs (e.g. road tolls) as incurred by the driver and agreed with the passenger before the journey begins • Soiling charge: £50 maximum

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Contents Executive summary

1

1

Our approach

4

1.1

Objective

4

1.2

Methodology

4

1.3

This report

5

2

Cost of operating a taxi in NI

6

2.1

Overview and methodology

6

2.2

Fixed costs

8

2.3

Running costs

9

2.4

Labour costs

12

2.5

Total operating costs

12

3

Possible tariff elements

14

3.1

Overview and key evaluation criteria

14

3.2

Core tariff elements

15

3.3

Additional tariff elements

19

3.4

Findings for the option analysis

30

4

Options analysis

31

4.1

Option 0: Do-nothing scenario

32

4.2

Option 1: Core tariffs only

32

4.3

Option 2: Core tariffs plus all additional tariffs

32

4.4

Option 3: Core tariffs plus 'green' additional tariffs

35

4.5

Conclusions as to tariff structure

37

5

Tariff table

38

5.1

Options for meter programming

38

5.2

A single national maximum taxi fare or regional fares

39

5.3

Allocating costs to tariffs

40

5.4

Additional allowances

46

5.5

Implementation of the tariff elements

52

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1

Our approach

The development of Northern Ireland's tariff structure, including the monetary values attached to each tariff element, was based on evidence collected from research and a consultation exercise. In addition a number of possible implementation options were also considered. This section provides a summary of our approach to gathering this evidence.

1.1

Objective

The objectives for introducing a regulated maximum tariff in Northern Ireland are as follows: • To promote the use of taxis in Northern Ireland, specifically: – To increase consumer confidence in the taxi industry in Northern Ireland as a professional, wellregulated and safe service – To provide greater transparency to users of taxis in Northern Ireland as to the maximum likely fare for any single journey – To enable taxi drivers in Northern Ireland to generate a reasonable income from taxiing – To encourage adequate supply for all types of demand. • To create a tariff structure with operational integrity, specifically: – To create a maximum tariff structure that is understandable to both taxi drivers and the users of taxis – To create a maximum tariff structure that can be updated on an annual basis – To create a maximum tariff structure that is evidence-based. • To be cognisant of implementation constraints, specifically: – The tariffs have to be in line with existing legislation (e.g. equality, competition, rural proofing) – Enforceability, with a view to not exacerbating compliance and enforcement issues – Having reasonable implementation costs – Legacy compatibility, meaning the tariff can be implemented using existing taximeters. These objectives have been agreed the Department of Environment (DoE). 1

The International Review and Benchmarking report also provides a review of international practice in tariff regulation, which helped to inform the development of these objectives and provide the context for this report.

1.2

Methodology

Figure 1.1 overleaf summarises the method for developing a tariff structure and associated maximum tariff rate. A key aspect of the approach has been the survey of taxi drivers across Northern Ireland. This has helped to determine driver operating behaviour and operating costs, which form the basis of determining the appropriate tariff levels (see section 2 for more details). Having determined the

1

See Review of taxi tariff structure & levels: International research and benchmarking, January 2011, PA Consulting Group & Transport Research Institute 4

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monetary values required for drivers to make a fair return on the provision of taxi services, the allocation of this across particular tariff elements was considered. Finally, a number of implementation issues were identified and addressed. Figure 1.1: Summary of the approach to determining Northern Ireland's tariff structure Based on the outcomes from below, develop recommendations for • Tariff elements and their monetary value • How these should be implemented Evaluate possible options against the project objectives: • Review of possible tariff elements • Analysis of allocation of monetary values Turning data into information: • Analysis of taxi driver survey data • Gathering and analysis of vehicle, cost and earnings data

Go

Option analysis Data analysis

Gather industry data and input: • Meetings with regional driver and company reps • National online and postal survey of drivers

NI taxi survey & consultations

Determine possible elements for inclusion, based on • Survey of UK and US licensing authorities • International literature review

Review of international practice

Review of strategic context, including: • Review of legislative and policy developments • Agree objectives with DoE

1.3

Objectives and constraints

This report

The remainder of this document is set out as follows: • Section 2 provides analysis of the results from the drivers' survey, together with the results with regard to the cost of operating a taxi in Northern Ireland • In section 3, a description of the various possible tariff elements is provided, together with their individual impact on supply and demand for taxi services, together with some other considerations • Following this, section 4 presents a summary of the option analysis with regard to the combination of these tariff elements into a possible tariff structure. These are evaluated against the project objectives and constraints, and a conclusion is provided with regard to a tariff structure for Northern Ireland • Finally, section 5 presents a tariff card for Northern Ireland, whereby monetary values are applied to the tariff structure. A number of implementation issues which need to be considered when rolling out the new tariff structure are also outlined.

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2

Cost of operating a taxi in NI

This section of the report outlines the key findings of a survey of Northern Ireland taxi drivers which was undertaken to establish vehicle operation and maintenance costs. These findings, together with data from central sources such as the UK ONS, have been used to estimate drivers' annual operating costs and forms the basis for setting the maximum tariff levels for taxis in Northern Ireland.

2.1

Overview and methodology

2.1.1

Categories of costs faced by taxi drivers

It is considered good practice that tariff levels should reflect the operating costs (including an allowance for labour costs) incurred by taxi drivers in providing their services. If drivers cannot cover their costs, they will not provide a service or may seek to provide a service at quality standards below that set by the licensing authority. Consequently, to establish tariffs it is necessary to understand the costs faced by drivers in the provision of the service. 2

In line with taxi drivers in other jurisdictions, the costs faced by taxi drivers in Northern Ireland can be categorised as follows: • Fixed costs: those costs that generally do not change based on mileage. This includes vehicle purchase costs, insurance, the annual license costs, road tax etc. • Running costs: including those costs which will change depending on mileage, notably annual fuel and vehicle maintenance costs • Labour costs: drivers must also be able to make a return above the fixed and running costs, i.e. a fair return for their labour. In the absence of this, it is unlikely that drivers will be able to remain in the sector. The level of costs in Northern Ireland was determined by undertaking a survey of taxi drivers, together with the collection and analysis of data from other data sources (described below).

2.1.2

Data sources

The Northern Ireland Taxi Driver survey is a key data source for the development of the tariff. This aids in determining patterns in vehicle replacement and maintenance, together with driver operating behaviour. Surveys were distributed by post to 2,000 registered taxi drivers in Northern Ireland, and an additional 500 survey forms were distributed via taxi associations and the Northern Ireland Taxi Federation. Respondents had the opportunity to return responses by post or to complete the survey on-line. A total of 150 responses were received from taxi drivers across Northern Ireland. As figure 2.1 shows, 63% of the responses were received from Northern Ireland's two largest cities, though this is in line with population numbers in both cities, a slightly higher proportion of responses was received from

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See Review of taxi tariff structure & levels: International research and benchmarking, January 2011, PA Consulting Group & Transport Research Institute 6

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Londonderry in comparison to Belfast. The distribution of responses also facilitates the analysis of any potential issues with regard to the difference between operating a taxi in urban and rural areas. Figure 2.1: Distribution of responses to Northern Ireland taxi drivers Survey 2010 Other, 15% Portadown, 2% Derry/Londonderry, 36%

Magherafelt, 2% Holywood, 2% North Down, 3% Antrim, 4%

Newry, 8%

Belfast, 27% Source: Northern Ireland Taxi Driver Survey, PA Consulting/TRI (2011)

While the survey is key in determining operating characteristics that reflect the industry as a whole, a number of other data sources were needed to inform the cost calculations. These included: • The Office of National Statistics (ONS) for data on equivalent labour costs and average fuel costs • Data from vehicle dealers with regard to the average vehicle purchase prices • Data from garages with regard to vehicle maintenance costs • Data from the DoE and other relevant agencies with regard to annual licensing costs, road tax, etc.

2.1.3

Key considerations

Live miles Where possible, costs have been determined based on operational data presented by industry, and this has been validated by examining central sources. One key piece of data presented in the drivers' survey is the figure for 'live miles', i.e. the number of miles the taxi driver drives per annum with a fee paying passenger in the vehicle. This is the time the driver has to recoup his costs. The average figure reported in the Northern Ireland Taxi Driver Survey is 25,940 miles (28,360 miles per annum for drivers in rural areas, 25,423 for those in urban areas) Discussions with the industry suggest that while drivers based in rural areas had slightly more driven miles, they have fewer trips per week. This was confirmed by the survey, where rural drivers averaged 88 fare trips per week while urban drivers averaged 93.5 fare trips per week.

Average costs The data presented is primarily based on the drivers' survey and a survey of industry vehicle bodies (e.g. dealerships and garages). Consequently, the costs are averages. Certain drivers will have higher than average costs, others will have lower costs. It was felt important that drivers had the ability to purchase new, rather than second hand taxis as this has a direct influence on the quality of the fleet. Consequently vehicle capital costs are based on the

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estimated average cost of purchasing new vehicles. This also facilitates more accurate updates of operating costs. Of course, not all drivers will maintain a vehicle in service for the full extent of its natural life, with many currently choosing to replace vehicles at a higher frequency, but this is done by choice, rather than expectation. Earlier renewal of vehicles need not impact on the driver financially, as resale of vehicles has an implicit second hand value to the seller, whilst maintaining a vehicle to the end of its service life assumes zero resale value.

2.2

Fixed costs

2.2.1

Annual vehicle capital costs

The calculation of annual vehicle capital cost is based on taking the average purchase price of a new vehicle, and then reducing the value of the vehicle over time (depreciation). In order to establish the appropriate purchase cost, respondents to the drivers' survey were asked about their vehicle purchase intention, i.e. what type of vehicle they were intending to replace their existing vehicle with. It was then possible to get a mean purchase price for each of these vehicles, and therefore an average figure for the fleet as a whole. The survey showed that the Northern Ireland taxi fleet is a mix of saloon type vehicles, and larger accessible taxis split between London style black taxis (such as the LTI TX or Allied E7 vehicles), and a variety of van conversions. The latter category (accessible taxis) tend to be more expensive to purchase, and therefore the possible need to distinguish between these two main vehicle types warranted investigation. However, as noted, the annual cost of these vehicles is what is of concern in setting the tariff. This involved setting an appropriate effective life for the vehicle. A vehicle life, or depreciation period, is defined as the typical period of time over which a vehicle operates in service. This has been derived in our study from depreciation periods applied elsewhere. For a saloon vehicle this is set at 6 years, 3 while accessible vehicles tend to have a longer effective life, of eight years. Table 2.1 below shows that the annual vehicle capital cost for an accessible taxi (£3,293) is broadly similar to that of a saloontype vehicle (£3,179). Table 2.1: Annual vehicle capital costs (Jan 2011) Vehicle Type

Mean purchase price

Effective life

Cost per annum

Cost per live mile

New saloon (and other non-accessible vehicles)

£19,071.35

6 years

£3,178.56

£0.1225

New accessible taxi

£26,344.88

8 years

£3,293.11

£0.1270

£3,202.06

£0.12

Weighted average

Source: PA Consulting/TRI (2011). The mean price of new vehicles was determined through a survey of dealers for 18 vehicle types commonly used by the Northern Ireland taxi industry, as set out in the International Review and Benchmarking report.

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This does not mean that a vehicle can only be used in service over the length of the depreciation period, and it is clear that older vehicles are used in service. Rather that this is the period of time where the value of the vehicle declines to zero. Vehicle life spans may also be affected by vehicle age policies. 8

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2.2.2

Other fixed costs

Table 2.2 sets out the annual average fixed costs as stated by taxi drivers in the survey. The most significant cost included is annual radio rental fees. The survey found that the vast majority of drivers are affiliated to a dispatch company, and that there is great variance in the fees charged. The average figure, £2,327, is outlined in Table 2.2. Table 2.2: Annual vehicle capital costs (Jan 2011) Cost Type

Mean cost per annum

Cost per live mile

Radio Circuit / Depot fees

£2,327.03

£0.09

Insurance

£1,132.78

£0.04

Road Tax

£198.97

£0.01

PSV/Taxi vehicle test fee

£138.50

£0.01

£21.00

£0.0008

Taxi Driver Licence

Source: Northern Ireland Taxi Driver Survey (PA Consulting/TRI (2011)), except for MOT fee and taxi driver licence which are fixed fees.

2.3

Running costs

2.3.1

Fuel Costs

Annual average fuel costs are based on vehicle fuel consumption rate and applying this to taxi drivers' reported mileage figures. The price of diesel is used, as the vast majority of taxis in Northern Ireland have diesel engines. Fuel costs can be derived from survey data, being the stated cost of fuel at the point of analysis, or from third party data, such as the Automobile Association record of current fuel prices. We have used stated fuel prices from the survey and validated these against current prices for diesel fuel at pump. Vehicle fuel consumption rates vary by location, vehicle type, operating circumstances and driving style and this plays a significant role in the cost of running a taxi. We have used a value of 25 miles per gallon (MPG) as the typical fuel consumption rate for taxis. Well-maintained and newer vehicles will perform better than this while older vehicles and those not fully maintained will have a higher consumption rate. We have derived the fuel consumption rate from the measured efficiencies of taxis applied by licensing authorities in Scotland. The fuel consumption rate chosen reflects the predominantly stop-start nature of the taxi business and is significantly lower than manufacturers’ claimed figures which tend to be based on a peak of performance in perfect conditions. The calculation also includes an allowance for fuel consumption while taxis are positioning. The positioning of vehicles at the start of a booked journey, or returning at the end, is an integral part of the taxi journey but is not included in “live miles” as it frequently does not involve the carriage of a fare paying passenger. We have included the additional positioning cost, in terms of fuel used in positioning, on the basis of 50% of actual driven miles. This makes an assumption that in one out of two fares a driver is able to attract a fare at, or near, the point of original drop off. With the widespread use of radio circuits this level of re-engagement is appropriate, and will extend to include un-booked hailed journeys. Given that the additional hire (on the return run) has itself an allowance for positioning, the total positioning costs will reflect the summation of both base and additional fares. 9 PA Consulting Services


Table 2.3: Annual taxi fuel costs (Jan 2011) Live miles

Positioning miles

Consumption MPG

Price per litre

Total cost per annum

Cost per live mile

25,940

6,485

25

£1.30

£7,665.16

£0.30

All Taxis

Source: Northern Ireland Taxi Driver Survey, PA Consulting/TRI (2011)

Table 2.3 shows the average fuel cost for operating a taxi is £7,665 per annum/£0.30 per live mile.

2.3.2

Vehicle parts

The most common method of determining maintenance costs is based on a basket of components that are required to be replaced. The most common components reported in our survey are set out in Table 2.4 below together with the frequency of replacement (per annum), replacement cost per annum and the equivalent cost per live mile. Table 2.4: Annual cost of vehicle parts Mean cost

Incidence weight

Total cost per annum

Cost per live mile

Tyres

£45.53

4.75

£216.27

£0.0083

Brake pads

£37.10

2.82

£104.62

£0.0040

Tail lamp assembly

£65.37

1.04

£67.98

£0.0026

£178.61

0.37

£66.09

£0.0025

£13.07

4.00

£52.28

£0.0020

Exhaust system

£284.30

0.18

£51.17

£0.0020

Shock absorber

£71.23

0.60

£42.74

£0.0016

Air filter

£10.49

4.00

£41.96

£0.0016

Battery

£87.11

0.36

£31.36

£0.0012

Fan belt

£15.48

2.00

£30.96

£0.0012

Brake shoes

£27.10

1.01

£27.37

£0.0011

Springs

£57.67

0.45

£25.95

£0.0010

Starter motor

£150.95

0.16

£24.15

£0.0009

Radiator

£144.26

0.15

£21.64

£0.0008

£5.32

4.00

£21.28

£0.0008

£150.55

0.13

£19.57

£0.0008

£15.83

1.08

£17.10

£0.0007

Windscreen

£127.48

0.13

£16.57

£0.0006

Wiper blade

£7.50

1.61

£12.08

£0.0005

Brake pipe

£44.99

0.20

£9.00

£0.0003

£900.14

£0.03

Clutch Headlamp replacement bulb

Oil filter Body panel Track rod ends

Totals

Source: Northern Ireland Taxi Driver Survey regarding incidence of replacement, mean cost is based on average of cost components on suppliers' websites. PA Consulting/TRI (2011)

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Some items reported as part of the survey (e.g. engine, gearbox) are replaced infrequently, with an average replacement cycle over ten years, i.e. the part is replaced less frequently than the vehicle itself. As a new vehicle would effectively supersede such replacements, we have excluded them from our calculation. The most significant of these costs is tyres, followed by brake pads.

2.3.3

Annual maintenance (labour) costs

A second element of maintaining vehicles relates to service costs, effectively a labour cost of fitting the parts identified. The survey identified that almost all taxi drivers (97%) get their vehicle serviced by a garage, paying on a per visit basis. Table 2.5 shows the fitting time per event (e.g. how long does it take to get one tyre fitted), the incidence weight (i.e. how often the event occurs per annum) and on this basis the total labour time per annum. Table 2.5: Annual labour time spent on parts replacement Hours fitting (per event)

Incidence weight

Time per annum (hours)

Tyres

0.50

4.75

2.375

Brake pads

0.75

2.82

2.115

Oil filter

0.50

4.00

2.000

Fan belt

1.00

2.00

2.000

Brake shoes

1.50

1.01

1.515

Clutch

4.00

0.37

1.480

Air filter

0.25

4.00

1.000

Shock absorber

1.50

0.60

0.900

Headlamp replacement bulb

0.20

4.00

0.800

Springs

1.50

0.45

0.675

Brake pipe

3.00

0.20

0.600

Windscreen

4.00

0.13

0.520

Wiper blade

0.25

1.61

0.403

Radiator

2.00

0.15

0.300

Body panel

2.00

0.13

0.260

Starter motor

1.50

0.16

0.240

Track rod ends

0.20

1.08

0.216

Tail Lamp assembly

0.20

1.04

0.208

Battery

0.50

0.36

0.180

Exhaust system

1.00

0.18

0.180

Totals

26.35

17.96

Source: hours required to fit is based on a survey of garages, incidence for each item are based on Northern Ireland taxi driver Survey. PA Consulting/TRI (2011)

PA/TRI undertook a survey of a number of garages. This showed average cost of garage labour is ÂŁ35 per hour. On the basis of this figure and Table 2.5, Table 2.6 shows that average labour cost for maintenance is ÂŁ628.83.

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Table 2.6: Maintenance Labour cost Vehicle Type

Mean hourly rate

Weighted labour hours

Cost per annum

Cost per live mile

£35

17.96

£628.83

£0.0242

All Taxis

Source: Mean hourly rate is based on a survey of garages, PA Consulting/TRI (2011)

2.4

Labour costs

The inclusion of compensation to drivers is consistent to cost models across authorities. The simplest way is to base annual labour costs (salary) in line with earnings for a similar trade. The Office of National Statistics (ONS) Annual Survey of Hours and Earnings, specifically to Transport and Mobile Machine operatives (ONS Sector 82), provides an appropriate baseline. This rate is measured and reported annually and reflects current earnings levels in transport and associated professions. The 4 gross rate of £24,470.10 is taken from the ONS 2010 national annual survey of hours and earnings .

2.5

Total operating costs

Table 2.7 provides a summary of all the cost components included in the Northern Ireland taxi cost model. The average annual cost is approximately £40,684 with 40% relating to vehicle operating costs (both fixed and variable) and 60% relating to driver's labour costs. Table 2.7 Average taxi operating costs and cost per live mile (Jan 2011) Cost Element

Total cost per annum

Cost per live mile

Vehicle capital costs

£3,202

£0.12

Radio Circuit / Depot fees

£2,327

£0.09

Insurance

£1,133

£0.04

Road Tax

£199

£0.01

MOT Fee

£138

£0.01

£21

£0.00

Total fixed costs

£7,020

£0.27

Fuel costs

£7,665

£0.30

Basket of parts (semi-variable)

£900

£0.03

Maintenance labour costs (semi-variable)

£629

£0.02

Total running costs

£9,194

£0.35

Driver labour costs

£24,470

£0.94

Totals

£40,684

£1.57

Taxi Driver Licence

Source: see sources outlined in Tables 2.1 to 2.6. Based on an average live miles per annum of 25,940.

As can be seen from Table 2.7, the total cost of operating a taxi in Northern Ireland is £1.57 per live mile. The key conclusions from this analysis are:

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http://www.statistics.gov.uk/downloads/theme_labour/ashe-2010/2010-occupation.pdf 12

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• In order for the average taxi driver to cover their labour and vehicle operating costs, the tariff rate would have to be set at an equivalent of £1.57 per live mile • While accessible taxis have higher up front purchase costs, their longer effective life means that their annual operating costs are in line with non-accessible vehicles. Consequently there is no evidence to support separate tariffs rates for accessible and non-accessible vehicles • While drivers in rural areas have proportionately fewer fares per day compared to drivers in urban areas, the average distance travelled for these fares is longer. This, coupled with the fact that there is no evidence of operating costs varying significantly between rural and urban areas, means that there is no evidence to support different tariff rates for urban and rural areas.

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3

Possible tariff elements

This section of the report considers the feasibility of the various elements that could possibly be included in Northern Ireland's tariff table. These are evaluated in line with the objectives set out in regard to the tariff structure, together with practical implementation considerations.

3.1

Overview and key evaluation criteria

3.1.1

Elements considered for inclusion 5

The International Review and Benchmarking report highlighted that, in general, tariffs structures contain two categories of tariff elements, which we have termed: • Core tariffs: which are designed to reflect taxi operating and labour costs. The primary tariff is the distance charge, with costs increasing in line with distance travelled. However, this is almost always accompanied by a waiting time tariff, which kicks-in when the taxi is in-service, but not moving, or is moving at low speeds (e.g. in heavy traffic). These core tariffs form a part of every journey calculated using a taximeter • Additional tariffs: there are a range of additional tariffs, which are included to varying degrees across jurisdictions. These are typically included to stimulate certain driver or consumer behaviour and are not typical to all taxi journeys. The main tariffs are summarised in the table below, and discussed in detail in the proceeding sections. Table 3.1: Core and additional tariff elements for consideration Core tariffs

Additional tariffs elements

• Distance charge

• Unsociable hours premium

• Waiting time

• Direct journey expenses

• Flag drop (or initial charge), including an allowance for distance and waiting time

• Extra passenger(s) charge • Call-out/pick-up charge • Luggage charge • Long distance charge • Boundary charge • Soiling charge • Minimum fare • Large vehicle allowance • Non-cash payment charges

3.1.2

Guiding principles

The establishment of a tariff structure is considered with a number of guiding principles in mind: • Cost reflective: the tariff structure and tariff levels must closely reflect the cost faced in providing taxi services. Tariffs that do not fully reflect costs may negatively impact on the level of supply or

5

See Review of taxi tariff structure & levels: International research and benchmarking, January 2011, PA Consulting Group & Transport Research Institute 14

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reduce the quality of service supplied. In this respect, the greater the proportion of the fare that is linked directly to the cost of providing the service, the fairer it is to all parties • Fair return: drivers must be allowed to make a return over operating costs that is reflective of the effort required to provide a service to the standards set by the Department. Failing to offer of such a fair return may result in taxi drivers moving to other sectors, thus reducing supply • Affordability: that the tariff relates to customers’ ability and willingness to pay. Affordable tariffs will stimulate demand • Government policy objectives and constraints: the tariff structure must contribute positively to achieving the objectives set by the Department for the national maximum fare, while operating within existing legislative and implementation related constraints • Ability to price discriminate: cognisance has also to be given to the fact that a national maximum fare is to be implemented, and those that wish to offer lower fares to customers are free to do so. The following sub-sections present analysis of the appropriateness of each of the possible tariff elements, taking cognisance of the above principles. It describes specifically their likely impact on demand for taxi services, together with impact on driver behaviour and supply of services. An initial recommendation on their inclusion in Northern Ireland's tariff structures is also presented. Section 4 of this report considers combinations of the tariff elements in the overall content of the objectives for a maximum fare structure for Northern Ireland. Section 5 considers the level at which each of these elements should be set to enable a fair return.

3.2

Core tariff elements

3.2.1

Distance charge

Description Distance charges are the primary means for calculating the fare of a taxi journey. In short, the greater the distance travelled, the greater the final fare to the customer. This is because distance charges are typically set to reflect the drivers' vehicle operating costs and the cost of labour for the provision of that journey.

Implementation From our review of international practice in taxi tariffs, all (52) jurisdictions reviewed charge a distance based charge. The standard approach to delivering this (i.e. through taxi meters) across the UK is on a stepped basis, i.e. a fee for every unit of distance travelled. This typically operates on the basis that the fee pays for every subsequent unit of distance travelled. For example, if the distance charge is set at 20p for 1/4 mile, the 20p goes on to the meter at the very beginning of the 1/4 mile journey. If the journey ends before the 1/4 mile has been completed, then the full 20p is still payable. A number of authorities have looked at charging based on very small units (e.g. per 1 meter or yard basis), however this has typically been rejected because: • The fare card becomes less transparent for customers. For example, instead of telling the customer that it is 20p per quarter mile, the fare card would have to state 0.45p per yard • In practice, the minimum unit of currency would have to be 1p. The meter would therefore tick over in 1p amounts, on a rapid basis. There is a belief that customers do not like meters ticking over

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very quickly (i.e. the rate of change), as it is associated with being over charged or making the fare seem to be overly expensive • From a practical point of view this results in fares of odd amounts, requiring the carriage of lots of small coinage. • Consequently, authorities typically set the distance units in significant blocks of yards or metres, and for associated fees of 10p - 30p (the higher fee allowing for a greater associated distance allowance).

Demand considerations All other things being equal, consumers typically expect to pay more the greater the quantity of a good or service that they are buying. Therefore, distance-based tariffs are good from a demand perspective, in that the greater the distance travelled, the greater the resultant fare.

Supply considerations A tariff structure that primarily reflects operating and labour costs will encourage supply. However, a fare calculated solely on distance travelled may dissuade drivers from operating in peak traffic times, or in areas where traffic congestion is an issue. This is because while they are not moving, the meter will remain static. While operating costs will be significantly less when not moving, the driver is incurring an opportunity cost with regard to the supply of his labour.

Transparency and compliance considerations Estimating the likely cost of a journey before it starts and calculating during the journey based on a distance charge is relatively straight forward. The main avenue for non-compliance is to have the meter incorrectly calibrated. Annual vehicle inspections will ensure that the meter is calibrated according to the regulated tariff structure. A further issue would be to drive distances that are longer than necessary. This requires a customer to make a complaint and have a receipt which indicates the exact distance travelled.

Conclusion Distance charge is a fair approach as it reflects operator costs and associated cost of labour. This can be updated on a regular basis to reflect changes in these costs. It also is fair and transparent for the consumer. From a compliance perspective, the risks associated with using a distance based fee are manageable.

3.3.2

Waiting time

Description This relates to when the taxi is engaged in the provision of the service, but the vehicle is not travelling any distance. This will typically be secondary to the distance charge, being invoked when the taxi is in traffic, or when waiting for a customer who is not in the vehicle.

Implementation The waiting time charge kicks in when the taxi is engaged by a customer, but is not travelling any distance. The charge is typically calculated on a per minute basis, and is charged in arrears. In other words, if the vehicle is stationary/close to stationary for one minute the metered fare will increase by the calculated amount.

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When the vehicle is stationary/close to stationary, vehicle operating costs can be said to be close to zero. However, the vehicle operator is still spending time with the customer. It could be argued therefore that the waiting time cost should reflect the labour time cost element of the provision of the taxi service (noting that the distance charge reflects both the labour costs and vehicle operating cost).

Demand considerations It is unlikely that customers will have an issue with the meter ticking forward despite the fact that the vehicle is not moving. This will particularly be the case if the rate of fare increase is less than the distance charge.

Supply considerations The time element ensures that drivers are compensated for the opportunity cost of sitting in traffic or waiting on a customer. This should help ensure the supply of journeys which might involve waiting time.

Transparency and compliance considerations The inclusion of the time element into the fare structure makes it a little more difficult for the customer or driver to estimate the fare with exact precision, compared to having only a distance charge. This is because it is difficult to estimate the likely impact of being stuck in traffic, for example. One consideration that may cause an issue with regard compliance is the policy with regard to when the service begins. For example, if a taxi is booked for a specific time of day, and the passenger is delayed, the question arises as to when the meter should be engaged. Disputes between the driver and customer can arise if the customer feels that the driver has engaged the meter too soon. For example, if the customer orders a taxi for 8:00am and the taxi arrives in time, but the customer does not get in to the car until 8:10am, the driver is usually entitled to the waiting time charge of ten minutes. Disputes can arise however if the customer disputes how long the driver has been waiting (and thus when the meter was engaged). One way to avoid this is to ensure that the printed receipt, which is linked to the meter, contains a 'start' and 'end' time, as proof of when the meter is engaged. An alternative approach is to rule that the meter can only be engaged when the customer enters the vehicle for the first time. This puts the onus on the driver to decide whether to wait for the passenger, or to refuse to provide the service due to having to wait for the customer.

Conclusion The inclusion of a waiting time element to the fare structure is necessary to ensure a fair return for drivers and to encourage supply at busy traffic periods or locations. The rate at which the waiting time tariff is set should be less than that of the distance tariff, as taxi operating costs are less in slow moving traffic or when the vehicle is stopped.

3.3.3

Flag drop and associated allowances

Description The flag drop, sometimes referred to as the initial charge, is a charge levied for engagement and applied as a vehicle departs from a pick up.

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Implementation This typically includes an allowance for a certain distance travelled, i.e. the tariff on the meter does not move forward until a certain distance is travelled. For example, the Belfast public hire taxi flag drop charge is ÂŁ3.00 and this allows for a distance of 0.5 miles. While the inclusion of a flag drop is almost universal in its inclusion in international tariff models, the distance covered by this initial charge does vary significantly. In the absence of a flag drop charge, the tariff on the meter would start at zero, and change depending on the characteristics of the trip.

Demand considerations There are a number of considerations with regard to the likely impact of a flag drop tariff. It may discourage demand for very short journeys, as the value to the customer may be diminished. Furthermore, if set too high it can discourage overall demand for taxis. This may be because customers are unaware what the flag drop covers and perceive that the cost of the journey is too high even before the journey has begun.

Supply considerations The flag drop offers the driver a minimum return per journey and therefore encourages the supply of journeys that cover a short distance. It also means that drivers that are ranking (and may have been waiting for a fare for a considerable time) receive a certain level of income for even a short journey. However, the level of the flag drop is never set to fully reflect operator-waiting time, but rather to provide an allowance for waiting times at rank, or additional time elements in attending a call out on a pre-booked journey.

Transparency and compliance considerations Higher flag drops are typically associated with higher distance and waiting time allowances. However, customers are often unaware of the distance allowance included in the flag drop. The main area of concern with regard to compliance is the early engagement of the meter, whereby the driver engages the meter prior to the customer engaging the service. This has the impact of reducing the allowance associated with the flag drop. For example, if the flag drop includes an allowance of one mile (or two minutes, for example), early engagement of the meter means that the flag drop will be exhausted before one mile is travelled or the time has elapsed. This is difficult for the customer to prove as the distance travelled before the meter changes is not easily gauged. Indeed the longer the distance allowance included in the flag drop, the easier it is for this to occur. Conversely, a lower flag drop (with lower distance or time allowances), means this is less likely to be an issue.

Conclusion While there is a reasonable case for consideration of including a flag drop element, this should be kept to a minimum so as to help minimise risks to consumer demand and related compliance issues.

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3.3

Additional tariff elements

3.3.1

Unsociable hours premium

Description It is usual in most jurisdictions that the tariff for distance and waiting time are set at a higher rate for certain periods.

Implementation Typically this involves higher distance and waiting time rates at night time and/or during weekend days and bank holidays. Most jurisdictions restrict this to two separate tariffs, although Belfast public hire currently has three. Some jurisdictions also apply a higher rate for specific holidays over the Christmas period or on New Year's Day. However, the time of day, and day of the week that higher tariff rates come into action, differs between jurisdictions. There are two main ways of determining when a premium should be charged. The first is to determine whether there are specific time periods where there is unmet demand. This is usually determined by examining when waiting times for customers are unacceptably long, and giving consideration to whether offering a premium rate will likely encourage increased supply at these times. A second and complimentary consideration is with regard to ensuring drivers are adequately rewarded for working during particularly unsociable hours.

Demand considerations Typically premium rates are charged at times when alternative modes of public transport are less available. This, coupled with the fact that customers are likely to accept the need to pay higher prices at peak demand times and unsociable hours, means that a premium rate should not have a significantly negative impact on demand. However, this is subject to the tariff rate being set at an acceptable level, both in and of itself, and relative to the normal tariff rate.

Supply considerations A higher rate is likely to encourage a certain proportion of drivers to provide a service when they otherwise would not have done so. This is only likely to be the case if the rate is set for a considerable period. For example, if having identified that there is significant unmet demand between the hours of 11:30pm and 12:30am, additional supply would not be encouraged if the premium rate were applicable to these times only. This is because drivers typically arrange their working time into one continuous shift.

Transparency and compliance considerations The fewer the tariffs the easier it should be for consumers to understand their fare. Charging one higher rate at certain times, as long as these times are clearly stated, should not add significantly to confusion for customers. Transparency is improved if the additional cost of the fare is included at the start of the journey, on the flag drop, rather than increasing the distance charge. This is because the cost of the journey will increase by a fixed amount which the customer is aware of in advance. The main avenue for non-compliance is to not have the meter calibrated correctly. Annual vehicle inspections will ensure that the meter is calibrated according to the regulated tariff structure.

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Conclusions A premium rate for times when unmet demand exists, and for unsociable hours, would be desirable. However, this must take account of taxi driver operating patterns, and what evidence there is regarding unmet demand for taxis in Northern Ireland. It should also be set at a rate that does not adversely impact demand for taxis, and reflects consumers' ability to pay.

3.3.2 Direct journey expenses Description Costs directly associated with the provision outside of time and distance tariffs. This includes items such as road tolls, airport barrier lifting costs, and car park costs. Note that this does not include the costs sometimes paid to airport authorities for sitting in airport holding areas. For example, in the Republic of Ireland, taxi drivers at Dublin Airport pay an annual subscription to Dublin Airport Authority. Rather than seeking to average this cost out per journey, the Taxi Directorate includes this cost when calculating the drivers overall operating costs, which is used to determine the time and distance tariffs. In other words, the driver's costs are covered in the time and distance tariffs, and therefore a separate charge is not needed.

Implementation Direct costs are charged at cost, and these are marked on the customers receipt. Ideally, these would be included at the start of the journey, through the use of the extras button on the meter. There are a number of reasons why it may be difficult to add the costs on the meter. The "extras" buttons on taximeters are usually calibrated in set units (e.g. 50p or ÂŁ1 extras), which means that a toll, of say ÂŁ1.25, could not be added as an extra. Also, in many instances the licensing authority may limit the amount of extras that can be charged on the meter. In practice this means restricting the number of times that the extras button on the meter can be engaged. This is typically set to ensure that the driver cannot use the extras button to intentionally overcharge customers. As a result, even if the direct cost is set in units facilitated by the meter, the driver may not be able to press the meter button a sufficient number of times to equal the toll costs. Printed receipts therefore need to have a space for "tolls" or other direct journey costs.

Demand considerations As long as customers are aware of the costs in advance of procuring the trip, adding the direct costs should not be an issue. Indeed, in the example of toll costs, the customer may have the option of avoiding these costs by agreeing to travel a different route. Further, setting the charge equal to the cost to the driver means that the customer does not feel that they are being overcharged, and therefore this shouldn’t have a negative impact on demand.

Supply considerations An inability to recoup direct journey costs would likely result in a reduced supply of journeys which involve direct costs. This will be negated if the driver can charge the cost to the customer.

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Transparency and compliance considerations As long as the customer is made aware of the direct cost of the journey up front, there should be no issues with regard to transparency. This will be improved if the driver is able to point to evidence of the cost incurred. The inclusion of charging for direct trip costs in the tariff table will encourage compliance and alignment with the overall tariff structure. The concern would be that if this was not allowed, drivers may seek to agree the fee for the journey in advance, rather than engage the meter to calculate the fare.

Conclusions The tariff table should permit the addition of direct costs to the fare for a journey. However, this should not include annual fees paid to airport or other transport terminals for allowances for ranking on private grounds. The Department will also need to monitor the costs charged to taxi drivers, and then passed on to consumers. For example, if a transport authority were to include a "barrier lift" charge of ÂŁ10, on the basis that they were aware that the taxi driver can pass on the costs, the impact on demand for taxi would be significantly impacted. Therefore, the Department need to understand where these costs arise, and how much is being charged.

3.3.3

Electronic payment charges

Description An additional charge levied where payment for the fare is made using a credit or debit card. Card providers sometimes levy additional costs on the retailer (to process payments), while drivers may also have to invest in mobile payment solutions.

Implementation It is possible to account for the capital or rental costs when calculating the appropriate distance and waiting time charges. Consequently, the decision becomes how to treat the fee charged per transaction. In other jurisdictions where card payment is more readily available, a number of options are chosen. This includes a percentage of the final fare, a fixed fee per transaction, or a mix of both (e.g. 5% of the final fare or ÂŁ1, whichever is greatest).

Demand considerations The ability to charge for additional costs associated with card payments is unlikely to be an issue that impacts on demand. This is because customers also have the option of paying in cash, thus avoiding this cost. However, if it is perceived that charges are exuberantly high, reflecting a profit above the costs of providing the service, this may cause some resentment towards the supplier.

Supply considerations Taxi drivers have to be able to recoup the cost of providing their service. If the cost of offering card payments outweighs the benefits (which, based on international experience, may include increased tips) then card facilities will not be offered. However, this is not an issue that will impact on the level of supply overall.

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Transparency and compliance considerations A fixed fee for credit card payments gives the greatest level of transparency of likely costs to the customer. A percentage-based approach means that the customer has to calculate the likely final fare in the first instance, and then add the credit card payment charge.

Conclusions Any allowance for credit card payments should reflect transaction costs only, with capital and rental costs accounted for in the time and distance tariffs. In this respect, it may be possible to treat electronic payment costs in the same fashion as direct journey expenses.

3.3.4

Pick-up/call out

Description The call out charge, also known as a booking fee, call-out, or positioning cost, is an extra charge applied to a taxi journey. Only a small percentage (10% in our review of 52 authorities) of jurisdictions allow for a separate pick-up charge.

Implementation The basic justification of a call out charge is that a taxi operator experiences costs in positioning to the origin of a pre-booked journey that is not reflected in the fare associated with that journey. In other words, unlike taxis hailed on the street or at a rank, the driver has an additional cost in travelling to pick up his/her passenger. This cost is likely to be greater for drivers operating outside of urban areas. Drivers that are affiliated to a dispatch company may also face additional radio rental costs, and the pick-up charge is sometimes used as justification to offset these costs. When applied, this is typically a set fee, and is charged separate to distance and time related charges. This set fee is not set to cover the exact amount of additional cost of providing the service - rather it is set based on historical precedent or after negotiation with driver representatives. Therefore it is not set at a level that reflects the additional travel cost. However, there are examples whereby rather than having a separate pick-up charge, the distance charge on the meter is engaged as soon as the driver receives the booking, and therefore receives an income based on distance travelled to pick the passenger up (e.g. in Rome).

Demand considerations A call-out charge may discourage the phone booking of taxis, in particular where customers have the alternative of hailing a taxi on the street or using alternative transport. This is likely to be less possible in rural areas. That said, if the overall tariff structure is set as a national maximum tariff structure, it may be possible to negotiate the pick-up charge out of the overall cost of the journey. However, this depends on the customers understanding of the national maximum taxi fare, their ability to negotiate, together with the driver's willingness to forgo or reduce the pick-up charge.

Supply considerations If a driver believes a journey is unprofitable, they may refuse to provide that journey. Alternatively, they may seek to provide the journey for a negotiated fee, outside of calculation on the meter. This is most likely to be in cases where the driver has a long distance to travel up to pick up a passenger which is followed by a metered fare which does not cover the cost of pick-up and the subsequent journey. This 22 PA Consulting Services


will especially be the case if, when reaching the passengers' desired destination, the driver finds himself out of his usual area of taxi operation. In the above situation, it is questionable whether a fixed pick-up fee, of say £1.00 or £2.00, will be sufficient to compensate for the related pick-up costs. Conversely however, a £2.00 fixed fee that would apply in urban areas would likely over-compensate the driver for a pick-up in an urban area. This is because radio dispatch operators typically allocate customers to taxis that are operating in their general vicinity, as this is to the benefit of both the driver and the customer.

Transparency and compliance considerations A distance-based pick-up charge, where the tariff is based on the distance from the driver's departure to pick-up point, has considerable transparency issues. This is because the meter is engaged prior to pick-up, and the customer cannot be certain as to where the driver will originate, or if they chose the most efficient route to the pick-up point. This can lead to disputes and complaints.

Conclusions The provision of taxis broadly matches population distribution, and many remote locations will in reality have some taxi supply within reasonable distance. The setting of a distance-based pick-up charge is fraught with potential downsides from a transparency and potential compliance and enforcement issues. The setting of a flat rate charge at an appropriate level is difficult to determine, as no one set fee will exactly match the cost picking up a passenger.

3.3.5

Additional passengers

Description An additional charged for where more than one passenger is carried.

Implementation This typically includes a set additional charge per additional passenger. However, in jurisdictions where this applies, there is variation with regard to the number of additional passengers this applies. In other words, some jurisdictions allow for a charge for each additional passenger, while other will charge for, for example, the fourth and subsequent passenger. In some instances where additional passenger charges apply, children are exempt. Additional passenger charges are typically included as "extras" on the meter programme, requiring the driver to hit a button on the meter to add this to the time and distance charges which are calculated automatically. As they are set as extras, they are typically determined as fixed costs in multiples of the base “extras” charge. The application of a pre-determined additional passenger charge may require multiple presses of the extras button.

Demand considerations The introduction of additional passenger charges in a jurisdiction where they didn’t previously exist may cause issues for customers, especially if it is not perceived that additional passengers are additional cost to the taxi operator. These charges are also typically added to the meter at the start of the journey. Therefore, a taxi journey which includes an initial charge and a number of passengers may be perceived to be very expensive before the journey has even begun.

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People with disabilities, who in some cases have to travel with additional passengers, would be adversely impacted by additional charges. Parents travelling with children may also feel aggrieved to have to pay extra.

Supply considerations It is unlikely that the exclusion of an additional charge for additional passengers will reduce the supply of taxi services to groups of two or more people.

Transparency and compliance considerations As with all "extras", consumers may be confused as to when the charge for extra passengers is applicable, and when it is not. Furthermore, the greater the number of extra charges included in the tariff structure, the more open the structure is to non-compliant behaviour by certain drivers.

Conclusions The distance charge can be calculated to include the average annual costs of operating the taxi, which includes additional passengers. Therefore, it is not necessary to include a separate charge for each customer on this basis. However, it may be reasonable to encourage the provision of larger vehicles, which are of particular importance for the provision of services to people with disabilities. One possible way to do this would be to allow additional charges for the fifth and subsequent passengers, to the maximum of eight. To avoid penalising passengers travelling with young children, the Department may consider excluding children from being counted.

3.3.6

Luggage charge

Description An additional charge levied for the carriage of luggage in the vehicle.

Implementation The majority of jurisdictions across Great Britain and Ireland do not incorporate an additional charge for luggage. For those that do include a luggage charge, there are a number of methods for charging. This includes a cost per piece, sometimes with a maximum charge for luggage (e.g. ÂŁ1.00 per piece, up to a maximum of ÂŁ2.00). The description of what constitutes "luggage" also has to be considered. This can range from all baggage, to only those that need to be carried in the vehicle's boot. The setting of the luggage tariff level does not usually follow the calculation of the direct cost of carrying the luggage. Rather it is set as a notional amount, sometimes based on a legacy approach to setting tariffs. Charges are typically included as "extras" on the meter programme, requiring the driver to hit a button on the meter to add this to the time and distance charges which are calculated automatically. The calculation of distance and waiting time tariffs include an allowance for the cost of carrying out a taxi driver's work, and includes reasonable assistance with baggage and the vehicles annual operating costs (which will be only slightly impacted by the amount of baggage carried). Therefore, to set a tariff that accurately reflects operating and labour costs, including an additional distinct cost for luggage

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would means two things: first you would have to calculate the exact cost of carrying luggage and secondly; this would have to be deducted from the distance and time charges.

Demand considerations Customers with a significant amount of baggage and no private transport may have few alternatives but to use a taxi. Consequently, the demand for taxis, especially at transport terminals, may not be significantly impacted by the inclusion of a separate tariff for luggage. However, customers may view an additional charge for luggage as unfair, particularly if they: • Do not perceive that the carriage of luggage is at an additional cost to the taxi driver, or • Consider that a reasonable level of assistance with baggage is part of a driver's normal remit.

Supply considerations Proponents of a distinct baggage charge see the rationale being that this encourages and rewards drivers for the additional labour and vehicle wear and tear when luggage is involved. However, this assumes that assisting customers with their luggage is outside a taxi driver's normal services.

Transparency and compliance considerations A luggage charge can add confusion for customers if it is not distinctly clear as to what this includes or excludes (e.g. hand bags and brief cases, shopping bags, carry-alls or suit cases). This can lead to customer complaints with regard to over-charging, which increases the workload of the licensing authorities' enforcement personnel. The greater the number of additional charges outside of distance and time tariffs (which are programmed directly on the taximeter) the easier it is for drivers to engage in overcharging. Overcharging with regard to luggage is difficult to prove, as there is no definitive record of an item having been carried or the type of luggage being carried.

Conclusions The distance and waiting time elements of a tariff are calculated based on operating and labour costs with regard to the taxi. This already includes the cost of carrying luggage. Setting a distinct luggage charge to reflect the direct cost of each type of luggage carried would appear to be over complicating the tariff, and adding to transparency and compliance issues.

3.3.7

Soiling charge

Description An additional charge payable only when the customer soils the interior of the vehicle. This can cause the driver additional cleaning or valet costs. There may also be an opportunity cost specifically where revenue is lost if the vehicle cannot be used until the cleaning takes place. The soiling charge is not designed to compensate drivers for deliberate or criminal damage to the vehicle. This is a matter for the police.

Implementation The soiling charge is distinct from the fare, and only charged in exceptional circumstances. It can be set to cover the costs of cleaning and valet service. However, this does not account for the time the driver may need to spend off the road while the car is being serviced. For example, if 25 PA Consulting Services


somebody soils the vehicle, and the driver cannot remedy it himself immediately they may have to cease operating until it is cleaned. The soiling charge may also be set to a level to act as a deterrent to soiling. It would be possible to set different soiling charges for different offences. However, one single charge is the most common approach.

Demand considerations The inclusion of a soiling charge will not have an impact on the demand for taxis.

Supply considerations Drivers are unlikely to provide a service to passengers they believe will soil their vehicle. The soiling charge is unlikely to change this. Rather, the soiling charge will compensate the driver if and when there is an issue with a customer. That said, collection of the soiling charge, especially in the course of work during unsociable hours or with aggravated customers, can be difficult for drivers.

Transparency and compliance considerations A single soiling charge is easy for the customer to understand. However, the basis for invoking the soiling charge may be less so, and this needs to be clear. This would also help ensure that drivers do not seek to use the soiling charge as a source of additional income.

Conclusions Prevention is better than cure when it comes to soiling. Consequently, a soiling charge that acts as a disincentive to soiling should be set. If invoked, this will also compensate the driver for being off the road, to some extent.

3.3.8

Minimum fare

Description The establishment of a minimum fare for any taxi journey.

Implementation This would involve setting a floor on the cost of hiring a taxi. For example, if the minimum fare was set at ÂŁ8, and the fare calculated on the meter reached only ÂŁ6.00, the customer would be liable for ÂŁ8.00.

Demand considerations If the level of the minimum fare is set at too high a level, then customers will seek to avoid taking a taxi for journeys that would cost significantly less than the minimum fare. This would be particularly difficult for customers that have no alternative but to use a taxi. It may also be an issue for tourists, and other customers that are not familiar with getting taxis in Northern Ireland.

Supply considerations This would reduce reluctance that certain drivers may have in providing short taxi journeys. However there is no evidence that this is an issue at present.

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This may cause an issue with regard to price competition between service providers, however. This is because a minimum fare, under regulation, would mean that operators could only offer a discount to the minimum fare level.

Transparency and compliance considerations This may be an issue for customers that use a taxi in Northern Ireland for the first time, (e.g. tourists). The addition of a minimum fare, when introducing Northern Ireland's maximum tariff structure, may also add some confusion, although this is not insurmountable. There are no associated compliance and enforcement issues.

Conclusions The inclusion of a minimum fare may be anti-competitive and could have an adverse impact for consumers that do not have an alternative to the use of taxis. Further, calculating and updating an appropriate minimum fare is problematic. Many of the objectives of a minimum fare can be achieved through having a flag drop. Furthermore, the flag drop charge has the added advantages of including a certain level of distance included.

3.3.9

Long distance tariff

Description A higher distance and waiting time tariff after a certain distance is travelled, on the basis that if the driver has to travel longer distances, they are likely to be outside of his usual area of operation. This means that they have to travel back to their area of operation before engaging another fare. The higher distance tariff would therefore offset some or all of the operating or opportunity cost of travelling back to the usual area of operation.

Implementation This involves establishing the opportunity costs of providing a longer journey, together with determining at what distance travelled should this be added to the initial distance tariff, to create a long distance tariff. In practice, this would mean that once the taxi has travelled past a certain distance (e.g. 12 miles), the meter will start to increase at the higher rate.

Demand considerations This makes longer journeys more expensive for customers, as they are paying for the distance travelled together with some compensation for the driver's return journey. Depending on the overall impact on journey cost, this could negatively impact on demand for longer taxi journeys.

Supply considerations It is likely that if a driver believes there is a significant opportunity cost to the provision of a long distance journey, they will do one of two things: refuse to provide the service or alternatively seek to negotiate a fixed price for the journey. Neither of these options is desirable. However, the likely incidence of this being an issue is low, as the vast majority of a taxi journeys will be within his or her usual area of operation. Furthermore, drivers are only likely to see a significant opportunity cost associated with longer journeys during peak periods of operation, i.e. when they would likely pick up a significant volume of fares within a short period of time. This is also a reason for keeping flag-drop tariffs relatively low.

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Transparency and compliance considerations There are no significant transparency issues with regard the imposition of long distance tariff. As discussed above, if a driver believes a long distance journey on the meter is not viable, they may seek to negotiate a fixed fee or refuse the journey. However, it is very difficult to estimate what long distance tariff would be suitable to offset this behaviour, and to determine at what distance this tariff should become applicable.

Conclusions It is possible to reflect overall annual operating costs in one single distance and waiting time tariff. This includes costs incurred in the delivery of longer journeys. Consequently, and given the downsides discussed above, there is no need for a long distance tariff at this time.

3.3.10

Large vehicle

Description A higher tariff is charged for larger vehicles (where size is characterised as passenger capacity). This section discusses the issues around large and accessible taxis. Accessible taxis are those designed or modified to safely convey persons with disabilities, typically wheelchair users; whereas a large vehicle may purely accommodate increased numbers passengers. Some confusion exists as, in some instances, a large vehicle may also be an accessible vehicle. The large vehicle should not, however, be assumed to be wheelchair accessible.

Implementation There is little evidence of other jurisdictions with a regulated tariff structure allowing larger vehicles to have a greater distance and time tariff, higher flag drop, or a separate "extra" allowance.

Demand considerations It is appropriate that sufficient accessible vehicles be available within the fleet to ensure adequate supply of such vehicles to meet demand. One method of achieving such supply is infrastructural - the limitation of ranking facilities to accessible vehicles; a second through financial incentive, allowing higher charges to be levied for the carriage of groups in vehicles that are both large and accessible. A certain proportion of taxi journeys are by larger groups, school transport and families although the majority tend to be for one and two passengers. Therefore, it is desirable that a certain proportion of the taxi fleet have a sufficient capacity to meet this type of demand. However, where a larger vehicle is the only vehicle available to a customer and they would have been satisfied with a saloon vehicle, there may be disagreement about what tariff they should be charged.

Supply considerations Drivers will consider a number of factors when choosing their vehicle type. From a cost point of view, upfront investment costs, together with ongoing operating costs will be considered. This will be balanced by consideration with regard to income generating possibilities, including demand for their vehicle type, together with the life of the vehicle. All other things being equal, a larger vehicle may be more expensive to purchase and operate (for example, greater fuel costs). However, vehicle passenger capacity is not the only determinant of

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costs. Brand, engine capacity, fuel efficiency, age, drivers operating patterns are all considerations when it comes to costs. Our research showed that the additional purchase costs of an accessible taxi is offset by the longer life-spans of these vehicles.

Transparency and compliance considerations Allowing different distance and time tariffs for vehicles of a different passenger capacity may cause an issue for consumers. This is because different taxis would have differently calibrated meters. The allowance of an additional extra, a set amount put on to the meter per journey, diminishes this issue.

Conclusions The cost of operating a range of taxi types and sizes is taken into account when determining the distance and time calculations. Consequently, it is not necessary to have a separate tariff structure for larger vehicles. However, consideration can be given to striking a balance between affordability and supply. This may be achieved by allowing the additional passenger charge to apply for the fifth and subsequent passenger. In this way, the supply of larger vehicles will be stimulated (or at least maintained at existing levels). It is important that such revenue measures are determined to stimulate the purchase of larger wheelchair accessible vehicles. This also means that those passengers with additional accessibility requirements are not disadvantaged by having to get a larger vehicle (as they do not incur the additional charge).

3.3.11

Boundary charges

Description Boundary charges arise where a vehicle crosses fare zones or between jurisdictions. Fare zones may exist to differentiate between different and distinct areas of one authority, whilst differing jurisdictions relate to neighbouring authority areas. In the case of Northern Ireland jurisdictional boundaries exist only where a taxi drives from Northern Ireland into the Republic of Ireland. Zone/boundaries currently exist between the Belfast urban zone and non-urban areas, though it is recommended that this distinction is removed. A boundary charge is an additional charge levied for journeys crossing a boundary and may be expressed as a single supplement, an additional or proportionately higher tariff, or the need to negotiate a fare outside the jurisdictional area of the authority issuing the taxi license.

Implementation Boundary charges are observed in some UK cities, and are generally implemented in one of the three ways described above (flat fee, proportionately higher tariff, or need to negotiate). Its implementation appears awkward, not least in so far as the majority of passengers are unaware of the exact boundary, and the implementation of the boundary charge can lead to disagreement between operator and passenger.

Demand considerations The impact of boundary charges on demand is the potential reduction of demand for longer distance journeys. This is felt particularly likely in the instance of unclear or opaque boundary charges. The relative attraction of taxi journeys for short distance cross-boundary travel will also be impacted, and

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this could be a serious consideration in transport across the Irish border to the detriment of the travelling public.

Supply considerations The logic of a boundary charge is lessened where the operating costs on one side of the boundary are broadly consistent with those on the other, the fundamental justifications for such a charge being removed where the driver incurs no penalty from crossing the boundary. The impact on supply for a city to rural journey has little if any impact on the supply of such a journey. This logic extends, for the most part, to the operator carrying a passenger across the Irish border, as the costs of operation are fully covered by the fare as stated in Northern Ireland. A difference does occur in that the taxi driver would be less likely, or unable to legally, attract a return fare from the Republic of Ireland. Whilst this supports the application of a border charge, the actual positioning costs of a driver are accommodated elsewhere within the tariff and have the effect of reducing loss from empty running.

Transparency and compliance considerations A serious issue arises in the approach to enforcing or even measuring cross boundary charges. In particular a lack of clear and apparent calculation make boundary charges particularly hard to justify, and the opaque nature of their application, particularly over their understanding and definition makes such a charge very hard to enforce.

Conclusions The application of a boundary charge is likely to work against the public interest and it is therefore recommended that such a charge is avoided.

3.4

Findings for the option analysis

3.4.1

Core tariff elements

Core tariffs can be set to reflect the majority of vehicle operating costs and driver labour costs. These tariffs are evidence-based, reflecting drivers operating practice and running costs. The distance charge should be the primary charge used, as it reflects both vehicle operating costs and labour costs. This offers the greatest level of transparency for customers with regard to how they are being charged for their journey. There is also a case for the inclusion of a waiting time charge as a secondary charge. This should be set at a level that is lower than the distance charge, thereby reflecting lower operating costs of a slow moving or stationary vehicle.

3.4.2

Additional tariffs

The greater the proportion of driver operating and labour costs that can be reflected in the core tariff elements, the less need there is for additional tariffs. Therefore, the inclusion of additional tariffs in the tariff table should be kept to a minimum. This means, that where possible, operating and labour costs should be reflected in the distance charge and waiting time charge. It is possible to do this for a range of potential additional tariffs, including the annual cost to operators of carrying luggage or carrying more than one passenger, for example. However, that is not to say that additional tariffs should be completely dismissed. Indeed, there are a number of incidences where they may be necessary to stimulate certain driver and consumer behaviour. 30 PA Consulting Services


4

Options analysis

With three main core tariffs, and 14 additional tariff elements, there are a large number of possible permutations. As noted in section 3, Northern Ireland's tariff structure is best served by a strong focus on the core tariff elements, while seeking to minimise the number of additional tariff elements. Consequently, the following possible tariff structures are considered: • A do-nothing scenario, that is leaving tariff regulations as it is at present • The inclusion of a core tariffs only (option 1) • Core tariffs plus all possible additional tariffs (option 2) • Core tariffs plus only those additional tariff elements that are necessary to assist in reaching project objectives (option 3). Each of these four options is considered against the objectives and constraints set out with regard to the implementation of a national maximum taxi fare in Northern Ireland. These objectives and constraints are summarised in table 4.1 below. This section outlines the option analysis for the possible combination of tariff elements into a national maximum tariff structure for Northern Ireland. These are evaluated against the Department's objectives and implementation constraints for the introduction of a regulated tariff structure. Table 4.1: Summary of objectives and constraints for the introduction of a taxi tariff structure High level

Key elements

To promote the use of taxis in Northern Ireland

• To increase consumer confidence in the taxi industry in Northern Ireland as a professional, well-regulated and safe service • To provide greater transparency to users of taxis in Northern Ireland as to the maximum likely fare for any single journey • To enable taxi drivers in Northern Ireland to generate a reasonable income from taxiing • To encourage adequate supply for all types of demand.

To create a tariff structure with operational integrity

• To create a maximum tariff structure that is understandable to both taxi drivers and the users of taxis • To create a maximum tariff structure that can be updated on an annual basis • To create a maximum tariff structure that is evidence-based.

To be cognisant of implementation constraints

• The tariffs have to be in line with existing legislation (e.g. on equality, competition, rural proofing etc) • Enforceability, with a view to not exacerbating compliance and enforcement issues • Having reasonable implementation costs • Legacy compatibility, meaning the tariff can be implemented using existing taximeters.

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4.1

Option 0: Do-nothing scenario

This option is based on no changes to the current charging approach. The International Review and Benchmarking report summarised the development of the taxi regulation in Northern Ireland since 2002. This found that, if implemented appropriately, industry stakeholders believe the introduction of a regulated tariff structure can be a means to help professionalise the industry, protect against uneconomic fare setting, and help identify unlicensed taxi operation. It also highlighted that there was support from consumers and consumer representatives, which generally focused on the potential benefits with regard to price transparency. Consequently, there is a significant opportunity cost of a "do-nothing" scenario, whereby the above objectives will not be realised. It would also mean that, for the most part, Northern Ireland taxi tariffs would remain unregulated, which is not in line with good practice in other developed economies. It would also mean that a significant section of the Taxis Act (Northern Ireland) 2008 will remain unimplemented.

4.2

Option 1: Core tariffs only

This option is based on only using the core tariff elements discussed in chapter 3, i.e. the tariff is exclusively based on the distance travelled in the vehicle, with a certain allowance for when the vehicle is engaged, but moving slowly in traffic, or stationary while waiting on the customer. Figure 4.1 reflects our evaluation of how each of the core tariff elements contributes to the overall objectives and constraints. A full green circle means that the inclusion of the tariff element would be in line with the objectives and project constraints, while half-green/white points to some issues, but still fairly positive. A red circle however points to the fact that the tariff could detract from reaching the objectives, or would mean the tariff would mean the overall structure is outside of the project constraints. The characteristics of the core tariff elements, as detailed in section 3, means that they all lend themselves very positively to reaching the project objectives, while operating with the legislative and other constraints. For example, the inclusion of a waiting time element means that drivers will not refuse to provide a service in congested areas or times of the day. However, there are two objectives which are only partly met by the inclusion of the core tariff elements only. Ensuring adequate supply for all types of demand will not be fully met by core tariffs only. In particular, this alone will not compensate drivers for any specific journey costs, such as road tolls or airport parking. This means that drivers may refuse to provide certain journeys or will provide the service an loss. Also, it does not incentivise drivers to operate at specific times when there may be unmet demand, were this to be confirmed as an issue. This is reflected in the "overall" colour coding assigned to these objectives in Figure 4.1 overleaf.

4.3

Option 2: Core tariffs plus all additional tariffs

The inclusion of additional tariffs, outside of primarily charging customers for the distance they have travelled, can add to a number of complications. A key concern is that customers fail to see the rationale for charging "extras", for issues such as carrying second and subsequent passengers or for carrying luggage. The greater the number of additional tariffs, the more difficult it is for consumers to have transparency with regard to the likely maximum fare. This is reflected in Figure 4.2, whereby the inclusion of additional tariffs detracts from the objectives around increasing consumer confidence and transparency for consumers.

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Figure 4.1: Option 1: the impact of core tariffs (only) on reaching the regulated tariff objectives

Distance

Waiting time

Flag drop

Unsociabl e hours premium

for Direct Charge each CallLuggage journey additional out/pick up charge expense passenger

Long distance

Large vehicle

Minimum fare

Soiling charge

Overall

To promote the use of taxis Increase consumer confidence in the taxi industry as a professional service Greater transparency for users regarding the likely maximum fare Encourage adequate supply for all types of demand Enable taxi drivers to generate reasonable income from taxiing To create a tariff structure with operational integrity Tariff structure that is understandable to both taxi drivers and customers Tariff structure that can be updated accurately annually Tariff structure that is evidence based To be cognisant of implementation constraints in line with existing equality, competition and other legislation Enforceability: does not accentuate compliance issues Reasonable implementation costs Legacy compatibility: takes account of existing technology capability Overall

Key Negative contribution

Neutral contribution

Positive contribution

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Figure 4.2: Option 2: the impact of core tariffs and all additional tariffs on reaching the objectives

Distance

Waiting time

Flag drop

Unsociabl e hours premium

for Direct Charge CallLuggage each journey additional expense passenger out/pick up charge

Long distance

Large vehicle

Minimum fare

Soiling charge

Overall

To promote the use of taxis Increase consumer confidence in the taxi industry as a professional service Greater transparency for users regarding the likely maximum fare Encourage adequate supply for all types of demand Enable taxi drivers to generate reasonable income from taxiing To create a tariff structure with operational integrity Tariff structure that is understandable to both taxi drivers and customers Tariff structure that can be updated accurately annually Tariff structure that is evidence based To be cognisant of implementation constraints in line with existing equality, competition and other legislation Enforceability: does not accentuate compliance issues Reasonable implementation costs Legacy compatibility: takes account of existing technology capability Overall

Key Negative contribution

Neutral contribution

Positive contribution

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Core tariff elements, particularly the distance tariff, take account of drivers annual operating behaviour and associated costs. These can be accurately updated on an annual basis, and therefore these tariffs are evidence based. Certain additional tariffs detract from these objectives. Indeed in most other jurisdictions, tariffs such as a luggage charge or additional passenger charge, are a result of legacy tariff tables or pressure from industry, rather than being a separate charge to reflect drivers' operating costs. The inclusion of a number of additional tariffs are also open to challenge under legislative constraints. For example, the inclusion of a minimum fare could feasibly be seen to be anti-competitive. An additional tariff for larger vehicles, or additional passengers, may be seen to discriminate against people with additional accessibility requirements or their need to be accompanied by additional passengers on their journey. Longer-distance tariffs and call-out charges may be seen as negatively impacting those that live in rural areas. Also, additional tariffs that are implemented through the press of a button on the taximeter (as opposed to being programmed into the taximeter) can add to compliance and enforcement issues. This is because, even when the driver is within his right to add the extras, the consumer may not understand this and feel that they are being overcharged. The small minority of drivers may also use the "extras" button to unlawfully add to the fare. Extras such as luggage charges and additional passenger tariffs are usually added in this way.

4.4

Option 3: Core tariffs plus 'green' additional tariffs

A number of additional tariffs do however add positively to the achievement of the objectives of introducing a regulated tariff structure (see Figure 4.3). More specifically: • An unsociable hours premium can be introduced which encourages supply at peak times and during highly unsociable hours. This has to be kept as close as possible to the standard distance tariff, so as to be seen as fair by customers. Keeping one separate premium tariff (as opposed to two, as in Belfast at the moment) will ensure any negative price transparency issues are minimised • Facilitating the collection of direct journey expenses, such as tolls and electronic payment costs, will mean that drivers will not avoid certain journeys or run at a loss • Similarly a soiling charge will allow drivers to recoup direct and indirect costs of a driver causing non-criminal damage to their vehicle.

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Figure 4.3: Option 3: Core, and "green" additional tariffs

Distance

Waiting time

Flag drop

Unsociabl e hours premium

for Direct Charge CallLuggage each journey additional expense passenger out/pick up charge

Long distance

Large vehicle

Minimum fare

Soiling charge

Overall

To promote the use of taxis Increase consumer confidence in the taxi industry as a professional service Greater transparency for users regarding the likely maximum fare Encourage adequate supply for all types of demand Enable taxi drivers to generate reasonable income from taxiing To create a tariff structure with operational integrity Tariff structure that is understandable to both taxi drivers and customers Tariff structure that can be updated accurately annually Tariff structure that is evidence based To be cognisant of implementation constraints in line with existing equality, competition and other legislation Enforceability: does not accentuate compliance issues Reasonable implementation costs Legacy compatibility: takes account of existing technology capability Overall

Key Negative contribution

Neutral contribution

Positive contribution

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4.5

Conclusions as to tariff structure

Following the review of individual tariff elements and possible combinations, the analysis concluded the Northern Ireland's proposed taxi tariff structure should include the following elements: • A distance tariff, which reflects the vehicle operating costs and a return for labour • When the vehicle is stationary, or moving at very low speeds, a waiting time tariff should be engaged. This should be lower than the distance tariff, reflecting lower vehicle operating costs at these times • A flag drop charge, which includes an allowance for a set distance and waiting time (where appropriate). This should be set at a reasonably low level so as to encourage demand for taxis, while also encouraging the use of taxis for very short journeys • An unsociable hours premium, whereby a higher distance and waiting time tariff are applicable at certain times. The flag drop could also be adjusted, either by decreasing the distance allowance included, or increasing the level of the flag drop. Ideally the premium rate should cover times where there is an identified unmet demand for taxi services, so that drivers are encouraged to supply services. These are usually at night time and at weekends, which are generally also considered to be "unsociable" hours of work in some, but not all professions • An extra passenger allowance for the fifth and subsequent passengers, to a maximum of the vehicle's passenger seating capacity. This additional allowance is considered feasible on the basis that it will encourage supply of larger vehicles, for which there is a demand. It is not set to reflect purported additional costs of carrying additional passengers, as these are reflected in the distance and waiting time tariffs • A separate soiling charge, set at a level that will encourage compliance by customers, and reflect at least part of the costs of having a vehicle out of service for cleaning due to a customers actions • The ability to collect direct journey costs in addition to the metered fare (e.g. airport car parking). The level for each of these elements is discussed in section 5 below.

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5

Tariff table

The data and options analysis has led to the following relevant conclusions with regard to the development of Northern Ireland's tariff table: • The cost of production for a typical taxi operator in Northern Ireland is £1.57 per mile driven in service. This includes an allowance to cover vehicle costs and labour costs. This does not consider taxi drivers working extended hours, who will receive a greater level of income, nor those on part time or restricted shifts who will earn proportionately less • This cost level should be reflected fully in a distance charge on the tariff table. A lower waiting time charge should also be included • A flag drop charge, unsociable hours premium and limited extras should also be included, although these are not set primarily to meet the costs of production; rather they are to stimulate supply of certain journey types. The following sections outline: • Whether tariffs should be programmed into meters at the maximum level or whether they can be programmed at any level provided each element is below the maximum • Whether there should be a single national tariff table for Northern Ireland or whether the maximum should vary to reflect regional variations • How these translate into a tariff table for Northern Ireland.

5.1

Options for meter programming

A key issue is relates to how the tariff is used as part of the calibrated meter within the taxi, specifically if it is set to be set: • At the maximum tariff level, where the passenger is able to negotiate a reduction against this maximum fare. This has the advantage of transparency and consistency for consumers, in that every taxi that is engaged has the same tariff on the meter. It also reduces the complexity for compliance and enforcement authorities that have responsibility for checking that meters are programmed according to the relevant regulations. However, this does require the consumer to negotiate a discount with the driver in advance of the journey, or to seek a dispatch company that are publicising the availability of discounted fares. • At any level provided it is below the maximum tariff level. For example, if the maximum flag drop tariff, as set by the Department, was set at £3, drivers would be permitted to operate a taxi with a meter that has a lower flag drop tariff, as well as lower distance and waiting time tariffs. This reduces the need for negotiation, which may suit certain consumers. However it could cause confusion for customers who do not understand variations between providers. It also increases the compliance and enforcement burden for the licensing and enforcement authorities. Drivers affiliated to dispatch companies may also face higher costs in this scenario if, for example, the company wishes to change its pricing policy on a frequent basis. It is also possible that some meter programming and calibration companies may be reluctant to programme meters outside of the guidance provided by the Department, or will pass on any increased costs of a bespoke service provision. Finally, and importantly, it may also result in uneconomic tariff setting, the removal of which is an objective of introducing a national maximum tariff structure.

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In practice, it is likely that the maximum fare will become the actual fare charged to consumers for the majority of journeys. This will especially be the case where customers: • Have few alternatives to taxi transport (e.g. late at night or when door-to-door transport is required) • Do not know the driver or travel frequently with the company • Do not know the driver or travel infrequently with the company. However, given the downsides with differently programmed meters, it is concluded that a standard approach to meter programming is most appropriate. This is particularly the case where the maximum fare is in line with consumers' ability and willingness to pay, thereby reducing the perceived 'need' for a discount. By doing this, taxi drivers and taxi companies will only seek to offer discounts on the basis of increasing their volume of fares (and subsequently the number of "live miles" per annum), rather than because of a perception that the maximum fare is too high.

5.2

A single national maximum taxi fare or regional fares

A key objective of introducing the regulated tariff structure is to bring both transparency and consistency to taxi prices across Northern Ireland, to the benefit of both industry and consumers. Consideration must be given to whether the introduction of a single tariff structure for Northern Ireland would significantly disadvantage drivers or consumers in particular areas, for example the major urban areas or rural areas. The Northern Ireland survey of taxi drivers found that there was no significant difference in operating characteristics from rural to the major urban areas (i.e. Belfast). It was further observed that, although fewer journeys are made in rural communities, on average these journeys tend to be longer. From this it can be inferred that income to the driver arising from longer journeys made in rural communities offsets a reduced number of bookings. This supports the argument for a national, rather than regional, tariff. The survey also found that there was very little difference in the required hours of operation between areas. In non-urban and small town operation, a mean value of 47 hours worked per week is reported. Drivers in Derry/Londonderry also reported a similar average (48 hours per week), whilst drivers in Belfast reported a mean working week of 51 hours. It is likely that such differences arise as a function of the numbers of drivers within the market, with the greater number of drivers in Belfast resulting in a longer working week to achieve the same number of live miles. Whilst the difference in stated mean working hours remains limited (47 – 51 hours), regional differences in hours worked does not justify regionalisation of tariff. On the basis that there is no significant difference in operating costs in different urban areas in Northern Ireland, there is no need to distinguish the tariff structure and tariff levels. In other words, a singe tariff structure can be applied to all major urban areas. Furthermore, given that the tariff is set at a maximum, drivers and customers are free to negotiate a discounted fare from that calculated on the meter. A further complication with regional fares relates to boundaries. Northern Ireland has relatively small local authority areas and these boundaries may change with the implementation of the Review of Public Administration. While there are alternative boundaries (for example county or town), these are not well known and would lead to additional complexity for the customer and taxi operator (knowing where the boundaries were). On this basis it is concluded that a single regulated tariff structure is for the whole of Northern Ireland is most appropriate. 39 PA Consulting Services


5.3

Allocating costs to tariffs

5.3.1

Distance charges

As highlighted in section 3.2.1, the standard approach to delivering distance charges through taximeters across the UK is on a stepped basis, i.e. a fee for every unit of distance travelled. Defining a “step” has advantages in terms of clarity for customers and ease of providing change. In establishing an appropriate step for Northern Ireland, the needs of customers and drivers must be considered to ensure that the step is fair for all parties. The use of meters is a requirement in GB and Ireland but, with the exception of Belfast Public Hire, not in Northern Ireland. A minority of taxi associations/operators use meters, whilst the remainder typically use: • A pre-defined set fare for given trips • A distance-based fare (per mile on the odometer). While both of the above non-metered systems are distance-based, both are relatively crude (either relying on the vehicle's odometer or an assessment of the distance by the driver). Table 5.1 overleaf shows the fare steps/systems operated at present for a sample of locations across Northern Ireland. This inconsistency in approach to fares generates confusion amongst customers as to the payment system and makes it difficult to compare value for money. In moving forward it is desirable to have a common approach across all taxis in Northern Ireland to distance charges. Table 5.1: Fare steps for a sample of areas in Northern Ireland Current Northern Ireland “steps” (source)

Fare step

Fare step

Belfast (Public Hire)

£0.10

Maghera (Glenone Taxis)

£0.10

Derry / Londonderry (NWTP)

Set fares

Newry (Ace Taxis)

Set fares

Newcastle (Donard Taxis)

Set fares

Portadown (A2B

Set fares/mile rate for other trips (£1.00)

Aldergrove (Aldergrove Taxis)

Not metered, mile rate (£1.20)

Eniskillen (Diamond)

Not metered, mile rate (£1.20)

Larne (A&B)

Not metered, mile rate (£1.30)

By way of background, Table 5.2 shows the steps for a sample of licensing areas across the UK. This shows that there is a range of steps from 10p to 30p, with the most frequent step change is in 20p units.

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Table 5.2: Fare steps for a sample of taxi licensing authorities across the UK Licensing area

Fare step

Plymouth

£0.30

Sheffield

£0.30

Edinburgh

£0.25

Birmingham

£0.20

Cardiff

£0.20

Carlisle

£0.20

Liverpool

£0.20

London

£0.20

Manchester

£0.20

Southampton

£0.20

Kingston upon Hull

£0.10

Oxford

£0.10

York

£0.10

Modal average

£0.20

The question then arises as to what the fare step should be. A higher step will buy longer distances, for example if 10p pays for 112 yards, 20p will pay for 224 yards. Because customers pay for the "next" step (be it 10p or 20p) in advance, if the customer does not travel the full 112 or 224 yards, they are still liable for the 10p or 20p (respectively). Table 5.3 shows that the higher the monetary step the higher a customer may "overpay". (It should be noted however, that this is not overcharging, in that the driver is not responsible for the fact that the customer has not used the full yardage allowed). Table 5.3: Impact of different step payment amounts Step amount

Minimum overpayment

Maximum overpayment

Average

10p step

0p

9p

4.5p

20p step

0p

19p

9.5p

30p step

0p

29p

14.5p

In certain instances, customers may use their exact allowance, and therefore the overpayment is zero. However, if the journey finishes immediately after the meter ticks over, a customer can be said to be overpaying by 9p (if the step is 10p), 19p (on a 20p step) and so on. However, these are the extreme cases, and on average it would be expected that a 10p step results in overpayment by 5p, while a 20p step has a resulting 10p overpayment (rounded up). In the context of fares in excess of £3.00, this amount is relatively small (less than 3%) and becomes a smaller proportion of the overall cost of a journey as the fare increases. While a 10p step has the relative advantage of minimising this "overpayment" by on average 5 pence per journey relative to a 20p step, a 20p step has other advantages. These are set out in Table 5.4. One of the advantages of a 20p step over a 10p step is that it makes tariff increases in line with inflation more feasible. This is because increases in fares are typically implemented by keeping the 41 PA Consulting Services


step fee fixed and reducing the distance allowance. For example, if 20p currently pays for 224 yards, and fares are to be increased by 4%, the adjustment is typically made by reducing the yardage figure by 4% (i.e. 9 yards). With a smaller fare step, there is less scope to do this as the starting yardage figure is lower. Table 5.4: Advantages and disadvantages of a 10p/20p fare step Step amount

Relative advantages

Relative disadvantages

10p step

Lower average overpayment (4.5p)

10p coin more bulky than 20p

Fare step in use at present in some areas in Northern Ireland (Belfast Public Hire)

More coins required (on average) in making change (potential for delay at journey end) Meter ticks over more quickly than 20p, giving impression of a higher charge/poorer value Tariff increases (for example for inflation) are less practical

20p step

20p coin less bulky than 10p

Higher average overpayment (9.5p)

Fewer coins required (on average) in making change (reducing potential for delay)

Higher fare step than currently used at present in some areas in Northern Ireland (Belfast Public Hire)

Meter ticks over more slowly that 10p, giving impression of a lower charge/better value Tariff increases (for example for inflation) are more practicable

While there is no single, compelling reason to adopt a 20p over a 10p fare step, on balance a 20p fare step seems appropriate. On the basis of a driver receiving £1.57 for every charged mile (to enable a reasonable income) this is equivalent to £0.20 for every 224 yards travelled. Table 5.5: Sample distance tariff as per Northern Ireland's Tariff Table Day/Time To be confirmed, see section 5.4

5.3.2

Calculation of fare

Rate

For every subsequent 224 yards

£0.20

Waiting time charges

The waiting time tariff is instigated when the vehicle is stationary (with a passenger inside) or travelling at very low speeds (e.g. in heavy traffic). As drivers face close to zero vehicle operating costs at these times (i.e. fuel and wear and tear are very low), the cost to the driver relates to their time. Based on the average salary and working time (see section 4.2), Table 5.6 outlines the tariff for Northern Ireland based on the step increment of £0.20. Table 5.6: Sample waiting time tariff as per Northern Ireland's Tariff Table Day/Time To be confirmed, see section 5.4

Calculation of fare

Rate

For every 73 seconds or part thereof, whist the vehicle is stationary

£0.20

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5.3.3

Flag drop

Flag drop charges are typically set to allow for time spent on the rank, to ensure a minimum return for drivers, and/or to promote the supply of short taxi journeys. Consequently, while initial tariffs do include a distance and waiting time allowance, the initial charge will cover more than the cost of production associated with covering this distance. By way of context, Table 5.7 shows the standard day time flag drops for a sample of authorities across the UK, including the distance allowances. Table 5.7: Flag drops and allowances in different licensing authorities Authority

Flag drop (£)

Included distance (yards)

Flag drop per yard included (pence)

Carlisle

£2.50

1,231

0.20p

Edinburgh

£1.60

492

0.33p

Manchester

£2.30

455

0.51p

Liverpool

£2.00

350

0.57p

London

£2.20

306

0.72p

Plymouth

£2.50

200

1.25p

Cardiff

£2.00

146

1.37p

Kingston upon Hull

£2.00

135

1.48p

Sheffield

£2.60

160

1.63p

York

£2.30

122

1.88p

Southampton

£2.40

120

2.00p

Oxford

£2.45

87

2.80p

Belfast Public Hire

£3.00

880

0.34p

The range of flag drop varies from £1.60 to £3.00 (the highest being for Belfast Public Hire), though distance allowance associated with the flag drops varies greatly. For example, the flag drop of £2.50 in Plymouth is far better value to the customer than the lower nominal rates £2.45 flag drop in Oxford or £2.40 in Southampton (see the "flag drop per yard included" figures). On this basis, Belfast Public Hire offers the third best value to the customer of the sample. In Northern Ireland there are a range of flag drop charges applied. Belfast Public Hire, the only regulated tariff, has a day-time flag drop charge of £3.00 with an associated allowance of 0.5 miles. As shown in Table 5.8, taxi operating companies across Northern Ireland typically apply flag drops from £2.00 to £3.50, with different distance allowance across them. A number (e.g. Larne, Newry and Portadown) apply a town fare rather than a mile based rate.

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Table 5.8: Indicative flag drops and allowances in different areas Area

Mean Flag drop (£)

Included distance (miles/yards)

Equivalent charge per 6 mile

Derry / Londonderry

£2.25

1.4 miles / 2464 yds

£1.61

Belfast Public Hire

£3.00

0.5 miles / 880 yds

£6.00

Belfast (Valuecabs)

£2.40

0.2 miles / 352 yds

£12.00

Belfast (Fonacab)

£3.00

0.7 miles / 1232 yds

£4.29

£3.00 - £3.50

2 miles / 3520 yds

£1.75

Maghera

£3.00

1 mile / 1760 yds

£3.00

Larne

£3.50

Local fare

N/A

Newry

£3.50

Local fare

N/A

Portadown

£3.00

Town fare

N/A

Coleraine

In order to establish an appropriate flag drop for Northern Ireland, a stated preference analysis was undertaken to identify the propensity to supply specific to a flag drop amount. In other words, drivers were surveyed as to whether or not they would supply services, with their willingness to supply changing depending on the level of the flag drop. Figure 5.1 shows the impact of differing flag drop amounts on propensity to supply. Figure 5.1: Driver propensity to supply with different flag drops

Coleraine Belfast Public Hire

Derry

As would be expected, with higher flag drops there is a greater propensity to supply, though this is noted to tail off at higher levels. This may arise as drivers perceive that a higher initial charge will have a negative impact on customers’ decisions to use taxis. A significant decline in the propensity to supply taxi services was noted when the stated flag drop fell below £2.90 (which is below the minimum charged by many companies in Northern Ireland). Thus on the basis of the stated preference

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Equivalent charges do not equate to mean charge per mile; rather the relative values of distances included in flag drop. 44

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analysis, if the flag drop was introduced in Northern Ireland below £3.00, it is likely that there would be shortage in taxi supply. This would impact negatively on (potential) taxi users. Table 5.9 gives example flag drop and associated distance allowances based on the average operator costs (as set out in Section 2). Thus a flag drop of £3.00 with an included distance allowance of 0.5 miles gives a "surplus" over the cost of production of £2.21. This has an equivalent time value to the driver of 13 minutes or distance value 1.4 miles. Table 5.9: Examples different flag drops and associated distance allowances Flag drop

Associated distance allowance

Cost of production (@ £1.57 per mile)

Surplus

Time value

Live mile equivalent

£3.00

0.5 miles

£0.79

£2.21

13 mins

1.4 miles

£2.50

0.5 miles

£0.79

£1.71

10 mins

1.1 miles

£2.00

0.5 miles

£0.79

£1.21

7 mins

0.8 miles

£3.00

0.75 miles

£1.18

£1.82

11 mins

1.2 miles

£2.50

0.75 miles

£1.18

£1.32

8 mins

0.8 miles

£2.00

0.75 miles

£1.18

£0.82

5 mins

0.5 miles

For illustrative purposes, Table 5.10 shows the impact of different flag drops on the overall cost of a journey. This includes a both flag drop, the distance charge and the cost of production outlined previously (as set out in 5.3.1). This shows that a one mile journey with a flag drop of £3 and the distance tariff would cost £3.60. A two mile journey on the same tariffs would cost £5.20. Table 5.10 also sets out the equivalent Belfast Public Hire charges. This shows that current fares for a one and two mile journey are 10p less and 20p less expensive (respectively) than with a flag drop of £3.00 and associated charge of £0.20 per subsequent 224 yards. A £2.50 flag drop, however, would mean that drivers receive 40p less than currently received for a one mile journey and 10p less for a 2 mile journey. Table 5.10: Impact of flag drop and distance tariff on overall cost per journey, tariff 1 (i.e. day-time) Current Belfast Public Hire (Tariff 1)

National Maximum Tariff 1 (with £3 flag drop and 0.5 mile allowance)

National Maximum Tariff 1 (with a £2.50 flag drop and 0.5 mile allowance)

£3.00

£3.00

£2.50

£0.10 for every subsequent 135.3 yards or part thereof

£0.20 every subsequent 224 yards or part thereof

£0.20 every subsequent 224 yards or part thereof

1 mile journey

£3.70

£3.80

£3.30

2 mile journey

£5.00

£5.40

£4.90

Flag drop Distance charge

The setting of flag drop is not a precise science. On the basis of the above analysis it seems that a flag drop of £3.00 with associated allowance of 880 yards (half mile) is appropriate. This is on the basis that: • Based on the stated preference analysis, a flag drop charges below £2.90 would possibly result in a significant decrease in propensity to supply • This flag drop is similar to that which currently applies to Belfast Public Hire taxis.

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While £3.00 is a high nominal fee in the UK context, the associated distance allowance of 880 yards is generous. This means that Northern Ireland flag drop actually compares very favourably against other parts of the UK.

5.4

Additional allowances

5.4.1 Unsociable hours premium Whilst the ability to supply taxi services is controlled (through vehicle and driver licensing, quality and safety testing), the choice of whether to supply and at what times remains with the driver and/or operating company. While the DOE may provide appropriate licenses to operate, they cannot require supply. In practice a driver’s choice to supply will be influenced by a series of factors including income, selection of a clientele, preferences for time of day and competition. It is also noted that taxi drivers may display “satisficing” behaviour, being the setting of target incomes over the course a day or month. Once a target is achieved the desire to supply reduces. As outlined in section 4, a higher tariff at certain times - in particular unsocial hours such as late at night, weekends or public holidays - is not set to reflect additional cost of service provision. Rather, the logic of applying a supplement is to encourage supply at night and at other points where demand peaks are common and to reward drivers for working in what typically may be unsociable times. This is in line with practice in the taxi industry in other jurisdictions. Such an unsociable hours premium is proposed for Northern Ireland. From existing literature, unmet demand /unsocialable hours typically relates to: • Peaks in some locations at the end of the evening rush hour (commuter traffic), for example in Edinburgh at 8pm • Peaks in night time demand at 12 midnight, and again at 3am, corresponding to the most common closing times for pubs and clubs • Bank holidays (including Christmas and New Year). In terms of current practice in Northern Ireland: • Belfast taxi companies have no additional charge for unsociable hours. One large Belfast-based company suggested that this related to the ability to allocate jobs across a pool of (affiliated) drivers • Belfast Public Hire does have a separate (and higher) unsociable hours tariff • Derry/Londonderry does not have an additional charge for unsociable hours • Operators in the Causeway, Mid-Ulster, East-Antrim and Newry areas suggested that a unsociable hours tariff supplement was appropriate and necessary to encourage supply. Here they do not have the opportunity to allocate across a large number of drivers. In terms of when an unsociable hours tariff would apply (i.e. time of day, day of week, and how bank holidays should be treated), approximately 50 interviews were undertaken with taxi drivers in Belfast, Derry/Londonderry and more rural areas (such as Coleraine, Maghera and Newry). Almost two out of three (65%) of respondents worked at night, with only 35% working day shifts only. There was an even split in opinion as to what constituted night-time operation, with approximately half believing it to be at 8pm, while half stated midnight. There was also a split with regard to when night-time ended, either 6am or 7am. A night time period was defined on the basis of impact on customer, with an 8pm start time reflecting drop off in supply, and a 6am end time reflecting a desire expressed in discussion to avoid penalising early morning commuter use of taxis.

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In terms of the level of unsociable hours tariff, a stated preference analysis was undertaken to consider what tariff level would maintain supply at existing levels. Propensity to supply differed between weekday night-time and that at weekends, with a lower propensity to supply at weekends than weekday night-times. Providing sufficient services at weekend is a significant issue for most licensing authorities in GB and is used to justify additional unsociable hours charges and/or night time tariffs. The survey of drivers found that a weekday supplement of c£0.40 per fare would maintain nightime supply, with an equivalent figure for weekend (including Friday night) of £1.20. The stated preference analysis also looked at supply of taxis on bank holidays. Current charges levied for supply of taxis on bank holidays are subject to a wider range of variation than that applied for night time operation on weekdays. The extent of such charges at present include: • No additional charge (typically with operators currently not levying a night time supplement) • Normal fare +100% • An additional £1.00 flag drop and reduced distance for each meter tick (Belfast Public Hire). Given that on bank holidays there can be a significant need for supply (in particular as public transport can operate on restricted timetables), the use of an additional tariff for bank holidays was considered. The necessary level of bank holiday supplement coincides with that appropriate for weekend night time (£1.20) allowing for the merging of weekend and bank holiday supplements. On the basis of responses it is possible to suggest a potential for three tariffs: weekday daytime, weekday night time, and weekends/bank holidays – to include public holidays and the “cusp” period, being the period from Friday night into Saturday morning. Weekend and bank holidays are calculated on the basis of commencing at 8pm the evening before, and concluding at 6am the following morning. We have therefore tested the impact of 3 tariffs, differentiated by an unsociable hours premium alone, with no additional mileage charge in tariffs 2 and 3. The use of a single supplementary payment allows for transparency in charging, and is set out below. We have applied an 8 pm start time and a 6 am end to night time charges. Weekend charges thus start at 8pm on Friday night, and end at 6am on Monday morning. Bank holiday charges continue from 8pm the evening prior to the bank holiday, and conclude at 6am the following morning. The impact of a £0.40 addition to the flag drop is outlined in Table 5.11. This would mean a 1 mile journey at weekday night time would cost £4.00 and a two mile journey would be £5.70. Table 5.11: Impact of additional charges applied to flag drop on tariff (i.e. Tariffs 2 and 3) Current Belfast Public Hire Tariff 2 ( 0.25 mile allowance)

Proposed maximum Tariff 2 (with £3.40 flag drop and 0.5 mile allowance)

Proposed maximum Tariff 3 (with £4.20 flag drop and 0.5 mile allowance)

£3.00

£3.40

£4.20

£0.10 for every subsequent 125.7 yards or part thereof

£0.20 for every subsequent 224 yards or part thereof

£0.20 for every subsequent 224 yards or part thereof

Cost of 1 mile journey

£4.10

£4.00

£4.80

Cost of 2 mile journey

£5.50

£5.70

£6.50

Flag drop Distance charge

These are both in line with the present Belfast Public Hire Tariff 2. Therefore, supply would not likely be negatively impacted by this change. The third tariff, applied at weekends and bank holidays, is in line with similar charges applied elsewhere in the UK and provides the additional incentive (supported 47 PA Consulting Services


by the stated preference analysis ) to maintain supply at weekends and bank holidays. Tariff 3, applied at weekends and bank holidays is also demonstrated and is in line with the stated preference results. Consequently, and in line with the project objectives, a simplified and transparent tariff structure is recommended. This is outlined in Table 5.12. Table 5.12: Proposed tariff structure and levels Times

Flag drop

Distance charge

Tariff 1

Weekdays: 06:00 - 20:00

£3.00

£0.20 every subsequent 224 yards

Tariff 2

Monday - Thursday: 20:00 -06:00

£3.40

£0.20 every subsequent 224 yards

Tariff 3

Friday 20:00 – Monday 06:00, and bank holidays from 20:00 on the day preceding to 06:00 the following morning

£4.20

£0.20 every subsequent 224 yards

5.4.2 Additional passenger charge The cost of carrying passengers in a standard taxi is reflected in the distance charge. Where the number of passengers seeking to travel in a vehicle is more than a standard saloon can carry and a larger vehicle is required, it is common practice in GB to seek additional revenue. Given that a standard saloon taxi can carry four passengers, it is reasonable that an additional charge is levied for the fifth and subsequent passengers. This levy may also help to encourage the supply of larger vehicles, for which there is a demand. The number of journeys undertaken with more than four passengers is relatively few and there is little data available on which to base this. A nominal additional fee of £1.00 for the fifth and for each of subsequent passenger per journey is proposed.

5.4.3 Direct journey expenses All additional direct expenses should be chargeable to the customer, and the customer should be made aware of these in advance. This may include road tolls, parking charges etc. The category also applies to airport journeys where a barrier fee, or similar charge, is applied. It does not, however, apply to site rental costs applied as a precursor to providing services as such charges are similar to comparable costs experienced in renting advantageous locations elsewhere. An airport operator may thus include a charge for a barrier lift, including car park fees associated in completing a specific journey in the case of a pre-booked journey, but not airport imposed depot fees or associated costs.

5.4.4 Soiling charge The soiling charge should be set at a figure that dissuades customers from soiling the vehicle, and will also compensate the driver (at least in part) for any occurrences. By way of comparison, Table 5.13 below shows soiling charges for a sample of authorities across the UK, ranging from £20 to £75.

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Table 5.13: Soiling charges for a sample of taxi licensing authorities Town

Soiling charge

York

£75.00

Southampton

£70.00

Cardiff

£50.00

Plymouth

£50.00

Sheffield

£50.00

Birmingham

£40.00

Kingston upon Hull

£40.00

London

£40.00

Carlisle

£35.00

Oxford

£30.00

Liverpool

£25.00

Edinburgh

£21.60

Manchester

£20.00

Simple average

£42.05

For Northern Ireland, a maximum soiling charge of £50 is suggested. This is on the basis that: • It will cover the cost of an internal valet service (typically £25) plus an allowance for driver income (given that the vehicle may have to be off the road while waiting to be valeted) • A charge of this level may go some way to dissuading soiling/acting as a deterrent • It is not too high as to be deemed meaningless or unenforceable • It is generally in line with practice in other jurisdictions. £50 is a maximum charge and passengers can negotiate with drivers a fee as appropriate.

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5.4.5 Summary The above analysis has identified the key elements that contribute to taxi driver costs and how these could be recouped to reflect the cost of supply. Table 5.14 summarises the findings and presents a tariff structure together with the maximum proposed fare rates. This means that drivers can offer and passengers can negotiate a reduced fare level. Table 5.15 sets out comparable costs based on reported fares applied across Northern Ireland. Table 5.14: Proposed tariff structure and levels Tariff 1 Monday - Friday: 06:00 - 20:00

Tariff 2

Tariff 3

Monday - Thursday: 20:00-06:00

Friday 20:00 – Monday 06:00 bank holidays (20:00 on the preceding day to 06:00 on the following day)

A flag drop of £3.00

A flag drop of £3.40

A flag drop of £4.20

This covers the first 880 yards (0.5 miles) of the journey

This covers the first 880 yards (0.5 miles) of the journey

This covers the first 880 yards (0.5 miles) of the journey

£0.20 every subsequent 224 yards

£0.20 every subsequent 224 yards

£0.20 every subsequent 224 yards

£0.20 for every 73 seconds or part thereof, whist the vehicle is stationary

£0.20 for every 73 seconds or part thereof, whist the vehicle is stationary

£0.20 for every 73 seconds or part thereof, whist the vehicle is stationary

The following additional charges may be payable in certain circumstances only: • Additional passengers: £1 for the fifth (5th) and each subsequent passenger in a vehicle • Direct costs (e.g. road tolls) as incurred by the driver and agreed with the passenger before the journey begins • Soiling charge: £50 maximum

It should be remembered that the aim of this tariff structure and the maximum tariff levels is: • To promote the use of taxis in Northern Ireland – To increase consumer confidence in the taxi industry in Northern Ireland as a professional, wellregulated and safe service – To provide greater transparency to users of taxis in Northern Ireland as to the maximum likely fare for any single journey – To enable taxi drivers in Northern Ireland to generate a reasonable income from taxiing • To create a taxi tariff structure that has operational integrity – To create a maximum taxi structure that is understandable to both taxi drivers and the users of taxis – To create a maximum taxi structure that can be updated on an annual basis – To create a maximum taxi structure that is evidence-based • To deliver against these objectives within a reasonable timeframe – To achieve the above changes within two years of project commencement. The above tariff structure and levels provide the basis for doing this. While the levels could mean that fares are higher than is currently the case in some areas, taxi drivers are able to discount and passengers are able to seek discounts of the fares. The proposed tariff levels are maximums. 50 PA Consulting Services


Table 5.15: Impact of proposed tariff structure on NI fares Location

Current typical fare

Proposed maximum fare

Belfast Public Hire

£3.70

£3.80

Belfast Private Hire (company A)

£3.55

£3.80

Belfast Private Hire (company B)

£4.15

£3.80

Maghera

£3.00

£3.80

Derry / Londonderry

£3.00*

£3.80

Newry

£3.50*

£3.80

Portadown

£3.00*

£3.80

Newcastle

£3.00*

£3.80

Larne

£3.50*

£3.80

Belfast Public Hire

£5.00

£5.40

Belfast Private Hire (company A)

£4.70

£5.40

Belfast Private Hire (company B)

£5.30

£5.40

Maghera

£4.20

£5.40

Derry / Londonderry

£3.00*

£5.40

Newry

£3.50*

£5.40

Portadown

£3.00*

£5.40

Newcastle

£3.00*

£5.40

Larne

£3.50*

£5.40

Belfast Public Hire

£5.90

£5.70

Belfast Private Hire (company A)

£4.70

£5.70

Belfast Private Hire (company B)

£5.30

£5.70

Maghera

£5.10

£5.70

Derry / Londonderry

£3.00*

£5.70

Newry

£3.50*

£5.70

Portadown

£3.00*

£5.70

Newcastle

£3.00*

£5.70

Larne

£3.50*

£5.70

… 1 mile daytime fare at 14:00 on a Thursday

… 2 mile daytime fare at 14:00 on a Thursday

… 2 mile night time fare at 01:00 on a Thursday

* Town fares apply within an estimated operational area. Exact distance measurement is not used by suppliers in these instances. It is debateable (given the cost information provided) the extent to which these town fares would cover costs and therefore are achievable.

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5.5

Implementation of the tariff elements

Having determined the appropriate elements and maximum tariff levels for inclusion, it is important to consider how these should be implemented and updated in order to maximise their contribution to the objectives of a national maximum tariff structure. Specifically: • Distance tariff – A fixed monetary unit is proposed for a designated distance (£0.20 for 224 yards). Updates to the tariff should be to the distance allowances rather than the monetary units . – The taxi meter receipt should indicate exact distance travelled. • Waiting time – Clear guidance as to when the meter can be engaged, especially for pre-booked taxis. For example, if the meter can be engaged only when the customer enters the taxi or from the time arranged for pick-up (assuming this is later than the time the taxi is entered) – The taxi meter receipt should indicate the time the meter was engaged and the journey end • Unsociable hours premium – A standard distance and waiting time tariff reflecting annual operating and labour costs. The premium rate reflects an addition above this, aimed at encouraging supply at times of unmet demand and at unsociable hours – Having designated the times and days to be covered, the appropriate calendar needs to be created and made available to meter calibrators. A calendar covering the capacity of the meter should be created (e.g. up to five years for many taxi meter models) – The tariff charged for a journey should be either the standard or premium level, i.e. the tariff rate does not change during a journey. This supports the objective of transparency for the consumer, and is in line with practice in the majority of other jurisdictions – The taxi meter receipt should indicate the time the meter was engaged and the journey finish – It would be prudent to test the levels of unmet demand at a number of locations in Northern Ireland during weekday evenings and weekends with current (not proposed) fare levels during these unsociable hours. This would provide reassurance that the stated preference analysis is based on situation where there is reasonable supply • Extra passenger allowance – The additional amount for five or more passengers should be added to the meter at the start of the journey, so that customers have price transparency as soon as possible. The number of extras added to the meter should be printed on the taxi meter receipt – Extras are added to the meter through pushing a button on the meter, i.e. one push per additional passenger that can be charged for. The number of extras added should be capped to the maximum capacity of the largest taxi, i.e. seven seats, to prevent accidental over-charging • Soiling charge – Drivers would give a hand-written receipt (i.e. not incorporated into the printed receipt) • Direct journey expenses – Printed receipt should include a space for these to be written on the basis that tolls and other expenses will be specific to certain journeys (and are not pre-programmable into the meter). – Drivers should be obliged to inform passengers of possible additional expenses before the journey begins.

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Taxi Report on fares