Debated in Parliament on 11 Nov 2013.
Dr Lily Neo asked the Minister for Transport whether more help can be provided to needy families to cope with public transport costs.
Mr Gan Thiam Poh asked the Minister for Transport how can public transport be made more affordable and attractive given the Ministry's intention to raise public transport ridership to 70% by 2020.
Mr Christopher de Souza asked the Minister for Transport whether concessionary fares or higher subsidies for public transport can be provided to disabled Singaporeans upon an application by them.
Mdm Speaker, there have been a number of questions and suggestions by Members during today's Parliament sitting as well as past sittings on the affordability of public transport fares and concessions. Since the release of the report by the Fare Review Mechanism Committee (FRMC), this has also been an issue of much public discussion. I feel, therefore, that I should give a more comprehensive reply in responding to the three Parliamentary Questions by also addressing the various recommendations by FRMC.
But before I do so, let me first put on record my deepest appreciation and commendation to FRMC Chairman Mr Richard Magnus and his Committee Members for their tremendous effort in putting together what I consider a very comprehensive —
Minister, are you taking all three Parliamentary Questions together? Are you seeking permission for that?
Yes, Mdm Speaker, I am, indeed, taking all three Questions together.
Please proceed.
I very much appreciate the FRMC Chairman Mr Richard Magnus and his Committee members for their effort in putting together a very comprehensive and balanced report. I do appreciate their efforts to consult widely and to look at the difficult issues of both ensuring commuters' interest
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in having affordable fares and the long-term financial sustainability of the public transport system.
Reading the report, and also from the generally positive response from the public to the report, I can clearly see that the FRMC has put a lot of "heart" into their recommendations, in particular, for a concession framework that better ensures fare affordability for Singaporeans.
I think it is useful to recap what is the context and purpose of this Committee that I appointed. In June 2012, I asked Mr Richard Magnus to chair a Committee to review and recommend improvements to the public transport fare review mechanism. In February of this year, I further requested the Committee to review the existing public transport concession schemes and propose improvements or new schemes to benefit a wider group of commuters, so that we can help keep down their expenditure on public transport.
We have studied the report carefully. The FRMC has put together a list of recommendations that meets its Terms of Reference and, in my view, addresses the issue of fare affordability in a comprehensive manner. The Government accepts the FRMC's recommendations in full, including the new fare formula; the fare review mechanism, which includes the proposal to allow for smoothening of fare increases by rolling over part of the fare increases to the following year; and the proposals for new concessions and enhancements to existing schemes. The new fare formula, which is an improvement over the old, was meticulously crafted to better reflect the cost pressures that the PTOs face.
Overall, the report is fair and reasonable and contains a timely reminder that we need to make regular fare adjustments from time to time to ensure that the system is sustainable and workable. Its recommendations will provide the Public Transport Council (PTC) with an enhanced framework to ensure that fares remain affordable across the diverse spectrum of public transport users.
In February this year, I explained in Parliament that our fare increases over the last few years have been slower than that of comparable cities like Hong Kong and London. For example, London had raised their public transport fares by 6.8% in 2011, 5.6% in 2012, and, in January this year, by 4.2%. Fares in Hong Kong have increased by a total of 13% since 2009, including the latest 2.7% increase in June this year, which was preceded by a 5.4% increase last year. I should add that fares in Singapore were not higher than both cities to begin with.
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In contrast, since 2005 – when the first FRMC had proposed the past fare formula that was valid till 2012 – from 2005 to 2011, which was when our last fare increase took place, public transport fares in Singapore have increased by a cumulative 2.7% or an average of 0.4% per annum. This is despite the fact that there have been significant changes to the cost environment of the public transport operators. For instance, diesel prices have gone up by about 90%, while national average wages have gone up by about 30% over the same period.
In short, fares have not kept pace with increases in operating costs. To the FRMC's credit, they did not duck this issue and have recognised the need for some discipline in ensuring that we have reasonably regular fare adjustments to keep our public transport system financially sustainable.
That said, we would like to assure Mr Gan Thiam Poh that we remain fully committed to ensuring that public transport fares remain affordable. Wages over the past few years have gone up at a much faster rate than fares, which means that fares have actually become more affordable for the average commuter. This is an important point that I would like to emphasise: public transport fares for the average commuter have become more affordable, not less.
However, we do recognise that there are certain commuter groups who would still be in need of help. That is why I had asked the FRMC to also study the affordability of public transport for Singaporeans of different income levels and various special groups who may need assistance should fares be raised. I am, therefore, pleased that the FRMC has come up with several useful recommendations, which we have decided to accept.
The FRMC has recommended that Government implement and fund two new concession schemes. One, for persons with disabilities (PWDs) and the other, for low-income workers (LIWs). I am pleased to inform Mr Christopher de Souza and Dr Lily Neo, who have asked for more public transport assistance for disabled and needy Singaporeans that the Government agrees with the FRMC's proposals. We are committed to further strengthening our social safety net on the public transport front. The two new concession schemes for LIWs and PWDs go beyond giving these two groups of Singaporeans ad hoc assistance through Public Transport Vouchers.
We will, of course, need some time to work out the details of these two concession schemes, including who can apply and how to apply, and the precise concessionary benefits. However, our rough estimate is that about half
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a million Singaporeans will be eligible for these two new schemes. This would constitute a 40% increase in the number of commuters who currently enjoy various fare concessions, from about 1.2 million currently, to about 1.7 million.
We have not yet decided on the exact amount of discounts to give to these two groups. However, it is my intention to ensure that the discounts given will more than offset any fare increase in the next fare exercise. So, the discounts that we are going to give to these two groups – the LIWs and the PWDs – will more than offset any fare increase in the next fare exercise.
What is of the greatest interest to all Members is not so much the new fare formula that is proposed in the FRMC report – although I will touch on it briefly at the end – but instead, what this means for the next fare review exercise – how much will fares increase, and when.
Following the Government's acceptance of the FRMC report, the next task will be for the Public Transport Council (PTC) to apply the new fare formula for the next fare review exercise and consider how to incorporate the FRMC's recommendations on existing concessions. The PTC will need time to go through various deliberations. While it may start the process for the 2013 fare review exercise later this year, its decision and the implementation of the decision will not likely be in 2013, but only in the first half of 2014, for practical reasons.
The PTC will consider the 2012 fare cap that was based on the old formula and which was suspended during the FRMC review, as well as the 2013 fare cap based on the new fare formula. Should the PTC, after careful study, decide not to effect both fare caps in one go, it may allow for part of this to be rolled over, as provided for under the new fare mechanism framework.
Given the intent and spirit of what the FRMC has recommended to smoothen fare increases and ensure fare affordability, I would urge the PTC to consider the possibility that any fare increase for this next round of fare adjustment not exceed the average national wage increase for 2013. This will avoid an outcome where fares suddenly become less affordable for the average commuter. So, what I am suggesting to the PTC is that for this next round of fare increase, that any increase should not exceed the average national wage increase for 2013.
PTC will, of course, have to decide what exactly the increase will be. That is their prerogative. And as part of the overall package for the coming round of
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fare adjustments, also look into implementing, in full or in part, the various enhancements to the existing fare concessions as recommended by the FRMC.
If we add together all these possible changes to the concession schemes, including those to be funded by the Government, the next fare exercise could see a total of about one million commuters actually benefiting in some way. This could include preschoolers, students, including those in the Polytechnics, and also those who may wish to take up the adult and senior citizen monthly passes, which will cap expenditure for heavy public transport users. This is in addition to the low-income workers and persons with disabilities whom I had mentioned earlier. We have to be patient for the details as these are matters on which the PTC will make the call as part of its fare review deliberations.
The PTC should also take into consideration the FRMC's recommendation for the PTOs to make one-off contributions from the fare increase they receive to the Public Transport Fund. Together with the channelling into this Fund the fines that have been incurred by PTOs for regulatory breaches, we will have a sizeable fund which can allow for more generous Public Transport vouchers to be given out to all needy households affected by any fare increase.
Let me next touch on the issue of service quality, as there has been some feedback that this is missing from the FRMC report. Some have suggested that we should suspend fare increases until there is tangible improvement in service levels. I do acknowledge that this is a source of unhappiness for some.
The FRMC has carefully considered this – whether to have a service component in the fare formula – and decided that the issue of service level is best addressed separately outside of the fare formula, where the Government can regulate and work with the operators to improve service levels.
I think this is sensible and certainly practical in terms of keeping the fare formula relatively straightforward. In addition, we have practical considerations as we have a unified fare structure that is applicable for the entire public transport system, and it would be challenging to try to give differentiated fare increases to different PTOs on account of service quality issues.
However, not having service quality as part of the new fare formula does not mean that we are not raising service levels, or that we are letting the PTOs off easily. In the 2008 Land Transport Master Plan (LTMP), we explicitly declared our long-term intention to make public transport a mode of choice. This is re-
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affirmed in our recently launched and refreshed 2013 LTMP.
Shifting commuters away from private to public transport is a strategic imperative, given our land constraints, and to make our city even more liveable. Our aim is to raise the public transport mode share during the peak period from the current 63% to 70% by 2020, and to 75% by 2030. To do so, we know that we have to substantively improve the availability and quality of public transport, and we have already announced many initiatives, both long and short-term.
For bus commuters, we are accelerating the programme to add 800 buses, or what is going to amount to about a 20% increase, to the bus fleet. In the areas where we have implemented new routes or improved existing services, the benefits are already being felt by commuters.
For rail, we will be adding more than 100 trains from 2014 over the next three years across all our rail lines. We will also be upgrading the signalling system of the North-South and East-West Lines by 2018 to allow peak hour trains to run at 100-second intervals, instead of 120 seconds currently. We will also be doubling our rail network from 178km to about 360km over the next 15 to 20 years.
In addition to adding more buses and trains, we have also seen some improvement in the reliability of the rail network. For instance, train withdrawal rates for our oldest North-South and East-West Lines have come down significantly from about four per 100,000 train-kilometres in June 2012 – that means, four withdrawals every 100,000 kilometres travelled – to about 2.3 per 100,000 train-kilometres in September this year.
We are also raising Operating Performance Standards, increasing penalties and tightening our regulatory framework to ensure that the PTOs deliver higher service levels. Starting next year, the rail operators will be running more train trips throughout the day to bring down waiting times to no more than five minutes for most of the day, even outside the peak period. PTOs will also need to further reduce the number of short service delays below five minutes and strengthen their maintenance regimes to raise reliability levels. We will complement these improvements with stiffer penalties for non-compliance.
We are, therefore, making significant moves to improve service levels and to realise these improvements as fast as we can. Major improvements will take time but they are on the way. Meanwhile, it is imperative that the public transport system as a whole continues to remain financially viable, with
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commuters, transport operators and the Government all contributing. Hence, there will still be a need for regular fare increases to keep the system going, to maintain and improve service levels. But in doing so, Members can have my assurance that we will insulate the more vulnerable and needy Singaporeans from the full impact of fare increases.
So, let me give Members this assurance that while fares are likely to have to go up in the coming years, they will not become less affordable for the average commuter, and, in fact, will be considerably more affordable for the low-income and the disadvantaged groups. This is my intention and I have every confidence that we can achieve it.
Mdm Speaker, I am glad that MOT accepts the FRMC's recommendations to give fare concessions to low-income workers, the disabled and Polytechnic students. May I ask the Minister whether the fare concessions can be given as Monthly Concession Passes, especially for the needy and the elderly, instead of the usual one-off transport vouchers? May I ask the Minister how does his Ministry ensure good outreach to assist the targeted groups so that no one falls through the cracks? Lastly, will the Minister consider different fare pricing for Singaporeans, PRs and visitors for our public transport?
Mdm Speaker, first, let me thank Dr Lily Neo for her supplementary questions and also for her strong advocacy over the years for the lower income and disadvantaged groups.
On whether it is monthly passes or ad hoc vouchers, the intent is for the two groups that we have mentioned – the LIWs and the PWDs – to be given a card that will entitle them to the discounted fares. It will not be in the form of vouchers. It will be in the form of a pass.
Secondly, on the point of good outreach, that is really important. Indeed, we would like to encourage all Members in the House to support us in this venture. I recall that in the previous fare exercise in 2011, we made available 200,000 public transport vouchers to try and offset the impact of the fare increase on the most vulnerable groups. Instead of making one call for applications, we actually made two calls. We made two calls for applications. In the end, just over half of the 200,000 vouchers were taken up. I think it is not the situation where we do not have enough vouchers but, really, it is how to reach out to them, how to make sure that they are fully aware of some of these schemes. We will try and do more in terms of the general publicity but I do
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encourage Members to support us in this.
Finally, with regard to differential pricing, I think it is something that we need to be quite careful about. In fact, already, there is a certain amount of differential pricing because many of the tourists who come in would already be using single-trip tickets, rather than to use the ez-link card. We have, over the years, set the single-trip fares at a different price compared to what you would pay if you were to use your ez-link card for a particular trip, but we are also mindful not to stretch this too far.
Thank you, Minister. I have questions specifically on our disabled Singaporeans; that was my Parliamentary Question. So, I will restrict it to that. Are the subsidies envisioned for our disabled Singaporeans distinct from the intent not to have fare increases beyond the NWC wage increase for 2013? Are they distinct concessions that will be given to our disabled Singaporeans?
Yes, that is the intent. For the LIWs and the PWDs, the intent is that, with the next round of fare increase, the discounts given to them will more than offset any fare increase. So, in other words, they will actually see a reduction in their fares.
Speaker, I would like to ask the Minister two supplementary questions. The first is the thinking behind the cost of certain schemes being borne by the Government and certain others being cross-subsidised by the full-fare commuters. And because some of the concession schemes are subsidised by the full-fare commuters, the rate with which these schemes are undertaken will affect the affordability of full-fare commuters. Can the Minister assure us that any future increases would bear this particular point in mind?
I want to thank Mr Cedric Foo for a very thoughtful question. When I asked the FRMC in February of this year to look at the concession schemes and to see whether we need additional schemes beyond the enhancements to existing schemes, I also asked them to look at the overall affordability how these schemes ought to be paid.
The FRMC, I think, has come up with some very balanced recommendations. To benefit the additional of about half a million people – the LIWs and the PWDs – and to be able to achieve what I have just said in terms of concessions given to them must more than offset any fare increase for this next round, it would
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entail quite a substantive amount to be invested in these concessions. I think the FRMC realised that if all these were to be cross-subsidised by full-fare paying commuters, it would be a heavy burden on them, bearing in mind that they believe that it is really up to about the 60th, maybe 70th, percentile of Singaporeans that are public transport users. So, the FRMC was conscious of this fact and recommended – and the Government has accepted – that the Government be responsible for the new concession schemes.
At the same time, the FRMC was also mindful that if all the concession schemes, including the existing ones, were to be borne by the Government, there would be a lack of tension in the system, so to speak. And so they retained the existing mechanism where enhancements to existing schemes would be borne by the rest of the commuters. So, I think there is a certain tension and a certain balance that they are trying to achieve.
Madam, I have four supplementary questions. First, will the Minister consider extending concessions to the intellectually-disabled commuters as well, not just physically-disabled commuters?
Second, regarding incorporation of service quality in the formula, since most commuters do associate service quality with their willingness to pay higher fares, the Minister has said that it is because the Government does not want to have differentiated fares between different operators but my question is "why not?" And how difficult is it to implement differentiated fares between the two operators? In fact, that will actually spur the operators to do better on the service quality standpoint.
The third question is regarding the energy component in the index. While I accept that energy is a major cost component for the PTOs, there are many other cost components as well, like manpower. Are we trying to shield the PTOs from all these negative externalities in the fare formula?
And my last question is, will this new fare formula – if you compare it with the previous fare formula and with the knowledge that we know as to how much the previous fare formula allowed for increases over the last few years – would this new fare formula lead to higher maximum fare increases?
Mdm Speaker, I want to thank Mr Giam for his supplementary questions. The first is that we talk about people with disabilities, not physical disabilities per se. There is, certainly on my part, no intention to
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exclude certain groups of people. Having said that, I would say that MOT is really not the expert in this area and we would be bringing in our colleagues from MSF and the groups who have much greater expertise to advise us further on this.
On service quality, the one thing you want to try and do is to keep it as straightforward as possible. The FRMC had that in mind, to not want to complicate the fare formula unnecessarily. If you do want to include a service quality component in the fare formula, then I suspect that the PTOs would also say, "Well, what about the cost increases that are associated with any service quality improvements? Would that also be included into the fare formula?"
Today, I think what we have is a situation where the regulator can very carefully and, I hope judiciously, increase the operating standards without the corresponding increase in cost being directly passed on to the commuters straightaway.
We have been increasing the operating performance standards. We have required the operators to put in more trains and so on, and that has not translated into a fare formula where the commuters are required to pay, so, bear that in mind.
The next is on the energy index and I am glad you agree with it but you also expressed concern whether we would then have to shield them from all the other components like manpower. Well, if you look at the fare formula, instead of just taking CPI and the wage index minus the productivity component, as in the past formula, now it is both core CPI plus the wage index and the energy index minus a smaller productivity formula.
We believe that that actually reflects better the cost structure of the operators. We have about 20%, or slightly over 20% of the expenditure going towards energy, which has increased by about 50% from what it was in the middle of the last decade. And 40% of their cost is already manpower-related.
When the FRMC came out with the new fare formula, they had looked very carefully at the cost structure of the PTOs, but they also recognised that, instead of using headline CPI, it was more appropriate, as recommended by the academics, to make use of core CPI to take away the accommodation and the private transport components of it.
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On whether the new or old formula is superior, which will lead to higher or lower increases, it really depends. In a year where the electricity and energy prices go up significantly, as they have in the past, then I believe that the new formula will lead to a higher number. But in a year where those remain relatively stable and where the CPI increases are largely driven by accommodation and private transportation, then the new formula would lead to a smaller number. Regardless of a higher or smaller number, when the FRMC looked at it, they really wanted a fare formula that was more reflective of the overall cost structure.
Mdm Speaker, the public is happy that there would be long-term concession rates for the low-income commuters. They are also heartened that the Public Transport Fund would be enhanced by way of collection of penalty fees, as well as a part of the fare increment in revenue that PTOs receive. We also note that only half of the transport vouchers in the recent round were collected or redeemed by commuters. I would like to ask the Minister how does the Ministry envisage the bigger fund will be used for the right purposes and whether they will consider allowing people with severe hardship to be able to apply, not just one time, but for many times, to tie over short term or even extended periods of financial hardship?
Those are good questions. Again, I reiterate the call to Members to be on the lookout for those who do need help and to see in what ways we can help them, both in transport as well as beyond transport. The intent, going forward, is perhaps, think about the possibility, as the Member has suggested, to not only make some vouchers available during a round of fare increase but also have some vouchers available on an ad hoc basis, so that assistance can be given to those who are most in need or who are in difficulties on a very sudden short-term basis. So, we will look at that very carefully and I thank you for the suggestion.
I would like to ask the Minister this: there are calls for including profitability into the public transport fare formula. I just want to know if that has been considered into the formula because if the transport operators are making excessive profits, then commuters will find it very hard to accept any fare increase.
Thank you. May I ask the Member for his definition of what would be considered excessive profits?
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If you look at the bottom line, and if you see that net profit is in the hundreds of millions as reported, then I think people will find that it is hard for them to say, "I still have got to pay for any of these fare increases."
The FRMC, while they have not completely addressed this, actually devised a feature to try and moderate this somewhat. The FRMC would like to recommend that we have regular fare increases, and not follow the pattern of what we have seen in recent years where, sometimes, it is deferred and forgone because there is no roll-over mechanism.
The FRMC added a feature that PTOs, based on their profitability, should contribute between 20% and 50% of the additional revenue that they would get arising from a fare increase exercise. So, for that year, they would take between 20% and 50%, depending on their profitability, and contribute this to the Public Transport Fund and then it would be up to PTC to decide how else to use the Fund beyond what it is today.
Having said that, without defending in any way what the PTOs' profitability numbers are, it is also interesting to look at how that has changed over the years. I think it has really been SMRT's profits that sort of enjoy a certain scrutiny, more so than SBST's. As part of the fare exercise, I was actually looking quite closely at the numbers. What we had seen from March 2011 to March 2013, over the space of those two years, was a 50% decrease in the profits for SMRT, and the last financial year was about $80 million.
Again, looking at the reports for the first two quarters of this year up to September, it has come down further by another 55% from last year's corresponding numbers. They are under some degree of cost pressures because we have required them to step up their maintenance, we have required them to set themselves to higher performance standards, and they have had to pay their staff more.
So, that is the situation as it is, which is why FRMC, when they put up the report, to their great credit, focused very much on affordability and concessions, but at various parts in the report, also made it very clear that they were concerned about the financial viability of the public transport system and, therefore, the need to maintain discipline in terms of having regular fare reviews.
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