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Motion – review of Commercial Passenger Vehicle reforms

Feb 20, 2019 | Parliament

Mr  BARTON  (Eastern Metropolitan) (15:48:24): I have some amendments to this motion. I would like to have those amendments circulated now if I may.

I move:

1. Omit all the words in paragraph (3)(a) and insert in their place ‘the Andrews Labor government began issuing licences for the nominal fee of $52.90 and at 31 January 2019 licences issued increased to 11 807 taxi licences and 50 152 hire car licences;’.

2. In paragraph (3)(b) omit the words ‘completely inadequate’.

3. In paragraph (3)(b) after the words ‘maximum of $250 000’ insert the words ‘and a $1 levy per trip was raised, to cover transition cost’.

4. Omit all the words in paragraph (3)(c) and insert in their place ‘the Fairness Fund was established to support the many cases of severe hardship;’.

5. Omit all the words in paragraph (4) and insert in their place ‘acknowledges that the High Court has found taxi licences to be property; and’.

6. Omit all the words in paragraph (5) and insert in their place ‘requires that the Economy and Infrastructure Committee meet within 14 days of its establishment to review the government’s CPV (commercial passenger vehicle) reforms, and subsequently report within six months after the committee first meets regarding the operation of the CPV reforms and investigate further reforms to ensure Victorians benefit from the best functioning CPV industry possible.’.

I am pleased to present the amendments to this motion for a number of reasons, but particularly because it is the main reason I was elected into this place and I think it is one of the most important jobs I need to do here. Many of you are unaware of the history behind the motion, so let me give you just a brief overview of what has happened over the last five years. The massive changes to the industry, make no mistake, were to accommodate Uber.

Let me just tell you what has happened with Uber around the world. There is a furphy going around in this country that Uber is taking over everything. That is simply untrue. It is not a knight in shining armour that is taking over the world and providing quality, good value service to its customers.

In the 10 years they have been operating they have not been able to turn a profit. A report from Goldman Sachs to its investors in relation to Uber in the US said that they do not believe Uber will turn a profit till 2030, and then only if driverless cars become available. How incredibly optimistic.

Uber has been forced to sell its businesses in Russia, where it retains a small shareholding; China; Southeast Asia; Singapore; and Hong Kong. They have pulled out.

In Europe their UberX model—what they called ‘UberPop’—is out of Germany, Italy, Greece, France, Spain and Portugal. They have gone back into some of those jurisdictions but are complying with the local laws. The European Union has ruled that Uber is a taxi service and should be treated as such. In the past few weeks tribunals in Paris have ruled that Uber drivers are actually employees.

In London Uber has lost a number of appeals against having drivers classified as employees. London is also a jurisdiction where Uber had its licence cancelled for appalling behaviour and records of assaults against customers. Uber does not want employees, because the ruling that they are employees makes the Uber model unviable.

In New York City they have just set a minimum wage for Uber and Lyft drivers at $17 an hour. Also, New York City has applied caps on the number of vehicles on the road because the oversupply of Ubers is pulling people off the public transport systems and causing major congestion issues.

We are already seeing serious congestion issues in Melbourne’s CBD, with vehicles hovering around like seagulls looking for a cold chip at the beach.

Prior to the emergence of the illegal rideshare service Uber, taxi and hire car operators, drivers and licence‑holders were operating lawfully under the previous regulatory environment. There were no restrictions on the numbers of commercial passenger vehicles entering the market.

When Uber launched in Australia in 2014, there were legitimate avenues for Uber and their drivers to lawfully purchase commercial passenger vehicle (CPV) licences and embark on a business venture, but they chose not to. They were supported and encouraged to drive without CPV licences by Uber. In fact Uber was paying for infringement notices for those caught driving illegally.

They unlawfully competed in the market from 2014 until August 2017, when changes to the legislation paved the way for the Uber workforce to enter the industry with minimal licensing costs. In this time Uber used a predatory pricing model to gain market share to penetrate the market.

The taxi industry was hamstrung, bound by regulated, metered fares determined by the Essential Services Commission. Taxis could not legally compete on price to foil any advance in competition. As a driver myself, my business was severely harmed and my income dropped 30 to 40 per cent.

Prior to August 2017 both taxis and hire cars fell under highly regulated commercial passenger vehicle licensing conditions. Hire car licences were non-assignable and could be purchased directly from the regulator—formerly known as the TSC, the Taxi Services Commission, now known as Commercial Passenger Vehicles Victoria—for a one-off fee of $40 000. However, the cost of legitimate entry into this industry did not suit Uber or their underlying business model, which relies on a constant stream of transitory workers who would otherwise be reluctant to invest in capital.

How many Uber drivers invested $40 000? I guess none.

Uber was certainly not offering to pay the fee.

Taxi licences, on the other hand, fell into two general categories: perpetual licences and non-transferrable annual licences. There were approximately 3500 perpetual licences in circulation in Victoria, with the remaining licences actually owned by the Victorian government, which they leased out at up to $23 000 per annum. In fact the Victorian government was the largest holder of taxi licences, with around 2000 licences.

Perpetual licences could be transferred on the open market and were able to be privately leased at the going rate of about $2000 per calendar month, pegged by the cost of annual government permits. Leasing had the advantage that the cost could be paid monthly rather than upfront, which made it less of a burden to enter the market.

Approximately 70 per cent of perpetual licences were leased, providing many with a revenue stream to service loans and cover living expenses and providing an income in retirement. Over time these perpetual taxi licences acquired value—market forces; scarcity means a rise in value.

At the initiation of the Fels inquiry in 2011, the value of perpetual taxi licences had increased to around $500 000, with an annual return of around $30 000 if they were leased. After implementation of the Fels reforms the government introduced an unlimited supply of annual permits at $23 000 per annum, and the value of licences fell to around $300 000. These licences had given exclusive business rights in the commercial passenger vehicle industry, yet they became irrelevant because the laws protecting those rights were being ignored.

In August 2017, when a bill passed in this place to deregulate the industry, all existing taxi and hire car licences were revoked and replaced with a single annual permit priced at $53.80. In compensation the government offered an arbitrary transition package of $100 000 for the first taxi licence and $50 000 for a maximum of three more held under a single entity, but nothing if you had worked hard all your life and you owned more.

Similarly, hire car licences were paid at $25 000 for the first and $12 500 for up to three more. Those still facing financial hardship were offered a means‑tested fairness fund.

Thousands, including me, were so disheartened by the whole process that we did not even bother to apply.

Thousands, including me, were so disheartened by the whole process that we did not even bother to apply. There have been many precedents of government licence buyouts or structural adjustment packages where the government has bought back each and every licence at a set price determined independently.

The fishing industry is but one example.

There has been some debate about whether taxi licences are actually property. There is no debate. In Federal Commissioner of Taxation v. Murry (1998) 193 CLR 605, the majority of the High Court said: “The licence is property … … A taxi licence is a valuable item of property because it has economic potential. It allows its holder to conduct a profitable business and it may be sold or leased for reward to a third party.”

A taxi licence was considered income-bearing property and could be held as collateral against borrowings within the banking sector. Many were included in superannuation and investment funds, so by revoking those licences without due compensation the government has left many people in significant financial hardship. I am among many who are paying off loans for a licence that we no longer own and from income no longer derived from the licence itself.

Many who established themselves as self-funded retirees have found themselves seeking a pension and selling their homes. The devastation and financial ramifications are far-reaching.

I just want to talk about the regulator. The taxi and hire car industry has completely lost confidence in the regulator. We made the mistake of believing that because we were doing everything correctly and we were meeting our legal obligations that we would be protected from others breaking the law. That simply did not happen.

This has brought about two serious court cases. There has been a legal action in the Supreme Court over the last 12 months between the regulator and a taxi group, which is ongoing. I have to declare my interest in the second one because I brought the legal action to Maurice Blackburn, along with my colleague André Baruch.

That class action is going to be the largest class action this country has ever seen. At this stage we have 4500 registrants, and that will probably double whatever else we have seen previously.

The point that we would like to make about what has happened here in Victoria is that no other state or territory in Australia has compulsorily revoked licences—none. We cannot find anywhere else on the planet where this action has happened either. Over $1 billion in property has been seized.

Stripping private property from people to accommodate a multinational corporation reluctant to require their workforce to invest in business capital was unheard of until now.

Let us not beat around the bush: these changes were to accommodate Uber, and it was not fair.

Every state and territory in Australia is struggling with how to accommodate new technology and compensate their existing industry. We acknowledge the Andrews government has paid in excess of $400 million to the taxi and hire car industry through transition payments and the Fairness Fund, but there is certainly a view in the industry that while we thank them for their deposit, we are looking for the balance of the payment for the property which has been seized. We now seek payment of the balance.

How do we think this is acceptable when this would be unacceptable for the vast majority of Victorians?

Not only is this about licence values; it is also about the ability of drivers to have an income. I am speaking about all drivers—taxi drivers and our new commercial passenger vehicle (CPV) licence holders are all struggling. Since the taxi reforms, taxi drivers, generally speaking, earn below the living wage—as low as $10 an hour. They earn no sick pay or superannuation, they have no holiday pay and there are questions about where they work and whether they have workers compensation. There is no award to protect them. In 2019 we have to ask ourselves as a society: how do we think this is acceptable when this would be unacceptable for the vast majority of Victorians?

I think this is a classic case of unintended consequences. In an effort to be seen as a progressive state Victoria jumped on the shiny new technology without giving enough due consideration to the effects it would have on the existing established industry. It is no longer possible to build a career as a commercial passenger vehicle operator because the industry is flooded with a transient and disgruntled workforce.

There are now 11 876 cabs on our streets. There are over 50 192 cars, including the original hire car services and newcomers Uber, DiDi, Ola and GoCatch. We also estimate that there are over 92 000 drivers out there scratching for work. CPV drivers are truly the bottom of the food chain.

For consumers, on the surface this seems like a fantastic situation. Oversupply in a free market leads to a huge drop in pricing. It is now cheap to split a ride to the city between a few friends, but cheap rides come at a cost, and that is usually paid by those working in it. We now have a commercial passenger vehicle industry that is essentially self-regulated. While the previous industry was somewhat over-prescribed, there is a long history of introducing regulations to ensure safety for both passengers and drivers.

Touting has been made legal. Before deregulation it was illegal for drivers to approach people and offer them rides. Now we find drivers at airports, at major events like the grand prix or the tennis and at the MCG, and up and down Collins Street offering rides with the often unspoken understanding that they are legitimate drivers. This is a serious safety issue. How do you know if you are actually getting into a legitimate vehicle?

We have also heard reports of sinister individuals masquerading as rideshare drivers and picking up passengers who have not paid attention to the car they stepped into. By deregulating the industry the government has opened Pandora’s box.

This is just the tip of the iceberg of issues we see in an industry that is now economically, socially and environmentally unsustainable.

I accept that the industry has evolved. We are all in this together now—taxis and hire cars—and despite the bad blood over the past five years we must now work together to fix the problems we now face. The former taxi and hire car industry deserves proper compensation. All drivers deserve to work in an industry where they can earn a fair wage, with fair benefits, for their effort, and the public deserves a safe and reliable commercial passenger vehicle network.

I commend this motion to the house.



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