I gave a talk to (in the main) taxi licence holders at the Dallas Brookes Hall this afternoon. It drew on my recent blog post – indeed I was introduced as the author of then post. It was a tricky situation for me as I do support reform of the taxi industry but I am sympathetic to the plight of licence holders. In the end I think that my position is the right one and a stance that is supported by many in the industry. My guess is that the Taxi Industry Inquiry will not succeed directly in slashing licence values but that some of the reforms on hire cars, pre-booked taxis and altering assignment rates and the operating costs attributable to owners will expropriate taxi licence wealth by stealth. This would be an efficiency reform financed by unfairness.
To those who are gung-ho about such reforms I would simply ask how would you feel if the government confiscated half of your superannuation savings? It is exactly analogous because many of the 1000 people at this meeting are holding licences as assets for their retirement. I met a couple of them and the fear is real.
An interesting feature of current licence values is their scale – around $470,000. This yields an annual income of around $30,000 from which a whole range of costs must be met. Given that inquiries over the years have consistently mooted the possibility of deregulation a reasonable question is “where is the risk premium here?” – returns just seem far too low given the prospect of capital losses from expropriation. The only plausible answer is that licence purchasers assume there is zero probability of uncompensated reforms getting up. Perhaps some hold out hopes for a substantial payout. (912)