Oral Reply by Acting Minister for Transport Chee Hong Tat to Parliamentary Question on Keeping Public Transport Fares Affordable
03 Oct 2023In Parliament
Mr Yip Hon Weng asked the Minister for Transport
a. whether deferring public transport fare increments to future years remains sustainable, given the anticipated continued rise in cost of living in Singapore;
b. whether the Ministry has mandated any measures to be taken by public transport operators to streamline processes and reduce expenses in order to mitigate rising costs; and
c. if so, what are these measures.
Mr Chua Kheng Wee Louis asked the Minister for Transport whether the Public Transport Council plans to expunge the 15.6% fare increase deferred for future Fare Review Exercises (FREs) after a 7.0% increase having been granted in 2023.
Ms Mariam Jaafar asked the Minister for Transport
a. what is the mean and median monthly spend on public transport in the past 12 months by (i) persons with disabilities (PWDs) and (ii) seniors who use public transport; and
b. whether the Ministry will consider introducing hybrid monthly concession passes for PWDs and seniors to be made available in different denominations for light, moderate and heavy users.
Mr Chua Kheng Wee Louis asked the Minister for Transport
a. whether the Government has data on the profitability of each public transport operator for each of the last three years; and
b. if so, what are their respective generated returns on invested capital.
Mr Gerald Giam Yean Song asked the Minister for Transport
a. what is the average monthly public transport expenditure of households with a monthly per capita income of less than $1,600; and
b. whether the Ministry will consider increasing the dollar amount of the Public Transport Vouchers disbursed to each eligible household to enable them to better cope with transport expenses.
Mr Gerald Giam Yean Song asked the Minister for Transport how will public transport commuters paying higher fares from December 2023 benefit from any increase in earnings and profits by the publicly listed transport companies.
Ms Hazel Poa asked the Minister for Transport
a. in the past five years, what is the median wage growth for (i) Professionals, Managers and Executives (ii) non- Professionals, Managers and Executives and (iii) senior management employed by public transport operators;
b. whether the Ministry will consider making this data publicly available in future fare review exercises; and
c. what is the reason for using the national wage index rather than the wage index specifically for the public transport operators.
Mr Don Wee asked the Minister for Transport whether the Public Transport Council can impose a moratorium on future fare increases after a 7.0% increase has been granted in 2023 given that the public transport operators have been profitable over the past years.
Mr Leong Mun Wai asked the Minister for Transport
a. how many Workfare Transport Concession Scheme cardholders currently spend more than (i) $96 per month and (ii) $3.15 per day respectively on train and non-express bus fares; and
b. whether the Public Transport Council has considered implementing daily fare capping for public transport fares to remove the upfront cost barriers associated with monthly concession passes for this group of commuters and, if not, why.
Reply by Acting Minister for Transport Chee Hong Tat:
1. Mr Speaker, may I have your permission to take Questions 13 to 15 together? My reply will also address Written Question No. 14 by Mr Louis Chua for today’s sitting, and related questions from Mr Gerald Giam, Ms Hazel Poa, Mr Don Wee, and Mr Leong Mun Wai for subsequent sittings.
2. In setting public transport fares, the Public Transport Council (PTC) is guided by the fare formula and aims to keep fares affordable for commuters, while ensuring that our public transport system remains financially sustainable.
Fare Formula and Fare Adjustment
3. The fare formula reflects the general cost drivers of providing public transport services, based on macroeconomic factors such as core inflation, national wage growth and energy prices. It provides for fares to be adjusted in tandem with changes in these cost drivers, rather than changes in operators’ actual costs. In this way, the operators cannot assume that their cost increases will be matched by correspondingly higher fares. Hence, they need to be disciplined in managing their costs and improving their productivity over time.
4. This approach also applies to wage costs. In setting fares, the PTC does not focus on the actual salaries paid by the operators. The formula is based on the national wage index. This allows operators to keep public transport sector salaries competitive with the rest of the economy, so that they are able to attract and retain their workers. Wage increases that exceed changes in the national wage index will not be covered by the fare formula. Over the past five years, the wages of public transport workers grew at a similar pace as the national wage index.
5. The fare formula also includes a Productivity Contribution, which reduces the allowable fare adjustment by 0.1%-points every year. This further incentivises the operators to look for continuous productivity improvements to reduce their costs. For example, the operators have been using joint tenders to achieve economies of scale, automating their maintenance processes, and upskilling their workers to improve productivity.
6. The fare formula therefore avoids operators’ costs from being directly passed on to commuters, while allowing commuters to benefit from productivity savings from the operators.
7. Guided by the formula, the PTC exercises judgment on how much of the allowable fare adjustment to implement each year, taking into consideration economic and social factors. For example, the PTC looks at affordability as measured by the estimated proportion of household income spent on public transport. For the lower-income, this proportion has fallen from 3.1% in 2013 to 2.4% in 2022. For average public transport users, the figure has also reduced from 2.2% in 2013 to 1.7% in 2022.
8. The quantum of allowable fare adjustment that is not implemented in a particular year is deferred and carried forward to future years. In the 2022 Fare Review Exercise (FRE), PTC deferred 10.6%-points of fare increase. In this year’s FRE, the fare formula output was 12.0%, driven by a 62% increase in energy prices, strong national wage growth at about 7%, and core inflation at about 4%. Adding the deferred quantum of 10.6% to the fare formula output, the maximum allowable fare increase for 2023 was 22.6%.
9. To keep public transport fares affordable for commuters, and understanding that Singaporean families are currently facing higher costs of living, the PTC again decided not to grant the full quantum this year. Instead, the PTC decided on an overall fare increase of 7.0% – which is less than a third of the maximum allowable fare increase of 22.6%. The remaining 15.6%-points will be deferred to future years.
10. To account for this funding gap, the Government will provide $300 million of additional subsidies in 2023, which is $100 million more than the previous year. This amount is on top of the $2 billion annual subsidies to fund bus and train services. In addition, the cost of public transport infrastructure is also fully funded by Government.
11. Mr Louis Chua asked whether the PTC plans to “expunge” the 15.6%-points. Mr Don Wee asked if the PTC can “impose a moratorium” on future fare increases. Mr Speaker, I am concerned that Mr Chua and Mr Wee are making these suggestions. Please allow me to explain why their proposals are not sound, as these will affect the longer-term reliability and financial sustainability of our public transport system, to the detriment of Singapore and Singaporeans.
12. I had earlier mentioned that the fare formula reflects real cost increases in our economy, such as energy costs and wages. If the deferred fare amount is “expunged”, as Mr Louis Chua proposed, or if fares are frozen for future years as Mr Don Wee suggested, it does not mean that these costs of running the public transport system will simply disappear into thin air.
13. Hence, I would like to ask Mr Chua and Mr Wee to clarify whether they are proposing for the operators to absorb this cost, or for taxpayers to bear a larger cost burden to provide higher government subsidies on a permanent basis? If it is the latter, they should elaborate how such a move will be funded every year and whether they are proposing for Singaporeans to pay additional taxes to do so? I hope that is not what they have in mind.
14. If it is to ask the public transport operators to absorb the costs, we need to consider how this will impact their financial sustainability over time, and in turn affect their ability to provide accessible and reliable public transport services.
15. Mr Louis Chua asked about the profits of the public transport operators, and Mr Don Wee suggested that we could freeze fares given that operators have been profitable. Bus and rail services adopt different operating models. For buses, Government collects the fare revenue and pays the operators a service fee that is derived from competitive bids via bus contracting tenders. Overall, bus services are operating at a loss and that is why Government needs to provide about $1 billion in subsidies for buses every year. Expunging the deferred fare or freezing future fare increases will result in larger losses and higher government subsidies.
16. For rail services, the operators collect the fares to cover their operating costs, so fares do impact the rail operators’ profitability directly. In the latest financial year, after accounting for government grants, SBS Transit reported a loss of several million dollars for their rail operations, while SMRT Trains reported an operating profit of $6 million, which represents a profit margin of less than 1%.
17. We should not pretend that the deferred fare increases can somehow be expunged and magically disappear, or assume that future fare increases can be frozen without consequences to our public transport system. Making such populist moves will further enlarge the funding gap over time which must be supported by higher government subsidies funded by taxpayers. It is not the responsible thing to do. We need to be clear that government subsidies are ultimately borne by current and future generations of taxpayers.
18. The PTC will continue to ensure that fare adjustments each year are affordable. In each future FRE, the PTC will assess the cost increases as reflected by the fare formula, the deferred fare amount from previous years, as well as the impact on affordability for commuters, before deciding on the fare increase to be granted for that year. And when the opportunity arises, the PTC will consider whether it is possible to lower the total deferred fare amount so the gap will gradually reduce over time.
Ensuring Affordability
19. The PTC and Government are also mindful that fare increases affect different commuter groups differently. While it is important that commuters bear their fair share of cost increases, we are committed to ensuring that fares remain affordable, especially for concession groups such as seniors, students, lower-wage workers and Persons with Disabilities. These groups enjoy discounts of up to 70% off adult per-journey fares.
20. Within each concession group, there is a wide range of spending on public transport, depending on different commuting patterns. Among all seniors, Persons with Disabilities, and individuals on the Workfare Transport Concession Scheme (WTCS), the median monthly spending on public transport is about $16, $24, and $35 respectively.
21. As heavy users of public transport will be more affected by the increase in per-journey fares, we will reduce the price of hybrid monthly concession passes by up to 10%, and introduce a new discounted WTCS monthly pass. This is expected to benefit about 60,000 commuters, including about 1,600 WTCS cardholders who currently pay per-journey fares and spend more than the monthly pass price of $96. Concession cardholders who make fewer public transport journeys will continue to enjoy substantial discounts off adult per-journey fares.
22. When fares increase, the PTC requires rail operators to contribute a proportion of their increased fare revenue to the Public Transport Fund. In the coming year, the rail operators will contribute a total of $16 million. Together with Government’s contributions to the Fund, these monies are used to provide Public Transport Vouchers (PTVs) to help cushion the impact on lower-income households. The Government will increase the PTV amount from $30 in 2022 to $50 this year.
23. Over the past decade, we have steadily enhanced the quality of our public transport system, by expanding the network and improving accessibility and reliability of services. These outcomes have been achieved through our strong tripartite partnership between the government, operators and workers; while keeping fares affordable and the public transport system financially sustainable. This will remain our approach going forward.
Back
a. whether deferring public transport fare increments to future years remains sustainable, given the anticipated continued rise in cost of living in Singapore;
b. whether the Ministry has mandated any measures to be taken by public transport operators to streamline processes and reduce expenses in order to mitigate rising costs; and
c. if so, what are these measures.
Mr Chua Kheng Wee Louis asked the Minister for Transport whether the Public Transport Council plans to expunge the 15.6% fare increase deferred for future Fare Review Exercises (FREs) after a 7.0% increase having been granted in 2023.
Ms Mariam Jaafar asked the Minister for Transport
a. what is the mean and median monthly spend on public transport in the past 12 months by (i) persons with disabilities (PWDs) and (ii) seniors who use public transport; and
b. whether the Ministry will consider introducing hybrid monthly concession passes for PWDs and seniors to be made available in different denominations for light, moderate and heavy users.
Mr Chua Kheng Wee Louis asked the Minister for Transport
a. whether the Government has data on the profitability of each public transport operator for each of the last three years; and
b. if so, what are their respective generated returns on invested capital.
Mr Gerald Giam Yean Song asked the Minister for Transport
a. what is the average monthly public transport expenditure of households with a monthly per capita income of less than $1,600; and
b. whether the Ministry will consider increasing the dollar amount of the Public Transport Vouchers disbursed to each eligible household to enable them to better cope with transport expenses.
Mr Gerald Giam Yean Song asked the Minister for Transport how will public transport commuters paying higher fares from December 2023 benefit from any increase in earnings and profits by the publicly listed transport companies.
Ms Hazel Poa asked the Minister for Transport
a. in the past five years, what is the median wage growth for (i) Professionals, Managers and Executives (ii) non- Professionals, Managers and Executives and (iii) senior management employed by public transport operators;
b. whether the Ministry will consider making this data publicly available in future fare review exercises; and
c. what is the reason for using the national wage index rather than the wage index specifically for the public transport operators.
Mr Don Wee asked the Minister for Transport whether the Public Transport Council can impose a moratorium on future fare increases after a 7.0% increase has been granted in 2023 given that the public transport operators have been profitable over the past years.
Mr Leong Mun Wai asked the Minister for Transport
a. how many Workfare Transport Concession Scheme cardholders currently spend more than (i) $96 per month and (ii) $3.15 per day respectively on train and non-express bus fares; and
b. whether the Public Transport Council has considered implementing daily fare capping for public transport fares to remove the upfront cost barriers associated with monthly concession passes for this group of commuters and, if not, why.
Reply by Acting Minister for Transport Chee Hong Tat:
1. Mr Speaker, may I have your permission to take Questions 13 to 15 together? My reply will also address Written Question No. 14 by Mr Louis Chua for today’s sitting, and related questions from Mr Gerald Giam, Ms Hazel Poa, Mr Don Wee, and Mr Leong Mun Wai for subsequent sittings.
2. In setting public transport fares, the Public Transport Council (PTC) is guided by the fare formula and aims to keep fares affordable for commuters, while ensuring that our public transport system remains financially sustainable.
Fare Formula and Fare Adjustment
3. The fare formula reflects the general cost drivers of providing public transport services, based on macroeconomic factors such as core inflation, national wage growth and energy prices. It provides for fares to be adjusted in tandem with changes in these cost drivers, rather than changes in operators’ actual costs. In this way, the operators cannot assume that their cost increases will be matched by correspondingly higher fares. Hence, they need to be disciplined in managing their costs and improving their productivity over time.
4. This approach also applies to wage costs. In setting fares, the PTC does not focus on the actual salaries paid by the operators. The formula is based on the national wage index. This allows operators to keep public transport sector salaries competitive with the rest of the economy, so that they are able to attract and retain their workers. Wage increases that exceed changes in the national wage index will not be covered by the fare formula. Over the past five years, the wages of public transport workers grew at a similar pace as the national wage index.
5. The fare formula also includes a Productivity Contribution, which reduces the allowable fare adjustment by 0.1%-points every year. This further incentivises the operators to look for continuous productivity improvements to reduce their costs. For example, the operators have been using joint tenders to achieve economies of scale, automating their maintenance processes, and upskilling their workers to improve productivity.
6. The fare formula therefore avoids operators’ costs from being directly passed on to commuters, while allowing commuters to benefit from productivity savings from the operators.
7. Guided by the formula, the PTC exercises judgment on how much of the allowable fare adjustment to implement each year, taking into consideration economic and social factors. For example, the PTC looks at affordability as measured by the estimated proportion of household income spent on public transport. For the lower-income, this proportion has fallen from 3.1% in 2013 to 2.4% in 2022. For average public transport users, the figure has also reduced from 2.2% in 2013 to 1.7% in 2022.
8. The quantum of allowable fare adjustment that is not implemented in a particular year is deferred and carried forward to future years. In the 2022 Fare Review Exercise (FRE), PTC deferred 10.6%-points of fare increase. In this year’s FRE, the fare formula output was 12.0%, driven by a 62% increase in energy prices, strong national wage growth at about 7%, and core inflation at about 4%. Adding the deferred quantum of 10.6% to the fare formula output, the maximum allowable fare increase for 2023 was 22.6%.
9. To keep public transport fares affordable for commuters, and understanding that Singaporean families are currently facing higher costs of living, the PTC again decided not to grant the full quantum this year. Instead, the PTC decided on an overall fare increase of 7.0% – which is less than a third of the maximum allowable fare increase of 22.6%. The remaining 15.6%-points will be deferred to future years.
10. To account for this funding gap, the Government will provide $300 million of additional subsidies in 2023, which is $100 million more than the previous year. This amount is on top of the $2 billion annual subsidies to fund bus and train services. In addition, the cost of public transport infrastructure is also fully funded by Government.
11. Mr Louis Chua asked whether the PTC plans to “expunge” the 15.6%-points. Mr Don Wee asked if the PTC can “impose a moratorium” on future fare increases. Mr Speaker, I am concerned that Mr Chua and Mr Wee are making these suggestions. Please allow me to explain why their proposals are not sound, as these will affect the longer-term reliability and financial sustainability of our public transport system, to the detriment of Singapore and Singaporeans.
12. I had earlier mentioned that the fare formula reflects real cost increases in our economy, such as energy costs and wages. If the deferred fare amount is “expunged”, as Mr Louis Chua proposed, or if fares are frozen for future years as Mr Don Wee suggested, it does not mean that these costs of running the public transport system will simply disappear into thin air.
13. Hence, I would like to ask Mr Chua and Mr Wee to clarify whether they are proposing for the operators to absorb this cost, or for taxpayers to bear a larger cost burden to provide higher government subsidies on a permanent basis? If it is the latter, they should elaborate how such a move will be funded every year and whether they are proposing for Singaporeans to pay additional taxes to do so? I hope that is not what they have in mind.
14. If it is to ask the public transport operators to absorb the costs, we need to consider how this will impact their financial sustainability over time, and in turn affect their ability to provide accessible and reliable public transport services.
15. Mr Louis Chua asked about the profits of the public transport operators, and Mr Don Wee suggested that we could freeze fares given that operators have been profitable. Bus and rail services adopt different operating models. For buses, Government collects the fare revenue and pays the operators a service fee that is derived from competitive bids via bus contracting tenders. Overall, bus services are operating at a loss and that is why Government needs to provide about $1 billion in subsidies for buses every year. Expunging the deferred fare or freezing future fare increases will result in larger losses and higher government subsidies.
16. For rail services, the operators collect the fares to cover their operating costs, so fares do impact the rail operators’ profitability directly. In the latest financial year, after accounting for government grants, SBS Transit reported a loss of several million dollars for their rail operations, while SMRT Trains reported an operating profit of $6 million, which represents a profit margin of less than 1%.
17. We should not pretend that the deferred fare increases can somehow be expunged and magically disappear, or assume that future fare increases can be frozen without consequences to our public transport system. Making such populist moves will further enlarge the funding gap over time which must be supported by higher government subsidies funded by taxpayers. It is not the responsible thing to do. We need to be clear that government subsidies are ultimately borne by current and future generations of taxpayers.
18. The PTC will continue to ensure that fare adjustments each year are affordable. In each future FRE, the PTC will assess the cost increases as reflected by the fare formula, the deferred fare amount from previous years, as well as the impact on affordability for commuters, before deciding on the fare increase to be granted for that year. And when the opportunity arises, the PTC will consider whether it is possible to lower the total deferred fare amount so the gap will gradually reduce over time.
Ensuring Affordability
19. The PTC and Government are also mindful that fare increases affect different commuter groups differently. While it is important that commuters bear their fair share of cost increases, we are committed to ensuring that fares remain affordable, especially for concession groups such as seniors, students, lower-wage workers and Persons with Disabilities. These groups enjoy discounts of up to 70% off adult per-journey fares.
20. Within each concession group, there is a wide range of spending on public transport, depending on different commuting patterns. Among all seniors, Persons with Disabilities, and individuals on the Workfare Transport Concession Scheme (WTCS), the median monthly spending on public transport is about $16, $24, and $35 respectively.
21. As heavy users of public transport will be more affected by the increase in per-journey fares, we will reduce the price of hybrid monthly concession passes by up to 10%, and introduce a new discounted WTCS monthly pass. This is expected to benefit about 60,000 commuters, including about 1,600 WTCS cardholders who currently pay per-journey fares and spend more than the monthly pass price of $96. Concession cardholders who make fewer public transport journeys will continue to enjoy substantial discounts off adult per-journey fares.
22. When fares increase, the PTC requires rail operators to contribute a proportion of their increased fare revenue to the Public Transport Fund. In the coming year, the rail operators will contribute a total of $16 million. Together with Government’s contributions to the Fund, these monies are used to provide Public Transport Vouchers (PTVs) to help cushion the impact on lower-income households. The Government will increase the PTV amount from $30 in 2022 to $50 this year.
23. Over the past decade, we have steadily enhanced the quality of our public transport system, by expanding the network and improving accessibility and reliability of services. These outcomes have been achieved through our strong tripartite partnership between the government, operators and workers; while keeping fares affordable and the public transport system financially sustainable. This will remain our approach going forward.
