Idea to use MTR dividends to subsidise fares is way off track
There are several reasons why this proposal is a particularly wrong-headed idea. And above all, it is a measure that does not focus on the poor
The city’s leader is eager to subsidise public transport fares with billions of dollars in dividend payments received annually from the MTR Corporation, according to the railway operator’s chairman.
City, July 6
I see the future. I can tell you now that you will soon again see reports in this newspaper thatHong Kong’s Gini coefficient, the measure of the income gap between rich and poor, is widening further.
I can also tell you that our government apologists will then again protest that this is not really a fully accurate measure of what is happening on the ground.
“We give our poor all kinds of benefits in kind,” they will say. “We give them ultra-low cost public housing, virtually free hospital care and commuter subsidies to mention just a few. Why don’t we include all these in the equation? If you keep the costs for the poor down, isn’t that just as good as pushing their incomes up?”
No it is not. The problem is that it works for a few people at a time but not when the benefits are spread across millions of people in a wide segment of the population. Employers then recognise what is happening and hold wages down accordingly.
“Why should we pay them more when the government is doing it for us?” they ask. “We pay as little as we need to pay and the government now helps meet that need.”
It is rarely quite so deliberate but it is nonetheless real. Adjustments that cannot easily be seen at a micro level are still made in exact response to general influences in the overall economy. Public housing tenants, for instance, have low incomes in part because their rents are heavily subsidised.
Providing social benefits in kind to the poor is thus not as good as raising their incomes, not if their incomes go down as a result.
But I can think of several reasons why it is a particularly wrong-headed idea to use MTR dividends paid to the government to subsidise public transport fares.
Above all, this measure does not focus on the poor.
Public transport is widely used by all people except those at the very top of the income range. I don’t need the cheaper fares. Yet I will be given them. I shouldn’t be.
The idea also ignores that our public transport fares are already very low. I can travel across Hong Kong from one end of the MTR system in Chai Wan to the other end in Tuen Mun for less than the cost of a single station hop on the London Underground.
It could be lower yet and still allow the MTR decent earnings but for the fact that the MTR was forced in 1998 to swallow the Airport Express, which had a higher construction cost than all the rest of the commuter network at the time.
The Airport Express will never cover its costs. It should have been lumped in with the airport and paid for through an airport departure tax. Instead we subsidise foreign travellers with local commuter fares. This is truly putting the cart before the horse. Why not unravel this anomaly first?
And then you get the economic axiom that to lower the cost of something is to encourage greater use of it.
We saw an example of this recently in a study that pointed out how a one-off subsidy of electricity tariffs several years ago resulted in higher electricity consumption.
This is fine if it is what we want to do. But do we really want to encourage people to live even further away from their places of work so that we will have to invest in even more public transport to get them back and forth?
This is not even to mention that biggest beneficiaries will be landlords and homeowners in those further out places, who will see their property values go up.