Budget 2024: “Handout” Approach Continues

Mr Speaker Sir,

Budget 2024 is a big budget because the Government had a bumper year in 2023.  Operating revenue in 2023 was larger than the original estimate by $8.0 billion because of the tax increases announced in 2022, high inflation and high property prices.  This $8 billion excess revenue together with the $23.5 billion NIRC for 2024 contributed to surplus budget resources of more than $30 billion to be allocated in this budget.  

As a result, the Government was able to make a record capital transfer of more than $30 billion to top-up existing endowment and trust funds and create some new ones.  Because of this, Budget 2024 will give some benefits to almost every Singaporean. 

However, the monies in the endowment and trust funds will fund social spending over many years into the future and only a small amount will be spent this year.  PSP has explained the workings of these funds during the Public Finance Motion three weeks ago and why capital transfers to these funds should not be considered as current-year spending.

Hence, Budget 2024 falls short on immediate spending in the current year.  While we welcome the $1.9 billion Assurance Package, and the effective reduction of the owner-occupier residential property tax increase announced in 2022 by the revision of the annual value bands of the properties, these supports are hardly enough for cash-strapped Singaporeans to cope with the current cost-of-living crisis.   

The Government has also decided to close the Special Account for CPF members above 55 years old. This will impact the retirement plans of many Singaporeans who can no longer enjoy a higher CPF interest rate and withdrawal flexibility of their CPF funds at the same time.  Can the Government tell us how much interest it’s paying these Special Accounts currently and how much will it save in interest payments?

On the other hand, we are pleased to note that Budget 2024 has addressed some of the issues that have been regularly raised by PSP in this House.

Firstly, the Government will now provide a Parenthood Provisional Housing (Open Market) Voucher for one year, to support eligible families in renting  HDB flats on the open market while waiting for their BTO flats.  This will be a great help to young Singaporeans looking to form their own families and PSP strongly supports it. 

Since Budget 2021, we have pointed out that the long waiting times to get a BTO flat is among one of the major factors pulling down our total fertility rate. As it is not possible to ramp up the BTO supply fast enough, PSP has always urged the Government to increase the number of rental flats and improve the quality of rental flats to enable young Singaporean couples to get a place to stay while waiting for their BTO flats. 

While we support the PPHS voucher, we are concerned that this scheme may negatively impact other groups of Singaporean tenants who are not eligible for PPHS.  We urge the Government to go further to establish rental flats as a viable housing option going forward. During the COS debates, I will explain why the PSP’s Millennial Apartments Scheme is a superior and more all-rounded policy compared to providing vouchers under PPHS.

Secondly, the Local Qualifying Salary (LQS) for full-time workers will be raised from $1400 to $1600 from this year.  We recognize this increase in LQS as a step closer to the Minimum Living Wage concept that PSP has proposed. 

PSP has long advocated for a Minimum Living Wage of $2200 per month for all Singaporean workers, which translates into a take-home pay of $1800 per month.

While we support the increase in the LQS, we are mindful of its negative impact on SMEs which need Singaporean headcount in order to employ foreign workers.  We hope the Government will introduce complementary measures to minimize the impact of the LQS increase on the business viability of our SMEs which are operating in a rising high-cost environment.

Thirdly, a new SkillsFuture Level Up Programme will be introduced to support mid-career workers with a $4000 credit. My colleague, Ms Hazel Poa has already affirmed our support for it. It’s good that the Government has now tied SkillsFuture training programmes to better employability outcomes. 

PSP has long argued that the SkillsFuture Programme, which costs about a billion dollars of taxpayers’ money a year, has contributed little to the employability of Singaporean workers.

Much more still needs to be done to ensure Singaporeans have a larger share of good well-paying jobs. To that end, we would also suggest a level-up for the Skills Development Fund so as to co-opt employers into the process, thereby ensuring that the training undertaken by workers are relevant to raising productivity in their current jobs.  

The Handout System

Mr Speaker Sir,

Budget 2024 has continued with the traditional “handout approach” of the Government. 

The handout approach is characterized by the existence of around 60 support schemes and services, each offering short-term handouts for a targeted segment of Singaporeans.

It is not uncommon however, that multiple schemes are applied to solve one particular socio-economic problem for one recipient, which often, and very understandably so, makes it very confusing to the recipient.

For example, during Budget 2022, the Minister for Manpower presented an example of a low-income 65-year-old landscape worker who enjoyed a total income of $27,570 a year. 

While this figure works out to be about the same as the Minimum Living Wage that PSP has proposed, the total income was not paid from one source, but consisted of a base income of $17,400, presumably paid by his employer, and $10,170 paid by the government through 7 different schemes, namely the Special Employment Credit, the Annual Progressive Wage Model Bonus, the Workfare Income Supplement, the Workfare Special Payment, CHAS subsidies, the Care and Support Package, and U-Save and GST Vouchers.

Hence, 7 schemes were applied to achieve the one socio-economic objective of ensuring that the worker had more to cope with the cost of living. 

Furthermore, such a system may contribute to lower self-esteem among lower-income workers because their basic pay is still very low and there are little incentives in the schemes to motivate them to improve themselves.     

The handout approach also comes with a high administrative cost because needy Singaporeans usually need external help to navigate through the maze of eligibility rules to qualify for a particular support.  For example, to deliver welfare benefits to a Singaporean, very often the SSO, the People’s Association, the Silver Generation Office and many other private charity groups are involved at the same time.

Slightly more than half of the 60 schemes also require applications. Many needy Singaporeans are already struggling. They may not have the time or energy to pay attention to what schemes they qualify for, even if these schemes can help them. They may also lack the English language proficiency to understand these rules.

Hence, despite the good intentions of the Government, the complexity of the handout approach means that many needy Singaporeans may not enjoy the benefits of many of the schemes.  Some of them may also not get the help they need fast enough, and this can be especially troubling when urgent help is required.

PSP is a strong advocate for more support for Singaporeans, but the taxpayer’s money spent must motivate Singaporeans to strive for higher goals, and not breed dependency on handouts. The PAP under the late Mr Lee Kuan Yew always sought to avoid breeding dependency.

In contrast, the PAP government of today is relying on a patchwork scheme of vouchers, rebates, and top-ups that lower-income Singaporeans are increasingly dependent on, instead of pursuing systemic economic reforms such as reducing rent-seeking in the property market, strengthening labour protections, or introducing a Minimum Living Wage. Is this system dragging Singaporeans into a social trap rather than providing a social trampoline that allows Singaporeans to bounce back?

This may be the reason why although the PAP government has increased social spending very substantially since about 2011, it did not seem to have improved the financial well-being of Singaporeans proportionately. 

The PSP Empowerment System

The main weakness of the handout system developed by the PAP government, is that it does not empower the individual. 

The objective of empowerment is to give the individual the means to take initiative to better his or her own life.  PSP believes this begins with providing the individual with a minimum level of support and then incentivizing him or her with attainable goals. 

Once the individual has reached these goals, he or she will be motivated to strive for more.  This whole process requires a “permanent scheme” approach and not a handout approach. 

PSP’s permanent scheme approach will streamline and consolidate the Government’s 60 over schemes into a few permanent, national schemes which are easy-to-understand, provides a minimum level of support and an incentive mechanism for Singaporeans to work towards bettering themselves.

I have been advocating this permanent scheme approach since my first budget debate in 2021, but my proposals were completely ignored by this Government.  I shall repeat 3 of those that I have recommended repeatedly.  

First and foremost, we have recommended the deferment of land cost from HDB flat pricing under the Affordable Homes Scheme (AHS).  In our opinion, the AHS will be the beginning to many potentially positive socio-economic outcomes.  For a start, it will immediately reduce the cost-of-living pressures on Singaporeans and allow them to have enough CPF savings without downgrading their HDB flats when they reach retirement.  

Most importantly, this peace of mind for housing and retirement will also apply to all future generations of Singaporeans.

With the AHS, we will not need to enhance the retirement adequacy of Singaporeans through schemes like the Matched Retirement Saving Scheme and the occasional top-up of CPF accounts. The resources in all these schemes can be consolidated into one permanent scheme namely the AHS. 

Secondly, we have recommended the Minimum Living Wage which will provide a minimum level of support to every working Singaporean permanently.  As PSP have said in our Manifesto 2020, anyone who puts in an honest day’s work should have enough to live with dignity.

The Minimum Living Wage is a social standard that we should establish that is not completely linked to the productivity of the worker.  Thus, we have proposed the Minimum Living Wage to be co-funded by the Government.  The co-funding can come from the many handout schemes as mentioned before.

After ensuring a minimum gross monthly wage of about $2200, we would like to recommend the Government to put in a permanent Progressive Wage Scheme to incentivize all Singaporean workers to continuously upskill towards higher gross monthly wages.

Thirdly, we have urged the Government to set up a National Health Insurance Scheme funded by it rather than having Singaporeans pay for their MediShield and CareShield premiums.

To minimize moral hazards, Singaporeans will have to co-pay healthcare expenses from their Medisave accounts. The Government can supplement the Medisave accounts with a HealthierSG bonus every year.  For Singaporeans who practice healthy living, this bonus will become excess Medisave balances which can be transferred to their Retirement Account to boost their retirement income.    

PSP envisages that with the majority of Singaporeans covered under a few permanent schemes, the Minister for Finance will not need to distribute handouts to millions of Singaporeans during every annual budget.

Our social welfare and security structure can also be streamlined and consolidated to focus on a much smaller group of needy Singaporeans.   

This is especially important as it ensures that this smaller group, who still need further help beyond that provided under the permanent schemes, receive the assistance they need expeditiously.

Conclusion

Mr Speaker Sir, I have presented the “handout approach” of the PAP government vis-a-vis PSP’s “permanent scheme approach”.  The latter empowers Singaporeans with certainty of help when they need it and encourages them to strive for higher goals with incentives. 

PSP estimated that the shift to the permanent scheme approach will not consume significantly more fiscal resources because the Government already has more than 60 schemes in place and has locked away tens of billions of dollars in endowment and trust funds. 

PSP believes that we can do a lot more to improve the well-being of our citizens, work to combat future challenges such as climate change, and provide support to worthy humanitarian causes abroad.

As owners of one of the largest sovereign wealth in the world, Singaporeans deserve better policies that can lead to better lives and a more secure future. We must be aware that we have the ability and responsibility to do more for ourselves, for Singapore, and also for the world.

Sir, we support the Budget in the hope that it’s a step in that direction.  

For Country For People

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