Election Blues


When normally sensible people start to sing from the same hymn sheet as the usual headbangers, you know it can only mean one thing: election season is here again.

Take the issue of MTR fare adjustment. There is an agreed formula for this established some years ago. It takes into account such matters as the changes in wage levels in the transport sector, electricity tariffs, and the cost of various essential supplies including spare parts. Applying the formula this year supported a fare adjustment of just over two per cent. Against a background of wage levels rising by an average of four per cent plus, one might have expected the adjustment to slip through unremarked. But no, out came the usual chorus which objects to every fare increase on principle (exactly what principle is that by the way?) pointing out that the MTRC had made a profit of some billions of dollars. This was true but not relevant: the lion’s share of the surplus had come from property development, with rail services achieving a very low return on investment. The shareholders – including the public purse as majority owner – deserved their share.

The government just batted this nonsense into the long grass, right? Well no. It agreed the situation needed looking into, and pressed the corporation to bring forward its periodic review of the formula.

Our underground railway is the envy of the world. Visitors from cities with similar mass transit systems marvel at the frequency and reliability of services here, the cleanliness of the carriages and stations, and above all the low fares. It is essential that any review not imperil the high standard of maintenance: after all if a bus breaks down it can easily be pushed aside and anyway will not usually block the whole road. By contrast, if a rail snaps, or a train breaks down, the whole network, or at the very least a substantial portion of it, will be out of commission until the fault is remedied. Parsimony in maintenance would be a false economy.

The other area where common sense has recently taken a back seat is Link REIT rent levels. Some years back, the Housing Authority sold the commercial areas of the podiums under public rental housing estates and associated carparks. The funds raised were then used to provide more housing units. A win/win right? The Housing Department freed from the responsibility of managing commercial premises which was not really its area of expertise, and resources freed up so more inadequately housed people could be given a decent place to live. Having paid perceived full market value for the assets, the management of Link REIT then proceeded to run the properties in a normal commercial way.

It is important to realise that public housing rents are effectively zero. Rates due on the properties are paid centrally by the Housing Authority to the government, and the management charges are deemed to be included in the rent paid. Factoring these two items out separately, there is virtually nothing left to pay for occupation of the housing units themselves. I have no quarrel with that, the public housing programme over the years has rid our hillsides of the ugly and dangerous squatter areas that used to prevail, and provided ordinary people with a vastly improved living environment. But in the process a curious sense of entitlement seems to have developed whereby those benefiting from very low housing rentals felt they were also eligible to enjoy cheap parking and below market rents for the shops and offices providing other services to them.

The absurdity of such an expectation can quickly be illustrated. Leaving aside the conundrum of why supposedly impoverished tenants need places to park their private cars in the first place, let us focus on something more straightforward like medical services. Public housing estates do not exist in a vacuum, they are part and parcel of their own local environment. If the going rate for a doctor’s consultation is (say) $300 in ordinary commercial premises in a given district, would the doctor whose clinic happens to be in the podium of a public rental estate nearby charge any less? It would be extraordinarily naïve to think so. If he were charged a concessionary rent, then he would no doubt charge the same fee, but then pocket the cost savings himself.

Similarly with shop rents. There is a natural brake on the range of goods and the prices charged arising from the average income of those living in the area. If a supermarket were to charge less for basic commodities because it enjoyed a concessionary rent, then shoppers would come from far and wide to enjoy the benefit. It just isn’t going to happen, folks. Notwithstanding the illogical premise, parties from all sides of the political spectrum have rushed to criticise Link management.

Elections for LegCo, the Election Committee, and chief executive are all coming up – it’s going to be a long eight months.


 
Mike Rowse
email: mike@rowse.com.hk