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Saturday, Jun 03, 2023

Ageing Hong Kong can’t afford ‘sky’s the limit’ fare subsidy for elderly

Ageing Hong Kong can’t afford ‘sky’s the limit’ fare subsidy for elderly

The flat HK$2 fare is open to abuse and costs taxpayers billions of dollars amid a budget deficit. It’s time to raise the qualifying age and cut back the benefit – so the scheme can be truly sustainable.

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 the authorities to come up with reforms. The outcome is likely to be much less generous but more sustainable. And changes could be imminent, judging from the recent critical comments from members of the Legislative Council.

It began around 20 years ago as a marketing strategy by some public transport operators to allow senior citizens (those aged 65 or above) 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, and that any loss of revenue – from seniors already travelling and paying the full fare – could be compensated for with revenue from induced travel, including from younger family members accompanying seniors.

Several features of the arrangement stood out – government expenditure was not involved, the fare concession was limited to public holidays and Sundays, and eligibility began at 65.

A decade ago, the government stepped decisively into the arrangement and substantially expanded its scope. Today, all seniors and those with disabilities travel for a maximum of HK$2 (25 US cents) or half the fare, whichever is lower. The difference between what the passenger pays and the set fare is paid by the government to the transport operator.

The justification for the government scheme was threefold: first, it was in recognition of the part played by older citizens in the growth and development of modern Hong Kong. Second, 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 be a disincentive.

A playground in Cheung Sha Wan on February 16. Encouraging the elderly to keep in touch with their families was one reason the government expanded the transport subsidy.

And third, that encouraging the elderly to keep in touch with their families and remain involved in society could help prolong their lives and improve the quality of their twilight years.

The scheme also has negative aspects. Subsidising public transport fares costs the taxpayer, and the scheme, being demand-driven, has no cap. In a city with an ageing population, the sky is literally the limit.

The scheme is also indiscriminate, benefiting both the well-off and the poor – when the long-standing principle of our social welfare expenditure is that it should target those most in need. And by applying the concession to all trips all day, it puts pressure on public transport capacity, including during rush hour.

Moreover, the scheme has been vulnerable to abuse, for instance, non-eligible people can get away with using the green Octopus card. Even the introduction of the JoyYou card, which carried the person’s photo, only serves as a deterrent if there is a vigorous and staff-intensive policing arrangement.

Another form of “leakage” has inevitably arisen in operation. If there are – as is often the case – different bus services covering all or part of the same route with different fares, there is no incentive for the user to wait for the cheapest one because of the flat cost of HK$2.

In an extreme case, a passenger could travel on a tunnel bus for just a few stops, staying entirely on Hong Kong Island (or within Kowloon), incurring the premium fare but paying only the flat one. The bus company would also benefit from this. 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 years. No particular rationale was offered for the new limit. It was essentially a populist measure to boost community morale.

The consequence has been a substantial increase in the amount the government has to set aside to compensate the transport operators. In 2012-13, the sum was HK$240 million, rising in 2021-22 to HK$1.3 billion. The figure for the last financial year, once available, is likely to show a further big jump.

The scale of the burden and 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. Suggestions have been put forward to reduce the expenditure, such as through a limit on the number of trips per day and harsher 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 cost a lot more, and it sent a signal that 60 was the age at which we expect people to stop working. While it would be politically impossible to take the concession away from those enjoying it, the age could be increased gradually for future beneficiaries – for example, by raising it by a year every two years until we get it back to 65.

For those aged 65 to 70, perhaps we could change the benefit to half fare, with the full HK$2 scheme as offered on the JoyYou card only kicking in at 70. Another idea would be to increase the individual’s contribution to HK$3 per trip to allow for inflation over the past 10 years. None of these changes would be popular, and implementation of any would have to be spread out over years.

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

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