Response by Senior Minister of State for Transport, Dr Amy Khor to Ms Hazel Poa's Adjournment Motion on “A More Equitable Certificate of Entitlement (COE) System"

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

Equity in the COE System

2.     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, or the 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.

Points/Needs-based Allocation System

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

4.     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. 

5.     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.

6.     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.

7.     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 judgment on who needs a car more? To use Ms Poa’s proposed allocation, is there strong justification why a male who has served National Service 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 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 

Separate COE Category for PHCs

8.     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 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? 

Tax on multiple car owning households

9.     Ms Poa has also suggested an additional tax for multiple car owning households, similar to additional buyer stamp duties (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?

COE Prices

10.    Mr Speaker, the Government understands the concerns with high COE prices. Other MPs, 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 Cat A, B and D where we bring forward COEs from the peak supply years to fill the current trough. In 2024, we increased the Cat 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’.

11.    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 MPs. Since then, the Prevailing Quota Premium (or PQP) across Categories A, B, C and D have come down by between 5% and 20%.

12.    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 ERP2.0. This increase in supply is the most direct way to give more households the choice of owning a car, without causing traffic congestion. 

13.    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.  

14.    There is also a role for shared transport which includes point-to-point (P2P) 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.

15.    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.