SINGAPORE - From utilities and public transport services, to certificates of entitlement (COEs) and housing, the Government should relook its policies to help Singaporeans cope with rising costs, Workers’ Party (WP) MPs said on Tuesday.

They were speaking in Parliament on the cost of living, following a motion tabled by WP chief Pritam Singh (Aljunied GRC) and Mr Louis Chua (Sengkang GRC).

Calling on the Government to review its policies, Mr Singh, who is Leader of the Opposition, said they must be “fit for purpose in this heightened inflationary environment”.

He said: “This House must leave no stone unturned, because for some Singaporeans this has become a cost-of-living crisis.”

Water and electricity

The WP suggested that the Government tweak the pricing structure for water and electricity services.

Mr Singh and fellow Aljunied GRC MP Sylvia Lim proposed tiered pricing for both, saying that it would help manage costs and also encourage conservation.

On water, Mr Singh suggested an increase from two to five tiers, to better align the water tariff to actual consumption by households.

Singapore prices water to reflect its scarcity, with differential pricing applied based on two usage tiers. Domestic consumers now pay a higher rate if they use above 40 cubic m a month.

Saying that the majority of households living in Housing Board flats consumed below 20 cubic m a month based on historical data, Mr Singh said the current two-tier structure does not fairly reflect water consumption patterns.

He proposed that the Government look at introducing a more finely tiered tariff structure, coupled with a graduated water conservation tax, so that households that consume more water cross-subsidise those that consume less.

With this “fairer” pricing structure, broad-based subsidies such as GST U-Save vouchers can then be reduced proportionately, so that only the most deserving receive them, he said.

On electricity, Ms Lim suggested tiered pricing and differential charges during off-peak hours for domestic users.

This means that households that consume electricity below a certain threshold would be charged a lower rate, while those that use more will be charged a higher rate, she said.

The differential charges based on timing will also reduce the peak-hour load, which is what strains the grid and results in higher costs of production, she added.

Responding to the proposals, Acting Minister for Transport Chee Hong Tat, who is also Senior Minister of State for Finance, said water is priced to reflect its scarcity, so as to encourage its sustainable and prudent use.

That is, it is priced to recover the cost of its supply and production, and to reflect the cost of producing the next drop of water, he added.

This means the same rate is paid by everyone so that all users take into account the scarcity value of water, he said.

Having additional pricing tiers would result in all households, whether rich or poor, paying a water price lower than its scarcity value for the first block of consumption, and this would be akin to providing a broad-based subsidy that would benefit the wealthy, he added.

The Government’s approach is to price water fully, then provide targeted and tiered support though U-Save rebates to those who need it most, he said.

The same rationale applies to electricity, he added.

He said the idea of pricing electricity based on the time of use was something the Government had already announced that it is exploring, noting that it is an accurate reflection of the actual cost of producing electricity during different periods of the day.

In response, Mr Singh said he was not suggesting that earlier blocks of consumption should be charged at a lower rate, with subsequent blocks at a higher rate.

Rather, the households would fall in the various tiers based on their total consumption, with each drop of water charged at the same rate depending on the tier they are in, he explained.

But Mr Chee said the water conservation tax, too, factors into pricing water correctly, and thus varying it could also lead to distortion. 

Trains, buses and COEs

Mr Gerald Giam (Aljunied GRC), citing increases in public transport fares, said the Government should set up a non-profit firm that would be able to provide a more efficient and affordable service for both commuters and taxpayers.

He called for the setting up of a National Transport Corporation (NTC) to oversee the planning and operation of all MRT, LRT and trunk bus services in Singapore.

Under this model, substantial profits that currently accrue to the public transport operators and their shareholders can instead be redirected to benefit commuters, he said.

The benefits of doing so include being able to set fares just high enough to ensure the NTC’s fiscal sustainability, without over-burdening commuters, and also ensure more uniform service standards, among other things.

To this, Mr Chee said that nationalising and taking away the profit element does not guarantee better outcomes for commuters.

He added that the profits made by the transport operators such as SBS Transit and SMRT are at a group level. 

Rail services, for instance, were either making losses or making very minimal profit.

Associate Professor Jamus Lim (Sengkang GRC) also suggested changes to the COE system. This includes dropping the Open category, or making people pay what they bid, instead of the lowest successful bid.

But what would make the most impact is to smooth the vehicle quota supply, by transferring excess quotas from high-supply years to low-supply ones.

While the Government has done this recently – by borrowing from future supply of COEs that will come from the deregistration of vehicles – these “marginal transfers” are not enough, he said.

He said the COE system inherently incentivises people to sell their cars and get reimbursed for their COEs in high-supply years, and retain their COEs in low-supply years, and this contributed to the supply gap.

He proposed stopping the practice of reimbursing people the book value of their COEs when they deregister their cars early.

Mr Chee noted that Prof Lim in fact agreed with the Government that it was important to smoothen the supply of the COE.

He noted that the Government had announced increases in the quota for this coming quarter, with 35 per cent more COEs for both Category A and Category B, compared with the last quarter.

“We are doing that, but we also need to be mindful of the impact if we overdo it,” he said.

It would be hard to predict future demand accurately and borrowing “too much” could introduce more volatility into the system, he said.

Housing demand and supply

Mr Louis Chua (Sengkang GRC) said that current measures are not enough in addressing the challenges faced in the public housing market.

There is still an insufficient supply of Build-To-Order (BTO) flats despite the Government reiterating its position that it has significantly increased the supply, and will launch up to 100,000 new flats in total from 2021 to 2025, he said.

Housing affordability remains an issue even with the new housing classification system slated for the second half of 2024. The measures could potentially add further upside pressure to resale HDB flat prices in some of the Plus and Prime locations, he added.

“We need to increase the supply of HDB flats across both the for-purchase market, and also the neglected for-rent market,” said Mr Chua.

He suggested that the Government look into building residential homes ahead of demand and have a fundamental rethink of the BTO system, as well as resume the pace of rental flat construction to be at least on a par with the net increase between 2011 and 2020.

Responding to his points, Senior Minister of State for National Development Sim Ann set out the Government’s overall approach towards maintaining stability in the housing market.

“As economic conditions improve, and wages rise in Singapore over the long term, we expect to see this reflected in a gradual rise in housing values and prices,” she said. 

Sudden shocks in either the public or private housing market will cause serious problems and even hardship for Singaporeans, which is why the Government actively uses policy levers, such as grants and stamp duty measures, to moderate price increases.

She attributed recent housing price movements to specific imbalances such as the falling behind of the building programme due to the Covid-19 pandemic, and the significant increase in HDB resale prices to factors like buyers turning to resale flats when BTO construction was delayed by the pandemic.

She said that HDB was already doing all it could on the supply side, and had also activated more levers on the demand side, such as by prioritising BTO flats for young married couples.

“Through catching up on supply and managing demand, we are stabilising the housing market and there are signs that this is happening,” she said.