South-west and east midlands most vulnerable to impact of VAT on fares

The East Midlands and the South West of England would be hit hardest by the imposition of 20% VAT on taxi fares, according to new research.

The government is looking at the VAT issue on taxi and private hire fares, and it could decide to impose a blanket 20% “taxi tax” across all fares, which would result in steep fare rises across England and Wales.

The issue has been brought into focus following court rulings regarding whether a customer’s contract is with the driver or the operator.

The recent Uber vs Sefton ruling last year made it clear that the “principal” was the operator, not the driver –though the judge steered clear of the issue of VAT, stating it was outside the scope of the judgement.

Now new research compiled by the “Stop the Taxi Tax” campaign claims VAT on private hire fares would disproportionately harm lower-income areas with vulnerable passengers and sparse public transport options across the UK.

On average, travelling to a town centre in the southwest by public transport takes 36 minutes – the longest journey of all English regions.

West Devon, for instance, sees an average journey time of a staggering 58 minutes to key services.

Compounding a lack of public transport options in the South West is a high proportion of elderly residents likely to require door-to-door transport in the form of taxis. Nearly one in four (23%) residents in the South West are over the age of 65.

East Midlands residents earn an average of £617 a week, below the national average of £652 so any hike in fares would disproportionately affect the region. Moreover, over one in five East Midlands residents are old age pensioners, suggesting a cut to accessible transport could hurt vulnerable or disabled passengers.

The analysis is based on ONS local data on: earnings; the proportion of residents aged 65 and over; and travel time to services by public transport.

The south-east may be protected from the impact of VAT on fares due to higher-than-average wages. Weekly earnings in the region stand at £692, the second highest in the country after London.

In last month’s Spring Budget, Chancellor Jeremy Hunt committed to launching a consultation of industry on the VAT treatment of taxi journeys in April.

A recent poll by YouGov showed that more than 70% of the British public opposes the measure.

Stop the Taxi Tax, is calling on the government to protect passengers from a 20% VAT hike. It argues that taxis and PHVs should be subject to the same 0% VAT rate as train, bus and airline travel.