Fares fair?

For occasional taxi journeys from my home to and from Heathrow and to my local station at Slough I am almost completely price insensitive. But in central London I do weigh up the costs and benefits of jumping in a taxi for shorter forays. This is a terrific article on the cost pressures facing London’s metered cabs whose prices are capped by Transport for London. Earlier on this year, the price of metered can journeys was raised by 2.7% - below the CPI and RPI rate of inflation and nowhere near the increase in the cost of fuel at the forecourts.

“Unlike the capital’s 44,000 private hire taxi drivers, who can charge what they want, fare rises for metered cabs are capped by Transport for London. Drivers argue that April’s annual 2.7% rise - which bumped the average cab fare up to £10.85 - was insufficient to cover earlier fuel increases let alone the further sharp rise since then. Transport for London, which calculates fare rises on the basis of changes to average national earnings and drivers’ costs, says it needs to strike a balance between protecting drivers’ income while also giving passengers value for money.”

There are lots of economic issues that could be discussed here:

Factors affecting market demand for taxi journeys - is this market a bell-weather for the wider economy?
Fixed and variable costs of operating as a taxi driver
The risks of self-employment
The price elasticity of demand for taxi fares
Cross-price elasticity as consumers weigh up the costs of using metered and private-hire vehicles and alternatives used as the tube and bus
The incentives for cab drivers to work a given number of hours
Price capping and the effects on consumer and producer welfare - different stakeholders
Externalities of taxi use compared to other forms of transport
Different pricing strategies - should taxi drivers be able to charge fuel surcharges? What of flat-rate fees for each journey?

A 3% rise in the capped fare looks pretty low given what else is happening in the economy. Provided fares are flexible and come down when fuel prices eventually fall, why should Transport for London not adjust fares more frequently to take into account changing market conditions?