Response to the Adjournment Motion “Toward Certificate of Entitlement (COE) 2.0” by Acting Minister for Transport, Mr Jeffrey Siow

1.     Mr Speaker, I want to thank the Member for his motion. Certificate of Entitlement (COE) policies have been debated extensively before in this chamber. Many ideas have been proposed and debated over the years. I want to take this opportunity to reiterate why we have this system and also address some of the questions that other Members have raised during this week’s sittings on COE.

2.     The COE system is neither perfect nor popular. But I am glad Associate Professor Lim agrees that there is still a need for a COE system. We do not have enough land for every person, or even every household, to own a car. If every household owns a car, we will have around 1.5 million private cars on our roads, which is more than two times the current population. We will need far more roads. But today, 12% of our land is already occupied by roads. Any additional land take by roads will come at the expense of other meritorious needs – housing, schools, hospitals and community facilities. Things that are good for our people.   

On Allocating Based on Need

3.     This is why our approach is to focus on mass public transport, and not car ownership. We let people make their own decisions on whether they want to spend their money to buy a car and bid for a COE. The COE revenues – about $4 to 6 billion a year on average – go towards subsidising public transport, as well as other government expenditures for the good of society such as healthcare, education, and defence. With COE revenues, we can provide every Singaporean with high-quality and affordable public transport. This way, we achieve the greatest good for the greatest number. This is the fairest approach because some people don't want to drive, some people are unable to drive, and some people don't want to be burdened by a car loan. But everyone can use good public transport to get to where they want to go. 

4.     Assoc Prof Lim argues for a COE system based on needs and concepts of fairness. Other Singaporeans have also shared similar perspectives with me, suggesting groups who can be treated specially or subsidised for car ownership. I sympathise with many of these perspectives. In particular, families with young children, or sending elderly parents to medical appointments. It is not easy navigating public transport with several young kids in tow, or with a senior in a wheelchair. Even though it is much better now than ten years ago, when the public transport system was not entirely barrier-free. Today, it is. I do not doubt that these families would benefit from having a car. As an alternative, some of them use private hire cars or rent a car once in a while. These options are not perfect substitutes. But they come close, and are more affordable than buying a car.

5.     I have received many appeals for COE subsidies for such families, or as the Member proposes, discounts. But whenever we consider this, it is difficult to make the case. This is because rather than give one family a substantial COE subsidy, say, $30 to 40K, the same amount of subsidy can be redistributed to benefit many more families. Including those who don’t want or are not able to have a car. For example, we can give many more families credits to be used for transport services, as we have done with the Large Families Scheme, or to defray other expenditures, through cash or vouchers.

6.     It is also challenging for the government to allocate COEs based on needs. What appears deserving to one person might not appear fair to another. For example, if we subsidise families with children – how many children? How old should the children be? Or if we allocate based on income, we have to decide whether to do household income, or personal income; and whether big households should be more deserving than small families.

7.     And then there are the practical considerations: Do we take away the car when the need is gone? All these ideas sound very attractive but no matter how one draws the line, there will still be people who fall on the wrong side, who believe they are more deserving. And we will still be here, at another sitting, debating at this late hour, on how each line has been drawn. No matter how one draws the line, there will still be people who fall on the wrong side and who believe they are more deserving.

8.     I understand the concern over the rising COE prices in recent months. More potential car buyers feel priced out. The Government has tried to stabilise the supply. We brought forward some COE quota from the future to flatten peaks and troughs of the supply curve. And we are making a one-off injection of up to about 20,000 COEs which we announced in October 2024. In fact, the COE quarterly supply has doubled since 2023. But COE prices have continued to rise because of demand. Electric vehicles, especially those from China, are being brought into Singapore cheaply and this means more money being put into COE bids.

9.     Some people have also suggested that PHC companies are responsible for driving up COE prices. Less than 10% of bids have been won by car leasing companies this year. Even if we remove all of the PHC bids, the price of the marginal bidders below the clearing price would not be much lower. Should we have a separate COE category for PHCs, or to move it to Category E, as the member suggests? A separate category would mean that we have to take quota away from Cat A and B - how much is enough? More than 10%, or less? If more than 10%, then there would be fewer COEs for Cat A and B than today. If less than 10%, there will be fewer PHCs to meet customer demand. Then, what could happen is higher PHC fares and higher rentals for drivers. This will disadvantage Singaporeans who cannot afford a car, and who can only rely on PHCs to get around.

Moving Forward and Our Investment in Public Transport 

10.    Ultimately, we all want to do better for Singapore and Singaporeans. I share the same broader goal as Assoc Prof Lim of expanding connectivity for all Singaporeans. Where we differ is in how to achieve that. For this Government, we make sure that we deliver the greatest good for the greatest number. We do so by investing heavily in our public transport system. The Government spends some $2 billion on operational subsidies to keep our bus and train services running each year. And we build new rail lines that serve millions of journeys each day. We build covered walkways, upgrade our footpaths and expand cycling paths to make the first-mile and last-mile journeys of public transport commuters more convenient and comfortable. The COE system should therefore be seen in this broader context. 

11.    A needs-based system for the COE sounds attractive, but in practice, it is subjective, divisive, and benefits too few. The market mechanism is transparent and allows the Government to channel COE revenues to the benefit of the wider public. This is not a perfect system, but it is the fairest and most effective way to allocate a scarce resource in Singapore’s context.

12.    Thank you, Mr Speaker.