07 March 2013

Public Transport Fare Review: Concessions, Concessions, Concessions

According to media reports, Fare Review Mechanism Committee chairman Richard Magnus said that the committee was considering, among other things, the following:

▪ A monthly travel pass for adults to help cap the monthly public transport expenses for average-income households or individuals.

▪ Concession fares for children who are taller than 0.9 metres but not yet in primary school and do not qualify for free travel.

▪ Concession fares for the disabled.

▪ Concession fares for polytechnic students.

▪ Concession fares for low-income earners.

Zero Sum
Giving certain groups of people concession fares is nice generally and politically but there is a cost.

It is unlikely that the public transport operators will be saddled with the cost unless the Fare Review Mechanism Committee thinks that they are earning excessive profit and can do with less.

But, if as in the past, the fare adjustment formula sets the maximum annual increase in train and bus revenue for the public transport operators, rather than the maximum annual increase in train and bus fares that they may charge, the more concession commuters there are, the fewer the residual non-concession commuters there are to bear the cost of providing the concessions in this zero-sum situation.
The non-concession commuters may be looking at a sizable increase in fares this year in the light of these proposed concessions and the fact that there was no adjustment in fares last year (even though the then fare adjustment formula pointed to a not insignificant increase).

Qualification Issues
It is not clear why the disabled are being considered for concession fares, as being disabled doesn't necessarily mean that a person is financially disadvantaged.

As for low- or average-income household members or individuals, who are being considered for concession fares, will or should these individuals be citizens, permanent residents or foreigners?

Qualifying criteria have unintended loopholes.  Take for example Workfare Income Supplement.  Years after its introduction, the Government realised that some low-wage recipients have spouses who earn almost double the median resident income from work and other recipients or their spouses own more than one property!  Or, the Utilities-Save rebates.  Years after its introduction, the Government realised that some recipients were non-citizens living in HDB flats which they had rented, instead of the citizens who owned those flats!

Administrative Cost
Who will bear the administrative cost of implementing the concessions, especially those for low-income earners and average-income households or individuals?

This is not a small matter because it is not a one-time exercise.  A low- or average-income earner may not remain a low- or average-income earner forever (we hope not anyway).

Can Singapore afford to divert manpower from a tight labour market to handle this exercise on an on-going basis?

It is much simpler to add, for example, $20 a month to an individual's Workfare Income Supplement or some other social assistance payout as a transport subsidy than to introduce a separate, free-standing transport concession.  The "disadvantage", however, is that the transport subsidy becomes commingled with the main payout and loses its separate identity, and recipients will quickly forget that they are receiving a transport subsidy.  Politicians don't like this because they want to be seen to be doing something to help alleviate the rising transport costs of the needy, and the more often they are seen doing so the better.

Policing Cost
It is a relatively straightforward matter for the public transport operators' staff to determine at a glance whether a commuter is a senior citizen or is disabled.

It is a different matter when it comes to determining whether an individual is a low- or average-income earner.  If Fare Review Mechanism Committee uses the same criteria as that for Workfare Income Supplement (which does not even apply to average-income earners), it will already cover 480,000 citizens, or 30 per cent of the citizen work force.  With so many commuters holding such concession passes, it will be nearly impossible for bus drivers to check whether the person boarding the bus is the rightful concession pass holder; nor will they want to because it puts them in a no-win confrontation.  It may also slow down the bus, and cause the operator to be fined.

Already, it is common to see children taller than 0.9 metres travel on public transport without paying and without being checked by the bus drivers; it makes little sense for the drivers to challenge the children or their parents who obviously think nothing about cheating, and teaching their children that it is all right to cheat, the public transport operator.

Creeping Entitlement
In years gone by, only students and children were entitled to pay less than the full fare.  Then, seniors were added, except that they had to pay full fare at peak hours but this restriction was removed later.

Will the concession entitlement mindset lead to more and more concessions and more and more generously defined concessions in the future?

I cannot help but wonder if this is another example of getting the wrong party to bear the cost of concessions and of implementing the concessions.

It is the State's duty and responsibility help needy citizens, e.g., low- or average-income households or individuals, by granting subsidised or concession fares.  Shifting this burden to the public transport operators means that the cost will ultimately be borne by non-concession commuters.  That is inequitable.

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