Australian state government bails out taxi license owners after Uber destroys their value

By John McGregor, translator and researcher on political violence

Uber’s various predatory tactics, as well as its underlying economic problems, have been well documented by Hubert Horan. In the Australian state of New South Wales, the government has responded to a disruption the tech industry has loved by paying taxi drivers compensation for the lost value in their taxi licenses.

When Uber first started operating in Australia, it did so illegally. Shared transport drivers were breaking the law and risking heavy fines for a few years in NSW before the government introduced new legislation to cover all taxis, car rentals and rideshares in 2016. As with much of the world, documentation of this scheme was revealed. For breaking the law I demand to break the market in Uber files.

By making its way into the Australian market, Uber has collapsed prices for local taxi licenses. In October 2012, the year Uber entered Australia for the first time, the value of a NSW taxi license was about A$400,000. Currently, the license is worth somewhere around A$100,000.

With nearly 6,700 taxi licenses in NSW, this represents a combined loss of around A$2 billion in value. This is of course a huge loss for taxi license holders in the state of 4-5,000, with Uber shareholders reaping the benefits of this loss.

When the New South Wales government decided to surrender to Uber and legalize its operations in the state, the drop in the value of the licenses was highly predictable. In order to mitigate anger among taxi drivers, NSW promised at the time to introduce a compensation scheme.

Under the euphemism ‘industry adjustment package’, the government has promised to distribute A$250 million to taxi license holders in compensation to cushion the blow to the value of their licenses (which they will keep).

A A$1 passenger service tax was introduced in February 2018 on all ‘point-to-point’ transfers (taxis, car rentals, and ride-sharing). Prior to the recent changes, Transport for NSW reported:

The tax will be imposed for no longer than five years, or until it raises the full amount required to fund the Industry Adjustment Assistance Package – whichever comes first.

As noted, the figure to be raised was A$250 million, which was actually raised as of June 2022 (despite the effects of Covid-19). Despite this, the PSL was initially extended to 2027 and on Wednesday was extended until 2029.

Along with this extension, the amount of compensation has swelled. New South Wales Liberal Treasurer Matt Keane has announced that A$145 million has already been paid and another A$500 million will be disbursed.

While the original decision to allow Uber to operate was made, Liberal Prime Minister Mike Bird tried to explain why small business in particular needed a bailout:

The thing that made the taxi stand/ride-sharing difficult to manage is that, unlike other companies facing disruption (eg video stores facing disruption from Netflix), the government has sold and regulated taxi license plates and has a responsibility to provide some protection for mothers and fathers And the investors who own these paintings.

Despite claiming that the government has a responsibility to provide protection to the industry it regulates, Bird fails to conclude that the problem lies in his government’s failure to enforce laws against Uber’s illegal operations (but instead to legitimize its predatory operations).

Under the current Liberal Perrottet government, expanded compensation packages will now save existing Sydney taxi license holders A$100,000 per license, up to a maximum of six; Outside of Sydney, the amount paid per license is up to A$130,000, with no cap on the number of licenses.

Simultaneously with this increase in the Industry Adjustment Package, the government has announced plans to completely liberalize the point-to-point industry. The Treasurer claimed that this liberalization “will create a level playing field across the sector, better freeing the taxi industry from competition, while driving improved and more innovative customer services.” This will, of course, radically further erode the value of NSW taxi licenses.

To justify why payments are high and not specified in regional areas, the government press release said:

Regional Transportation and Roads Minister Sam Faraway said the taxi industry is of vital importance in regional areas, where ride-sharing services are not as available as they are in the city.

This financial assistance package will help the regional taxi industry move forward and build on its vital role in providing transportation services across the regional state of New South Wales.

It is difficult to see how these two goals can be reconciled. Rideshare services are already allowed to operate in regional areas, but, Farraway notes, they haven’t expanded into that market. This is largely because their model does not perform well in regional areas. Liberalization of taxi licenses could increase taxi drivers to regional areas but it is clear that these new drivers will not receive the financial assistance intended to “help the regional taxi industry move forward”. Removing the gap between regional taxi licenses and Sydney is likely to increase the number of taxis in cities at the expense of regions where urban licenses already make up nearly 80% of taxis in NSW.

Instead, the incremental industry adjustment package is just the next stage in the Liberal government’s plan to funnel money toward its small business voter base while enacting plans to deregulate the corporate payroll. The end result of this dual loyalty is that the Australian consumer is forced to pay in order for the Liberal Party to keep the peace. Whichever form of point-to-point travel they choose, NSW consumers will be forced to bail out a small subset of drivers, and taxi licenses holders, whose investments have failed in the face of aggressive US capital and the takeover of the NSW government by corporate concerns. .

The NSW government has already faced several strikes by rail workers in recent weeks, and is still facing more, including a plan to shut down ticket machines that is expected to cost A$1.5-2 million a day if it continues. At the heart of these controversies is a plan by the New South Wales government to operate a new batch of vehicles as driver-only trains, that is, without a guard on board. Despite this, the NSW government has chosen not to direct the funds towards public transport infrastructure or fares, and instead towards the latest generation of regulated NSW taxi drivers. The government has not provided any explanation as to why 45,000 taxi license holders should be protected, but no more than 350 “mothers and fathers” who serve as bouncers on intercity trains.

Faced with Uber’s typical strategy of entering the illegal market, the New South Wales government, like many others, ignored compliance with the law and eventually expired, with disastrous effects on the local taxi industry. Unlike other governments, once Uber devoured A$2 billion of value in the local taxi industry, driving its share price up at the expense of NSW taxi owners, the NSW government decided that NSW consumers would pay that price. , regardless of the form of reference to the transfer point of their choice. Having paid to bail out taxi owners, NSW consumers will remain stuck in a wholly unregulated point of market steering to the mercy of the same forces that caused the collapse of the former regulated taxi industry.

Related Posts

Leave a Reply

Your email address will not be published.