Budget debate: Cost of making public transport free for seniors and the disabled will be significant, says Iswaran

The cost of such a scheme would mean a 15 per cent to 20 per cent increase to the $2 billion in public transport subsidies. ST PHOTO: SAMUEL ANG

SINGAPORE - A proposal by Workers' Party MP Jamus Lim to make public transport free for all seniors and people with disabilities here sparked an exchange between Transport Minister S. Iswaran and the opposition party on the cost of such a scheme and how to balance the books.

Mr Iswaran said making public transport free for seniors and people with disabilities here would mean a 15 per cent to 20 per cent increase to the $2 billion in public transport subsidies that taxpayers here are already shouldering each year.

If this cost is borne by commuters instead, adult fares would have to go up by 30 to 40 cents on average, said the minister in response to Mr Lim (Sengkang GRC) during the debate on his ministry's budget on Wednesday (March 9).

Mr Iswaran said this financial burden "is by no means insignificant", and it will only increase as the number of seniors and people with disabilities holding concession cards here rises from 975,000 now to about 1.2 million in 2030.

This is why the authorities take a different approach, which involves softening the blow of fare hikes for this group of vulnerable commuters, he said.

"When Associate Professor Jamus Lim suggests making public transport free for seniors and persons with disabilities, we understand where he is coming from, yet don't necessarily agree with where he suggests we go," Mr Iswaran added.

Prof Lim had argued that free public transport for seniors would allow those who want to keep working to do so without having to worry about transport costs, and encourage them to engage in social interactions.

He estimated that such a scheme would cost $300 million to $400 million a year, which he claimed would only be a 3 per cent to 4 per cent increase in the Transport Ministry's budget.

The ministry's estimated budget for financial year 2022/2023 is $10.9 billion.

Responding, Mr Iswaran pointed out that two-thirds of the Transport Ministry’s total budget is for development expenditures.

“What you are proposing is a recurrent operational subsidy of $300 to $400 million. So in other words, it is on the lower base that we should be looking at,” he said.

Mr Iswaran added that his ministry’s operating budget has also gone up in the past two years because of Covid-19 specific measures.

“So if you discount that further, what you’re actually proposing is an increase in subsidies – if I use my $2 billion reference point – of about 20 to 25 per cent. That is a significant increase,” he said.

Prof Lim had also said a compromise would be to allow free rides only during off-peak hours, when there is usually spare capacity in the buses and trains here.

“I wonder, instead of ferrying air, could we instead ferry the elderly and the disabled,” Prof Lim later added, referencing comments made in March last year by then Transport Minister Ong Ye Kung about excess bus capacity.

He also suggested that Mr Iswaran was making a strawman argument when the minister had discussed the impact making public transport free for some would have on other commuters, as this was not what he had proposed.

To this, the minister said that while whether to incur a significant increase in subsidies is a matter for debate,  “we should also, to be intellectually rigorous, examine where the member and his party stand when it comes to sources of revenue”.

Mr Iswaran noted that Leader of the Opposition Pritam Singh had previously made a point about how fare increases are contributing to cost of living, while the WP had also taken a "dim view" of some of the revenue sources proposed by Finance Minister Lawrence Wong.

He did not elaborate, but the WP has objected to the Government's move to raise the goods and services (GST) tax from 7 per cent to 9 per cent.

"In other words, the Workers' Party looks askance at increases in fares, and yet, we are also arguing for spending more. And where do we cut them from?" Mr Iswaran said. "We have to square the circle, and it is by no means a strawman."

Mr Singh rose to clarify that the WP had put up four alternatives to raising the GST, including higher taxes on the wealthy and raising corporate tax.

"It's not as if the money is going to come from an unknown source," Mr Singh said.

To this, Mr Iswaran said proposals that incur additional expenses cannot be made under one ministry's budget with the expectation that it will be taken care of at the macro level.

"Every year, we have to address this issue of the balance between quality service, affordability and financial sustainability and this is not going to go away," he said.

"We do need the discipline of also addressing how, within that particular ministry's budget, we are making every effort to find the appropriate balance."

On Prof Lim's suggestion to provide free rides during off-peak hours, Mr Iswaran said he would not rule it out, but noted this would change the concession fare system and has to be carefully looked at. He added that seniors and people with disabilities with concession cards already receive a discount of up to 55 per cent.

Mr Iswaran said the Government has always sought to keep public transport affordable, even as operating costs rise.

This is why public transport subsidies are tilted towards vulnerable commuters, he said, citing the $20 million in public transport vouchers set aside each year to help lower income households defray the cost when fare were raised in 2019 and 2021.

When fares rise, adult commuters bear more of the increase than concessionary commuter groups, the minister said. "Everyone pays a share, and those who can pay more, do so. This is a more equitable and sustainable approach, which has served us well over the years."

Looking ahead, Mr Iswaran said shifting work and travel patterns, an ageing population and volatile energy prices will affect public transport over the next decade.

Hence, it is important to have a fare formula for long-term financial sustainability, he added. A review of the current fare formula will start this year and conclude next year.

"The PTC will continue to strike the delicate balance across cost pressures faced by public transport operators, the burden on taxpayers of public transport subsidies, and fare affordability for commuters," he said.

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