Fare stability fund idea won't cut it in real world

PUBLISHED : Tuesday, 29 April, 2008, 12:00am
UPDATED : Tuesday, 29 April, 2008, 12:00am

A lawmaker has urged the government to set up a public fund to keep transport fares stable.

Andrew Cheng Kar-foo, chairman of the Legislative Council's transport panel, said companies with franchises, such as the MTR Corporation and bus firms, should be required to contribute part of their profits to establish such a fund. Money could then be given to operators under pressure to raise fares.

SCMP, April 28

Ihave a lot of time for Martin Lee Chu-ming, founder of the Democratic Party, but I hold against him that he rarely went outside his own profession to look for people to join him in Legco.

Much as I am sure that Andrew Cheng is a fine fellow with many personal qualities to recommend him, he is a solicitor with an understanding of little more than legal matters and is utterly out of his depth as chairman of Legco's transport panel.

I have tried to understand transport economics as he apparently conceives them with this daft idea of a fare stability fund, but I have failed.

It's a strange non-dynamic world where costs are unvarying except for minor fluctuations and are determined, I suppose, on the basis of moral obligations. I'm not sure this is a world to be found in our universe.

Think for a moment, Mr Cheng, of what might happen to your fund if public transport operators find their fuel bills, wages, equipment costs and road usage tolls all rising steeply while they are in a struggle to keep their passenger levels up.

They soon would no longer have profits to contribute to the fund, would they? In fact, they would soon all line up to dip into the fund and very soon that fund would run dry if it ever accumulated any money at all.

In that case, rather than have all the fuss and expense of deciding who would have to contribute how much to the fund and how much each could withdraw and with what limits, wouldn't it make sense to let each adjust its fares to a level that would generate a reasonable return on its investment?

And here is the real brain teaser for you, Mr Cheng. Guess what the circumstances of public transport operators are right now.

Yes, fuel bills are rising with the rocketing costs of petroleum and other fossil fuels, wages are rising with declining unemployment, equipment costs are up because our currency is tied to a weak US dollar, and the tunnel companies are raising their tolls, which hits bus companies in particular quite hard.

As the first chart shows, however, the weighted average fare of public transport operators (MTR, bus, light bus, taxi, tram, ferry) has not risen in 10 years.

The second chart shows you how the single largest public transport company, Kowloon Motor Bus (KMB), which accounts for 25 per cent of all passenger embarkations, is losing patronage.

Granted that it is mostly losing them to the MTR, which is gaining passengers, but the MTR has effectively been reabsorbed as an arm of government and no longer cares whether it loses money. That gives it an edge in squeezing KMB.

Making things worse for the bus companies is the fact that some years ago the government would no longer match their longer-term investment commitments with commitments to a fare structure that could guarantee them a decent return.

Instead, it made bureaucratic whim the determining factor for fares under a system called the Modified Basket of Factors Approach.

This is supposedly based on the overall consumer price index plus transport wages, but, if the bureaucrats don't like what this tells them, they can resort to 'public acceptability and affordability'.

Secretary for Transport Eva Cheng, for instance, took refuge in these weasel words only on Saturday to dodge her duty of a frank review of public transport fares.

I used to take the bus regularly before my pleasure in the ride was destroyed by that abomination, Bus TV, and I don't favour higher fares. I prefer them, however, to filthy, ill-maintained, dangerously driven and infrequent buses or no bus service at all.

That's our choice. But in government Andrew Cheng doesn't know it and Eva Cheng won't face it.