Fare Game? Flagging down the cost of public sector taxis

Fare Game? Flagging down the cost of public servant taxis.

Taxi

Ride-sharing

• Expensive • Outdated • Taking taxpayers for a ride

• Cheap • Efficient • Saves taxpayer $3.3m/year

NZ Govt

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

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INTRODUCTION The rise of ride-sharing in New Zealand The last three years has seen a rapid rise in ride-sharing apps, such as Uber and Zoomy, throughout New Zealand. These apps are a simple way to match people who need rides with drivers, cutting out many costs that taxi companies incur. Ridesharing’s efficiency, flexibility and low cost poses a real threat to taxi companies.

Since the introduction of ridesharing into New Zealand’s market, these companies and its drivers have faced the brunt of a campaign from taxi industry lobby groups, and a less than welcoming approach from the Government.

Ride-sharing apps have demonstrated that taxi regulations were outdated, overly bureaucratic, and in certain areas, entirely inappropriate. It required numerous checks and tests to be carried out before a taxi driver could operate, and all at a significant cost to the driver. It was estimated that it took $1,500, and 1-3 months for paperwork to be completed to fully endorse a driver.

Until recently, the New Zealand Government took a hardline approach towards bringing the new and innovative ride-sharing regime within the outdated former regime. Instead of keeping up with the development in technology,

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the Government took a punitive approach, fining drivers, and issuing serious threats towards the continuation of the ride-sharing industry operating in New Zealand.

The public service and ride-sharing The public service rare among the largest users ot taxisl. Many bureaucrats need to travel to do their job. This report demonstrates that overwhelmingly, still, public service departments prefer to take taxis over ride-sharing apps.

So why has the public service not jumped on the ride-sharing wagon? Clearly, ride-sharing apps offer much lower rates than taxis can. This report identifies $3.3 million of potential annual savings that would result from the public service embracing ride-sharing.

Included are additional benefits, such as GPS tracking systems and administrative efficiency – including instant electronic receipts - which would mean that oversight of public use of taxpayers’ money would be better.

However, not only has the public service failed to embrace ridesharing, some departments have gone as far as banning its use by staff. From the tier-one Government departments we surveyed, at least five of them have written policies which ban their staff from using such platforms.

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

The path from regulation to co-operation It took three years for the Government to recognise that ridesharing operators should be able to operate legally in New Zealand.

The Land Transport Amendment Bill (No 2) came into force on 1 October this year, following years of the Government criticising ridesharing companies for not fully complying with its outdated taxi licensing regime.

“This paper makes the case for the public service to embrace ridesharing apps” This paper makes the case for the public service to embrace ride-sharing apps in carrying out their work. It will highlight the current expenditure of tier-one Government departments on taxis, and estimate the wealth of savings that a move to ride-sharing would provide.

It will explain the efficiency and improved processes that using ride-sharing apps would confer.

International comparisons will be included, to show how New Zealand’s public service is lagging behind in embracing the

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

technology.

It will also assess whether the Government should reconsider their proposal to change the government fleet to be one in three electric vehicles, and instead be more open to the opportunities offered by ride-sharing.

Ultimately, the public service has an obligation to all taxpayers to use the most cost-effective systems where they are fit for purpose. Now that the Government has caught up with the times, and regulated for the ride-sharing industry, the public service should follow suit.

About the Author Matthew Rhodes is a Researcher at the New Zealand Taxpayers’ Union. He has taken a keen interest in the government’s response to the collaborative economy, appearing on television against NZTA’s staff ban against Uber last October. He is currently in his final semester of an LLB/BA at Victoria University. While at the Taxpayers’ Union, Matthew has managed the official information requests and day-to-day communications.

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PART ONE – THE POTENTIAL SAVINGS AND EFFICIENCY OF RIDE-SHARING APPS Our data shows that over the tierone Government departments, $9.3 million was spent on taxis over the period of a year, up until 1 June 2017. This is compared to just $77,102 spent on ride-sharing apps.

The Ministry of Social Development spent the most on taxis: $1.28 million in a year to 1 June 2017.

The Ministry of Foreign Affairs are the most regular users of ridesharing apps, spending $58,638 in a year to 1 June 2017. Presumably this is due to so many staff being based overseas, where these apps have been more widely embraced.

Taxi

Uber

Total

Expenditure

Expenditure

Expenditure

Ministry of Social Development *

$1,279,958

Unknown*

$1,279,958

Inland Revenue Department*

$1,117,499

Unknown*

$1,117,499

$986,067

$2,000

$988,067

Department of Corrections

$777,941

$0

$777,941

Ministry of Justice

$642,258

$193

$642,451

Ministry of Health*

$576,414

Unknown*

$576,414

Ministry of Education

$515,496

$18

$515,514

Department of Internal Affairs

$500,371

$1,628

$501,999

Ministry of Foreign Affairs

$444,806

$58,638

$503,444

New Zealand Customs Service

$396,380

$52

$396,432

Statistics NZ*

$298,561

Unknown*

$298,561

Ministry for Primary Industries

$296,553

$4,815

$301,368

Department of Conservation

$241,625

$1,233

$242,858

Land Information NZ

$227,104

$235

$227,339

$204,258

$446

$204,704

Treasury

$128,723

$581

$129,304

Te Puni Kokiri

$121,745

$0

$121,745

Ministry for the Environment

$117,686

$19

$117,706

Oranga Tamariki*

$90,853

Unknown*

$90,853

$68,578

$2,675

$71,253

Ministry of Defence

$57,500

$90

$57,590

Ministry of Transport

$53,511

$92

$53,603

Crown Law

$51,358

$0

$51,358

Ministry for Pacific Peoples

$43,093

$0

$43,093

Serious Fraud Office

$35,323

$17

$35,340

Ministry for Culture and Heritage

$29,352

$91

$29,443

Ministry for Culture and Heritage

$18,253

$4,278

$22,531

Ministry for Women

$13,489.02

$0.00

$13,489

TOTAL

$9,334,756

$77,102

$9,411,858

Organisation

Ministry of Business, Innovation and Employment

Department of the Prime Minister and Cabinet

Government Communications Security Bureau

* denotes where the agency could not separate out ride-sharing costs from general taxi expenditure

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FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

The Department of Conservation, Ministry of Justice, Crown Law, Ministry for Women and the Department of Internal Affairs, all have internal policies which ban their staff from using ride-sharing apps for work travel.

DOC did not allow ride-sharing because they claim they are not licensed transportation providers.

When we asked DOC whether their position has changed since the ride-sharing industry has become regulated, remarkably the Department said safety concerns remained because it cannot be guaranteed that all drivers will now comply with the law.

Similarly, Ministry of Justice says that ride-sharing is not recognised

by NZTA and therefore it cannot be used. They also subsequently advised us that this is not changing, despit the new laws.

Internal Affairs are implementing a policy banning ride-sharing due to ‘health and safety requirements’.

Now that ride-sharing has been regulated, we say that there is no justification for Government agencies to continue to ban staff use of ride-sharing. Those departments which still have bans in place should remove them.

How much can be saved?

Whilst ride-sharing companies do not publicise the potential savings compared to taxi fares, to estimate the potential savings for agencies to move to ride-sharing, we searched TaxiFares.co.nz, which estimates taxi fares in New Zealand. That showed that the average cost of a taxi between Wellington Airport and (as an example) the MBIE headquarters

on Stout Street, at 1pm on a Monday, would cost $37.50. A fare estimate at the same time for the same route on Uber would cost $24.37. That’s a 35% saving by using Uber over taxis.

If you apply that savings figure to the whole of the central government departments, we estimate that taxpayers could have saved $3.27 million, in just one year, if all of their public servants used ride-sharing over taxis. That figure does not include what the State Services Commission calls non-public service agencies, like the Police or Defence Force, nor does it include Crown Entities, like ACC and the DHBs - so the savings to the taxpayer would likely be much higher than that figure.

We applied that saving to all of MBIE’s expenditure on taxis between 1 June 2016 and 1 June 2017, as outlined in the table above. If all staff from these agencies had used ride-sharing in that time, they could have saved taxpayers $345,123.

Since Uber has been in Wellington since mid-2014, the failure of public servants to embrace the service could have cost taxpayers around $9.8 million.

What about efficiency?

Ride-sharing apps also provide opportunities for more efficient charge-back processes and transparency. Many of the departments which said they allowed employees to use ridesharing applications require employees to be reimbursed through a more onerous system, compared to the relative ease of issuing charge cards for taxis.

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

These processes disincentive officials from using ride-sharing apps, due to the more timeconsuming process under current departmental policies.

However, the potential administrative efficiency from using ride-sharing applications is an opportunity for departments to reduce staff reimbursement and administrative costs.

Uber for Business, for example, provides a platform for managers to oversee and monitor the trips taken by their emloyees. It can provide managers with individual trip times, locations, vehicle classes, and total Uber expenses for specific periods of time. It can generate reports and review a rollup of all trip activity from a single dashboard. Managers can also set customised rules for things like vehicle class or spend allowance, so officials could simply never go beyond their organisation’s trip policies.

This would also make staff travel more transparent and open for public scrutiny, which is a good thing.

More broadly, other benefits of ride-sharing apps include GPS tracking for every second of the journey. They also offer two-way rating systems, where, before riders get into a car with a driver, they can look at their ratings and other statistics, like how many rides the driver has taken.

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PART TWO – OVERSEAS EXAMPLES Our research suggests New Zealand is lagging behind other Governments when it comes to public servants taking advantage of the efficiency ride-sharing provides.

United States In the United States, the Obama administration last year issued a bulletin allowing federal agencies to reimburse employees who used ride-sharing on official business. The General Services Administration noted that companies like Uber can provide

“an efficient and cost effective alternative to taxis or rental cars.” Following the change in presidency, the bulletin was formally signed into law in May

by President Trump through the Modernizing Government Travel Act, which also requires the GSA to report regularly on savings the measures make.

Congressman David Schweikert even introduced legislation that would reduce the size of the federal government’s fleet, and move towards increased use of ride-sharing services.

Australia In 2015, changes to regulations made public servants in Canberra able to bill business related Uber trips to the taxpayer, before the app had even launched in the city.

ACT was the first state or territory in Australia to regulate the ride-

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sharing industry.

Officials at the time commented on the efficiency of being able to streamline expense claims for the app, as well as the added expected benefits of reducing transport costs within departments.

Federal officials in Canberra were subsequently able to use Uber on official business, also.

Ed Husic, the ALP spokesperson on digital innovation said that in small markets, “governments

can be powerful customers for start-ups. If governments are slow in modernizing their internal processes and denying start-ups the chance to be supplier, they’re denying growth opportunities for these smaller firms.”

Even the Australian Tax Office, embroiled in a dispute over Uber’s tax liability, said it was looking forward to being able to cut its $4 million (AUD) taxi bill.

Similarly, once Uber was legalised in New South Wales, some public departments began allowing their staff to use the app, beginning with the Department of Finance, Services and Information. Finance Minister Dominic Perrottet said at the time “Governments shouldn’t

be shackled to legacy systems and processes – we should move with the times and take advantage of what the collaborative economy has to offer.” The NSW Government taxi bill had stacked up to around $8 million dollars per year.

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

PART THREE - SHOULD THE NZ GOVERNMENT DITCH ITS FLEET FOR MORE USE OF RIDE-SHARING? Dominic Perrotet of NSW, and Congressman David Schweikert of the United states, have both made proposals to ditch part of the Government fleet monopoly, and embrace the use of ride-sharing more widely. In NSW, Mr Perrotet said it could result in savings to taxpayers of around $5-7 million (AUD) each year.

The New Zealand Government has recently announced that one in three of the government fleet will be electric by the year 2021. The Government says it currently has around 15,500 cars in its whole fleet.

The Government refused to disclose how much their most recent replacement of 32 Crown Cars would have cost, but at market price it is $6.4 million, and that’s just for replacing 32 vehicles.

Replacing the Government fleet with one third electric cars will come at a very large cost to taxpayers. Figures obtained under the Official Information Act show that the 28 tier-one Government departments own 4,564 vehicles.

Just three of those are electric.

This means that for just the tierone Government departments alone, 1,518 vehicles will need to be replaced with electric vehicles. Assuming that the other 10,500 or so vehicles the whole

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

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of Government owns are also not electric, the Government will have to replace and upgrade around 5,000 cars in total.

Furthermore, our information shows that tier-one Government departments incur around $11.2 million in ongoing costs to keep cars in the fleet running.

We say the Government should instead reduce the size of its fleet, and make it easier for officials to use ride-sharing for their work. It is accepted that for some public servants who are constantly on the go, or may need to transport goods, ride-sharing would not be appropriate. But for those who are just using cars as a run-about town vehicle, costs can be saved whilst still achieving the Government’s goals.

Given a very large proportion of ride-sharing vehicles are electric (due to the more efficient running costs), the Government’s goal of getting more electric vehicles on the road could be equally met with a move towards ride sharing.

Organisation

Non-electric

Electric

Running costs

Ministry of Social Development

1196

0

$3,079,390

Inland Revenue Department

143

0

$342,290

MBIE

Refused

Department of Corrections

time of writing

Ministry of Justice

192

0

$549,559

Ministry of Health

15

0

$28,668

Ministry of Education

565

0

$1,887,000

Department of Internal Affairs

161

1

$1,278,000

Ministry of Foreign Affairs

153

0

$767,213

New Zealand Customs Service

153

1

$409,484

Statistics NZ

16

0

$183,000

Ministry for Primary Industries

458

0

$1,567,204

Department of Conservation

705

1

Unknown

Land Information NZ

10

0

$67,367

DPMC

16

0

$18,190

Treasury

0

0

$0.00

Te Puni Kokiri

67

0

$410,894

Ministry for the Environment

0

0

$0.00

Oranga Tamariki

690

0

$573,403

GCSB

18

0

$60,783

Ministry of Defence

2

0

Unknown

Ministry of Transport

0

0

$0

Crown Law

0

0

$0

Ministry for Pacific Peoples

Refused

Serious Fraud Office

1

0

$3,860

0

0

$0.00

State Services Commission

0

0

$0.00

Ministry for Women

0

0

$0.00

TOTAL

4561

3

$11,226,305

Ministry for Culture and Heritage

7

Not responded by

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

CONCLUSION Now that the ride-sharing industry has been regulated, the public service have no excuse for their continued insistence on using taxis.

With potential savings of millions of dollars, and the opportunity to drastically improve their department’s efficiency, public servant officials owe it to taxpayers to review their operational culture and accompanying policies.

But it should not stop there. The Government’s goal of having more electric vehicles on the roads can be met in a much more costeffective manner, by encouraging the use of ride-sharing, instead of purchasing thousands of electric cars.

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.

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www.taxpayers.org.nz 9

FARE GAME? FLAGGING DOWN THE COST OF PUBLIC SERVANT TAXIS NOVEMBER 2017.