Following his 2019 Budget Presentation in Parliament on Monday (18 Feb), Finance Minister Heng Swee Keat participated in a forum on national TV to discuss the contents of the budget and address concerns from members of the public.
Merdeka Generation Package and the focus on elderly Singaporeans
To start off with, Mr Heng was asked about the highly anticipated Merdeka Generation Package (MGP) for which details were announced on Monday and which included a heavy focus on healthcare.
Mr Heng noted that about half of those considered the Merdeka Generation – those born between 1950 to 1959 – are still in the workforce, so the emphasis of the MGP is to help this group of young seniors to stay active, healthy, and engaged in the community.
Having said that, a member of the public raised concerns that the 2019 budget seems heavily focused on the elders of Singapore.
Mr Heng said “But first let me say, it is not possible for one budget to cover everyone in Singapore.” This is a point the Minister repeated throughout the course of the forum.
The minister went on to say that there are already a number of initiatives in the budget for younger people such as the emphasis on training for youth as well as MediSave contributions for those who just missed out on the MGP.
The minister also highlighted the tripartite workgroup which was announced during the budget to address issues like healthcare and concerns of seniors as Singapore ages.
High cost of living
One audience member noted that there were a few ‘glaring omissions’ in the budget, chief of which were the sandwich class that missed out on the MGP and other packages targeted towards the youth. He raised the issue of the rising cost of living and asked if greater consideration could be given to this group of people.
Mr Heng said, “It’s important that we try and keep the cost of living affordable for our people and there are a few things that we do. First and foremost, we operate a very open competitive system.“
He said that the fact that Singapore operates an open system with no tariffs on imports keeps the market competitive which is, in the long run, good for the consumers. He added that the fact that the Singapore Dollar has strengthened also helps in terms of cost of living at home because imported goods are now cheaper.
But the reality on the ground doesn’t seem to match Mr Heng’s assessment. Looking at comments section of the video on Facebook, many netizens disagreed that goods are cheaper and that cost of living in Singapore is affordable.
One person question the Minister on whether the government would consider absorbing GST for essential items such as food as a measure to bring down the cost of living for middle-income to low-income families.
Mr Heng replied, “This was very carefully studied before we introduced GST. And I took a look at it again recently when this was discussed. “
He pointed out that countries which sought to differentiate between essential and non-essential items often disagree and that it ends up being very ‘distortionary’.
The system Singapore choose to employ is simply, he said, and does not incur any administrative cost. “We do not cause any confusion, everybody pays the same amount for everything we purchase,” he added.
Low birth rates
Naturally, the question of cost of living led into the concern of Singapore’s low birth rate. On this point, Mr Heng said it is a ‘very important issue’.
He pointed out the various subsidies and packages that the government has implemented over the years to encourage Singaporeans to have more children such as the baby bonus, the Child Development Account and the education subsidies in place for children who opt to further their education in institutes of higher learning.
He stressed that the most important factor is mindset, saying that a “fundamental change in mindset” is important.
Unfortunately, Mr Heng did not address how the rising cost of living might be affecting the decision of young Singaporean couples to have more than one child.
Business restructuring
As for how the current budget might affect business, specifically the reduction in foreign worker quota in the service sector, Mr Heng said, “I know it is not easy for us to just restructure. But my concern is if we do not act now, we will be storing up problems for the future”.
He said that while this route is harder, it will eventually lead Singapore to a desirable destination – which is an economy that is less dependent on foreign talent.
He also pointed out Singapore’s ‘vibrant’ startup system. He said, “It’s good that our startup system is becoming more vibrant and that many of our startups are growing nicely. The next stage is to help them scale up.”
He also repeated what the government has said before about the how “digital technology will have a very significant impact on every sector in the economy”.
How will Singapore fund this budget?
The moderator then mentioned that the budget has been described as ‘expansionary’ and ‘generous’, and asked how the government is intending to fund it.
Mr Heng said, “I’ve very grateful as Finance Minister that I inherited a very good situation. And In particular, I’m very grateful to our founding fathers for leaving us with these reserves”
He mentioned that Singapore has accumulated reserves in the early years. Now, he says Singapore needs proper principles in place to safeguard its fiscal position in order to be responsible not only to the current generation but future generations as well.
Mr Heng also noted that some of the surpluses gained in the previous year came from ‘unexpected developments’ such as the collection of more stamp duty and higher stat board contributions due to a healthier financial market.
He said that it is also important to recognise that at the end of term any surplus will be logged into the past reserves. ”The past reserves are then invested for our people,” he added.
But Mr Heng also cautioned that these were “one off events” and that a budget cannot be planned on the basis that there will be some good luck. And it a surplus today doesn’t mean that the government will splurge tomorrow.
“In fact, if our founding fathers had taken that approach, we would not even have one cent of this net investment return contribution to talk about and we’ll not be talking about increasing GST from 7% to 9%, it will be much more,” he continued.
Election budget?
With the impending general elections – predictions are that it will be called sometime this year – the moderator asked for Mr Heng’s response to those who described the 2019 Budget as an ‘election budget’.
Mr Heng responded, “If they mean that they are very happy with the budget, then I’ll say that is good. But I don’t plan on that basis.”
“First and foremost, the budget…is really a strategic plan to allocate resources for Singapore to remain successful, vibrant in the long run and to be fair across generations. So it’s not about we’re near the elections so let’s spend this, let’s spend that,” he added.
In coming up with the budget, Mr Heng said he had “many meetings with various ministries and Ministers”, always starting with a very long list of requests which had to be cut down. Eventually, he would have discussions with the Prime Minister on the country’s priorities and what the government ought to spend on.
“This is the way that we plan our budget and I must say that let us maintain that”, he continued.