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Why fares should double and other ideas for a better transport system

~By: Gordon Lee~

In this article, I outline a total rework of the transport fare regime can strike a good balance between service standards and affordability. I will focus mainly on the bus network.

Proposal 1: Change the PTO revenue structure

As the Government pointed out when they announced the $1.1bn bus bailout package, “the PTO’s bus operations are already running operating losses”.[1] These losses motivate bus companies to cut service standards, since the current model is such that bus fares go directly to bus companies.

I propose that bus fares go directly to the bus regulator (e.g. LTA) instead of bus companies. Bus companies will be paid based on the number of miles they run, according to competitive tenders on routes made every five years.

With bus companies knowing in advance how much they will receive for the services they provide - this security will make them look at how to increase customer satisfaction levels to ensure they get re-awarded the tender in five years time. To achieve this, “league tables” for bus operators can be published, as is done in London.[2]

Proposal 2: Double bus fares to fund public transport investments

Bus fares should double to provide additional funding for public transport investments.Some ideas from London include...

(A) Bus routes that run through-out the night, including 24/7 routes.[3]

(B) Audio-visual bus announcements (like those on trains) on every bus.[4]

(C) Automatic triggering of green light when buses approach traffic junctions.[5]

As many people noted, the main issue that commuters have with public transport is not price, but levels of service. Nevertheless, I will propose ways to keep public transport affordable.

Proposal 3: Subsidise regular commuters with season passes

Regular commuters are vulnerable to fare increases because they obviously rely (more than others) on public transport and hence tend to spend a greater part of their income on transport. After a doubling of fares, these regular commuters should be subsidised in the form of season tickets, or daily price capping on your EZ-link card.

 

Transport is supposedly expensive in London, but after taking 3 bus rides in a day, all other bus rides are free because of daily price capping. Besides, you also can buy adult season passes that allow unlimited bus travel at the following rates[6]:
>>One week season pass --- for the price of 14 bus journeys

>>One month season pass --- for the price of 53 bus journeys
>>One year season pass --- for the price of 557 bus journeys

This protects the regular user of public transport - and allow the user to benefit from higher fares charged to occasional users of public transport (e.g. tourists). Singapore received 1.2 million visitors in Jan 2012 alone - visitors who were probably prepared to spend slightly more on a holiday away from home.[7]

Singapore currently operates a season pass scheme, and it might be good to look at how this scheme can be extended and expanded.

Proposal 4: Higher government spending on public transport

The LTA is proud that fare revenues in Singapore are 26% higher than operating costs.[8]

However, basic economics would suggest that since public transport generates significant positive externalities, the Government should subsidising it by spending more on public transport than it receives. This would lead to greater well-being for commuters and the country at large.

Proposal 5: Protect vulnerable commuters

I propose free transport for those under 18 and in full-time education, the disabled, and elderly above the pension age. In addition, I also call for subsidising transport for those aged 18 to 25 and in full-time education, and those on income support.

This will be paid for by:

(A) Doubling the “normal” fares
(B) Higher government spending on transport
These two proposals have been mentioned earlier.

 

Over a lifetime, a person pays more when they are better able to (i.e. adult and working), but does not pay when they are less able to (i.e. studying or retired). This is what economists might call “consumption smoothing”. This means that people prefer to be equally well-off over their lifetime rather than having fluctuations in their well-being. Proposal 5 helps to achieve this by redistributing a person’s disposable income over their lifetime.

Proposal 6: Scrap distance-based fares

The LTA’s reason for introducing distance-based fares is to eliminate a “transfer penalty” that commuters faced, and to “encourage commuters to take the most efficient routes”.[9]

By encouraging commuters to “take the most efficient routes”, the LTA is potentially causing inefficiencies in the transport system.

This is because as Braess’s paradox states, when commuters “seek the most efficient route”, the expansion of the transport system tends to “reduce the network’s overall efficiency”.[10] This is too wordy to explain here, so please refer to the referenced article for more information on this counter-intuitive idea.

Moreover, a distance-based fare system:

(A) penalises longer distance commuters (who have little alternative option)
(B) encourages short-distance commuters to take the bus for say 800 m instead of simply walking
(C) makes it difficult to compare fares between MRT and bus - or even different bus routes