• Fri
  • Aug 22, 2014
  • Updated: 2:02pm

Of course end-users should be the ones who pay for things

PUBLISHED : Sunday, 08 April, 2012, 12:00am
UPDATED : Sunday, 08 April, 2012, 12:00am

However, the suggestion that a levy will be raised to pay for the [airport] project has proved controversial. The imposition of the levy could lead to higher air fares and this could put off some business people from overseas investing in Hong Kong. The potentially harmful effects of such a levy cannot be taken lightly.

Letter to the editor, April 2

Why can't they be taken lightly? I take them lightly. In fact I don't think these harmful effects exist. The opposite is actually true. The alternative to the User Pay principle for financing a third runway is Loser Pay. The burden will fall on the poor again.

Let's dispense with one misleading notion immediately. There is a commonly-held view in this town, obviously shared by this letter writer, that we are crucially dependent on investment from foreign business people.

Once again the opposite is actually true. We invest far more abroad than others invest in Hong Kong and this has been true for as long as records go back. As a result, our net international investment position - a ballpark estimate of what we own abroad less what outsiders own in Hong Kong - came last year to HK$5.5 trillion, three times the size of our gross domestic product.

There is no danger that foreigners can pull the plug on us. We have more water to pour into this tub than they can drain out of it. Let them try to pull the plug. They will only pull it on themselves.

I suspect another misleading notion here as well. It is a reverence of almost religious proportions for business as if business were the purpose of life. What's good for General Motors is good for America, they used to say in the United States.

What business thinks good, of course, is the maximum amount of winnings for each businessman. Letting them all contend against each other is an excellent way to run an economy but that is no reason for government to favour businessmen over its other constituents.

There is a simple test to apply here. If the commercial benefits of a third runway are greater than the cost of that runway, it is probably worthwhile building that runway.

It is then also worthwhile to make the commercial beneficiaries pay their share of the cost of it. They still get more out of it than they put into it and, on that basis, it is a profitable investment transaction for them. Business charges for what it sells. Why should it not pay for what it buys? And if the benefits of a third runway are not worth its cost then the question of who should pay is moot. We should not build it.

There is also a very easy way of determining whether the benefits outweigh the costs and it is this: we make an estimate of the price tag for a third runway, calculate what the annual carrying costs would be and divide this by the number of annual users to arrive at an extra ticket cost per passenger.

My own guess is that this would come to more than HK$400 and it will make many people vote with their feet for Shenzen airport.

I could be wrong about this. Maybe everyone in Hong Kong will be happy to pay an extra HK$400 a year. But where I am sure I am right is that this is by far the best and most equitable way of determining whether we want this runway. Let the people decide with the contents of their own wallets.

I am also sure of the worst and least equitable way of funding the runway: it is to make taxpayers pay on the reasoning that foreign businesses would rather leave Hong Kong than contribute to a profitable investment and that we cannot do without their money when we ourselves are rolling in a surfeit of the stuff.

But even this is not the worst thing about saddling the public with the bill.

The worst thing is that however much we talk of progressive tax, it is always regressive. Whether through resultant lower wages, higher costs or reduced services, the heaviest burden of public expenditure always falls in the end on the working poor.

When you abandon User Pay, you get Loser Pay.

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