The notion of free bus and train rides may be an appealing one - but it has to be paid for ultimately.
It will amount to a billion-dollar bill.
Transport Minister Raymond Lim said that it would take a further 1.5 percentage point hike in our goods and services tax (GST) to cover this additional cost.
He revealed this at a dialogue session with MacPherson residents on Sunday.
But if the funding of a free transport system is done by increasing our GST, the poor may end up being burdened even more, industry watchers said.
Urban transport policy expert Paul Barter said that many cities do subsidise public transport, and one or two even make it free.
Hasselt, in Belgium, was the first city in the world to implement zero-fare bus services in 1997.
The aim was to promote the new bus system so that it would catch on and become the natural option for getting around.
The assistant professor at the Lee Kuan Yew School of Public Policy said there are some valid reasons to consider this.
But providing a price subsidy always has a cost.
Said Mr Barter: "I guess the minister is saying that if Singaporeans really want free public transport, it is possible. But they need to understand that the money has to come from somewhere, such as higher taxes or from cutting spending on other things."
Depending on where the money comes from, poor households might actually be worse off.
For example, GST increases tend to hurt the poor more than the rich relatively speaking, he said.
"And there are lots of public transport users who are not poor. So part of the subsidy would go to people who don't really need the help.
"If the main aim is to help poor people then it would probably be better to help them more directly with assistance that targets the people who need help," added Mr Barter.
Ms Chow Penn Nee of UOB Economic Research, however, thinks that this idea will probably benefit the lower-income group since its members are the ones who have received the biggest GST rebates.
She said the middle class is the segment that will get squeezed the most since they are not receiving more in rebates but would have to pay higher GST on their purchases.
As for the well-off, GST at 8.5 per cent will probably not affect them too much, she added.
There could be other ways of funding free transport instead of increasing GST, said financial analyst Leong Sze Hian.
Having free transport will benefit the lower and middle-income segments but will be less so for those with higher incomes because they usually own cars, he said.
Heavy price to pay
But Mr Leong warned that the price to pay for free transport may be a heavy one.
"It's like taking from Peter to pay Paul. Given the context that we're in a recession, it's quite suicidal to increase GST now, whether to fund transport or other things. We'll come back to square one. We should lower costs for the public instead.
"And GST is a regressive tax, it'll hurt the lower-income families more than the higher income ones," he added.
"If the main aim is to help poor people, then it would probably be better to help them more directly with assistance that targets the people who need help."
- Mr Paul Barter, assistant professor at the Lee Kuan Yew School of Public Policy
This article was first published in The New Paper on Dec 23, 2008.
