On Friday 22 September, many Londoners who regularly use Uber received an email. âAs you may have heard,â it began, âthe Mayor and Transport for London have announced that they will not be renewing Uberâs licence to operate in our city when it expires on 30 September.â
âWe are sure Londoners will be as astounded as we are by this decision,â the email continued, with a sense of disbelief. It then pointed readers towards an online petition against this attempt to âban the app from the capital.â
Oddly, the email was sent by a company that TfL have taken no direct action against, and referred to an app that TfL have made no effort (and have no power) to ban.
When two become one
If that last statement sounds confusing, then this is understandable. It is because the consumer experience that is âUberâ is not actually the same as the companies that deliver it.
And âcompaniesâ is, ultimately, correct. Although most users of the system donât realise it, over the course of requesting, completing and paying for their journey an Uber user in London actually interacts with two different companies – one Dutch, one British.
The first of those companies is Uber BV (UBV). Based in the Netherlands, this company is responsible for the actual Uber app. When a user wants to be picked up and picks a driver, they are interacting with UBV. It is UBV that request that driver be dispatched to the user’s location. It is also UBV who then collect any payment required.
At no point, however, does the user actually get into a car owned, managed or operated by UBV. That duty falls to the second, UK-based company – Uber London Ltd. (ULL). It is ULL who are responsible for all Uber vehicles – and their drivers – in London. Like Addison Lee or any of the other thousands of smaller operators that can be found on high streets throughout the capital, ULL are a minicab firm. They just happen to be one that no passenger has ever called directly – they respond exclusively to requests from UBV.
This setup may seem unwieldy, but it is deliberate. In part, it is what has allowed Uber to blur the boundary between being a ‘pre-booked’ service and ‘plying-for-hire’ (a difference we explored when we last looked at the London taxi trade back in 2015). It is also this setup that also allows Uber to pay what their critics say is less than their ‘fair shareâ of tax – Uber pays no VAT and, last year, only paid ÂŁ411,000 in Corporation Tax.
The average Londoner can be forgiven for not knowing all of the above (commentators in the media, less so). In the context of the journey, it is the experience that matters, not the technology or corporate structure that delivers it. In the context of understanding the current licensing situation, however, knowing the difference between the companies that make up that that Uber experience is important. Because without that, it is very easy for both Uberâs supporters and opponents to misunderstand what this dispute is actually about.
The raw facts
Uber London Ltd (ULL) are a minicab operator. This means they require a private hire operator’s licence. Licences last five years and ULL were last issued one in May 2012. They recently applied for its renewal.
ULL were granted a four-month extension to that licence earlier this year. This was because TfL, who are responsible for regulating taxi services in London, had a number of concerns that ULL might not meet the required standards of operational practice. These are rules that all private hire operators – from the smallest local cab firm to Addison Lee – are required to meet. Issuing a four-month extension rather than a five-year one was intended to provide the time necessary to investigate those issues further.
On Friday 22 September, TfL announced that they believe ULL does not meet the required standard in the following areas:
- Their approach to reporting serious criminal offences.
- Their approach to how medical certificates are obtained.
- Their approach to how Enhanced Disclosure and Barring Service (DBS) checks are obtained.
- Their approach to explaining the use of Greyball in London – software that could be used to block regulatory bodies from gaining full access to the app and prevent officials from undertaking regulatory or law enforcement duties.
As a result, their application for a new licence has been denied.
It is important to note here: Uber users are not about to lose their ability to use the service. ULL have the right to appeal this decision and will remain in operation until that appeal has been heard. Similarly, if changes are made to their operational practices to meet those requirements to TfLâs satisfaction, then a new licence can be issued.
Put simply, this isnât about the app.
So why does everyone think it is?
Washington DC, September 2012
âI know that you like to cast this as some kind of fight,â said Mary Cheh, Chair of the Committee on Transport and the Environment, âDo you understand that? Iâm not in a fight with you.â
âWhen you tell us we canât charge lower fares, offer a high-quality service at the best possible price, you are fighting with us.â Replied Travis Kalanick, Uberâs increasingly high profile, controversial (and now former) CEO.
âYou still want to fight!â Cheh sighed, throwing her hands in the air.
Back in San Francisco, Salle Yoo, Uberâs chief counsel, was watching in horror via webcast. Pulling out her phone, she began frantically texting the legal team sitting with Kalanick in the room:
Pull him from the stand!!!
It was too late. Kalanick had already launched into a monologue on toilet roll prices in Soviet Russia. He had turned what had been intended as a (relatively) amicable hearing about setting a base fare for Uber X services in the city into an accusation – and apparent public rejection by Kalanick – of an attempt at consumer price fixing.
The events that day, which are recounted in Brad Stoneâs âThe Upstartsâ, were important. In hindsight, they marked the point where Uber shifted gears and not only started to aggressively move in on existing taxi markets, but also began to use public support as a weapon.
Cause and effect
Weirdly, one of the causes for that shift in attitude and policy was something Londonâs Black Cab trade had done.
Kalanick and fellow founder Garrett Camp had launched Uber in 2008 with a simple goal – to provide a high-quality, reliable alternative to San Franciscoâs notoriously awful taxis.
Whatâs important to note here is that neither man originally saw Uber as a direct price-for-price rival to the existing San Francisco taxi trade. San Francisco, like many cities in the USA, utilised a medallion system to help regulate the number of taxi drivers in operation at any one time. Over the years, the number of medallions available had not increased to match rising passenger demand.
Camp – who had moved to San Francisco after the sale of his first startup, StumbleUpon, became increasingly frustrated at his inability to get around town. Then Camp discovered that town car licences (for limousine services) werenât subject to the medallion limits. Soon he began to float the idea of a car service for a pool of registered users that relied on limousine licences instead.
This would be more expensive than a regular cab service, but he argued that the benefits of better quality vehicles and a more reliable service would make it worthwhile in the eyes of users. A friend and fellow startup entrepreneur, Kalanick, agreed. They hired some developers and then started touting the idea to investors (often describing it as “AirBNB for taxis”). Uber grew from there.
As the company expanded, this âluxury on the cheapâ model sometimes brought Uber into conflict with the existing US taxi industry and individual city regulators. The fact that they were rarely undercutting the existing market helped limit resistance, however.
What eventually shifted Uber into a different gear was the arrival of a threat from abroad – Hailo.
Hailo wars
Founded by Jay Bregman in 2009, Hailo was a way for Londonâs Black cab trade to combat the inroads private hire firms had been making into their market share. Those firms were starting to use the web and digital technology to make pre-booking much more convenient. Bregman had seen Uber’s app and realised the potential. He created Hailo as a way to help Black Cabs do the same thing.
At this, Hailo was initially successful. Bregman, an American by birth, soon started casting his eyes across the Atlantic at the opportunities to do the same thing there. In March 2012, Bregman announced that Hailo had raised $17m to fund an expansion into the US, where it would attempt to partner with existing cab firms as it had done in London.
Expansion into London had already been on Uberâs radar. They had also been aware of Hailo. Bregmanâs announcement, however, turned a potential rival in an overseas market into a direct, domestic threat. Uberâs reaction was swift and aggressive, as was the âapp warâ which soon erupted in cities such as Boston and New York where both firms had a presence.
One of the crucial effects of the Hailo wars was that they finally settled a long-running argument that had existed over Uberâs direction between its two founders. Camp had continued to insist that Uber offer luxury at a (smallish) premium. Kalanick had argued that it was convenience, at a low cost, that would drive expansion. When Hailo crossed the pond, offering a low-cost service, Kalanick’s viewpoint finally won out based on necessity.
Controlling the debate
As the Washington hearing would show later that year, Kalanickâs victory had enormous consequences – not just in terms of how the service was priced and would work (it would lead to the launch of Uber X, the product with which most users are familiar), but in how Uber would pitch itself to the public.
The approach that Kalanick took in his Washington testimony, of espousing the public need as being the same as Uberâs need, has since become a standard part of Uberâs tactics for selling expansion into new markets. The ability – often correct – to claim that Uber offers a better service at a cheaper price is powerful selling point, one that Uber have never shied away from pushing.
Itâs a simple argument. It is also one that Uber have used to drown out more complex objections from incumbent operators, regulators or politicians in areas into which theyâve expanded. It is also one of the reasons why Uber have continued to push the narrative that they are a technical disruptor when skirting (or sometimes ignoring) existing regulations – because being an innovative startup is âsexyâ. Being a multinational that ignores the rules isnât.
Back to the licence
Understanding where Uber have come from, and their approach to messaging, is critical to understanding the London operator licence debate. Uber may be trying to frame this as a battle over the availability (or otherwise) of the app, but that’s not what this is. It is a regulatory issue between TfL as regulator and ULL as an operator of minicabs.
The decision to cast the debate in this way is undoubtedly deliberate. Uber are aware that their users are not just passengers, but a powerful lobbying group when pointed in the right direction – as long as the message Uber are pushing is something they will get behind. Access to the Uber app is a simple message to sell, the need to lighten ULL’s corporate responsibilities is not.
Corporate responsibilities
One of the primary responsibilities of the taxi regulator in most locations is the consideration of passenger safety. This is very much the case in London – both for individual drivers and for operators.
The expectation of drivers is relatively obvious – that they do not break the law, nor commit a crime of any kind. The expectation of operators is a bit more complex – it is not just about ensuring that drivers are adequately checked before they are hired (and that those checks are processed by a mutually approved company), but also that their activity is effectively monitored while they are working. Just as importantly, the operator is responsible for making sure that any customer complaints are taken seriously and acted upon appropriately.
The nature of that action can vary. The report of a minor offence may warrant only the intervention of the operator themselves or escalation of the incident to TfL via the regular (but slow) reporting channels. It is expected, however, that serious crimes will be dealt with promptly, and reported directly to the police as well.
On 12 April 2017, the Metropolitan Police wrote to TfL expressing a major concern. In the letter, Inspector Neil Bellany claimed that ULL were not reporting serious crimes to the police. They cited three specific incidents by way of example.
The first of these related to a âroad rageâ incident in which the driver had appeared to pull a gun, causing the passenger to flee the scene. Uber dismissed the driver, having determined that the weapon was a pepper spray, not a handgun, but failed to report the incident to the police. As a result, the police only became aware of the incident a month later when TfL, as operator, processed ULLâs incident reports.
At this point, the police attempted to investigate (pepper spray is an offensive weapon in the UK) but, the letter indicated, Uber refused to provide more information unless a formal request via the Data Protection Act was submitted.
The other two offences were even more serious, and here it is best simply to quote the letter itself:
The facts are that on the 30 January 2016 a female was sexually assaulted by an Uber driver. From what we can ascertain Uber have spoken to the driver who denied the offence. Uber have continued to employ the driver and have done nothing more. While Uber did not say they would contact the police the victim believed that they would inform the police on her behalf.
On the 10 May 2016 the same driver has committed a second more serious sexual assault against a different passenger. Again Uber havenât said to this victim they would contact the police, but she was, to use her words, âstrongly under the impressionâ that they would.
On the 13 May 2016 Uber have finally acted and dismissed the driver, notifying LTPH [London Taxi and Private Hire] Licensing who have passed the information to the MPS.
The second offence of the two was more serious in its nature. Had Uber notified police after the first offence it would be right to assume that the second would have been prevented. It is also worth noting that once Uber supplied police with the victimâs details both have welcomed us contacting them and have fully assisted with the prosecutions. Both cases were charged as sexual assaults and are at court next week for hearing.
Uber hold a position not to report crime on the basis that it may breach the rights of the passenger. When asked what the position would be in the hypothetical case of a driver who commits a serious sexual assault against a passenger they confirmed that they would dismiss the driver and report to TfL, but not inform the police.
The letter concluded by pointing out that these werenât the only incidents the Metropolitan Police had become aware of. In total, Uber had failed to report six sexual assaults, two public order offences and one assault to the police. This had lead to delays of up to 7 months before they were investigated. Particularly damning, with the public order offences this meant that in both cases the prosecution time limit had passed before the police became aware of them.
As the letter concludes:
The significant concern I am raising is that Uber have been made aware of criminal activity and yet havenât informed the police. Uber are however proactive in reporting lower level document frauds to both the MPS and LTPH. My concern is twofold, firstly it seems they are deciding what to report (less serious matters / less damaging to reputation over serious offences) and secondly by not reporting to police promptly they are allowing situations to develop that clearly affect the safety and security of the public.
The Metropolitan police letter is arguably one of the most important pieces of evidence as to why TfL’s decision not to renew ULL’s licence is almost certainly the correct one right now – or at least that there are certainly grounds to stop and think. Because one of the most common defences of Uber is that they provide an important service to women and others late at night. In places where minicabs won’t come out, or for people whose personal experience has left them uncomfortable using Black Cabs or other minicab services, Uber offer a safe, trackable alternative. They aren’t just offering a minicab service, but peace of mind.
That argument is entirely valid. Right now, however, TfL have essentially indicated that they don’t trust ULL to deliver that service. The perception of safety does not match the reality.
Again, it is not about the app.
Greyball
Concerns about vetting and reporting practices at ULL may make up the bulk of TfLâs reasons for rejection, but there is also more. There is Greyball.
Greyball is a tagging system within the Uber app. When a user who has been ‘greyballed’ fires up the map, rather than showing them the ‘real’ view of what is happening, the app shows them a custom Uber map instead. This system also allows nearby drivers to be alerted to the presence of a ‘greyballed’ user, or for those users to be hidden from drivers as well.
Greyballâs existence was revealed to the world in March 2017 as part of an investigation by the New York Times into Uberâs activities in Portland back in 2014. The paper claimed that Uber, knowing that they were breaking the regulations on taxi operation in the city, had accessed user data within the app and elsewhere to identify likely city officials and target them with false information. This ensured that those individuals were not picked up for rides, hampering attempts by the Portland authorities to police Uberâs activities.
Initially, Uber denied the accusations. They confirmed that Greyball existed, but insisted that it was only used for promotional purposes, testing and to protect drivers in countries where there was a risk of physical assault.
Nonetheless, the seriousness of the allegations and the evidence presented by the New York Times prompted Portland’s Board of Transport (PBOT) to launch an official investigation into Uberâs activities. That report was completed in April. It was made public at the beginning of September. In it, Portland published evidence – and an admission from Uber itself – that during the period in which it had been illegal for Uber to operate in Portland, they had indeed used it to help drivers avoid taxi inspectors. In Portlandâs own words:
Based on this analysis, PBOT has found that when Uber illegally entered the Portland market in December 2014, the company tagged 17 individual rider accounts, 16 of which have been identified as government officials using its Greyball software tool. Uber used Greyball software to intentionally evade PBOTâs officers from December 5 to December 19, 2014 and deny 29 separate ride requests by PBOT enforcement officers.
The report did confirm that, after regulatory changes allowed Uber to enter the market legally, there seemed to be no evidence that Greyball had been used for this purpose again, As the report states, however:
[i]t is important to note that finding no evidence of the use of Greyball or similar software tools after April 2015 does not prove definitively that such tools were not used. It is inherently difficult to prove a negative. In using Greyball, Uber has sullied its own reputation and cast a cloud over the TNC [transportation network company] industry generally. The use of Greyball has only strengthened PBOTâs resolve to operate a robust and effective system of protections for Portlandâs TNC customers.
Portland also went one further. They canvassed other transport authorities throughout the US asking whether, in light of the discovery of Greyball, they now felt they had evidence or suspicions that they had been targeted in a similar way. Their conclusions were as follows:
PBOT asked these agencies if they have ever suspected TNCs of using Greyball or any other software programs to block, delay or deter regulators from performing official functions. As shown in figure 3.0 below, seven of the 17 agencies surveyed suspected Greyball use, while four agencies (figure 3.1) stated that they have evidence of such tactics. One agency reported that they only have anecdotal evidence, but felt that drivers took twice as long to show up for regulators during undercover inspections. The other agencies cities believe that their enforcement teams and/or police officers have been blocked from or deceived by the application during enforcement efforts.
Uber are now under investigation by the US Department of Justice for their use of Greyball in the US.
Of all the transport operators in Europe, TfL are arguably the most technically literate. It is hard to see how the potential use of Greyball wouldnât have raised eyebrows within the organisation, so it is not surprising to see it make the list of issues. A regulator is only as good as their ability to regulate and, as the Portland report shows, Uber have âformâ for blocking that ability when it suits them.
Sources suggest that TfL have requested significant assurances and guarantees that Greyball will not be used in this way in London. The fact that it makes the list of issues, however, suggests that this demand has currently not been met. It is possible this is one of the times when Uber’s setup – multiple companies under one brand – has caused a problem outside of ULLâs control. Uber Global may ultimately be the only organisation able to provide such software assurances. Until now, they may simply not have realised just how important it was that they give them.
Understanding the economics
There is still much more to explore on the subject of Uber. Not just Uber Londonâs particular issues with TfL, but the economics of how they operate and what their future plans might be.
That last part is important because the main element of Uberâs grand narrative – their continued ability to offer low fares – is not as guaranteed a prospect as Londoners (and indeed all users) have been led to believe.
For now, it is simply worth bearing something in mind: Uberâs fares do not cover the actual cost of a journey.
Just how large the deficit is varies by territory and – as the firm donât disclose more financial information than necessary – it is difficult to know what the shortfall per trip is in London itself. In New York, however, where some 2016 numbers are available, it seems that every journey only covers 41% of the costs involved in making it.
Just why Uber do this is something we will explore another time, but for now it is important just to know it is happening. It means that, without significant changes to Uberâs operational model, the company will never make a profit (indeed it currently loses roughly $2bn a year). As one expert in transport economics writes:
Thus there is no basis for assuming Uber is on the same rapid, scale economy driven path to profitability that some digitally-based startups achieved. In fact, Uber would require one of the greatest profit improvements in history just to achieve breakeven.
This means that Uberâs cheap fares – rightly argued as one of the ways in which it provides a âsocial goodâ for low-income users – are likely only temporary.
Indeed the only way this wonât be the case is if there is a significant technical change to the way Uber delivers its service. In this regard, Uber has often pulled on its reputation as a âstartupâ and has pointed to the way Amazon and others have ‘hacked’ their growth – by finding economies of scale or using technological innovation to save money in workflows and supply chains.
Unfortunately, this simply isn’t how transport works. Up to 80% of the cost of each Uber journey is a fixed cost – the money paid to the driver, the cost of fuel and sundry costs related to the vehicle. It doesn’t matter how many drivers or vehicles uber have, the percentage of any fare that is required to meet those costs will largely remain the same. This is one of the reasons why we don’t see more “megacab” firms such as Addison Lee – generally speaking, they’re not worth the effort if you’re looking to make a buck. Amazon can save money by sticking more books in warehouses. Uber can’t do the same by sticking more people in the same number of cars.
Uber, of course, are aware of this. Indeed itâs why they have quickly become one of the biggest investors in self-driving vehicle technology (and are subject to a lawsuit from Google over the alleged theft of information related to that subject).
It is worth bearing in mind though that Uberâs stated concern for their ‘40,000 drivers’ in London should be taken with a considerable pinch of salt. Not only is the active figure likely closer to 25,000 (based on Uberâs own growth forecasts from last year), but they would also quite like to get rid of all those drivers anyway – or at the very least squeeze their income further in order to push that cost-per-journey figure closer to being in the black.
Bullying a bully
None of these issues with Uberâs operational are likely exclusive to London. Which begs the question – why have TfL said ânoâ when practically everyone else has said ‘yes’?
To a large extent, the extreme public backlash this news received and the size of Uber’s petition provide the answer – because Uber are a bully. Unfortunately for them, TfL are an even bigger one.
TfL aren’t just a transport authority. They are arguably the largest transport authority in the world. Indeed legislatively speaking TfL aren’t really a transport authority at all (at least not in the way most of the world understands the term). TfL are constituted as a local authority. One with an operating budget of over ÂŁ10bn a year. They also have a deep reserve of expertise – both legal and technical.
Nothing to divide
To make things worse for Uber, TfL are (facetiously) a dictatorship – they’re a local authority that isn’t accountable to an electorate. They serve, and act, at the pleasure of just one person – the Mayor of London, the third most powerful directly elected official in Europe (behind the French and Russian presidents).
This is a problem for Uber. In almost every other jurisdiction they have operated in Uber have been able to turn their users into a political weapon. That weapon has then been turned on whatever political weak point exists within the legislature of the state or city they are attempting to enter, using populism to get regulations changed to meet Uber’s needs. The situation in London is unique, simply because there is only one weak point that can be exploited – that which exists between TfL and the Mayor.
This isn’t hyperbole on our part. Just how much direct power the Mayor of London exercises over TfL is one of the themes that has been emerging from our transcripts of the interviews conducted for the Garden Bridge Report. To quote the current Transport Commissioner, Mike Brown, in conversation with Margaret Hodge, MP:
Margaret Hodge: But itâs your money.
Mike Brown: Yes, I know but the Mayor can do what he wants as the Chair of the TfL Board.
MH: Without accountability to the Board?
MB: Yes and Mayoral Directions are â the Mayor is actually extremely powerful in terms of Mayoral Directions. He or she can do whatever they want.
MH: What, to whatever upper limit you want?
Andy Brown: Thatâs right, I think, yeah.
MB: Yeah, pretty much is. Yeah â so arguably itâs more direct financial authority than even a Prime Minister would have, for example.
As long as the TfL and the Mayor, Sadiq Khan, remain in lockstep on the licence issue, therefore, Uberâs most powerful weapon has no ammunition. 500,000 signatures mean nothing to TfL if the organisation has the backing of the Mayor and they are confident of a victory in court.
It is also worth noting that all TfL really wants Uber to do is comply with the rules. Despite the image that has been pushed in some sections of the media, TfL has not suddenly become the champion of the embattled London cabbie (many of whom would laugh heartily at the idea). TfL has always seen itself as the taxi industryâs regulator, not as the Black Cabâs saviour. This was true back in 2015 when the Uber debate really erupted in earnest and it is still true now.
Indeed if TfL have any kind of ulterior motive for their actions, it is simply that they dislike the impact Uber are having on congestion within the capital, and the effect this congestion then has on the bus network. Indeed Uber would do well to remember the last time a minicab operator made the mistake of making it harder for TfLâs buses to run on time.
That the Mayor was prepared to go so public in his support for such an unpopular action should also serve as a warning for Uber. When it comes to legal action, TfL are risk-averse in the extreme – there is a reason they have never sued the US Embassy over unpaid Congestion Charge fees – but the current Mayor is even more so.
Whilst his field is human rights rather than transport, Khan is a lawyer himself and by all accounts a good one. GQâs Politician of the Year is also an extremely shrewd political operator. It is unlikely that he would have lent his support to TfL on this subject unless he knew it was far more likely to eventually make him look like a statesman who stands up to multinationals, than a man who steals cheap travel from the people who voted for him.
Ultimately, the next few days (and beyond) will likely come to define the relationship between London and Uber. Indeed sources suggest that Uber have already begun to make conciliatory noises to TfL, as the seriousness of the situation bubbles up beyond ULL and UBV to Uber Global itself. Only time will tell if this is true.
In the meantime, however, the next time you see a link to a petition or someone raging about this decision being âanti-innovationâ, remember Greyball. Remember the Metropolitan Police letter. Remember that this is about holding ULL, as a company, to the same set of standards to which every other mini-cab operator in London already complies.
Most of all though remember: it is not about the app.
In the next part of this series, we break down Uber’s driver figures and ask if they add up.
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271 comments
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2nd para, final sentence needs removing looks like an incomplete copy-pasta of the next para.
[Fixed, Cheers. LBM]
Thanks IA – I am reporting separately to John Bull. There are more.
[I corrected more just now, Cheers. LBM]
In Hong Kong, the police outright arrested *drivers* for carrying passengers without appropriate insurance / licence (Uber ultimately claimed that anyone using the app would be appropriately insured, but many, including myself, are still too afraid to help others with the app). I worry that the Metropolitan Police could do something similar against individual drivers after the licence of ULL has been revoked.
There are social media rumours alleging that some of the signatures on the petition were faked.
Thank you for the article. I had not expected to be so interested in an article about cabs. Equally, I had not understood the separation between the app and the operator. It is clear to me that TfL will demand more re: ensuring drivers are DBS checked, and that their vehicles are insured and roadworthy as well as all the other issues highlighted.
Your quote about Uber’s current unprofitability and between the lines suggesting that fares need to be two and a half times their current level needs publicity. Motorised transport in London is not cheap, and if folk have a jolly good night out in London getting through perhaps ÂŁ100, is ÂŁ12.50 (up from a fiver) for a taxi too much to ask?
I suspect this might be a watershed moment for the new CEO to make his mark, particularly if he reads LR or otherwise understands the uniquely powerful position that the Mayor/TfL is in.
Maybe they are, maybe they aren’t – doesn’t really matter. Ultimately, focusing on the petition is pointless and feeds into the narrative that this is about technology, not the kind of basic compliance expected of any operator.
(I put that far more distinctly and swearily on Twitter the other day)
Uber pays no VAT and, last year, only paid ÂŁ411,000 in Corporation Tax.
Yeah. Interesting little snippet, that.
The previous thread on this subject touched on tax & HMRC’s attitudes to the dispute – are we likely to hear more, do you think?.
why have TfL said ânoâ when practically everyone else has said âyesâ?
Not actually so
See Here for a list
And, the communications from MetPlod are deeply disturbing, though not news to many of us. Many females will not go anywhere near “Uber” for exactly those reasons, & I don’t blame them one little bit.
I find it very interesting that the “overall congestion” aspect, so to speak, is not any part of the current dispute.
Second thoughts
Uber’s losses ….
If Uber have been running in London at a loss, for the past 5 years, & are only covering 45% of their expenses, then …
Where / Who is supplying the monies to keep them going, because it will require very deep pockets indeed. Not part of the present/upcoming legal hearings, of course, but I would have thought it would be a matter of genuine “Public Interest”
Thanks for giving us chapter and verse. I hope TFL have the resolve to stand up to Uber who seem to think themselves above the law.
TfLâs guidelines for PHV operators are set out in the attached document:
http://content.tfl.gov.uk/operator-licensing-guidance-notes.pdf
The information about fit and proper persons, and how TfL will apply them, is set out on page 6.
It will be interesting to compare what they have set out in that document and their approach with ULL.
Can I just point out that Kalanick resigned some months ago? Former CEO?
This article is really eye-opening and seems well researched. Thank you. I was ignorant about Greyball and uber’s somewhat shady history.
The issues surrounding the lack of profit are also alarming. It smells like a land grab with a long-term objective of a monopoly which will end in a price hike once users are addicted and reliant on the service. Even if they don’t hike the price there is the issue of “how am I paying for this service”, with the amount of data they collect about you… man that is a scary prospect.
Thank you for a well written and informative article.
I note from the Standard that
“- between 2011 and 2015, a total of 1,948 [cab] drivers were charged with criminal offences.
– Of these, 521 were charged with violent or sexual offences, which can include grievous bodily harm or rape.
– in 2014/2015, a staggering 141 drivers were named as suspects in sex offences.
– These included 31 in cases of rape, and 110 for other sexual assaults.”
From the Indi
“32 assault claims were made against employees of [Uber] …. which totalled at 154 allegations including attacks in minicabs and chauffeur vehicles.”
Genuine question: how many “minicab operator licences” does TfL have to “not extend” each year due to the other 122 allegations?
Another thought – should the licence for a London taci operator require that the provision of any “app” or payment be made to a UK company simply to prevent money laundering? Why should money be pushed through an offshore structure to avoid VAT (if it applies, transport services are largely zero rated anyway). The licence could include a requirement to ensure the entire business was UK based?
Briantist: Your question may well deserve attention. However, the article does make clear that TfL’s objection regarding offences by drivers is not about the number of these, but specifically about ULL’s response to serious accusations, choosing not to report them to the police (apparently to help avoid reputational damage to their brand).
Good light-shining. But I don’t get how if Uber is so tragically loss-making that it paid UK tax at all?
KRW: That may be a good question. But exactly the same sort of question could be asked about Amazon and many other organisations. If competition among juristrictions to seek lowest rates of tax is allowed at all, then it is hard to see why minicab services (alone) should be prevented from exploiting it.
“Which begs the question”.
http://begthequestion.info/
If rule 47 said that all cabs must be blue, and uber cabs were red, then a rule has been broken and uber is at fault.
The problem here is that the “fit and proper” rule is finger in the air territory, and combined with a mayor with direct links to the GMB makes the decision look suspect. Is this about uber or about a mayor politically positioning himself for the big job?
I’m sure this will be sorted out by uber meeting the requirements of TFL, but TFL need to sort themselves out and better define the rules. They have been a long way behind the curve trying to catch up with the changing taxi market.
@Malcom – Fair point. My personal feeling is that one assault or sexual assault is one too many. I guess I’m wondering if TfL are putting all cab firms on notice, or is Uber a “tall poppy”?
I just find it hard to think that every single one of the 3,000 Licensed PHV operators in London (DoT 25 August 2015) has robust ISO9000-style procedure documents for recording incidents and managing their onward reporting to the Met,
That’s why I am wondering how many get struck off each year for technical non-compliance?
John,
As a ‘bear of very little brain’ I have read and re-read this sentence
There is also the issue of Greyball â a custom piece of software designed by Uber which can provide the ârealâ Uber map that the user sees on their device with a convincing fake one.
but am still struggling to understand exactly what ‘Greyball’ is. Any chance of a simple explanation?
Re Verulamus,
The most astute thing for Uber Global to do would be to set up a new equivalent to ULL with completely new management, procedures and assurances while they go through the appeal process then dispatch ULL as soon as they can swap over to the new entity.
The question is whether Uber Global is seen as fit and proper controlling entity in the light of Greyball and any policy on selective reporting of crimes from them?
ULL’s failure to report the assault allegations after the first time which then allowed the second incident to take place will probably cause some major issues for them and their senior staff if there are guilty verdicts in the trial, any bets on the second victim suing Uber for negligence which could be proved to be systematic? Hopefully they have kept all internal material relating to such cases or they will get in trouble for that too.
Uber dragging out the appeals process could actually be helpful it allowing TfL case to strengthen in the mean time.
Uber probably want “a one size fits all” business operating model (similar to Apple OS – identical across all devices in last 5+years) and not end up with lots of tailored operating models (similar to Android – tweaked for every device) which will be a lot more expensive.
This article shrugs off the criticism of TfL and defenses of Uber a little too easily.
– It doesnât address half the reasons TfL gave (the “approach to obtaining medicals / DBS checks”). Iâm struggling to understand this one, because itâs TfL who issue PCO licenses, and in doing so check peopleâs medicals / DBS certificates. What is the substance of TfLâs accusation against Uber here – that they are encouraging people to forge these credentials?
– If, as you say, itâs ânot about the appâ, then why is the use of Greyball (part of the apps algorithm) relevant?
– Regarding safety, the main reason it is safe is because of the app: it gives you the drivers first name, photo, license plate, car make and model, and lets other people see exactly where you are. If a taxi driver commits a crime, doesnât it make sense to report it to the police first, and isnât it a breeze identifying them with the above information? The Metâs letter doesnât make sense.
– How is it âbullyingâ to ask people to willingly sign a petition? Isnât that a valid part of democracy?
– You say âTfL has not suddenly become the champion of the embattled London cabbieâ. You also say that theyâre accountable to Sadiq Khan. So how does these two things conflate with actions such as this: (https://www.ft.com/content/3cfe4e16-7963-11e6-97ae-647294649b28)?
I do think Uber should be subject to further regulations, but I also do not understand the logic behind the reasons TfL have given. If anyone could enlighten me, please do!
Re John UK
Greyball – the app is/was fed computer generated fake data designed to deceive not real data based on the actual location of cars, predicted arrival times and driver/vehicle identities which normal users get. The fake data meant the officials who ended up being greyballed could never get in an actual car unless someone else did the booking for them but Ubers pre and post ride tracking could also have ended up in those extra individuals also being greyballed. The London equivalent might included blocking anyone who had been in Palestra for example.
@John U.K.: As an example: the fake map could exclude any Uber cabs within a certain area around the location of the App user, so as to convince the app user to use an alternate mode of transport….
Re Jonni,
“â If, as you say, itâs ânot about the appâ, then why is the use of Greyball (part of the apps algorithm) relevant?”
Regulatory subversion (with plenty of intent as the code didn’t write itself), which undermines the case for being fit and proper.
Question
IANAL, but it seems to me that the ULL / UBV split is of very dubious legality, as regards both employment & tax legislation.
Anyone care to make a more informed comment on that one?
@GREG TINGEY
Low interest rates are driving venture capital investors into seemingly crazier and crazy “tech companies”. They are hoping for some future massive margins but right now your takeaway via Deliveroo or taxi via Uber are massively loss making and the funding comes from venture capital funds
When I hear Uber-users talk about the service there is often free-market element to the response, along the lines of “I have a right to have a taxi-on-demand”. The reality in a city like London is that there isn’t enough road space to support that point of view, never mind the knock-on effect on air quality and pedestrian/cycle safety.
Given this, I’ve come to believe that the congestion charge is targetting the wrong thing when considering taxis. Currently, there is a per-vehicle per-day charge paid by the driver. I think a good case can be made for a per-journey charge to be paid directly by the passenger instead, probably around ÂŁ5 in central London. This charge would have to be highly visible and with the same explicit aim as the original congestion charge – to reduce the number of journeys on London’s roads by changing peoples’ behaviour.
“If Uber have been running in London at a loss, for the past 5 years, & are only covering 45% of their expenses, then âŠ
Where / Who is supplying the monies to keep them going, because it will require very deep pockets indeed”
FTAlphaville and Naked Capitalism have both run some interesting articles on the economics of Uber. As I understand it, the 45% figure is on Uber’s share of the takings rather than the entire fare – i.e. the fare would not have to increase by over 100%, but the amount Uber takes would.
As to who is subsidising it, there are two main contributors: venture capitalists who have either been seduced by the hype around new tech, or who think that it’s worth subsidising now to allow Uber to gain a de facto monopoly and get the benefits of being able to charge monopoly rents in the future.
The second group are the drivers. Uber relies heavily on the drivers funding their capital. It is the drivers who lease the cars, maintain them, clean them, pay for fuel etc. One of the criticisms levied at Uber’s business model is that they will gradually run out of drivers as drivers realise that, when they include capital costs, they are making a very poor return for the hours they work.
Greyball *is* about the app, surely?
Under “Corporate Responsibility’ – there is a “when TfL, as operator, processed” – should that be “as regulator”?
Otherwise, a brilliantly dispassionate discussion of the route to where we are now. I do think that TfL mis-stepped by not including in their press release the fact that Uber had been given a 4 month extension to sort these problems.
I think Uber will easily win the appeal. The letter to the met police wasn’t shown to them, they claim to have implemented a portal for LEO to use, the parts about DBS and criminal checks are done by TfL themselves – it doesn’t add up.
The only bit that does make any sense is greyball but I don’t think they have been convicted yet on it.
I also think the PHO guidelines are very vague.
John: I think the word “provide” should be “replace”. Essentially Uber used (and possibly still uses) various techniques to identify government officials and enforcement officers and gives them a fake map within the app that prevents them finding Uber cars, and therefore checking up on them or gathering evidence.
Yes that’s right; did you know that Uber are also in court with one of their biggest investors? Basically from where they see it as “boardroom chess” appointing people that they recognise, will favour him – Paving the way for I would imagine “a rehabilitated monumental return”
Using Uber, is like buying a shirt that you know has been made by 7 year old in a sweat shop.
@ John U.K. There is a good explanation on Wikipedia about the origin and use of “Greyball” software see:
https://en.wikipedia.org/wiki/Greyball
Given that 45% figure, how much of each fare is passed on to the driver? Are drivers receiving a direct subsidy from Uber?
Thanks for this.
Couple things I wanted to clear up – is it true that TfL are now issuing the licenses and Uber have nothing to do with performing the background checks? (except presumably collecting the documents, for which they seem to be doing their part of reporting frauds)
Is Uber’s behaviour of not reporting crimes “on the basis that it may breach the rights of the passenger” consistent or expected in other countries/cultures? Is this more likely a case of a multinational with a one-size-doesnt-fit-all policy than a company deliberately avoiding bad press? Or is that a naive point of view?
Despite my promotion of this excellent article on my social media, I suspect my Millennial friends (on both sides of the political spectrum) will continue decry Sadiq and TFL for crushing a much loved, cheap transport option.
Personally, if you break (or ignore) the rules, you’ve gotta be prepared to live with the consequences.
A great article (as usual). Thanks.
Not only has Kalanick left the CEO role as KRW points out, but Salle Yoo has given notice that she intends to leave as soon as a successor is found. Interesting times.
The article briefly mentions the effect on congestion of cheap car based public transport (Private Hire cars are exempt from the congestion charge). I’m surprised more hasn’t been made of this by TfL as it must increase the cost of running the bus network at the same time as reducing revenues. I vaguely remember the previous mayor suggesting a cap on PH numbers for this reason.
@StephenC
I agree. And the level to which TNCs (transportation network companies) are adding to congestion and thereby slowing competing bus services is vital as well. TNC’s are helpful in low density suburbs, but not in denser, busier areas.
I expect that TfL and other major transport agencies in other cities will develop policies to restrict TNCs in such busier areas. Difficult, but necessary. Some cities/agencies have already partnered with TNC(s) to provide suburban mobility (Amtrak in the US for instance).
Some interesting and insightful stuff, but as a bit of an anorak on these things there’s a temptation to nitpick!
However, no point in any kind of lengthy critique, so a couple of major points.
1) I don’t understand the point about Uber’s byzantine corporate structure and how this impacts on the pre-booked/plying for hire dichotomy. That distinction is surely about how the passenger interacts with the driver in the streets? For example, if a minicab firm with a straightforward corporate structure used an off the shelf app fundamentally similar to Uber’s, how would the pre-booked/plying for hire nexus be different because of Uber’s Dutch connection? It seems totally irrelevant.
2) As regards the perception of safety not meeting the reality, surely this is substantively correct irrespective of Uber not reporting a handful of incidents to police? Thus Uber now seems little better than the mainstream PH trade in terms of sexual assaults and rapes, and the Met’s taxi and PH unit recently claimed Uber’s drivers were responsible for a disproportionately high number of driving offences compared to other PH drivers. And compared to Uber, the black taxis seem safe as houses.
But, you’re right in essence – it isn’t about the app, because in London Uber is essentially just a huge minicab firm employing the latest communications/booking technology (and helping push the envelope in that regard) and the dispute with TfL is simply about stuff that’s old hat – medicals, vetting and criminality. (And the greyball thing is essentially the same as provincial taxi firms putting the word out when licensing enforcement officers are doing spot checks, and suddenly there’s tumbleweed moving up the taxi ranks instead of vehicles!)
By the same token, all this sharing/gig economy stuff in the economic debate is a red herring. Uber’s structure and the driver’s experience is fundamentally the same as traditional minicab firms. Of course, the app is a new way of booking and despatching cars, but lots of taxi and private hire firms are using apps now to augment their more traditional booking/despatch methods.
Of course, if the congestion charge is ever to migrate to a much more finely-tuned road pricing scheme, then vehicles such as the Uber ones, already equipped to report their exact location every minute of the day, could well be in the vanguard.
It does seem a nonsense that a cab or minicab of any kind waiting for a fare pays far less (in fuel, driving around getting in everyone’s way) than it might pay in parking charges (even supposing there was a car park or cab rank space available). Driving space (unlike parking space) is “free” (tragedy of the commons applies).
Sam @ 1347 What’s perhaps surprising is that Uber had so much involvement in the vetting process in the first place. Provincial practice is that the driver applies to the licensing authority (local councils), the LA liaises with the government’s Disclosure and Barring Service, and when the driver’s record comes through the LA then decides whether they’re fit and proper. Uber seems a bit too cosy with TfL in that regard, and there’s also been a third party commercial organisation involved which TfL are now objecting to. As I said, more normal practice simply seem to be for the driver to apply for a license to the LA, and the Uber-style taxi/minicab office or platform isn’t involved – all they really need to do is to make sure the drivers they take on have the requisite licence. There’s a sniff of collusion between TfL and Uber here, and now it’s come back to bite TfL, and of course Uber too, thus Uber desiring to self-regulate as much as possible smacks of regulatory failure by TfL.
Another point too is that Uber’s involvement in the application process detracts from their argument that the drivers are self-employed. To take an analogy from normal employment practices, even if a travelling salesman was *employed* by a company, his driving licence would be a matter between him and the DVLA – his employer wouldn’t be involved.
KRW 09:44
When John Bull started writing this article Kalanick was CEO. The need to respond to events and quickly get this published left this oversight (now updated).
The 41% figure may well be true, but it’s a huge leap to say “their continued ability to offer low fares … is not as guaranteed”. Uber’s fares are close to those on rival app Kabbee, which isn’t funded by deep-pocketed venture capitalists. Local minicab offices aren’t going to close any time soon – plenty of older people rely on minicabs and don’t use smartphones. Therefore there will always be a price ceiling; and it’s not far off Uber’s current prices.
In the absence of more detail, my best guess is that the 41% problem is because Uber is investing heavily to expand worldwide. In mature markets they should already be profitable.
Uber or not, app-based minicab orders are here to stay.
On the subject of economics: although loss making overall, Uber is actually profitable in the UK (http://www.telegraph.co.uk/business/2016/10/10/uber-drivers-racked-up-115m-of-fares-in-the-uk-last-year—doubl/). They take either 20% or 25% of the fare which the passenger pays, and the driver gets the rest.
Internationally though they are as loss making as the article suggests – probably because of fighting expensive legal battles!
Another long and unstructured diatribe; sprinkled with anecdotes, obfuscating ‘facts’, and without a shred of actual data. The only interesting statement is that – ‘TfL are (facetiously) a dictatorship â theyâre a local authority that isnât accountable to an electorate. They serve, and act, at the pleasure of just one person â the Mayor of London, the third most powerful directly elected official in Europe (behind the French and Russian presidents)’. Uber has played dirty to beat a filthy taxi industry – nurtured and protected by generations of TFL and London politicians.
“He had turned […] a […] hearing about setting a base fare for Uber X services in the city into an accusation […] of an attempt at consumer price fixing.”
As the transportation expert quoted in the article, I wanted to offer my appreciation for an article that is substantially better grounded in evidence about the actual issues than 95% of what is seen in the mainstream press. A couple small corrections/updates that do not affect any of the main points.
(a) the $2bn P&L losses were for 2015; they exceeded $3bn in 2016.
(b) Uber Global revenue only covered 41% of their costs in 2015, a negative 142% profit marginâthis was a true Global result (except for separately organized Uber China which lost even more) not just New York. While total losses increased in 2016, the margin improved, but only because Uber unilaterally cut driver compensation by over $1bn in 2016.
(c) There is zero public evidence that Uber âmakes moneyâ in London, but whether it does or not is irrelevant to the issues here. Uber has raised $13bn to date, and has a $68bn valuation that is entirely based on the prospect that it could emerge as the overwhelmingly dominant taxi company in most global markets. It valuation would totally collapse if it retreated to the position of as a niche premium provider in selected high-income urban areas. Industry dominance would allow it to do things like unilaterally cut driver compensation by $1bn in a single year.
Absolutely none of Uberâs growth or popularity can be attributed to technology, superior efficiency or superior service. It is entirely due to staggeringly large subsidies ($5bn in 2015/16, funded out of the $13bn its venture capital backers have provided) and a massive PR/propaganda campaign designed to deceive people about its complete lack of competitive economics, and to make its march toward industry dominance seem inevitable.
I understand the narrow claim several commenters have made about the app not being irrelevant, but the âItâs not about the appâ argument gets to two critical issues.
(1) The app does not make Uber materially more efficient than other taxi operatorsâthe appâs functionality isnât terribly innovative, can (and has been) readily copied, and this type of smartphone ordering has never had any impact on competition in any other market, and obviously canât explain Uberâs $68bn valuation and
(2) the app isnât popular with consumers because they like its user interfaceâit is popular with users because it shows them uneconomically greater cab availability at uneconomically lower prices (thanks to those massive subsidies), and those users have been inundated with PR/propaganda messages over the years portraying Uber as a heroic innovator fighting entrenched providers who are much less efficient.
I cannot comment on Khanâs motivation or approach here, but I would remind you that when New York Mayor Bill deBlasio tried to fight Uberâs propaganda machine on the basis of technocratic regulatory issues Uber thoroughly crushed and embarrassed him. The Uber Board will certainly see Khan as an existential challenge.
The âthis is not how transport worksâ comment in the article is absolutely critical. Absolutely none of the claims made by Uber or its many fanboys or by allegedly neutral media reporters includes any objective evidence showing that Uber discovered taxi efficiency breakthroughs that no one else in the previous hundred years of motorized taxis had figured out. If anyone wants to dig into these economic and political issues further, there are now ten separate pieces of the story at the Naked Capitalism blog that are easily digestible. The overall âWill the Growth of Uber Increase Economic Welfare?â argument has just been published by the Transportation Law Journal, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2933177
Found this article via a BTL comment in the FT, and would like to thank you for these insights, what a pity more of the mainstream press aren’t aware.
FYI, they won’t have chosen the Netherlands at random. The Netherlands, rather surprisingly for those of us who think of them as otherwise good collaborative Europeans, run a grubby little corporate tax loophole for foreign companies registering there. The elaborate Google tax scam uses it, as depicted in the BBC doc about the Welsh village that did a Google.
Donation on its way, and will be an avid future reader
Another exceptional article, many thanks.
As well as a ferocious PR machine, Uber also cultivate political connections. For example, one of their major investors is Blackrock, who know employ George Osbourne. About as connected to the UK political establishment as you can be without actually being in the Cabinet.
Re the separation of the London based mini cab operator and the offshore provider of the app.
Whether that is proper goes to the heart of the debate with global companies (Amazon / Starbucks / etc). However much many of us raise our eyebrows, it is common for multinationals to declare minimum value to the part of the service delivered locally and expensive services (IP rights, licensing etc) to be booked offshore.
Thus far, HMRC have been very timid in challenging these accounting divisions, but the EU is now reviewing the appropriateness of such arrangements (much to the horror of Ireland and Luxembourg). How engaged the UK is with this EU review (given the big political issue that we must not mention) is hard to ascertain.
Good, comprehensive article.
I am surprised that you didn’t have anything much about Uber’s [Snipped] Tory links. The normally loathsome Daily Mail did (to be fair) a pretty good job of exposing that side of the story:
http://www.dailymail.co.uk/news/article-4351418/Cameron-aide-s-uber-cover-up.html
and it is an aspect worth mentioning in the London context.
As to Uber’s losses and their business model. You have described a potential and blatant predatory pricing scheme and predatory pricing is prohibited by UK and EU law. You have also done well in pointing out that Uber cannot take advantage of economies of scale as there are no economies of scale in linking a local passenger to a local driver.
Given that is so I would suggest that Uber’s backers may have picked the wrong horse if they expect that predatory pricing will win them some sort of a monopoly in future. There is nothing hugely difficult in having an app to hire a cab and, in the long-run, nothing to stop competitors like Lyft or other smaller, local or national firms from doing the same sort of thing.
I wouldn’t be surprised if Uber eventually collapse under the weight of their own stupid excesses. To that end this is an interesting insight:
http://www.zerohedge.com/news/2017-06-25/ubers-theranos-moment
Interesting article that fills in some of my knowledge gaps. However it basically confirms my view and remarks made under the previous recent article. I had not appreciated the “trashing of Bill de Blasio” in New York which rather makes the politcal context here very interesting as do the well known links between Uber and the party currently in government. One wonders what dirty tricks will emerge from that quarter in due course.
I am also pleased to read from people more informed than me that my basic observation about Uber (and their backers) basically seeking a (near) monopoly on local car based transport is correct. Nice to have one’s reading of a situation broadly confirmed.
And can I add I just love the references to TfL being a “bigger bully than Uber” and “a dictatorship”. It certainly makes for an interesting battle ground.
One non taxi related question – how on earth did you devise the ranking that put Khan 3rd behind Macron and Putin in terms of elected power? Where is the likes of the German Chancellor in the list?
The German Chancellor, like the British Prime Minister, and many other such people, is not directly elected by the people. She is elected by the Bundestag (lower house of the federal German parliament).
@WW: the key word is ‘directly’ in directly elected – Merkel for example is chosen by the Bundestag and so indirectly elected, as are most heads of government in Europe. The implication being that a Prime Minister is accountable to Parliament (and to their party who can remove them), but the Mayor is accountable only to the voters – the London Assembly can’t generally stop the Mayor doing something (although as Livingstone discovered the Local Government Ombudsman can suspend the Mayor).
The point more usually made is that the Mayor has something like the third largest individual mandate (ie number of people voting for them) in Europe.
@Marco Fante: predatory pricing is prohibited by UK and EU law
Predatory pricing is also notoriously hard to prove, as shown by the many cases of British bus companies since deregulation lowering their fares until their competition disappears, then raising them.
@Sam: Is Uberâs behaviour of not reporting crimes âon the basis that it may breach the rights of the passengerâ consistent or expected in other countries/cultures?
Their claimed motive of protecting the privacy of their users isn’t even consistent with their own corporate culture, given the use of “God mode” in the app to allow Uber employees to track individual users’ movements.
@Ian J,
Re. predatory pricing it can be hard to prove but In Uber’s case it is (or would be) so openly apparent that it would be hard prove otherwise.
If you are referring to the famous case of the Darlington bus wars, the Monopolies and Mergers Commission did find against Stagecoach and other predators and the offending firms were subsequently forced to give undertakings to preserve competition.
http://www.independent.co.uk/news/business/stagecoach-in-undertaking-on-predatory-policy-1357558.html
Dear Moderator,
I notice the snipping. Given that the relevant facts re. Rachel Whetstone et al. have been supported to some considerable degree by TfL and Westminster repsonses to FoI requests, would it be OK to say: Uber’s arguably corrupt Tory links or perhaps, Uber’s allegedly corrupt Tory Connections?
@Marco Fante: Not just Darlington. Twenty Office of Fair Trading investigations didn’t stop Stagecoach (and other bus companies) gaining numerous lucrative local monopolies: note that in the Darlington case they negotiated a settlement rather than being convicted in court, and the undertakings were only for three years. I’m sure Uber would happily agree not to raise their prices for three years if it enabled them to maintain a dominant share of the London market.
The tendency to monopoly for Uber comes about because you need to bring together a critical mass of both drivers and passengers – not enough drivers and waiting times will be too long and the passengers will choose another app, not enough passengers and drivers won’t sign up. This makes it hard to get a new competing service off the ground.
@Islanddweller: one of their major investors is Blackrock, who now employ George Osborne
How have the Evening Standard been covering the story?
ROB
( 25th Sept, 18.05 ) On the subject of economics: although loss making overall, Uber is actually profitable in the UK – but only because they are not (YET) paying employer’s NI or holiday pay, or all the other “Little Extras” that are needed if you are a “Real Employer” which both I & much more importantly, HMRI think they are …..
Ian J
In answer to your question
And other, preceding articles.
IMHO, very neutrally, though the comment-trolls in the “ES” are anything but, of course.
@ Ian J,
“The tendency to monopoly for Uber comes about because you need to bring together a critical mass of both drivers and passengers”
Which plenty of locally based cab companies have been doing for decades. Most successful monopolists have giant physical, infrastructure, massive supply chains or unique products that can’t be easily replicated.
Uber have none of these. There are no economies of scale in linking a local passenger to a local driver. They have nothing but an app for a hiring a cab (nothing too special or amazing there) and an updated take on the same old BS “new economy” hype that we saw before the dot com collapse in 2001.
They are BS. They are probably the next Theranos.
Update – Uber’s employment tribunal appeal, – report in the “Indie”.
Oh & Ian J
The “Standard”, allowing for the usual journalists’ licence, seems to be reporting fairly well on the issue.
The latest piece Here, for instance
There are other “articles” (note the quotes) which seem to be pure propaganda, however – most interesting.
A great article as usual, thank you JB.
While Uber may well be unhealthily close to the Conservative party, the link with BlackRock via George Osborne shouldn’t be overdone. BlackRock is the largest fund manager in the world, they invest in pretty much everybody on pretty much any stockmarket you’ve ever heard of, and many private investments too, of which Uber is one. The Uber investment was made before Osborne joined them and will be managed by people in the US who he’s surely never met.
They do all this on behalf of their clients – it’s not their money, it’s money they take fees for managing for other people, like the pension funds and savings of many of the people reading this article. What’s more, they’ll be lawyered-up to the hilt with internal rules designed to prevent them favouring one set of clients over another.
All of Uber, the Tories, certain local newspaper editors and BlackRock can rightly be criticised for many things, but sometimes a cigar is just a cigar.
Marco Fante,
Looking at your question another way…
We are primarily a transport related website though I accept we do cover stuff at the margins (Garden Bridge for example). We also want serious debate not a slanging match. And we also have to be mindful, both morally and legally, of potential libellous stuff – especially stuff given without any facts to back them up.
So, if the intention is to throw light onto the transport debate that is fine. Using unnecessarily inflammatory language generally isn’t. As a general guide, any adjective describing the Daily Mail tends to send moderators into a bit of a tizzy.
Primary question to ask yourself is why your are writing this stuff. If it is to have a go at a political party or a particular business or business practice then you are probably writing in the wrong place. If it is to add to the transport debate by pointing out dubious connections that might have influenced decisions then keep writing.
A Moderator.
TfL a dictatorship only answerable to the Mayor of London, who just so happens to be elected. So not really.
It is interesting how Uber subsidizes the price. I thought they surcharge based on demand.
Uber do surcharge based on demand. That is irrelevant to whether or not they “subsidize the price”. Like any commercial organisation, they publish no more about their finances than they are legally obliged to (which is not much). So whether and (if so) by how much they subsidize is not definitely known in public. But apparently well-informed commentators think that they do – world wide, and also, probably, in London.
Marco Fante, you’re right about the need for a critical mass, but rather than saying local firms have that, maybe they if fact don’t as regards providing a cross-London despatch platform?
From afar, seems to me that a shortcoming with London PH providers is that they are generally local in scope (or quite expensive like Addison Lee) and for people who do a lot of travelling all over London it’s all a bit hit or miss as regards availability, pricing and quality.
On the other hand, Uber’s managed to quickly penetrate the market to achieve the critical mass to provide a pan-London product, with aggressive and transparent pricing and a more homogenous offering in terms of quality.
Which is perhaps why Uber hasn’t achieve the same market penetration in the provinces that they’ve managed in London – in smaller cities there are already providers offering a similar service across their area. (Delta taxis on Merseyside always spring to mind as a regional Uber-esque operation that’s been operating for decades.)
Of course, there are many shortcomings with Uber’s product, and to a degree the safety thing increasingly looks like marketing tech-induced myth over the substantive facts.
And, as seems to be a theme with the original piece and many comments, whether Uber’s model is financially viable in the long term is a huge question, and it may be that its $13 billion of funding is simply being used to prop up something that’s unsustainable. (Of course, to what extent any losses are simply attributable to start up cost that won’t recur in the longer term is an unknowable.)
@Stuart Winton,
You make some interesting points about a pan-London taxi service and I will readily admit that hadn’t occurred to me. Probably because I can’t yet imagine being able to afford to travel across the whole of London in a taxi.
I’m not sure that your observation about firms like Addison Lee being relatively expensive is entirely fair, however, given that Uber’s prices are below cost and heavily subsidised. My previous comment on that topic relates to the suggestion that Uber may be currently subsidising prices now with a view to destroying competitors, establishing a monopoly and raising prices thereafter (ie. predatory pricing).
My point there was to say that is unlikely (whether it is their intention or not) because the business they are in is highly contestable. If they did establish dominance others could easily move in and undercut them as soon as they started charging monopoly prices.
@ Ian J / Malcolm – thanks for the clarification re “directly elected” and the power list ranking.
@ Ian J – the bus market thing is difficult because in most places there is a relatively strong incumbent who runs the most lucrative routes. Any new competitor is likely to go after the most attractive prospects so immediately finds themselves in a likely “punch up” with the stronger incumbent. Is the incumbent just supposed to sit there and do nothing? Clearly not if you believe in the “market” and “competition”. The other side of the argument is don’t moan if you’re the newbie and then find yourself in a scrap with the “big boys”. I don’t really understand why the competition gurus get so het up about this stuff as it’s surely just the way of the world – sometimes the newcomer finds a niche and survives, other times they misjudge and go under, on rare occasions they’re squashed to death by the incumbent being vile. Examples like Darlington are rare and, I’d argue, not indicative of normal competition. Darlington Corporation Buses were nearly on their last legs. Rather than await a sale Stagecoach used their Busways subsidiary to kill them off. The irony in all this is that Stagecoach eventually sold up anyway to Arriva (formerly British Bus formerly United Auto) who at the start of deregulation had little or no town service presence and had long run the out of town, interurban and rural services. In those rare instances where the big boys fight each other (e.g Go Ahead vs Arriva on Northumberland interurban routes) it rarely lasts very long as deeper pockets just allow losses to rack up instead and someone eventually decides it’s no longer worth throwing money away.
Desperately scrambling back to taxis etc I don’t see too many parallels between the bus wars of old and Uber. The issues are clearly different and are more to do with Uber’s competence and also their cultural awareness of different countries. Yes they’ve exported the App around the world but I do wonder if their American viewpoint about regulation and state controlled bodies has led them to be a tad myopic and insenstive to “how things are done” elsewhere. And clearly there is regulation in the USA and they’ve fallen foul of it but it doesn’t seem to have changed their disdain for the concept
@ Callum – the reference to TfL as a dictator was in inverted commas so clearly not entirely serious. Being serious for a moment, though, TfL does have a lot of power and it is certainly viewed as being overbearing, unresponsive and not very attentive to “not invented here” ideas.
Read the endless reports and recommendations from London Assembly committees on a range of subjects. Sit in (or watch) conferences with reps from the London Boroughs and see what they think about TfL. Look back and see how adept TfL has been in “capturing” new Mayors and generally tuning them in to “TfL’s way of doing things”. No Mayor has yet radically changed TfL’s structure, its culture or how it does things. For all the “protestations” about Mayoral Directions (ooh we are powerless compared to the Mayor) there is a load of evidence out there in written answers and policy documents that show the Mayor and their deputies have little overall influence on what happens. The basic strategic and operational direction of TfL is unchanged as it nears the end of its second decade in existence.
There are a few glimmers of flexibility in one or two fields that TfL are active in but culturally there is a long held belief of “we know best” and when you couple that with extensive powers and influence you can see why the “dictator” tag is not without some relevance for some people. One thing the battle with Uber does do is shine a little light on how TfL will deal with “new businesses”. We have an interesting contrast with Citymapper (essentially an app / tech business) that is now dabbling with provision of bus and shared taxi services. Citymapper seem keener to work with TfL than tweak them on the end of the nose but one wonders whether the basic objective is not far removed from that of Uber. In other words get in quickly, get a niche and progressively expand these competing services, get “user” support via social media and then, if difficulties arise, turn that support against TfL. TfL are alert to the risk of new entrants undermining their traditional services but I wonder where the crunch point is? At some point Citymapper (or others) will want to run an all day service that does compete with TfL routes and will take money from TfL. At some point Citymapper’s supporters will want Oyster on Citymapper services – what happens then? Interesting times ahead I think for all the parties involved.
[ And just for clarity it may not necessarily be Citymapper, it could be another app based business looking to copy what they’re doing. No need to call the lawyers! ]
For those keen to dig deeper into financial aspects of the Uber model and the huge losses they are running, I recommend this piece by Izabella Kaminska at the FT. (It’s free to read, though you may have to register to see it)
https://ftalphaville.ft.com/2016/12/01/2180647/the-taxi-unicorns-new-clothes/
@Malcolm,
It may be a little misleading to simply say that “Like any commercial organisation, they publish no more about their finances than they are legally obliged to (which is not much).”
Unlike most companies of its size Uber is a privately owned company and not a publicy listed corporation. If it was a corporation it would be obliged to disclose a lot more than it does now. That said, nonetheless, it has come under pressure from investors to publish more and a lot of the detail has become available to Reuters and other news outlets:
http://www.reuters.com/article/us-uber-profitability/true-price-of-an-uber-ride-in-question-as-investors-assess-firms-value-idUSKCN1B3103
https://www.axios.com/exclusive-uber-financials-2475912645.html
http://www.zerohedge.com/news/2017-08-22/first-time-ever-mutual-funds-slash-uber-valuation-15
Callum & MF:
Technical point (I think)
Are not TfL also answerable to the London Assembly & the Transport Committee thereof?
And, they are well-known, inside London, at least, for undertaking quite large-scale customer survey exercises so as to gauge public reactions to their actions & policies.
People often disgree with those actions & vigorous debate usually ensues.
So, you are correct & Marco F seems to be mistaken …..
Many thanks for a most informative article. No wonder you’re having to re-cache it loads of times!
Excellent article as always. Clearly Uber have failed to comply with their licence.
Out of curiousity, how many commentators here are in the cab trade?
Out here in the shires the Districts licence Hackney Carriages and Private Hire, and as far as I understand there’s no restrictions on “out of area” operation, especially with Private Hire- certainly a great many of the PH vehicles operating within Cambridge City have South Cambridgeshire licences. Am I right in understanding that there are restrictions on non TfL Private Hire operating within London? Presumably out of area PH can at least end a fare within London? But there’s enough restriction there to at least stop Uber getting every London driver to register with e.g. Watford Borough Council?
Under TfL rules, all new black cabs from 1 January 2018 will need to be capable of producing zero emissions (likely electric), and older cabs will need to be retired.
However the same rules don’t apply to Uber and other transportation network companies (TNC), or mini-cabs for that matter.
As many places in London are now over EU air quality limits, surely TfL needs to enforce a common air quality policy across the private hire industry. I realise that requiring TNC’s and mini-cabs to meet the same requirements as black cabs will take longer, but it does need to be implemented. Especially as the number TNC vehicles working are increasing.
I’m glad that finally there is some mention of Uber’s beginnings.
I would note, however, that the author spins this tale with considerable benefit towards Uber.
While limousine licenses aren’t limited in number like taxi medallions, at the same time the limousine licenses prohibit these vehicles from picking people up on the street. They are charter vehicles which require a point to point wayfare bill.
Uber got around this by ex-post-facto providing the “wayfare”, and furthermore was free-riding on the limousine companies – because the limo drivers are private individuals and would pick up customers in between limo company provided fares.
Only when Uber grew large enough did they start contracting directly with limousine companies in order to both provide sufficient supply and to forestall limo companies from banning drivers to use the limo companys’ cars to make side money.
So in point of fact, Uber’s business model was to skirt the law from the very beginning – not be a law abiding institution as the author insinuates.
MF & Callum
On the “responsible to the electors” matter, TfL are also responsible to both the Transport Committee & the whole of the London Assembly, as past discussion & comments in these pages have recorded.
Marco Fante
Indeed taking Uber across London on a regular basis is beyond the reach of most, but no doubt there is a market for that kind of thing!
However, what I had in mind more was the likes of those millennial types who go out partying, have careers and do a bit of travelling about, and have generally busy lives. So they end up in a London borough late at night where there’s no black cabs and they don’t know the local minicabs and when they do find a number they don’t know what will turn up and are worried about pricing etc, but now they have Uber anytime, anyplace, anywhere. (And even if they travel to Manchester, say, they use the same app for a broadly similar service.)
Haven’t been in London since I stayed there for three years almost thirty years ago, and was only in a handful of cabs during that time, so to a degree I’m just guessing. But I suspect Uber has made travel for some a bit more like the tube/train network was for me when I was there, and of course Uber and cabs generally add that bit of flexibility, safety and privacy for those who prefer not to use public transport.
So that’s what I was getting at about achieving a critical mass to offer a pan-London service that most minicab services will only provide on a more local basis, but apologies if that seemed a bit tangential to your point about predatory pricing.
Anyway, how precisely does the legal definition of predatory pricing work? Whatever the contractual niceties, on one legal level the drivers are micro-businesses charging the customers for the product, and of course the drivers must be profitable in general terms, otherwise they’d soon give up, or would move to another minicab firm.
Uber, on the other hand, derives its income from charging drivers fees based on the latter’s income from fares. But these fees don’t seem particularly cheap by industry standards, so if Uber is loss-making in the UK then that must be because of start up costs and excessive spending on lobbying and legal advice, perhaps?
So if the drivers are making a profit from the fares and Uber’s product sold to drivers isn’t cheap then does that mean it isn’t predatory, or am I looking at all this the wrong way?
So what I’m trying to say is that Uber’s product to drivers doesn’t seem particularly cheap, therefore losses are due to excessive costs rather than predatory pricing?
The Register has an interesting comment about Uber’s financing and being sued herw: https://www.theregister.co.uk/2017/09/26/uber_sued_squandering_company_value/
This may be relevant?
“Indie” report on Uber withdrawing from Quebec, because of .. “strict new regulations”.
@WW: I donât think your comments regarding Darlington buses are entirely fair… If youâre a local bus company that tries to do well by its employees, its social responsibilities and its shareholders, then there is no chance youâre going to be able to compete against a distant company hugely larger than you are, who are willing to pour huge amounts amounts of money into sinking a competitor.
This is a key question, as it raises issues around unfair competition and at what point should regulators intervene… Quite often by the time the regulator can intervene, itâs too late…
Now one can say that companies that grow too big, get lazy and therefore become targets for smaller and more nimble competition. Having worked for some very large banks, I can see this happening, mainly as divisions within the organisation are fighting each other rather than real competitors. However this can take decades, can we afford the monopoly to hold in the meantime?
@C1UE
Surely the San Francisco roots of Uber display the real problems with protectionist policies, such as those which limit the number of taxi licenses on an arbitrary basis. While these may give a good livelihood to taxi drivers, they do little to help the consumer and in such circumstances there will always be those who seek to circumvent such regulations where there’s a consumer demand to be satisfied.
It’s likely that any decisions to put an arbitrary limit on PHV numbers in London is likely to go the same way, with corruption creeping in (or maybe galloping in) to control licenses and customer service declining. This is hardly in anyone’s interest, certainly not any traveller’s.
I think it is too easily forgotten that taxi fares, including Uber, are still substantially higher than public transport fares so that competition between any form of taxi and public transport is certainly weighted in the direction of the latter. Even with Uber, the taxi/PHV share of the market is still much lower than for public transport. There is also evidence that the overall market does work. When the night tube started, Uber has reported a very significant reduction in the number of bookings it received at its peak booking time (midnight) in central London, but an equally significant rise in the number of bookings from suburban tube stations for the last mile. That seems to me to be a win-win result.
LBM
Remember that the car of choice for Uber UK drivers is a Toyota Prius hybrid so they are in a good position emissions wise.
Anon. E Mouse and Greg Tingey,
I’m sure that your observations about the public accountability of TfL are quite interesting in their own way but they have little or nothing to do with what I have written so I am not sure why those comments were addressed to me.
@Stuart Winton,
Since you asked, this a neat description of predatory pricing and the web page that goes with it is quite simple and straightforward:
“Predatory pricing in the UK is illegal. It is prohibited under EU Competition Law to sell goods at a loss with purpose of forcing other firms out of business.”
https://www.economicshelp.org/blog/glossary/predatory-pricing/
Having seen that and fully read the London Reconnections article above you will see the relevance.
@Anon.E.Mouse:
Are not TfL also answerable to the London Assembly & the Transport Committee thereof?
They are answerable in the sense that Assembly Members can ask awkward questions and TfL will generally eventually answer them, but not in the sense that the Assembly can actually stop TfL from doing something or force it to do something, in the way that the Mayor can. Unless you can get together a two thirds majority for the ‘nuclear option’ of blocking the Mayor’s budget.
The real accountability beyond the Mayor is that TfL’s decisions are subject to judicial review and so have to meet a certain level of ‘reasonableness’. Hence Addison Lee sought judicial review of the decision not to allow minicabs in bus lanes, and Uber will presumably seek judicial review of the decision not to renew their license.
And to add the standard reminder on judicial reviews …
In recent years, TfL has a very good track record in winning judicial reviews as they are experienced in dealing with them and prepare the ground well in anticipation that they will follow. If they think they are going to lose a judicial review they would have considered caving in as soon as they got a whiff of one in the offing.
As the LTDA judicial review into the East-West Cycle Superhighway showed, a judicial review can be very useful to TfL in establishing exactly what the legal situation is (so less to fear next time) and getting an endorsement of their action.
I suspect Uber stand to lose a lot more than TfL if they were so unwise as to go that route – but it seems in the last 24 hours or so they have seen sense and want to talk to TfL about exactly what the problems are and how they can put them right.
@Marco Fante
Thanks for that. My point was perhaps that when people use the term predatory pricing re Uber they’re referring to the fares charged to end users. My point was that the drivers must be profitable because otherwise they’d cease trading, or at least wouldn’t be working for Uber.
So if Uber in the UK is profitable because the fees it charges to drivers exceed its costs in the UK then its fee structure can’t be predatory?
http://www.telegraph.co.uk/business/2016/10/10/uber-drivers-racked-up-115m-of-fares-in-the-uk-last-year—doubl/
Which in turn leads back to another point I couldn’t really understand in the original piece about economies of scale and profitability. Basically, the way most taxi and minicab platforms work is to charge drivers a fee for providing them with work – essentially, the more drivers they have under their umbrella then the more income they have.
So I can’t see why they can’t have economies of scale, since they can expand (which they’ve obviously done in London) while there must be fixed costs that don’t depend on the number of drivers they have on their books, particularly in terms of accommodation, office staff (especially at more senior levels) and the whole app/booking/despatch thing, which must have a high level of fixed costs attached to it?
There’s also the whole short term/long term thing – even if Uber was loss making in the UK, presumably in assessing whether pricing is predatory some consideration is taken for short term start up costs and how that impacts on short term profitability rather than in the longer term?
@Quinlet
You’re bang on the money as regards limiting the number of PHV licenses in London, and the consequences of that. Don’t get me started – it’s my pet subject!
However, you’re wrong to say that it provides taxi drivers with a good living. More accurately, it provides *vehicle licence holders* with monopoly profits.
Of course, many taxi drivers are also vehicle licence holders, so to that extent you’re correct, but in New York (being the most obvious example globally) many of the ‘medallions’ are controlled by non-drivers, and any extra fare income they derive from the limit is lost to them and accrues to the medallion holder in the form of excessive rentals, roughly speaking.
@SHLR – I think you’re taking my comments as somehow endorsing what happened in Darlington. I don’t like what Stagecoach did, it was wrong. Worse, from an entirely sentimental viewpoint on my part, they used Busways Travel Services as their local weapon of choice. As a long time admirer of Tyne and Wear’s bus division and former employee / placement student there it was utterly out of character for Busways to act so aggressively but, of course, they had to do what Perth head office told them to do.
However I would just come back to DCT themselves. While yes it was locally controlled and no doubt wasn’t vicious to its employees the business was “on its knees”. It simply didn’t have the financial resources readily to hand to cope with the deregulated world. It had been substantially weakened by competition from United minibuses on its town services. It had not been able to renew its fleet effectively either. I am not saying these are “excuses” for predatory action but you can perhaps see why Stagecoach saw an opportunity. I suspect that if things had stretched a few years into the future that Go Ahead might well also have “had a go” at Darlington.
It’s a very fine line between effective competition that is legal and overly aggressive or predatory action which is not. I agree with you that the competition authorities are almost always too late in responding. However I’d also say that the competition authorities seem to be blind to the decades of history of consolidation, buy outs and rationalisation that was a feature of the bus industry long before 26 October 1986 (deregulation day). This then tends to cause them to try to swim against the tide of how mass transport services tend to be provided. They also appear to have a disproportionately aggressive attitude to Stagecoach where almost anything they do is likely to be referred somewhere. Meanwhile other groups can buy whatever company they like or take over routes if the company closes with nary an eyelid being batted. I am not sure that is really an appropriate stance even allowing for one particularly awful episode in Darlington.
@ Greg and others – I see Ian J has just beaten me to the answer. TfL are not accountable or responsible to the London Assembly or its Committees. They are subject to scrutiny as part of the organisational / executive structure controlled by the Mayor. TfL duly trot along to committees and answer questions and write letters and make soothing noises in the full knowledge that the Committee or even the entire Assembly can’t touch them in any meaningful way. I’ve watched too many committee webcasts and seen what then happens to avoid being a tad cynical about the process.
The more experienced Assembly members know that the way to get TfL to do something is to get the Mayor to accept whatever point / issue / complaint they’re raising and for the instruction to TfL to come via the Mayor. A tad cumbersome perhaps but reflective of where the power / accountability sits. I’ve never seen TfL “stick two fingers up” to a Committee report or recommendations as that probably wouldn’t be the right public response. However it’s clear that some recommendations don’t get implemented properly or are done in the short term and then disappear in the hope that no-one notices. I’ve direct experience of that one in terms of how TfL presented the costs and revenues of the bus network. The irony there is that the Transport Cttee under Val Shawcross asked for a particular presentation of the costs / revenues. When Labour won the Mayoralty in 2016 guess who was involved in changing the presentation of the data in the Annual Report so that the recommendation was no longer met? I had to resort to FOI to get some of the numbers and then an Assembly member had to use a Mayor’s Question to get the rest. Ironic eh? It’s as if they think no one notices what gets agreed in writing and no one is actually waiting to see the numbers published as promised.
Ian is right to highlight that the main Assembly power is the potential to not agree the Mayor’s annual budget. However we’ve never had the required split of votes to give one party group or group and minor parties the power to stop the budget. We had one episode under Boris where the relevant meeting started and the Tories were one member down (but on the way to the meeting). Labour thus tried to rush through proceedings to vote the budget down while the Tories tried to slow / stop proceedings through endless procedural challenges until their member arrived. It was almost farcical to watch. In the end said member did arrive and the proceedings returned to normal and Labour never did vote down Boris’s budget.
A bit off topic, perhaps, but it is to a degree relevant to any assessment of Uber in London, and underlines the difficulty of analysing the market in economic terms based on the official statistics.)
Interesting point about cabs working cross-border. As youâll know, traditionally PHVs could work anywhere in the provinces, as long as the three tiers of the licensing structure coincide licensing-area-wise â operator, vehicle and driver. So before minicabs in London were even licensed as PHVs (and years before Uber arrived in London) Delta on Merseyside did a lot of work in Liverpool, but the cars were licensed by, and the business based in, neighbouring Sefton Borough Council. But as long as all three licenses were issued by Sefton then the cars could work anywhere. What Delta couldnât do, though, was use Liverpool licensed drivers to work in Liverpool, because the operator was based in and licensed by Sefton.
Why? Well, geographical proximity and expansion of the business presumably â local authority areas wonât necessarily coincide with market and commercial requirements, particularly in a metropolis like Merseyside which encompasses several local authority areas â a bit like each London borough being responsible for licensing. Thereâs also an element of shopping around for areas with low barriers to entry for vehicles and drivers, not to mention things like licensing fees.
However, hackney carriages can do pre-booked work anywhere without an operatorâs license (ie acting as de facto PHVs) so there are quite a few in the UK working out of area on a permanent basis. A few years ago HCs licensed in Berwick were working as far as a few hundred miles away. This reached the courts and there was something of a clampdown, but it still happens â there are apparently a lot of Rossendale-licensed HCs working in places like Bradford and Sheffield, for example.
However, the Law Commission investigated the trade a few years ago, and relaxed the cross-border rules for PHVs, so (as far as I can work out) now itâs a bit easier for the likes of Delta to work across local authority boundaries. Which in turn has benefited Uber. So there appear to be TfL licensed vehicles working in places like Sheffield, because TfL provide an analysis of where the private hire drivers live.
So 68 live in Bradford as of June this year. Which is presumably where theyâre working, most obviously for Uber? Of course, some living in Northampton (say) could well be working in London. But does anyone actually know?
By the same token, presumably there are PHVs *not* licensed by TfL working in London?
But since the editor of this site is working on an analysis of Uber drivers in London, the official figures can be misleading. However, intuitively I doubt if the number of TfL licensed drivers is as distorted by the cross-border issue as was the case regarding PHVs in Sefton and HCs in Berwick or Rossendale.
For what itâs worth, in Scotland (where I am!) the cross-border rules are a lot tighter. Thus, and as is the norm elsewhere, a PHV or HC can take passengers from their local authority area to another and pick-up passengers from locations the other side of their local authority border, but what they canât do is station themselves permanently in another area and do work there, as per Sefton and Rossendale.
A bit OT, but was TfL more responsive when Livingstone had less than 1/3 support in the Assembly? I do recall that the Greens wanted (and got) quite a bit of cycle stuff
Fantastic article and I only wish more of this was in the MSM so that the public have a more informed and balanced view of this situation.
With regards to one question from Sam: ‘Is it true that TfL are now issuing the licenses and Uber have nothing to do with performing the background checks? (except presumably collecting the documents, for which they seem to be doing their part of reporting frauds)’. Uber hired a company who ‘conducted’ 13,000 DBS checks and handed these ‘fabricated’ certificates to Uber drivers who then produced them to TfL (who believed them to be authentic). I believe TfL failed when they found out and gave Uber 28 days to correct this, while the drivers were still allowed to continue to work!
Another problem with Uber drivers is that many of them are from outside the UK and no DBS is expected from them (Human Rights) prior to their time in the UK. All they need is a letter of good character from a Signatory or Attestor which, again, is a system wide open to fraud!
There is also evidence of drivers having received ‘fake’ Medical Certificates which they ‘bought’ together with the fact that many of the drivers have on/off Hire & Reward Insurance which is why many of them have ‘bolted’ following the innumerable accidents in London.
Under the FOI Act, (and very much aware of the [Accusation snipped] ‘chumocracy’ between Cameron, Osborne and Senior Uber Executives who lobbied Boris to leave Uber alone), a group of taxi drivers relentlessly requested transparency with regards to any written communications between them all. Despite Uber declining, saying they have no minutes of meetings or emails, a young TfL clerk was more accommodating and copies of said emails etc were handed over (copies of which have been duly shared on social media platforms).
Consequently, these emails and minutes were handed over to a group of MP’s who set up an All Party Parliamentary Group and shared the information with the London Assembly and the awkward questions began. The saga continues and hopefully, Cameron, Osborne, Uber Execs and Senior TfL staff will be held accountable for handing out some 130,000 phv licences to Uber drivers like they were sweets. In the meantime, many black taxi drivers were driven to despair when they couldn’t get their licences renewed despite applying some four months in advance, rendering them unable to pay the loans/rents for their taxi or pay for fuel, some not able to pay their mortgages/rents and some, unfortunately, losing their homes, wives/partners and children. Moreover, a FB page was set up and ran by wives/girlfriends/partners 24/7, where grown men could talk in confidence about their low mood, depression, severe anxiety and/or anger at the situation they found themselves in. There was 4 who needed Crisis Intervention teams to support them when they were feeling suicidal.
A #SaveTaxi FB was also set up by the wife of a cabbie (now 18,000 members and an admin team of 9 ladies who work tirelessly round the clock) so that cabbies, wives etc could post their thoughts. The admin ladies and many #SaveTaxi members have, for the last 3 years, been instrumental in lobbying TfL, Sadiq Khan, MP’s the Prime Minister and MSM regarding the uneven playing field, the chumocracy (http://www.dailymail.co.uk/debate/article-4358824/PETER-OBOURNE-growing-smell-Uber.html), [Accusation snipped] favouritism towards Uber.
In the end, with all the evidence (chumocracy [Accusations snipped], of over five years (shared via FB, Linked-In and Twitter together with MSM who were initially formally ordered by the aforementioned Prime Minister and Chancellor of the Exchequer to leave well alone!) the current Mayor of London and TfL had no other option other than to refuse to renew Uber’s Licence.
Fortunately, certain leading (whether we like them or not) newspapers are keen to let this all leak out over the coming weeks. London taxi drivers together with their wives/partners/girlfriends and families are angry because all they asked for was a level playing field. They’re not angry at Uber drivers, as they too need to earn a living [Accusations snipped].
If you’re not bored already and you really want to read more please read the perspective of a London Cabbie: http://backofmylondoncab.blogspot.co.uk/2017/09/at-risk-of-repeating-myself.html?m=1
https://www.londonreconnections.com/wp-admin/edit-comments.php#comments-form
[Please note that accusatory and defamatory language is not allowed in LR comments. I’ve snipped out such text in this post, but please note that comments containing such language may be removed outright. LBM]
For the avoidance of doubt, my comment @ 14.22 was specifically addressed to AL__S. who commented on the cross-border issue @ 1836 last night. Forgot to include that in the comment, so the second paragraph in particular may sound a bit daft!
However, on a related point (although again perhaps off topic), for those who are not as anoraky about these things as me, TfL is in fact only *one* of nearly 400 HC/PHV licensing authorities in the UK, although numerically by far the biggest.
Essentially, it’s local councils outside London who license HCs and PHVs, hence their number. However, there are a small number of broad frameworks governing each council as follows, although each of them will have its own rules and regulations, and, for example, different tariff structures for HCs, (which can also apply to PHVs, depending on the local regime.)
The broad frameworks are roughly as follows:
London
Obviously the HC/black cab regime dates from some time ago. Minicabs were totally unlicensed until the early 2000s, when they were then regulated as PHVs, thus bringing the capital into line with the rest of the UK. But noteworthy that until then someone could serve a prison sentence for rape or murder and be driving a minicab on release, thus putting the current Uber debate into some perspective.
England and Wales except London
Most of the HC legislation dates from 1847(?), so in some regards has not kept the pace with contemporary developments. The PHV legislation is a bit more recent, namely from 1963(?).
However, the Welsh Assembly has more recently been devolved powers regarding the sector, and I think it is currently consulting on changes to the regime.
Scotland
The legislation for both HCs and PHVs dates from a single Act passed in 1982, so a bit more modern and integrated. Although originating in Westminster, the legislation differs from that in England and Wales in several respects, but now responsibility for it all resides with the Scottish Parliament.
Northern Ireland
This is a bit different from the others, but unfortunately I don’t know the details. However, as far as I know PHVs can pick up unbooked passengers from the street at certain times, so are effectively HCs on a periodic basis.
@Stuart Winton and others
A recent report
http://home.bt.com/lifestyle/money/mortgages-bills/jobs-with-the-biggest-pay-rises-are-you-better-off-than-5-years-ago-11364210160857
shows that taxi drivers have seen amongst the biggest pay rises over the last 5 years. While this doesn’t disaggregate between London and the rest of the country or between black cab and PHV drivers, the PHV sector in London must be a significant share of the total Either black cab drivers have seen even bigger increases or Uber has failed to keep down their drivers’ pay. Either way, it doesn’t really square up with the thesis that Uber has been taking the bread out of other taxi drivers’ mouths. Interestingly, the practice whereby two or three black cab drivers shared one vehicle, so as to reduce the impact of the capital costs of running a black cab, seems largely to have disappeared, a bit more evidence that black cab drivers are hardly hard done by.
@Stuart Winton
Grand economies of scale do not apply to this industry for reasons that I have already described. That has always been the case in the past and there is no compelling reason as to why it should change now. Most businesses have some overhead costs. That in itself is not an argument.
As to Uber’s UK business being “profitable”, determining that would require unpicking the complex web of ownership and payment that is described in the article above. The Telegraph article that you cite doesn’t do that, nor does it explain where the massive driver “subsidies” that it mentions are coming from. The figure that it provides for Uber’s global losses is also completely inconsistent with those of Reuters, Axios and everyone else that has reliably written on that topic.
One worthy point that that the Telegraph piece does make is that any viability that Uber does have in the UK currently relies on its chronic and unsustainable underpayment of drivers. I say unsustainable for 2 reasons, one being the current tribunal ruling and the other being the fact that it eventually leaves them vulnerable to competitors that will pay more.
I note that @Carlo has left an interesting and extensive comment. Aspects of it have been moderated as it involves some accusations that relate to the relationship between the Cameron govt. and Uber executives. The relevant and well-established allegations cite undue influence that was brought to bear upon former Mayor, Boris Johnson on Uber’s behalf.
For those who may be unaware, intrigued or interested in that particular aspect, the relevant details can be found here:
http://www.dailymail.co.uk/news/article-4351418/Cameron-aide-s-uber-cover-up.html
https://www.theguardian.com/technology/2017/apr/13/data-watchdog-no-10-cameron-uber-correspondence-regulation
@Marco Fante
Sorry, but still can’t see why there can’t be economies of scale in the industry. You initially said there were ‘no’ economies of scale, now you’ve qualified that by saying there are ‘no GRAND’ economies of scale, which I hadn’t claimed.
It just seems counter-intuitive that there’s some sort of finite limit to the number of drivers a minicab or taxi platform will take on. After all, perhaps the most dominant paradigm is for such platforms to be open-ended about the number of drivers they’ll take on, and Uber has just replicated this paradigm on a huge scale. So if perhaps thirty years ago these platforms would expand even if it meant taking on more telephonists to answer the phone and controllers to despatch the cars, they would generally do so presumably because there was a significant fixed cost base that made the incremental cost of taking on more drivers profitable.
In fact, intuitively I suspect Uber’s core operation has more economies of scale than the standard minicab operation, because it’s maybe more top-heavy with lawyers, PR people and MBA types whose numbers depend less on the amount of drivers on the books. Likewise, Uber’s high degree of automation also points towards a higher than average fixed cost base, and less incremental cost in taking on more drivers? Of course, the app is not peculiar to Uber, and in any case despatching cars was becoming increasingly automated years before the app put in an appearance.
So you’ll have to explain to me why in simple terms Uber and similar smaller platforms shouldn’t expand – your knowledge of economics is clearly significantly greater than mine, but I do know a bit about the industry’s structure and dynamics in practical terms, and on an intuitive level your claim just doesn’t ring true.
After all, 10 years ago you could have made a similar point about Addison Lee, which with 4,000 cars was (I think) easily the biggest player at that time, yet was highly profitable, with founder John Griffin selling his majority stake for ÂŁ300m a few years back.
Again intuitively, I would imagine that the reason most minicab operations are tiny compared to Uber is that the market is highly contestable (if that’s the right term!) and that while there are economies of scale present, they’re not the ‘grand’ ones that you mentioned in your last post.
On the other hand, and on a related point, perhaps it could be said that you need huge capital funding to create the kind of critical mass to offer the pan-London service that I talked about earlier and to that extent there is a degree of monopoly increasingly present, born of Uber’s access to huge amounts of capital?
As for Uber’s supposed profitability in the UK, I agree that its byzantine corporate structure and opaqueness mean the numbers have to be taken with a pinch of salt.
The Telegraph piece says it’s extrapolated Uber’s ÂŁ23m fee income from drivers to give a total figure of ÂŁ115m in fares (@20%). That was for the year ending December 2015, but even assuming Uber had only 10,000 active drivers at that time, that means income per driver must be less than ÂŁ11,500 per annum. Since full time drivers must be making more three or four times that, it would suggest a huge number of part-time drivers doing just a handful of hours per week. Of course, that’s what the gig economy is all about, but it does underline the difficulty of quantifying the whole thing, particularly with Uber’s rapid growth and thus the difficulty of ascertaining driver numbers at any particular time. So of necessity any analysis of driver earnings or similar is going to have a huge degree of spuriousness about it.
@Marco Fante, you said:
“One worthy point that that the Telegraph piece does make is that any viability that Uber does have in the UK currently relies on its chronic and unsustainable underpayment of drivers. I say unsustainable for 2 reasons, one being the current tribunal ruling and the other being the fact that it eventually leaves them vulnerable to competitors that will pay more.”
But if Uber’s unsustainable on that basis, then the rest of the industry will suffer likewise from the tribunal ruling?
After all, just this week another tribunal ruling went against Addison Lee, a la Uber, and one a report cited one of the lawyers involved thus:
“If you think of Uber as the archetypal âgig economyâ company, and Addison Lee as something a bit different â actually [this shows] they operate in a very similar way,â said Nigel Mackay, a solicitor at law firm Leigh Day who worked for the claimants in both the Uber and Addison Lee cases.
Ditto the rest of the minicab industry, and confirming what some knew since Uber’s arrival – never mind the ‘gig/sharing economy’ and ‘ride-sharing’ blather: fundamentally, Uber just replicates the minicab paradigm, and there’s more than a sniff of tall poppy syndrome attracting attention to issues that are portrayed as new but are in fact old hat.
So I can’t see how Uber’s model leaves it unsustainable because of underpayment to drivers and the tribunal ruling, and thus ‘vulnerable to competitors who pay more’. Assuming any ruling on employment status is enforced industry-wide, why would Uber be any more vulnerable than its competitors? And why would competitors be able to pay more?
After all, traditionally there’s a high churn of drivers moving from platform to platform looking for higher earnings, but of course because of this and the platforms’ open-ended approach to recruitment, any excess earnings on one platform will soon be reduced to the industry norm as drivers move there, reducing earnings until an industry-wide equilibrium of some kind is reached.
Of course, Uber’s rapid expansion and perhaps greater informational difficulties caused by its brand and marketing efforts portraying it as something new and different may have upset this equilibrium a bit, but in the final analysis drivers just move to the platform where the work is and vice versa, so I can’t see how Uber is particularly disadvantaged in that regard.
Of more relevance is why in the first place minicab driving is poorly remunerated, but surely that’s a labour market thing and nothing directly to do with the platforms per se?
@Quinlet
Thanks for that. Can’t get the page to load now, but had a look last night. 44% increase in taxi/cab driver earnings in five years seems counter-intuitive.
However, had a look at the BBC page for the source statistics, and it says near the bottom that it “doesn’t include the self-employed”, so that would exclude almost every driver pertinent to the London Uber/minicab/black cab discussion! So the figures are presumably for some niche in the sector, which might explain why they’re counter-intuitive.
http://www.bbc.co.uk/news/business-40756834
As regards London black cab drivers sharing vehicles, when was that?
I’ve been looking at the figures for twenty years now, and a couple of quick calculations last night showed a driver to vehicle ratio of 1.19 now to 1.14 in the early 2000s. (Might have been the other way round, but either way confirms that most black cabs in London are ‘singled’ and nothing much has changed for the thick end of twenty years.)
The ‘losses’ (60% on every ride) are covered by the huge pot of VC sourced capital Uber has amassed the past few years.
Uber’s business model is obviously to establish a commanding foot print then begin to raise fares to cover costs. They need to do this before the pot of gold runs out.
By then Musk and others will have established a driverless service that will kick the feet out from under Uber and black cabs alike.
@Stuart. If the tribunal rules that uber drivers are employees rather than self employed – I don’t agree that this automatically extrapolates across all mini cab businesses.
Some of the tests the tribunal applies are (does the driver have a genuine ability to choose which hours to work / which jobs to accept) and does the customer pay (therefore contract directly) with the driver or pay a third party. The answers to those tests will be very different for many mini cab drivers compared to those working for Uber – therefore I don’t think a ruling against Uber would automatically affect all mini cab operators.
Thoughts on economies of scale: surely the main benefit of scale is that if you have to build a computer management platform, linked to an app, then it makes sense to spread that investment across as many cars and drivers as possible. A small rural minicab company wouldn’t have access to the IT skills, unless there is good commercial off-the-shelf software both for the management and the app. Uber, because of its size, has been able to build highly sophisticated software.
Secondly, when I want a cab, I want it now, or I want it at a set time (“My appointment is 11:15 so I will need the cab to pick me up from home at 10:45, and then collect me at 12:00 to take me back home.”) A small company will say that no one is available, or that there is an hour’s wait for the second ride. A big company, such as Uber, Greywall permitting, is likely to have a car available for both slots. Again, Uber wins because of size, as will other large companies.
Finally, Stuart WIinton at 10:11: Maybe the employed drivers are those driving big limos that are to be seen outside head offices of banks and other large companies. I see that many of them now sport TfL minicab badges. Why, I’m not sure: maybe there are tax advantages. But the drivers are likely employed by a set of specialist limo providers.
Regarding John Bull’s point on Twitter about TfL licensed vehicles being used outside London, and the cross border issue generally, Brighton reputedly has the stiffest knowledge test outside London. And this applies to PH as well as HC. Which might explain why the TfL postcode-derived map shows 157 TfL drivers living in Brighton. Of course, they could conceivably be working in London, but some no doubt work in Brighton and are able to avoid the knowledge test by using a TfL licensed vehicle.
Less commutable from London is Birmingham, obviously, and the TfL map shows 747 drivers living there. Had a look at the council’s website, and they have some sort of exam for PHV drivers, and group 2 medical standards (normally the higher standard required of bus and truck drivers), so that might be more onerous than London, thus explaining why they might use a London PHV to work in Birmingham (I don’t know the precise TfL PH driver criteria, but as far as I’m aware they’re pretty straightforward.)
By the same token, the GMB have been complaining about drivers banned in Southend as not fit and proper, but being able to obtain TfL licenses and work in Southend with Uber. Presumably this is because ultimately it’s up to local councillors who they’ll license as drivers, so control in that regard can vary between licensing areas. (In theory even a convicted murderer/rapist/terrorist/armed robber could be granted a license because itâs ultimately at the discretion of local councillors, although in practical terms those convicted of very serious crimes are unlikely to be successful.)
This is mentioned in a Guardian piece from earlier this year, but it seems to contain several inaccuracies. It’s claimed that prior to the Deregulation Act 2015 PHVs had to return to their area between jobs. Don’t think that’s correct, as per Delta in Sefton, who could work in Liverpool without returning to Sefton, as long as the operator, vehicle and driver were licensed by Sefton.
https://www.theguardian.com/technology/2017/feb/17/uber-exploiting-loophole-to-spread-tentacles-across-uk-gmb-union-says
Not sure how precisely the 2015 Act facilitates working out-of-area and how this interacts with Uberâs Byzantine corporate structure, but the bottom line is that TfL licensed PHVs can work anywhere Uber is operating.
(As per usual the Guardian piece contains some ostensibly misleading and inaccurate stuff, apart from the GMBâs claim that previously PHVs had to return to their licensing area. So it says: â414 of Sheffieldâs minicab drivers were found to have obtained their licences from Rossendale councilâ.
Strictly speaking theyâre more probably Hackney Carriage drivers licensed by Rossendale but acting as de facto minicab/PHV drivers â they can do pre-booked/private hire work anywhere, but can only do unbooked/public hire work in the Rossendale area.
Likewise (and more pertinent to London) the article says, âwhile 53 [in Sheffield] had taxi licences issued by Transport for London.â This is presumably more accurately private hire licenses â although âtaxiâ is often used generically, in the more technical context it suggests London black cab drivers are working in Sheffield â seems unlikely in terms of shopping around licensing areas for lower standards and cheaper fees.)
So all maybe slightly off topic, but in any economic/market assessment of PHVs/Uber numbers in London itâs necessary to bear in mind that in fact some of them are operating in other markets, and while the above rationalisation is no doubt only a part explanation, itâs perhaps sufficient for the purposes of John Bullâs assessment.
On the other hand, actually quantifying the whole thing is a different matter entirely!
And on a broader point the cross-border factor has probably been instrumental in militating against mega-cab firms (in the provinces at least), and as I recall it the inherent inefficiency was why the Law Commission set in train the process to deregulate in that regard. Which has in turn proved convenient for Uberâs ambitionâs for a pan-national service and brand.
@IslandDweller
Yes, you’re right that the Uber’s structure and practices won’t be replicated across the minicab trade.
However, at a rough guess I would say the tendency would be for other firms to be *more* controlling than Uber, for example in terms of things like uniforms and shift patterns? On the other hand, I can’t really think of many ways that minicab drivers could be *less* controlled than Uber’s.
In fact that’s one of the reasons (apart from the issue being highlighted in the first place) why the Uber tribunal judgement seems so striking – by industry standards Uber drivers don’t seem particularly controlled!
Of course, every firm is different, but one oddity is that Uber says its drives can work for other operators (although I’m not sure how this works in practice). But I suspect that for the vast majority of more established firms working for another operator would be strictly prohibited. So that’s maybe one regard in which Uber isn’t particularly controlling compared to industry norms. (In fact I wouldn’t be surprised if that was a deliberate strategy by Uber to avoid drivers being considered employees, but as it transpired wasn’t quite enough, but of course it will all become a bit clearer once the current appeal process is complete.)
@AlanBG
Indeed there have been off the shelf computerised despatch systems available for a couple of decades now, although in the early days you’d probably need a dozen cars at least to make it financially viable as compared to two-way radios. Mobile telephony and all that has advanced things in that regard, culminating in the app. Not really a thing I know a lot about, but as far as I’m aware, now off the shelf apps are ten a penny, and throughout the UK most of the major players have an app option, although I suspect most still receive most of their bookings via telephone.
But you’re bang on about the numbers thing, which means a more efficient system for both drivers and customers, and to reiterate an earlier point, Uber’s ability to gain the critical mass to offer a pan-London service results in a virtuous circle of increasing efficiency as numbers and market penetration increase.
And, yes, the chauffer thing could explain the BBC’s figures for wage increases. The category behind taxi/cab drivers/chauffeurs is “Rubber process operatives”, so clearly a niche sector, and I suspect the figure for the taxi category is simply an outlier for whatever reason.
As for the TfL badges on the limos, until a few years ago cars on long-term contracts for a single customer were exempt from licensing, but the DfT closed the exemption due to abuse. So that’s a possible explanation for the badges, but I’m not entirely sure. (Don’t know the precise TfL rules, but PHVs in the provinces normally require license plates, but many authorities provide an exemption from displaying the plate for chauffeur/executive and similar services.)
As a reminder to all commentators, please spell out abbreviations in the first instance, so that readers, many of whom are not in or curious about the transport sector, can understand.
PHV means private hire vehicle, HC means Hackney carriage.
But what is GMB?
Malcolm, quoting wikipedia, writes: GMB is a general trade union in the United Kingdom.
@Stuart. Indeed – the Uber PR machine does say that drivers are free to refuse jobs. But Uber control the algorithms that allocate jobs to drivers, and we don’t get to inspect that. There are multiple allegations that if Uber drivers repeatedly turn down jobs they will suddenly find they don’t get offered further jobs. As for Uber drivers being free to pick their hours, again there are allegations that if they are not logged on when Uber want them logged on they don’t get offered work when they do log back in. But I am straying into dangerous territory because none of us have access to the Uber algorithms. I’ll be very interested to see how this employment case turns out.
PS to Mods – minor admin thing – I no longer see the option to remember my details so I have to fill in my details for every comment – is this a temporary loss?
I know we have to tread carefully with politicians, so may I just observe that it seems somewhat unusual that the Prime Minister should be offering her opinions on a London taxi licencing issue….
https://www.theguardian.com/technology/2017/sep/28/uber-licence-withdrawal-disproportionate-says-theresa-may
@JeffinLondon
If Uber’s strategy is to create a monopoly and then increase prices then London will not be the first city to succumb for a variety of reasons:
– Uber started operations in many US cities well before it started in London
– the public transport share of the market in London is high compared to the taxi share
– the black cab sector is well regulated (including on price)
Logically, if Uber is to succeed, then it must be getting close to its goal in at least one (probably US) city. If it isn’t getting close anywhere by now, then this business model is unlikely to succeed. If it is, then we should be hearing about that city (or those cities) because they will be suffering the pain of high prices. No deafening cries as far as I can detect, which suggests either that their business model is a failure and Uber will not be able to sustain the level of losses they are incurring for much longer or that they have a different business model. Certainly I would be expecting the more hard headed investors in Uber to be starting to say ‘when are we going to get our money back?’
Fascinating article, thank,you.
ID
Also there is, to my admittedly jaundiced view, a very partisan (as in pro-Uber)
article in the Indie, as well ….
@IslandDweller 28 Sept 20:50 – “I no longer see the option to remember my details so I have to fill in my details for every comment â is this a temporary loss?”
Likewise here but I note it’s still there on all other topics. Somebody above mentioned having to re-cache this topic a lot, as witness the delay in one’s comments going up, presumably because there’s a lot of what Uber may describe as ‘background checks’ on the commentators’ comments.
@Islanddweller – yes exactly. It is most curious that Mrs May has taken time out from national and international responsibilities to talk about taxi licenses in London, a devolved matter of regional importance, and effectively undermine the Mayor and TfL in the process. What does she know that we don’t, and why is she seeking to influence the outcome of this matter? Perhaps the Cameron/Johnson/Uber relationship has potential to become a PR disaster, perhaps this is an attempt to deflect attention from some as yet undiscovered issue. It will be interesting to see how everyone London-side responds.
@IslandDweller and @Ben; In reply to your comments ‘it seems somewhat unusual that the Prime Minister should be offering her opinions on a London taxi licencing issueâŠ.’ and ‘It is most curious that Mrs May has taken time out from national and international responsibilities to talk about taxi licenses in London….’ Perhaps the following might shed some light……
The Prime Minister Theresa Mayâs husband is a senior executive at a $1.4tn investment fund that profits from tax avoiding companies (said to include uber).
https://www.nytimes.com/2016/07/15/business/international/philip-may-a-financier-who-may-find-it-harder-to-be-low-key.html?mcubz=1
http://www.independent.co.uk/news/uk/politics/theresa-may-philip-may-amazon-starbucks-google-capital-group-philip-morris-a7133231.html
“There have been 48 offences in the period (1 Feb 2016 – 28 Feb 2017) where Uber was referenced in a crime report for a Taxi and Private Hire journey-related sexual offence in London”
Police PDF / Freedom of information request:
https://maps.met.police.uk/globalassets/foi-media/disclosure_2017/july_2017/information-rights-unit—incidents-of-sexual-assaults-by-uber-private-hire-drivers-from-february-2016-to-february-2017
GF & others
We also have to remember that there is an Appeal Process being gone through in the courts, right now. And we all, moderators & commenters alike, will have to be careful of what may or may not constitute “Contempt of Court”
@Greg: I saw that article in the Indy as well. It struck me that tries to do everything to avoid addressing the concerns raised by TfL…
One does wonder how much party affiliations have to do with various politician’s choices about what, and how much, to say about Uber. Any stick with which to beat the political opponent is liable to be deployed.
But the tendency of many people in the political world to blur the distinctions between London, the South-East, England, Britain and the UK (when it suits a particular argument) is well-known. The very existence of terms like “The Home Counties” and “The provinces” shows this. Similar things happen all over the world.
@IslandDweller
That’s interesting – of course, one of the most interesting aspects of Uber is how its PR/marketing/spin/brand blah blah has cemented numerous misleading impressions, primarily that it’s something new in terms of a platform and that it’s reinvented the labour market for drivers. Of course, that’s all hardly peculiar to Uber; the commercial world generally and indeed the world of politics and the public sector is broadly similar, but Uber do seem particularly adept at the whole PR thing.
But one major facet of this is the flexibility for drivers thing. Of course, that’s nothing new, particularly for hackney carriage drivers, who come and go as they please – the laws of supply and demand and the ‘invisible hand’ of the market are at work.
Private hire and despatch platforms are essentially similar – however, the work comes via a two-way radio or app (at either end of the technology continuum) rather than from the streets and taxi ranks, but from the driver’s perspective they can come and go as the please.
But this ‘open-shift’ pattern can only apply to the more substantial platforms – for the laws of supply and demand to work well, the more participants in the market the better (ie the more participants in the market the closer it will be to the ‘perfect market’, in economic terms).
So one of the arguments adduced by this week’s Addison Lee case on employment status was that drivers can choose their hours. Addison Lee has 4,000(?) drivers.
At the other end of the scale, if a firm has only a dozen cars because it’s a minor player in London or its operating in a small town, then even if the drivers are deemed self-employed it should be obvious that the open-shift modus won’t work. The firm will have to utilise some sort of shift pattern to offer a 24/7 service.
But, and coming back to your point, even with a behemoth like Uber I wouldn’t be surprised if in fact the open-shift model isn’t absolute, despite the PR.
And on a related point, assuming Uber’s open-shift pattern is more absolute than most, perhaps that’s why they don’t allow advance bookings – they might have to roster drivers if there was a shed load of 4 am runs to Heathrow or Gatwick, for example. Wouldn’t do for the PR if customers were booking early morning airport transfers and no one turned up!
This dimension might also explain why Uber is only targeting the conurbations and bigger towns and cities – their open shift model wouldn’t work in smaller towns, but if they rostered drivers as a consequence then that would detract from their self-employment argument. (Just speculating here and could be completely wrong – obviously the more densely populated areas are the most obvious targets for a business like Uber, irrespective of the arguments regarding drivers’ employment status.)
(The ability to refuse jobs you mention is also another interesting dimension to the employment status question – whatever the actuality of Uber, I suspect drivers are afforded more discretion than the average mainstream taxi/private hire platform, which again maybe suggests that if the ongoing appeal goes against Uber then the more established industry will be quaking in their boots.)
Regarding Uber’s profitability (again!), apparently Delta on Merseyside employs 250 staff and has 2,000 drivers on its ‘platform’.
The Uber profit figures in the Telegraph article say it employs 105 staff. That was for the year ending December 2015, when Uber must have had at least 10,000 drivers, probably around double that.
So compared to Delta, there’s obviously a huge disparity in terms of the number of staff and the number of drivers.
Which could underline that the app-based booking/despatch system is hyper-efficient (or uber-efficient, even), thus if Delta requires more office staff to answer the phones as it expands market share and takes on more drivers, with a highly automated system like Uber’s it can expand significantly without taking on the kind of staff numbers required by Delta.
Moreover, since Uber’s average salary is ÂŁ68k, even by London standards that suggests it’s top heavy in terms of techies, PR, MBA and ‘public affairs’ types, suggesting a high fixed-cost base compared to Delta, therefore less variable costs than Delta resulting from expansion.
All of which might suggest Uber enjoys significantly greater economies of scale than the established industry, presumably because of the app-based system – it can expand customer/driver numbers significantly without taking taking on commensurate numbers of office staff, ditto at senior staff levels.
Thus in basic terms, compared to the established industry it has high fixed costs and lower variable costs, thus (if I understand the term correctly) greater economies of scale.
But I suppose that’s what technology and automation is all about, so intuitively hardly surprising.
And it should be noted that Delta is probably at the cutting edge of the established industry in terms of technology and efficiency. (And, like most major players now uses an app, although I suspect the vast majority of its bookings are still voice-based.)
Of course, it would be easy to pick holes in all of this, so a couple of caveats.
1 Delta probably employs a fairly high proportion of part-time staff, while I suspect the opposite is the case for Uber. But even assuming Delta staff work only 20 hours per week on average, and Delta comprised c.100 full-time equivalents compared to Uber’s 105, compared to driver numbers there’s still a huge disparity.
2 As regards Uber’s accounts, it’s not entirely clear if you can crudely compare Delta’s staff/driver ratio with Uber’s. But the press portrayals of Uber’s figures certainly suggest the 105 staff are overseeing all of its drivers (in London at least) and there aren’t other staff employed by other companies in the Uber group that might distort the figures.
Further to the profitability thing, according to Addison Lee’s website they have 900+ HQ staff. So
Delta: Drivers 2,000 Staff 250
Addy Lee: Drivers 4,000 Staff 900
Uber: Drivers 20,000 Staff 105
So assuming that’s comparing like with like, Addison Lee even more labour-intensive than Delta, and off the scale compared to Uber.
So Uber has nearly 200 drivers per staff member, Addy Lee has little more than four drivers per staff member?
Even assuming Uber is the most automated, the numbers just don’t ring true and suggest not comparing like-with-like.
Re Stuart Winton,
Addy Lee also do courier and van delivery work. Also do they lease /own the vehicles (all identical spec people carriers) in which case might they maintain in house? In which case very different model to other firms…
Traditionally the minibuses some firms provide are owned by the firm rather than the drivers which may also explain differences in “staff” vs “drivers” if those vehicles are driven by staff with D1 license but other vehicles by self employeed drivers (who are the registered keepers) with a normal B license.
The BBC Radio 4 programme, âMore or Lessâ which was broadcast this afternoon (29 Sep) included a small piece on Uber, specifically examining the claim by the Black Cab drivers association that a sexual assault is more likely in an Uber than other taxis. The programme will be available on iplayer.
The presenters are careful to point out that published data sources are limited, and that Uber refused to cooperate with the programme researchers. Nevertheless, the conclusion they reached is that with available statistics, there is no evidence that the incidence rate of sexual assaults is any higher in Uber than other taxis.
For the avoidance of all doubt, I am in no way defending Uber. If they have not cooperated with tfl and police in investigating the alleged incidences of assault then tfl should throw the book at them.
@NGH
Thanks for that – indeed that could provide an explanation. As you’ll know most operations of this type have operations like courier and chauffeur drive which aren’t part of their core activities, and without really looking into this I was simply assuming they were negligible in terms of the overall numbers.
Likewise, it’s commonplace for taxi and minicab platforms to utilise mostly owner-drivers, but to also have a number of company-owned vehicles which they recruit drivers for, further complicating any analysis.
And that in turn represents another oddity in the self-employment debate – if Uber drivers are considered employees, what about those driving the minicab firm’s vehicles, working shifts and wearing uniforms, but still deemed self-employed!!
(As regards an earlier comment about filling in the comment form, apparently I’m someone called ‘Kit Green’, but I’ll change that to my real name before posting…)
@IslandDweller
“…there is no evidence that the incidence rate of sexual assaults is any higher in Uber than other taxis.”
Looking at the figures and trying not to be selective, indeed that’s maybe along the lines of what the stats suggest and what many seem to be thinking.
But perhaps the conclusion specifically referred to private hire (or minicabs) rather than black cabs? Suspect in London at least that black cabs a lot safer than minicabs, but Uber not significantly different to other minicabs.
Of course, some analyses simply use the term ‘taxi’ generically, obscuring any nuances, or indeed hiding fundamental differences.
So a Spectator piece when this whole thing kicked off effectively claimed black cabs in London no better than Uber and minicabs, but this was (I think) based on a Sun piece which conflated Hackney Carriages and private hire and combined the stats simply as taxis.
But all this maybe symptomatic of Uber often defensively saying they’re no worse than the more mainstream trade when they’re responding to criticism, or that they’re just doing the same in terms of practices.
So even Uber forced to admit at times that they’re simply same old, same old…
@Stuart Winton
Quite possibly some of Uber’s headcount involved in the London operations is based at either the Dutch parent of Uber London Ltd, Uber International Holding B.V. (and whose accounts are apparently available on what is presumably the Dutch equivalent of Companies House, http://www.kv.nl) or even at the ultimate US parent, Uber Technologies Inc.
Companies House also shows there have been several changes to directors during August.
@ NGH. Yes, Add-Lee have their own workshop and maintain their own vehicles.
So staff numbers perhaps not directly comparable with other PHV companies.
@Stuart Winton,
Lets just say that contestability in the cab industry is sufficient, and economies of scale insufficient, enough to one ensure that no one establishes a monopoly, or for that matter a monopoly level of dominance.
So if Uber, as some suggest, is trying to justify its losses and massive market capitalisation with some sort of global predatory pricing plan, then I for one, would not be joining those investors.
I think that eventually, they may find that anyone can do what they do and some might do it better. Doing it better might include the idea of not pissing everyone off and becoming one of the most hated companies in the world.
@AlanBG
Economies of scale occur at a national and global. level. There is no such thing as local economies of scale (its a contradiction in terms) and there ain’t nothing too special about that app.
@Stuart Winton
I am Kit Green!
Is this a cookie / security issue? How can I turn up in another user’s autofill?
If Uber London Ltd. paid ÂŁ411k in corporation tax, that would imply an operating profit of around ÂŁ2m, not a loss. While there could technically be a subsidy from Uber BV, the whole point of the Dutch sandwich is to move profits from a higher-tax jurisdiction to a lower one, not vice versa. So this canât be predatory pricing.
But even if Uber could gain a monopoly, it would be a contestable monopoly, so we donât really care too much. This wouldnât be like the bus wars because thereâs a huge difference in capital cost and bureaucratic hoops to jump through between setting up a ârent-a-radioâ minicab outfit and setting up a bus company.
Where I live in a small town in West Yorkshire, there are two minicab companies. Competition between them ensures that prices are reasonable and the cars are clean. As a result, nobody bothers using Uber because it isnât any cheaper and youâll have to wait longer for a car to come from Huddersfield or Bradford than for one thatâs probably just about to finish another job ÂŒ mile away: Uber will only be able to take significant amounts of business where they offer better pricing and/or standards than the incumbent.
Whether or not Uber have complied with the terms of their license and/or been treated fairly by TfL: that is a matter for the courts to decide. My only defence of them is that they have not been practicing predatory pricing.
As an aside, having Toyota Priuses (Prii?) driving around central London could be better for air quality than electric cars. In areas with a high NOx count, what comes out the exhaust of a modern naturally aspirated Atkinson cycle engine is likely to be cleaner than whatâs gone into its air intake!
Is this (what happened in Austin, Texas, when Uber and Lyft left) relevant ?
[Moderator’s note: When making a posting comprising mainly a link (which is anyway not particularly encouraged), would commentors please add at least a few words indicating what the linked-to article contains. Malcolm]
@Kit Green
That’s one for the site administrators, I’m afraid!
When I’ve been posting the page refreshes automatically and my details are still in the form. When I close the browser and open it again my details have to be re-entered manually.
On one occasion, when I posted and the page automatically refreshed *your* name and email address were already in the form…
How they got there is beyond my technical nous!
It’s very unfortunate that the Financial Times website is paywalled, as yesterday’s weekend edition ( 30/09/2017) has two pieces on this:
One – a very sarcastic piece by R Shrimsley on how HORRIBLE, horrible Uber is,” except when I desperately need it” … ( It made me smile, anyway )
Two – a fullish ( page-&-a-quarter) article on being an Uber driver, which is a much more informative read.
Recommended, if you can get hold of either paper or electronic copies …
@Shieldsman: kv.nl is a recruitment company… what you actually wanted was De Kamer van Koophandel (kvk), as you can see thereâs lots of bits of Uber!
I’m usually very impressed by the analysis in the articles here, especially the author’s, but there are a lot of cheap rhetorical tricks in here – especially galling when you disagree with the main premise.
Every anti-Uber actor is enhanced. And vice versa. Is GQ’s opinion of Sadiq Khan really relevant? Or what Uber’s lawyer said on the phone during testimony (which – being in a similar job myself I know – goes entirely to perception).
Sure, it’s sexy to be a disruptive start up & unsexy to be a multinational with a corporate structure designed to enhance ones ability to execute a business model profitably. Pointing out that it’s cheap to portray them as the “sexy” option, doesn’t make it less cheap to portray them by implication as the “unsexy” option.
Finally, the claim “it’s about the app” is false misses the point. “The app” is shorthand for the customer proposition, An app is how customers think of uber. The customer proposition IS what TFL are taking away.
On to substance…
Uber provide a better customer service than their rivals (probably) and their antecedents (definitely). The governor of Michigan was recently critised for regulation that allowed self drive cars on the streets ahead of other jurisdictions, on the grounds local citizens would be more at risk than if they waited until SDCs were more proven. But, he said, if SDC are safer, how many will die by our delay. Let’s assume 6 sexual assaults have happened because Uber exists. I know, personally, of 3 on night busses. So how many assaults have Uber prevented? I’d certainly be more comfortable with my daughter coming home by Uber, than the traditional alternative.
If they’re out of line, they should be made to get back in line. But that doesn’t mean a ban. Sure, SK can ignore a petition. That’s a bad surely a bad thing.
Sorry, on phone on train. Pardon the typos!
Rant over.
IC. Did you read all the detail in this article? Uber had already been given four months to – using your phrase – “get back into line”. They didn’t, hence the refusal by tfl to renew their licence.
And also, (as has been mentioned by a number of others) how is a ban not an appropriate response to a company that refuses to play by the rules?
With apologies for a hyperbolic metaphor – a ban is a nuclear option. “Make a desert & call it peace”. Especially when one app is essentially synonymous with the market. Completely disproportionate. Fine them enough that the cost of non compliance is greater than the cost of compliance. Do we ban unions, or TOCs, if after 4 months warning they don’t completely comply with certain rules? No – because they’re essential to an ecosystem that delivers value to the public. So are Uber.
IC: A slight weakness in this argument is that a “ban” does not take effect immediately, but is subject to appeals and challenges. Which will be no surprise to TfL. So although expressed as an absolute ban, it is, in practice, a threatened ban. “Threaten to make it a desert” makes a bit more sense. Yes, Uber are part of the ecosystem, and they might remain so. But if they do not – and Uber-free cities do exist, as has been mentioned – then similar value to the public will, perhaps, be delivered by other companies who might be able to come closer to complying with “certain rules”.
IC
You were claiming “substance” & then said:
Uber provide a better customer service than their rivals (probably) and their antecedents (definitely).
I’m sorry, but I would fundamentally disagree with that remark, on several grounds, all probably much too long to (re)enumerate here.
Nonetheless, I would be much happier if you could produce real evidence to justify such a sweeping statement?
Later ….
Especially when one app is essentially synonymous with the market. BUT IT IS NOT – see the header & entire discussion in this thread.
@ IC – in respect of the allegations concerning sexual assaults I think you’ve missed the point. In the Uber cases I believe it was the car *driver* who was the assailant. Uber, as the employer (despite their protestations to the contrary) are directly responsible. Are you saying that night bus drivers sexually assaulted passengers? Or is it the case that a passenger assaulted another passenger? If the latter, while appalling and unacceptable, it is not the same as with Uber. I have yet to see any instances where a London bus company has been threatened by the appropriate regulators with a loss of their operating licence because of failure to properly vet their employees. I would also expect TfL and the bus company to have fully co-operated with the police by reporting the assault, ensuring the victim was properly looked after and providing CCTV evidence and other information and access to the vehicle for forensic examination. Again a world away from what is stated in the letter from the Met Police.
I take your point about “prevention” by providing a transport service to people but you can make the same argument many times over about black cabs, the night tube and LT / TfL having vastly expanded and improved the night bus network to allow people to travel conveniently, safely and affordably without recourse to unregulated minicabs or having to walk home.
@IC: âThe appâ is shorthand for the customer proposition
But what actually is the customer proposition? A major issue is that Uber’s position to regulators is that their proposition to customers is that they provide nothing more than a means for individual customers to locate and pay an individual self-employed driver (it’s just an app, in other words). What then happens between the customer and the driver is then, from Uber’s self-defined legal standpoint, not something they need accept responsibility for.
Strictly speaking in this view Uber’s customers are not the passengers at all – they are the drivers (who pay Uber its commission in return for being provided with passengers and payment services).
But Uber’s proposition as perceived by its passengers is that it is providing a transport service, and it is trying to leverage that perception by encouraging passengers to lobby government on its behalf.
It’s a bit like Coca Cola – the Coca Cola Company’s customers are not end consumers, but the (historically independently owned) bottlers who buy the syrup and turn it into a soft drink. But that doesn’t mean that the company can afford to ignore the quality and safety standards of its bottlers.
Uber is not the only company to have a “customer proposition” which is out of step with its legal proposition. All brand owners who deliver wholly or in part through franchisees (e.g. McDonald’s, and also perhaps TfL as owner of –
inter alia – the “Overground” brand) do this. It’s not necessarily illegal.
Of course Uber’s alleged failure to vet its drivers properly and/or to act properly on allegations of sexual assaults is/are deplorable. But to the victims, or their families, the distinction between an assault by a driver and an assault by a fellow-passenger is a complete irrelevance. The risk of assault stems from the whole system, and an estimate of risk – and any arguments resulting from that estimate – will be made taking into account that whole system.
@Malcolm: The difference with McDonalds is that no-one doubts that McDonalds franchises are employers and they accept the obligations that go with being an employer (including legal liability for the actions of their employees). Uber ULL is like a franchisee of Uber BV, but there is then a further level of detachment caused by the claim the drivers are independent contractors.
In the Overground example, TfL impose strict and onerous requirements on passenger safety and report detailed statistics on crime on the Overground (and tube, DLR, and buses). If it turned out that either MTR or TfL had deliberately sought to avoid reporting serious crimes so that the statistics looked better, that would cause a major scandal.
to the victims, or their families, the distinction between an assault by a driver and an assault by a fellow-passenger is a complete irrelevance
Really? One difference is that the person in control of a vehicle is in a much more powerful position than a passenger, and this power means that extra vetting is needed.
@ Malcolm, I agree – if this is a threat to get them to take compliance seriously then I have no issue; I was working to an assumption this was preliminary to a ban, & there was little that could effectively be done in the meantime. If that wasn’t TfLs intention, no issue.
@ Greg. I’m afraid my evidence is just the last decade of my travelling around London, after a few drinks, in the small hours of the morning. Also to long to enumerate here! I’m guessing your point re the market is there are other ride hailing apps? If so I take that point; but I’d suggest here that the customer is sufficiently price elastic and/or sensitive to ease of use, that Uber have created their own demand / market. I’d suggest that’s plain from the size of their customer base in London (& the portion of those who now get cabs when they’d never have dreamt of doing so before).
@ Walthamstow Writer & Ian J. I see your arguments, but Malcolm has made the responses I would! Especially on safety – if TfL “ban” the safest way home, I’d suggest they’re as culpable (morally if not legally) as they would be for failing to vet an employee / subcontractor, instal CCTV etc. That “ban” might be justified on other grounds, but it would see ironic to do on grounds of safety.
Ian J,
There is an analogy here between Uber and the dreadful situation in the past of the rented hairdressers chair. Ladies would book an appointment with a specific stylist and something would go horribly wrong with their hair. The salon would then claim that the stylist merely rented a chair in the salon and the customer’s contract was with the stylist.
I forget how this ended up but I think that the judges took a very dim view of the fact that the customer believed her contract was with the salon, had no reason to believe otherwise and no way of knowing, and it wasn’t made abundantly clear to the customer that the situation was different to the perception given.
At the very least, if one’s contract is not with Uber, it should be made clear that the contract is with the individual driver before the journey is made. This clearly doesn’t happen.
@ IC – I think we need to agree to disagree. Uber have had ample opportunity to put things right so they are compliant with the terms of the licence they wish to retain. They have not done so. They have perpetuated a view that they are somehow not what they demonstrably are in terms of being an employer and all of the attendant legal obligations that flow from that. You are clearly willing to still consider Uber “the safest” form of transport at night despite all of the issues with their past record and from a minority of their employees. I’m afraid I can’t make that leap at all in terms of personal safety. I, and I suspect most people, would expect any transport provider to be scrupulous in terms of employee vetting, vehicle safety, training, crime reporting etc. That Uber have not been and have not seen fit to recognise (until very recently) that they have problems that need fixing means I could never contemplate getting in an Uber vehicle. On the rare occasions I’m out late at night I’ll rely on the tube, trains and (night) buses to get me home.
My “complete irrelevance” referred to the situation after the assault has happened. I quite agree that many factors, including whether or not the attacker is in charge of the vehicle, can influence the likelihood of assault, and these factors can be considered by the person trying not to get assaulted. But instead of deciding on such a basis, it seems quite reasonable for a “potential victim” (in practice, almost anyone) to look at the statistics. If these show that riding with Uber is much more dangerous, or indeed much less dangerous, than riding on a night bus, then they should perhaps decide accordingly.
Of course vetting of a potential lone driver (of any public vehicle) should be much more stringent than the vetting of a fellow passenger (which is no vetting at all). Thankfully attacks on passengers by drivers (whether of buses or taxis) are already quite rare, but certainly all necessary steps should be taken to make them rarer still.
On the basis that, as IanJ says, the Uber drivers are self employed and not responsible to Uber, precisely the same argument applies to the radio circuits such as ComCab and Radio Taxis. All they do, too, is to put prospective customers in touch with drivers of black cabs. I have yet to see any suggestion that ComCab or Radio Taxis should be vetting the drivers associated with their circuit or cooperating with the police over alleged assaults.
Quintet. But are Uber drivers self employed? The initial verdict of the employment tribunal case (subject to appeal) is that they are not. I think we all await with interest the verdict from the appeal.
Indeed, the results of that appeal will be very interesting. But it is far from impossible that any such judgement would have implications for the black cab radio circuits, too. Much will depend on the reasoning given. The significant difference between the radio circuits and Uber is that the Uber drivers’ income is routed through Uber whereas the black cab drivers get their income directly and then pay the circuits a fee. While the routing is different the effect would appear to be the same. HMRC does not normally allow itself to be fooled by different routing methods for income.
There is a lot of comment above about economies of scale, and indeed Uber will benefit from spreading its fixed corporate and app maintenance costs over a bigger user base. But mainly what it is trying to drive is (winner takes all) platform power – the tendency of buyers and sellers (passengers and drivers in Uber’s case) to congregate on the platform where all the sellers and buyers are. Although Amazon and ebay benefit to some extent from economies of scale their continued dominance relies on platform power – which is much harder for a new entrant to attack. A new entrant may try to undercut the incumbent quasi monopoly, but will never have enough supply of buyers/sellers to get a toe hold. It is similarly this platform power (rather than economies of scale) that drives the local dominance in some areas of traditional PHV providers.
I note that Uber are publicly whingeing abut the horrible costs of having to pay National Insurance if they are deemed an employer.
See Here
PoP @ 10 Oct 09:48. I encountered a similar try-on when I booked with a local cab company in Chippenham to take self + wife to Gatwick and then pick us up from Heathrow a week later. I was going on a consultancy trip and my wife coming with me. When I asked for a VAT receipt afterwards I was told there was no VAT because the driver was self employed. Needless to say this cut little ice and they rapidly, but very reluctantly, caved in when I pointed out that the only interaction was my making of the booking, that was with the company and hence the contract was with them.
The latest accounts for ULL are now available at Companies House
https://beta.companieshouse.gov.uk/company/08014782/filing-history
One statement that leaps off the page for me is this one. “The company’s principal activity is to provide local marketing and support to the Uber Group”. Given that ULL is the company with the tfl licence, surely the principal activity of that company is transportation services???
I guess we’re back to the argument that on the one hand Uber Group wants a Private Hire licence yet on the other hand claims that it is merely a technology company that merely introduces potential riders to self employed drivers.
I’m really baffled about where and how Uber books the revenue and costs of providing transportation in London. If they are booking all those costs through Uber in the Netherlands, I fail to see how they can produce a transfer pricing justification for that. Would be interested to hear the opinion of an accountant (which I am not) if we have one in the commentariat.
I understand Uber submitted an appeal against the termination of their licence at Westminster Magistrate’s Court this morning. Today was the last day they could do this. Case may be heard in December (source BBC on social media).
Island Dweller: I have no special knowledge, but things I have read suggest to me that sending money on trips round Europe, or even further afield, happens quite a lot with big companies. It might be difficult to justify, if the companies were pressed hard on the matter, but such pressure does not seem to happen much if you are a big company. Now in an ideal world….
Malcolm. Yes, true, I was deeply involved in doing just that in a former employment. But you have to be able to construct a justifiable economic reason why youâre booking costs/revenues in a different jurisdiction,
I struggle to see how a business that is licensed to provide Private Hire services within London can build a justification on why costs/revenues from that activity should be booked in the Netherlands.
If only HMRC was not so chronically under resourced (and under trained in international transfer pricing) in investigating potential cases of abuse.
If only. But to return to the TfL angle, I don’t think abusive transfer pricing, if it is happening, should be any of TfL’s concern. They can only refuse to licence Uber on specified grounds, which is what they are doing.
Of course, how we got into the money issue is in trying to challenge the claims by Uber that banning them would put ridiculous numbers of people out of work. Which got into issues of trying to estimate the real number of drivers (or full time equivalents), using published data. Unfortunately for this approach, it seems that a significant part of the money is “out of sight”.
Malcolm. You may be right, this may be beyond the remit of what tfl can look at. But isnât that a hole in the regulatory system? How can tfl properly review the behaviour of the licence holder (ULL) if that entity is not the company where the licenced activity is booked.
@Quinlet
Interesting point about the traditional black cab radio circuits in London. No point in a detailed analysis of the employment status position, but perhaps a fundamental argument could be that black cab drivers are not dependent on the platform for work – they could revert to public hire work only. Uber driver are clearly dependent on the platform for work, or at least Uber or another private hire platform.
As regards the circuits being responsible for the conduct of drivers, an oddity is that no licence is required to take private hire bookings for hackney carriages, so there’s no question of the circuit being held responsible for its drivers, at least from a strictly licensing perspective.
In turn that explains why hackney carriages elsewhere in England are doing private hire work perhaps several hundred miles away from where the driver and vehicle are licensed. The hackney carriage doesn’t have to be linked to any licensed entity for accepting work, as long as it’s pre-booked jobs – a hackney carriage can only do public hire work in the area it’s licensed in.
For what it’s worth, in Scotland it’s slightly different, because although platform licensing lagged a bit behind that in provincial England and Wales, when implemented it applied to both private hire and hackney carriages. Interestingly, though, the rationale for this was not so much errant individual drivers as the use of circuits for money laundering and drug dealing.
But which in turn points to why I think Uber are being treated a bit unfairly as regards deficiencies in the driver licensing process – that should have been purely TfL’s responsibility, with little Uber involvement.
@Quinlet
“The significant difference between the radio circuits and Uber is that the Uber driversâ income is routed through Uber whereas the black cab drivers get their income directly and then pay the circuits a fee.”
A point I forgot to mention earlier is that my recollection from several years ago was that the London black cab circuits only did account work, so to that extent are essentially identical to Uber as regards the routing of the income from fares?
Maybe I’m wrong (or maybe it was just one of the circuits), but in any case I don’t think that dimension is particularly significant as regards employment status. In particular, the norm in more traditional circuits is for drivers to do an element of account work and an element of cash work. For the sake of convenience if nothing else, the circuit/platform bills the customer rather than a corporate customer (say) being invoiced by numerous different drivers.
So if the routing of the fare income is a factor as regards employment status, could the above mean that drivers are self-employed while doing cash work but employed while doing account work?
Again, my own viewpoint is that the routing of the fare income isn’t particularly significant – it’s more about efficiency and convenience for all concerned.
On the other hand, and as per Paying Guest’s post on 11 October, the VAT dimension to the transaction is interesting, since I think normally the VAT-registered platform will invoice the customer on behalf of individual drivers and then farm the money out when it’s paid. But since that payment is made to individual drivers who aren’t VAT-registered there will be no VAT paid by the customer.
Surely a VAT registered company (company 1) must charge VAT on all customer invoices. The VAT status of a supplier (company 2) to company 1 is only of relevance if company 2 is VAT registered and therefore company 1 can reclaim any VAT paid to company 2.
If company 2 is not VAT registered then there will be no VAT for company 1 to reclaim.
The VAT relationship between the two companies has no bearing on company 1’s customers who must be charged VAT. This may not be the case if company 1 is simply a collection agent taking a fee.
Uber London Limited (ULL) is VAT registered. But (from what those of us who have never used Uber can deduce), customers in the UK are not charged for their ride by ULL, they are charged by the Dutch Uber company that does not charge VAT.
I’m surprised that Addison Lee (who do charge VAT to their customers) are not screaming from the rooftops about this.
VAT must be charged to consumers, regardless of which EU country the billing entity is registered in. This sounds like a massive loophole.
On VAT, standard industry practice is for the platform or circuit to charge VAT to drivers on the fees they charge (the drivers are the platform/circuit’s customers). The drivers’ customers don’t pay VAT on the fare because drivers generally turn over less than the VAT registration threshold.
Because of this, there’s generally no VAT element on the taxi/minicab fares paid by passengers.
Where Uber differs is that because it bills drivers from a Dutch company it doesn’t have to charge them VAT either, because under EU rules cross-border transactions are exempt from VAT.
So as far as the fare-paying cab-using public are concerned Uber drivers are just like most other cab drivers as regards the VAT situation – they’re below the VAT threshold, so it isn’t charged. But Uber differs from other cab platforms because it’s billing drivers from the Netherlands, so there’s no VAT payable.
And all of which in turn explains why reconciling driver numbers and suchlike with the figures in Uber London Ltd’s accounts is effectively impossible – the fees paid by drivers are collected by the Dutch company.
Hang on, if I buy something from a company in another European Country, I do pay VAT. Just not at the British rate, but at the rate applicable to the country where the company is based and payable to the local taxation authorities.
This is the quid pro quo for not having to pay import duty when buying something in another country of the EU and one of the reasons why countries are not allowed to mess around with their VAT rates too much.
If Uber are getting out of the paying BTW (VAT equivalent) to the Dutch tax authorities then something is very wrong!
First – an apology and correction from me. Seems Iâm wrong in my earlier comment when I said that Addison Lee charge VAT. They do on certain ancillary items (example – parking fees incurred while waiting for a customer pickup at Heathrow) but not on the core journey element of the charge.
@Stuart. Re your comments about billing from the Netherlands. I think it is more complicated than what youâve stated.
There is an exemption whereby a VAT registered company within one EU State does not add VAT to customers in another EU-State. But that exemption only applies if the receiving customer is also registered for VAT. We have to assume that the vast majority of Uber users in London are not registered for VAT, and therefore that this cross-border exemption does not apply. Uber in the Netherlands does have a duty to charge VAT on the charges it makes to UK customers.
The next level of complication is that the Netherlands has various rates of VAT. There is a special 0% tariff which applies to non-Dutch entrepreneurs who conduct business in foreign countries out of the Netherlands. This mainly involves the supply of goods or services from the Netherlands to another EU country. So (my guess) this will be the exemption that Uber are relying on. (Well off-topic, but why on earth other EU States allow the Netherlands to get away with such a scheme is beyond me).
It is puzzling why HMRC have not challenged this invoicing ruse. The core of the Uber service (the provision of a ride) is provided by ULL in London – only ULL has the licence to provide this service. Uber in the Netherlands may provide some auxiliary part of the service (the licencing of the App and senior management oversight) but the largest billable part of the service is provided by ULL. As the headline said at the start – this is not about the App.
@Stuart. The other part of your comment – about the billing conventions of Account Circuits.
I can see how this arrangement made sense when the âold paradigmâ applied. You called an office who sent a car to you. At the end of the journey you handed over hard cash to the driver, who would (on request) provide you with a receipt from him/herself directly. (I know it never actually happened like that – you always got a blank chit with no contact details whatsoever – just a slip of paper that said âtaxi receiptâ and you had to fill in the amount yourselfâŠ)
With Uber (and it seems AdLee) a different paradigm applies. You are invoiced by Uber, the only contact details you ever have are for Uber, and Uber specifically prevents you from getting the contact details of the driver who provided the service. This was one of the core elements in the employment case – the judge observed that Uber were effectively principal not agent. Roll on the judgement of that appeal.
Island Dweller – yes, there is a difference between zero-rated and VAT-exempt, even if it is not noticeable to the end user.
A bit tangential (because this specific issue is about sellers outside the U.K. rather than elsewhere in EU). Commons Public Accounts committee berating HMRC for being too cautious in the way it pursues VAT dodges.
http://www.independent.co.uk/news/business/news/amazon-and-ebay-profiting-from-fraud-by-sellers-who-dodge-vat-mps-say-a8005501.html
@Island Dweller
My (very basic) understanding of the VAT position was derived from this Reuters piece:
“Uber avoids having to charge British value added tax on its booking fees by treating each driver as an individual business and then billing drivers across EU borders from its Dutch subsidiary, using an EU VAT provision called the âreverse chargeâ.
“The rule lets businesses sell goods or services to other businesses across EU borders without paying VAT. There is usually no loss of tax revenue, because the importing business collects VAT from its own customers.
“But since Uber drivers mostly generate less than the 85,000 pounds a year sales threshold to register for VAT in Britain, they donât have to collect it.
“Gett and mytaxi both bill their drivers from companies within Britain. As the reverse charge does not apply to domestic sales, that means that unlike Uber they must charge drivers VAT.”
https://uk.reuters.com/article/uk-uber-tax-britain/exclusive-loophole-allows-uber-to-avoid-uk-tax-undercut-rivals-idUKKBN18Y1Z6
It’s obviously all very complex and properly researching it all would take some time, but the Reuters take certainly seems at odds with your own take on the 0% Dutch rate that Uber may be taking advantage of.
@Southern Heights
As far as I can make out the VAT position may be different if the charge is made to another business rather than an end consumer (perhaps Island Dweller could confirm). So Uber’s income derives from charging other businesses (the individual drivers) and not by charging the end consumers. The drivers charge the end consumers (passengers!), but the individual drivers don’t have to be VAT-registered, because they’re below the registration threshold.
@Island Dweller
This piece from 2015 mentions the Dutch VAT rate of “0% for entrepreneurs conducting foreign business from the Netherlands.”
http://uk.businessinsider.com/uber-tax-in-europe-2015-7
And in 2014 TfL referred Uber’s tax position to HMRC for investigation, so presumably it’s all been looked at:
http://www.bbc.co.uk/news/business-29632646
As regards your point about the radio circuits and the ‘old paradigm’, while it’s true that most drivers on most conventional platforms would deal primarily with cash, most would also do an element of non-cash work, and the circuit or platform would invoice the customer on behalf of all the drivers, for convenience if nothing else, and then distribute the payment to individual drivers. Which didn’t see to affect the VAT position.
Where Uber differs (and perhaps one or more of the traditional black cab circuits in London) is that they’re doing *only* non-cash work.
Even Addison Lee drivers do a mix of cash and non-cash work, it would seem. Its T&Cs says:
“In consideration of the provision of Services in relation to Non-Account Bookings, the Customer must pay for the Services either directly to the Driver by way of cash or cheque, or by way of Card Payment, which will be processed by a third party payment processor on the Driverâs behalf. Where applicable, VAT (where chargeable depending on the individual VAT status of the Driver) may be added to such Charges.”
More on the international complications of VAT.
Some general principles first.
Source: http://europa.eu/youreurope/business/vat-customs/cross-border/index_en.htm
â Countries within the EU – Selling to businesses
If you sell goods to another business and these goods are sent to another EU country, you do not charge VAT – if the customer has a valid VAT number. If the customer does not have a valid VAT number, you must normally charge VAT on the sale at the rate applicable in your country.â
There are some specific exceptions to those general guidelines – some apply to services.
Source: https://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/where-tax_en
Various extracts below:
âSupply of services
On 1 January 2010, rules were introduced to ensure that VAT on services will better accrue to the country of consumption [see Directive 2008/8/EC]. To ensure more uniform application, certain aspects of these rules have been clarified through implementing measures which have applied directly since 1 July 2011 (see Implementing Regulation No 282/2011).
The place of taxation is determined by where the services are supplied. This depends not only on the nature of the service supplied but also on the status of the customer receiving the service. A distinction must be made between a taxable person acting as such (a business acting in its business capacity) and a non-taxable person (a private individual who is the final consumer).â
and
âB2B and B2C passenger transport is taxed according to the distances covered [Article 48 of the VAT Directive].â
What is not spelled out in that sentence is the implication that the transport service is cross border. Example – if a journey is 50km in France and 50km in Belgium then there should be 50% of the service taxed with French VAT and 50% with Belgian VAT. As the Uber rides we are talking about are within London, this rule would require VAT to be 100% at the UK rate.
@MODS. I tried to introduce different fonts for the text above to try and make it easier to show where I was quoted from an EU publication and where I was adding my own comment. Couldn’t figure out a way to do that…?
@ Stuart. Re your comment at 2015.
Couple of comments on the Reuters analysis.
(1) I don’t agree with their assertion on cross border exemption. My reading of the EU original text, quoted in my comment above, states that the non-charging of VAT on a cross border transaction ONLY applies if the purchasing customer is a business which is VAT registered. That doesn’t apply.
(2) That article seems to imply that Uber is invoicing drivers for the service that Uber provide to them – presumably the provision of an App to provide customer “orders”. But that doesn’t address the charging and accounting for the core part of the service – the actual ride.
@PoP: if oneâs contract is not with Uber, it should be made clear that the contract is with the individual driver before the journey is made. This clearly doesnât happen.
For what it’s worth Uber’s Terms and Conditions are very clear about this:
“Transportation Provider” means the provider to you of transportation services, including any drivers licensed to carry out private hire bookings in accordance with the PHV Regulations.[…]
Uber UK accepts PHV Bookings acting as disclosed agent for the Transportation Provider (as principal). Such acceptance by Uber UK as agent for the Transportation Provider gives rise to a contract for the provision to you of transportation services between you and the Transportation Provider (the “Transportation Contract”). For the avoidance of doubt: Uber UK does not itself provide transportation services, and is not a Transportation Provider. Uber UK acts as intermediary between you and the Transportation Provider. You acknowledge and agree that the provision to you of transportation services by the Transportation Provider is pursuant to the Transportation Contract and that Uber UK accepts your booking as agent for the Transportation Provider, but is not a party to that contract.
For the sake of clarity, your PHV Booking will be accepted and allocated to a Transportation Provider by Uber UK as holder of the relevant operator’s licence.
[…]
YOU ACKNOWLEDGE THAT UBER DOES NOT PROVIDE TRANSPORTATION, LOGISTICS, DELIVERY OR VENDOR SERVICES OR FUNCTION AS A TRANSPORTATION PROVIDER OR CARRIER AND THAT ALL SUCH TRANSPORTATION, LOGISTICS, DELIVERY AND VENDOR SERVICES ARE PROVIDED BY INDEPENDENT THIRD PARTY CONTRACTORS WHO ARE NOT EMPLOYED BY UBER OR ANY OF ITS AFFILIATES.
I make that ten different ways of saying the same thing. I assume that at some point in the app signup process the user presses a button to say that they have read and understood the terms and conditions. I have no memory of doing this myself, because it is such an automatic action to dismiss this kind of legalese without reading it. But a court might feel that if you had been given a chance to read the contract, and perhaps even claimed to have done so, that Uber had done enough to make their role clear.
@IanJ. Fascinating, thanks for sharing.
As I recall, the core of the Uber employment case is that the judge described these terms as an inaccurate depiction of the real relationship between Uber, the driver(s) and the customer(s).
In tax and employment cases, what the contract says can be surprisingly unimportant. What matters is the âduck testâ. What is the real relationship between the parties? If it walks like, quacks like, etc.
In the FT today (registration needed).
Two rivals to Uber, Taxify and Via, are complaining that TfL have sat on their applications for months. They apparently both submitted applications in April. Apparently the usual turnaround time is about 12 weeks. Spokespeople for both the applicants are quoted as saying that TfL won’t respond to their emails, phone calls and have refused to meet. FT contacted TfL who have refused to comment.
Are TtL waiting for the Uber case to play out before they’ll contemplate licencing any similar service?
Ian J,
Everyone knows that people don’t read terms and conditions buried away somewhere. So the number of times they make it clear there is irrelevant. If doing a business-to-business transaction they are very relevant but consumer law has a concept of ‘reasonableness’ and doesn’t expect consumers to read long, waffly contracts written in legalise – let alone understand them.
There is also the issue that consumers normally have no option to vary contracts, Whereas you can negotiate in some situations, the Uber app almost certainly only has ‘Accept or ‘Decline’. It doesn’t have a ‘Negotiate Different Conditions’ option which is effectively afforded to businesses agreeing deals on equal terms. So the consumer is entitled to some further measures of protection to be provided by the law.
You can get some ideas as to what Lord Denning would have thought about this by looking at Thornton v Shoe Lane Parking Ltd. And that was back in 1970. Things have moved on a lot since then.
To use a statement in vogue, Uber fails the duck test. Furthermore, one could argue, under consumer law, that Uber’s terms and conditions count against them. If you accept Uber’s terms and conditions then you can reasonably assume your contract is with Uber. I find it very hard to argue against that.
@PoP
You beat me to it on the duck test.
@Ian J
The other critical factor is that, although HMRC might have made a policy decision after due discussion with the Treasury (and possibly certain members of the government) to treat this strictly on the basis of published Terms and & Conditions, the relevant second tier tax tribunal or higher court will be completely independent and impartial in deciding the correct interpretation. The decision will be made using the law, factual evidence and, where appropriate, the concept that the substance of any transaction overrides its legal form.
It will not matter that HMRC and Uber might prefer to describe a web-footed wide billed domestic water fowl as a kind of amphibious flying chicken.
@Islanddweller
Regarding (1) at 2303 last night. Indeed it all does seem a bit confusing, but since it’s presumably been subject to some scrutiny then Uber must be taking advantage of the Dutch 0% rate? Anyway, whatever the minutiae I’m quite happy to simply accept that by invoicing drivers from the Netherlands, Uber is able to avoid paying VAT and to that extent gives it a competitive advantage over other providers/platforms/circuits. Of course, competitors and possibly most members of the public would probably deem this advantage unfair, but on the other hand no different to other multinational behemoths with their armies of ‘creative’ lawyers and accountants who can optimise these Byzantine corporate structures to their best advantage.
As regards point (2), you said:
“That article seems to imply that Uber is invoicing drivers for the service that Uber provide to them â presumably the provision of an App to provide customer âordersâ. But that doesnât address the charging and accounting for the core part of the service â the actual ride.”
But the latter seems fairly clear cut and simply mirrors accepted practice in the industry – drivers are treated as individual business entities, and to that extent the vast majority will be below the VAT registration threshold. (Apologies if that’s merely restating the obvious, but if so then I don’t really get your point.) Of course, as the Addison Lee T&Cs make clear, some drivers *may* be VAT-registered, but from the passengers’ perspective it’s just pot luck in that regard:
“Where applicable, VAT (where chargeable depending on the individual VAT status of the Driver) may be added to such Charges.â
On the other hand, of course, the VAT position of individual drivers and their passenger is not clear cut and, while presumably the two issues aren’t identical, to a significant degree the issues involved are the same as those disputed as regards the matter of employment status?
Which of course is currently being litigated and subject to appeal. And while I haven’t really been paying much attention to it, isn’t the VAT status of individual drivers that which is being litigated by the QC Jolyon Maugham?
As regards the relevance or otherwise of Uber’s T&Cs, perhaps it’s instructive that this simply reflects accepted practice in the industry, but of course in the vast majority of cases historically there’s no contractual minutiae because it’s simply been a case of phoning a taxi/minicab office and ordering a car. So presumably the details of the contractual situation and the VAT implications are all implied rather than written or even verbal.
AIUI, Jolyon Maugham’s case follows on from the employment case, and is based on the ruling therein: if the drivers are working for (employed by) ULL, then ULL (rather than they) are making the supply – and so should be charging VAT, so he should be getting a VAT receipt… please can the court tell ULL to provide it. And as a follow on case to the VAT tribunal, as ULL aren’t supplying the receipt, will HMRC allow him to reclaim the VAT (that he paid to ULL) – an action to which Uber are not a party.
In neither case is the VAT status of the drivers an issue – if they are workers, then (AIUI) they are supplying labour for a wage, not a VATable supply as a business.
Now, as my comment at 2052 appeared, what’s happened to the other one I’ve tried repeatedly to post, but seems to have vanished into the ether? … Another attempt:
At the heart of all these issues is the confusion and obfuscation over who is supplying what to whom (and, for VAT purposes, where), between (in London) riders (final customers), ULL, UBV and ‘Transportation Providers’ (Uber drivers) – elsewhere the issues are the same, although the players are different.
And given that amongst the basis for regulation is that taxi providers are ‘honest and professional’ I would like to think that TfL are asking questions over this: ‘fit and proper’ people should be making it clear. As it appears that ULL are providing services to UBV (and not the other way), they would seem at the least to be ‘close to the wind’ over properly working the Operator licence functions,..
The European Court of Justice are currently considering whether ‘Uber’ are providing a taxi service or an ‘information society’ service – they have reached the stage of the Advocate General opining that it is a taxi service (see https://www.lexology.com/library/detail.aspx?g=d7e10658-b599-4e81-8b09-e97295f8ce97 and http://curia.europa.eu/juris/documents.jsf?num=C-434/15 ) on (largely) the issue of inseparability. One implication of this that the place of supply will be ‘where the taxi is’, so the final VAT charge is definitely in the UK (and subject to UK rules).
While most Uber drivers are not required to be, and are not, registered for VAT, it appears that some are (and that UBV/ULL provide for them to be) – see various entries under https://uberpeople.net/search/51235776/?q=VAT . For these – following Uber’s line that they are the supplier – a proper UK VAT receipt (including driver’s VAT number, name and address) should be issued: but I have not come across any reference to such. The standard Uber receipt (examples on line) appears (to my inexpert eye) to be rather a Dutch VAT receipt for a zero rated (under Dutch rules) supply, made by Uber BV in the Netherlands. And so may not be appropriateâŠ
Driver VAT status is now confusing me. Does it mean that it is pot luck if I have a VAT registered driver and therefore should be charged 20% more than if I had a non registered driver?
I think it depends on the operator, and who is the contracting party. If I understand correctly, for Addison Lee, if the driver is the contracting party, then they will add VAT if they are VAT registered (and if they aren’t, VAT will not be charged – lucky you!); but if AL are the contracting party (e.g. for account work), then AL will always charge VAT (and reclaim any VAT that their driver may charge them). For Uber I don’t know: one of the Uberpeople comments implied that Uber always paid the driver the same, and if he was VAT registered he lost out, as he had to pay the VAT share to HMRC.
(Thanks for the explanation over my disappearing comment)
@Kit Green. That would be the case if you were genuinely contracting with that driver directly. The limited number of court cases thus far (subject to appeal) say thatâs not the reality and that your contract is with Uber.
@Kit Green
Many Hackney Carriage tariff cards state that for VAT-registered cab businesses the fare is deemed to include VAT. So the fare is the same whether or not the individual driver is VAT-registered – obviously it would defeat the purpose of regulating maximum fares if different Hackney Carriages on the rank were charging different fares because some were VAT-registered and some not.
Private hire will be the same, I expect, although on a strict reading Addison Lee’s T&Cs seem to suggest that a VAT registered driver could be charging more. However, I suspect that in practice the vast majority of private hire drivers will charge what the platform/circuit tells them to charge, a la Uber, and that any driver who happens to be VAT-registered will just have to take the hit.
Where it could be pot luck for the consumer, though, is that if they are VAT-registered then whether or not they can reclaim the VAT on the fare they’ve paid will depend on the VAT status of the driver.
However, since in the vast majority of cases reclaiming VAT won’t be an issue and the driver won’t be registered then it’s probably not a matter that’s often highlighted, historically at least.
I agree that the repetitive assertions in Uber’s terms and conditions are a bit of a case of protesting too much (and also reflect Uber’s roots in America where these clickwrap licences are actually enforceable, and the mindset that the technology industry is miraculously immune from normal tax, employment and regulatory constraints).
The problem is that if Uber just ends up as the new Addison Lee then it won’t be worth as much as its owners hope it is.
Going back to the article’s description of the now-defunct Hailo: How does the duck test apply to an app that allows you to hail and pay for a black cab? Or a minicab?
Perhaps for this reason, in Australia all businesses providing taxi or limousine services have to register for GST (their version of VAT), including Uber drivers – see https://www.ato.gov.au/Business/GST/Registering-for-GST/#Doyouneedtoregister1 and https://www.theguardian.com/australia-news/2017/feb/17/uber-drivers-must-pay-gst-federal-court-rules .
Ian J
the mindset that the technology industry is miraculously immune from normal tax, employment and regulatory constraints
Yes, well ……
Beware of the marching ducks?
@various. There seems to be an implication that taxi drivers will be VAT registered if their turnover is greater than the threshold and otherwise will not be registered. If I recall correctly this is not necessarily the case and anyone with a turnover below the threshold can still register for VAT voluntarily (it may be advantageous if they have paid a lot of VAT that they wish to reclaim). So any driver *might * be VAT registered irrespective of turnover. Or am I misremembering?
@LittleJohn. Yes, thatâs right, they could. In practice, very few businesses/traders below the threshold will register. Thereâs an admin overhead in being registered (itâs got easier in recent years, but still needs you to have good understanding of the rules or to pay someone who does). This is one of the few things HMRC do pay attention to for any sign of playing games with the rules – VAT claims by small traders.
[Have run my own VAT registered small business in previous life…]
@IslandDweller – not quite true. It is advantageous to small businesses where trading is primarily B2B as you can reclaim the input VAT and the business you are trading with will reclaim their input VAT (your output VAT). Also advantageous for business with substantial zero rated or exempt outputs. In my case as a defence consultant it was in my interest to stay registered throughout the rundown to retirement long after my turnover fell below the registration threshold. Many of my clients were overseas (outside the EC); hence my outputs were exports and I received a VAT refund from HMRC every single quarter without ever incurring the overhead of an inspection (much to my surprise). None of this, however, is likely to apply to cab drivers!
@Littlejohn
Voluntary VAT-registration might make sense in some circumstances (as others more knowledgeable have pointed out), but for the vast majority of cab drivers it’s likely to be of only academic interest.
Correct me if I’m wrong, but since at a rough guess I would have thought that around half of the average cab fare is clear profit to the driver, then at a fundamental level accounting for almost 17%* of all fare income as VAT just doesn’t make sense – the VAT reclaimable as a consequence of registration would be way below that payable.
And minicabbing/taxiing/Ubering isn’t the kind of thing you’ll be doing for very long if you’re making a loss, ergo…
Also, although the profit may not make the job worthwhile (if it’s ÂŁ5 per hour, say) it’s still clear profit as far as the VAT implications are concerned.
*ie gross fares are divided by 6 to calculate the VAT payable @ 20% on net fares.
A couple of comments about VAT registration for Uber drivers: firstly, many of them do it as a ‘side line’ to other work, which may be VATable, and so impact registration considerations; and secondly, their fee payment to Uber BV (as a Dutch company) will not include a (UK) VAT charge: it is for them to account for it to the UK VATman via the reverse charge mechanism, and although there are matching input and output VAT amounts, netting to zero payment, the amount does count as turnover for VAT threshold purposes.
@Kit Green
Regarding VAT on fares, I coincidentally came across this on Moray Council’s website:
“Inclusion of Vat in charges – the position of individual businesses as regards VAT registration is unknown, however it is open to the Committee, in fixing fares and charges, to decide and state whether these are to be inclusive or exclusive of VAT. The current Fare Card does not state whether the maximum fares and charges are to be inclusive or exclusive of VAT. Advice received from HM Revenue & Customs indicates that where the Fare Card is silent on this issue then the published maximum fares and charges are to be taken as being inclusive of any VAT that is due.”
Which would appear to entertain the possibility that a tariff card could state that there are two classes of fare payable, depending on the VAT status of the driver!
However, in reality I suspect that simply doesn’t happen – if a tariff card mentions VAT, it will say that fares are inclusive. Google terms like – hackney carriage fare tariff card VAT – and there’s lots of stuff comes up, but I suspect there’s nothing saying that two levels of regulated fares are payable, depending on VAT status!
(Moray’s fare-setting process is governed by tye Scottish legislation, but I can’t think of any reason the VAT position would be any different in London or provincial England.)
Chariot suspended in San Francisco as the ride share service failed three routine inspections – drivers did not have the correct licences
https://www.wired.com/story/chariot-suspended-transportation-hard/
“Chariot, the Ford-owned van commuter service that crowdsources its routes from passengers, is the subject of some controversy in San Francisco, the city where it was born. For its 3,000 to 4,000 daily riders, Chariot is a valuable, non-personal-car form of mass transit, a cost-effective-ish alternative to the cityâs sometimes sluggish and limited public transportation system (a rush hour ride is $5, compared to Muniâs $2.50). For others, the serviceâs vans are a straight-up nuisance: loudly idling near their homes, belching exhaust, double parking on already crowded streets, and hanging out stops meant for city buses.
“So it was with a mixture of joy and despair that San Franciscans greeted the news that Chariot had been suspended in California. (It also operates in Seattle, Austin, and New York.) Late Thursday afternoon, as rush hour bore down upon the City by the Bay, the California Public Utilities Commission yanked the serviceâs operating license. Chariot had failed three routine inspections by the California Highway Patrol, as officials found not all of its drivers had the right licenses to operate the company’s 14-person passenger vans. âWe are committed to always providing our riders with safe and reliable service, and we comply with regulatory orders even when we disagree with them,â the company said in an email sent to riders.
“It’s likely Chariot will be back up and running in a few days, once it passes a re-inspection. According to California Highway Patrol spokesperson Jaime Coffee, the company requested a re-inspection on Thursday and the process began Friday morning. Assuming Chariot has nixed the drivers without proper licensesâor theyâve obtained the right onesâit will take two or three days for the service to get its license back and start operating again…”
Not sure if the links below are relevant, but:
Firstly: Uber have concealed a huge data-breach & payment of ransom to “hackers” – but it appears to be mainly or wholly US-based. Report here
Secondly: Uber appear to be involved in fraudulent charging for “phantom rides” with a report here
This may apply here, as although it appears to be SIngapore-based, users claim they have been charged for non-existent rides in London & other places.
Now, since these incidents occurred before the TfL licence-withdrawl, they could, possibly be admitted as evidence in the ongoing enquiry, if they also affected users in London?
Yes / No?
Update on the previous post …
The US Information Commissioner is now looking into this serious data breach & appears to be consulting with his equivalent in this country (Who is, I think, the Data Protection Registrar. )
Link HERE
Whither London Buses? Following the recent wave of announced Bus route cut backs Chariots have now appied to run 6 minbus peak time demand responsive bus routes. They tend to run through residental roads before running express to a major station or tube station. For example the Shooter Hill Shot runs to North Greenwich.
Thanks to 853 blog for the heads up https://853london.com/2017/11/21/shooters-hill-shot-ford-plans-commuter-chariot-service-to-north-greenwich/
An irony if Mr Khans legacy is a two tier London bus service, with major streets still covered and the rest a mixture of bare bones public service and private peak time express coverage.
@ Rational Plan – there are consultations open on each of the Chariot proposed routes. I think 2 or 3 are cleverly designed and could do well *if* the price is attractive and operation is reliable. Some of the other routes look a little dubious to me – do we really need a peak time minibus to cover Kennington to Battersea Park in lieu of the NLE? Some of the others use a lot of residential roads in areas that may kick up an enormous fuss about “buses” (of whatever shape) using “their” roads. It will be interesting to see how TfL approach these applications given they have said they will not concede control of the transport network to incomers. Some of the Chariot routes may nibble at TfL’s bus revenue which is the last thing that is needed. The bigger question, though, is if the first six routes broadly “succeed” then how many more have been planned and is there the capacity to operate them effectively? Some of the first six routes seem to use public parking spaces as “stands” which is unlikely to be popular in some areas.
I have to say that I wonder whether the Mayor has a clue what is going on. He traded on the “son of a bus driver” tag line and all that is happening with the bus network is that it is carrying fewer people, is costing too much to run and earning too little in revenue. He promised to “protect” the network and all that is happening is that it is being cut in terms of service volume and a few very marginal routes. No point in having lots of “clean” vehicles if they’re not carrying people. I would never have expected a Labour Mayor to do a worse job than Boris as steward of the bus network but Mr Khan is certainly doing that.
@WW: Interesting… Not sure itâs going to work in London and certainly requires Uberesque like perception filters/gig economy to be viable…
This proposed bus sevice (Assuming it actually qualifies as a “bus” ( Public stage carriage, etc ) has a potential problem:
If one wants public transport in that area, how does one find out about it, if you are not a local?
@Greg
There is this thing called advertising.
Re LBM,
I think GT’s point is that the operator might need a large ongoing marketing budget…
@ SHLR – at this stage I haven’t seen any public information as to what operating model Ford will use. Will they employ people directly or contract hire people or subcontract the whole shebang to a bus or coach company with the requisite legal standing / paperwork? Citymapper subcontracted to Impact Group who are owned by Tower Transit so part of the “establishment”.
I’m not really in favour of private sector interlopers nibbling at the edges of a public sector bus network. However it has become increasingly clear that this sort of thing would arrive in London because the market is huge, there is a greater awareness / take up of technology that will offer a lower cost base for newcomers and these insurgent companies tend to like taking on the “establishment”. When you add in the Mayor’s repeated “son of a bus driver” squawking then “London is Open” and what the draft Transport Strategy says about “infill services using minibuses” we cannot be suprised that someone might come along and see how try the sentiment is.
The risk around approval sits partly with the applicant but more with TfL at this stage. If it says “no” it will need strong grounds to do so to avoid the inevitable “oh look London isn’t open” “Mayor’s agency stiffles innovation” headlines that could be stirred up. However the financial and operational risks sit with Ford and they may need to work hard to get the services off the ground if they are approved. Nonetheless they have managed to grab headlines already so I imagine social media will be a major avenue in generating interest alongside more traditional promotional efforts. It is an American concept and they are typically very good at creating vast amounts of “hooplah” for the most ordinary of things. Citymapper hardly had to undertake any advertising – they got a huge amount of social media interest and TV coverage just from running a green minibus round in a circle in Central London.
LBM & others
As all here know, I’m a lifelong Londoner … but, it often happens that I need to go to parts of “The Little VIllage” with which I am not intimately familiar & might need to use a bus. Normally, one uses TfL’s resources for this, but – how is a casual visitor to (say) the appropriate part of Greenwich to find out, in advance, if visiting the area, that this service actually exists?
Or will the information be as fragmented as that provided by the private TOC’s in the rail sector, where the “other” companies simply don’t (appear to) exist?
One of the big issues with Chariot is if they will accept Oyster/Travelcards/contactless debit/credit cards. Even in the late 1980s Travelcards were so successful that Thames Transit ( a government inspired competitor to London Buses) failed, even though they offered a reasonably frequent service on two or three useful routes. If Chariot require cash or a stand alone payment system then I think they will have difficulties.
And if they don’t and are successful it will clearly undermine local bus services, and you’d end up with situation like everywhere outside London – oversupply on certain corridors / during core times, lack of services elsewhere / at other times, and piss-poor quality…
@Quinlet
It is unlikely that Chariot would participate in the TfL fare scheme, as its business model would not be able to sustain passengers paying the standard TfL bus fare. I also doubt that it would want to handover all its useage data to TfL, which it would have to do if it wanted TfL revenue. (And at say 2 with-flow trips per bus each hour with say 10 passengers on each trip, 20xÂŁ1.50=ÂŁ30 per hour revenue for six hours a day is not going to cover all of the costs involved).
Based on common practice in Germany, smaller operators are allocated x% of the overall revenue, usually on a mileage basis. But since Chariot would be such a small part of the whole transport offer, that would be a percentage beginning 0.000-something at best. Unfortunately the German authorities only survey things periodically – in some cases, the figures are ten years out of date. The scale of change can be so enormous that your share of the pool becomes smaller because a new tram route – or cross-city rail line – has opened, even though you are carrying more passengers.
If it is formally timetabled, it may be that there it will have to accept English National Concessionary Travel Scheme passes, and be reimbursed for doing so. Outside London, it is now common practice for this to be an overall fixed sum, divided up between the operators – so the only way to accommodate a newcomer is for everyone else to get a smaller share of the cake.
MoK
The linked article states that it will be timetabled – “every 10 minutes”.
But that may be journalistic/bloggers misinterpretation, perhaps.
@ Greg – TfL has a responsibility, as the provider of bus stops and stands and access thereto, to provide panel timetables for all registered services in London. It even does this for coach services that stop in the Greater London area. On Mike Harris’s Busmap.co.uk website there is a timetable section with a drop down list of non TfL services. You will find TfL style timetables for services like the Berry’s coach service from Hammersmith to the West Country or First Berkshire’s route 3 from Uxbridge to Slough. Oddly there is no panel for Citymapper’s CM2 route but that may simply be because Mike hasn’t been sent a copy of the panel.
I would expect TfL to provide panels for any Chariots routes that are granted approval to operate. TfL doesn’t have a wider promotional role beyond this – that is for the individual operator to undertake. Let’s be honest TfL don’t really market the bus network in any active sense barring the rather poor (IMO) trial of branding in Barkingside. The network is just “there” and people are expected to use it.
WW
Thank you
That Mike Harris busmap site is very useful.
I think TfL may be playing a good game with the Chariot & Citymapper minibuses. They know that Uber (and whatever replaces it) are popular, are hitting bus patronage and are exacerbating congestion. They also know that they have little control over how, where and when Uber operate (barring the ‘nuclear option’ of not renewing their license). Much better for them to try to shift Uber customers onto fixed route services they have some degree of control over through the London Service Permit regime. If these services fail then TfL lose nothing, if they are fairly successful then minibus services might become a small but not irrelevant part of the transport network, much like coaches, which operate under the same regulatory regime. If these minibus services prove very popular, then I would expect TfL to launch their own fully-regulated routes integrated into the official bus network. As long as TfL manage these services effectively, listen to resident and passenger concerns at consultation and during operation, and don’t license routes that compete with the existing bus network, what have they got to lose?
In the US, you have to reserve (and presumably pay for) a seat on a specific service. You canât just stand at the bus stop and flag down the bus. Not clear if they want to use the same operating model in London, or indeed if the tfl licensing regime requires buses to take anyone standing at a stop (subject to vehicle capacity limits).
The Chariot service is based on Ford Transit mini buses, about 20 seats. Far smaller than other London buses.
Oh for that edit button…. should have said âReserve a seat using their app.â
One wonders whether the demographic of potential bus users along some of the routes (notably Southwark) are the types who have smartphones, and routinely pay for things through apps….
@ Stewart – “and don’t license routes that compete with the existing route network”. I’d say that was almost impossible to achieve. All of the proposed Chariot routes compete with some element of the existing bus route network. Yes some links are new in that Chariot are proposing a direct bus rather than changing on the TfL network but even so. The essential differences are price and, as Island Dweller says, the way in which you “book” your bus. Unless TfL’s finances radically improve then I do not see TfL being able to launch their own minibus services other than 1 or 2 trial services to evaluate the “concept” in TfL’s terms. This would be in line with the draft Transport Strategy so TfL would be seen to meet the Mayor’s aspirations. The current frequency cutbacks are an attempt to deal with a massive divergence between TfL business plan assumptions and reality in terms of patronage, revenue and costs. Every cut is just to fund that “black hole” rather than releasing resource for redeployment elsewhere. Even the proposed Crossrail bus changes are largely resource neutral with only modest network expansion in SE and W London.
[Non-sequitur snipped. LBM]
ID
I don’t think the “pre-booking” methodology would be legal for a “proper” bus service here … the pre-publicity seems to suggest some form of stage carriage service, anyway.
Think of these as first class bus section for commuters.
If you already have to travel armpit to armpit by bus to get to a tube station, for a few quid more per day you might be tempted to switch to a well padded seat while avoiding potentially ahem the more characterfull travellers on London Buses. Also with some element of express service and it could prove quite popular. after it’s only a few minibuses at the moment ona peak flow basis. It won’t take that many people paying ÂŁ3 or ÂŁ4 to amke it popular.
There must be lots of potential routes that could go to key railheads.
At the end of the day we maybe talking about a bit of abstraction from London buses. With population growth and restricted resources I can see more and more of these choking up zone 2 and 3.
Yet again ,the “FT” has a piece on Uber in their weekend pages – unfortunately paywalled & too long for me to transcribe.
Although not directly related to our “London-local” problems, yet again it highlights Uber’s err .. “casual” approach to regulations & normal, legitimate business practices.
Recommended as background reading, if you can get hold of a copy.
I guess this is the article you refer to [the paywall should be bypassed ;)]
https://www.google.se/url?sa=t&rct=j&q=&esrc=s&source=newssearch&cd=1&cad=rja&uact=8&ved=0ahUKEwiuu_KSz97XAhUCIpoKHS2rDskQqQIIJSgAMAA&url=https%3A%2F%2Fwww.ft.com%2Fcontent%2Fd890585e-d102-11e7-9dbb-291a884dd8c6&usg=AOvVaw2wjTBFi8FEZucxFbnZvVDd
Ooops, no. That didn’t work. Try clicking the first result from this:
https://www.google.se/search?q=Uber:+the+clean-up+after+Kalanick+continues
[Both work for me. Am leaving both links up. LBM]
Uber broke California law by concealing massive data hack,
LA city attorney says.
LBM
Last I heard, the Data Protection Commissioner was looking into the exact same thing in this country .
( Gorn ‘orribly quiet, though … )
On the matter of minibuses, I do still hear people-not-from-London go on about how cash fares aren’t available now (ignoring the fact that they were twice the Oyster price) so is there a market on some possible routes specifically for those who like the notes and coins of the realm?
Didn’t tfl say that cash fares are down to 1% of customers by the time they were removed? Suspect the cash only market is tiny.
Certainly the basket of fares that TfL uses to measure typical fares and fares increases has only about 1% cash fares in it. The issue for non-cash fares is what the alternative is. If it is a bank debit/credit card then this is widely available to almost everybody. If it is a network specific card, such as Oyster, this maybe almost as good for Londoners and frequent visitors to London, but starts to cause issues for occasional visitors. If it is a company specific card, it becomes a serious inconvenience for anyone other than regular users of that company’s services – which is, of course, one significant reason why electronic payment on buses has been much slower to take off outside London.
@ Man of Kent – OT, but small bus operators in urban areas in Germany mostly have gross-costs contracts (often as subcontractors to bigger operators), because as you note revenue allocation in fully integrated urban networks is difficult (esp. open ones).
@IslandDweller: I believe the overall costs (robbery, cash handling, etc..) exceeded the amount that was actually collected, or at least cost such a significant proportion of the total take, that the hassle just wasn’t worth it.
I believe it was mentioned here….
@quinlet
The smart card option outside London has largely been a substitute for longer-period (weekly and beyond) flash passes, or for use as an electronic purse – what someone from TfL described as “swapping your money for my money”. In most cases, no capping option exists – Robin Hood in Nottingham being an honourable exception – though some incentive for use exists if (a) the fare is cheaper than the cash alternative, and/or (b) the operator has an ‘exact fare only’ system.
The switch to contactless payment has generally resulted in a higher uptake than peddling smartcards has ever achieved in many locations.
With non-flat bus fares – as exist in most places outside London – smartcards are much harder to deal with as, unless you keep the ‘talk to the driver’ system and the cards not really adding much (Man of Kent describes the limited functions of such a system), there’s got to be a touch out to tell the card how much the fare was. Such a thing is not easy to do with buses, unlike trains.
@Si: Touching out shouldn’t be a problem, even if there is only one door. I don’t see any technical problem. The bus can remember the cards that are on the bus and so keep track of the fare stages using GPS.
As the bus moves, it should be a piece of cake to calculate the correct fare for each card. You’re never going to have more than a hundred cards on the bus and then you’d only need to do it for PAYG.
You could even make it so that if a person with a weekly valid for A-B, tries to get off at C (C being further than B), it slams the doors shut… đ
A mobile phone has more than enough computational power for that….
@ Si – I agree that for a graduated fare structure you generally need touch in and out for a smart PAYG system to work. I believe Trent Barton use that for their Mango card. Not sure how the Robin Hood Card works on their buses. I’ve used touch in and out in the Netherlands and in Singapore. It takes a bit of getting used to if you’re familiar with London’s bus system but it allows multi modal transfers and lower through fares in Singapore. I dare say the data is extremely valuable to the network planners in SG and has helped inform their progressive expansive of bus services. It probably also underpins some aspects of the network retendering that is underway in Singapore.
You can already pay by contactless card on some bus routes well away from London. I paid my fare on a Dover bus that way a few weeks ago. Virtually all buses in Glasgow now accept contactless.
You do still have to interact with the driver (because fare depends on destination), but it’s still a step forward as you don’t need a fist full of coins (something that drives me insane as I rarely carry coins).
Both VÀsttrafik (western Sweden) and SkÄnetrafiken (southern Sweden) have quite dumb smart cards that are also surprisingly effective and quite different from one another.
VĂ€sttrafik have flat fares within each zone. If, like most people since the zones are large, you are travelling in just one zone you just need to tap a reader anywhere on the train, tram or bus, meaning you can board from any door. This makes for very efficient boarding. If you want multiple zones (which is not the norm), you can either tap a special button on the reader or tap twice, once in each zone. Ticket inspections are frequent.
SkÄnetrafiken have flat fares on all local (green) buses so one tap is sufficient, but graduated fares on regional (yellow) buses & trains, requiring you to talk to the driver, unless you have a period ticket. On all buses must tap by the driver or show him/her a paper or mobile ticket so boarding from the rear door causes shouting. Ticket inspections are rare.
Neither system keeps a record of your journeys, only your payments and balance, which can be annoying. Both allow you to pay for multiple passengers on one card, which can be very useful. Both provide for mobile ticketing via an app with the same payment structure.
It is hard to see such dumb systems working in a complex transport network and fare structure like London but in a smaller city/region if almost all public transport is controlled by one body, then they work just fine.
@Stewart: Introducing contactless paymenbts can also be seen as a good opportunity to simplify complex fare systems!
According to today’s Guardian, the European Court of Justice (ECJ) has ruled that Uber is a transport services company.
‘In its ruling, the ECJ said an âintermediation serviceâ, âthe purpose of which is to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys, must be regarded as being inherently linked to a transport service and, accordingly, must be classified as âa service in the field of transportâ within the meaning of EU lawâ.’
‘The decision in Luxembourg, after a challenge brought by taxi drivers in Barcelona, will apply across the whole of the EU, including the UK.’
https://www.theguardian.com/technology/2017/dec/20/uber-european-court-of-justice-ruling-barcelona-taxi-drivers-ecj-eu
This appears to override the result of the duck test and Uber London Ltd must now be viewed as a lame, if not terminally ill, one.
Actually, at this time of year, it can more effectively compared to a turkey.
Tom Edwards, BBC correspondent, tweeted this earlier today.
For the avoidance of doubt, Tom is referring to Westminster Magistrates in this tweet, it’s not related to the EU decision which coincidentally also came out today.
” Details emerging from court docs of why Tfl didnât renew Uber London licence – Uber âmisled Tfl in correspondenceâ about booking process & âbusiness model does not comply with statutory frameworkâ pic.twitter.com/DW6sYLWkID “
Re Nameless,
This is the result of the Duck Test just conducted by an organisation several steps in the pecking order along (at the end of) the appeals process. Makes it far easier for HMRC to sink their teeth into Uber sooner and with less opportunity to wriggle free.
@NGH
I concur, but the term “fangs” doesn’t seem commensurate with a pecking order. Isn’t HMRC as more of a hawk or eagle, such that we might agree on claws?
In any event we are witnessing the present iteration of Uber tending towards the condition of a Norwegian Blue.
Another press article today. Andrew Gilligan (Yes, that one, but in his role as journalist rather than former cycling commisar) in the Sunday Times (paywall).
Nothing new in what Gilligan writes about per se, but seems to be increase in emphasis around Uber’s relationship with the truth. Gilligan’s article asserts that tfl have accused Uber of lying – considerably stronger language than we’ve previously seen which was more along the line of ‘misleading’. Gilligan asserts that tfl lied in the earlier Court case, about whether the Uber business model uses a taxi meter.
Re Island Dweller,
And this in the week that Uber was accused of lying by a US judge in his courtroom in pre trial hearings. (Waymo IP theft trial with the evidence they said didn’t exist being released by former employee (non a party in the case) instead who didn’t like the former CEO…)
One of the reasons Gilligan was the cycling commissar was that he was persona non grata in many news organisation after a few blunders and not being entirely honest about them in the investigations that followed, hence he needed a media facing job for a suitably long period of time till rehabilitated enough to attempt journalism again.
Uber steadfastly has not made money, as Forbes.com writes:
https://www.forbes.com/sites/lensherman/2017/12/14/why-cant-uber-make-money/#61fe700e10ec
Looking at something completely different I was pointed at an FT article “Britain is over-tolerant of monopolies” ( https://www.ft.com/content/10fc1cae-b183-11e7-a398-73d59db9e399 , from last October), which has an interesting view on Uber:
“Take the ongoing dispute between Transport for London and Uber over whether the car-booking service should retain its taxi licence. TfL is up in arms about safety standards. But the real scandal here is the way Uber has been allowed to hoover up the London taxi market. Almost unseen, the US company has been able to turn a price-regulated black cab monopoly into an unregulated one where it increasingly dominates the capitalâs streets. Facts on market shares are hard to obtain, in part because of Uberâs un-transparent structure. Fares for its services are paid not to a UK company, but to a Netherlands vehicle, which remits only sufficient money to the UK subsidiary to cover its costs and pay vestigial amounts of tax. Nonetheless, it is clear that Uber has built a very substantial position in the five years since it received a licence, the only app-based service yet to do so.
The service has 40,000 drivers on its network, four times the number of black cab drivers. The second largest non-black cab private hire operator in London, Addison Lee, has just 4,800 drivers on its books. Compare that, for instance, to supposedly highly regulated Paris. There, customers have a choice of numerous app-based services, including Uber, Taxify, Allocab and Le Cab, as well as traditional regulated taxis. Travis Kalanick, Uberâs founder, may talk about London as the âChampionâs League of transportationâ. But it is also one of the companyâs top three cities worldwide in terms of profitability. Unsurprisingly, perhaps, given that in this âcompetitionâ, the authorities have excluded its main rivals. Other app-based services such as Taxify have been unable so far to obtain licences. Perhaps Uber has been treated as a guinea pig by the regulators. But if so, that careless decision may have allowed it to steal an uncatchable head start.”
Londonâs Evening Standard newspaper, edited by the former chancellor George Osborne, has agreed a ÂŁ3 million deal with six leading commercial companies, including Google and Uber, promising them âmoney-canât-buyâ positive news and âfavourableâ comment coverage, openDemocracy can reveal.
Well another taxi firm has just lost a court hearing regarding wages . I assume this will have further effects on uber – who have gone very, very quiet in the past few months, I notice.
Uber lost their latest appeal today. Judges (on 2-1 basis) concurred with lower courts that Uber drivers are employees. Uber were granted permission to appeal to Supreme Court.
Workers, not employees.
Entitled to workers’ rights but paid as self employed- no PAYE.
Hardly a surprise result though.
This still leaves ULL with a huge potential VAT liability which could wipe it out.
Things aren’t going too well for Uber:
Minicabs including Uber to pay London congestion charge
Although this isn’t really news but the BBC seems to have now woken up to the fact.
Re PoP,
Probably reminded by TfL re-publicising it…
It will be interesting to see just how far this judgement extends into the black cab world via the radio circuits
What surprises me about Uber is the way they have infiltrated the mind of many that they are the only option.
Colleague, not from London, was organising a presentation at a City of London location. End of the day and he seems to spend 10 minutes on his phone logging on and putting in details of where he is and his hotel. Then another 10 minutes looking out of the window, then he goes out onto the street, where I last saw him looking anxiously up and down.
All the while black cabs are passing with their light on …
@MrBeckton: Meanwhile he could have probably walked it….
TfL have just renewed Uber’s existing 15 month licence for two months.
According to ES:
‘But this morning, with the current licence due to expire at midnight tomorrow, TfL said it needed further information from the firm before it could consider whether to grant a full licence.
A TfL spokesman said today: âUber London Limited has been granted a two-month private hire operator licence to allow for scrutiny of additional information that we are requesting ahead of consideration of any potential further licensing application.â’
Apparently ‘ Last month Uber was fined ÂŁ29,600 at Westminster magistratesâ court for two counts of picking up passengers without the required âhire and rewardâ insurance.’
Doesn’t inspire confidence, does it?
There’s an update on the state of play between Uber and HMRC on the FT Alphaville site today.
The article is free to read, but you may need to register first
https://ftalphaville.ft.com/2019/10/09/1570629132000/Uber-s-UK-VAT-liability-confirmed/#comments
Uber London Ltd’s December 2018 accounts disclose as a contingent liability the fact that they are in an “ongoing dialog with HMRC” over the VAT treatment of the company’s business.
In view of the amount potentially due as unpaid VAT – 16.66% of the last four years’s gross fares paid by passengers (plus interest and penalties) – I doubt HMRC will let Uber off with a slapped wrist.
Uber will fight it but if the Supreme Court rules against them on their pending drivers’ “self employment” status appeal, I don’t think their position is viable.
NB “ongoing dialog”: Uber= hedgehog, HMRC= HGV
@Nameless. You seem to suggest HMRC have made the running. Au contraire.
If you read that ftaphaville post, you’ll see that HMRC have not been in any way proactive about tackling Uber. HMRC have been forced to engage because of the employment status court cases.
Todays news per TfL press release:
“Uber London Limited found to be not fit and proper to hold a private hire operator licence”
https://tfl.gov.uk/info-for/media/press-releases/2019/november/uber-london-limited-found-to-be-not-fit-and-proper-to-hold-a-private-hire-operator-licence