Parliament: Land Transport Authority (Amendment) Bill (Pritam Singh / BSEP) – 9 July 2012

Mr Speaker, I seek a few clarifications from the Minister with regard to sections 12 and 13B of the proposed amendment and insertion into the Land Transport Authority of Singapore Act respectively, made necessary by the Bus Service Enhancement Fund (BSEF).

Mr Speaker, the tabling of these amendments to the LTA Act sheds more light on how the BSEF will be implemented, further detailing the points covered by the Finance and Transport Ministers during the Budget and Committee of Supply debates earlier this year. In the Minister for Finance’s speech on 17 February 2012, he referred to the Government’s commitment to fund 550 buses as a “one-time commitment”. In the Minister’s round-up speech on 1 March 2012, the Minister stated that out of the $1.1 billion package, $280 million was budgeted for the purchase of 550 buses, while $820 million covers net operating costs over 10 years. The Minister also stated that should PTO’s losses in running the additional 550 buses turn out to be lower than expected, Government funding will be reduced correspondingly.

My first query relates to clause 7 which introduces section 13B(1)(e) to the Act. The section states that “there shall be established by the Authority of Bus Service Enhancement Fund comprising [amongst others] − all investments and other property purchased out of moneys in the Bus Service Enhancement Fund, including the net income from such investments”. Separately, section 13B(1)(f) states that BSEF will comprise “all interest received on investments belonging to the Bus Service Enhancement Fund, and all amounts received by the Authority from the sale of any investment or other property paid for with money from the Bus Service Enhancement Fund”.

In light of this, could the Minister please explain the effect of section 13B(1)(e) and (f) that I have just highlighted, which give the Government wide powers to use BSEF funds beyond bus acquisition and accounting for net operating costs as long as the object of these investments is to improve and expand the range and reliability of bus services? At first blush, it appears as if the $280 million earmarked for bus acquisition and $820 million for net operating costs do not leave much scope for additional investment since this neatly comes up to $1.1 billion. If the PTOs do not use the entire $1.1 billion set aside for 550 buses, the Bill suggests that the BSEF will continue to exist to extend grants and loans to the PTOs. I understand from the Minister that this is the case because it also accounts for potential future programmes. What this really means is that the BSEF would institutionalise active Government intervention in the public transport sector for the long term, until such a time the Government decides to dissolve the BSEF.

The proposed Bill will also allows BSEF funds to be employed for investment in any property in addition to the standard investment power of statutory bodies, as provided for in section 33A of the Interpretation Act, which is referred to in section 17 of the LTA Act. Could the Minister share with the House the type of investments that the monies in the BSEF are envisaged to be used for, apart from those permitted under section 33A of the Interpretation Act and, more specifically, the risk profile of these envisaged investments?

My second query relates to clause 7 introducing section 13B(2) to the Act, which gives wide-ranging powers to the LTA to withdraw BSEF monies to provide grants or loans to the holder of a bus service licence or a bus service operator’s licence. The inclusion of this provision clearly presages the use of BSEF to extend loans, not just grants − a point which I raised in my speech on the BSEF during the Budget debate, where I proposed that the Government claw back the $1.1 billion from the two PTOs over a fixed period of time.

This question is quite central to the disbursement of $1.1 billion the taxpayer monies, as it is clear that the Government eschewed from extending the BSEF as a loan to the PTOs, even though both PTOs operate in near monopolistic market conditions and have announced healthy dividends for their shareholders over the years. Can the Minister please share with the House what considerations the Government deliberated upon when it decided to extend the $1.1 billion BSEF to the two PTOs, as opposed to extending a loan − as we now know that this Bill also authorises the Government to use the BSEF for the purpose of extending loans to PTOs and holders of bus operator licences? In addition, can the Minister also clarify what factors would determine when the LTA would decide to extend a loan to a PTO or bus licence holder, as opposed to a grant from the BSEF?

My third query relates to clause 5 to amend section 12(1) of the Act. Sections 13A and 13B require certain revenue streams to be channelled into the Railway Sinking Fund and the Bus Service Enhancement Fund respectively, instead of the Land Transport Revenue Account. The explanatory note to the proposed Bill states that the Minister will apportion this revenue stream between the Bus Service Enhancement Fund on the one hand, and the Land Transport Revenue Account on the other. Would the Minister clarify what is the expected ratio of apportionment between the two accounts?

Finally, Mr Speaker, Sir, in the Channel NewsAsia report on 14 May 2012, it was reported that the purpose of the BSEF was for the Government to set aside money to fund the commitment for the Bus Service Enhancement Programme and provide transparency and accountability as to the use of the money.

I have a final clarification I seek from the Minister and this pertains to a point about the potential abuse, or even the creative use of the BSEF by the PTOs.

For example, in anticipation of 550 additional taxpayer-funded buses on the roads, can the PTOs deploy the taxpayer-funded BSEF buses rather than their self-financed buses to service existing routes which are comparatively less revenue-generating than other routes? If so, the PTOs can plausibly improve their profit margins by deploying their self-financed buses on the more profitable routes, legitimately employing the BSEF to subsidise their operations as a whole. This is conceivable since the Minister has stated that 300 of the 550 buses will go towards supporting existing bus routes while 250 will be for new routes.

The Minister also stated during his COI speech that as an additional safeguard, the LTA will scrutinise the PTOs’ actual costs for the purchase and running of BSEF buses. However, does this Government scrutiny extend to the selection of bus routes by the PTOs on which the BSEF buses will operate? The Finance Minister has assured the House that should the PTOs’ losses in running the additional 550 buses turn out to be lower than expected, Government funding will be reduced correspondingly.

However, there is nothing in this Bill that can protect the taxpayer from the shrewd use of the BSEF by the PTOs – a scenario that should not be discounted because these are ultimately profit-generating entities fundamentally answerable to their shareholders. Would the Minister demand strict and active regulatory oversight over the use of the BSEF such that the prospects of abuse are significantly lowered? Can we have an assurance from the Minister that the LTA will be able to perform this role and prevent the abuse of the BSEF, in light of recent question marks over the LTA’s regulatory responsibilities with regard to the COI on SMRT disruptions? With that, thank you very much, Mr Speaker.