Singapore Budget 2024: Building Our Shared Future Together

A Budget for all as Singapore tackles immediate cost-of-living challenges, invests in longer-term goals

By Goh Yan Han, Political Correspondent, The Straits Times, 17 Feb 2024

Everyone will have a slice of the Budget 2024 pie, which aims to address immediate challenges like cost-of-living pressures while investing in longer-term goals of strong economic growth, better jobs and a culture of lifelong learning.

Key policy moves include enhancements to the Assurance Package like giving out more Community Development Council (CDC) vouchers.

A significant top-up of SkillsFuture credits will benefit mid-career workers, while a corporate income tax rebate aims to help companies manage rising costs.

The Government will also be rolling out strategies to improve retirement adequacy, lower healthcare costs and provide more for lower-wage workers.

Many of these moves were signposted earlier in the Forward Singapore report released in October 2023.

Budget 2024 rolls out the first instalment of the Forward Singapore programmes, Deputy Prime Minister Lawrence Wong said in Parliament on Feb 16 as he delivered his third annual Budget speech.

He laid out a $131.4 billion proposal – about 18.3 per cent of Singapore’s gross domestic product.

These moves are part of an “ambitious agenda” to achieve the shared goals of building a nation that is vibrant and inclusive, fair and thriving, as well as resilient and united, he said.

They come amid a mixed outlook for 2024, he said. Growth in major economies is expected to be resilient, but geopolitical risks continue to loom large.

At the same time, global inflationary pressures are tipped to further recede, said DPM Wong, who is also Finance Minister.

He was “cautiously optimistic” that 2024 will be better than 2023, as he projected a $0.8 billion surplus for the upcoming financial year – “essentially a balanced fiscal position”.

Tackling cost-of-living pressures

DPM Wong acknowledged the pressure of higher living costs faced by many households.

While the economic situation is expected to improve in 2024, there are still uncertainties, which is why he has further enhanced the Assurance Package, said DPM Wong.

The package, meant to offset the impact of the goods and services tax hike, will be boosted by another $1.9 billion.

This includes an additional $600 in CDC vouchers for all Singaporean households, with the first tranche of $300 to be disbursed in end-June, and the remainder in January 2025.

All adult Singaporeans with an assessable income of up to $100,000 and who do not own more than one property will also receive a Cost-of-Living Special Payment of between $200 and $400 in cash.

Other measures to help individuals with costs include a MediSave top-up of up to $300 for about 1.4 million adult Singaporeans aged 21 to 50.

Those aged 51 and above will receive up to $1,500 in their Medisave Accounts under the earlier announced Majulah Package.

To help parents, fee caps – the maximum amount that school operators can charge – will be reduced for government-supported pre-schools. There will also be fee reductions for special education schools.

In addition, there will be a personal income tax rebate of 50 per cent, capped at $200, for the 2024 year of assessment.

Businesses will also receive help to manage rising costs, such as a 50 per cent corporate income tax rebate, capped at $40,000.

Supporting workers and businesses

A key component of the Budget is a suite of measures targeted at mid-career workers.

All Singaporeans aged 40 and above will receive a $4,000 top-up in SkillsFuture Credit as part of a new SkillsFuture Level-Up programme.

This will benefit about 1.95 million Singaporeans currently, though those younger will receive the top-up as well when they turn 40.

While the existing basic tier of $500 SkillsFuture Credit covers a wide range of courses, the new credit will only be allowed for use for selected training programmes with better employability outcomes. More details will be announced later.

Under the new programme, there will be subsidies for all Singaporeans aged 40 and above to pursue another full-time diploma at polytechnics, institutes of technical education and arts institutions from the 2025 academic year onwards. Currently, only those studying for their first diploma benefit from government subsidy.

DPM Wong also unveiled a monthly training allowance for Singaporeans aged 40 and above who enrol in selected full-time courses.

These moves are meant to help Singaporeans develop to their fullest potential, and to have productive and meaningful careers, he said.

A key priority of the Government is to ensure a strong, innovative and vibrant economy – and it will do so by focusing on productivity and innovation, he added.

DPM Wong announced a new Refundable Investment Credit, a tax credit meant to help Singapore stay competitive and attract investments from global companies.

There will also be investments to upgrade the Nationwide Broadband Network to enable mass market access to broadband speeds of up to 10 gigabits per second in the second half of this decade. This would be 10 times faster than the broadband speed in most homes today.

DPM Wong also brought up the temporary financial support scheme for the involuntarily employed, which had been mentioned in the Forward SG report.

He said that the Government is working out the parameters for the scheme, and will provide more details later in the year.

“Ours must always be an economy that provides opportunities for all; an economy that benefits the many rather than the few,” he said.

In this vein, DPM Wong announced enhancements to schemes that uplift lower-wage workers, such as the Workfare Income Supplement scheme and Workfare payouts.

The Government will also provide more support for employers who raise the wages of lower-wage workers by increasing its co-funding levels of the Progressive Wage Credit Scheme – from a maximum of 30 per cent to 50 per cent.

To encourage and support more young ITE graduates in upskilling efforts, a new ITE Progression Award will be rolled out for those aged 30 and below.

This will include a $5,000 top-up to their Post-Secondary Education Accounts when they enrol in a diploma programme, as well as a further $10,000 top-up to their Central Provident Fund (CPF) Ordinary Account when they attain their diplomas.

Help for seniors

Another area that the Budget provides for is support for the retirement needs of senior citizens.

DPM Wong said there will be adjustments to the CPF system, such as an increase in CPF contribution rates for those aged 55 to 65 by 1.5 percentage points in 2025.

Employers will be able to benefit from the CPF Transit Offset for another year, to cover half of the increase in their contributions for 2025. This will help cushion the impact on business costs.

The Enhanced Retirement Sum – the maximum amount one can put in the CPF retirement account to receive CPF payouts – will also be raised from 2025, to become four times the Basic Retirement Sum (BRS). It is currently three times the BRS.

The CPF system will also be tweaked, as the Special Account will be closed for those aged 55 and above, starting in 2025. The savings in the Special Account will be transferred to the Retirement Account, up to the Full Retirement Sum. The rest will be transferred to the Ordinary Account.

In addition, there will be enhancements to retirement support schemes for seniors who need more help. These include the Silver Support Scheme and Matched Retirement Savings Scheme.

DPM Wong also provided more details on the Majulah Package, announced by Prime Minister Lee Hsien Loong at the National Day Rally in 2023. The scheme will benefit about 1.6 million Singaporeans.

The package includes an Earn and Save Bonus for seniors earning up to $6,000 a month to accumulate more retirement savings and a one-time Retirement Savings Bonus of between $1,000 and $1,500 for seniors with retirement savings below the BRS.

Rounding up his speech, DPM Wong said the Forward Singapore policy moves will cost around $5 billion in the 2024 financial year, and will in total reach close to $40 billion by the end of the decade.

Projections by the Finance Ministry in 2023 assessed that government spending would increase to around 20 per cent of GDP by 2030.

DPM Wong said that for now, that remains the Government’s assessment.

Assuming the Government stays within this range of spending increase, it should have sufficient revenues to maintain a balanced budget over the coming years, he added.

But the medium-term fiscal position is tight, as there are many pressures to spend more.

“We will have to manage these expenditures carefully, or we will end up with a significant funding gap,” he said.

This is already happening in many other advanced economies, where public finances are on an unsustainable path and fiscal systems are at risk of breaking, he added.

“We must never allow this to happen in Singapore. Instead, let us uphold the ethos of fiscal discipline and responsibility that has served us well, and ensure that our fiscal position always remains balanced, sound and sustainable.”

He reiterated that Singapore has been able to weather past storms and emerge stronger.

“I believe we can do so again in our road ahead, so long as we stay united, work together and continue to keep faith in each other.”

Parliament will debate the Budget and the spending plans of various ministries from Feb 26 to March 7.

PM Lee Hsien Loong addresses Singapore's public finances and reserves in Parliament on 7 February 2024

Singaporeans are both beneficiaries and stewards of the reserves: Prime Minister Lee Hsien Loong at the Debate on the Motion on Public Finances

By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 8 Feb 2024

Sacrifice and careful husbandry by earlier generations was how the Republic built up its nest egg of past reserves, and the current generation should see themselves as not just beneficiaries but also trustees who protect this inheritance for future Singaporeans, said Prime Minister Lee Hsien Loong.

The past savings were built up at a unique time in Singapore’s history when it could set aside budget surpluses, and if they are gone, it will not be possible to build them up again, he stressed.

This is why it is important to have the “right instincts”: to save where possible, to resist pressures to use the reserves, and to unlock them only when really necessary, he said.

PM Lee was speaking in Parliament on Feb 7, amid calls by opposition MPs for the Government to use more of the reserves.

“We must not erode the patrimony, this family treasure, which we have inherited from our forefathers, nor should we burden future generations with debt nor mortgage their future,” he added.

This compact of protecting the reserves has been forged across generations of Singaporeans, and had also been upheld across both sides of the House, he said.

He reiterated the Government’s long-held stance on the reserves in response to a call by Progress Singapore Party (PSP) Non-Constituency MPs Leong Mun Wai and Hazel Poa for the Government to review its current budget and reserves accumulation policies.

The two NCMPs had proposed that more of the reserves be used to “help present-day Singaporeans reduce their financial burdens and improve their quality of life”.

They were joined in this by Leader of the Opposition Pritam Singh and Workers’ Party (WP) MPs, who repeated their party’s position that using more investment returns would not jeopardise growth of the reserves.

Mr Leong said that in the face of the goods and services tax (GST) hike and rising cost of living, accumulating reserves at the current rate “hurts the welfare of present-day Singaporeans”.

PSP’s view is that current reserves are enough, especially if the Government is raising taxes “for the sake of maintaining the current rate of reserves accumulation”.

How much is enough?

But it is a misconception that a specific number can be deemed enough when it comes to the reserves, said PM Lee.

He recounted how Singapore first tapped $4 billion of the reserves in 2008 when the global financial crisis hit, to help employers pay Central Provident Fund contributions and protect jobs.

When the Covid-19 pandemic hit, some $40 billion was drawn from the reserves to fund assurance packages and pay for vaccines to save lives and livelihoods.

That is far from the worst thing that can befall Singapore, PM Lee added. He noted that the war in Ukraine costs the Eastern European country more than US$100 million (S$134 million) a day.

These examples are why there is no sensible answer to the question of how big a nest egg is enough.

“Looking ahead 50 years, can anyone promise that Singapore will enjoy another half century of peace and tranquillity? Or guarantee that someone will come to our rescue if we ever find ourselves in the same situation as Ukraine?” he said.

“We can never say for sure how much is enough, because we do not know what kind of crises we will face in the future, or how our investments will fare.”

But that does not mean Singapore should mindlessly save for a rainy day without regard for present needs, said PM Lee.

That is why the Government had enshrined in the Constitution the “50-50” rule, which allows up to half of returns from investing the reserves to be used for current spending.

This also happens to be about the right ratio to keep the reserves in proportion with the gross domestic product, PM Lee added.

With long-term expected real returns of the reserves currently at about 4 per cent, the Government can spend about 2 per cent and save the other 2 per cent. Singapore’s economy is expected to grow at about 2 per cent a year if things go well.

Keeping this balance means the Government can count on the reserves to provide one-fifth of its annual revenue – or around 3.5 per cent of GDP – without having to double the GST, said PM Lee.

Reserves spent on current generations

Among the points Mr Leong made was that too much money from the reserves was locked up in trust and endowment funds to pay for longer-term spending, at the expense of current generations.

Ms Poa, meanwhile, suggested that it was excessive to plough the proceeds of land sales back into the reserves, since land is sold on leases and is thus more akin to a renewable resource.

The Government’s policies therefore prioritised future generations at the expense of current Singaporeans.

Rebutting these arguments, Minister in the Prime Minister’s Office Indranee Rajah said that money in these funds was “not just for the far unknown future”, but was set aside to meet specific funding commitments for the benefit of today’s Singaporeans.

These include the over $2 billion disbursed each year from the GST Voucher Fund to help lower- and middle-income households defray their GST expenses, and money in the Pioneer Generation Fund and Merdeka Generation Fund that is drawn down regularly to support Singaporeans in those cohorts.

As for funds set up to pay for large infrastructure projects, these help to smoothen the lumpy spending on such projects and ensure that future generations will not have to scramble to find money to pay for them, Ms Indranee said.

“This is prudent, thoughtful and responsible fiscal policy – not evidence of excess fiscal resources,” she added.

As for treating land sales as revenue, Ms Indranee said selling land did not generate wealth. Instead, it merely converted a physical asset into a financial asset.

The cash proceeds accrue to the reserves and are then invested to generate returns, which contribute to government spending. In this way, the proceeds of land sales are used indirectly in each year’s budget, she said.

Past savings are also a strategic asset during crises and emergencies. Thus, it would be imprudent to disclose the size of the reserves, she said in response to calls for greater transparency from PSP and WP MPs.

Take it to the ballot box

PM Lee noted that the growing political pressure to use more of the reserves was not new, and that it would always be tough to raise taxes.

Early in Singapore’s history, founding prime minister Lee Kuan Yew and his team had anticipated this, and that is why they had formulated a two-key system that required the president’s approval to unlock the country’s savings, he said.

When Singapore instituted the 50 per cent spending rule in 2001, the former prime minister intervened in the debate to remind the House that at the end of the day, the Government’s deepest obligation is to the future.

“Not just to the present; certainly not to the past,” said PM Lee.

He said that is why in taking care of today’s citizens, the People’s Action Party (PAP) Government is conscious to also safeguard the interests of young people not yet of voting age, future citizens not yet born, and the long-term interests of Singapore.

This ethos was in fact shared across the aisle in the past, he added, noting that former WP leader Low Thia Khiang had commended the Government for being prudent when it returned $4 billion to past reserves in 2009.

“Now I hear the opposition arguing that we should change the rules and draw more from reserves, and that of course they have no intention to raid the reserves, far from wanting to bankrupt Singapore,” said PM Lee.

“They say we can easily afford what they are proposing, I conclude their tune has changed.”

Mr Singh’s rejoinder was that different times call for different measures, which was why the PAP Government has said it is unlikely to return to the reserves the $40 billion it took out to deal with Covid-19.

Mr Singh, who is WP chief, also said the Prime Minister was cherry-picking what Mr Low had said.

PM Lee said the PAP is convinced that it has the right approach to stewarding the reserves.

Opposition parties who want to spend more should therefore put the issue upfront and campaign on it at the next general election, he said.

“Say you want to touch, you want to spend, you want to shift the rules,” he said. “Don’t pretend that you’re just as prudent, only more kind-hearted.”

The PAP will join the issue and convince Singaporeans that its way – taking a long-term view of the reserves, and striking the right balance between present and future needs – is the right one for Singapore, said PM Lee.

“We are confident that we will win the argument, and we’ll be able to get Singaporeans to do the right thing.”

PM Lee said he had spent 40 years of his life stewarding and safeguarding the reserves, and was now preparing to hand over to his successor a Singapore in good order, one that is more prosperous and more secure.

“I ask everyone to help them maintain the prudent policies that have served us well to keep Singapore on the right track, so that we can all continue to benefit from the nation’s success for many years to come,” he said.