The OFT appear to be set on deregulating the provision of local taxi services. At the moment local authorities restrict the number of taxi cab licences and set maximum fares, often restricting firms to only charging this maximum. This does have the effect of restricting the supply of taxis to the market at peak times, in particular public holidays and on Saturday nights.
The problem with deregulation however is if it is at the expense of quality regulation. Local regulation usually is based on the maximum number of taxis that a market will bear whilst still allowing quality vehicles and tax driving to remain a full time occupation. Allowing unlimited number of drivers at peak hours along with price competition may result in taxi driving being uneconomic for full time drivers. This is likely to lower the quality incentive. Ironically, the effect of deregulation could be to result in quality regulations being tighter. This would have the effect of removing the extra supply from the market by creating a different barrier to entry.
The Department of Trade and Industry is likely to overrule the OFT on these grounds.