Any public transport fare increase is bound to cause unhappiness when many are already buffeted by the rising cost of living amid high inflation. Public bus and train rides will cost more from Saturday (Dec 23), by up to 11 cents more per journey for adult commuters.
Financial pressures are mounting for both public transport operators – facing higher operating costs and lower ridership post-pandemic - and the public already bracing for planned increases to the Goods and Services Tax (GST) and water prices.
Although the fare hikes are smaller for concession card holders, while lower-income workers and families can avail themselves of cheaper hybrid concession passes and Public Transport Vouchers, the broader question remains: How should the burden of higher costs be shared among taxpayers, public transport operators and commuters in a way that is fair, sustainable and maximises the public good?
The government already subsidises public transport to the tune of over S$2 billion a year, or more than S$1 per journey according to a 2022 parliamentary reply.
While this is a considerable sum, a case could be made for even greater government support for public transport.
MERITS OF PUBLIC TRANSPORT ARE CLEAR
Public transport is a quintessential “merit good” – which confers benefits to society beyond the individual commuter, and hence is deserving of public funding. Such benefits, called positive externalities by economists, come from it being a substitute for private modes of transport.
Reducing congestion saves motorists’ time, reduces stress on the roads, and facilitates the smooth passage of emergency vehicles. There are also benefits from cleaner air and lower carbon emissions, the latter being critical for Singapore’s green transition and international climate commitments.
Singapore’s car-lite ambition is underpinned by a policy of zero growth in car population, with car ownership controls – most notably, the Certificate of Entitlement (COE) system – a necessary complement to Electronic Road Pricing to ensure drivers feel the social and environmental costs of private car use.
COE premiums put private car ownership out of the reach of many Singaporeans by design. This makes affordable and reliable public transport a prerequisite for an inclusive society.
Boosting public transport affordability would further buttress the case for a car-lite society. This would also provide citizens with greater assurance and peace of mind, particularly those who spend a larger share of their monthly income on public transport.
FREE PUBLIC TRANSPORT?
But even if we all agree public transport could be further subsidised, it becomes a question of how and how much.
Countries and cities around the world have been experimenting with lower fares or even free public transport.
Estonia’s capital Tallinn pioneered fare-free public transport a decade ago, while Luxembourg followed suit in 2020. Germany introduced a €9 (US$8.95) monthly travel pass for three months in 2022 while Austria rolled out an annual nationwide transport pass that works out to about €3 a day.
However, outcomes have been mixed. Luxembourg has not seen an improvement in traffic conditions as workers living outside the country continue to make daily commutes in, while in Estonia, pedestrians and cyclists were more likely than motorists to switch to public transport.
The impact on traffic and private car use is just one dimension; other social benefits should be factored in too. Public transport subsidies can boost disposable incomes and encourage seniors to step out of their homes. Greater mobility can also serve economic and urban development aims such as to move jobs outside crowded city centres.
LOW RISK OF EXCESSIVE USE
One consideration that strengthens the case for further subsidising public transport is the lower risk of excessive consumption.
For any public subsidy, there is a need to consider its impact on incentives and fiscal sustainability. Subsidising fuel, electricity or water may encourage inefficient use and excessive consumption.
Even healthcare, another merit good, is prone to the “buffet syndrome” if costs are fully borne by the state or insurers, which could lead to an unsustainable increase in demand and public expenditure.
On the other hand, travel is usually a means to an end – we take it to get to work or run errands - rather than as an end in itself.
Would there be a surge in demand for public transport just because fares were lowered? That seems unlikely.
Besides, a cautious policymaker could guard against the risks of overconsumption, such as by limiting discounted fares to two bus or MRT trips a day, with subsequent travel charged at the regular rate.
The idea of free or discounted fares is not in fact new to Singapore. In 2013, a trial programme was launched offering free transit for early morning travellers in a bid to reduce peak hour crowding on trains. This resulted in a 7 per cent reduction in the number of commuters during the morning peak period, albeit lower than the target 10 to 20 per cent.
This initiative has since been replaced by a 50-cent discount for those who begin their commute before 7.45am.
Lost revenue from extending discounted fares would, of course, have to be recovered elsewhere – whether from the state or from higher fares for those who commute more frequently.
SOUND REGULATION AND SUSTAINED INVESTMENT
A simple system of discounted fares could give Singaporeans peace of mind while encouraging more to use public transport.
Further tweaks may be needed to incorporate this in our transport system, such as maintaining some differentiation in pricing between peak and non-peak travel to spread out demand.
Lower cost alone will not persuade many motorists to switch to public transport unless the latter is efficient, comfortable and reliable. Sound regulation and investment are also necessary to ensure the system’s efficiency, service quality and long-term viability.
It is important that public transport operators continue to be given appropriate incentives to improve productivity and service quality, so that public funding is not eaten up by inefficiency. Sustained investment in assets and infrastructure is also critical for the long-term health of the public transport system, even if this investment cannot be fully recouped from fare revenue.
The Public Transport Council’s (PTC) fare adjustment formula has played a key role over the years in distributing the burden of higher operating costs among public transport operators, commuters and the government. The PTC periodically reviews the formula, as it did in April, to account for changes in the public transport landscape.
But in light of Singapore’s green ambition and cost of living pressures, it may be timely to relook the basis of fare-setting with fresh eyes.
This article was first published in CNA on 23 Dec 2023. Read the full article
here.