Isaac Ho is a former Mansion House aide and a master’s graduate from the London School of Economics. He writes in a personal capacity.
In the past couple of years, Londoners have seen some new strides made in their transport system. The long-awaited Elizabeth Line was finally opened; a new Superloop Bus System was created; new carriages are on their way for the DLR and the Piccadilly Line. Nevertheless, we have also seen fares regularly rise alongside persistent delays and strikes. As Sadiq Khan starts his third term, is it time we considered a new way of doing transport in London?
The Mass Transit Railway Corporation (MTR) is the body responsible for operating all of Hong Kong’s rail and underground services. Having begun service over four decades ago under the then-British colonial administration, the MTR was also one of the first transit services to integrate a smart contactless payment system: the Octopus Card. It has remained the most profitable metro railway in the world with a steady farebox recovery ratio, which measures fare revenue against costs, at around 185 per cent returns compared to TfL’s 61 per cent and New York MTA’s 52.6 per cent before the pandemic.
What is most unique about the MTR is that it is simultaneously both a public and private entity. This is because while it is a privately run company listed on the stock exchange, the Government of Hong Kong holds around 75 per cent of its shares with the pledge of at least retaining 50 per cent at a minimum. This means that, although MTR is financially independent from the government, it pays a substantial amount of revenue into the public purse in the form of dividends as it becomes more profitable.
Due to this special relationship shared between MTR and the Government, the Corporation also receives preferential treatment when acquiring land from the government by being able to purchase at the green field price. This means the sale is made at cost price as most land sales would take into account the intended use and the predicted profit return in the acquisition. The MTR would then not only build a new station on the land but also new housing estates, shopping centres, and even office buildings, all owned and managed by the Corporation.
This system is known as the ‘Rail + Property’ model. It provides an integrated framework for housing and business developments. Meanwhile, the Government views public transport not as a bottomless pit of spending but as an important source of revenue that actually incentives investment and improvement. Additionally, due to this preferential treatment, the MTR also operates under very tight public scrutiny to optimise service delivery. As an example, the Corporation is legally required to report any delay longer than 8 minutes to the Department for Transport and a 31-minute delay would incur a £100,000 fine with the CEO routinely being summoned to the Legislative Council to be questioned.
This has enabled the MTR network to secure its place as one of the world’s most efficient, clean, and rapidly developed networks. The Corporation is also commissioned to run services in Macau, Beijing, Shenzhen, Hangzhou, Melbourne, Sydney, and London’s Elizabeth Line. It has played a key role in providing a large quantity of housing in a city where real estate costs 78 per cent more than London in the city centre and 109 per cent more in the suburbs by paving the way for new town development in areas that would otherwise be inaccessible due to Hong Kong’s mountainous terrain.
In comparison, London enjoys the advantage of having a flat and landlocked geography with a significantly more dispersed urban area in contrast to Hong Kong’s dense high-rises. With the right business model, TfL should be able to soar even higher than MTR in revenue and delivery. It would also enable London to build a significantly higher number of houses to meet the city’s constant and desperate demand for quality and affordable housing, coupled with the appropriate business and retail development. From a financial perspective, the immense revenue the model generates would also empower the Greater London Authority to be financially self-sustainable or even upwardly subsidise the Central Government.
This would also bring down the cost of living as fares become affordable since it would no longer be the mainstream of revenue for TfL. In Hong Kong, the most expensive journey one could take would be from the border station with China to Admiralty at the heart of the city at around the equivalent of £5 with most other journeys in the realm of 40p – £2. The ‘Rail + Property’ model has given Hong Kongers a world-class transit system and played a crucial role in connecting transport to business to housing.
Too often, we are trapped in the dichotomy between nationalisation and privatisation in policy discussions here in the UK. As London enters this new era, is it time to rethink how we do transport?
