Long-term Sustainability of Annual Public Transport Subsidies, Impacts on Future Fare-setting and Transparency Safeguards in Subsidy Allocation

Mr Jackson Lam asked the Acting Minister for Transport (a) whether the Ministry has studied the long-term sustainability of relying on annual subsidies exceeding $2 billion to moderate fare increases; (b) how this approach affects future fare-setting autonomy of the Public Transport Council; and (c) what safeguards exist to ensure transparency in subsidy allocation across operators.

In deciding the fare adjustment each year, the Public Transport Council (PTC) is guided by a fare adjustment formula, which tracks the general cost drivers of providing public transport services, and considers other factors, such as the state of the economy and cost of living. It makes its decisions independently after considering these factors.

For this year's fare review exercise, PTC decided on a fare increase of 5%, less than the maximum allowable fare adjustment quantum of 14.4%. This means 9.4% of the allowable fare adjustment will be deferred. The Government is providing another $200 million of additional subsidies in the coming year to cover the gap arising from this deferment. This amount is based on projected public transport revenue for 2026 and the deferred fare quantum. The eventual amount of subsidies provided to each operator to cover the deferred fare quantum is calculated by the Land Transport Authority based on the actual ridership for each of their rail lines.

This is distinct from the more than $2 billion in annual subsidies provided by Government to keep bus and train services running. These subsidies allow operators to provide reliable and high-quality service while keeping fares affordable and also covers the cost of replacing and renewing our operating assets like buses and rail systems.