Effectiveness of controls over the taxi industry.

In 1997, we reported on the Land Transport Safety Authority’s (the Authority) application of the “fit and proper person” assessment for those hoping to become taxi drivers. During that audit, we found that, except for the Wellington regional office, there were few cases where the issue or renewal of a passenger endorsement was questionable. The Authority agreed with parts of our report, but strongly disagreed with our references to particular decisions made by the regional offices. We also raised concerns about the level of enforcement and information sharing between the Authority and the Police.

At the time, the Authority was primarily responsible for land transport safety, including the taxi industry. On 1 December 2004, it was merged with another Crown entity, Transfund, to create a new land transport authority, Land Transport New Zealand.

In this audit, we examined whether the Authority had acted on our previous findings, and also took a wider look at the controls over the quality and safety of taxi services. We expected the Authority to have robust policies and procedures for granting the endorsements and licences needed to enter the taxi industry. We also expected an effective monitoring and enforcement framework to ensure the industry complied with its legislative obligations.

During the audit, it became clear that the Authority had a different view to ours about its role. We consider that our expectations were accurate, and consistent with both the legislation relevant to the Authority, and its accountability documents.

We also consider that our expectations are consistent with Land Transport New Zealand’s legislative objective, so we audited and reported on that basis.

Our audit findings are based on evidence from Authority documents, interviews, file reviews, and analysis of statistics.

The taxi industry framework

Before 1989, controls over the taxi industry covered, among other things, the number of operators who could work in the taxi industry at any one time, and the fares taxi drivers could charge. The legislative environment for the taxi industry changed in 1989, when the Transport Services Licensing Act 1989 set up a new licensing system to govern the entry of individuals and organisations into transport service industries. The focus, from 1989, was on the quality of those in the taxi industry, and not the number of taxi organisations or drivers.

For the taxi industry, the result was a large increase in the number of new entrants. Before 1989, there were 2567 taxi licence holders, who belonged to 107 taxi organisations and drove 2742 taxis. As at September 2004, there were 23,000 passenger endorsement holders – that is, individuals qualified as taxi drivers. (The figure excludes bus drivers and other holders of passenger endorsements.) They belonged to 190 approved taxi organisations that used 8089 taxis.

A prescriptive range of legislation, made up of various Acts, Rules, and Regulations, covers the taxi industry. The legislation places many obligations on taxi organisations, passenger service licence holders, taxi drivers, and course providers who wish to enter the taxi industry, as well as continuing obligations for those already in the industry.

Controls over entry to the taxi industry

In relation to the controls over entry to the taxi industry, we expected applicants with a history of any serious crimes, or a history of repeated offending, to be precluded from entering the taxi industry. To an extent this expectation is met by the proposed prohibition of persons with certain convictions from operating a taxi, which are set out in the Land Transport Amendment Bill.

Nevertheless, to assess the Authority’s performance against this expectation we did not look at the adequacy of individual decisions, because they are the result of the exercise of discretion by certain Authority staff. Instead, we focused on the procedures used to make decisions, and the consistency of the procedures between the Authority’s regional offices.

We expected there would be policies and procedures governing the role of the Authority’s agents, who would ensure that applicants had satisfied all the statutory requirements before an application was forwarded to the Authority for an assessment of the person’s fitness and propriety. We were satisfied that a manual guided the agents’ activities.

The Authority had a compliance manual to guide the activities of compliance staff. However, staff knowledge and use of the compliance manual, especially when inducting new staff, was limited. In our view, the Authority should have made greater use of the compliance manual, especially for those staff who made fitness and propriety assessments under delegation from the Director of the Authority. Additional resources, such as legislation and case law, should have been better used.

To assess fitness and propriety, the Authority got information on an applicant’s criminal and traffic conviction history from the Police. Where relevant, they also got information from the New Zealand Immigration Service. We were concerned that the Authority did not always get all the information available, from either the Police or the New Zealand Immigration Service, in order to make a full assessment of an applicant’s fitness and propriety. This is of concern given the importance placed on the fit and proper person assessment as a means of preventing unfit and improper people from entering the taxi industry.

We expected that the Authority (or its agents) would get and keep proof that a driver had satisfied the requirements for a passenger endorsement. The regional offices had varying document storage procedures, and used different coversheets to check that applications met statutory requirements. Only one of the coversheets, from the 4 offices we visited, covered all the statutory requirements for becoming a taxi driver. Twenty percent of the new application files we examined did not contain proof that all the legislative requirements had been met to gain a passenger endorsement. The Authority must be able to prove that those entering the taxi industry have satisfied the requirements for doing so.

Taxi drivers are required to have, among other things, the appropriate Area Knowledge Certificate for the areas in which they drive. The Authority approves providers of the area knowledge courses. About one-third of the providers of area knowledge courses are taxi organisations. We consider that taxi organisations have a conflict of interest in issuing Area Knowledge Certificates to prospective taxi drivers because the organisations obtain income from the drivers. This situation needs to be managed by the Authority.

Taxi drivers must also pass a passenger endorsement course. There were 2 types of provider for passenger endorsement courses, both approved by the Authority.

The 2 types of provider used different methods of testing, which resulted in 2 standards.

Accordingly, in our view, the arrangements for area knowledge and passenger endorsement courses do not ensure high standards in the taxi industry.

Overall, in relation to the entry controls administered by the Authority, we consider that some of the procedures used, and inconsistency of their use between regional offices, create the risk that unfit or improper people could enter the taxi industry.

The Authority’s monitoring and enforcing compliance of the taxi industry

We expected the Authority to monitor closely, in conjunction with the Police, the compliance of the taxi industry with its legislative obligations. If the Authority found non-compliance, we expected it to take appropriate enforcement action (suspending or revoking a licence or endorsement, issuing offence notices, or otherwise bringing the person or organisation into compliance). If the Police charged or convicted a taxi driver of a serious offence, we expected that the Police would notify the Authority so it could take appropriate enforcement action.

During our audit, the Authority told us that it considered it had only limited responsibility for monitoring compliance in the taxi industry, and that the industry was responsible for ensuring it complied with legislation. The Authority’s position was that it had a legislative mandate of “safety”, which, given resource allocations, meant reducing or minimising death or injury in the land transport system, to achieve the goals in the Road Safety to 2010 strategy. The taxi industry was not as high a priority as other parts of the transport sector, such as goods service vehicles.

In our view, the Authority had responsibility for monitoring the taxi industry according to its legislative purpose, and the specific powers it had been given by Parliament in the Land Transport Act 1998, Transport Services Licensing Act 1989, and subordinate legislation. However, we acknowledge that other agencies also have a role.

Further, while it was the responsibility of those in the industry to meet their obligations, the Authority must be able to determine whether the obligations for operating in the land transport system are met. In order to maintain effective oversight of the industry, it is essential for the Authority to collect and analyse data, to gain information that can be used to target non-compliant operators. However, the Authority relies on the industry’s own record keeping.

We obtained data from the Authority to assess how much monitoring the Authority was conducting of the taxi industry. While the Authority is meeting its targets as reported in the Statement of Intent 2004/2005, there are no performance measures that relate directly to the taxi industry. Our analysis of the data revealed variations between regional offices, but more importantly variations between years within offices. A significant drop in audit hours was recorded in the Auckland and Wellington regional offices between 2002-03 and 2003-04. This is a concern because these offices cover the 2 largest taxi populations. Overall, we consider that the Authority is not adequately monitoring the taxi industry.

We were concerned that, on occasion, the Police overlooked telling the Authority of taxi drivers who are charged or convicted of serious offences. Non-notification prevents the Authority from taking appropriate enforcement action, such as suspending a driver, awaiting the outcome of their case. There had been little improvement since our 1997 report. We consider that formality is required around the provision of information, and the Authority and the Police need to agree which offences must be notified to the Authority. The Authority also needs to provide the Police with information on those drivers whose licence or endorsement the Authority has suspended or revoked.

In our view, inadequate monitoring and enforcing of taxi industry compliance by the Authority, as well as the informal information-sharing process between the Authority and the Police, worsened the weaknesses in the Authority’s administration of the entry controls. We consider that the weaknesses led to the risk that unfit and improper people were able to gain entry to the taxi industry, and once in, such people were not likely to be required – through targeted monitoring and effective enforcement – to comply with the legislative requirements. In this respect there had been little improvement since our 1997 report.

Monitoring by other agencies

In the absence of adequate monitoring by the Authority, other agencies such as the Police’s Commercial Vehicle Investigation Unit (CVIU), local authorities, and airport companies, had introduced their own measures to address problems they have with the taxi industry.

We examined data held by the CVIU, and accompanied CVIU staff carrying out their work. We saw taxi drivers take extreme measures to avoid inspection. In the 2003-04 year, the CVIU Vehicle Safety Officers ordered more than a third of the taxis and shuttles they inspected to stop working as a taxi or shuttle until faults were remedied.

The monitoring work of the CVIU and the Authority overlapped. The CVIU believed that it should have sole responsibility for on-road taxi monitoring and enforcement. We consider that there is a significant level of non-compliance in the taxi industry, as evidenced by CVIU statistics, our audit observation, and stakeholder feedback.

Consistency of the compliance function

We expected the recruitment and induction procedures for compliance staff to be consistent between regional offices. We also expected the Authority to have compliance training material, policies, and procedures for granting passenger endorsements. This would ensure that the decisions comply with legislation, and promote consistent decision-making. Finally, to further promote consistency, we expected the Authority to have procedures for sharing best practice, or discussing common issues.

In the Authority’s regional offices, there were different approaches to recruitment and induction, although the general procedures were the same. Relevant legislation was the primary guide for new staff, who worked with a more experienced “buddy”.

The Authority did not have any policies around the exercise of discretion in the fit and proper person assessment, because of a concern that policies could be seen to fetter the legislated discretion of compliance staff. Instead, compliance staff relied on statutory requirements.

In addition to courses suggested or requested through the performance management system, the Authority had created a New Zealand Qualifications Authority qualification for compliance staff, based on unit standards. To produce the standards for the qualification, the Authority had established the appropriate roles of a Compliance Officer, and the appropriate performance required to achieve a competent standard. In our view, the qualification was a useful tool for training new staff and refreshing the knowledge of existing staff. It may help promote consistent practice throughout the organisation.

However, overall, the systems and decision-making procedures between the Authority’s regional offices were inconsistent. Sharing best practice and discussing common issues happened informally and infrequently.

Changes in the land transport sector

During our audit, the land transport sector underwent significant change.

The Land Transport Safety Authority and Transfund were merged, to create Land Transport New Zealand. This placed on hold a proposed reorganisation of the Compliance Section’s functions. The reorganisation, if it goes ahead, would address some of our specific concerns with the regional decision-making procedures.

During our audit, the Land Transport Amendment Bill was introduced to Parliament. The purpose of the Bill is to enhance existing land transport safety legislation to support more efficient and effective enforcement, operation, and administration.

It also attempts to address aspects of the current licensing regime that passenger service users perceive as safety risks. However, we are concerned that present weaknesses in the licensing regime will remain, when the Bill is passed, unless Land Transport New Zealand increases the amount of monitoring it conducts.

Consumer awareness and the Operator Safety Rating System

In our view, Land Transport New Zealand should consider repeating earlier efforts to educate the public about the rights of taxi passengers, and obligations of taxi drivers. The proposed Operator Safety Rating System may help to guide consumers toward more safety-conscious operators, and provide Land Transport New Zealand with information to target non-compliant operators.

However, Land Transport New Zealand plans to implement the Operator Safety Rating System for goods service vehicles first, because they have been assessed as posing the highest safety risk. A lack of progress with implementing the system means that a comparable system for taxis is some years away.


We make 61 recommendations in our full report. For clarity, our report still refers to the Authority because it was the entity we audited. However, our recommendations, and comments relating to proposed changes, refer to the postmerger organisation – Land Transport New Zealand – given its inheritance of the Authority’s procedures in relation to the licensing of the taxi industry, and monitoring and enforcing its compliance.

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