# Bureaucrats miss the bus to a fairer deal on public transport fares

PUBLISHED : Tuesday, 25 January, 2005, 12:00am
UPDATED : Tuesday, 25 January, 2005, 12:00am

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'I will do my best before my term ends [in 2007] to complete this fare-adjustment mechanism.'

Transport Secretary

Sarah Liao Sau-tung

'Well, that does it. We'll have to wait until after 2007 for that fare-adjustment mechanism now.'

My response

IF YOU THINK THAT this snap judgment is an unkind one, let me tell you that the last time I heard anything concrete from Ms Liao's people about a mechanism for establishing bus fares was 11/2 years ago.

It went by the name of P = W-(K*T) and if you, like me, are easily impressed by what looks like a complex mathematical formula, it should have done the job of convincing us that Ms Liao was hard at work.

Trouble is, however, that if you do not at some point substitute numbers for the letters in such an equation, it will never amount to much, which is the record of this one so far.

Let me explain the formula to you. The letter 'P' represents price (or fare) and 'W' represents the costs of inputs to the operator (or inflation). The formula then says that the figure by which fare increases should stay below the rate of inflation will be determined by 'T', growth in productivity, times 'K', a number between 0 and 1.

It is a derivative of a formula adopted in Britain for fare regulation, CPI-X, which says that fare increases must be kept below the overall rate of inflation by a margin to be established in arm wrestles between bureaucrats and the transport industry.

It is all very well that we have tried to come up with something more refined but, for starters, we shall have to further refine that 'W' for inflation. To their credit, the drafters of the formula recognised that we cannot simply take the overall rate of consumer inflation. It has to be made relative to the input costs of the bus companies.

So what else have we heard for the past 18 months on how to do this equitably? Answer: Not a word.

What of that 'T'? Is productivity to mean only annual turnover divided by the number of employees or do we also take account of the fact that a bus company's costs take in a good deal more than wages alone. Not a word have we heard for 18 months.

And what of that 'K'? There is a mighty big difference for the purposes of this formula between 0.1 and 0.9. What is it to be, 0.34 or 0.86 or something else? Just narrow that range down for us, please, Ms Liao. We have not heard a peep from you for 18 months.

Now I recognise, madam, that you may have been busy discussing these matters with the bus companies during that time but your boss, the chief executive, has also told us recently that he is resolutely opposed to collusion between business and government.

Do you not think it has been a rather one-sided discussion if bus passengers have had no input for 18 months? Would it not be better to avoid even any appearance of that collusion to which Mr Tung is so resolutely opposed?

And while I am glad to hear you say that bus fares should be allowed to go down as well as up, may I draw your attention to the chart? There has not been much down in bus fares since the CPI peaked in 1998 and, if inflation now starts to rise again, you will probably have missed your chance to get those fare reductions.

I accept, as I have said above, that a direct comparison between overall CPI and bus company costs is not necessarily appropriate. To cite just one input, however, much lower interest rates helped reduce Kowloon Motor Bus' borrowing costs to \$34.8 million in its latest published accounts from \$147.3 million in 1998.

You may want to take account of it when bus companies complain that their costs have not come down by as much as the CPI. In some elements not represented in the CPI they have come down a good deal more.

Yet the only concrete thing I have seen your department do recently is cut two bus routes that competed with the KCRC's new Ma On Shan line.

Rather than fare adjustment, this is what I would call an unfair adjustment. If people would rather take the bus, why force them on the train?

I suppose it was done to help cover up what was a bad investment decision in going ahead with that Ma On Shan line. I also suppose there is not much better we can expect before 2007.