Not populist by any stretch
By Siew Kum Hong, Published MyPaper, 24 Feb 2014
THIS year's Budget saw the Government continue, if not accelerate, the trend of increased social spending over the past few years. Apart from the usual measured help to address social inequity and issues like rising health-care costs, the Government also introduced the generous Pioneer Generation Package (PGP).But almost inevitably, muttering about "vote buying" surfaced soon after the Budget speech ended. I was not surprised, but I will confess to being a little disappointed.
In the first place, this is almost certainly not an election budget. One of the most interesting things about the PGP is how it will be funded, via an $8 billion endowment funded by the Government's current surpluses.
Election budgets in Singapore are usually marked by big-ticket cash giveaways for voters, but such schemes must be funded through current surpluses. The PGP will seriously restrict this Government's ability to fund such giveaways.
And seriously, which government looking to pick up votes would take the unpopular decision to increase sin taxes on alcohol, cigarettes and gambling?
More importantly, there is absolutely nothing wrong with the Government introducing policies that are good for Singaporeans, even if Singaporeans like them and may become more likely to thank the ruling party at the ballot box.
There is a fine, but very crucial, difference between popular and populist policies: The motivation behind the policies.
The former are good policies that happen to be popular; the latter are policies that are made for the primary purpose of winning votes, regardless of whether they are good policies.
And the Budget announcements on Friday fall squarely into the category of good policies. Growing social inequity and the rising cost of living mean that there is a legitimate and increasing need for social spending; indeed, there is a strong argument that the increased social expenditures in recent years are merely to compensate for significant under-investment in the previous decades.
To accuse the Government of populism or vote-buying, when it makes good policy that Singaporeans also happen to like, says more about the speaker than it does about the Government.
Singaporeans can, and should, criticise the Government and hold it to account when it makes mistakes or bad policies. But not everything that the Government does is bad, erroneous or misguided. And we need to recognise that and act accordingly, if political discourse in this country is to progress and mature.
Such knee-jerk cynicism could also inadvertently make it harder for the ruling party to pursue good and popular policies in the future, if the party has to cater to its conservative base, which is known to have an ideological aversion to populism and an almost macho desire for making "hard choices", as opposed to simply the "right choices".
We must recognise that we all benefit when the government of the day, whoever it may be, makes good policies. Isn't it all the better when those are also policies that we like?
The writer is vice-president of civil rights group Maruah, a corporate counsel, and former Nominated MP. He wonders if there will be a Generation X Package when he becomes a senior citizen.
A 'levelling up' Budget, one worth remembering
It is notable for the social initiatives it contained as well as the features it left out
By Vikram Khanna, The Business Times, 22 Feb 2014
Few Budgets are long remembered. Budget 2014 deserves to be one of them. It will be remembered most of all for its pathbreaking social initiatives, particularly its pioneer generation package which, at a stroke, provides a raft of health-care subsidies to some 450,000 Singaporeans for the rest of their lives, with no ifs and buts, and no uncertainties - the $8 billion needed to fund this initiative is already in the bag. In this context, one of the Budget's notable features is what it did not contain. There was no increase in income taxes (though no tax rebates either), no lowering of the threshold for the top rate as some had expected and no new wealth taxes, not even on property.
Rather than penalising upper-income earners, or relying on trickle-down economics, Mr Tharman chose to "pull up" those at the lower end of the scale, through expanded subsidies for education, wages, housing and health care. A remarkable statistic cited in the Budget was that the social initiatives of the last five years, plus those in Budget 2014, provide support to lower and middle-income Singaporeans that is about 21/2 times what it was a decade ago.
This Budget reaffirms and reinforces the sea change in the Government's approach to governance, with social policies being accorded at least as much (if not more) importance than economic incentives, which used to be the mainstay of Budgets in the not-so-distant past.
One of the keys to any "levelling up" approach to tackling inequality lies in education, which is the ultimate ticket to social mobility. Mr Tharman, a former minister for education, has over the years been generous with funding for this critical sector.
In Budget 2014, he has raised the ante, with more fee assistance for kindergarten education for both lower and middle-income households and more generous bursaries for tertiary education, which now cover students from about two-thirds of Singaporean households.
The education sector is now so riven with subsidies, with varying qualification criteria, that it might be worth considering simplifying things by making education free, or almost free, for all Singaporeans across the board, all the way to the tertiary level. Social mobility considerations aside, this may also be the best way in the long run to reduce dependence on foreign talent.
Businesses will be relieved that there was no further tightening of policies on foreign workers, except in construction. This makes sense, first because this sector contains one of the highest concentrations of foreign workers, and second because Budget 2014 incentivises - and in some areas, mandates - construction companies to adopt more productive, less labour-intensive technologies such as pre-fabrication and pre-casting, which have long been the norm in other advanced economies and should have been here long ago.
Small and medium-sized enterprises in particular have welcomed the extension of the Productivity and Innovation Credit (PIC) scheme for another three years and the new PIC-plus scheme, which will raise expenditure caps for qualifying activities by 50 per cent. Also helpful is the extension of the 50 per cent additional tax deduction on qualifying research and development expenditure for another 10 years, which provides more durable and predictable support for this long-haul activity.
The incentives for the adoption of information communications and technology products and services will be equally welcomed by both users and vendors. The Budget also fills some of the other gaps faced by SMEs in the areas of start-up funding and support for internationalisation.
Wide ranging as it was, is there something Budget 2014 missed that should have been there? A case can be made, especially in the light of the generous support for health-care users, that relatively little was provided for health-care suppliers, or potential suppliers.
While the Government has been proactive in wooing and supporting industries in the technology space in the form of tax breaks, funding and other subsidies, it has not done anywhere near as much for the health-care industry (including elder care), in which the private sector can also play a role. Hopefully, such support will be forthcoming.
Finally, on property: the big story here was, again, what was not in the Budget - no rollback of any of the property cooling measures was announced, which will disappoint some players in the industry.
There are plausible arguments for keeping the measures in place - the overheated market is still a recent phenomenon, and interest rates are still low. However, asset values have started to fall in some areas, and monetary policy is likely to tighten, moving forward. Mr Tharman said that the Government "will continue to monitor the property market and adjust (its) measures when necessary". Hopefully, it will act pre-emptively to prevent overcooling - just as it did to prevent overheating.
The makings of a social investment state
By Eugene KB Tan, Published TODAY, 22 Feb 2014
The Budget is not just a fiscal instrument policy. It is very much an economic, political and social instrument as well. It is a unique opportunity to define and reaffirm the society that we aspire to have.
The Budget unveiled yesterday seeks to be a popular one. At a time when many other countries have continual difficulties finding adequate fiscal resources and balancing budgets, this Budget provides Singapore with the wherewithal to attend to our growing social needs. It sets the tone for the FY2015-16 Budget, when the nation celebrates its golden jubilee.
The key economic themes persist: Productivity, restructuring, reducing reliance on cheap foreign manpower, infrastructure investments and long-term planning. But social themes dominate this Budget: Taken as a whole, it exudes inclusiveness, equity (not equality) through redistribution, appreciation and gratitude (the Pioneer Generation Package, or PGP), welfare (but not welfarism) and opportunity.
LEFTWARD SHIFT CONTINUES?
In some respects, the Budget continues the People’s Action Party Government’s apparent leftward shift. The Budget’s centrepiece is the PGP, reflecting both the nation’s ability and the political imperative to care for the pioneers who laid the foundations for Singapore’s success. This has important and salutary effects, because it provides the tentative assurance that recognition, appreciation and care must be the hallmarks of this society.
The continuation and expansion of schemes to help lower- and, increasingly, middle-income households all indicate the abiding concern with the income gap, social mobility and cohesion. The Government is not known for its “generous” Budgets, and the larger social spending each year is bound to make those who value fiscal prudence and tight-fistedness worry.
However, I see it more as playing catch-up to make up for past under-investments in the social sector, especially in healthcare, where the budget is increasing by almost 25 per cent.
Lest the intent is misunderstood, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam emphasised the centrality of personal and collective responsibility as a means to ensure that the Budget’s social accent does not unintentionally enervate our work ethic or set us down the road to welfare dependence.
BETTER-OFF MUST UPLIFT LESS WELL-OFF
It’s a thin line between a popular and populist Budget. While it is absolutely crucial to reduce class divides, this Budget’s greater social spending is measured and seeks to avoid setting ourselves up for a class war where the societal reflex is about “tearing down the wealthy”. The poor are not poor because the rich are rich. But the Budget could do with more direct benefits to the average Singaporean; the well-off Singaporeans benefit more directly from already low personal income taxes, for instance.
The Budget must nudge more giving by Singaporeans and corporate entities. It would be excellent if this and future Budgets could inspire Singaporeans to think about what else can be done to uplift the less well-off.
Money is necessary — but time, expertise, commitment and effort by better-off Singaporeans would make those social dollars engender meaningful, rather than stop-gap, measures and outcomes. I welcome the Budget’s effort to develop social sector professionals.
SEEDING SOCIAL CAPITAL
I also welcome the 1 per cent increase of the CPF employer contribution, which will be chanelled to the Medisave account. This is timely and I hope employers see this as the right thing to do and recognise their social responsibility to contribute to the healthcare needs of their Singaporean employees.
In short, the Budget can play a vital role in developing social capital. Strong social capital can help make our social expenditures more impactful and sustainable, while strengthening societal bonds. We will then have the benefit of a more gracious, caring, and cohesive society.
I believe we have the makings of a social investment state — one where public expenditure is not viewed as an expense, but is used to provide stabilisation and social insurance against externally generated risks, as well as to sustain the physical, human and social capital necessary for growth.
What’s unique about Singapore’s social investment state is that, unlike the Nordic models, high public expenditure is not accompanied by high taxes — well, not yet anyway. As needs grow and rapidly evolve, each Budget will have to provide a platform for positive change amid continuity, and new sources of income will have to be found.
Eugene K B Tan is Associate Professor of law at the Singapore Management University School of Law, and a Nominated Member of Parliament.
PGP: A Precedent-Generating Package?
Also a phenomenally generous one, it could spark demands of 'more, more'
By Chua Mui Hoong, The Straits Times, 22 Feb 2014
IN ONE fell swoop, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday slayed two urban legends about Singapore.
One: that you can die, but you can't afford to get sick. Two: that the Government is in competition with business and does not support small and medium-sized enterprises.
Budget 2014 was officially titled "Opportunities for the Future, Assurance for our Seniors".
For a Budget widely expected to focus on households and social measures, there turned out to be significant measures to help companies boost productivity and nudge them up the value chain.
Instead of competing in the market, the Government made use of its power as regulator and enabler to subsidise companies' use of technology, their purchase of equipment, and even their fibre broadband access.
The Government also made use of its market dominance as a land-owner: Companies that tender for, or build on government land sales sites, have to meet efficiency standards for construction.
But it was people, not businesses, that were at the heart of most measures of assurance in this Budget. As Mr Tharman put it: "We cannot leave people to face life's uncertainties on their own. That is not our approach. But as we strengthen our social support and safety nets, our whole approach must encourage a compact between personal and collective responsibility, where each reinforces the other."
The crown jewel of Budget 2014 was the much-anticipated Pioneer Generation Package (PGP) of health-care subsidies to the 450,000 "pioneers", or those aged 65 and above this year.
Subsidies at specialist outpatient clinics (SOCs) will go up for most patients. For the pioneer generation, an extra tier will increase the subsidy to as high as 85 per cent.
The Government will also subsidise and pay premiums for this group under MediShield Life, the new universal health coverage scheme that begins in 2015.
Three things stand out about the package.
First, by offering the PGP benefits for life, the Government is building on the promise made when it said MediShield Life will cover everyone, for life, and include pre-existing illness.
Taken together, the change makes a world of difference for the elderly.
Today, many 80-year-olds do not even have basic MediShield insurance coverage: they never signed up, or dropped out when premiums rose with age. But come next year, the same person will be covered under MediShield Life, and with the extra premium subsidies under the PGP, will have premiums fully paid for.
Within a year, they go from zero health coverage - and full exposure to the risk of illness - to full health coverage, with 100 per cent premium subsidy.
This Government has responded decisively in an amazingly short time to tackle anxiety about health-care costs. The adage that you can die but cannot afford to fall sick will continue to be uttered at opposition rallies - but it will not have the same sting in General Election 2016.
You could call the PGP the Phenomenally Generous Package.
Two: The PGP is not means- tested, which means everyone in the same cohort qualifies for the same benefit, regardless of income. And unlike cash handouts of yore, there is no need to put in even a token co-payment.
Will Singaporeans come to expect more subsidies that are given to all, regardless of income, for life, with zero co-payment? Will the PGP turn into the Precedent- Generating Package, sparking clamorous demands of more, more, more? Human nature being what it is, I would bet on it.
Of course the Government can say that the PGP is for a special generation that built the country. But every cohort, generation, or demographic in need, can claim to be special. The Government can also say that the PGP sits on top of health-care subsidies, like those for SOCs, that are already means- tested.
But the fact is that the PGP benefits are the same, whether a 70-year-old lives in a Sentosa Cove bungalow or across the gateway in a one-room rental flat at Telok Blangah. The absence of means-testing, and the absence of a phased-in tier of subsidies, makes the PGP, while well-intended, regressive.
Meanwhile, a cleaner born in January 1950 (64 years old this year), will have to fork out $34 to see a SOC specialist, when his towkay boss born a month earlier, in December 1949 (and 65 this year), pays $17.
The PGP suffers from the "cliff effect" - when a small difference in age means a huge difference in subsidy - which could result in someone shunning treatment. Since health and lives are at stake, I wish the Ministry of Finance had thought a lot harder about how to soften the cliff effect.
Three: The PGP is fully funded today, even while its commitments are expected to last for a good 20 years or more. From this year's Budget, $8 billion will be set aside. With interest, this is expected to generate enough to cover the $9 billion cost over the pioneers' lifetime. The Government could have drawn on reserves for this group, which among all age groups has the strongest moral claim on the reserves as the generation that built Singapore. But it didn't.
Is the PGP a vote-getting measure? I think it will win some votes among the elderly. But if getting votes were the main intention, the Government could have made it harder for future governments to get access to the funds, such as by requiring the use of reserves which would need the Elected President's consent.
Right now, the money has been put aside, and no matter who is in power, the package gets paid out.
In other words, today's government took the financial hit to its bottom line; but tomorrow's government can still take the credit, as the benefits get paid out.
That's not very savvy politics. But it is good fiscal discipline - and the moral thing to do, not subjecting the pioneer generation's peace of mind to political vicissitudes.
Goodies sweet but leave some gaps unplugged
By Salma Khalik, The Straits Times, 22 Feb 2014
THE slew of help the Government is giving to counter rising health-care costs is staggering, especially with the added benefits the 450,000 older people will get under the Pioneer Generation Package.
Everyone will have insurance from next year - at no added cost for at least a few years.For the lower- and middle-income group, the premium subsidy will be permanent.
This alone will take a huge load off the minds of older people especially, who foresee their premiums soaring as they age and their Medisave money dwindling.
But among the goodies, a most pleasant piece of news is: The cost of seeing a specialist will be almost halved for lower-income patients; instead of paying 50 per cent of the bill, it will be 30 per cent. For the Pioneer Generation, the bill will be further reduced to only 15 per cent. Hence, a poor senior will pay less than one-third of what he is paying now to see a specialist.
While such generosity is laudable, the downside is that it may encourage the wrong behaviour. With the cost of seeing a specialist so cheap - a $200 bill reduced to just $30 - will seniors, most of whom suffer from some chronic ailment, insist on being treated by a specialist all the time, instead of a general practitioner or polyclinic doctor who is well able to care for them?
Such an attitude would be worrisome. Not because of the cost but what it would do to the already acute shortage of specialists for treating the seriously sick. Other measures need to be put in place to prevent such an outcome.
One that was announced yesterday is the additional 50 per cent discount at polyclinics for seniors. This means they need pay only a fraction over $3 for consultation, and 35 cents for a week's supply of each subsidised drug. This may keep poor patients from dashing to a specialist outpatient clinic.
But what about the better off among the 450,000 pioneers? Would they prefer seeing a GP or a specialist? After all, as subsidised patients, they need to pay only 25 per cent of the bill.
Would giving all of them the Community Health Assist Scheme card do the trick? Perhaps, if they would also get the higher subsidies that go with the blue card aimed at the very poor.
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam spoke of the need to "reduce the over-concentration of patient load in our acute hospitals". But the bulk of goodies is for hospital treatment, both as in- and outpatients.
Many seniors have difficulty going for treatment. For them, home care makes more sense, and good home care could keep them out of hospital. Greater government aid in this area would be welcome.
Higher productivity everyone's business
It is not a challenge for firms alone - all S'poreans will have to change tack
By Fiona Chan, The Straits Times, 22 Feb 2014
THE stakes have been raised in Singapore's crusade to restructure its economy with the Government making it clear yesterday that everyone - not just companies - must chip in for the transformation to succeed.
The Republic is entering the fifth year of its campaign to raise productivity with precious little to show for it so far. Productivity growth was zero last year and shrank 2 per cent the year before that.
In response, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday adopted three approaches to urge greater productivity in Singapore.
First, he underlined the fact that companies too slow to raise productivity will lose out.
For the first time in five Budgets, Mr Tharman introduced no across-the-board measures to reduce foreign worker inflows.
Instead, he turned up the heat on productivity laggards. Firms in the construction sector, which have trailed the rest of the country in productivity gains, will have to fork out even higher levies for low-skilled foreign workers from 2016.
They could also eventually be required to employ a minimum proportion of high-skilled foreign workers among their staff, Mr Tharman said. As a concession, construction firms will be allowed to hold on to their foreign workers for a longer time, a request they have often made.
In contrast, companies already with stakes in the productivity game were rewarded.
Those maxing out their productivity expenditures were given higher spending caps, for which they can claim tax deductions or cash payouts under the popular Productivity and Innovation Credit (PIC) scheme.
Companies adopting infocomm technology will also enjoy the fruits of a $500 million initiative, which encourages firms to step up their use of all kinds of technology from high-level data analytics and robots to the rather more pedestrian broadband subscription.
With these "sharper incentives", the overall message to bosses was clear: the Government will lend a helping hand to firms, but only those that are serious about upping their productivity game.
"We will aggressively support every form of upgrading by firms," Mr Tharman assured companies. "Any company that invests in order to save manpower or achieve innovative breakthroughs gets government support, as long as it has its own money in the game."
To underscore the point, he revealed that Singapore's productivity schemes are giving back to companies more in support than the additional foreign worker levies collected.
In other words, companies not taking advantage of these schemes will simply be subsidising those who do.
It will also be harder for them to survive as business costs continue to rise. Unlike in last year's Budget, Mr Tharman gave no blanket help for firms struggling with higher expenses, despite loud pleas in recent weeks.
In fact, he unexpectedly announced that companies would have to cough up more in Central Provident Fund (CPF) contributions for all workers - particularly older employees - to help them cope with health care and retirement needs.
The second approach Mr Tharman took to productivity yesterday was to emphasise that Singapore's restructuring drive is "a major, multi-year undertaking".
As such, the Government will keep some of its productivity schemes in place for a longer period, in response to calls from companies to do so.
The PIC scheme, which was due to expire next year, will be extended for another three years. Initiatives to encourage research and development and more intensive land use will also be prolonged.
Mr Tharman's third and last major approach was to observe that when it comes to raising the whole country's productivity, all Singaporeans are in it together.
In a departure from previous productivity directives, he threw down the restructuring gauntlet to all Singaporeans, calling on them to do their part to help the economy take the next step towards transformation.
Higher productivity is not a challenge to be tackled by companies alone, Mr Tharman said. For the economy's restructuring to succeed, all Singaporeans will have to change their behaviour, whether as managers, workers or customers.
"Productivity is not ultimately about the dollars and cents of upgrading," he said. "We must all make the effort to change our social norms, in order to raise productivity and pay."
He listed three ways Singaporeans can get on board the restructuring drive.
First, company owners and managers must create a workplace culture where employees' views and contributions are valued. As any employee knows, an engaged and empowered worker is a productive one.
Second, each employee must develop a mastery of his or her job and take pride in it, "seeking not just competence but excellence".
This doesn't mean longer hours at work, but time better spent, Mr Tharman said. "Doing the job well is what counts, not long hours on the job."
Last and perhaps most important is our behaviour as customers: Singaporeans must get used to not having service staff at their beck and call. In most cases, a machine will do just as well - maybe even better.
"Quality service comes in many forms," Mr Tharman noted, adding that Singapore is behind many other cities in the use of self-service technologies such as check-out counters in supermarkets.
He also outlined a vision for restaurants and cafes to be more like those in Europe or the United States: operating with fewer employees, each with more responsibility and better pay, and "where customers treat staff with respect and the staff wear their uniforms with pride".
Restructuring Singapore's economy will only succeed if, "at its heart, it is about these changes in our social practices", Mr Tharman added.
Of all the productivity points mentioned in the Budget, it is this one - neither a carrot nor a stick, but a simple observation - that is perhaps the most important.
After all, it should be remembered that the ultimate aim of the productivity drive is to increase the real salaries and living standards of all Singaporeans.
It's time each one of us stepped up to the plate to play a bigger part in raising productivity.
The productivity ball is now in SMEs’ court
By Lennon Lee, Published TODAY, 22 Feb 2014
One word stuck in my mind after listening to Budget 2014, announced by Finance Minister Tharman Shanmugaratnam: For small and medium enterprises (SMEs) and local businesses, it was a refrain of productivity, productivity and more productivity.
On the wish lists of many SMEs had been the extension of and improvements to the Productivity and Innovation Credit (PIC) scheme as well as to certain funding initiatives, not to mention increased support for internationalisation.
To a degree, these wishes have all been addressed. In addition to the three-year extension of the PIC scheme, new schemes and enhancements were introduced, targeted at SMEs. They include PIC+, an Infocomm Technologies for Productivity and Growth (IPG) Programme, the second phase of the Co-Investment Programme (CIP) and the Government taking a bigger share of the risk for micro-loans.
To qualify for PIC+, an SME would have to have an annual turnover of less than S$100 million or a workforce of no more than 200 on a group basis. So, not only businesses with local shareholdings would benefit from the PIC+, but also a company incorporated in Singapore with 100 per cent foreign ownership.
LAST WINDOW OF OPPORTUNITY
Given that the Government has maintained its stance on restricting foreign labour growth, SMEs worst hit by the foreign worker levy and quota — especially those in the service sectors such as F&B and construction — and who have not embarked on productivity gains, will now have to seriously consider the use of technology and innovation, as the PIC+ and IPG expire in three years.
This may be the last window of opportunity that the Government will offer these SMEs.
Now that the SMEs’ calls have been heard to some extent, what remains is their readiness to tap these targeted schemes and programmes. There is still a third of SMEs with turnover of at least S$1 million that have not taken advantage of the PIC scheme since its introduction in Budget 2010. I would expect the PIC+ to have a similar take-up rate, unless more is done to identify and engage these SMEs.
The Budget did not provide any help to deal with the rising costs of doing business in Singapore — something that affects SMEs significantly. The reality is that as wages and rentals continue to pick up (not forgetting an increase in the CPF contribution rate by 1 per cent and a hike in the foreign work levy), profit margins are expected to be further eroded. There will be cash-strapped SMEs with little left to invest in productivity and take advantage of the schemes.
It is also interesting that one of the conditions for enabling high-speed connectivity for businesses under the IPG Programme requires the SME not to have already subscribed for the fibre subscription plan; otherwise, it would not be able to enjoy the 50 per cent subsidy on the plan and acquisition costs of the Wireless@SG equipment. An SME could have subscribed to the fibre subscription plan for other uses such as email and intranet usage that is not connected to Infocomm Technologies-based (ICT-based) productivity solutions. I would think that it would be easier for the fibre subscription to be automatically subsidised as long as the SME adopts a qualifying ICT-based productivity-based solution.
In short, chasing productivity is the central theme for this year’s Budget for businesses, and special attention has been given to SMEs to encourage them to grow and compete internationally.
It’s up to SMEs to rise to the occasion with aplomb and dynamism.
Lennon Lee is a partner with the Corporate Tax Advisory Group of PwC Singapore.
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