Monday 20 February 2012

Budget 2012 initiatives and reactions

Govt to spend S$5.5 billion over 5 years to help less well off
Channel NewsAsia, 17 Feb 2012

Finance Minister Tharman Shanmugaratnam has revealed the government will spend about S$5.5 billion over the next five years to help the less well off in Singapore.

Speaking during a post-Budget discussion on Channel NewsAsia, Mr Tharman said the money is what is set aside for new initiatives targeted at the elderly, disabled and lower income group.

He said that a good part of that is in healthcare.

He also touched on the permanent GST Voucher scheme, which he said is meant to be a fairer tax system for Singaporeans.

Mr Tharman explained: "What we wanted to do is to introduce a voucher that will also help them with their daily costs and their medical costs, quite apart from the topping up of income from Workfare, improving subsidies...give them something in the form of a voucher.

"For the first five years, we did it on a temporary basis, now I am doing in on a permanent basis so people can see it with their own eyes and they can understand the whole nature of the tax system, that this is actually a fair tax system...(you are) getting something back if (you are) poor, if (you are) rich, you do not get anything back because your job is to pay some taxes for the betterment of society. That is the basic logic."

For the business community, Mr Tharman said the government is also providing far more this year.

He acknowledged that the pain is in the foreign worker levy. But he added much is going back in terms of productivity incentives as well as the incentives to hire Singaporean workers.

Mr Tharman said this year's Budget amounted to 15 per cent of Singapore's Gross Domestic Product (GDP) for all the expenditure announced.

He said that in five years, this will go up to 17 per cent - attributing the sharp increase to heavy investments in transport and healthcare.

Good for older workers, the poor, less so for businesses
By Melissa Tan , Magdalen Ng, The Straits Times, 21 Feb 2012

THE Budget was a step in the right direction but could have done more to address challenges in areas including Singapore's productivity drive, experts said in panel discussions yesterday.

They also expressed concerns that the latest Budget, released last Friday, offered little to business at a time of global economic uncertainty.

At one session held by the Economic Society of Singapore (ESS), speakers noted that the Budget would help groups such as older Singaporean workers and the poor. It would also, in the long run, hopefully wean Singapore off its dependence on foreign labour.

At another, organised by the Singapore Centre for Applied and Policy Economics (Scape), speakers agreed that Budget 2012 demonstrated the Government's determination to ramp up productivity.

In opening remarks at the ESS panel, Nanyang Technological University (NTU) economics professor Lim Chong Yah said the Budget set out in great detail measures to overcome difficulties such as the 'increasing over dependence on foreign workers' here.

NTU economics professor Chew Soon Beng also noted the social policy aspects: 'This is a very friendly Budget for older workers and the poor.

'But there is no free lunch - it is a very difficult Budget for businesses'.

ESS vice-president Manu Bhaskaran added that in terms of improving social safety nets 'there's been a lot of progress, in particular in health-care spending... (which) addresses a particularly painful problem for Singaporeans'.

But he echoed Professor Chew, suggesting that the tightening of the foreign worker restrictions could provide more difficulties for business at a time of global economic uncertainty.

'That will reduce its resilience in facing the exogenous shocks... The Budget is actually more contractionary in its fiscal stance than it was last year... (it) doesn't seem to help very much'.

Mr Bhaskaran added that 'the drive to increase productivity clearly is not gaining traction and there is a need for review and rethinking of the fundamental approach'.

He noted that the current approach to improving productivity was 'basically continuing the strategy we were employing in the past, which is trying to use a price and quantity measure to jack up the cost of foreign workers... and schemes like the PIC.'

The PIC - Productivity and Innovation Credit scheme - is aimed at encouraging firms to become more productive. It allows deductions of 400 per cent on up to $400,000 of a firm's annual expenditure on each of six qualifying activities.

But Mr Bhaskaran said he was 'not sure whether these are really working. Clearly businesses will respond to price signals but it will take some time'.

He noted that in other countries such as Germany, small companies - which account for the bulk of employment - are linked by networks to large companies.

That means that 'when big companies move up the value chain, small companies naturally follow along'.

'But the difference for Singapore is that we are so dominated by multinational companies that they have their own supply chains, and that means we have not built the kind of networks that link small companies to big companies'.

This was one reason why 'in the last 15 years we've found it difficult to push up productivity'.

At the Scape discussion, associate economics professor Chia Ngee Choon argued there may be a drawback with the 'Silver Housing' policy.

Under the policy, a Silver Housing Bonus of $20,000 will be given to older Singaporeans wishing to sell their existing flats and buy three-room or smaller HDB flats.

She said that the policy may not benefit the very groups it should help - the elderly who live in rental flats, or in one- to two-room flats.

This is because some are unable to downgrade further, and others may have to use the sale proceeds to top up the minimum sum in their CPF accounts.

'The scheme may not help people at the lower rungs, and a more in-depth study will have to be done on how much money is actually unlocked for the elderly.'

Salary cap for grant on hiring maid for elderly
Families must also send maid for training to get $120 monthly grant
By Poon Chian Hui, The Straits Times, 21 Feb 2012

FAMILIES which wish to tap a new grant to hire a maid to care for the frail elderly at home must not have a per capita monthly income of more than $2,200.

The maid must also attend a caregiver training course before the family can get the $120 monthly grant.

The Ministry of Health (MOH) released these details yesterday following the announcement of the grant by Finance Minister Tharman Shanmugaratnam in his Budget speech last Friday.

The grant will be on top of the $95 concession on the foreign maid levy that households with elderly members already enjoy. The normal levy is $265.

The grant is part of a move to make longer-term care more affordable as Singapore ages.

Last year, there were 352,600 people aged 65 and older. By 2030, one in five Singaporeans will be aged 65 or older.

To qualify for the maid grant, the elderly person must have either severe dementia or be unable to perform three or more day-to-day tasks such as eating, dressing or going to the toilet by himself.

Both family members and maids can go for caregiver courses approved by the Centre for Enabled Living, which is under the Ministry of Community Development, Youth and Sports and coordinates care for the disabled and elderly.

The centre provides an annual grant of $200 for caregiver training. Families who want to send their maids for the courses can tap this.

To apply for this grant, the family must meet the per capita income criteria and the elderly person must be assessed by a medical professional.

Currently, one needs to pay a nominal fee of $10 for this disability assessment, with the remaining cost subsidised by the Government.

But if the family chooses to have the assessment done at home, they will have to pay $40.

Ms Teoh Zsin Woon, group director of MOH's Ageing Planning Office, said the grant is 'an extension of home care, for people who may hire a maid rather than tap home-based care'.

It could also help families who are considering moving their elderly members in nursing homes back home, she said.

Ms Teoh said the majority of nursing home patients would be unable to perform three activities of daily living.

Subsidies may help family of stroke sufferer in nursing home
THREE years ago, Mr Ho Hock Ming suffered a stroke and lost the use of the right side of his body.

The family of the 78-year-old decided to place him in a nursing home so he could get round-the-clock care.

United Medicare Centre charges about $3,000 a month, but the family did not qualify for government subsidies.

To qualify, the family must have a monthly household income of no more than $1,400 per family member.

'It's not easy. We are struggling to pay,' said his 40-year-old daughter, who did not want to be named.

There is also the worry her elderly mother could become more frail in the future and require similar care.

The administrative officer, who also has two children to care for, said: 'If everything goes to paying for nursing home care and the children's education, then what is left? We won't have much in savings at all.'

The middle-income family hopes the relaxed criteria for subsidies announced in this year's Budget means they will finally get some help with bills.

The income cap is to be raised, to $2,200 per family member. Those who qualify will get at least 20 per cent in subsidies.

His daughter thinks that the Government, besides expanding the qualifying criteria, could also look into raising the amount of money handed out, as the cost of living in Singapore is climbing.

'It's not that we want to put him in a nursing home. But someone has to be there to take care of him,' she said.

'Subsidies will definitely help us a lot.'

Opposition parties weigh in on Budget measures
by Teo Xuanwei, TODAY, 19 Feb 2012

The National Solidarity Party (NSP) has suggested that the maximum number of foreigners let in annually for the next decade should not exceed 50,000.

This is double the 23,000 births required to hit the 60,000 babies needed each year to replace the Republic's population, said secretary-general Hazel Poa in the party's response to the Government's Budget announced on Friday.

Ms Poa said it is difficult to assess whether the proposed expansion in capacity for buses and hospitals, as announced by Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam, is adequate because there is "an absence of a population plan for Singapore".

This was one of three areas the NSP felt was "inadequately addressed" in what it described as an otherwise "well-balanced Budget, (that was) hard-nosed in some areas and compassionate in others".

The NSP also said that while there were measures to take better care of older Singaporeans, it was "very disappointing" that there were none announced to address the problem of the falling total fertility rate (TFR).

"Our falling TFR is by far one of the most important issues facing the Government. For a "Budget for our future", it is very disappointing that the budget statement failed to mention any initiatives to continue battling this problem," she said. "We hope that Parliament will debate over this matter and develop fiscally supportable proposals in the coming days."

The third suggestion was for greater flexibility in the withdrawal of Central Provident Fund (CPF) for certain groups of older Singaporeans. For example, someone who was over 55, unemployed and diagnosed with a terminal illness like cancer, could be allowed to use the money in their CPF for treatment.

"The gradual raising of the CPF withdrawal age has created real difficulties for some Singaporeans who really need their money that is sitting in the CPF account," said Ms Poa. "While we agree with the general principle that people need to save up for their retirement, there are always circumstances when departing from the principle is the sensible thing to do."

The NSP also repeated its proposal of allowing more bus operators into the market to spur competition, as well as bring in added capital and capacity.

"This will make it unnecessary for taxpayers to foot the full S$1.1 billion bill to increase the bus capacity of private bus operators," she said.

SPP's response

Like the NSP, the Singapore People's Party (SPP) also welcomed the proposed further curbs on foreign labour, which had caused businesses some degree of concern.

SPP chairman Lina Chiam agreed with the Government's stance that "the flood of cheap foreign labour had provided Singapore an unsustainable economic model".

"The effect of foreign labour is akin to the use of performance-enhancement drugs in sports. Growth of the economy is our end goal," said Mrs Chiam, who is a Non-Constituency MP. "Sustainable economic growth that brings about prosperity of existing Singaporeans should be the key measure of our economic performance."

She added though, that the People's Action Party has to "think out of the box for more creative solutions to enhance productivity in our industries during this tough economic year".

Conditions must be conducive for Small and Medium Enterprises to grow alongside the multinational corporations the Trade and Industry Ministry brings in, said Mrs Chiam, who noted the recent complaints about labour, cost of doing business, and industrial rental rates.

"The Government should be publicly accountable for each of these issues that dampen the entrepreneurial abilities of local businesses," she added.

The NSP, said the quota cuts "underscores the fact that the Government has heard the electorate and taken steps to address some of their concerns".

Both parties also welcomed the slew of other measures Mr Tharman announced that were aimed at helping the elderly and low-income.
SDP's response

The Singapore Democratic Party (SDP), meanwhile, felt this year's Budget was "nothing new". "Without significant re-allocation of our expenditure, our economy will continue to remain unstable and prone to wild swings," said SDP treasurer Vincent Wijeysingha. 

"As a result, Singaporeans will continue to hurt and their socio-economic problems will not be addressed." 

The SDP said it will present its Shadow Budget tomorrow.

The Workers' Party has reserved comments on the Budget, while the Reform Party did not respond by press time.

Nine-day debate starts next Tuesday
By Rachel Chang, The Straits Times, 21 Feb 2012

THE nine-day debate on the Government's Budget statement for the new financial year will start in Parliament next Tuesday (28 Feb).

During this annual marathon, Members of Parliament will weigh in on the programmes and spending priorities that Finance Minister Tharman Shanmugaratnam announced last Friday.

Among them, the rise in Central Provident Fund contribution rates for older workers as well as the further restrictions on hiring foreign workers are likely to be hot topics.

Mr Gan Thiam Poh (Pasir Ris-Punggol GRC) said he was concerned over the 'side effects' of letting a company have a smaller proportion of foreigners among its staff.

'Since there will be more demand for workers than supply, their wages will go up, and this will feed through to higher prices for Singaporeans,' he said.

During the sitting, MPs will initially debate the Budget statement, normally over two days. Each MP can speak for up to 20 minutes.

Mr Tharman will respond to the comments and questions, after which Parliament will vote on the Budget for financial year 2012, which starts on April 1.

MPs will then scrutinise and comment on the spending plans of individual ministries.

Ministers will present their budgets in general order of seniority - beginning with the Prime Minister's Office, and ending with the Ministry of Community Development, Youth and Sports helmed by Acting Minister Chan Chun Sing, the most junior Cabinet member.

During these debates, MPs file 'cuts' - a call for a $100 reduction in a ministry's budget - and use the chance to express their views on the programmes and policies of a ministry.

The minister and other office-holders will respond and, if satisfied, the MP will withdraw the cut.

The debate will wrap up on March 9.

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