Saturday 19 February 2022

Singapore Budget 2022: Charting Our New Way Forward Together

Finance Minister Lawrence Wong unveils major tax measures to fund spending needs


Singapore to raise GST from 7% to 9% in two stages in 2023 and 2024

Assurance Package increased to $6.6 billion; GST Voucher scheme beefed up to offset GST hike

Higher personal income taxes for top 1.2% of taxpayers in Singapore

Higher taxes on residential properties, luxury cars, as Singapore adjusts wealth taxes
By Justin Ong, Political Correspondent, The Straits Times, 18 Feb 2022

Singapore on Friday (Feb 18) unveiled a slew of progressive tax measures aimed not only at generating revenues to fund major programmes needed over the next few years, but also at addressing social inequalities.

The hike in goods and services tax (GST) to fund the recurring social and healthcare needs of a rapidly ageing population was further delayed to 2023 in response to concerns over rising prices.

The hike will be staggered over two steps - with GST rising from 7 per cent to 8 per cent on Jan 1 next year, and then to 9 per cent from Jan 1, 2024. The impact of the increase will be cushioned, especially for low-income households.

The wealthy will also pay more of other taxes.

"Those who earn more, contribute more," said Finance Minister Lawrence Wong in his first Budget since assuming the portfolio in May last year, as he outlined increases in personal income, property, vehicle and carbon taxes as part of an expansionary $109 billion Budget, including special transfers.

He also announced a $6 billion draw on the reserves as part of Singapore's continuing fight against Covid-19, and over $1 billion in support for businesses, households and individuals hard-hit by the pandemic.

With a view to future challenges and opportunities, Mr Wong said he would commit up to another $1 billion or so to spur companies to invest in new capabilities, while further tightening workforce policies to ensure foreign hires of the "right calibre".


This year's Budget will run up an expected overall deficit of $3 billion, amid a tone of cautious optimism sounded by Mr Wong as Singapore enters a period of transition and recovery after two years of grappling with the pandemic and its fallout.

"The global economy is still vulnerable to pandemic-related risks, and further supply chain disruptions. Geopolitical and security risks loom," he warned at the start of his speech, which was around two hours long. "We may also see a slowdown in external demand as the major economies scale back their pandemic support, and central banks tighten their accommodative monetary policies to deal with the threat of inflation."

But barring fresh disruptions, Mr Wong said he expects the Singapore economy to continue to do well, and grow by 3 per cent to 5 per cent this year.

Looking ahead, with government expenditures projected to increase significantly in the coming years - especially in healthcare - enhancements to Singapore's tax system would be needed to raise additional revenue, he added.

"That means everyone chips in and contributes to a vibrant economy and strengthened social compact, but those with greater means contribute a larger share," said Mr Wong, who also co-chairs a multi-ministry task force handling the pandemic.


To that end, personal income tax will be increased from 2024. The portion of chargeable income in excess of $500,000 up to $1 million, will be taxed at 23 per cent, up from 22 per cent currently. Chargeable income in excess of $1 million will be taxed at 24 per cent.


Property tax rates will also be increased, with more significant hikes for high-end properties, said Mr Wong.

For non-owner-occupied residential properties, including investment properties, tax rates will go up from the current 10 per cent to 20 per cent range, to 12 per cent to 36 per cent.

For owner-occupied ones, tax rates for the portion of annual value in excess of $30,000 will be increased from the present 4 per cent to 16 per cent, to 6 per cent to 32 per cent.

Luxury cars will be taxed at a higher rate, with an additional Additional Registration Fee tier for cars at a rate of 220 per cent for the portion of Open Market Value in excess of $80,000.


The GST hike, pushed back to 2023 and staggered over two steps, will be heavily cushioned.


To better support the daily needs of the lower-income and elderly, the permanent GST Voucher scheme - now comprising cash, utilities and medical rebates - has also been enhanced, with service and conservancy charge (S&CC) rebates becoming an additional permanent component.


Meanwhile, the projected $6 billion draw on the reserves "to maintain a multi-layered public health defence" against Covid-19 has received in-principle support from President Halimah Yacob.

This will be the third year in a row that the reserves are being tapped, bringing the total expected drawdown for the three financial years of 2020 to 2022 to $42.9 billion - less than the initial sum of $52 billion the Government earmarked in 2020.

This reflects Singapore's prudence in the use of past reserves, he said, explaining that Singapore's pandemic response had averted worse public health outcomes, and that the rebound in economy and businesses had been stronger than expected.

Still, in recognition that some segments of society continue to struggle, Mr Wong announced a $500 million Jobs and Business Support Package, which includes a Small Business Recovery Grant for those most affected by Covid-19 restrictions, such as food and beverage and hospitality enterprises.

They will receive a $1,000 payout per local employee, up to a cap of $10,000 per firm.


A $560 million Household Support Package will also help Singaporeans with utility bills, education and daily essentials. It includes GST Voucher-U-Save rebates for the rest of the year, and additional $100 in Community Development Council Vouchers for all.


To plan ahead for a post-pandemic world and the opportunities it offers, Singapore will also commit an additional $200 million over the next few years to schemes to build digital capabilities in business and workers; and around $600 million to expand the Productivity Solutions Grant for SMEs to implement automation efforts.

New initiatives such as the Singapore Global Enterprises and Singapore Global Executive Programme will help larger firms grow overseas and attract the next generation of leaders.


At the same time, to ensure that incoming employment pass holders are comparable in quality to the top third of the local professionals, managers, executives and technicians (PMET) workforce, from September this year their qualifying salary threshold will be raised from $4,500 to $5,000; and from $5,000 to $5,500 for the financial service sector.


Environmental sustainability was also on the Budget agenda, with Mr Wong revealing that Singapore will now target net zero emissions by or around 2050.

Its previous aim was to halve emissions by then, with a view to achieving net-zero "as soon as viable in the second half of the century".

To match these new ambitions, taxes on carbon emissions will be raised from the current $5 per tonne to $25 in 2024 and 2025, and $45 in 2026 and 2027, with a view to reaching $50 to $80 by 2030.


Another key plank of this year's Budget was renewing and strengthening Singapore's social compact.

For lower-wage workers, a new Progressive Wage Credit Scheme will see the Government helping businesses by co-funding wage increases between 2022 and 2026, for employees earning up to $2,500. For those earning above $2,500 and up to $3,000, co-funding support will be offered until 2024.

From Jan 1, 2023, the qualifying income cap for the Workfare Income Supplement will be raised from $2,300 to $2,500.


Mr Wong also sketched out other efforts in boosting retirement adequacy, investing in children, integrating social service delivery, preparing for future healthcare needs, and better supporting the charities sector; with more details to come when MPs debate the Budget and spending plans of various ministries in the coming weeks.


Prime Minister Lee Hsien Loong said in a Facebook post that this Budget will lay the basis for “sound and sustainable government finances, post-pandemic and beyond”.

“We are building a greener and more sustainable city, transforming our economy to create good jobs for Singaporeans, expanding our healthcare system for an ageing society, and strengthening social programmes so that no one is left behind,” he added.



"Looking back at what we have been through during these Covid-19 years, we have nothing to fear. We will always overcome. We will always prevail," he concluded.

"We will chart a new way forward together. We will see through the pandemic today, and build a better Singapore tomorrow."





Press freedom ranking based on country's media laws, not quality: News veteran Patrick Daniel

IPS-Nathan Lecture: The Singapore Media's Long and Winding Road: 1824 to 2022
By Goh Yan Han, Political Correspondent, The Straits Times, 17 Feb 2022

The commonly cited Reporters Without Borders (RSF) index reflects its assessment of media laws in a country, rather than the quality of the journalism there, said Mr Patrick Daniel on Thursday (Feb 17).

He noted how RSF's annual World Press Freedom Index ranked Singapore 160th in its 2021 edition, and questioned if Singapore deserved its ranking, which was one spot above Somalia, one below Sudan, and well below Russia and Myanmar.

"It's baffling to many people," he said at the Institute of Policy Studies lecture.

He pointed out that the index is a measure of "the level of freedom available to the media". It is not an indicator of the quality of journalism in the country.

"Many of our critics don't make that distinction."

RSF's view is that Singapore's media laws breach media freedom, Mr Daniel added.


When Singapore passed the Protection from Online Falsehoods and Manipulation Act (POFMA) in 2019, "they punished us by dropping us seven places".

With the Foreign Interference (Countermeasures) Act (FICA) passed last year, Singapore's ranking will drop further, he said.

He was asked if the Singapore media should engage with the people behind the index.

Mr Daniel said that in his many years as editor-in-chief of Singapore Press Holdings' English/Malay/Tamil Division, not once had those behind the index tried to engage him.

If anyone had asked to see him to discuss press freedom, he would have been happy to do so. "But there is a little bit of opacity in the methodology," he said. "I don't want to rubbish them, they've been doing it for a long time, but there should be some kind of audit of their methodology."


Of POFMA, he said in his lecture: "We will run afoul of people who are absolutist and say you can't have a POFMA. If you looked at what POFMA is, it just says you cannot communicate false facts, it's simple, that's it.

"So for everybody else who is doing a good job, talking truthfully, POFMA doesn't affect us."

Wednesday 16 February 2022

Raeesah-Gate: Parliament votes to refer Workers' Party leaders Pritam Singh, Faisal Manap to Public Prosecutor as recommended by the Committee of Privileges

Singapore's system will fail if trust is eroded and lost: PM Lee Hsien Loong at COP report debate

Honesty of opposition no longer inconsequential in a more contested landscape: PM Lee

Pritam Singh rejects Committee of Privileges' findings, says Raeesah Khan was disenchanted with Workers' Party

Workers' Party leaders did not address key findings from COP during debate: Indranee Rajah

House also agrees with committee's finding that Ms Raeesah Khan be fined $35,000 for lying in Parliament
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 15 Feb 2022

Parliament on Tuesday (Feb 15) voted to refer Leader of the Opposition and Workers' Party chief Pritam Singh for further probe by the Public Prosecutor over a lying scandal, after a four-hour debate in which Prime Minister Lee Hsien Loong urged MPs from both sides of the aisle to vote with their conscience.

PM Lee warned that trust in Parliament and Singapore's political system will be eroded if flagrant, egregious transgressions by MPs were allowed to pass.

The vote came after a total of 10 MPs, including three from the WP and two Nominated MPs, spoke on the report of Parliament's privileges committee that had called for Mr Singh to be referred to the Public Prosecutor for possible criminal charges over lies he told under oath.

Speaking before the vote, Mr Singh said he had no objection to being referred to the Public Prosecutor and would do his utmost to clear his name.


The committee was set up to look into lies told by former MP Raeesah Khan in Parliament on Aug 3 and Oct 4, but had found serious misconduct by Mr Singh, as well as WP chair Sylvia Lim and vice-chair Faisal Manap, in the process of its investigations.

PM Lee said integrity was the linchpin of democracy, adding that giving Mr Singh and his fellow WP leaders a free pass would be detrimental to democracy.



The three WP leaders, speaking during the debate, maintained that they had never asked Ms Khan to take her lie to the grave, as she had claimed.

The House voted on two motions, the first of which called on it to agree with the committee's finding that Ms Khan was guilty of abusing parliamentary privilege by lying in Parliament last year, and its recommendation that she be fined $35,000 - $25,000 for the lies she told in August and $10,000 for lying again in October.

Leader of the House Indranee Rajah had proposed to allow MPs to vote on the different parts of this motion separately, after Mr Singh said the WP would not support the part about Ms Khan's reduced $10,000 fine that was premised on her receiving guidance by WP leaders to lie.


The second motion, which was also split, called on Parliament to agree to refer Mr Singh as well as Mr Faisal to the Public Prosecutor. It also seeks to defer any parliamentary sanctions on the duo and Ms Lim with regard to Ms Khan's lie, until the conclusion of any investigations and possible criminal proceedings against Mr Singh.

Both motions were passed, with Mr Singh and the WP MPs supporting part of the first motion, and voting against the second.

Progress Singapore Non-Constituency MPs Leong Mun Wai and Hazel Poa voted in support of all parts of both motions, except for the $10,000 fine for Ms Khan that the WP also voted against.


Ms Khan had on Aug 3 claimed to have accompanied a sexual assault victim to a police station, where officers allegedly handled the matter insensitively and drove the victim to tears. She repeated the untruth on Oct 4. She has since resigned from her MP seat and from the party.

The matter was referred to the Committee of Privileges, which after hearing evidence from Ms Khan and other witnesses, including the WP leaders, concluded that Ms Khan should be fined $35,000 in all.

The panel also said Mr Singh and Mr Faisal should be referred to the Public Prosecutor for investigations to consider if criminal proceedings ought to be instituted.

The panel had determined that Mr Singh had lied while giving evidence under oath and that this could amount to perjury, and that Mr Faisal's refusal to answer questions could amount to contempt of Parliament.

At the start of the debate, Ms Indranee noted that the ability to speak freely in Parliament is one of the most powerful privileges in a parliamentary democracy such as Singapore, but this must be done responsibly and not abused.

Speaking next, Mr Singh rejected the committee's conclusions that he had guided Ms Khan to lie to Parliament last year, and that he had committed any offences as part of his role in the entire affair.

He acknowledged that he had given her too much time to clarify the lie, and said he had done so because he was sympathetic to how she had been a sexual assault victim.


PM Lee, in his speech, underlined the gravity of the matter before the House, noting that for Singapore's system to work, people must be able to respect the institution of Parliament and trust its members, processes and proceedings.

That is why the right norms of behaviour among MPs have to be guarded carefully, foremost being to tell the truth always and to do right by Singapore, even when - and especially if - it is hard or awkward, he said.

"If something goes wrong, or something wrong has been done, own up and take responsibility - do not hide, dodge, or spin further lies, to obfuscate and cover up the original fib," PM Lee said as he called on all MPs to vote with their conscience on the two motions.

"The COP report is long and detailed, but the core issues are few and stark... Online, people call this Raeesah-Gate, after Watergate. And just like in the original Watergate affair, while investigating Ms Khan's transgressions, the COP unexpectedly stumbled upon a cover-up by WP leaders, even more serious than the original offence," he added.

"Now with the findings before us, it is our responsibility, Parliament's responsibility, for the MPs to take the necessary and appropriate course of action."

Said PM Lee: "If Parliament condones lying among its own members, how can Singaporeans trust the institution of Parliament? If we let flagrant, egregious transgressions pass, it will erode trust in our leaders, respect for Parliament, and support for our whole political system, and Singapore will be heading for trouble."


Friday 11 February 2022

Committee of Privileges recommends Workers’ Party chief Pritam Singh face further probe, $35,000 fine for Raeesah Khan over lies in Parliament

Pritam Singh the 'operating brain' behind Raeesah Khan's repeated lie: Committee of Privileges Report

Sylvia Lim's volunteered notes from WP's internal disciplinary panel meeting damaging to Pritam Singh's testimony

COP report objective, attempts to politicise matter regrettable: Speaker of Parliament Tan Chuan-Jin

Honesty is foundation of democracy, not debates that include lies: Ong Ye Kung on COP report
By Justin Ong, Political Correspondent, The Straits Times, 11 Feb 2022

A parliamentary committee has recommended that former Workers’ Party (WP) MP Raeesah Khan be fined and Leader of the Opposition Pritam Singh be referred to the Public Prosecutor for their roles in lies told by Ms Khan in Parliament in August and October last year.

The Committee of Privileges said Ms Khan should be fined a total of $35,000 over lies she told the House in August and October last year.

It also said the Public Prosecutor should further investigate Mr Singh’s conduct before the committee, “with a view to considering if criminal proceedings ought to be instituted”.

The committee said it was satisfied that Mr Singh was untruthful in giving evidence under oath, and that this may amount to perjury, a serious criminal offence.


The committee, whose report was released yesterday, similarly recommended that WP vice-chair Faisal Manap, an MP for Aljunied GRC, be referred to the Public Prosecutor for further investigations over his refusal to answer relevant questions put forth during its hearings, and to also consider if criminal proceedings ought to be instituted.

The committee’s recommendations are expected to be debated when Parliament sits next week, with Leader of the House Indranee Rajah set to move a motion for MPs to vote on.


The panel is chaired by Speaker of Parliament Tan Chuan-Jin and comprises six other People's Action Party lawmakers and Hougang MP Dennis Tan from the WP.

It recommended that Ms Khan be fined $25,000 for stating an untruth in Parliament on Aug 3, when she claimed to have accompanied a sexual assault victim to a police station where officers allegedly handled the matter insensitively and drove the victim to tears.

She repeated the untruth on Oct 4 - for which the committee is recommending an additional fine of $10,000.


In November, Ms Khan confessed in Parliament that she had in fact heard this anecdote in a support group she was part of, and had shared it without the victim's consent.

Ms Khan, 29, resigned as a WP member and MP for Sengkang GRC on Nov 30, a mere 15 months after being sworn in as Singapore's youngest MP after the 2020 general election.

Appropriate sanctions for the WP leaders should be deferred until after the conclusion of investigations or criminal proceedings, if any, against Mr Singh, said the committee.

The committee hearings in December saw the public release of six special reports and over 30 hours of video recordings of testimonies.

They were filled with conflicting accounts of what transpired between and around Ms Khan’s telling of the lie on Aug 3, her repeated fib on Oct 4, and her eventual admission on Nov 1.


Laying out its considerations behind the sanctions in a report numbering over 1,000 pages that it presented to Parliament on Thursday, the committee said Ms Khan must “take full and sole responsibility” for the untruth on Aug 3, which she had uttered twice while making a clarification on the same day.

For repeating the lie on Oct 4, the committee said it was recommending a smaller fine of $10,000 – compared to $25,000 for the August act.

The committee noted that while ordinarily, repeating an untruth should carry a higher penalty, there were “mitigating circumstances” - including that Ms Khan had confessed internally to WP leaders on Aug 8; that she had been acting thereafter on the guidance and advice of WP leaders to “bury” or continue the untruth; and that she ultimately resigned from Parliament.

Mr Singh was singled out by the committee for being the “key orchestrator” and “operating brain” behind the circumstances leading to Ms Khan’s repeated untruth on Oct 4.


The committee suggested that Parliament refer Mr Singh to the Public Prosecutor, citing – among other things – its belief that Mr Singh had lied to them on affirmation; and that the “seriousness of the matter” would be best served through a trial process where a court could look at the matter afresh and Mr Singh could defend himself with legal counsel.

While the committee was of the view that WP chairman Sylvia Lim and Mr Faisal had played a “relatively subsidiary role” compared to Mr Singh, it noted that Mr Faisal’s “flagrant and inexcusable” refusal to answer questions posed by the committee could amount to contempt of Parliament.

These questions were pertaining to a meeting between the three leaders before Mr Faisal appeared before the committee on Dec 10.

The committee thus recommended that Mr Faisal also be referred to the Public Prosecutor for further investigation.


Its report noted that WP MP and committee member Dennis Tan had objected to all the findings during a review of a draft, but had no further comments after a round of deliberations by committee members over his objections.

Posting on Facebook shortly after the release of the report, Mr Singh, who is WP chief and an MP for Aljunied GRC, said he and Mr Faisal would continue their work as per normal till the matter is resolved.

He noted that there remain a number of unknowns, assuming Parliament adopts the committee’s recommendations.

“These include the eventual decision of the Public Prosecutor to prosecute, the intervening time before the matter goes to trial, the eventual verdict and any sentence meted out, and the prospect of both Faisal and I losing our parliamentary seats and stepping down as Members of Parliament if either of us is fined $2,000 or more,” Mr Singh added.


Thursday 10 February 2022

GST 9%: $6 billion Assurance Package can cover about 10 times cost of tax hike for some, says Lawrence Wong

Finance Minister pledges comprehensive measures to cushion impact for retirees, those less well-off
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 9 Feb 2022

A package that will be rolled out to cushion the impact of the impending goods and services tax (GST) hike is set to cover about 10 times the extra amount some families will spend, said Finance Minister Lawrence Wong on Wednesday (Feb 9).

He was addressing people's concerns that the cost of living may go up with the tax increase, which is needed to raise additional revenue for Singapore's growing healthcare and social needs.

Mr Wong pledged that there will be a comprehensive set of measures that will offset the increase for lower- and middle-income households as well as retirees, including permanent enhancements to the GST Voucher scheme.

His video message comes amid prices rising steadily in Singapore, with core inflation hitting an eight-year high of 2.1 per cent in December, up from 1.6 per cent in November.

As groceries and utilities bills soar, some have raised concerns that the planned GST hike of two percentage points, from 7 per cent to 9 per cent, will drive up prices.


Giving a better idea of how the $6 billion Assurance Package that is meant to offset the increase will work, Mr Wong said that a couple with two children and earning $5,000 a month will receive around $6,500 in benefits under the package.

This works out to about 10 times the extra GST that they will have to pay each year, he added in the video posted to his social media accounts.

Besides these transitional offset measures, the Government will also permanently enhance the GST voucher scheme, introduced in 2012 to offset some of the cash outlays as well as medical and utilities expenses of lower-income Singaporeans, he said.

He added that he would share more details in the Budget statement on Feb 18.


The GST hike was first announced in 2018 and the Government has said that it will have to be implemented by 2025.

Prime Minister Lee Hsien Loong said in his New Year message this year that the Government will have to start "moving" on it, with Singapore's economy recovering from the Covid-19 pandemic.

Reiterating a point made when the GST hike was first announced in 2018, Mr Wong said that it will bring in the additional revenue that Singapore needs to take better care of its elderly and pay for growing healthcare needs.

"Singapore is now at a critical turning point. We are still seeing through the pandemic today. At the same time, we are working hard to build a better Singapore for tomorrow," he added.

"To do so, we will need to invest more in our people and social infrastructure. The GST increase will help generate the revenue we need for this purpose."


Singapore's healthcare expenditure is set to hit $59.1 billion in 2030, up from $20.7 billion in 2018. And the proportion of those aged 65 and older will make up 25 per cent of the population by 2030, up from 17.6 per cent currently.

In the 2020/21 financial year, the Government collected $10.3 billion in GST, accounting for 21 per cent of the Government's tax revenue. It was the largest contributor after corporate income tax at 33 per cent and individual income tax at 26 per cent.

With the two percentage point increase, GST could overtake individual income tax as the second-highest contributor to the coffers.


Mr Wong, who will deliver the Budget statement on Feb 18, said: "When I was growing up, my mother taught me the importance of financial prudence to live within our means and take care of those around us.

"These values continue to guide me, and I'm sure they resonate with many of you."

Sunday 6 February 2022

Inflation and cost of living: How concerned should we be?

Managing the pressure of inflation: How bad will it get and should you be worried?
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 5 Feb 2022

Despite efforts to bring down prices, inflation has continued to rise.

The core inflation rate, which the Government has said is a more accurate gauge for locals, hit 2.1 per cent in December 2021, year on year.

This is up from 1.6 per cent in November and 1.5 per cent in October, the month when the Monetary Authority of Singapore (MAS) raised the slope of its currency policy band to strengthen the Singdollar.

Around the world, prices are rising, putting governments under pressure.

In Singapore, Leader of the Opposition Pritam Singh highlighted the issue in his New Year's Day message, describing cost of living as a likely "major pressure point for many Singaporean households" in the year ahead.

Citing higher costs of many basic needs such as utilities, transport and medical insurance, he pledged that the Workers' Party will track what the Government does to support Singaporeans who need the most help.

MPs, too, have asked in Parliament for the Government to do more.



How bad will it get?

Economists say the situation is set to get worse before it gets better.

OCBC Bank's head of treasury and research Selena Ling reckons that core inflation may hit 2.8 per cent and stay at this elevated rate for most of the year.

MAS recently reviewed its initial core inflation forecast of 1 per cent to 2 per cent and bumped it up to 2 per cent to 3 per cent.

While this is nowhere as high as the core inflation of 5.2 per cent reached in 2011 and 6.5 per cent reached in 2008, Singapore has not seen such a rapid increase in prices since 2013 and 2014.

Price pressures may worsen as the recovery from the pandemic spurs demand, and a manpower crunch - due to border restrictions - pushes up wages, she adds.

Meanwhile, as factories roared back to life, the world experienced its biggest ever increase in electricity demand last year, pushing energy prices to record highs. The International Energy Agency expects the situation to persist for another three years.

Minister of State for Trade and Industry Low Yen Ling told Parliament last month that the Government expects global energy prices and bottlenecks in global transportation to ease gradually over the course of the year, meaning prices should come down.


Why is it a concern?

Inflation has different implications for different income groups.

Typically, those in the lower-income groups are the most squeezed when prices soar.

Spending on food makes up the bulk of their household expenditure, and with grocery prices rising, they will find themselves counting the cents to decide whether to purchase a bunch of kai lan or chye sim.

Singapore Management University law don Eugene Tan says low-wage earners, retirees, the sandwiched class and those reliant on the gig economy may find it hard to cope with the higher prices of essential items.

"Taken together, they are a large enough group to weightily add to the overall societal worries and unhappiness," he adds.

But MPs say that much of the impact on the bottom 20th percentile of households is offset by government handouts, such as U-Save rebates of up to $595 to help cover utilities bills and public transport vouchers of $30 each to help with transport costs.

There is also income support, such as Silver Support of between $720 and $3,600 per year for seniors who had low incomes in their working years, and the Workfare Income Supplement of up to $4,000 per year in cash for lower-wage workers.

Meanwhile, the middle-income earners could find their purchasing power eroded.

National University of Singapore (NUS) sociologist Tan Ern Ser says inflation may hit some middle-income Singaporeans "geared up to live the Singapore Dream".

He cites how they may find big- ticket items like cars and homes - whose prices have been rising - edging beyond their reach.

"I reckon the middle class would have to learn to live within their means and, for those married, to stay the course of being high-earning dual-income couples," says Associate Professor Tan.

Former People's Action Party (PAP) MP Inderjit Singh, who was in Parliament from 1997 to 2015, warns of political implications.

"It will hit the middle-income group the most and when it does, these are the swing voters who can make a difference at a general election," he says.

What price to pay?

The link between rising prices and their political fallout has been seen globally.

In the US, where inflation has hit 7 per cent, political watchers are already predicting that it will become a political problem for President Joe Biden during the mid-term elections to be held in November.

While Singapore did not experience runaway inflation before the 2011 General Election, SMU's Prof Tan and NUS' Prof Tan say cost-of-living issues had contributed in part to the ruling PAP's worst showing since independence.

"Not doing enough to deal with inflation can be regarded as being indicative of the government's tone-deafness to the average person's daily concerns," says SMU's Prof Tan.

MPs such as West Coast GRC's Mr Ang Wei Neng have heard residents complain about the higher electricity bills and more expensive hawker food.

To help residents who cannot cope, he has raised $100,000 for food for 200 vulnerable households. Children from rental flats get vouchers of up to $60 to join a tuition programme.

Meanwhile, raising wages is the key to helping the middle-income earners, who typically do not qualify for much government aid, says Bukit Panjang MP Liang Eng Hwa. He adds that there has to be sufficient subsidies to help this group afford housing, education and healthcare.

In fact, Singapore University of Social Sciences' associate professor of economics Walter Theseira says the combination of inflation and stagnant wages is the real issue.

It can be overcome if firms do well and raise wages soon. "People will grumble, but in six months to a year, nobody will say much any more because they are enjoying real wage growth," he adds.

Even after accounting for inflation, workers enjoyed real wage growth last year, with real median income of full-time employed residents rising 1.1 per cent, and for those at the 20th percentile, rising 4.6 per cent in 2021, Ms Low told Parliament.

Impact of GST hike

Price spikes caused by external factors are not the only concern. The impending hike in goods and services tax (GST) also looms large.

Prime Minister Lee Hsien Loong said during his New Year's Day message that the upcoming Budget will have to "start moving" on the matter, first announced in 2018 and due to take place by 2025.

Sengkang GRC MP Jamus Lim, from the Workers' Party, citing the experience of Japan, said in a Facebook post last month that the GST increase from 7 per cent to 9 per cent could "add fuel to the fire", sparking inflation and stalling gross domestic product growth.

Indeed, inflation could get worse, says Ms Ling, if companies start to price in a more than 2 percentage point increase in prices.

Companies that could not pass on their higher operating costs to consumers over the past two years may do so now due to the better economic conditions, she adds.

At the same time, if consumers expect prices to rise faster, they could also start hoarding, driving up prices even more.

Prof Theseira says that regardless of whether this eventually plays out, there will be the inevitable perception that the increase in GST will fuel higher prices.

He puts it down to this: "People don't like the idea of government policies further increasing prices at a time when they feel prices are already rising faster than they can cope with."

Mr Liang believes that the $6 billion Assurance Package set aside will go some way in addressing people's concerns, since it will stave off the tax increase for five years for most households and 10 years for lower-income households.

"What's important is that this offset helps to safeguard the purchasing power of Singaporeans," he says.


Prof Theseira says that any economist would generally agree with the Government's approach of raising the GST while providing the Assurance Package to mitigate the impact on lower-income earners.

The problem is that many people will not make the connection between the offsets and the price increases, since sticker shock hits immediately, but such subsidies typically get deposited into people's bank accounts once a month.

But Prof Theseira says he is not in favour of a delay, which will just kick the can down the road.

Instead, he suggests that the GST hike be packaged with other tax increases such as for wealth taxes, for instance.

"My view is that the GST increase can be packaged with other tax adjustments so people can see that we are collecting from groups that have benefited a lot from the last couple of years," he says, citing studies that show those in the top income groups have benefited the most from Covid-19.