Anything will burn, even a business model

September 29, 2017
Taxi drivers protest against Uber in 2015.

As if it were wrapped in flammable polyethelene (PE) cladding, Uber’s seemingly unstoppable plan for world domination caught fire in London last month; and the blaze might be as hard to extinguish as the inferno that engulfed the 24-storey Grenfell Tower in the same city in June.

The deadly fire at Grenfell, and Uber’s repeated failings — in terms of vehicle safety, sexual assault, regulatory avoidance and driver exploitation — are both the direct result of under-regulation and multi-layered regulatory and policy failure.

Londoners are finding out first-hand that deregulation — of their built environment, and their road transport system — is dangerous. The neoliberal-inspired “war on red tape” is exposing communities all over the developed world to unacceptable risks, exploitation and corrupting influences.

Australia is vulnerable and exposed and our politicians and regulators have an opportunity to reduce our risk profile by learning the lessons of London.  

London Mayor Sadiq Khan copped a lot of the reflected heat from the Grenfell tragedy. Now he seems to have lost his appetite for being pushed around by greedy operators and decided to act to tackle his latest challenge, Uber, head on.  


Last month, the local government body responsible for transport in the Greater London area, Transport for London (TfL), announced it would not renew Uber’s licence to operate in that city when it expires on September 30. In a decision lauded as a “historic victory” by the 600,000-member general trade union GMB, TfL determined that Uber was not a “fit and proper” operator.

TfL said Uber’s approach and conduct demonstrated a lack of corporate responsibility with potential public safety and security implications. It flagged concerns about Uber’s reporting of criminal offences — especially sexual assault — and obtaining medical certificates and driver background checks. It was also concerned by Uber’s use of Greyball, which is software that can be used to block regulators from gaining full access to its app.

The decision of TfL remains subject to appeal and Uber can continue to operate in the interim. Regardless of the ultimate verdict for Uber in London, the decision is significant. British regulators have sent a clear message to Uber and others like it that subverting safety and corporate governance standards and obligations will not be tolerated indefinitely.

This sort of messaging matters to the likes of Uber, because its success is built on a game of regulatory poker. Uber tries to bluff regulators into thinking it is holding a full house when it has a pair of twos. Its modus operandi is to sneak into existing markets, leverage as much value as it can from the established market players (without adequately paying its way or its drivers), and subvert established regulations.

It works on the theory that once established, its popularity — linked entirely to its relative inexpensiveness, which is itself linked to its low pay rates and risk-shifting cost structures — means governments and regulators find a way to let it remain. It is regulatory arbitrage — a bet that it won’t be subject to government rules that would put it out of business. TfL has called Uber’s bluff, and has a stronger hand than the US interloper.

Capturing attention in the wake of the decision to terminate Uber’s London operating licence has been a petition with more than half a million signatories, calling for the decision to be revoked. Many people like Uber’s cheap fares and would like them to remain, apparently. How very unsurprising.

Unsurprising too is that the petition is offered as evidence by Uber supporters and commentators as being not only a relevant consideration, but the relevant consideration. Uber’s popularity means we should keep it, the argument goes. This is exactly the dynamic Uber is seeking to establish (and it has been widely reported that Uber itself is behind the petition).

The extent to which Uber is an innovator has been overstated. A bit like refurbishing the exterior of an old public housing block, Uber has taken something very old and re-badged it. It has taken the age-old industry of passenger transport for a fare and clad it in shiny new language and encased it in a culture so toxic it is combustible.

To its credit though, Uber can claim to have broken new ground in terms of the evolution of the art of regulatory capture. It has developed it into something better described as Regulatory Stockholm Syndrome, where the hostage community is completely in the thrall of its captor. It is a perverse dynamic where the regulators, in this case the London Mayor and TfL, find themselves vehemently opposed by the very citizens they are acting to protect.

Cost options

If we cave in to this way of thinking we are being deluded into Uber’s and broader gig economy’s game of bluff. The sad reality is, if consumers are given a choice between a less expensive and more expensive option, they will always choose the former.

If, for example, building regulations were stripped back, allowing houses and apartments to be built by the cheapest means possible, of course consumers would rush to the cheap option.

The trouble is, with no or inadequate regulation governing the quality and suitability of the products used, the soundness of the structure or the safety of the workers, it is a disaster waiting to happen. Buildings would collapse, burn or otherwise fail. Consumers would be ripped off and workers will be killed or injured.

We would have a situation where unscrupulous developers could give old buildings a make-over of colourful cladding — a compound akin to compressed petrol — leaving people living in a death trap with no sprinkler system. Imagine that! Well, it happened, and almost 80 people died and hundreds more were displaced. It is called market failure.

Government responsibility

If we allow low cost popularity to be the only measure of the merits of something, we are on a very slippery slope. One of the key functions of the state is to protect its citizens.

In Australia, in Britain and other places, the role of government as protector is considered and discussed in terms of government’s role in protecting citizens from terrorism, or crime in the community.

Less often discussed is the state’s equally important duty to ensure a safe, secure and decent quality of life for all its citizens — until something goes wrong and we have a big apartment tower fire like that in Melbourne in 2014, or Grenfell, or a legionella bacteria outbreak in the air-conditioning system of a big public hospital, or children killed by carbon monoxide poisoning from their gas heater. Then everyone talks about it.

In the aftermath of the Grenfell Tower fire, Australian federal and state governments have scrambled to determine the scale of the problem. There has been plenty of finger-pointing and blaming going on. But there is widespread agreement that the problem is real, complex and the risks are enormous.

State governments have been clambering over one another to claim that their audit of the use of PE cladding in their state is more comprehensive than anyone else’s. When looked at together, these audits tell a very scary story, especially in terms of the hospitals and other public spaces with flammable cladding.

Recently, the ACT government announced there was flammable cladding on the Centenary Hospital in Canberra and that it would be replaced. The hospital opened in 2012, three years after the ACT government declared it had clamped down on the use of flammable cladding.

In Queensland, the Labor government claims it has initiated “Australia’s best response” to the flammable cladding issue and declared that 44 buildings — 23 government and 21 private constructions — are being investigated.

The Princess Alexandra Hospital in Brisbane has up to 24,000 square metres of combustible cladding. Three other health facilities in the state — Lady Cilento Children’s Hospital in South Brisbane and hospitals in Cairns and Mackay — have also been named. Apart from these facilities, none of the remaining 40 buildings have been identified.

The NSW government estimates that there are well over 1000 buildings it has identified as potentially containing flammable cladding.

The Victorian government has established a taskforce headed by former premier Ted Baillieu and former deputy premier John Thwaites, both of whom were members of governments that deregulated the building industry. An inner-city building audit conducted in response to the Lacrosse fire found that 87 out of 170 high-rise buildings were covered with flammable cladding.

The Senate has conducted an inquiry into the issue, looking at everything from how this material enters the Australian market in the first place, to what, if any, are the safe uses of PE and what needs to change to ensure the issue is addressed.

As a result of all the inquiries and audits, there is a growing understanding of the size and complexity of the problem and the regulatory failings that have caused it. The key lesson is that governments across Australia have created the conditions for the use of dangerous building materials by weakening the regulatory framework through privatisation and self-regulation.

Grenfell served as a wake-up call to Australian regulators. Let’s hope Mayor Khan holds his nerve, and that Australian state governments also heed the call from London when it comes to standing up to the likes of Uber. It is, after all, the role of government to keep the community safe.

Oh, and if Uber does get the old heave-ho, what responsibility does it take for the 40,000 London drivers who have been slaving away for sub-minimum wages, or worse still have leased vehicles from Uber? That’s right. None. They are “contractors” remember, not employees, so they will not be able to bring unfair dismissal claims, will not be able to claim statutory redundancy pay and will not be entitled to any notice pay.

Don’t you just love the gig economy.

[Richard McEncroe is a Melbourne-based writer and public policy consultant.]

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