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Budget 2015 not quite as rosy as made out to be

By Howard Lee

The cynical among us would see Budget 2015 as an extension of a vote-buying scheme from Budget 2014. The focus of 2014 was on the elderly through the Pioneer Generation Package, and 2015 saw a distinctive shift towards the middle-income wage earners.

Some attention was paid on the Silver Support Scheme and levelling CPF contributions, but a lot more attention went towards tweaking policies for innovation and productivity, education for both the working group and children, transport cost and taxes – issues that concern the working folks.

By the pecking order of election goodies, the People’s Action Party government seems to be working its way through every sector of society, dishing out benefits to make, eventually, everyone happy. Or is it?

It is important to note that Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam began delivering the Budget on one pretext: That Singapore will maintain its stand of encouraging self-reliance among citizens and fiscal prudence in government spending. Budget 2015 had been generous in hand-outs, but the conditions for their delivery remain the same – there is no free lunch, and citizens are expected to chip in.

In that perspective, if Budget 2015 had been an electioneering attempt, it would have failed, because while the items have the material of an “inclusive society”, the entire Budget does not have it in spirit.

workers320240Advancing the economy – or not

Let’s start with looking at the five growth sectors that DPM Tharman identified – advanced engineering, smart and sustainable urban solutions, logistics and aerospace, and Asian finance and wealth management. For sure, the DPM will be leaving much of it to the Trade and Industry Minister to flesh out details during the Committee of Supply debate, but assuming that these will be programme-centric, let’s take a look instead at how citizens can leverage these, or tap on them for progress.

How would we prepare ourselves for jobs in these sectors? Presumably, we can tap on the SkillsFuture initiative, which has about 2,000 SkillsFuture study awards and 100 SkillsFuture Fellowships in the pipeline. How well are such training linked to the new growth sectors? Will industry be consulted, and will focus be on retaining, or bringing in already-trained talent to fill the jobs? We do not know.

There were also items presented for encouraging innovation – 70% increase in grants for new enterprises, simplification of process for application (yes, some hopeful trimming of red tape) for projects less than $30,000, and an improved international growth scheme.

But are application processes and start-up grants a key make-or-break for new enterprises, or is it more important for them to be supported by large enterprises, counted as partners in large projects? Can there and should there be government incentives to encourage such partnerships, rather than depend on a general mentorship scheme? Again, we don’t know.

Egalitarian taxes – or not

income tax 2016 to 2017 - IRAS

And then there was the much-vaunted “Robin Hood” tax – increasing taxes for top earners by 2% for their second tax bracket. A “Robin Hood” theory suggests that money is taken from the rich to be given to the poor. There is no change in tax rates for the lower income groups. So the only way for a “give-back” is through government transfers.

Where are these transfers to be made? Possibly through the Silver Support Scheme, which we are to understand would have three criteria for assessing how much they would get: Lifetime wages, level of household support and housing type. In other words, we can expect our elderly to be means tested, automatically this time it seems, to the death before they can see any benefits.

Or possibly through the reduced maid levies, Edusave top-ups, waiver of examination fees for school students, subsidies for school bus services, and increases in GST vouchers.

Interestingly, the increase in tax rates for the top income earners is expected to reap $400mil, but the expenditure projected for all the other transfers would likely rack up to more than $1bil. Where is the short-fall to be made? No prizes for guessing.

cpfCaring for the vulnerable – or not

Part of the government’s plans for Budget 2015 was purportedly to take the burden off the middle-income “sandwich class” who have to care for both children and elderly parents. This would include enhancing the Central Provident Fund system to increase CPF contribution during working years, increasing the CPF salary ceiling from $5,000 to $6,000, and revising upwards CPF interest rates.

Hardly anyone would have noted that the increase in CPF contribution rates for elderly was long overdue. Moreover, the increase for older workers above 55 years old is actually smaller, which means the restoration is not actually applied to all older workers. It boggles the mind as to why the government should think that older workers would need lower contributions, since we are facing retirement inadequacy. Why not keep the increase the same for all older workers, since it is CPF that said that the employability of older workers is improving?

Clearly, while there were the goodies in Budget 2015, the trade-off seems to be more buckling down for us. Which is really not anything unusual, so it would be a great mistake to give the Budget the glowing, levelling-the-social-strata status it evidently does not deserve. The initiatives thrown up are in dire need of a more comprehensive approach, instead or yet more tokenism.

Of course, the government should not be expected to think of everything for us from the first step to the last. The question to ask, however, is whether it has sufficient foresight to encourage us to take that first step, and if not, does it still deserve our taxes and votes, which it would use to pretend that it does? Budget is essentially our government telling us how well it has and will be spending our money. How has our government performed?

Editor's note: This article has been edited to correct earlier figures cited for CPF contributions by employers and calculations for taxs. Apologies if it had caused any misunderstanding.