London’s ambitious plan to control the number of private hire vehicles (PHVs) on its streets is facing a fundamental roadblock: a long-standing legal loophole that allows drivers licensed outside the capital to operate within it freely. Transport for London (TfL) officials now warn that without national legislative change to close this “cross-border” gap, any local cap on licences would be largely symbolic.
Regulatory gap allows out-of-area drivers to operate freely in the capital, undermining enforcement and market controls
At a recent London Assembly Transport Committee hearing, Deputy Mayor of London Seb Dance was unequivocal. “The problem with the cap is that whilst you have the cross-border issue, cap is essentially meaningless,” he stated. His comment highlights a core structural flaw: TfL can license and regulate vehicles and drivers within its jurisdiction, but it has virtually no authority over those licensed by other councils, such as in neighbouring counties like Essex, Hertfordshire, or Surrey, who then drive predominantly in London.
This situation stems from national legislation governing private hire vehicles. The law permits a driver, vehicle, and operator to all be licensed by a single local authority and accept bookings anywhere in England, regardless of where the journey occurs. While designed for pre-booked cross-county travel, this framework has been exploited by app-based platforms. It now enables a significant, unquantified number of out-of-area licences to effectively function as a de facto London fleet, bypassing TfL’s specific, often stricter, standards on vehicle age, emissions, and driver vetting.
Safety and Market Fairness at Risk
TfL Commissioner Andy Lord told the committee this is a “real concern” on two fronts: passenger safety and fair competition. “It’s potential that there’s vehicles in London that aren’t to the same specification and safety requirements as London licensed vehicles,” Lord said, adding that such drivers are “plying in an area where they weren’t actually licensed or regulated.” Because TfL’s enforcement powers are largely confined to its own licence holders, it cannot easily inspect or sanction non-compliant out-of-area vehicles operating on London roads.
The market distortion is profound. London already has over 100,000 licensed PHVs, according to TfL data. The unfettered entry of additional vehicles from surrounding areas contributes to chronic oversupply. This intensifies competition for trips, which TfL has previously warned can suppress driver earnings. It also creates an uneven playing field: London-licensed operators and drivers must comply with TfL’s stringent, and often more costly, regulations, while their cross-border competitors do not.
The Path to Reform: National Legislation Required
Both Dance and Lord confirmed that TfL has been lobbying the Department for Transport (DfT) for years to amend the national rules. The most likely vehicle for change is the government’s upcoming English Devolution Bill. Proposed solutions could include defining a driver’s “primary area of operation” as the authority that licensed them, restricting non-essential cross-border work. However, Lord acknowledged the need for exceptions, such as for pre-booked long-distance trips terminating in London, which would require carefully crafted enforcement boundaries.
The issue has gained political traction, intersecting with wider concerns about worker exploitation and safeguarding highlighted in Baroness Casey’s recent review of London’s taxi and private hire trade. This has increased pressure on ministers to standardise licensing standards and reduce inconsistencies between local authorities. For TfL, the message is clear: meaningful local control over its PHV market—whether through a cap or other measures—is impossible until the cross-border loophole is closed at a national level.
