Banning Uber is not the answer

29 Sep 17

The Social Market Foundation’s Scott Corfe says banning the likes of Uber would make households poorer.

Transport for London’s recent decision to deny Uber a renewed licence to operate in the capital has led to public outcry. Hundreds of thousands have signed a petition calling on the Mayor of London to rethink this decision, highlighting how at odds it seems to be with public sentiment. 

In the eyes of many Londoners, particularly cash-strapped younger households, Uber has allowed them to access affordable and convenient taxis, in contrast to expensive black cabs.  They are aghast at the prospect of this being taken away, a return to grim evenings waiting in the pouring rain for a bus home.

Transport for London argues that Uber has failed to act responsibly, particularly with respect to ensuring passenger safety by thoroughly auditing the backgrounds of its drivers. Others suggest that the decision to deny Uber a new licence has more to do with politics; Sadiq Khan needing to preserve the support of anti-Uber union officials that helped fund his campaign. Either way, the decision has riled Londoners and led to claims that policymakers are protecting the interests of a minority (black cab drivers) over a majority (people trying to travel around the capital).

We are in a time of great ambivalence about technology and its impact on our lives, and the furore over Uber is a reflection of this. On the one hand, consumers are seeing huge benefits from technology and the “gig economy” that it is enabling. AirBnB and Uber have enabled individuals to take holidays and travel around cities at much lower costs than were previously possible. From the perspective of Uber drivers and property owners, these digital platforms enable them to boost their incomes and to make better use of the assets they own – their cars and houses. 

Yet, at the same time, the gig economy has become associated with a more precarious labour market. Some perceive the TfL ruling as the start of a fightback against this. Uber drivers and the like face much more uncertain incomes than traditional workers. Compared with employees and entrepreneurs, they often have the worst of both worlds – lacking the guaranteed income and rights of employees, and the genuine flexibility of the self-employed. SMF research shows that they are also much less likely than employees to receive training, limiting their ability to improve their skills and longer-term earnings potential.

The blurred world of the gig economy often enables companies to avoid the tax and regulatory burdens faced by traditional businesses, leading to claims that they are competing unfairly. Unlike black cab drivers, Uber drivers are not required to have passed “the Knowledge” – a test of awareness of London’s roads. By treating drivers as self-employed, Uber reduces its tax burden compared with a situation where drivers are treated as employees. It has gotten away, until now, with relatively lax safety checks.

Tackling the perceived excesses of the gig economy, in a positive way, will be difficult.  There is a risk that new regulations and restrictions, while well intended, could lead to worse outcomes for both gig economy workers and consumers. An outright ban on Uber and similar platforms could lead to job losses for tens of thousands of drivers in London. Consumers would also be worse off – either having to pay through the roof for a black cab or resorting to an inconvenient journey via public transport.

The gig economy is not perfect, and there is clearly scope for improvement. Uber has some questions to answer on passenger safety and drivers' rights', and it is not unreasonable for TfL to want the company to revamp some of its practices before acquiring a new licence. As the SMF has noted, there is a case for doing more to ensure the “self-employed” in the gig economy have access to more rights such as sick pay, and to training opportunities.

But outright bans and heavy-handed restrictions on Uber and other parts of the gig economy would be madness. Gig-oriented technologies are boosting incomes and helping to reduce the cost of living at a time when household finances are under the cosh. Let’s not make people poorer. 

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