It is the time to the year when licensing authorities are setting their fees for the next financial year. It is important that taxi and private hire licence holders understand the law relating to fee setting to understand how when licensing authorities should arrive at their fees and how this can be challenged. The recent judgment in the Wakefield case has demonstrated the importance and value of all of the aforementioned to the trade.
What the Wakefield case has reconfirmed as a general legal principle is that licensing authorities have no powers beyond those which statute has given them. Therefore in respect of setting and adopting hackney carriage and private hire licensing fees, licensing authorities are bound by the specific heads of recovery as prescribed in legislation.
In this article, I will consider what the legislation allows licensing authorities to take into account when setting fees, some of the most significant and well established “redlines” and briefly look at the ways the trade can challenge licensing fees.
s.53 of the Local Government (Miscellaneous Provisions) Act 1976:
“…a district council may demand and recover for the grant to any person of a licence to drive a hackney carriage, or a private hire vehicle, as the case may be, such a fee as they consider reasonable with a view to recovering the costs of issue and administration and may remit the whole or part of the fee in respect of a private hire vehicle in any case in which they think it appropriate to do so.” Section 53 above therefore limits the cost of a driver’s licence to the council’s administration costs associated with the “…the grant to any person of a licence to drive a hackney carriage, or a private hire vehicle…”.
s.70 of the Local Government (Miscellaneous Provisions) Act 1976: “…a district council may charge such fees for the grant of vehicle and operators’ licences as may be resolved by them from time to time and as may be sufficient in the aggregate to cover in whole or in part:
(a) the reasonable cost of the carrying out by or on behalf of the district council of inspections of hackney carriages and private hire vehicles for the purpose of determining whether any such licence should be granted or renewed;
(b) the reasonable cost of providing hackney carriage stands; and
(c) any reasonable administrative or other costs in connection with the foregoing and with the control and supervision of hackney carriages and private hire vehicles.”
The licensing costs recoverable by a district authority in respect of vehicles and operators is limited to vehicle inspection costs for the specific purpose of determining their suitability to be licensed, reasonable cost of providing hackney carriage stands, reasonable administration costs for processing the licence application and finally reasonable costs associated with “…control and supervision of hackney carriages and private hire vehicles.”
It is clear from section 53, that a local authority cannot include driver enforcement and supervision costs against driver licence fees. Saffam J in the Wakefield case therefore concluded that, to this extent, licensing regimes cannot be fully self-funding.
The 1967 Act prescribes the procedure that a district council must follow when setting fees for vehicle and operators’ licences.
s.70(3)-(5) states that if a district council sets fees in excess of those prescribed in subsection 2 (which all licensing authorities do), it must consult by placing a notice in a local newspaper circulating in the district and allowing for a consultation period of no less than twenty-eight days. If any person makes an objection to the proposed fees, a further date (not later than two months after the first specified date) must be set to allow the council to consider the objection and to vary the fees if applicable.
The fee adoption and variation process is important for the trade to be aware of because, if a district council does not comply with the advertising and consultation requirements, the fees set by it would be unlawful and open to challenge and claims for restitution.
Over the years there has been substantial litigation on the subject of licensing fees and particularly in connection with taxi and private hire licensing fees. From this have arisen a number of general common law principles that are now established and embedded as non-negotiable fee setting principles.
There is an established an important principle that taxi and private hire licensing fees cannot be used as a general source of raise revenue for a district council. A series of court cases, starting with Manchester City Council [R] v King [QBD] 1991, has established the principle that a district council must, when setting fees, consider any previous surplus and, if they so chose, deficit and adjust the level of fees accordingly. For example, when a district authority’s accounts showed a surplus in taxi and/or private hire fee income, that surplus must be factored in. Where accounts show a deficit, this too can be factored in but, unlike a surplus, a deficit can be ignored.
It is worth noting however that in local authority accounting timescales, adjusting fees according to surplus/deficit will happen on a three yearly cycle because taxi and private hire licensing fees setting happens before the financial year end. For example, fees set for 19/20 will look at any surplus/deficit in 17/18, because the financial year 18/19 is still current.
Cross subsidisation is the practice of charging higher fees to one group (i.e. driver’s licences) to subsidise lower prices for another group (i.e. vehicles licences). As I previously explained in this article, a general legal principle is that licensing authorities have no powers beyond those which statute has given them. Therefore in respect of setting and adopting hackney carriage and private hire licensing fees, licensing authorities are bound by the specific heads of recovery as prescribed in legislation.
It is clear from the various statutory provisions mentioned above that each type of licence has a specific head(s) of recovery prescribed. As a consequence, it is not lawful for a district council to cross subsidise income because, in doing so, a district council is recovering costs for some licences that are not permitted as a head of recovery for that particular licence (see Wakefield case below as an example).
In the case of R (Cummings) v. Cardiff  EWHC 2544, the High Court made the following Order: “A local authority must keep separate accounts for and ensure when determining hackney carriage and private hire licence fees under sections 53 and 70 of the Local Government (Miscellaneous Provisions) Act 1976 that any surplus and deficit accrued under each of the determining hackney carriage and private hire licensing regimes, and between each licence within those regimes, are only accounted for and taken into account within the regime under which they have accrued and a surplus from one licensing regime shall not be used to subsidise a deficit in another.”
Whilst the general principle of costs against specific heads of recovery applies here, the recent judgement in the case of Wakefield District Private Hire and Hackney Association v Wakefield MBC (December 2018) is worth a mention. At the time of writing, the full judgement was yet to be published, but the case’s details and conclusions could be summarised as follows:
Wakefield Council included in its vehicle licence fees enforcement costs associated with supervision of vehicles. The council argued that the costs were properly accounted for against vehicles because the errant drivers were driving vehicles.
Saffman J reportedly described the council’s argument as ‘stretching beyond breaking point’ the language of the section and held that the fees charged were unlawful. In particular, the council had wrongly interpreted section 70 of the Local Government (Miscellaneous Provisions) Act 1976 and had erroneously charged the costs of enforcement against drivers (for speeding, bad parking, dressing inappropriately and a miscellany of uncivil or illegal conduct) to the control and supervision of vehicles.
Of more significance was Saffman J’s ruling that there is no general principle of law that licensing regimes should be self-financing which has been a very long held position. The natural consequence of the ruling the Wakefield case is that in the case of, for example, vehicle licensing where there is no provision to include cost of enforcement, the enforcement costs will have to be funded by the local tax payers.
As with any decision made by a licensing authority, it is subject to legal challenge. As I have previously mentioned in this article, there has been a substantial amount of litigation around fees and charges for taxi and private hire licensing. Whilst a judicial review may seem the most obvious means of challenge, a complaint to the local auditor can be as effective without the substantial costs attached to judicial review proceedings.
A decision to set fees in respect of taxi and private hire licensing taken by a district council is challengeable in the High Court by way of judicial review. There are specific rules that must be followed when seeking a judicial review of such a decision.
The Civil Procedure Rules states that judicial review proceedings must be filed promptly but in any event not later than 3 months after the grounds to make the claim first arose. There are therefore strict timescales in place.
Furthermore, there are specific grounds for seeking a judicial review (briefly stated as):
1. Illegality – failure to follow the law properly 2. Irrationality – demonstrably unreasonable as to constitute ‘irrationality’ 3. Procedural impropriety/unfairness - act so unfairly that it amounts to an abuse of power
The High Court can, in finding the action of a district council to be unlawful:
1. Quash the decision and requiring the council to re-take the decision; 2. Making a declaration; and/or 3. Award damages.
An alternative means of challenging fees set by a district authority is through a complaint to the Local Auditor (previously District Auditor).
Local Auditors are people officially appointed to carry out the audit of local government and health bodies’ financial arrangements and this will also therefore include licensing fees as these form part of a district council’s accounts.
Generally speaking, there is a period of 30 days after the setting of fees where licence holders can inspect and object to the fees set. The objection should relate to legally relevant matters such as not complying with legislative requirements, incorrect charging and calculations etc. If the district authority’s response is unsatisfactory, a complaint to the appointed local auditor can be made in writing indicating which item(s) in the accounts are being objected to and why they are unlawful.
Local auditors have a range of statutory powers attributed to them including the ability to apply to the High Court for a statutory declaration that an item, or items, of account is against the law. In such circumstances, the local auditor can require the district council to act to rectify and remedy the error.