Public transport will be made free of charge in Luxembourg starting 1 March 2020
Photo: Frédéric Antzorn/archives
Making public transport free of charge could push back the next compulsory earnings increase or indexation by a month, but there is no guarantee, ministers have said.
The government first made the headline-grabbing announcement in 2018 in a bid to reduce congestion and lower carbon emissions.
The measure, which applies to all public transport in the country financed by the State, will enter into force on 1 March 2020. But its impact on the national consumer price index, on which compulsory earnings increases are pegged, is expected to be minimal.
According to the latest Statec previsions, if nothing changes between now and March 2020, free public transport would push back the next indexation increase by a month. “This delay is however uncertain,” finance minister Pierre Gramegna (DP) and economy minister Etienne Schneider (LSAP) wrote in a joint response to a parliamentary question from MP Gilles Roth (CSV) published Tuesday.
“Firstly, the impact of free public transport on the consumer price index can only be estimated for now (new information, notably on the prices of 2020 and the impact of cross-border ticket prices, remain outstanding),” the two ministers wrote.
They added that any indexation delay depends also on inflation rates across the board in Luxembourg.
Luxembourg uses a sliding wage scale or index to ensure that earnings remain in line with the cost of living in a bid to preserve purchasing power.
The calculation considers price fluctuations in a basket of 8,000 goods and services. If the average inflation of these items reaches 2.5% for more than 6 months, it triggers a 2.5% increase in pay and pensions. Public transport is covered in three sections of the basket: rail transport, bus transport and combined transport of rail and roads.
“These three positions represent a total of around 1% of the consumer price index. Because they group together services which remain paid for (first class, cross-border subscriptions etc.), the estimated impact of free public transport on the general index is estimated at -0.24 percentage points on the annual inflation rate,” the ministers wrote.
According to recent figures from statistic body Statec, annual inflation fell from 1.9% in December 2018 to 1.8% in January 2019. The last time earnings were indexed was in August 2018.
The current index base is 863.07. It must hit 873.94 points to trigger the next indexation increase.