Part D – Understanding and improving industry performance (PDF ...

While some respondents call for the assignment of
licences to be prohibited outright, others see merit in
capping future assignment fees. In its submission, the
ESC argues that an assignment fee cap “would limit the
economic profits being transferred to licence holders”
and “be a means to positively affect the distribution
of income between industry participants”. 54 The VTA
notes that “placing a cap on assignment fees will control
excessive and beyond the usual demands by licence
holders”, 55 while a joint submission from Ambassador
Taxis, TaxiLink and Cabways argues that capping
assignment fees “will automatically bring a correction to
the prices being paid for assignable licences”. 56
Some licence holders point out that they have made
business and investment decisions based on an
expectation that licences will remain tradeable and
assignable, and will continue to have a ‘reasonable
scarcity value’ through government regulation of the
number of licences issued.
10.3.2. The effect of assignments and
transfers on market performance
In discussing licence assignment and transfer, it is helpful
to understand some of the history to the introduction and
development of these policies.
Licence transfers have been allowed since some time
in the early 1970s. The widespread use of assignments
began after the Foletta inquiry, in the late 1980s. Prior to
this time, assignments were only allowed under relatively
strict criteria. By 1989, 239 licence assignments had
been approved. By 2001 this had reached 1,287 for the
metropolitan fleet. 57 In 2011, this number reached 2,155
or nearly 70 per cent of assignable licences. 58
These effects seem to be reflected in licence value
data. Table 10.3 summarises licence price changes in
metropolitan Melbourne from 1975 to 2011 in both nominal
and real (inflation adjusted) terms. Growth in real licence
values appeared to accelerate after the Foletta review was
completed and assignments became more widespread.
Table 10.3 Licence value changes, 1975 to 2011
Period
Annual growth
in licence value
(nominal)
1975 – 1985 12.7% 2.9%
1985 – 1995 12.2% 6.6%
1986 – 2011 9.1% 5.6%
Sources: Foletta (1986), KPMG (1999), VTD data
Annual growth
in licence value
(real)
Many have pointed to the introduction of assignments
as the start of many of the industry’s observed problems
with ‘investors’, summed up by one submission:
What is the purpose of a taxi licence? It used to be
to operate a taxi-cab and provide a personalised
door to door service for the travelling public. Then
licence assignment was introduced, during a period
of government insanity, and is now the most common
operating structure…The ability to assign your licence
goes back about twenty years when after much
agitation and lobbying from long term licence owners,
the government of the day allowed owners to lease or
assign their licence to another party. Allow them to
use their licence as a form of superannuation if you
like. With one fell swoop of the legislator’s pen they
not only added another [item] to an already long list
of expenses, but put in place the largest single
expense item… 59
However, the Foletta inquiry noted that the industry
already had a number of existing problems in 1986. In
particular, poor driver remuneration, high licence values
and an insufficient number of taxis to meet peak demand
were all evident at the time of the inquiry. The assignment
of licences from the late 1980s could not have caused
any of these problems, although, arguably, it could have
accentuated them.
54 ESC Submission, Op. Cit., p.VII and p.34
55 VTA, Submission to the Taxi Industry Inquiry, SS60C, p.1
56 Ambassador Taxis, TaxiLink and Cabways, Op. Cit., p.30
57 McQuillen, Rob (2001), Op. Cit., p.12
58 Inquiry calculation based on VTD data. Note that not all metropolitan
licences are assignable
59 Holger Hansen, Op. Cit., p.1
200