Fair Fares

Hong Kong’s long-running system of subsidising public transport fares for senior citizens has had many twists and turns over the years. But fiscal reality seems about to kick in and oblige authorities to come up with a package of rational reforms. The outcome is likely to be much less generous but more sustainable. The changes could be imminent judging from the recent critical comments from members of the Legislative Council.

The scheme began around 20 years ago as a marketing strategy by some public transport operators on their own initiative. Senior citizens (defined as those aged 65 or above) would henceforth be allowed to travel for half price on Sundays and public holidays. This was partly a goodwill gesture and partly a calculation that these were (mostly) empty seats, that any loss of revenue from seniors who were already travelling (and paying full fare) could be compensated by additional revenue from induced travel, including from younger family members accompanying them.

Several features of the scheme stand out: government expenditure was not involved; the concession was limited to public holidays and Sundays; eligibility began at 65.

Ten years ago, the government stepped decisively into the arrangement and substantially expanded the scope. In future all seniors and the disabled would be able to travel for a maximum of $2 or half the fare whichever was lower. The difference between what the passenger would pay and the set fare would be paid by the government direct to the operator. The justification for the revised scheme was essentially threefold: it was recognition of the part played by older citizens in the growth and development of modern Hong Kong; that many of those who continued working past the age of 65 were performing important, but mostly low-paid, jobs and high transport fees might act as a disincentive to their continuing to do so; encouraging the elderly to keep in touch with their families and remain involved in society at large – their socialisation -- was a socially worthwhile objective which could help prolong their lives and improve the quality of their twilight years.

The revised scheme also had negative aspects. It would cost a lot of public money from the taxpayer to subsidise the concession, and the scheme was without limit as it was entirely demand-driven. In a time of aging population the sky was literally the limit. It was indiscriminate in that the billionaire would benefit as much as the less well-off whereas the long-standing principle of our social welfare expenditure is that it should be targeted at those most in need; by applying to trips taken on any day at any time it would add to pressure on public transport capacity including at rush hours.

Moreover, the revised scheme was particularly vulnerable to abuse, that is, use of the green-coloured Octopus card by non-eligible persons. Even the later introduction of the Joy You card, with photo, would only serve as a deterrent if there were a vigorous and staff-intensive policing arrangement. Another form of “leakage” would inevitably arise in operation. If there were – as is often the case – several different bus services covering all or part of the same route with different fares, there was no incentive for the user to wait for the cheaper one because the cost to him would be the flat $2. In an extreme case, the passenger could travel on a tunnel bus for a few stops entirely on Hong Kong Island (or within Kowloon) incurring the premium fare but his price would be fixed. The bus company would also benefit. Only the taxpayer would be worse off.

These problems were compounded last year when the qualifying age was reduced by the previous administration to 60. No particular rationale was offered for the new limit, it was essentially a populist measure to boost community morale. The inevitable consequence has been a substantial increase in the amount the government has to set aside to compensate the operators. In 2012-13 expenditure was $240 million rising in 2021-22 to $1.3 billion. The figure for the last financial year, once available, is likely to show a further substantial increase.

The scale of the burden, and the lack of focus, is beginning to change the minds of officials and legislators about the merits of the scheme, even among those who were until recently its biggest supporters. Various suggestions have been put forward to reduce the expenditure, such as by limiting the number of trips per day, and there have also been suggestions to increase penalties for misuse.

I think we need to confront the reality that lowering the qualifying age to 60 was a mistake for two reasons: it would inevitably cost a lot more, and it sent a signal that 60 was the age at which we expected people to stop working. While it would be politically impossible to take the concession away from those already enjoying it, the age could be increased gradually for future beneficiaries say by raising it by one year every two years until we got it back to 65. From 65 to 70 perhaps we could change the benefit to half fare with the full $2 scheme per the Joy You card only kicking in at 70. Another idea would be to increase the individual’s contribution to $3 per trip to allow for inflation over the past 10 years. None of these proposed changes would be popular, and implementation of any of them would have to be spread over a number of years.

But at a time of multi-billion dollar deficits, we need to bite the bullet and put all options on the table.