“Free” public transport means more expensive public transport

In a press conference on Monday, Luxembourg’s Ministry of Transport under François Bausch (Greens) announced the details of “free” public transport in the country. As of March 1, 2020, all public transport services, will be free of charge. Cross-border rides will cost less, as customers will pay only for the fares in France, Belgium or Germany.

The ministry also announced that first-class seats in trains will be maintained, for which passengers will still need a ticket. As a result, the job descriptions of public transport workers such as ticket controllers, will need to be rewritten.

The union of public rail workers worried that staff at ticket counters might be laid off. As a result, the FNCTTFEL (better known as Landesverband, given that the acronym is quite the tongue-twister) had suggested last week to keep the counters open to hand out free tickets, which passenger would have to get before using public transport. Given the absurdity of this proposal, it wouldn’t surprise one to hear the union also suggested to have ticket controllers checking the free tickets, and fine those who lose them. Reasonable people will be glad to know that the ministry did not take the union up on its proposal.

In an op-ed last month, I laid out the problems of “free” public transport from a political perspective. But there are also market problems.. The European Union, in the Mobility Package, liberalised European rail services, opening them to international competition. This means that both private and public operators can service any market they like, indiscriminately of national rules. In countries such as the Czech Republic or Italy, private rail operators have modernised services at acceptable prices. A more recent example is Flixtrain, a rail services started by the German company Flixbus, which already services numerous destinations in Germany. The company is challenging the incumbent, Deutsche Bahn, which is continuously under fire for high prices and consistent delays.

By investing 40 million euros of taxpayers’ money into making public transport free of charge, Luxembourg reduces the competitiveness of such prospective new services. A train operator from Switzerland, for instance, could connect Brussels to Berne by crossing Luxembourg. This would re-establish the Luxembourg-Berne connection cancelled years ago. But as free public transport in Luxembourg would reduce the competitiveness of the journey, the operator would become less profitable, and less likely to set the line up.

Now, some consumers could say “what do I care whether or a Swiss rail operator makes profits or not?”. The problem is that “free” public transport comes at a cost. The additional 40 million comes directly from taxpayers via direct or indirect taxes. And so, Luxembourgers pay more to rival those companies that could have provided them with a better service. If the government were to start a supermarket chain and rival private retail prices by subsidising products, this would also distort the market and offer less choice to consumers.

The bottom line is this: “free” public transport may be an appealing campaign promise, but it doesn’t show understanding of market economics. If the government was honest about improving public transport, it would take the approach of the European Union and those countries that have previously liberalised their rail services.

This article was first published by the Luxembourg Times.

Pictures are Creative Commons.

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About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

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