Paying for an inclusive society

Editorial, The Straits Times, 16 Mar 2012

THE old joke, that a budget is an orderly system for living beyond one's means, is unlikely to apply to Singapore, where fiscal prudence - the careful spending of hard-earned resources - is second nature. The Government's Budget this year sticks to that tested tradition on the whole. In its attempt to underwrite the fostering of a more inclusive society, the Budget has a slew of generous measures to help almost every social constituency affected by economic change.

These include lower-income Singaporeans, particularly families that could slip into a permanent underclass; middle-income households; senior citizens; and Singaporeans with disabilities. There's a substantial rise in healthcare spending; a new housing bonus for older Singaporeans; and programmes to uplift those at the bottom of the income ladder. A Special Employment Credit is available for employers who hire Singaporean workers aged above 50. Help is also extended to small and medium- sized enterprises affected by economic restructuring and a shortage of workers. All these reflect the ambitious sweep of this people-friendly Budget.

The funds to power these programmes are available, and the country has the resources to sustain the increased spending for the next five years, as Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam has noted. But beyond that, the Government may need to find new sources of revenues, including tax revenues.

This could be a challenge given the uncertainties of the global economy. This should cause those pushing for still more spending in the pursuit of the popular goal of social inclusiveness to pause and ponder the possible downside.

Every generous Budget sets the tone for future spending by raising expectations and costs, as the rolling back of social programmes exacts an electoral price that most politicians are loath to pay. Indeed, expectations can rise immediately. The announcement that healthcare spending would go up, from today's 1.6 per cent to 3.5 per cent of GDP by 2030, led to the Workers' Party's recommendation of a 6 per cent benchmark.

A social safety net cast wide could mean debts that would burden the nation, or a legacy of higher taxes left by this generation for the next one. Businesses and the workforce should not be saddled with heavy tax burdens even as the elderly and others are looked after.

With the travails of Greece in mind, Singapore must avoid an addictive culture of over-spending and stick to sound budgets and strong reserves. The shelf life of worthy programmes is only as good as the means to keep them running.