Extra aid for firms, workers hit by COVID-19 curbs to cost $1.2 billion
Sum to be covered by reallocation of funds; no need to draw from reserves: Lawrence Wong
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 6 Jul 2021
The additional support package to help companies and workers affected by the latest Covid-19 restrictions is expected to cost $1.2 billion, with the amount covered through the reallocation of funds, Finance Minister Lawrence Wong told Parliament yesterday.
There will be no need to draw from the reserves again, he said, noting that Singapore is already expected to draw up to $53.7 billion of it, an amount "which we are not likely to be able to put back any time soon, if at all".
Half of the $1.2 billion will be covered by funds originally earmarked for the Deep Tunnel Sewerage System and North-South Corridor projects. Singapore will instead borrow to finance these projects, under the Significant Infrastructure Government Loan Act that allows borrowing to finance long-term infrastructure.
The remaining $0.6 billion will be reallocated from development expenditure that was underutilised mainly because of project delays arising from Covid-19.
In his first ministerial statement on government spending since becoming Finance Minister in May, Mr Wong said the Government would not hesitate to use its fiscal firepower to protect lives and livelihoods, but stressed that any spending must not unfairly burden future generations.
"Our expenditure in financial year 2020 was the highest ever in the history of our country; and this unprecedented fiscal response has also led to the largest Budget deficit in Singapore's history," he said.
"Now that things are better, we should refrain from drawing further on past reserves. Instead, we will fund the support measures using resources that were approved in this year's Budget."
He pointed out that the high levels of government spending worldwide could saddle future generations with crippling debt.
While Singapore has been able to buck this trend owing to the foresight and fiscal prudence of its previous generations, it has had to draw on past reserves in two consecutive financial years, he noted.
It initially did so last year at the height of the pandemic when the economy suffered its worst recession and shrank by 5.4 per cent, and again at the start of financial year 2021 to pay for continuing Covid-19 measures.
A spike in unlinked Covid-19 community cases, with clusters fuelled by the more transmissible Delta variant of the coronavirus, forced the country into phase two (heightened alert) on May 16, with restrictions on dining in at food outlets and social gatherings.
The restrictions were eased from June 14, when the country moved into phase three (heightened alert).
Mr Wong said that Singapore is relatively well placed to deal with the pandemic now, with the economy steadily improving, strong testing and tracing capabilities, as well as a vaccination programme that is making good progress.
He said most parts of the economy continued to operate over the past two months, unlike during the circuit breaker period from April to June last year, when "literally the entire economy was shut down".
With infection numbers having been brought down, Singapore expects to open up further, with larger groups of five people allowed to dine at food outlets from next Monday, he said.
Yesterday, he also announced the extension of the Temporary Bridging Loan Programme and Enhanced Enterprise Financing Scheme - Trade Loan for an additional six months from Oct 1 to March 31 next year, to help small and medium-sized enterprises tide over cash flow problems as they prepare for the new normal.
Other support measures, announced on May 28 to help businesses and workers worst hit by the latest round of restrictions, include an extension of the Jobs Support Scheme (JSS) to food and beverage outlets, gyms and performing arts organisations, among others, which have been badly hit. They received JSS support of 50 per cent.
Rental relief was also provided for businesses, while targeted help was given to affected groups and workers such as taxi and private-hire car drivers and those who are self-employed.
JSS support will be tapered off to 10 per cent for two weeks from next Monday, as Singapore prepares to reopen its economy further.
Parliament will debate the additional support package on July 26.
$1.2 billion for additional support measures: How Singapore firms and workers will benefit
By Lim Min Zhang, The Straits Times, 6 Jul 2021
Finance Minister Lawrence Wong told Parliament yesterday that additional support measures for the recent period of heightened alert are expected to cost $1.2 billion.
Singapore tightened Covid-19 restrictions for about a month from May 16, with dining in at eateries prohibited and working from home made the default as large clusters emerged and community cases rose.
Curbs were eased from June 14 and some support measures will taper down from this month.
Here is how businesses and workers will benefit from the support measures, and how the sum will be funded.
What the $1.2 billion goes to
Wage subsidies of 50 per cent under the Jobs Support Scheme given from May 16 to July 11 for businesses in the food and beverage, sports, performing arts and arts education sectors.
The support is 30 per cent for qualifying retail outlets, cinema operators, museums, art galleries, historical sites and family entertainment centres.
The support under the scheme will be reduced to 10 per cent from July 12 to 25.
A temporary Covid-19 Recovery Grant offers up to $700 for lower-to middle-income workers significantly affected during this period until end-July. They must not already be receiving support under the Covid-19 Recovery Grant launched in January.
A driver relief fund offered eligible taxi and private-hire car drivers $750 per vehicle per month from May 16 to June 30. The amount was reduced from this month.
Hawkers in places managed by the National Environment Agency (NEA) or NEA-appointed operators also received a two-month rental waiver.
A month of rental waiver was also given for qualifying tenants of government-owned commercial properties.
How SMEs will be supported
Small and medium-sized enterprises (SMEs) will continue receiving help to access credit.
The Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme - Trade Loan will be extended for an additional six months, from Oct 1 to March 31 next year.
The parameters for both schemes remain unchanged, including the government risk-share of 70 per cent.
The Temporary Bridging Loan Programme is aimed at helping local companies manage their immediate cash flow needs, while the Enhanced Enterprise Financing Scheme - Trade Loan covers businesses' trade needs in areas such as inventory and stock financing.
Where the $1.2 billion will come from
About half of the $1.2 billion will come from an amount that was originally budgeted for the Deep Tunnel Sewerage System and the North-South Corridor.
This is a one-off adjustment as the Significant Infrastructure Government Loan Act (Singa) - which allows borrowing for these projects - was passed after the financial year had started.
The remaining sum will be reallocated from the under-utilisation of development expenditure, mainly due to delays in projects arising from Covid-19.
A Supplementary Supply Bill will be introduced to effect the reallocation of $1.2 billion. Past reserves will not be tapped.
Singapore's fiscal deficit is $11 billion, same as earlier estimates, no further draw on past reserves
By Grace Ho, Senior Political Correspondent, The Straits Times, 6 Jul 2021
Singapore's overall fiscal deficit for this financial year is $11 billion, the same as earlier estimates, and no further draw on past reserves is needed, said the Ministry of Finance yesterday.
It gave this interim update on the financial year 2021 in conjunction with Finance Minister Lawrence Wong's ministerial statement in Parliament, where he said that the support package to help companies and workers affected by the period of heightened alert is expected to cost $1.2 billion.
Mr Wong's statement comes ahead of a Supplementary Supply Bill to effect the reallocation of funds for the measures earlier announced on May 28, June 10 and June 18, in view of phases two and three (heightened alert).
Singapore went into phase two (heightened alert) on May 16, introducing measures to curb the spread of the more transmissible Delta variant of the coronavirus after clusters emerged at Tan Tock Seng Hospital and Changi Airport and unlinked community cases increased. These meant restrictions in indoor settings where people do not have their masks on, including at food and beverage outlets, gyms and fitness centres, as well as live arts and cultural performance venues.
The restrictions were eased from June 14, when the country moved into phase three (heightened alert).
According to the interim update, operating revenue is projected to decrease by $100 million compared with estimates presented in February this year.
This is due to revenue foregone for the waiver of rental charges, to support individuals and businesses during periods of heightened safe management measures.
Total expenditure is expected to have a net decrease of $500 million compared with earlier estimates. This is because the increase in operating expenditure for targeted support to affected individuals is offset by decreases in development expenditure mainly due to Covid-19 construction delays.
Special transfers are expected to go up by $1 billion due to measures to support businesses and individuals during periods of heightened alert, through the Jobs Support Scheme of wage subsidies and rental relief.
The capitalisation of nationally significant infrastructure under the Significant Infrastructure Government Loan Act is expected to free up an additional $600 million compared with earlier estimates.
Taken together, the revised overall fiscal deficit is $11 billion, with no net increase compared with earlier estimates and no further draw on past reserves, said the MOF.
Parliament: COVID-19 support measures
First loans in 40 years to fund infrastructure
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 6 Jul 2021
Singapore will borrow to finance two infrastructure projects for the first time in 40 years, with the money originally set aside for them to be reallocated to fund Covid-19 support measures.
Finance Minister Lawrence Wong disclosed in Parliament yesterday that the Government will capitalise about $0.6 billion in development expenditure for the Deep Tunnel Sewerage System and the North-South Corridor under the Significant Infrastructure Government Loan Act (Singa).
The money earmarked for the two projects will go towards funding part of the $1.2 billion support package to help businesses and workers during the period of heightened alert.
The other half of the $1.2 billion to fund the Covid-19 support measures will be reallocated from development expenditure that was underutilised mainly due to delays in projects arising from Covid-19.
Mr Wong said: "We expect to catch up on our development schedules as the situation stabilises. Hence, the delayed expenditure will still need to be incurred in future financial years.
He said the two projects, whose development expenditure will be capitalised from the fourth quarter of this year, meet the criteria for financing under the new law.
Singa allows the Government to borrow up to $90 billion to pay for infrastructure that will last for at least 50 years, so as to distribute fiscal responsibility more equitably across the generations of people who will benefit from the projects.
Under the law, the annual interest threshold of borrowings under Singa cannot exceed $5 billion, and each project funded under the law must be sizeable and cost at least $4 billion.
Mr Wong stressed that this would be a one-off adjustment as Singa was passed in May after the start of the 2021 financial year.
He added that in future, the amounts to be borrowed will be incorporated as part of the annual Budget Estimates. "We will not have such reallocation space in future."
Explaining the reallocation of funds for the Covid-19 packages, he said drawing on past savings is a major move reserved for exceptional circumstances. Singapore's economy shrank 5.4 per cent last year, but is now improving.
He also said that when the Reserves Protection Framework was introduced in 1991, no one could have foreseen that a pandemic of such a magnitude would hit one day. "But it is precisely this discipline of setting aside resources for rainy days that has put us in a strong fiscal position to respond decisively to the current crisis."
While Singapore had been able to tap these reserves, other governments were forced to borrow and would have to service the debts.
"They may look affordable now, but will not be so once interest rates increase to more normal levels," he said. "The day of reckoning will come, and the burden will surely fall on the young and future generations."
He noted that Singapore had already drawn on past reserves to the tune of $53.7 billion over last year and this year, and with things on a more even keel now, it made sense to fund the support measures using resources that were approved in this year's Budget.
"Let me be clear: We will not hesitate to use the full measure of our fiscal firepower to protect the lives and livelihoods of Singaporeans. But we also need to be careful about the state of our public finances and ensure they are sustainable for the future."
Temporary bridging loan, enhanced enterprise financing schemes for SMEs extended till March 2022
They will help firms with immediate cash flow needs and stock financing amid crisis
By Prisca Ang, The Straits Times, 6 Jul 2021
Small and medium-sized enterprises (SMEs) can continue to access credit to build their capabilities with the extension of two schemes, Finance Minister Lawrence Wong said yesterday.
The Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme - Trade Loan will be extended for an additional six months from Oct 1 to March 31 next year. They were previously extended last October for the period from April 1 to Sept 30.
"For many SMEs, access to credit is a critical lifeline to tide them through this crisis... While economic conditions have improved, such access to credit remains critical to our SMEs," Mr Wong said in a ministerial statement on the support measures for businesses and workers affected by the latest Covid-19 measures.
The Temporary Bridging Loan Programme is aimed at help-ing local companies manage their immediate cash flow needs, while the Enhanced Enterprise Financing Scheme - Trade Loan covers businesses' trade needs in areas such as inventory and stock financing.
The Government has supported more than $22 billion worth of loans to more than 25,000 enterprises through Enterprise Singapore's (ESG) financing schemes since the start of last year, said Mr Wong, adding that 99 per cent of the recipients were SMEs.
About half were in wholesale trade, construction and manufacturing, with other sectors such as services and retail also supported, ESG said in a statement.
The parameters for both schemes remain unchanged, including the Government's risk share of 70 per cent.
The Monetary Authority of Singapore (MAS) will also extend, accordingly, the MAS Singapore Dollar Facility for Enterprise Singapore Loans, which provides lower-cost funding for banks and finance companies to support their lending to local enterprises.
The facility will continue to provide Singapore dollar funding at an interest rate of 0.1 per cent per annum for a two-year tenor to eligible financial institutions to support loans made under the Temporary Bridging Loan Programme and Enterprise Financing Scheme - SME Working Capital Loan, which finances operational cash flow needs, from Oct 1 to March 31 next year, MAS said yesterday.
It added that the facility has disbursed $13.3 billion since its introduction in April last year.
Mr Wong said in his statement: "The way we have gone about providing support this round, as well as our ongoing support schemes over the years, reflect our fiscal approach in supporting Singaporeans and businesses in Singapore."
The Government has ensured a fair tax regime for all even before the pandemic, he said.
Overall income tax revenue - both corporate and personal - as a percentage of gross domestic product is around 6 per cent, about half the Organisation for Economic Cooperation and Development average of 12 per cent, he said.
Mr Wong said Singapore has a competitive tax regime for companies, especially SMEs, as they are the backbone of the economy.
He added that a global movement to change corporate tax rules will affect only a select group of global companies, and not smaller enterprises. "So, our SMEs in Singapore can continue to enjoy low taxes."
Singapore's SMEs - companies with an annual turnover of up to $100 million - make up more than 95 per cent of active companies here but contribute less than a third of the nation's corporate income tax revenue.
More than half of such companies do not pay any corporate tax.
Besides taxes, the Government recognises that SMEs are concerned about costs such as rental, labour and utilities, said Mr Wong. "We do not directly offset such costs in normal times, but instead provide a wide range of schemes to help them improve productivity and build new capabilities."
About 70 per cent of government grant disbursements to businesses from 2015 to 2019 went to SMEs.
"During times of crises, we recognise that lower-income households and SMEs face bigger challenges, and that is why we have designed our interventions to benefit them the most," said Mr Wong.
About two-thirds of the $26.7 billion paid out to date under the Jobs Support Scheme went to SMEs, as did 90 per cent of the benefits from the Year of Assessment 2020 corporate income tax rebate.
Govt will conduct review of COVID-19 response after situation stabilises, COI not an appropriate format: Teo Chee Hean
By Yuen Sin, Political Correspondent, The Straits Times, 6 Jul 2021
There will be a wide-ranging review of the Government's Covid-19 response after the situation has stabilised, to allow Singapore to learn valuable lessons and improve its response to pandemics in future.
Senior Minister Teo Chee Hean yesterday announced plans for an after-action review (AAR) in response to Leader of the Opposition Pritam Singh, who asked if the Government would commit to setting up a commission of inquiry (COI) to review its pandemic response.
Mr Teo, who is the Coordinating Minister for National Security, said the AAR should be open and forthcoming.
It should also acknowledge shortcomings where the Government could and should have done better, even as it analyses successes.
"We certainly want to learn all the lessons that we (can)... including those which can be submitted by members of the public who have views, and informed views particularly," Mr Teo said.
But as Singapore is still in the thick of the battle against Covid-19, the AAR will have to wait till the country is out of the woods, he said.
He added that while the Government has not determined the precise form such a review will take, a COI - which is a quasi-judicial investigative tribunal that includes a current or former High Court judge - is not the most appropriate way to achieve this objective.
Mr Singh, the Workers' Party chief, acknowledged Mr Teo's points about the COI, but added that such inquiries have also covered matters of public policy and multi-agency issues of grave public concern.
To this, Mr Teo said that in his experience, the COI is "probably best suited to look into a singular event that has occurred in a specific moment or instant in time", such as a building collapse or major accident.
"I don't think the pandemic fits well into such a situation. It is an ongoing and evolving event. It is not over yet," he said.
"In fact, many lessons have already been learnt along the way, not necessarily through formal AARs or a COI, but because of actual ground experience in which the agencies have adapted and adjusted their response."
These adjustments were made not just to improve effectiveness, but also in response to the evolving virus and other evolving situations, he said.
Singapore has changed and adapted its testing and safe management procedures along the way, including those for incoming travellers, he noted.
Mr Singh subsequently pointed to Section Three of the Inquiries Act, which states that a commission may be appointed by the President for "any matter in which an inquiry would, in the opinion of the President, be for the public welfare or in the public interest".
In response, Mr Teo said the AAR is more broad-ranging than the COI, which is usually defined in a very specific way.
"The Government intends to do a very broad-ranging AAR and on all aspects, because there are many aspects to this particular pandemic from which we can learn good lessons for the future."
In May last year, then National Development Minister Lawrence Wong, who is now Finance Minister, said the Government would comprehensively review the Covid-19 pandemic and its overall response to it from start to finish.
This would help it learn and improve, he had told then Nominated MPs Walter Theseira and Anthea Ong, who had asked if a committee of inquiry would be appointed to investigate the causes of the Covid-19 outbreak among foreign workers in dormitories.
A committee of inquiry is appointed by a minister, unlike a COI, which is appointed by the President.
COIs set up in the past investigated issues such as the Hotel New World collapse in 1986 and the Sentosa cable car accident in 1983.
* 20 July 2021
* $1.1 billion COVID-19 support package for workers, businesses hit by Phase 2 (Heightened Alert) restrictions from 22 July 2021 to 18 August 2021
It includes wage subsidies under the Jobs Support Scheme (JSS) of up to 60%, rental relief and a new hawker relief fund
By Grace Ho, Senior Political Correspondent, The Straits Times, 24 Jul 2021
A $1.1 billion support package that includes enhanced wage subsidies under the Jobs Support Scheme (JSS), rental relief and a new relief fund for market and hawker centre stallholders will be rolled out to cushion businesses and workers from the blow of harsher Covid-19 restrictions.
Wage support will be bumped up to 60 per cent for the hardest-hit sectors such as food and beverage (F&B), gyms and performing arts organisations that have had to suspend many, if not all, of their activities, the Ministry of Finance (MOF) said yesterday - a day after tightened measures kicked in, and ahead of a debate in Parliament next week on the package.
The package, which comes on top of a $1.2 billion package announced weeks earlier to cover tighter measures imposed since May, will be funded by reallocated monies arising from one-off underutilised budgets as a result of Covid-19 delaying some projects, as well as funds set aside earlier in the event that support measures needed to be extended.
In a video posted on Facebook and Instagram yesterday, Finance Minister Lawrence Wong said he had been engaging business leaders and trade associations virtually, and the package was put together based on their inputs.
"I hope all of these measures will help our affected workers and businesses tide through these challenging times. Remember: You are not alone. We are here with you, for you, and we will overcome this crisis together as one people."
On Thursday, Singapore reverted to phase two (heightened alert), with tighter measures in place until Aug 18 to curb the worsening Covid-19 situation.
Business associations, small-and medium-sized enterprises (SMEs) and F&B establishments recently pleaded with landlords to take on their share of the burden and give timely rental rebates, as many shops and restaurants contemplate winding up after a 16-month roller-coaster ride of changes, including to dining-in rules.
Acknowledging their concerns, MOF said it is looking at how to ensure rental obligations are shared fairly between the Government, landlords and qualifying tenants.
Tenants of government-owned commercial properties will now get an extra four weeks of rental waiver, while eligible tenant-occupiers and owner-occupiers of privately owned commercial properties will get two weeks of rental relief in cash payouts under the Rental Support Scheme.
JSS support will be raised to 40 per cent for sectors significantly affected by restrictions, such as the retail sector, tourist attractions, licensed hotels and cinema operators. This will taper to 10 per cent from Aug 19 to 31.
The Covid-19 Driver Relief Fund will be enhanced for taxi and private-hire car drivers, while a new Market and Hawker Centre Relief Fund will give a one-off $500 cash payout to all individual stallholders of cooked-food and market stalls in centres managed by the National Environment Agency (NEA) or NEA-appointed operators.
To help other workers affected by the tightened measures, the Government will also make the temporary Covid-19 Recovery Grant available until Aug 31.
Business associations yesterday welcomed the latest package.
Association of Small and Medium Enterprises (Asme) president Kurt Wee said businesses, especially those in the F&B sector, will find relief in the higher JSS support levels.
He said Asme is aware that many companies had been preparing to cut manpower. "With this announcement, I believe and hope that businesses will be in a better position to push and sustain through this trying period without manpower cuts."
DBS Bank senior economist Irvin Seah said there is a real need for help on the ground, and this is likely to be the last injection of support before the country reaches the target to vaccinate two-thirds of its population by next month.
"The amount, in the bigger scheme of things, is not (too) big. But hopefully, this does not amount to a permanent shift in our fiscal policy mandate."
** Over $2 billion being provided to support workers, businesses affected by two periods of heightened alert
Package financed by reallocation of funds, will not affect Singapore's fiscal position: Finance Minister Lawrence Wong
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 27 Jul 2021
More than $2 billion will be set aside to support workers and businesses grappling with the impact of tighter Covid-19 restrictions since May, Finance Minister Lawrence Wong announced yesterday, as he said that the latest period of heightened alert is not expected to derail Singapore's economic recovery.
He acknowledged that the domestic, consumer-facing sectors, such as retail and food and beverage (F&B), will continue to face challenges, but said that Singapore remains on track to achieve growth of 4 per cent to 6 per cent this year.
Mr Wong was giving a statement in Parliament shortly before he introduced the Supplementary Supply Bill to effect the reallocation of funds for the measures.
The latest round of support measures for the current phase two (heightened alert) period was announced by the Ministry of Finance last Friday, and includes rental relief for hawkers and eligible businesses as well as enhanced wage support under the Jobs Support Scheme. It is expected to cost up to $1.1 billion.
This will be financed by the reallocation of funds, in keeping with Singapore's principles of fiscal responsibility and prudence, said Mr Wong.
The bulk of the amount, about $0.9 billion, will come from operating and development expenditures that will not be used owing to delays caused by the pandemic. These are one-off expenditures slated for activities in schools and for construction projects that have been cancelled or postponed.
The remaining amount will be covered by the buffer of $0.2 billion already provided for as part of the supplementary estimates presented early this month. This buffer had been set aside in anticipation of enhancements to or extensions of support measures.
Mr Wong said: "I had said previously that given the stronger position we are in today compared with last year, and the fact that most of the economy remains open, we should not be drawing on past reserves. This remains the case."
He said that since the support package will be funded via reallocation of funds, Singapore's overall fiscal position for Financial Year 2021 is expected to remain unchanged, with an overall deficit of $11 billion, or 2.2 per cent of gross domestic product.
Mr Wong said he recognised that businesses in the affected sectors had been working very hard to adapt to the changing regulations, and are deeply disappointed by the recent turn of events.
But business leaders he spoke to understood the need for the restrictions, and have continued to show resilience and the resolve to ride out the storm.
He noted that last week, he and Trade and Industry Minister Gan Kim Yong met representatives from the Singapore Business Federation and several trade associations from the retail and F&B sectors who said many businesses were facing more strain this time.
"It is not just having to enter into another heightened alert. But it is the broader challenge of having to endure more than 1½ years' worth of restrictions, as well as continued disruptions to their business," he said, adding that the latest round of measures has taken in their feedback.
JSS support will be raised to 60 per cent for sectors - such as F&B, sports, performing arts and arts education - that have to close or suspend most activities.
Support will go up to 40 per cent for those significantly affected by restrictions, such as the retail and tourism sectors, cinema operators and family entertainment centres.
The wage support will taper to 10 per cent as businesses reopen, from Aug 19 to 31.
The Covid-19 Driver Relief Fund will be enhanced for taxi and private-hire car drivers, while a new Market and Hawker Centre Relief Fund will give a one-off $500 cash payout to all individual stallholders of cooked-food and market stalls in centres managed by the National Environment Agency (NEA) or NEA-appointed operators.
To help other workers affected by the tightened curbs, the Government will also make the temporary Covid-19 Recovery Grant available until Aug 31.
These measures come on top of a package announced weeks earlier to cover tighter measures imposed since May. The earlier measures will also be funded by reallocation of funds, some of which will come from capitalisation of development expenditure under the recently passed Significant Infrastructure Government Loan Act.
With about 70 per cent of Singapore's economic activities in outward-oriented sectors, the earlier projected growth of 4 per cent to 6 per cent this year remains on track, as long as external demand remains healthy, said Mr Wong.
He said the bigger uncertainty for recovery is the impact the Delta variant of the coronavirus may have on the major economies in Europe and the United States, which will affect external demand.
He noted that most economists are still projecting a robust global economic recovery this year.
But he said there are growing fears that as countries open up and the Delta variant spreads, the resurgence in cases could lead to more hospitalisations and fatalities, which could force a return to lockdowns and impinge on global economic growth.
"We must continue to stay agile and nimble, and keep on updating our Covid-19 and economic strategies based on the latest developments around us," he said.
"Ultimately, the best way to support our businesses and workers is to bring the infection under control, push up our vaccine coverage and reopen our economy. These continue to be our key priorities."
MPs will debate the statement today.
Parliament Debate on Support Measures for Phase 2 (Heightened Alert) and Phase 3 (Heightened Alert)
Tax hikes will take into account fiscal needs, economy: Minister
GST increase necessary to fund growing healthcare spending as population ages: Lawrence Wong
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 28 Jul 2021
In deciding the timing of any increase to tax rates, including the goods and services tax (GST), the Government will take into account Singapore's fiscal needs as well as the prevailing economic conditions, said Finance Minister Lawrence Wong yesterday.
The GST hike had come up for discussion as Parliament debated support measures for businesses and workers affected by the periods of heightened alert since May, with some MPs suggesting the hike should be put off until the economy recovers from the pandemic.
The increase in GST rate from 7 per cent to 9 per cent is to take place by 2025, but Mr Yip Hon Weng (Yio Chu Kang) asked if it could be pushed back a few years, urging the Government to exercise flexibility and sensitivity.
"Even the traditional arguments for hiking GST and then providing rebates to the people worst affected, may not be salient in a crisis like today," he said.
Workers' Party MP Louis Chua (Sengkang GRC) suggested the Government could look to corporate taxes to boost its coffers, before revisiting the GST increase.
In response, Mr Wong said the Government has already been growing its revenue sources over the years, by raising income tax, property tax and stamp duty, among others, and will continue to review these and other options.
But he added that the increase in GST would still be necessary to fund the growing spending in healthcare as Singapore's population ages.
As these are broad-based needs, they should be funded by a broad-based tax like GST, he explained, stressing that Singapore must have a sustainable fiscal strategy.
GST currently contributes about 15 per cent of the Government's operating revenue.
Nominated MP Hoon Hian Teck also highlighted the need to look beyond Covid-19 to recognise other fundamental spending needs of the country and to find the tax revenues to pay for the expected increase in spending.
He said: "Today, we will need to confront the reality, even under the challenges of Covid-19, that an ageing population - resulting from increased life expectancy, as well as reduced fertility rate, and therefore consequently the highest spending on health - will require additional fiscal resources."
Some MPs had previously expressed concerns about GST being regressive and thus disproportionately affecting the poor, and Mr Wong yesterday urged Singaporeans not to see the GST in isolation.
He said the GST is tied to the permanent GST Voucher scheme, which offsets the GST for lower-income Singaporeans. The Government had also announced a $6 billion package to cushion the impact of the impending GST hike, and an enhancement of the permanent GST voucher scheme, and Mr Wong noted that lower-and middle-income families get more help.
The minister said that taken as a whole, Singapore's system of taxes and transfers is progressive. "Concerns about regressivity have been mitigated, and will continue to be, as we plan for the GST increase."
He also cautioned against taking the easy way out by relying heavily on past savings or borrowing to finance spending, noting that many advanced economies were grappling with annual budget deficits that have been made worse as the Covid-19 pandemic further pushed up government borrowing.
For many countries, borrowing often started with good intentions, to raise public spending on healthcare or welfare schemes, he noted.
But he said this could result in a downward spiral as spending balloons and outpaces the ability to raise revenues, and a country is forced to borrow year after year to finance its annual deficits.
He added: "What's more worrying is that societal norms and individual expectations change and an entitlement mindset sets in. It becomes politically very challenging to roll back any benefit and to raise taxes, or even to mention it.
"There's a tendency to short-change the future, and to overspend on the present. That's why we must always resist the siren song of easy money. And we must do our part to uphold a culture of fiscal responsibility and stewardship."
To this end, Singapore's reserves protection framework helps to achieve a balance of safeguarding past savings while allowing some spending, he said, describing it as "a balance between spending for today's needs, and saving for the future needs of today's generations and generations to come".
Under the Net Investment Returns Contribution (NIRC) framework, the Government can spend up to half of the long-term expected investment returns generated by Temasek, GIC and the Monetary Authority of Singapore - the three entities tasked to invest Singapore's reserves.
Mr Liang Eng Hwa (Bukit Panjang) said the NIRC had increased to $19.6 billion based on the latest available revised estimates, compared with $18.4 billion in financial year 2020, and $17.04 billion in financial year 2019.
"We have to expect markets and asset valuations to be constantly fluctuating in the years ahead, and hence this sound and prudent computation of NIRC by smoothing out the expected investment returns over a long period is necessary to ensure steady and predictable net investment returns contributions for the purpose of budget and cash flow planning," he added.
Mr Wong said the Government is not closed off to adjusting the framework, but noted this was done not too long ago, in 2015, in a careful and considered manner.
The framework was not meant to cover every funding need, he said. "Therefore we should not, at the first sign of need, push for changes in the rules now just to take the easy way out and avoid having to raise tax revenues to meet our growing recurrent expenditure needs. That would not be the responsible thing to do."
Singapore has drawn a total of $53.7 billion from the reserves for this and the last financial years to fund Covid-19 support measures.
As to how additional support for workers and businesses might be funded if the need arises later this financial year, Mr Wong said this would come from tightening operating and development expenditures, instead of dipping into the reserves. "That's what we would do if we had to do another package within this financial year," he said.
Govt pushing out support for firms as fast as it can, says minister
Lawrence Wong addresses concerns raised, outlines help for businesses throughout year
By Choo Yun Ting, The Straits Times, 28 Jul 2021
Firms' concerns over the disbursement of relief have been heard and the Government is working to push out support as fast as it can, Finance Minister Lawrence Wong said yesterday.
In his round-up speech after a parliamentary debate on additional support measures, he acknowledged the calls that MPs had made about the timeliness and availability of government assistance to firms and individuals.
"We will strive to push out the support as fast as we can. We will do so within our operational limits while ensuring accuracy and good governance," he said, in reply to firms' cash-flow concerns which MPs had highlighted.
Government assistance is flowing such that there is support for businesses throughout the year, he noted, citing how eligible firms have been receiving Jobs Support Scheme (JSS) payouts since last April, with the most recent disbursement last month.
The cash payouts under the Rental Support Scheme will be paid out next month, before the next tranche of JSS payments in September, he added.
At the same time, government agencies do exercise flexibility in the implementation of different schemes, Mr Wong noted. He acknowledged that there may be businesses or workers that do not qualify for some relief schemes.
To that end, the Covid-19 Recovery Grant - Temporary caters to individuals who may not fit into any of the schemes, he said.
Likewise, the Government also takes into account businesses which are badly affected but may not fall neatly into specific Singapore Standard Industrial Classification codes, Mr Wong said. These codes are used to determine which category the business is in and the level of JSS payouts it qualifies for.
It has extended JSS support for close to 6,000 firms through such appeals, and those which have benefited include suppliers and vendors to the food and beverage sector, retail and events companies.
Noting calls to extend moratoriums for loan schemes, Mr Wong said that for now, the Monetary Authority of Singapore and the economic agencies' assessment is that the credit market remains healthy and the current support measures are sufficient.
"But we will continue to monitor the situation closely and we will review the need for any adjustments," he said.
Mr Wong also outlined existing help, such as training allowances and grants for freelancers, for areas like the arts and sports sectors.
Recognising the issues faced by landlords and tenants in the area of rental relief, Mr Wong reiterated that the Government intervenes only in specific situations and in a carefully scoped manner.
"The Ministry of Law is carefully considering the eligibility criteria and details of the framework, which they will announce in due course," he said, referring to the framework for equitable co-sharing of rental obligations.
"Ultimately, landlords and tenants have a symbiotic relationship where both parties do well or conversely do poorly together, so it's important to keep lines of communication open to ensure constructive discussions."
Mr Wong stressed that the best way to help firms is to allow them to resume operations and that remains the Government's priority.
"When we do so, and when we start to reopen our economy, reopen our borders, the manpower inflow will also resume," he said, adding that this would address acute labour shortages in sectors like construction and marine.
In response to suggestions to create a fund catering to the pandemic-related economic response or automatic stabilisers, Mr Wong said it may be challenging to do so this year given that the Government will not have the resources for it.
But it is an idea that it can study for the next Budget, and it will have to strike the right balance to ensure that Parliament continues to have oversight over the relief measures should it do so, he added.
Post-pandemic goals for Singapore
Vibrant economy, inclusive society still key goals: Lawrence Wong
Singapore must continue to transform its economy and strengthen social fabric, says minister
By Linette Lai, Political Correspondent, The Straits Times, 28 Jul 2021
As different as the post-pandemic world may look, Singapore's fundamental goals - that is, staying valuable to the global economy and building a fairer and more inclusive society - remain the same.
This was the message Finance Minister Lawrence Wong sought to get across yesterday, in his speech wrapping up nearly five hours of debate on the Government's latest support package for businesses and workers affected by tightened Covid-19 restrictions.
Life will be different from what it used to be, with greater uncertainty and volatility to be expected, Mr Wong told the House.
"So, we must continue this important work of transforming our economy, and equipping our people with the skills they need in an age of change," he said.
"As we transition to this new normal, we must go beyond support measures towards building strength and resilience for the future. We must continue to invest in growing our economy, strengthening our society and greening our home."
He was responding to suggestions and views from 25 MPs who spoke on two rounds of support measures, announced in May as well as last Friday.
At present, several emerging global trends threaten Singapore's value proposition as a hub economy, Mr Wong said. Countries are moving to reshore their production activities, while a growing consensus on a global minimum tax rate is likely to blunt the impact of Singapore's own tax incentives for foreign firms.
Like Venice after the Middle Ages, these external developments could spell decline for Singapore, he warned. Mr Wong, who visited Venice earlier this month for a Group of 20 finance ministers meeting, recounted how the Italian city had once been a vital trading hub, but failed to adapt to changes in the wider world. With the invention of ships that could sail for months without ever making landfall, traders bypassed Venice and the city-state fell into decline.
"What happened to Venice can happen to Singapore, too, if we are not careful," he said. "We must never take our hub status for granted. We must continue to stay open and double down on our connectivity as a trusted hub for commerce, trade and talent."
As rapid technological change causes disruption, Singapore must continually strengthen its value proposition of being a gateway to Asia and the wider world, he added. To do this, it will work to anchor more start-ups and nurture innovation here. At the same time, existing companies will have to relook their business models.
"This process of restructuring and transformation is vital to keeping our economy vibrant and strong," Mr Wong added. "And so the focus of our support measures will over time shift from providing pain relief, as we are now, to building deep capabilities for companies to innovate and transform."
Acknowledging criticism that such government schemes can be difficult for firms to navigate, the minister said Enterprise Singapore will take all feedback seriously.
On the employment front, Mr Wong assured Parliament that more jobs will be created as the economy recovers and demand for workers goes up.
"I understand the concern amongst those in temporary jobs, because they're worried that once Covid is over, they may not have jobs," he said. "We are monitoring this carefully, to ensure that those in temporary jobs now will be emplaced into permanent positions."
The country is also working to equip Singaporeans with the skills needed for jobs of the future.
"Singapore will never be a large market or the cheapest place to do business," he said. "But what has made Singapore an attractive value proposition for investors is our overall system's competitiveness."
With Covid-19 having revealed vulnerabilities in the social fabric, work must also be put into building a fairer and more inclusive society, Mr Wong said. This involves strengthening social safety nets for the unemployed, as well as boosting support for caregivers and those in the gig economy.
"We want to progress not individually, or for our own families, but for all in our larger Singapore family," he said.
But efforts to build such a society must go "beyond redistribution and the provision of social assistance". "We must put maximum effort to help every worker earn a fair wage and be accorded due respect for their contributions," he added.
This is why the Government, unions and employers have been working to raise wages and enhance the employability of lower-wage workers, he said. A tripartite work group is studying how Singapore can move faster on this front, including covering more workers under the Progressive Wage Model.
Mr Wong pledged to continue protecting the livelihoods of the most vulnerable workers, saying: "We all have a part to play to ensure social mobility, opportunity, and importantly, dignity for every worker."
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