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Adding up what the Budget means for now and the future

Adding up what the Budget means for now and the future

Source: Straits Times
Article Date: 29 Mar 2021
Author: Linette Lai

The Budget is a statement of the Government's priorities for the year, and the years ahead.

Every national Budget contains numbers, lots of them.

But each number has meaning.

One number may mean a reprieve for families whose finances have been hit by the Covid-19 pandemic, another gives businesses hurt by the same some breathing room.

One string of numbers may bring relief to people who have lost their jobs. Another may give younger Singaporeans, including students and their parents, a glimpse of the country's future economy, through the investments the Government makes.

This year, there are numbers to make the eyes of green movement activists light up as the Government goes big on sustainability.

In other words, the Budget is a statement of the Government's priorities for the year, and the years ahead.

At the same time, every nation seeks to balance its books, none more so than Singapore, which is known for its fiscal prudence and spending within its means.

So beyond environmental sustainability, the Government is also concerned about financial sustainability.

That explains why it feels a need to broach the difficult subject of tax hikes, specifically the need to raise the goods and services tax or GST.

It believes that when the nation's spending needs go up, it has a duty to find ways to increase the amount of revenue it collects through raising taxes.

Tax hikes are of course unpopular with many people, as are foreign talent.

That is why such topics are often the subject of heated exchanges each year when Members of Parliament meet to debate the Budget statement.

SHORT AND LONG-TERM NEEDS

The Finance Minister, currently Mr Heng Swee Keat, who is also Deputy Prime Minister, delivers the Budget statement each year in February.

In the statement, the Government lays out its priorities and spending plans. Many Budgets feature a centrepiece announcement that sets the broader theme for that year.

In 2014, for instance, the launch of the Pioneer Generation Package shone the spotlight on Singapore's ageing population and its growing healthcare needs.

The following year, SkillsFuture schemes were the focus. These underscored a national push for lifelong learning.

Last year, the focus was on keeping Singapore afloat at the height of the pandemic, with an unprecedented five Budgets rolled out in quick succession between February and August.

This year's $107 billion Budget strikes a different tone. Although it includes measures designed to provide immediate help to industries and individuals who still need a boost, it also has schemes to help the country emerge stronger from the crisis and find its footing in a brave new world.

An $11 billion Covid-19 Resilience Package has been rolled out to meet Singapore's immediate needs. Sectors that remain crippled by the pandemic - such as aviation, aerospace and tourism - get extended wage support as part of the Jobs Support Scheme.

This package also funds the Covid-19 Recovery Grant, which supports workers who have lost their jobs or had their incomes significantly impacted.

Meanwhile, families get short-term relief through a $900 million Household Support Package, which includes vouchers that can be used to support local businesses and service and conservancy charges rebates.

As for investments in Singapore's future, this year's Budget includes $24 billion to be spent over the next three years, to help companies and workers adapt to changes in the global landscape and cultivate a spirit of innovation.

Help will also be given to Singapore businesses in the form of access to capital, so as to help them transform their business models and processes for the digital age, and create better jobs for workers here.

The country will strengthen its status as a global business and technology hub, said Trade and Industry Minister Chan Chun Sing, so as to ensure a sustainable recovery out of the Covid-19 crisis.

The global focus is moving from cost competitiveness to factors such as the speed to evolve new products and serve new markets, the resilience of supply chains and the quality of new ideas.

Intellectual capital, Mr Chan said, is fast overtaking physical and financial capital as the defining competitive yardstick.

Giving the example of the semiconductor industry, he noted that instead of worrying about Singapore's global market share, the focus should be whether it has the access to the intellectual property to produce the chips, and build the machines that produce those chips.

THE SINGAPOREAN CORE

Singapore's reliance on foreign manpower - a contentious issue at the best of times - gained renewed salience during the pandemic due to job cuts.

Although the data suggests that the labour market turned the corner in the fourth quarter of last year, the debate on this issue rages on: How large a role should foreign workers play in the nation's economy, especially at a time when economic circumstances have sharpened the competition between them and Singaporeans?

Several MPs suggested allowing firms greater access to foreign manpower in certain sectors - such as marine shipyard and manufacturing - to address persistent shortages. Yet others emphasised strengthening the Singaporean core and reducing reliance on foreign labour.

The Government's stance is that foreign workers should complement their Singaporean counterparts, with programmes in place to ensure that hiring is fair and skills are being transferred to build up local capabilities.

Members of the opposition Progress Singapore Party are among those who want higher barriers to entry for foreigners who seek to work here. Its representative in Parliament, Mr Leong Mun Wai, has taken issue with the Monetary Authority of Singapore (MAS), the country's central bank.

He has accused the MAS of failing to prioritise the finding and placing of Singaporeans in top financial sector posts.

Transport Minister and MAS board member Ong Ye Kung refuted this charge.

He said the country cannot close itself to foreign talent who compete with Singaporeans for jobs, but must remain open to such competition even as it builds capabilities among Singaporeans so they can seize more opportunities.

SUSTAINING A NATION

The hottest topic this year is no doubt environmental sustainability, with seven ministers joining the debate on it.

They outlined plans to boost electric vehicle adoption, build more energy-efficient buildings and parks, and reduce carbon emissions. A goal has been set for 20 per cent of schools to be carbon neutral by 2030.

All schools will also step up environmental education.

Singapore can contribute to global efforts by serving as a living laboratory for the testing of green solutions, which can then be exported to the region and beyond, said Minister for Sustainability and the Environment Grace Fu.

At the same time, the country must pace itself so as not to hurt its economic competitiveness by moving too quickly or get left behind if it lags, she added.

While a new broad consensus seems to have formed around the need for Singapore to go greener, no such agreement exists for a key plank of the Government's fiscal sustainability plan, namely the GST hike.

GST is set to go up from 7 to 9 per cent some time between next year and 2025, as part of efforts to raise recurrent revenue to pay for growing recurrent spending in areas such as healthcare.

A $6 billion Assurance Package has been set aside to cushion the blow, effectively delaying the tax hike for most households for at least five years.

There is also scope to further review Singapore's wealth taxes, Mr Heng said. But that will not replace the need to increase the GST.

The debate over whether the country should spend more of the returns it gets from investing its reserves continues. The current cap is set at 50 per cent of net investment returns from the reserves, which were built up over the years from past Budget surpluses.

The net investment returns contribution is currently the largest single source of government revenue, outstripping even corporate and personal income taxes.

Mr Heng warned against spending more of the investment returns from the reserves, saying that if earlier generations of Singapore's leaders had "succumbed to the temptation to spend more, we would not have built up our reserves".

"And without reserves, we would not have been able to generate this stable and recurrent source of revenue today," he said.

The debate over the reserves neatly sums up the challenge of national budgeting, which like setting limits on carbon emissions, involves a careful balance of the interests of younger and older generations, and those yet to come.

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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