Annual Public Transport Subsidy Amount and How This Compares with Other Government Subsidies and Support

7 Mr Liang Eng Hwa asked the Minister for Transport (a) how does the Government determine the current annual amount of public transport subsidies; (b) in light of rising costs, whether the Government will consider reviewing this amount; (c) what intrinsic values does the Government derive from the provision of public transport subsidies; and (d) how do public transport subsidies compare with other areas of subsidies and support provided by the Government.

The Minister for Transport (Mr S Iswaran): Mr Speaker, pre-COVID-19, Singaporeans took about eight million trips every day on public transport for work, school, social purposes. A reliable, convenient and affordable public transport system is essential to ensuring connectivity in our densely populated city. It also boosts economic activity, reduces road congestion and emissions and contributes to sustainability and the liveability of our city.

Over the last decade, we have steadily enhanced the public transport system with attendant increases in cost. Commuters have benefited from a 40% expansion of the rail network, 80 new bus services, reduced peak-hour waiting times for basic bus services from 30 to 15 minutes, as well as significant improvements in rail reliability from 67,000 to over one million mean kilometres between failures.

From 2012 to 2021, operating costs for public transport increased by 7% per year on average. This was not matched by revenue growth. Consequently, Government subsidies have been increasing. The Government, currently, subsidises public transport services by more than $2 billion a year, or about $1 for every journey. In addition, we have committed over $60 billion to expand and renew the rail network over the next decade.

As with other subsidised services, the Government has to consider how best to share the cost between users and current as well as future generations of taxpayers. There are three key aspects.

First, the Government continues to fully fund the expansion of public transport infrastructure as these are large lumpy expenditures.

Second, we must find ways to economise and get value-for-money. This requires a comprehensive approach – from efficient procurement by LTA and productivity-focused operations by public transport operators, to optimising the provision of bus and rail services even as we grow the overall network to serve new residential areas. Ultimately, we have to deploy our finite resources in a manner that best serves all Singaporeans.

And third, we have a fare formula to ensure that commuters pay a fair share of the costs, by accounting for key cost drivers for public transport, in particular, wages, energy and inflation. The Government is also mindful that we have to support those with greater needs and fewer means. We keep fares lower for concession groups, such as seniors and students, and provide Public Transport Vouchers to low-income families.

We will continue to work with public transport operators to ensure judicious cost management. The fare formula is being reviewed to ensure robustness and relevance, in light of changes in the industry and in commuting patterns. As we continue to expand the public transport network and operating costs rise with inflation and other cost drivers, we will continue to seek an optimal balance between the fiscal sustainability of Government spending on public transport and ensuring affordability of public transport fares, especially for the vulnerable segments of our society.

Mr Speaker: Mr Liang Eng Hwa.

Mr Liang Eng Hwa (Bukit Panjang): Thank you, Sir. I thank the Minister and also commend MOT and LTA for the significant build-up of public transport connectivity. It is, indeed, money well-spent and value-for-money, I would say. The Minister mentioned about the upcoming fare adjustment formula review and, of course, in every fare review, we wait with bated breath on the outcome. Can I ask the Minister how he sees the fare adjustment formula being improved upon and what can the public expect?

Also, it would appear that, under the current formula, the balancing item to square up the costs versus the revenue is the fare adjustments. Can I ask the Minister if this is, indeed, the case and whether the Public Transport Operators (PTOs) as well as the subsidies from the Government can also help to take a bigger share of any cost increases?

My final point is whether the Public Transport Vouchers can also be part of the household support or GST Offset Package.

Mr S Iswaran: Mr Speaker, I thank the Member for his questions. First, just so that we are all having the same frame of reference, there is a Fare Review Exercise. This is really the annual exercise conducted by the Public Transport Council to decide whether there is a need for an increase of the public transport fares and, if so, by how much, based on the current formula. This should normally come out sometime in the fourth quarter.

Separate to that is the Fare Formula Review. In other words, the formula itself needs to be reconsidered, taking into account the changing commuting patterns, the cost drivers and other factors, so that we can ensure that any fare formula we use in the next cycle is one that is robust and relevant to the circumstances within which our public transport system operates.

So, how will it be improved upon? I think, by that, the Member refers to the fare formula. We ought to give the Public Transport Council the time to go through the process and come up with these recommendations. But we can also be quite clear that it is apparent that there are many factors that are at play at this point, not least of which are, for example, commuting patterns, which may have changed – in fact, we already see some changes because of work-from-home and so on – the energy costs, whether that is a pattern that we expect to sustain inflationary pressures and so on. So, we should allow the Public Transport Council the space and time to do a proper job and come back with its considered recommendation. But clearly, the intent is to ensure that whatever formula we use is one that is relevant and applicable, given the circumstances within which we will find ourselves over the next three to five years.

On the fare adjustment itself and Government subsidies, well, in some ways, it is arithmetic. There is a cost to providing public transport. There is revenue that comes from the fares that commuters pay. And if the two do not meet, then somebody has to pick up the slack. And the slack, in general, has been picked up through Government subsidies. And as I have said, today, the Government subsidy is of the order of the magnitude of $2 billion a year, about $1 billion each for our train and for our bus services. And we will have to see how the formula works out, what the specific recommendations are going to be and then, we have to take stock from there.

But, the fundamental point – one that I made earlier in my response but which I wish to re-emphasise – is that we do need to strike that balance between on the one hand, having a public transport system that is reliable, efficient, accessible and, at the same time, affordable because the reliability, efficiency and availability of public transport do come at a cost and the costs are increasing. So, we need to decide how that cost burden is to be apportioned, not just between the commuters and taxpayers of this generation but also the taxpayers of future generations because liabilities that we take on today will also be imposed on future generations of taxpayers. So, we have to keep that in mind in making the decision.

Finally, the Member's question on Public Transport Vouchers to help mitigate the impact, in particular, on vulnerable segments. This is something that we take very seriously. Members may recall that, last year, when the fares were increased, we also announced about 600,000 Public Transport Vouchers would be made available. That is about the third decile in terms of income earners – in other words, up to the 30th percentile of income earners. Or if you include those who have no income, it is up to the 40th percentile or the fourth decile, so, up to 40% of Singapore households would be able to benefit from those Public Transport Vouchers. And we will make sure that we continue to address the needs of these vulnerable segments through an appropriate provision of such Public Transport Vouchers.