Mr Speaker Sir,
We welcome the financial assistance that the DPM has announced in Budget 2023 to help Singaporeans cope with the rising cost of living and inflation.
However, we are not sure whether more of the same short-term, ad hoc financial assistance will strengthen the resilience of Singaporeans and help them move forward in a new era. The dozens of short-term handouts like CDC vouchers, Assurance Payout, Cost of Living Special Payment, Public Transport Vouchers and so on, are more likely to breed dependency (“What’s in it for me?”) but unlikely to strengthen resilience.
We have said many times in this Parliament that we need long term programmes to give Singaporeans comfort over their current and future financial positions before they can concentrate on becoming innovative workers and enterprising risk-takers to build Singapore into a competitive information economy.
A Strong Fiscal Position
We do not understand why the Government is reluctant to implement long term programmes although according to our estimates, Singapore has sufficient fiscal resources to fund these programmes without drawing on the national reserves. The Government likes to argue that alternative policy proposals will “raid the reserves” but Singaporeans should note that this is a baseless allegation.
Singaporeans should have guessed from the Covid-19 experience how large our reserves are and how strong our fiscal position is. If we do not have that, the Government would not be able to commit to a $100 billion Covid-response package which is equal to more than 20% of Singapore’s GDP in 2019. In the end, the Government spent a total of $72 billion fighting Covid-19 but the interesting part is how the Government has funded it.
The Government did not need to draw $72 billion from the reserves but only $40 billion because it was able to find $32 billion of excess fiscal resources in the budgets of 2020 to 2022 to fund the balance.
On top of that, in the same three years, the Government was able to set aside $24 billion from the budgets to top-up various endowment and trust funds whose spending are for future years.
Hence, we can say that there is a total of $56 billion ($32 billion + $24 billion) of excess resources in the budgets over the past three financial years. This translates into an annualized amount of about $18.7 billion. This amount is roughly equal to the Net Investment Return Contribution (NIRC) allocated to the budget each year. This is proof that the NIRC has always been a slack in the budget which is normally not used to benefit Singaporeans in the year that it was allocated.
The Government has argued that the NIRC is pooled with the rest of the budgetary resources and used for all purposes. But by setting aside a sum of money almost equal to the NIRC in trust funds and endowment funds, it is equivalent to not spending the NIRC in the current year.
In fact, there may be more slack in the budget because we cannot understand why the total expenditure has stubbornly stuck at the $100 billion level in 2023. The total expenditure was $75 billion in 2019, the year before the Covid-19 pandemic. It shot up to $100 billion from 2020, presumably for fighting Covid-19. Hence, we have expected the expenditure to drop significantly in 2023 as we wind down the exceptional Covid-19 expenditures. We look forward to the DPM explaining with specific figures why the total expenditure has not come down.
However, even ignoring the potential spending cuts, it is quite safe to say that we have excess fiscal resources each year, mainly from the NIRC, which can be deployed more proactively for the benefit of low-income and middle-income Singaporeans. In 2023, the NIRC has reached a new record of $23.5 billion.
PSP has always been confident that we have excess fiscal resources from the NIRC and other potential spending cuts. That is the reason why we have argued during Budget 2022 that there is absolutely no necessity to increase the GST and other taxes to increase revenue.
This year, PSP will present an Alternative Budget with long-term programmes to give Singaporeans an idea how our budget can be restructured to better strengthen their financial security.
Resetting the Public Housing Market
First, the Alternative Budget will implement the Affordable Homes Scheme and Millennial Apartments Scheme to reset the public housing policy. This is the single-most important long-term structural programme that will boost the financial security of Singaporeans.
In Budget 2023, the Government has increased CPF housing grant to help young Singaporeans buy resale flats. While we agree that young Singaporeans need help with affordable housing, the CPF grant may not be the best solution because it will further inflame the resale market. This will necessitate higher CPF grants in the next round and the cycle will repeat itself. In order to get out of this vicious cycle, we need a more fundamental solution and PSP has proposed the Affordable Homes Scheme and Millennial Apartments Scheme as one policy option.
With the schemes, every Singaporean in each generation will enjoy an affordable HDB flat to start a family without sacrificing his retirement in the future. So we do not understand why the Government said such schemes would negatively affect the future generation.
To counter other narratives that the Government is spreading, we would also like to reiterate that the schemes will not cause a sharp fall in resale prices because the demand and supply situation will remain tight and the Affordable Homes’ sellers will need to sell above current resale prices in order to earn a profit.
On the other hand, Singaporeans who want to sell their flats after the Minimum Occupation Period need not worry about paying a big clawback because the breakeven price for a seller will be roughly the same whether under the current BTO scheme or the Affordable Homes Scheme.
The Affordable Homes Scheme and Millennial Apartments Scheme will not draw down the reserves. Although land cost is waived for Singaporeans who live in their HDB flats for their entire lives, most Singaporeans aspire to upgrade and about half to two-thirds of the deferred land cost will be paid to the reserves eventually. In the Alternative Budget, we have budgeted $2 billion a year from the excess fiscal resources to reflect the upfront investment cost.
Promoting the Middle Class
Second, the Alternative Budget will promote the financial security of the middle-class Singaporeans as a priority.
It is the decline of the middle-class that has given rise to the two Singapores that the Leader of Opposition has just described.
While the middle-class may not be a homogenous group, it stretches roughly from the 20th percentile to the 80th percentile income brackets, and it is the group targeted by the Government for spreading the tax burden over as wide a spectrum of the population as possible. In contrast, the top 10% income bracket is doing well because Singapore’s tax regime favours them and the bottom 20% do not pay taxes.
It is not wrong, as a fiscal principle, to spread the tax burden as widely as possible. However, middle-class Singaporeans are already over-taxed relative to their income. Personal income tax may be low but there is a whole range of indirect taxes they pay – the GST, high housing prices, stamp duties, MediShield and CareShield premiums, COE, ERP, ARF, domestic helper levy and so on.
During Budget 2022, besides the GST, we have spoken out against the property tax increase which affected the middle-class Singaporeans. This year, the stamp duty and ARF increases will affect them again.
In the Alternative Budget, the PSP proposes that some of the tax increases of Budget 2022 and 2023 should be reversed. GST will be reverted to 7% and property tax increases for owner-occupied properties will be restricted to those with Annual Value of more than $50,000. The stamp duty increase will be limited to properties that are worth more than $3 million and the ARF increase will be limited to cars with OMV of more than $60,000. PSP believes that if tax increases are necessary, they should be targeted at the wealthy individuals and corporates.
The PSP would also budget $4 billion for the nationalization of the MediShield and CareShield schemes which we first recommended during Budget 2021. This will relieve especially middle-class and senior Singaporeans of the anxiety over ever-rising healthcare insurance premiums. After the HDB flat, healthcare expense is the biggest drain on the CPF savings of Singaporeans. While we should maintain the Medisave account for Singaporeans to share in the healthcare expenses to prevent over-consumption, the existence of multiple healthcare insurance schemes has added unnecessary costs and complications to the healthcare system. By taking over the whole healthcare insurance, we hope the Government will be in a better position to develop an optimal healthcare system together with the new HealthierSG initiative.
Enhancing Job Security
Third, PSP is very concerned about the job security and job prospect of Singaporeans. The Government should always be mindful that Singaporeans are disadvantaged when competing with Employment Pass holders (EPs) who are exempted from CPF contributions. While we welcome the move to increase the contribution cap to $8,000 to boost retirement adequacy, it will exacerbate the disadvantaged position of the Singaporean PMEs relative to the EPs.
In the Alternative Budget, to level the playing field between Singaporean and foreign employees, PSP will introduce a $1,200 monthly levy on EPs, which we have recommended since 2021. This EP levy is estimated to generate additional revenue of $2 to 3 billion which will add to our excess fiscal resources.
In Budget 2023, there is one positive change in the Government’s approach, which is the Jobs-Skills Integration programme. Finally, the Government realizes that funding of skills training should be tied to specific job prospect.
We have always been skeptical about the nearly $1 billion of annual spending on SkillsFuture and all the other spending on retraining and placement of Singaporeans who have lost their jobs, because it is unrealistic to expect all Singaporeans who have been displaced by foreign PMETs to acquire totally new skills and join new sectors. We should have focused our spending on training Singaporeans to acquire skills that help them hold onto their existing jobs or find jobs in fields with similar required core competencies. A good manpower policy is one that will not allow the displacement of Singaporeans from the job market. Given that thousands of Singaporeans have been displaced in the past two decades, Singaporeans can judge for themselves whether this Government has done a good job or not.
Compassionate Spending
Fourth, PSP will increase the amount of compassionate spending for the low-skilled workers and disadvantaged segments of our society.
PSP proposes budgeting $3 billion for a living wage which guarantees a minimum monthly take home pay of $1,800 for all Singaporean workers. We have recommended this during Budget 2021. The living wage will allow all Singaporean workers to attain the minimum standard of living. The Progressive Wage Model can remain but for helping workers to achieve a higher wage level than the living wage.
Next, PSP proposes budgeting $1 billion to help the disadvantaged segments of our society by doubling the ComCare pay-out for the poor and providing an allowance for caregivers and stay-at-home parents in recognition of their sacrifices and contribution to society.
Conclusion
Mr Speaker, Sir,
In the Occasional Paper on the Medium Term Fiscal Projections, the Government has painted a scenario of looming current and future budget deficits, but PSP has pointed out that in fact, there are excess fiscal resources in the Budget that can be deployed better. And this is before further potential savings that we can have from spending cuts partly due to the end of the Covid-19 pandemic.
PSP has proposed an Alternative Budget to demonstrate how the budget can be restructured to deploy these resources. For a start, we have increased net spending by about $8 billion, a fraction of the excess resources we have, to implement long-term programmes that will:
- Proactively deploy excess fiscal resources in the Budget for the benefit of the current generation of Singaporeans.
- Promote the financial security of the middle class, who are the bedrock of society, as a priority.
- Reduce socioeconomic ills caused by high property prices by resetting our public housing policy and eventually wean off Singapore’s over-dependence on property as an engine of economic growth.
I invite Singaporeans to be the judge of the merits of the proposals in the Alternative Budget.
Singaporeans deserve better.
For Country For People.
Thank you.
