Passenger Transport Act: Disallowance Of Passenger Transport (Private Hire Vehicle Services) Regulation 2001
PASSENGER TRANSPORT ACT: DISALLOWANCE OF PASSENGER TRANSPORT (PRIVATE HIRE VEHICLE SERVICES) REGULATION 2001
Debate resumed from 17 October.
The Hon. MALCOLM JONES [11.10 a.m.]: I adjourned the debate on the disallowance of the Passenger Transport (Private Hire Vehicle Services) Regulation last Wednesday to enable the Minister for Transport, and Minister for Roads to reconsider the issues relating to the hire car industry and to come up with an appropriate formula or suggestion to assist people who are adversely affected by this regulation. From yesterday's meeting with the Government and from my subsequent discussions with the Minister's staff, the Minister does not wish to address this issue. He has the same attitude to this issue as he had to the M5. I support the disallowance motion.
The Hon. PETER BREEN [11.11 a.m.]: I take this opportunity to offer my support to people in the hire car industry who have outlaid substantial amounts of money for their licence plates and now find their investment undermined by the Government. I have always been a supporter of just terms compensation when the Government takes unilateral action against private industry, particularly small business operators. I refer to a letter dated 28 September from Antonio Princi of St. Ives to Minister Carl Scully. He said:
I Antonio Princi owner operator just starting out in this new business am seriously affected by this decision. The state Governments decision to halve short term licence fees will reduce value of hire car plates adversely affecting me. I am devastated at this.
Mid March I purchased a Hire Car Plate and paid $138000—with stamp duty. I purchased this as an investment. I had to borrow money from the bank and now have a mortgage of $135000—Per month I have to pay $1213—I also purchased a new car costing $50414—on Corporate Hire Purchase and paying $987—per month. Added expense is also petrol costing $800—per month and any other expenses incurred.
In a letter dated 21 October Jan and John Edwards of Kenthurst wrote:
Why does Mr C Scully and the Labor Party of NSW want to destroy our financial security?
We can't get an answer! Perhaps you can help us …
If you support the Opposition in their attempts to debate the Disallowance, Mr Scully may be forced to give us his reasons.
My reaction to that letter is to say that getting reasons from Minister Scully is like extracting teeth. I asked him about filtration in the cross-city tunnel and he referred me to the Minister for Urban Affairs and Planning, Andrew Refshauge. Whenever I ask him about filtering the M5 East emission stack he has a conniption. Of all the Ministers in the Carr Government, Minister Scully is the most obstinate in my opinion, and the present disallowance motion is directly attributable to his obstinacy and his hardline approach to his portfolio. He was supposed to brief the crossbench yesterday on the issue, but he just happened to be out of the State. As if his diary has not been planned months ahead!
I am no expert in the car hire business, but from my personal observation the industry appears to be operating quite well. Every weekend I see hire cars in the city—they are a treat. Vintage cars, stretch limousines and old Rolls Royces seem to work happily together. Why does the Government want to upset the apple cart in an industry that operates efficiently? More to the point, why does the Government want to interfere in the market for licence plates? What concerns me most is that the Government will do to the hire car industry what it has done to the taxi industry—namely, flood the market with plates and cause chaos. I am told that the value of a taxi licence has dropped $25,000 since the events in the United States of America on 11 September. As a result, we can expect further pressure on taxi drivers, who already drive like lunatics in my experience. Like taxis, hire cars will become more and more dilapidated as people struggle to recover their investments. The Government needs to talk with the people affected by this regulation.
I have also received letters from Glen Kachel of Maroubra, Roy and Helen Easton of Copacabana, Michael Parsons of Hunters Hill, Adel Eldahaby and Salma Ibrahim of Eastlakes, Sammy Dawood of Quakers Hill and many other people—they are too numerous to list. I have also received a submission from the Motor Traders Association, which I understand is the peak body for the car hire industry. These people have substantial investments in their licence plates and many of them will face bankruptcy if the Government acts in the way it has proposed. I urge honourable members to support the disallowance motion.
The PRESIDENT: Order! Members wishing to contribute to debate should, at the appropriate time, stand and actually seek the call. Often it is not clear to the Chair, with a number of members walking about the Chamber at any one time, whether those members are rising to seek the call or are simply leaving the Chamber.
The Hon. Dr ARTHUR CHESTERFIELD-EVANS [11.16 a.m.]: The Passenger Transport (Private Hire Vehicle Services) Regulation was made under section 63 of the Passenger Transport Act 1990. This debate is about the merits of disallowing this regulation. It goes beyond what is happening in the hire car industry. It is about due process for government dealing with a variety of interests that exist in New South Wales. This regulation implements several recommendations as outlined in the final report of the Independent Pricing and Regulatory Tribunal [IPART] into the review of the taxicab and hire car industries. The report argued:
… restricting the number of taxi and hire car licences does not appear to generate any significant benefits for passengers, drivers or anyone working in the industries other than the licence owners.
It must be acknowledged that cartels of monopolies can exploit their market position and provide no benefit to consumers or the economy as a whole. An increase in the number of hire car licences in Sydney, and other regulatory reforms as proposed in this regulation, would go some way to decrease waiting times during taxi changeover periods, increase transport to and from the airport, and offer a wide variety of transport options to consumers. The principal recommendation made by the IPART report in relation to fees for hire car licences is:
Further, IPART recommended that the price structure for hire car plates should be:
Hire car licences should be issued to any person who can satisfy the quality-based entry requirements … all hire car business should operate under the same licence conditions.
… reduced to an amount which reflects only the sum of administrative and compliance costs associated with the industry.
Hire care services offer a premium product which prices them out of the range of most people. Legislation prohibits them to obtain customers off the street or taxi ranks, so their share of the market is minimal. The IPART report noted:
The Australian Democrats support most of this regulation. However, part 5, section 38, refers to reduced fees for licences. It states:
… the current constraint on the supply of licences in the hire car industry has stifled innovation and the development of new market opportunities …
If hire car operators succeed in establishing themselves in market segments currently serviced by taxis, this will free up capacity within the existing supply of taxis.
The Director-General, in accordance with section 39I (2) of the Act, may fix a licence fee at less than the current value of the licence on the open market or may decide not to impose a licence fee for the licence in circumstances where, in the opinion of the Director-General, the service concerned would for economic or other reasons be unlikely to be provided if the full licence fee were to be imposed.
That does not reflect recommendations made by the IPART report. The current unrestricted annual fee is $16,000 per annum and some perpetual licences have been auctioned at $150,000. Some people have mortgaged their homes and put a substantial amount of money into this investment. I have received a lot of correspondence from people who said that they would be financially devastated if this regulation is permitted in its current form. We are seeking a commitment from the Minister that he will go back to the drawing board, negotiate with stakeholders and provide a better outcome for those who have been affected. In fairness to the Minister, I have received advice from his staff that some compensation will be negotiated. As pointed out by the Minister's staff, it might well be that some of these licences were issued at no cost. However, those licences now have a value. It is not enough simply for ministerial staff to state, "These licences were issued without cost. They have no value and we have no obligation."
People have speculated in licences. It is not the job of the Government to pick up the tab for profits made by people who have invested in licence plates any more than it is the job of the Government to guarantee the profits made by people who have invested in the stock market. However, there are those who genuinely believed that this was sound financial investment based on precedent. Because the Government did not indicate what was likely to happen in the future, those people have been seriously disadvantaged. The Minister, who arranged an interview with members on the crossbenches on Tuesday, was not even in the State on that day. That somewhat cavalier approach by the Minister might not result in members on the crossbenches voting against this disallowance motion. The Minister's staff came up with a proposal to establish a committee to look at hardship cases. However, we need a little more detail before we are able to vote against this disallowance motion.
The Minister, who tends to go out on a limb, said to members on the crossbenches, "If you do not support this regulation the system will collapse and industry will be disadvantaged. You either take the whole package or you get nothing." Effectively, members on the crossbenches, who are practising brinkmanship, are being told by the Government, "Either you give us the whole regulation with the bits that you do not like, or there will be chaos and it will be your fault." As this has happened on a number of occasions it has made me wonder whether the procedure for the disallowance of regulations should be changed. If proposed regulations are disallowed we must be able to revert to previous regulations. Our regulatory system appears to have worked in the past. I note that the new regulation appears to contain many of the provisions contained in the old regulation. I am not persuaded to vote with the Government on this issue. The Government must do more than simply give members on the crossbenches bland assurances. So far that is all that we have received. If the Government wants the support of members on the crossbenches in relation to this motion it must tell us how it proposes to address this drop in licence fees.
The Hon. Dr PETER WONG [11.23 a.m.]: I support the disallowance motion moved by the Opposition. I believe that the deregulation of the hire car industry is ideology driven. As the Hon. Peter Breen said, the Government has not consulted most of the stakeholders involved to this issue. Independent members have received many letters of complaint. The Government must look at this issue fairly and compensate those unfortunate people who bought licences at a high price. This regulation must go back to the drawing board. Until that occurs it cannot be fully debated in this House.
The Hon. HELEN SHAM-HO [11.24 a.m.]: Earlier I was not certain whether to support the motion moved by the Opposition to disallow the Passenger Transport (Private Hire Vehicle Services) Regulation 2001. However, I am now inclined to support the motion because I have received numerous letters of complaint from my constituents. Last week I received a briefing from the Motor Traders Association of New South Wales [MTA] and yesterday I received additional letters of complaint. I was surprised when the Opposition moved this disallowance motion. As a matter of principle, I agree with the Minister for Transport, and Minister for Roads that this industry should be deregulated—a recommendation made in the report of the Independent Pricing and Regulatory Tribunal [IPART]. However, the way in which that is occurring is a problem. As was said earlier, industry was more than content with the progress that was being made in this regard. Industry is objecting to the fact that the regulation has been changed, which is why this disallowance motion has been moved. I take this opportunity to place on record what Jim Gibbons, Executive Director of the Motor Traders Association of New South Wales, said in his letter to me about the New South Wales hire car industry. He said:
- MTA supports the deregulation of so-called wedding cars and school formal cars;
- MTA concurs with the IPART that, without the maintenance of high vehicle and service standards within the hire car industry, there will effectively be de-regulation of entry into the taxi industry and this is agreed by all to be an desirable result;
- Although not MTA's preferred result, the Association has contemplated that de-regulation will proceed and has advocated that if that were to be the case, then proper compensation needed to be made based on values existing before the IPART recommendations were released.
I agree that there should be proper compensation. All those who have contributed in debate on this motion are agreed on one point: proper compensation. Fair compensation must be paid. I place on record another letter from one of my constituents. It is not my intention to read all the letters that I have received from my constituents, but I received this letter only yesterday. This letter, which clearly sets out how most people feel about the deregulation of hire car plates, was written by Glen Kachel, on behalf of his wife. Among other things he is asking for my help to alleviate these problems. I certainly want to help my constituents. After all, that is the purpose for which I have been elected. Glen Kachel states, in part:
the Department of Transport—
reduced the fees for a Hire Car licence to $8,235 per year, thereby effectively deregulating the industry, despite the NSW Government's claim to the contrary.
We purchased our plate in 1988 and operated it ourselves for a number of years before leasing it out. The plate was acquired with the idea that it would form a substantial part of our superannuation and that plan had been working well up until now. We are self funded retirees aged 66 and 69 respectively.
Added to this problem is the fact that the Government does not pay GST on those lease fees, as we do, and therefore have an unfair trading advantage as well.
Apart from more than halving the funds generated from the lease, our capital investment has also been slashed by this NSW Government led bureaucratic action.
The NSW Government has, in our opinion, a moral obligation to adequately and comprehensively compensate all unrestricted Hire Car licence holders, because in August and October 1998 there were 20 licences auctioned by them and almost $3 million was realised from those sales.
The Hon. Richard Jones: They took the money then, didn't they?
The Hon. HELEN SHAM-HO: Yes, they did. That is the immoral part. The letter continues:
Mr Kachel has stated his case very clearly and I am very sympathetic to his cause. As I said, I have numerous other letters to that effect. Earlier this morning I told the Minister's adviser that setting up the committee as proposed by the Minister is one way out but it is not what I would like to see. This independent committee is supposed to look at the package of compensation, not just at anything. The committee's brief or reference is to look at adequate compensation. That is fair enough. I support the adjournment of this disallowance motion to give the Minister more time to look at the regulation.
We would appreciate your assistance on our behalf and trust this letter might reinforce any approaches you make to the Minister for Transport , to convince him to either reverse this unfair decision or grant adequate compensation to all affected licence holders, as the only just outcome to the predicament which has been thrust upon us.
I was told that it takes four months to put another regulation in place. I would like the Minister to tell us if that is true. If this regulation were disallowed today or in the next fortnight, there would be a window of opportunity for other people to come in and wreck the industry. I would like the Minister to clarify why it would take four months to put a regulation in place. I told the adviser that I thought we could legislate within two weeks, because regulations can be legislated. He did not know. But I know that we can legislate anything if Parliament sees fit. Being a lawyer, I know that the Government could have legislation in two weeks. In any case, I will give the Government an opportunity to rectify the situation. I would prefer to make compromises so that everybody can be happy.
Reverend the Hon. FRED NILE [11.32 a.m.]: In a moment I propose to move that debate on the disallowance of the Passenger Transport (Private Hire Vehicle Services) Regulation be adjourned to the next sitting Wednesday. But before I do that I want to ask a couple of questions and raise some points for the benefit of the Minister. It was said that there is no connection between this regulation and the Government's change to the system, which halves the value of licences from $16,100 per annum to $8,200 per annum. I understand that this regulation gives the director-general the power to do that. If the regulation were disallowed the director-general would lose the power to do what he has done or would do. So there is a connection between the regulation and the controversial issue relating to the hire car industry. Many members have received correspondence from various individuals. In one letter to the Premier dated 10 September Mr Anthony Willock stated:
Mr Willock stated that because of the Government's decision to deregulate, these hire car plates have become unsaleable on the open market. Other honourable members have referred to the fact that as late as 1998 the Department of Transport auctioned 20 licences at an average price of $150,000. That adds up to about $3 million to the Department of Transport. I have been told that at the auction people were warned about the possibility of the regulation. The argument is that the user bears the cost—the purchaser was warned, so he should be wary about spending that amount of money. When Mr Willock complained to the Minister's office, the person who answered the phone said, "When you make an investment you take a risk, and it was just bad luck." There was not much sympathy for the people who were affected.
I am writing in respect of your governments decision to arbitrarily lower the lease rate for government issued hire car plates from $16,100 pa to $8,200 pa. In a single stroke of a pen Carl Scully has destroyed the value of 270 privately held perpetual hire car plates. I own one such plate which I bought on the open market for $100k in July 1996. I operated that licence on a vehicle until Dec 2000. I then decided to lease the plate to a small hire car company for $1,200 a month, which was the going rate. The cost of lease for a government plate was $1,340 per month. I owe $62,000 on the plate, borrowed from Esanda. My repayments are $1,275 per month with 5 years to go on the loan.
I have a copy of a letter dated 5 July from Mr Michael Deegan, the director-general, to Mr K. Stanley of the Hire Car and Chauffeured Limousine Division of the Motor Traders Association of New South Wales. Warnings were given as early as 5 July, the date of this directive. There appears to have been a break in communications with individual licence holders as to whether anyone took the time to inform them about the impact of the proposed reforms to improve private hire vehicle services. I seek leave to table that letter and the attached proposals for reform.
Debate adjourned on motion by Reverend the Hon. Fred Nile.