Raise transport subsidies, not fares

Reports that public transport subsidies are set to triple from the current €10 million per annum are not surprising. It simply exposes the Catch-22 situation faced by Arriva when it was asked to offer an improved public transport service, while initially operating on a paltry subsidy of €4.6 million which eventually had to more than double.

The result was an overall reduction in the number of buses, and the introduction of never-ending panoramic routes which increased the duration of some voyages.

While Arriva did bring about positive improvements as regards pricing (€1.50 day tickets and €6.50 week tickets) and greater discipline among drivers, it failed on the more basic aim of providing access from A to B within a reasonable time-frame.

One may well ask today whether the service would have been better had Arriva been offered the same amount reportedly offered to the Spanish-owned Autobuses Urbanos de Leon (ALESA) company. It is also legitimate to ask whether Arriva was indeed offered the same subsidy before it left Malta.

What is clear is that the former PN government which oversaw the reform was trying to square a circle: it expected a private company to improve the service without being offered enough money to do so. It also expected the private company to assume social responsibilities – e.g., operating vital but unviable routes – which would be expected from a national service.

This cannot work in practice. If we value public service we have to pay for it: and this applies to governments. Private companies will legitimately expect to make a profit over and above performing loss-making public obligations. This means that the government subsidy has to be big enough to make up for the public service aspects, while still allowing the company to make a decent profit.

On the other hand it is of concern that fares are expected to increase in step with the subsidy. One expects that any fare increase should be absorbed in subsidies offered by the government. This is because public transport users include the most vulnerable social categories: the elderly (who at present travel on just 50 cents for a full day ticket), immigrants, students and those who cannot afford a car.

One may well argue that the current fares are too cheap as they are. But one must be cautious about applying private sector reasoning to a public service. Public transport is not just about money. An affordable service is vital in encouraging people to use public transport instead of their private cars. This should also be a key objective, given the present traffic situation (complete with environmental considerations).

Several mid-size European cities and many smaller towns around the world have converted their bus networks to zero-fare. In 2013 Tallinn, the capital city of Estonia, did something that no other city its size had done before: it made all public transit in the city free for residents.

The city of Hasselt in Belgium is also a notable example: fares were abolished in 1997 and patronage was as much as “13 times higher” by 2006.

Facing budget problems last year, Hasselt reintroduced fares of just 0.60, although young people, seniors and those receiving public benefits can still ride for free.

While free public transport may not be possible in Malta, it makes sense to fund the sector, at least to retain the present fares. This would surely be a positive way of investing income from the citizenship scheme which is expected to rake in €200 million for Malta.

Another alternative to a twofold increase in subsidies and tariffs is to retain the nationalised post-Arriva bus service, which would directly depend on the government for funding. This means that the operating company would not need the income to generate a profit. By the same token, the public would be paying for what it gets, and nothing more.

The disadvantage here would be that the government may lack the capital investment required to operate a modern service, as well as the well-known risks associated with political patronage: especially in jobs. Memories of how Air Malta was rendered unprofitable over similar issues are still very fresh in one’s mind.

Moreover the standard of discipline has already been seen to decline in the past months following Arriva’s departure. It would be regrettable if they declined further as the result of re-nationalisation.

Above all, it is imperative that transparency is not sacrificed in the process of finding an alternative to Arriva and the current loss-making government operation. The new operating company will legitimately expect to make a profit margin, and this requires government investment. But the public deserves to know how the money allocated in subsidies is to be spent by the company.

All this exposes the fact that the current government has placed itself in a position of weakness, by politely getting rid of Arriva without having a clear Plan B. Any company negotiating with the Maltese government would have exploited the weakness of this position to secure the best deal possible.

As the taxpayer will be footing the bill anyway, one hopes that passengers will not have to pay more than is required for the operation of a decent modern service.