Early experiences of Uber in London did not encourage me to become a regular user. My first driver thought I wanted to go to Birmingham when the ride had been booked from Clapham to Mayfair. The next was a furious driver who would have seen off Lewis Hamilton at Hyde Park Corner. Call me old-fashioned, but I still prefer the pottering black cab with its opinionated Essex-dweller at the wheel and the possibility of paying in cash. So my own modus operandi is unaffected by Transport for London’s decision not to renew Uber’s licence in the capital and I’m not in the least upset about it.
OK, life today is all about apps, cashless convenience and the individual’s right to make choices and take risks. To oppose Uber on ideological grounds, as Mayor Sadiq Khan is accused of doing, is to defend the 1970s-style closed-shop and ‘workers’ rights’ over the consumer’s interest in fast-evolving free markets. Fine: let’s have a multiplicity of ‘ridesharing’ and minicab services alongside licensed taxis. I’m not generally in favour of banning anything.
But let’s remember that Uber is popular with customers not because it’s a flagship of libertarianism but because it’s dirt cheap; and with drivers because it’s a ready source of income however mean the net hourly rate. And that’s the problem at the core of its model. In the decade since its inception, Uber has used billions of investor dollars to subsidise a strategy designed to destroy full-fare competitors in city after city; passengers have never paid anything like the economic cost of their ride. An essay by Hubert Horan in American Affairs (May 2019) argues that Uber is actually less efficient than many of the competitors it drives out of business — because individual Uber drivers have to pay their own vehicle financing and maintenance (plus Uber itself has hefty overheads) and that adds up to more cost per car than a traditional cab fleet.
In short, the Uber model is ruthless but unsustainable and corrosive; if TfL’s ruling hastens its retreat, there’s nothing to regret.
Hubris at TSB
Could there be a more glaring example of hubris than the following combination of headlines from the past week? I’m talking about ‘TSB attacks lawyers over “harsh” report into IT fiasco’ (the Telegraph); ‘Thousands of TSB users left without wages in latest IT bungle’ (the Daily Mail); and ‘Struggling TSB to close 100 branches and axe staff’ (the Times) — to which, as a footnote, let’s add a Which? survey earlier this month that ranked TSB bottom among the UK’s 12 biggest banks for cyber security.
The lawyers referred to are the City firm of Slaughter & May, who produced a damning report into the extended collapse of TSB’s systems in April 2018 after it tried to migrate millions of customer accounts to a new platform supplied by its Spanish owner, Banco Sabadell; one consequence of the breakdown was a tsunami of online fraud attempts. Some reports say Sabadell refused to co-operate with the inquiry; Slaughters say TSB itself refused to answer follow-up questions after challenging the first draft; TSB chairman Richard Meddings is now whingeing about ‘inaccuracies’ in the final version. Meanwhile the ‘bungle’ occurred last week when TSB had to offer ‘emergency cash’ to customers whose wages and other payments had been temporarily held up.
I can’t think of a single reason, other than inertia, why customers should stay loyal to any service provider that is so sulkily reluctant to address its own faults. And I can only repeat the question I threw at regulators last year: is Sabadell a fit and proper owner for a UK bank?
Leave EIS alone
Asking what an incoming Labour government might do for the sort of early-stage ventures that are already looking ahead to The Spectator’s 2020 Economic Disruptor Awards is a bit like asking — with the BBC’s adaption of The War of the Worlds in mind — what a Martian invasion would do to advance the green agenda. You might think that in John McDonnell’s earth-scorching bid to overthrow capitalism, he wouldn’t bother with byways of the tax code — but it turns out he has already spotted Entrepreneurs’ Relief (which allows Capital Gains Tax of 10 per cent on the sale of qualifying business assets up to £10 million) and aims to abolish it. Interestingly, however, the Tories also say they’ll ‘review and reform’ this device, which costs £2 billion a year but is suspected of being widely used as a loophole for the rich and, according to former HMRC chief Sir Edward Troup, is ‘no incentive for real entrepreneurship’.
Much more valuable for genuine venturers is the Enterprise Investment Scheme, which allows 30 per cent upfront income tax relief on qualifying investments plus CGT exemption. This one is a proven good thing, having helped channel £20 billion into 30,000 companies since it was launched in 1994. EIS numbers have fallen lately after pressure from Philip Hammond to steer the benefit towards higher-risk ‘knowledge-based’ businesses and away from anything that might whiff of avoidance. But it would be hugely damaging to the UK start-up scene if the EIS was to be attacked head-on by McDonnell: asked once whether he might do so, he replied ‘not necessarily’, which I think we can assume means ‘yes’.
Gremlins and nightmares
The first item of last week’s column (in print) suffered a production glitch which deleted a line and spoiled my squib about Boris’s reversal, in his speech to the CBI, of a promised cut to corporation tax. Never mind: it was — as I suggested it would be — no more than a soundbite moment, eclipsed later in the week by the launch of Labour’s manifesto. If the barking madness of that document’s tax-spend-and-nationalise commitments were also the work of production gremlins, we might sleep a little easier: the nightmare is that it means what it says.