"Uber London loses licence to operate"

Same old, same old, one bunch of monopolists fighting another.

I use public transport in London (which is excellent and far faster than cabs), so I'm not too bothered, but on behalf of all the people who like using Uber (and all the drivers who have registered with them) I hope that Uber can bounce back from this - like they always seem to do.

The interesting bit in the original version of the article (since removed) was a reference to TfL's recent changes to licensing fees.

TfL explain here:

The Capital's private hire industry has grown dramatically, from 65,000 licensed drivers in 2013/14, to more than 116,000 today. The number of vehicles has increased from 50,000 to 88,000 over the same period. With this growth, there has been a substantial increase in the cost of ensuring private hire operators fulfil their licensing obligations and in tackling illegal activity to keep passengers safe...

The total projected cost for licensing, enforcement and compliance for the taxi and private hire trades over the next five years is £209m. The law allows the recovery of costs incurred for licensing, regulatory and enforcement activity through the licence fee process. All money generated through the process has to be spent on such activity...

Previously a 'small' operator, with no more than two vehicles, would pay £1,488 and a 'standard' operator - those with more than two vehicles, regardless of the size of its fleet - would pay £2,826 for a licence lasting five years.

The new fee structure, approved by the TfL Finance Committee, will replace the existing two 'tiers' with eight; with charges ranging from around £2,000 for a five year licence for those with 10 vehicles or fewer, to £464,000 per year for the largest operator. This would ensure the licence fee structure for private hire operators reflects the costs of compliance activity according to the scale of each operator.

Point 1. How inefficient is TfL? They've got to do about 204,000 checks a year (total drivers plus cars). £209 million ÷ by 5 years ÷ 204,000 checks = £200 per check. How long can it take to check that a car has MOT, is taxed and insured? How long can it take to do check that a driver doesn't have a criminal conviction for a violent offence (about the only thing that can possibly be relevant)? How does that cost £200 a pop?

Point 2. What sort of maniac designed the charges to be a barrier to entry like that? A small operator pays a considerably higher fee per driver/per car than a large one. It's not quite as extreme under the new system as the old system, but what's wrong with a flat charge per car or per driver?

Point 3. If TfL wants money from taxi drivers, how about imposing a charge to reflect all the privileges they get, like parking in front of stations and being able to use bus lanes?

Final point, and I've no hard evidence for this, but I've noticed that if you see a London taxi going at full tilt, it is usually empty; if you see one dawdling along, it is usually carrying passengers. Could this be because they can charge for time spent (in addition to charging for distance)? They've every incentive to behave like this i.e. provide a poorer service.

Uber - employment lawyers don't understand maths or logic

From the BBC:

Uber drivers have won the right to be classed as workers rather than self-employed.

The ruling by a London employment tribunal means drivers for the ride-hailing app will be entitled to holiday pay, paid rest breaks and the national minimum wage. The GMB union described the decision as a "monumental victory" for some 40,000 drivers in England and Wales…

Fair enoughski, but this is just people fighting over the same source of income. Taxi drivers, collectively have a monopoly - each licence is a little monopoly. the tell tale sign is that an increase in demand for taxi rides does not increase the supply of taxi licences (which are at the whim of a local council or similar), it merely pushes up the value of the licences.

From the point of view of the consumer, Uber busted the taxi drivers' monopoly, bringing down prices and increasing supply, but from the point of view of drivers, it created a new one of its own. The trick with these platforms is to persuade passengers/buyers that they are the biggest and have most drivers on call, while simultaneously persuading drivers/suppliers that they are the biggest and have most potential customers.

Things being what they are, it is far easier and more efficient if everybody uses the same platform.*

Which brings me to this…

The ruling accused Uber of "resorting in its documentation to fictions, twisted language and even brand new terminology", adding: "The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common 'platform' is to our mind faintly ridiculous."

No, that is exactly how it is. Presumably, if you register as a driver with Uber that does not stop you from registering as a driver with other platforms at the same time. Question is then - whose employee are they now? Do they have two employers? How is the holiday pay, rest pay and national minimum wage while on call but not driving supposed to be split between the two?

Here comes the maths fail:

Alex Bearman, partner at Russell-Cooke solicitors, said Uber could look to meet any additional costs by increasing the percentage of each fare that it kept as commission: "It seems likely that this decision will be appealed and we may not see a final determination for some time to come."

Again, no. It appears that Uber takes about 25% of the total fare paid by the customer. If Uber takes a higher percentage, then that leaves less for the driver, not more. So either:
- Uber takes a lower percentage (which won't kill it, their income is pure profit/rent once its minimal overheads are paid) or
- prices overall go up by a third to get driver's average hourly earnings up from £5.03 to the National Minimum Wage. And you can't just put prices up, the result will be less demand and fewer Uber drivers. So those at the margin will be unemployed again and those who keep their jobs will earn more for less work. Which is classic rent seeking, it is just when trade unions do it, they dress it up as A Good Thing.
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Then there are taxes on output and employment to consider. Let's assume our driver is genuinely self-employed and is below VAT registration threshold. He makes £10/hour gross, Uber takes 25% leaving our driver £7.50/hour, on which he pays 29% income tax/NIC = £5.33 after tax. The self-employed will also get a full tax deduction for motor vehicle costs.

If the drivers are all now employees of Uber, the full fare will be liable to VAT, so out of £10, £1.67 goes in VAT. This leaves £8.33. Even if Uber generously slashes its fee to 5% (42p after VAT) to cover its minimal overheads, this leaves £7.91 to pay gross wages. 96p goes in Employer's NIC, leaving £6.95 employment income taxable at 32%, leaving our driver with £4.73 per hour. The tax deduction which employees can claim for business use of private car is also much more restrictive than for the self-employed and is more difficult to claim.

So an epic fail all round**!

* Which is why the answer is for the government to simply set up its own low-cost ride sharing app, it can provide it for free to all and sundry and will make its money back ten times over from all the extra income tax/NIC it can collect (even at self-employed 29% rate) now that it knows who is doing what. That still looks like a monopoly in the old-fashioned sense of there being a single provider, but in practice it isn't a monopoly at all.

** Unless you are totally cynical and think that the Employment Tribunal is an arm of government and decided the case this way because it vastly increases the tax take from Uber drivers...

Outbreak of common sense...

… in Berlin.

To sum up that article from Spiegel, the Berlin "Verwaltungsgericht", which translates as "administrative court" has told the Berlin "Landesamt" which is the lowest instance, that it cannot simply ban the Uber taxi app on such spurious grounds and the original ban has been lifted pending a full decision of the court (quite which one is not clear).

So the lawyers will be earning themselves silly putting in increasingly meaningless counter-applications and counter-counter-applications.

Exactly the same thing happened when the city of Hamburg tried to ban Uber back in July, that was promptly suspended by the Hamburg administrative court.