A More Equitable Certificate of Entitlement

Mr Speaker, Sir, I move, "That Parliament do now adjourn."

*Question proposed.*

Ms Hazel Poa.

A More Equitable Certificate of Entitlement

Mr Speaker, Sir, the Certificate of Entitlement, or COE, system was introduced in 1990 to manage the growth of the car population in Singapore. It does so by allocating a limited supply of COEs via a bidding system. Those with the highest bid win the right to own a vehicle in Singapore.

The COE system currently is based on purely economic considerations, on the belief that economic efficiency is optimised by allocating resources to those most willing and able to pay. This has meant that car ownership has also become a goal that is only achievable by the wealthy, without regard for who has a greater need for a car. The Progress Singapore Party (PSP) is of the view that public policies should not be based on economic optimisation alone. Social considerations must also be taken into account for fairer and more holistic policies.

In the case of commercial vehicles, PSP has no objection to the current system of allocating based on those most willing and able to pay. However, for private vehicles, PSP believes that even though not everyone in Singapore will be able to own a car, we should also consider the needs of certain groups in society in deciding who gets to own a car. We would, therefore, like to propose a hybrid COE system that takes into account both economic and social factors in the allocation of private vehicles, which will only apply to Categories A, B and D COEs. This also means that PSP will support the creation of a separate COE category for private hire cars (PHCs). We look forward to the Transport Minister sharing an update on this during the Budget debate in February.

In 2023, I urged the Government to consider adjusting our COE system to take into consideration needs factors, such as families with persons with disabilities (PwDs) or children. However, then-Minister for Transport S Iswaran cited various practical difficulties incorporating needs into the system. Therefore, today I would like to propose a feasible COE system that takes into account needs factors for the Government's consideration.

We propose that instead of bidding for Categories A, B and D COEs using cash, bids should be placed using COE credits. What are COE credits and how do we get them? COE credits will be distributed by Government to adult Singapore Citizens and Permanent Residents (PRs) each month. The number of COE credits received by each person will depend on various factors, such as nationality, the number of children, age, disability and so forth.

For illustration purposes, let me give some examples of how we can distribute the COE credits. For example, we can distribute 100 credits to each adult Singapore Citizen and 70 to each adult PR. Those with children aged 12 or below get an additional 200 credits per child who is a Singaporean Citizen; and 140 per child who is a PR. Senior citizens above the retirement age gets an additional 100 credits. Those who have mobility impairment, such as those who qualify for Class 1 or Class 2 car park labels for the disabled, can get an additional 200 credits. In recognition of the contributions of those who served National Service (NS), we can also distribute additional credits to them. These examples given are not exhaustive, but serve to illustrate how we can use this system to take into account needs and social contributions and make it less costly for those with greater need to own a vehicle.

These COE credits will be transferable. Families can pool their COE credits together to bid for a vehicle. Larger families will, thus, find it less costly to get a car. COE credits can also be traded. Those who want to own a vehicle can buy the COE credits from those who do not, in order to submit a higher bid. This sets up a system of transfer from vehicle owners to those using public transport. Foreigners residing in Singapore who wish to buy a car will also have to buy COE credits from Singaporeans and PRs.

Under this system, unavoidably, those who are financially better off would still be better able to acquire a COE, although it is ameliorated to some extent by distributing COE credits based on needs factors. It is also accompanied by a redistribution of wealth from vehicle owners to non-car owners and from foreigners to Singaporeans and PRs. It is thus not only a tool for controlling the number of vehicles, but also a tool for redistribution that is self-adjusting based on different economic conditions. For example, when the economic gap between the upper segments and the rest widens, the transfers automatically increase with the additional purchasing power of the top, and vice-versa.

The intention of PSP’s proposed system is to: one, lower the cost for those with greater need compared to those with less; two, lower the cost for those willing to wait and accumulate their COE credits as compared to those who are less patient; and three, reward those who choose not to own a car and help them better cope with the rising cost of public transportation.

In addition to the normal COE credits, we propose the introduction of Gift COE credits, which can only be gifted to others, not sold.

While we try to formulate public policies to cater to different circumstances as best as we can, it is not practical to expect all scenarios to be covered. As individuals, we are better able to see the circumstances of the people around us and make our own judgement on who has a greater need. We can transfer our Gift COE credits to those with greater needs or simply just to whoever we wish to help.

For example, in addition to the 100 COE credits for each adult Singaporean, we can give 10 Gift COE credits. To prevent abuses, we can put certain safeguards in place. For example, Gift COE credits cannot be used by people who live at the same address. Also, once A has gifted B with credits, B or anyone from B's household cannot give credits to A or anyone from A’s household for the next one year.

This system allows us to plug some of the gaps that is sometimes unavoidable in public policies and fosters a climate of mutual help in the community. We believe that the bonds in our community will be the stronger for it. Gifting tends to be a one-way flow from the richer to the poorer. With the gift credits, even the poorest among us will have opportunities to give something to their friends.

COE is a significant revenue source for the Government, accounting for an estimated $4.66 billion in revenue in FY2023, or about 4.5% of total Government revenue. PSP is aware that if the Government foregoes all COE revenues, there will be a big hole in public revenue that will have to be filled through other means.

Thus, to reduce the impact of the new COE system on Government revenue, we propose that the Government collect a base fee per COE. In other words, in order to get a COE, you will need to pay a base fee to the Government, plus COE credits, which can be accumulated for free or bought from others.

We would like to suggest two ways to determine this base fee. First option, a flat fee of say $50,000 per Category A (Cat A) COE and $70,000 per Cat B COE. The flat fee can be determined by taking reference from historical COE prices and then indexed to inflation thereafter.

The second option, a percentage of the car’s open market value, which is how the Additional Registration Fee (ARF) is calculated. This will make it more expensive to own luxury cars, while those who need a car solely for transport will find it easier to own cheaper cars. This makes for a more equitable car ownership policy. In fact, for this option, we can do it via raising the ARF to make up for the lost revenue.

Even with the implementation of a base fee, there will still be some loss of revenue for the Government, as these monies are transferred from vehicle owners to public transport users instead of to the Government.

PSP is thus mindful of the need to ensure prudent Government spending. It has always been a priority for PSP to ensure that the Government’s policies do not over-burden the public purse. For example, we have previously questioned the Government’s grants to Singapore Press Holdings, expenditures by the People’s Association and spending related to the Sports Hub. It is also our view that the Government needs to re-assess how we are spending or collecting money in some areas of public policy to ensure greater fairness for Singaporeans. Housing is one example. COE policy is another.

In 2023, I asked the Minister for Transport in this House if the authorities would consider introducing a levy for additional vehicle purchases, similar to the Additional Buyer’s Stamp Duty, or ABSD, used in the housing market. At the time, the Minister said that high COE prices were not explained by multiple car-owning households.

However, PSP believes that there is a need to send a signal against the accumulation of multiple cars by ultra-wealthy households for pleasure when these scarce COEs could be more useful in the hands of another household that does not currently own a car. Thus, we continue to feel that an additional levy should be imposed on any additional car purchases by a household.

However, in order to be fairer to multi-generational families residing together or larger families, exceptions can be made where the household size is such that the ratio of household members to each car is five or more before such additional purchase. Mr Speaker, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] Singapore introduced the Certificate of Entitlement (COE) system in 1990. Over the years, while the COE system has effectively controlled the number of cars in Singapore, it has also been criticised because under the current system, the highest bidder wins. This has made car ownership a privilege of the wealthy, without considering the benefits that private cars can bring to families in need, such as those with elderly, children, or disabled members.

PSP believes that public policy should not only consider economic benefits. We must consider the needs of the general public to formulate fairer and more comprehensive policies.

In 2023, I called on the Government in Parliament to consider adjusting the COE system based on public needs. At that time, Transport Minister S. Iswaran rejected this proposal, citing some implementation difficulties. Therefore, today I want to propose a COE system that can consider needs and is implementable for the government's consideration. For commercial vehicles, we believe the current highest-bidder-wins system can be maintained, and a new COE category should be established for private hire cars.

PSP proposes that instead of bidding for Categories A, B, and D using cash, for private cars and motorcycles, we create a new bidding system using "COE credits" .

Under this system, the Government would distribute "COE credits” to all adult Singaporean citizens and permanent residents every month. For example, we could give 100 credits to each adult Singaporean citizen and 70 credits to each adult permanent resident. Additional credits could be given to those with young children, those over retirement age, the disabled, and those serving National Service.

People can accumulate these credits, buy and sell them, and then use these credits to bid for COEs.

Under our proposed COE system, people with greater need for car ownership have the opportunity to buy cars at a lower cost; those willing to wait and accumulate credits also have the chance to buy cars at a lower cost; those who choose not to buy cars can sell their credits to offset public transport costs. This will create a wealth transfer from car owners to non-car owners.

We also propose issuing gift credits that can only be given away and not bought or sold, to encourage a spirit of mutual help in society. With these gift credits, even struggling families would have more opportunities and ability to give to friends. The income from COEs is a considerable sum, and abandoning it entirely would create a large fiscal gap. Therefore, we propose that in addition to bidding with credits, car owners must pay a COE base fee. We suggest two ways to set this fee.

First, we can set a fixed fee based on historical COE prices for Categories A, B, and D. For example, the base fee for a Category A COE could be set at $50,000, and Category B at $70,000. This fee could increase in the future linked to inflation.

Second, the base fee could be linked to the car's Open Market Value (OMV). This would make luxury cars more expensive, helping to create a fairer car ownership policy. If this option is chosen, it could be implemented by increasing the Additional Registration Fee (ARF). We also suggest that households purchasing more than one car should pay an additional fee. For fairness, some large families or multi-generational households could be exempted.

PSP believes that as our country has achieved remarkable economic development in its 60 years since independence, we have the ability to create more empathetic policies in various areas such as housing, employment, and social welfare. Since the last General Election, we have been continuously proposing these alternative policies in Parliament. While these alternative policies may not be the most economically efficient when viewed purely from an economic perspective, we believe our alternative policies can treat all citizens more fairly. We call on the government to seriously consider the alternative COE policy we have proposed today.

(In English): Mr Speaker, fairness should be at the heart of our public policies as our nation progresses economically. PSP believes that our proposed approach better balances economic and social considerations, and builds a system that provides a fairer and more equitable allocation of COEs for private vehicles and better matches our value system. We hope the Government will seriously consider this model.

Senior Minister of State Amy Khor.

Mr Speaker, I note that the Member's speech is primarily about a COE Credits Allocation Framework.

Given Singapore's land and carbon constraints, it is critical to manage our vehicle population and usage. We do so through the Vehicle Quota System (VQS), which works efficiently to allocate a scarce resource, COEs, through a price mechanism. In addition, we manage congestion during peak hours through the Electronic Road Pricing (ERP) system.

Mr Speaker, the PSP's proposals may be well-intentioned, but they are unlikely to be effective in practice.

First, Ms Poa highlights concerns with the current price mechanism but comes up with a credit framework system, a rather complicated one. Under the proposal, those who want to own a car can buy COE credits from those who do not. The net effect is people who can acquire COEs will still be those who are willing and able to pay for it.

Second, our system today is a transparent, single price mechanism for every bidding exercise. How will the prices for PSP’s credits be set? Are we inadvertently creating more friction and complexity in the process for Singaporeans who genuinely want to buy a vehicle? Their proposal may potentially drive the price of credits underground, where the prices of the credits become opaque and unknowing consumers get fleeced, akin, for instance, to the price gouging of Taylor Swift concert tickets last year. A COE under such circumstances may well cost even more than today. And to guard against black markets, we will need to set up a whole new trading and enforcement regime, which will ultimately cost taxpayers even more.

Third, the PSP suggested that those who do not need their credits can sell it and thus set up a “system of transfer” from vehicle owners to those using public transport. However, our system today already achieves this at the macro-level. COEs that are paid by private owners form part of the Government’s revenue, which is used to fund the Government’s subsidies for public transport and other public goods such as housing, healthcare and education.

Fourth, I find it concerning that the PSP is suggesting the Government dictates who gets more credits. It may sound attractive in the first instance, that different people with different needs should get different amount of credits.

But needs are very subjective. How do we pass such judgement on who needs a car more? To use Ms Poa's proposed allocation, is there strong justification why a male who has served NS needs a car more than a female who has not, and thus should be given more credits to own a car? Or that a child under 12 years of age should be allocated twice the credits of an adult?

I fully agree that we should recognise our NSmen for their contributions. We have done so in other ways such as NS credits. Similarly, families with children are given Baby Bonuses and other assistance. For these groups, we provide additional support upfront in a transparent and direct way, instead of through a convoluted credit system.

Ms Poa also said that the PSP supports the creation of a separate COE category for PHCs. There have been similar suggestions raised by Mr Gan Thiam Poh and Mr Yip Hon Weng in this House. As Minister Chee Hong Tat has explained previously, this is not a straightforward exercise and needs careful study. It entails creating a separate COE category for PHCs and moving existing quota from Cat A and B into it. If we move too much of the existing quota from Cat A and B to this new category for PHCs, it would overly reduce the supply in Cat A and B and could lead to an increase in COE prices.

Conversely, if we moved too few quota to the separate category for PHCs, it would lead to insufficient PHC supply, resulting in higher cost and reduced accessibility for point-to-point commuters. So, how much of the existing Cat A and B quota should be shifted to the new category for PHCs? There are no easy answers. Perhaps, the PSP can share with us the amount of COE quota they propose to take from Cat A and B, to transfer into this new category for PHCs?

Ms Poa has also suggested an additional tax for multiple car owning households, similar to ABSD. The key intent of ABSD is to curb speculative behaviour in the property market. Cars are less regarded as speculative assets, in part because the COE system limits the validity of use. The same parallel therefore cannot be drawn. As we have also shared previously in this House, multiple car-owning households are not the main drivers for COE quota. Fewer than 5% of all households own more than one car and the percentage has been gradually coming down. Amongst these, there are inter-generational or larger households. Should we penalise such households just because they choose to live together rather than in separate properties?

Mr Speaker, the Government understands the concerns with high COE prices. Other Members, such as Mr Melvin Yong, Ms Ng Ling Ling and Mr Liang Eng Hwa, have also raised similar concerns in the House. We have explained that prices are a function of supply and demand. The Government cannot control demand, but we have made significant moves to increase supply, including through the "cut-and-fill" approach for Cats A, B and D where we bring forward COEs from the peak supply years to fill the current trough. In 2024, we increased the Cats A and B quota by more than 9,000 via "cut-and-fill". The quota released was more than 30% higher than what it would have been without "cut-and-fill".

The increased supply appears to have dampened COE price increases. When we debated the Cost of Living Motion in this House in November 2023, Ms Poa highlighted her concern with high COE prices, as did other Members. Since then, the Prevailing Quota Premium, or PQP, across Cats A, B, C and D have come down by between 5% and 20%.

Mr Speaker, the Government will, where appropriate, continue to increase the COE supply through "cut-and-fill" and from February 2025 onwards, also through the 20,000 additional COEs announced in October 2024, till it reaches its projected peak from 2026. The additional injection of up to 20,000 COEs is made possible due to changes in travel patterns after COVID-19 and enhanced capabilities to manage traffic congestion with ERP 2.0. This increase in supply is the most direct way to give more households the choice of owning a car, without causing traffic congestion.

More importantly, we remain committed to our shared car-lite vision where walk, cycle, ride are the predominant travel modes. Central to our car-lite vision is mass public transport. We will continue to expand our rail network over the next decade. Last year, we have also launched the Bus Connectivity Enhancement Programme to enhance the bus network.

There is also a role for shared transport which includes point-to-point services and car sharing services. These services allow those who need to use a car every now and then, to access car-like services without having to own a car.

In conclusion, Mr Speaker, the Government has and will continue to invest heavily in public transport and infrastructure to make it accessible, affordable and convenient for all. We believe this will also be the most equitable approach in meeting the transport needs of all Singaporeans.

It has been a long day.

*Question put, and agreed to.*

*Resolved, "That Parliament do now adjourn."*

Ms Poa, the time is up, as we have only 30 minutes for the entire Adjournment Motion.

Pursuant to Standing Order 2(3)(a), I wish to inform hon Members that the Sitting tomorrow will commence at 11.00 am.

Adjourned accordingly at 10.21 pm.