Public Transport Fare Adjustment in Fare Review Exercise 2022

Mr Gerald Giam Yean Song asked the Minister for Transport given that 10.6% of the maximum allowable public transport fare adjustment quantum in the Fare Review Exercise (FRE) 2022 will be carried over to future exercises (a) whether this will be on top of the maximum allowable fare adjustment quantum for future FREs; (b) when is the earliest time it will be effected; and (c) whether cost of living concerns will be considered in deciding whether this quantum will be effected.

Mr Chua Kheng Wee Louis asked the Minister for Transport with regard to the additional Government subsidy of about $200 million in 2023 to support the public transport system (a) what is the amount of subsidy granted to (i) each public transport operator and (ii) households, respectively; and (b) whether the subsidies granted are in addition to or negates the need to implement the 10.6 percentage point fare increase for consumers that is carried over to future fare review exercises.

Sir, my reply will also address questions that had been raised by Mr Mohd Fahmi Bin Aliman in an earlier Sitting, and also by Mr Saktiandi Supaat1 for a later Sitting on the topic of public transport fare adjustments.

Sir, in deciding on changes in public transport fares, the Public Transport Council (PTC) aims for fares to keep up with costs increases over time whilst ensuring affordability. The fare formula, therefore, incorporates component indices, such as core inflation, wage growth and energy prices, which reflect the cost drivers of providing public transport services. The output of the fare formula establishes the fare increase cap for a given year. PTC then considers various other factors before deciding on the actual fare increase to implement and, consequently, how much to carry over to future Fare Review Exercises (FREs).

PTC considers overall economic growth, wage growth, unemployment rate and other metrics that reflect the state of Singapore's economy at the time of each FRE.

PTC also seeks to ensure that public transport, as an essential service, remains affordable to all Singaporeans. As wages have risen over the past decade, households have been spending a lower proportion of their income on public transport. For the second decile of households, which essentially represents lower-income public transport users, this has fallen from 3.5% in 2012 to 2.5% in 2021. For the second quintile, which represents average public transport users, that figure has also fallen from 2.3% to 1.8%.

In this year's FRE, the fare formula output set the maximum allowable fare adjustment at 13.5%. One main contributory factor was the 117% increase in energy prices. PTC decided to implement a lower increase of 2.9% after considering the economic and social impact on commuters. The remaining 10.6% will be carried over to future FREs. Meanwhile, the Government will provide additional subsidies of about $200 million in the coming year to make up for the shortfall. This benefits all commuters as it defrays the overall fare increase. To reiterate, without this additional support, commuters would have had to pay a much higher fare increase of 13.5%.

At each FRE, PTC will also consider both the carry-over from previous FREs, as well as that year's fare formula output. So, for example, in 2021, the formula output was -2.2%, in other words, a reduction, but there was a carry-over amount of 4.4% and, therefore, the increase that was implemented was 2.2%. Apart from the 10.6% carried over from this year, all other carried-over amounts have been implemented.

Over the past decade, we have enhanced the quality of our public transport system, with a larger network, higher frequencies and more reliable services. Despite this, fares have not kept up with costs of running the public transport system. From 2012 to 2021, the compounded increase in costs has been about 7%. Fares have been increasing over the same period at about 1% a year.

So, the Government has stepped up with funding to bridge the gap and ensure the continued operation of public transport services. The cumulative sum is now more than $2 billion a year, with the additional subsidy of about $200 million in the coming year.

Mr Gerald Giam has asked whether PTC decides on fare adjustments based on bus service reliability. We have made steady improvements over the past decade, with maximum scheduled frequencies during peak periods falling from 30 minutes to 15 minutes today. In terms of Excess Wait Time (EWT) and On-Time Adherence (OTA) scores between 2018 and 2022, all services have met the required standards, and this includes service 228, which, I know, is close to Mr Gerald Giam's heart.

Looking ahead, it is essential that public transport fares keep pace with cost increases. Otherwise, the public transport system will become financially unsustainable and that will be to the detriment of commuters and taxpayers. When PTC reviews fares, it will continue to ensure that any increases are subject to prevailing economic and social considerations.

So, let me reassure Members that we are fully committed to ensuring that public transport fares remain affordable, even as we keep a keen eye on the financial sustainability of our public transport system. Today, seniors, students, lower-wage workers and persons with disabilities are eligible for concession fares and increases in their fares are typically less than that for adult commuters. The Government has also made available Public Transport Vouchers (PTVs) to cushion the impact of fare increases for eligible households. For this year's FRE, these vouchers will help up to the 30th percentile of income-earning households, or the 40th percentile of all resident households. And we will continue to address the needs of vulnerable commuters through the provision of PTVs and other measures as necessary.

Thank you. I thank the Minister for his reply. Indeed, bus service 228 is very close to my heart and, more importantly, close to the hearts of my residents in Bedok Reservoir.

I would like to clarify with the Minister what he deems to be an acceptable interval between feeder buses, because he says that all the services, including bus service 228, have met the standard. What is really the interval, because I just checked the bus stop opposite Block 716 in Bedok Reservoir Road and it shows an interval of seven to 15 minutes, which I would think that it is a bit long because, previously, residents had several other buses to be able to get to Bedok Interchange from their houses. But now, they have only one bus. So, they depend on that bus and the low interval of that bus.

Secondly, can the Ministry look into reducing the headways further because this will go a long way in terms of improving the commuter experience of many commuters?

Mr Speaker, I thank the Member for his questions. I note that his questions are very specific, and actually quite a deviation from public transport fares themselves.

Nevertheless, first, what constitutes an acceptable interval? I think it is very hard to give a universally applicable answer. The reason is because the same bus service, or the time of day, there will be variations because of traffic conditions, such as peak, off-peak. Peak periods, you try to keep the headway shorter because of the needs. But off-peak, you allow for more.

So, there will always be a range and that also applies to geographic distribution. What we try to do is – because, specifically, the Member's point is on buses – bus contracts spell out clearly the performance requirements and we hold the public transport operators (PTOs) who are awarded the contracts closely to the delivery of those key performance indicators (KPIs). There are incentives and disincentives that apply when they deviate. And, of course, if the deviations are systematic or problematic, then we take further action in that regard.

Secondly, can we reduce headways? Well, this is basically re-canvassing the discussions we have had at the Budget and many other occasions, and I compliment the Member on his consistency in raising the issue. But the bottom line is this: every decision has an accompanying cost implication. I notice the Member has not commented on the 2.9% increase. So, I assume the Member finds it acceptable. But bear in mind that this comes with a significant subsidy from the Government, on top of what we are already doing for this year. Every time we reduce headways, it means you either have to have more buses and, therefore, you also need more bus captains, costs will go up and we have to find ways to address this.

This is not a theoretical argument either, because over the years, if you look at it, in terms of rail reliability – mean kilometres between failures – we have actually made significant improvements because the Land Transport Authority (LTA) has specified an outcome. But that is a number. To achieve that number or exceed it, then the PTOs have to invest significant resources on maintenance. That has a cost implication. We have added, I think, about 80-odd new bus services. That has a cost implication.

So, when we advocate, sure, I think we would all like to have shorter headways, more capacity and so on. But I just want to make the point that even as we consider this, we also have to take into account the cost implications and, as this year's exercise demonstrates, there is a major cost overhang that we are carrying, and we are carrying this as a Government, as representatives of the people.

Thank you, Mr Speaker. The supplementary question I am going to ask is in relation to the gap that the Minister mentioned. There is a 7% increase in the cost of transport expenditure and infrastructure itself, as the Minister mentioned before. Also just now, the Minister mentioned about the 1% transport price increase annually. So, there is this gap of about 6%. Whether this gap is sustainable is one question that I have, and will the Government subsidies eventually stop?

The second supplementary question is in relation to the PTVs. Can I ask if, eventually, these PTVs can be permanent or enhanced even further and made automatic in future Budgets?

Mr Speaker, I am conscious of the time and I want to make sure I meet the on-time arrival KPI. But let me address the questions very quickly with your indulgence, Sir.

First, is the gap sustainable? As I have pointed out, that is precisely the issue because our costs have been rising and our fares have not been anyway near that rate. There is a fare formula review exercise that is underway. I think we will need to take a hard look at this and that is what the PTC is working on – what exactly is the way forward for us. And this is not just about the sums, but it really comes down to an overall discussion on the compact that we expect. And fare formula and fare adjustments are not just about the current generation because everything we do not pay now, as we discussed in other debates, also has an impact on future generations. So, we need to keep that in mind.

Second, therefore, the implication for Government subsidies? Well, the Government has stepped up and has clearly put in a significant amount – $2 billion, and another $200 million for next year. What we do going forward, will again, be a matter of discussion that we will have to also address in this House as part of our larger policy with respect to public transport.

Finally, can PTVs be made a permanent feature? I suspect that question is best addressed by the Minister for Finance. But I would argue that from our perspective – and I want to reiterate the point – we are committed to making sure fares are affordable, especially for vulnerable commuters. That includes not just in the way we address fare increase adjustments and the discounts for what we can do and, also through the concession passes, but it is also through PTVs.

As Members would have noticed, this year and, also in the previous exercise, there has been a very significant allocation for PTVs – up to the 30th percentile of income-earning households. I think that is a major provision and we will continue to see what else needs to be done in that regard.

I suppose permanent PTVs could be one of the possibilities, but I think that we should just see through this exercise first.