Wednesday, 6 April 2022

More support, earlier roll-out of Budget 2022 measures

Singaporean households to get $100 CDC vouchers, other support measures earlier amid rising prices
By Goh Yan Han, Political Correspondent, The Straits Times, 4 Apr 2022

More support is on the way for households given the economic impact of the conflict in Ukraine, and some Budget measures will be rolled out earlier, Finance Minister Lawrence Wong told Parliament on Monday (April 4).

He noted that the war has contributed to a further spike in inflation around the world and other factors, such as supply chain issues, have contributed to rising prices.

As such, the $100 worth of Community Development Council (CDC) vouchers for 2022, which was announced in this year's Budget, will be given out to every Singaporean household by the middle of May, said Mr Wong.

This comes after the first tranche of $100 CDC vouchers for all Singaporean households was disbursed four months ago last December to help Singaporeans with their daily expenses.

Mr Wong said: "I understand the concerns that many households and businesses have about the current situation... Where possible, I will bring forward the implementation of our Budget measures."

More financial support is also on the cards for lower-income households that will be more impacted by the higher prices during this period.

All new ComCare short- to medium-term assistance applicants between April and September 2022 will be given at least six months' worth of support from the social service offices, said Mr Wong.

Households that are already on this assistance scheme can also have their assistance extended for at least another three months if they need more help.

Lower-income households will also get more help with their public transport fares.

These vouchers had been made available last December to help households cope with the public transport fare hike.

This group will hence receive $60 worth of the vouchers in total, which will roughly cover the additional fares paid by a family of four this year following the fare hike last December.

These vouchers are also available to all households with a monthly income per member of up to $1,600. Applications are open from now to Oct 31, 2022. Eligible households who had already received the first voucher, and who need a second voucher, can also apply again, said Mr Wong.

Mr Wong also announced that to help businesses, he will bring forward the disbursement of the Small Business Recovery Grant, which provides up to $10,000 for small- to medium-sized enterprises most affected by Covid-19 restrictions over the past year.

Most eligible businesses will be able to receive the grant by June, he said. Originally, eligible businesses for the grant would have been notified from June 2022.

The finance minister was responding to MPs who had asked if the Government would be enhancing the support measures announced in the Budget.

"We will need time to allow these measures to take effect and feed through the economy, before we can monitor their impact, assess the overall situation and then consider what additional steps we might want to take," he said.

Mr Wong also noted that the Budget had included rebates for service and conservancy charges (S&CC) and utility bills for households.

"This will address a key cost of living component which several members asked about," he said.

Other measures in place include the Covid-19 Recovery Grant to help those experiencing job loss or sustained income loss - available till the end of the year - and the Taxi Subsidy Scheme for lower-income persons with disabilities who require point-to point services to commute.

Mr Wong said: “If the situation worsens and more support is needed, the Government stands ready to do so.”

Singapore will always need to deal with carbon constraints, tight labour market: Lawrence Wong
By Choo Yun Ting, Business Correspondent, The Straits Times, 4 Apr 2022

While war and global inflationary pressures are responsible for the current increase in prices here, carbon and labour are set to be permanent constraints for Singapore's economy, Finance Minister Lawrence Wong said on Monday (April 4).

Even if the war in Ukraine had never happened, Singapore would still need to adjust to a secular increase in energy prices as it decarbonises its economy, he said. The country's rapidly ageing population also means it will continue to face a tight labour market in the future.

This means that Singapore cannot offset labour and carbon costs perpetually and must double down on its transformation efforts to make its economy more resilient to external shocks, Mr Wong added.

During his ministerial statement in Parliament, Mr Wong provided the House with an update on the macroeconomic situation amid the conflict in Ukraine and the Government's approach on issues such as inflation and support for households.

He highlighted several factors that contributed to rising global prices in 2021, such as expansionary macroeconomic policies adopted by major economies such as the United States and the euro zone to stimulate economies amid the Covid-19 pandemic, supply chain pressures and demand for energy outstripping supply.

With the war in Ukraine, it is now likely that global inflation will be higher for longer, the minister acknowledged.

Inflation in Germany and the US has already risen to nearly 8 per cent, the highest in 40 years, and no one can tell how the war in Ukraine will unfold, Mr Wong said.

"We all hope that attempts to de-escalate are successful, and a diplomatic solution can be found at the negotiating table.

"But we must be prepared for a prolonged conflict, or even further escalation, which will cause further supply disruptions and additional inflationary pressures," he cautioned.

Aside from the war, other factors are also contributing to rising prices, Mr Wong said, pointing out how the global economy is continuing to grapple with supply chain issues due to the pandemic.

In the longer-term, global warming and increased adverse weather events could affect agricultural productivity and reduce food production, putting upward pressure on prices, and the global economy will also have to internalise the cost of carbon in its overall consumption over time, he added.

Mr Wong noted how central banks of several major economies, such as the US Federal Reserve and the Bank of England, have raised interest rates to tackle inflation, with the European Central Bank expected to follow suit.

But these central banks also face a difficult dilemma in needing to balance between economic growth and reining in prices, he said.

If downside risks of higher inflation and slower growth for the global economy materialise, there will be a major impact on Singapore as a small and open economy, the minister said.

To this end, Singapore has anticipated some of these risks and taken prompt action through monetary and fiscal policies.

For one thing, the Monetary Authority of Singapore (MAS) had pre-emptively raised the rate of appreciation of its exchange rate policy band in October last year and also in an off-cycle move in January this year, to help dampen inflationary pressures, Mr Wong pointed out.

"Monetary policy will continue to do its part to ensure medium-term price stability," he said, adding that the MAS is watching closely the impact of geopolitical- and pandemic-related shocks on the Singapore economy and inflation, and will be putting out its monetary policy statement later this month as scheduled.

Mr Wong underscored the importance of economic restructuring and transformation to make Singapore's economy more resilient to external shocks.

"This is also how we sustain continued income growth for Singaporeans, with earnings rising faster than inflation, so that we can retain and grow our purchasing power, and achieve higher standards of living," he said.

Citing how the pandemic had accelerated the pace of digitalisation among businesses here, the minister said he hopes the current increase in business costs and energy prices will motivate all firms to change their mindsets and practices, and to tap available government schemes to transform.

To help businesses deal with current challenges, the disbursement of the Small Business Recovery Grant, which provides one-off cash support of up to $10,000 for small and medium-sized enterprises most affected by Covid-19 restrictions over the past year, will be brought forward, Mr Wong said.

Most eligible businesses will be able to receive the grant by June, he noted. It was earlier announced at Budget 2022 that eligible firms would be notified from June.

In his speech, the minister also noted how this is not the first time Singapore has had to deal with such challenging external economic conditions. For example, the Republic's inflation rate was as high as 30 per cent year on year in the first half of 1974 and around 10 per cent in the second quarter of 1980 during the oil crises of the 1970s.

"These events underscored our vulnerabilities to inflation, as a price-taking small open economy. In response, in the early 1980s, we developed a unique exchange rate-centred monetary policy that helped tame imported inflation," Mr Wong said.

Similarly, the Government's swift action also helped Singapore navigate the 2008-2009 global financial crisis, and measures taken amid the Covid-19 pandemic have enabled resident employment and income to quickly recover to pre-pandemic levels while keeping the death toll low.

But Singapore now faces yet another economic challenge, before it has had the chance to see through the pandemic, said the minister.

"After many years of relative price stability, the recent surge of higher inflation has understandably come as a shock to many. But when viewed against the global context and our own experience, I hope we can better understand the causes of higher prices and what we can do to manage this together."

Singapore must not let the current situation become a "blame game", with the Government against people, sellers against buyers, or hawkers against consumers, he stressed.

"What we are experiencing today in Singapore is the result of external forces that impact the entire global economy. We can't do very much to change this, but we can continue to keep faith with one another as we have done over the last two years."

Lowering fuel duties counterproductive, will amount to subsidising private transport: Lawrence Wong
By Kok Yufeng, Transport Correspondent, The Straits Times, 4 Apr 2022

Reducing or suspending petrol and diesel duties to cushion the impact of rising fuel prices on motorists and transport operators here will have counterproductive effects, said Finance Minister Lawrence Wong on Monday (April 4).

Fewer than four in 10 households in Singapore own cars, he noted. Among the lowest quintile, only about one in 10 households do.

A reduction in fuel duties or the provision of road tax rebates would hence benefit this "relatively small but generally better-off group", Mr Wong said in Parliament.

Should fuel duties be cut, some of the subsidies will also flow back to fuel producers and suppliers instead of just consumers as pump prices may fall by a smaller margin than the reduction in duties.

More crucially, such a move will also reduce the incentive to switch to more energy-efficient modes of transport, which is a critical element in Singapore's plans for sustainable living, Mr Wong added.

The minister was responding to calls from seven backbenchers - Mr Murali Pillai (Bukit Batok), Mr Edward Chia (Holland-Bukit Timah GRC), Mr Xie Yao Quan (Jurong GRC), Ms Mariam Jaafar, Dr Lim Wee Kiak (both Sembawang GRC), Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Workers' Party MP Louis Chua (Sengkang GRC) - to temporarily lower fuel excise duties, give road tax rebates or provide other support in the light of spiralling fuel prices.

Fuelled by the war in Ukraine and subsequent sanctions on Russia, prices at the petrol pump climbed to $3 a litre or more in early March. Pump prices have fallen since then due to easing oil prices, with all brands of 92-octane fuel and one 95-octane dipping below $3 as at Monday (April 4).

Mr Wong said on Monday that he understood why MPs had asked the Government to reduce or suspend fuel duties in the light of the rise in pump prices.

But he said the better way to help Singaporeans cope with rising fuel costs, and inflation in general, is to provide them with support through measures that have been catered for as part of the Budget this year. These include rebates for service and conservancy charges and utility bills, as well as increased assistance for the lower-income.

The $100 of CDC Vouchers for every Singaporean household announced in the Budget will also be disbursed sooner, by mid-May, he added.

"Through these measures, we are extending concrete help directly to Singaporeans to cope with their different areas of needs, including their utility bills, children's education, and daily essentials, and we are providing more targeted help for the lower-income groups," he said.

Mr Wong said he recognised that some groups, such as cabbies, private-hire car drivers and delivery riders, have been affected by increases in petrol and diesel prices.

He noted that taxi and private-hire car operators have implemented temporary increases in fares to cushion the blow of higher pump prices, and have consumers share this burden.

He also noted that these operators have tie-ups with petrol companies to offer fuel at discounted prices.

He urged those who are in need of financial assistance to approach social service offices, community centres, or self-help groups.

Duties went up to 79 cents a litre for premium grades (98-octane and above) petrol, and 66 cents a litre for intermediate grades (92-octane and 95-octane).

The increases of 15 cents a litre for premium grades and 10 cents for intermediate grades were meant to set price signals and change behaviour in order to get drivers to either switch to electric vehicles or drive less, then Finance Minister Heng Swee Keat had said.

Mr Wong said on Monday that the Government collects fuel duties and road taxes for revenue, as well as to price in the negative externalities of vehicle transport, such as the impact on public health and the environment.

Over the past five years, the Government has collected an average of $920 million a year in fuel duties at the pump.

This has gone towards various programmes and subsidies that directly benefit Singaporeans, Mr Wong added, including spending on public transport infrastructure.

During the subsequent debate, Mr Wong reiterated that the fuel duties play an important role in Singapore’s plans to become more sustainable.

“We all talked about wanting to move greener, wanting to embrace more energy-efficient modes of transport, a point which everyone supported, incidentally, in this House not too long ago,” said the minister, referencing the debate in March on the Government’s green plan.

“And then now, at the first sign of price rising, we are wanting to withdraw so quickly? So let’s have some perspective... yes we have, indeed, an immediate issue of inflation to tackle, but we also want to press ahead with our net-zero plans and our green transition, and these duties are there for that important purpose.

"It doesn’t mean we will not do anything to help the affected groups at all, because we will find other ways to help.”

Fuel duties help Singapore achieve net zero emission targets: Lawrence Wong
By Linette Lai, Health Correspondent, The Straits Times, 4 Apr 2022

Even as Singapore works to tackle the immediate problem of inflation, it should take a broader perspective where fuel duties are concerned, said Finance Minister Lawrence Wong on Monday (April 4).

He pointed out that such taxes are an important part of the country's plans to achieve net zero emissions and become a greener economy.

"We all talked about wanting to move greener, wanting to embrace more energy-efficient modes of transport - a point which everyone supported, incidentally, in this House not too long ago," Mr Wong told Parliament.

"And then now, at the first sign of prices rising, we are wanting to withdraw so quickly? Let's have some perspective in seeing the broader considerations and challenges."

The minister had earlier delivered a statement on inflation and business costs in Singapore, in which he set out the Government's stance on fuel duties and road tax rebates.

Any move to suspend or reduce petrol and diesel duties would amount to a subsidy on private transport, and benefit a small group of people who are already more well-off, he said.

It would also see some subsidies flowing back to fuel producers and suppliers, instead of just benefiting consumers.

Mr Murali Pillai (Bukit Batok) pointed out that petrol duties were last raised in February last year, when no one could have predicted that the Ukraine war would take place and result in fuel prices going up.

He asked when the Government would consider cutting fuel duties, given how much these impact business costs.

Mr Wong responded that the revenues generated by such taxes are not small, and are used to subsidise public transport, among other things. "So we should think carefully about giving up these sources of revenue, particularly when we are facing considerable revenue challenges already."

The minister also pointed out that fuel duties price in negative externalities that result from the use of petrol and diesel. It would not be consistent for Singapore to progressively raise carbon taxes - as it is currently doing - while reducing fuel duties, he said.

"We will help people who are affected... We have been helping, and we will continue to monitor the situation. For those who need more help, if the situation worsens, we will certainly do more," Mr Wong added.

"But the better way of helping is not through a reduction in fuel duties. The better way of helping is to directly help those who are impacted through other means."

Mr Xie Yao Quan (Jurong GRC) then asked about the possibility of cutting just diesel duties, as many delivery vehicles rely on diesel fuel.

Mr Wong reiterated that the issue of negative externalities remains whether the fuel in question is diesel or petrol.

"We have, indeed, an immediate issue of inflation to tackle," he said. "But we also want to press ahead with our net zero plans and our green transition. These duties are there... for that important purpose."

This does not mean that the Government will not do anything to help affected groups, such as cabbies and private-hire car and delivery drivers, Mr Wong added.

"We will do more to help them, but we will help them directly, more effectively - rather than through a reduction in duties."

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