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Overview
Background
We are seeking views on a number of proposals including:
- Changes to taxi fares and tariffs in London
- Changes to the Cost Index
- Updating the card payment requirements for taxi drivers
- Fixed fare, capped fare and shared taxi arrangements
Transport for London (TfL) licenses and regulates taxi (black cab) and private hire services in London. We also regulate taxi fares and set the maximum fares that can be charged. These fares are determined by tariffs that are normally reviewed each year and updated to reflect changes in a Cost Index.
Taxi fares and tariffs
Taxi fares are based upon the time of day, distance travelled and the time taken for a taxi journey. The tariffs set the rates passengers pay to travel a certain distance or for a certain length of time.
There are four different taxi tariff rates:
- Tariff 1: Monday to Friday, 05:00-20:00
- Tariff 2: Monday to Friday, 20:00-22:00 and Saturday and Sunday, 05:00-22:00
- Tariff 3: Every night 22:00-05:00 and public holidays
- Tariff for journeys over six miles (sometimes referred to as Tariff 4)
Cost Index
The Cost Index tracks changes to the costs for a number of elements related to being a taxi driver in London (including vehicle costs, parts, tyres, servicing, fuel, insurance and social costs) plus changes to average national earnings. These figures are updated as part of the review of taxi fares and tariffs to give a total figure for the change in costs and average national earnings. For the 2017 review this total figure was 2.8 per cent. For this review the Cost Index figure is 3.6 per cent.
However, it is important to note that the Cost Index and the total figure produced when this is updated are independent of the taxi fares and tariffs. There is no statutory requirement for the Cost Index figure to be applied equally to all tariff rates.
Any changes to the tariffs can be based on the Cost Index or on other factors. Last year’s review is an example of a different approach being taken. The total Cost Index figure for the costs of operating a taxi in London and national average earnings was 2.8 per cent. However, instead of increasing all of the tariff rates by this figure only Tariffs 1 and 2 were increased.
Following a public consultation the TfL Board approved increasing Tariffs 1 and 2 by 3.7 per cent and 3.9 per cent respectively, both of which were higher than the Cost Index figure (2.8 per cent). However, this was offset by Tariff 3 and the tariff rate for journeys over six miles being frozen to address concerns raised by passengers and taxi drivers about late night and longer taxi journeys being too expensive
2017 changes
In summary, the changes introduced in 2017 were:
- Increased average fares during Tariff 1 by 3.7 per cent
- Increased average fares during Tariff 2 by 3.9 per cent
- Extended the fuel charge arrangements in the event of a significant increase or decrease in the price of diesel
- Updated the taximeter specification
In 2017 we also:
- Froze Tariff 3
- Froze the tariff rate for journeys over six miles (Tariff 4)
- Froze the minimum fare
All of the tariff changes came into effect on Saturday 3 June 2017 following approval by the TfL Board on 29 March 2017.
Why We Are Consulting
Potential changes for 2018/19
We are now seeking views on the following:
- Whether the minimum fare of £2.60 should be increased and if so by how much
- Whether Tariff 1 and Tariff 2 should be increased
- Whether Tariff 3 should be frozen
- Whether the tariff rate for journeys over six miles (Tariff 4) should be changed
- Removing the social costs element from the Cost Index
- Adding transaction costs for card payment devices to the Cost Index – this would be in addition to the 20 pence minimum fare increase introduced in April 2016
- Continuing the present arrangement that allows taxi drivers to add an extra charge of 40 pence to the fare if fuel prices increase significantly and reduce fares by 40 pence if fuel prices fall significantly
- Whether there should be an increase to the additional charge for taxi journeys that start from a taxi rank at Heathrow Airport and, if so, by how much
- Reviewing options for fixed or capped fares to or from Heathrow Airport
- Increasing by 50 pence the fares for the fixed fare, shared taxi schemes that operate from Euston Station
- Adding fares for six passengers sharing a taxi to the shared taxi conversion table
- Updating the card payment device requirements for taxis so that all drivers accept American Express as well as Visa and MasterCard
Taxi tariff rates and minimum fare
When taxi fares and tariffs have been previously reviewed, the outcome has often been to apply any change shown by the Cost Index to all tariff rates. This has generally meant an annual increase to all tariff rates and taxi fares.
Recent exceptions to this are in 2015 when the Cost Index showed fares should be decreased by 0.1 per cent and this change was deferred to the following year. Also, last year, when Tariffs 1 and 2 were increased by more than the Cost Index figure but offset by a freeze to Tariff 3 and the tariff rate for journeys over six miles (Tariff 4).
The general pattern of year on year increases has resulted in feedback that taxi fares are too high, especially late at night (Tariff 3) and for journeys over six miles (Tariff 4). It has been suggested that high fares late at night have affected the public’s perception of taxi fares at all times, making them less likely to use taxis at any time of the day as they believe the fare will be excessively high.
If we applied the Cost Index figure to all tariff rates, this would mean an increase of 3.6 per cent across all of the tariffs. While we appreciate the costs of operating a taxi in London have increased, we also need to consider the passenger impact of the increase, in addition to the perception that taxi fares are expensive and becoming unaffordable
Discussions have been held with the taxi driver associations, who wish to ensure taxi drivers are adequately recompensed. However, any proposals must also focus on providing passengers with an assurance that taxi fares are not too expensive.
With this in mind, we are inviting comments on the following:
- A potential increase to the minimum fare (flagfall)
- A potential increase to Tariffs 1 and 2. It has been suggested that an increase could be set at 0.6 per cent.
- A potential freeze in Tariff 3 fares (for the second year running)
- A potential freeze to the tariff rate for journeys over six miles (for the second year running) or whether any changes to this tariff rate should be made
We have been asked by the taxi driver associations to increase Tariffs 1 and 2, but to make no changes to the other tariff rates. The taxi driver associations have also expressed a view that the minimum fare (flagfall) could be increased by 40 pence.
The minimum taxi fare in London is currently £2.60, which is lower than in some other parts of the UK. Increasing the minimum fare by 40 pence, as requested by the taxi driver associations, would make it £3.00 at all times.
A small increase to Tariffs 1 and 2, alongside an uplift in the minimum fare, and a freeze in the other tariff rates, could assist the Trade to address the increasing costs of operating a taxi in London.
Tariff rate for longer journeys
The tariff rate for longer journeys (sometimes referred to as Tariff 4) is higher than Tariffs 1 and 2 but lower than Tariff 3. The historical reason for there being a different tariff rate for longer journeys is because drivers completing these journeys may be less likely to be hailed on the return journey to the area where they normally work. This may be less of an issue now as some drivers will be offered fares from a taxi company during their return journey.
It has been suggested that taxi fares for longer journeys are too high and these are only a small part of the overall taxi market which is not growing or attracting new passengers.
We have previously consulted on changing the distance when this tariff rate starts and are now interested in your views on the tariff rate for longer journeys and if any changes to this should be made. Potential changes could include:
- Changing the distance when this tariff comes into effect from six miles to a longer distance – if you feel this should be increased, we are interested in your views on what the new distance could be. For example, eight, 10 or 12 miles.
- Reducing the rate charged
- Reducing the times when this tariff rate applies
- Removing this separate tariff rate
Social costs element of the Cost Index
The Cost Index contains a number of different elements, one of which is social costs. The social costs element relates to the unsociable hours worked by some taxi drivers. The current Cost Index shows that the social cost element would contribute 0.1 per cent to the total figure.
Not all taxi drivers work unsociable hours and the different tariff rates are designed so that drivers who do work unsociable hours can potentially earn more as the tariff rate is higher – Tariff 3 applies to taxi journeys undertaken between 22:00 and 05:00 every night and this is the highest tariff rate.
Last year, we proposed removing the social costs element from the Cost Index. This change was not taken forward. However, this is still an option and we are interested in your views on this.
Adding costs for card payment transaction charges to the Cost Index
Since October 2016, all taxi drivers have been required to accept card payments and all taxis must now be fitted with a fully working TfL-approved card payment device in the correct position in the passenger compartment. Enabling passengers to pay by card in all taxis has generally been well received by taxi drivers and passengers.
There are transaction charges when taxi drivers accept card payments and these can vary depending upon the type of card payment device used and the agreement the driver has with the company who provides the device. The transaction charges are typically between two and four per cent but can also include additional charges.
We are now reviewing whether transaction charges should be included in the Cost Index. Including these in the Cost Index would mean that if transaction charges increase, then taxi fares would also increase and passengers would pay more.
In April 2016, we increased the minimum fare by 20 pence for all taxi journeys. This increase was intended to help drivers cover the costs of accepting card payments. If transaction costs were to be included in the Cost Index, this would mean that there were two increases to the fares for all passengers (regardless of whether they pay by card) – the minimum fare increase plus any increase as a result of changes to the Cost Index.
We’re interested in your views on transaction charges when paying by card for a taxi and if these charges should be included in the Cost Index.
Diesel price changes
Diesel prices can vary rapidly and unpredictably, and a high increase during the year would result in additional costs for drivers which they would not be able to recover from passengers. Since July 2008, special provisions have been in place to allow an extra charge of 40 pence to be added to each taxi fare if the cost of diesel rises significantly.
The extra charge would be authorised if diesel prices reach a threshold level. The threshold represents the price at which the overall increase in taxi costs would be in proportion to the increase in the average fare, represented by the diesel charge.
We propose to continue this arrangement, setting an appropriate threshold for diesel prices which, if met, would trigger the approval of an extra charge of 40 pence being added to taxi fares. The threshold will depend on the level of the general fares increase and the diesel price used in the calculation of the fare increase.
A provision has also been introduced where fares would be reduced by 40 pence if diesel prices fell significantly.
We are interested in your views on extending the arrangements in the event of a significant increase or decrease in the price of diesel.
Heathrow Airport extra charge
Taxi drivers picking up passengers from the taxi ranks at Heathrow Airport must pay a fee to access the taxi ranks. To compensate drivers for this they can add an extra charge on to the fare for journeys which start from Heathrow Airport taxi ranks.
The fee drivers must pay is currently £3.50 and the extra charge they can add on to the fare is £2.80. The taxi driver associations have requested that this is increased from £2.80 to £3.20 and we are interested in your views on this.
Fixed fare and capped fare schemes
We are continuing to review options for fixed fare and capped fare schemes to and from Heathrow Airport. In the past there have been mixed views on these but it is felt that fixed or capped fares could benefit passengers travelling to or from the airport. Fixed fares are already available at some airports including in New York, Rome and Paris.
We’re interested in your views on fixed and capped fares between Heathrow Airport and central London, if you feel that a fixed fare or capped fare scheme should be trialled and, if you do, what the fares should be and which areas should be covered.
Euston Station fixed fares
A number of fixed fare, shared taxi schemes operate from Euston Station. The schemes match up passengers travelling to similar destinations and the fare each passenger pays is below the metered fare but the total fare the driver receives is above the metered fare, meaning that the schemes should be attractive to both passengers and drivers. The fares were last reviewed and increased in April 2012.
Following a request from the taxi driver associations, there is a potential proposal to increase each of the fixed fares by 50 pence, and we are interested in your views on this.
Shared taxi conversion table
The shared taxi conversion table can be used to calculate taxi fares when passengers share a taxi. The table shows the fare each passenger pays and these are based on the fare on the taximeter and the number of passengers sharing the taxi. The fare each passenger pays is lower than the metered fare but the total fare the driver receives is greater than the metered fare, meaning that the arrangement should be attractive to both passengers and drivers. The shared taxi conversion table can be used anywhere in London and at any time, although it is not believed to be widely used.
At present the table only covers five passengers sharing however, many taxis can carry up to six passengers.
We are proposing to add fares for six passengers sharing and welcome your views on the proposed fares.
Updating the card payment device requirements to include American Express
All taxis must have a TfL-approved card payment device fitted in the passenger compartment and the device must accept as a minimum Visa and MasterCard.
All of the approved devices already accept American Express and we are now proposing to update the list of cards that card payment devices and taxi drivers must accept so as this includes American Express as well as Visa and MasterCard.
We are interested in your views on this.
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