$3 billion benefits to cope with inflation?

Uniquely Singapore

Leong Sze Hian

With headlines in our local papers screaming “S’poreans in line for $3b payouts” (TODAY, April 15), “$3b payout over the next six months” (Straits Times), “2.4m S’poreans to get $3b in benefits this year” (Straits Times), one would be hard pressed to find anything amiss.

The Ministry of Finance’s (MOF) press release that some 2.4 million Singaporeans stand to get $3 billion in benefits this year, to help them cope with the rising cost of living, is laudable.

Until you sieve through the $3 billion help package itself.

Skewed examples in MOF’s press release

In its press release, the MOF says:

“For example, a family of three living in a three-room HDB flat could receive benefits of about $5,000, which is about six times the estimated increase in their cost of living (Annex A), and a family of five living in a 5-room HDB flat will get about $4,900 – about 2.5 times the estimated increase in their living costs (Annex B)”.

The above two examples given may be skewed towards higher benefits, because they both have retirees and older low-income household members, who receive relatively higher benefits and the Workfare Income Supplement (WIS) than the average household.

If we take for example, a typical family of a couple with two children, and household income of say $4,000 ($2,000 each working member), the direct cash benefits would be $1,100 ($700 Growth Dividends and $400 GST Credits).

Thus, the benefits may not be 2.5 times the estimated increase in living costs in 2008, but only 0.56 times ($1,100 divided by $4,912 (Annex B) divided by 2.5).

What percentage of households has a combination of both retirees and older low-income workers in the same household? This may probably be the exception, rather than the norm. Thus, the examples given by MOF are not terribly accurate or representative of households.

Offsetting inflation?

Further, despite claims by the government that the handouts will help combat inflation, this may not be completely true.

For example:

Medisave top-ups which can only be used in the future when one is hospitalised. Also, MediShield premiums will be increased this year. According to the Straits Times, “basic MediShield insurance are set to increase – by about $120 for most people… They will go up for everyone, with older policy-holders bearing higher increases, and younger ones most likely paying just a few dollars more.” In another ST report, “For older people who are likely to require more hospital care, the premium is set to increase by less than $40 a month. Their current premiums range from $600-$705 a year. The change will push it to more than $1,000 a year for them.”

The Post-Secondary Education Account (PSEA) can only be used when children enter university. How many households have children that enter universities annually? (Universities have also announced, in February 2008, an increase in tuition fees by between 4 per cent to 20 per cent – Straits Times.)

The Property Tax Rebate may be negated by the increase in property tax for all HDB flats from 1 January 2008

The U-Save Rebate may be eroded by increased utility tariffs. (Channel NewsAsia)

The S & CC Rebate may be offset by the previous years’ increases.

The Income Tax Rebates may not benefit the lower and middle-income, as over 60 per cent of Singaporeans do not pay income tax.

By the way, The PAP Community Foundation (PCF) has just announced that the fees at its kindergartens will increase by up to 100 per cent in July. (“Sharp hike in kindergarten fees”, Today, Apr 25).

It is important to note that the GST Credits are meant to offset the GST increase last year, and is not a new or extra measure to cope with the 26-year high inflation.

In the example given of a family of three living in a 3-room flat, with two retirees and a son earning $1,000 a month (Annex A), even after adding the direct cash benefits, the per capita household income would still be only about $449 (see below [1]), which is still below the criteria of $500 which is generally used to define a needy family in Singapore.

I feel that it may not be very appropriate to describe the so-called “benefits” as “six times the increase in their cost of living”.

Medisave top-up keeping step with healthcare inflation?

As to the claim of giving about 60,000 elderly an extra $100 top-up to their Medisave in September (“Over 80s to get extra $100 Medisave top-up”, ST, Apr 18), the total one-time ad-hoc top-up amount is only enough to pay for about one to one and a half years of the premium increase.

Remember that, according to news reports, Singaporeans aged 81-85 will need to pay between $30 and $40 more a month in premiums – or up to $480 more a year.

What’s the point of ad-hoc top-ups, when medical costs and premiums keep rising? How can the Medisave top-up be included as “benefits to help Singaporeans cope with inflation”?

To facilitate analysis and policy review of the impact of the benefits package, I would like to suggest that a breakdown of the different amounts for each benefit category for different households by income be made available to the public.

Raising wages not an option, depending on govt handouts is?

So, what else can be done to help Singaporeans cope with another 26-year high inflation of 6.7 per cent in March 2008? Raising wages?

Well, according to the acting Minister of Manpower, Gan Kim Yong:

“Raising wages to address the issue of rising costs may be an enticing option but that is not the right solution… He said adjusting wages upwards to meet rising prices would only result in a “price-wage spiral” and Singaporeans should look at the bigger picture.” (Channel NewsAsia)

It would thus seem that Singaporeans will have to regularly and constantly depend on the government for handouts in order to ‘fight’ inflation. Yet, such ad hoc top-ups will only be given “provided we have the surpluses in the budget”, according to Senior Minister Goh Chok Tong. (Channel NewsAsia)

Perhaps the more important – and puzzling – question is: Why have Singaporeans, with one of the highest savings rates in the world, become so dependant on government handouts to even just get by?

One shudders to think what would happen to the poorer Singaporeans if there were no “budget surpluses”.

Click on pictures to enlarge.

Special thanks to Grace Toh.

Additional contribution from Andrew Loh.


[1] $4,150 Growth Dividends + GST Credits + WIS plus $12,000 income, divided by 12 months divided by 3 persons.

Read also: The Relentless Rising Cost Of Living.


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