Rhetoric rises on $2 fare subsidy

Hmm, the government seems to be raising its rhetoric on the HK$2 transport fare scheme that is without doubt the most popular program it has offered to date.

If Financial Secretary Paul Chan Mo-po's hands were not tied by the dilemma of a structural fiscal deficit, his colleagues including - Executive Council convenor Regina Ip Lau Suk-yee and lawmaker Chan Kin-por - would have likely avoided hinting at an extremely unpopular prospect to scale back, or even ditch, the subsidy scheme.

Times have definitely changed.

When Carrie Lam Cheng Yuet-ngor reversed her usual fiscal prudence to lower the age threshold of the scheme from 65 to 60 in her last year as chief executive, the announcement was made after it was endorsed by Exco of which Ip then was also a member.

It was also applauded by lawmakers in general despite concerns that the HK$2 scheme could be open to abuse.

As an old saying goes, there is nothing to fear if one's pocket is deep. An estimated extra cost of HK$1.7 billion a year to lower the age of eligibility to 60 was not a concern for policymakers at that time.

Before us is a less friendly environment. First, the government is heading for another year of fiscal deficit. Second, the prospect does not appear to be particularly bright for a number of revenue streams, including land sales and salary tax.

It will tighten Paul Chan's hands further if revenues turn out to be less than predicted at the end of the current fiscal year.

The elevated rhetoric targeting a popular government initiative could be evidence of mounting concerns within the administration. The financial secretary is under pressure to tighten the purse strings by looking at every possible saving.

As Chan Kin-por questioned in the Legislative Council about the abuse situation of the scheme, the question may also be viewed as a curtain raiser for what could be coming from the government.

Abuse is a concern, but officials are more worried about the overall financial implication of the scheme. Like corruption, "abuse" is deemed immoral and can provide the government an entry point to make changes to the program.

Looking forward, what could happen to the HK$2 scheme?

In the best-case scenario, it will be modified to include additional limits on its use.

In the worst-case scenario, it may be scrapped to save the government billions of dollars a year - but this is least likely in light of the scheme's huge popularity.

According to a Legco paper in 2021, a degree of abuse was anticipated and the question was about how to keep it at a low level.

At that time, a survey found that some passengers hopped on long-haul buses for short journeys, therefore costing taxpayers more to subsidize these short journeys.

It was estimated that this would cost the scheme HK$21 million to HK$27 million extra a year due to passengers hopping on for convenience.

This is unwarranted wastage, but it accounts for a tiny fraction of the scheme's total budget.

It will not surprise me if the government tightens the use of JoyYou cards.