Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
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“These rebates will benefit 800,000 households and cost the Government about $200 million, on top of the amounts committed as part of the GST Offset Package. How the household benefits add up These measures will provide significant benefits for Singaporeans this year, and further benefits in the future. The average Singaporean household, someone at the middle of the income spectrum, will receive about $3,000 from this year’s Budget. $3,000 is equivalent to about 5% of their annual household incomes. It will also be more than double the increase they could see in their household expenses this year[8] [Chart 5 and Annex B-2* ]. Further, these Government benefits are on top of wage increases that they can expect to receive which will also help to offset inflation. The Government benefits alone are more than double the likely increase in cost of living this year and on top of that, you have got wage increases in a tight-labour market and a growing economy. Lower-income households will get more, especially in comparison to their household expenses. I will illustrate with the case of a 4-person family, with parents earning a combined monthly income of $2,000. They have two young children, one in primary school and the other in childcare. Not an uncommon description of a low-income family. The couple will receive Growth Dividends of $1,700 and Workfare Special Bonus of $780 in total. In addition, they will benefit from a Child Development Credit of $400, for that one child who is in childcare and a further $260 from this year’s enhanced U-Save and S&CC rebates. In total, therefore, they will receive about $3,100 from the "Grow & Share" package.”
“I will also give $300 to those who live in more expensive homes but who do not have high incomes [Table 3* ]. To recognise their contributions to the nation, I will also give NSmen and NSFs, including those below 21 years of age, an additional $100 of Growth Dividends. This is on top of the National Service Recognition Award (NSRA) payments that eligible servicemen will be receiving, starting February 2011. The Growth Dividends will benefit about 2.5 million Singaporeans and cost the Government $1.5 billion this year. Singaporeans can look forward to receiving their Growth Dividends and CPF top-ups by 1st May 2011. Help with household expenses Besides the Growth Dividends, we will provide households with more direct help to cope with rising expenses. Utility costs are going up because of the sharp rise in global oil prices. To help households cope with rising costs, I will provide additional Utilities-Save (U-Save) and Service and Conservancy Charges (S&CC) rebates this year. *Cols. 2705-2706. Singaporeans in HDB flats are still receiving U-Save, S&CC and rental rebates as part of the GST Offset Package introduced in 2007. I will top up the U-Save rebates this year. 1- and 2-room households will get an additional $170, giving them a total of $360 in U-Save rebates this year. This is equivalent to about five months of their utility bills. Those in 3- and 4-room flats will get between $320 and $340, and a little less for 5-room and executive flats. I will also provide additional S&CC rebates. 1- to 4-room HDB households will get an extra month of rebate. This will add up to three months of S&CC rebates this year for 1- to 2-room households, two months for 3- and 4-room households, and at least one month for the larger flats [Table 4* ].”
“"Grow & Share" package Mr Speaker, Sir, we have introduced several long-term measures to help lower- and middle-income Singaporeans in this Budget. I am complementing these long-term measures with a package of one-off measures to share our surplus and provide benefits to Singaporeans this year. This is our "Grow & Share" package, which will total $3.2 billion. I have already described some of the measures in this package, including rebates on personal income tax, the Workfare Special Bonus, top-ups to CPF Medisave accounts, the new Child Development Credit, top-ups to funds that benefit school-going children, and additional support for self-help groups and VWOs. Let me now announce further measures in the "Grow & Share" package that this year’s good Budget makes possible. Additional measures in the "Grow & Share" package –Growth Dividends First, to share the fruits of last year’s exceptional economic growth, I will give Growth Dividends to all adult Singaporeans. As in the past, the amount each Singaporean will receive will depend on his income and the value of his home. Both factors are relevant. We should give more to Singaporeans who are low-income regardless of where they live. However, there is also a difference in the level of affluence between those who stay in smaller HDB flats and those who live in high-value properties, even if they may not be drawing much income, for example, spouses who are not working. The majority of Singaporeans – 80% – will get $600 to $800 each in Growth Dividend this year. Those with low incomes and who live in 3-room or smaller HDB flats will get a Growth Dividend of $800. Those in the middle-income group and who live in HDB flats and low-value private homes will receive a Growth Dividend of $600.”
“An estimated 700,000 residents in Jurong Lake, East Coast, and Hougang will also enjoy the new batch of improvements under the Remaking our Heartland (ROH) initiative, some of whom will be beneficiaries also of the Neighbourhood Renewal Programme and the Home Improvement Programme. These rejuvenation and upgrading projects will take place in phases across the island. Building a vibrant arts and culture environment We will also bring the arts and culture within reach of more Singaporeans, and add depth and vibrancy to our arts scene. Interest in arts and culture is in fact growing. Singapore’s arts scene is now being noticed internationally. CNNGo recently highlighted the top reason to visit Singapore this year as being that "Art is Alive", citing a whole range of events taking place, including the Huayi Festival and Art Stage Singapore which were recently held, and upcoming events such as the Singapore Biennale and the Mosaic Music Festival. We will build on the positive momentum we have achieved in recent years. The main thrust of what we want to do is to reach out to everyone, and to move beyond the arts and civic district into the heartlands. We will also provide enhanced support for arts institutions and practitioners, so as to encourage groundbreaking new work and to enable more Singaporeans to fulfil their aspirations for careers in the arts. The Minister for Information, Communications and the Arts will speak about these plans during the COS. We will therefore significantly increase Government spending on arts and culture. Over the next five years, our average annual programme spending, and this does not include things like infrastructure, will be about $365 million, an increase of more than 50% over the current level.”
“Helping lower-income families own their homes –Special CPF Housing Grant We currently provide the Additional CPF Housing Grant (AHG) to help the bottom 50% of our households to own their homes. The low-income group in particular gets an AHG of $40,000. In this Budget, we will introduce further significant measures to help low-income families purchase their flats. The Government will introduce a Special CPF Housing Grant (SHG) to help low-income families making a first-time purchase of a Build-to-Order flat, on top of the existing Additional CPF Housing Grant. This Special CPF Housing Grant will be provided to families who earn up to $2,250 per month. The Special CPF Housing Grant, together with our other subsidies, will allow more low-income families to own their own homes. In total, the Government will provide about $175 million in grants each year, for these families to pay for the flat which they will own. This is in addition to providing them with a subsidised loan to pay for their share. Details of this new Grant will be provided by the Minister for National Development in the COS. Rejuvenating our heartland We will spend $10 billion to upgrade homes and rejuvenate estates over the next 10 years. This is a major effort to preserve the value of our HDB flats and help them appreciate over time. Under the Home Improvement Programme (HIP), Neighbourhood Renewal Programme (NRP) and Lift Upgrading Programme (LUP), we will invest up to $55,000 per flat. In 2011 alone, around 50,000 flat owners will benefit from these schemes. In the following five years, from 2012 through 2016, another 300,000 flat owners will benefit from these upgrading programmes.”
“They are reaching out proactively to more needy families, to ensure that they remain integrated in the mainstream, and to help their children progress in school. To help them do more, I will set aside an additional $20 million to help with the professional development of social workers, so that our VWOs can better serve the needs of needy Singaporeans in the future. I will also provide self-help groups with an additional $10 million over the next two years. Supporting community giving I spoke earlier about our unique approach of co-funding charitable contributions for the purpose of developing the long-term care sector. We will do more to crowd in the community across the charitable sector. So we have unique schemes for universities and long-term care, one for one matching of Government grants and long-term care as introduced in this Budget. But besides that, across the charitable sector, we will do more to crowd in donors, crowd in the community. I will extend for another five years the 250% tax deduction for contributions to Institutions of Public Character (IPC) that I introduced in 2009. The enhanced scheme has had encouraging results, with sustained giving even during the 2009 recession. I hope that with the strong recovery in both corporate and higher-end individual incomes, we will see many more coming forward to help us make Singapore a truly caring society. Enhancing homes and our quality of life We are making major investments to make Singapore a top quality home for our citizens. We also want more Singaporeans, including those in the lower-income groups, to have a home of their own which they can take pride in, which can appreciate in value over time, which will allow them to share in our prosperity together with other Singaporeans.”
“In addition, the Government will raise the target size of the Medifund endowment from $2 billion to $3 billion. Helping the needy –enhancing ComCare The ComCare Fund has proved to be a major benefit to needy citizens, enabling them to tide over difficult times. The Fund now stands at $800 million. I will inject a further $500 million into the ComCare Fund this year. The Government will also raise the target size for the ComCare Fund from $1 billion to $1.5 billion. The income from this larger fund will ensure that there is no lack of support for needy Singaporeans, even in years when our economy is down. Increase in Public Assistance and Singapore Allowance We will also revise the Public Assistance (PA) scheme, which provides financial aid to those who are permanently unable to work. The adjustments will ensure that the basic needs of PA recipients are adequately met, taking into account recent increases in their household costs, and to provide a buffer for possible spikes that we may see this year, for example in food prices. For a single-person household, we will raise PA rates from $360 currently to $400 a month. Corresponding adjustments will be made for larger households and for the children. The Minister for Community Development, Youth and Sports will provide more details of these increases in the COS. We will also make adjustments to help lower-income Government pensioners. The Government will increase the Singapore Allowance by $20 per month to $260. This will raise the monthly pension ceiling to $1,190 and benefit about 10,000 pensioners. Additional funding to VWOs and self-help groups Our self-help groups and VWOs such as family service centres have been expanding their roles.”
“I encourage our philanthropists and others in the community to come forward, participate, and help develop new and better care services together with our VWOs. Support for programmes to help the elderly immobile We will provide additional financial support for low-income elderly people to help improve their mobility and independence, such as obtaining assistive devices like wheelchairs and walking-frames. The Government will set aside $10 million this year, for community organisations to tap on for this purpose. The Minister for Health will outline the details of this initiative in the COS. This new initiative is to help the VWOs obtain assistive devices and reach out to low-income elderly people to help them improve their mobility and their lives. Helping with medical expenses – topping up our Medisave accounts Next, I will turn to medical expenses. As part of the surplus sharing that this year’s Budget allows, I will provide a top-up this year to the CPF Medisave Accounts of Singaporeans aged 45 and above. Those aged 45 to 49 will receive up to $300, while those aged 50 to 59 will get a top-up of up to $400. Older Singaporeans will receive more, with those 80 and above getting up to $700 [Table 2* ]. The majority of Singaporeans would fall within the higher quantum. The Medisave top-ups will benefit approximately 1.3 million Singaporeans, and will cost the Government $500 million. Building up Medifund I will augment our Medifund endowment, which is money well spent in *Cols. 2703-2704. helping needy Singaporeans who are unable to pay for their medical expenses even after using their Medisave and drawing on MediShield. The Medifund endowment currently stands at $1.9 billion. I will top it up with another $500 million from this year’s Budget.”
“With this top-up, taken as a whole, we will be able to provide an additional 40% of funding to support the VWOs in the sector. We will also raise the target size of the ElderCare Fund to $3 billion. Matching grants for long-term care Second, besides existing methods of Government funding, the Government will provide support to catalyse a higher level of philanthropic and community support for the long-term care sector. Our VWOs in the sector face many challenges, such as attracting and training good people, and developing new capabilities and services, for which they need more support from the community. I will introduce a scheme of matching Government grants for donations to the long-term care sector, similar to what we have done for our universities. I will put $1 billion into a new Community Silver Trust, to provide one-to-one matching for donations to VWOs that provide long- term care to Singaporeans. This commitment of $1 billion should hopefully spur a much higher level of private funding over the next 10 years. Let me give an example of the type of quality care that this additional support can make possible. This example is one that Members see in St Luke’s Hospital. In fact, a relatively recent innovation, it developed a glove-like device to help its elderly stroke patients regain functionality in their hands. During the trial phase, the "Neuro Hand" programme helped patients recover faster. It will now be used for most stroke patients in St Luke’s Hospital from April this year. A small example, but you need many more of these innovations, better people, better training and, overall, a very high level of capabilities across the sector.”
“We want to provide our seniors with the best possible care and help them stay healthy and active in their retirement years. We are continuing to make major investments in new acute care hospitals – Khoo Teck Puat Hospital was opened last year in the north, and Jurong General Hospital will open in 2014. Our next big priority is to build up our long-term care sector. We will develop a high quality and comprehensive system, to provide the best possible care for the elderly and the disabled, not just in our hospitals but also in the community and in their homes. We will provide enhanced Government support so that we can develop the VWO sector for long-term care – good people and institutions that bring passion, expertise, and resources to help the elderly and disabled. Today, we already have several good long-term care providers amongst our VWOs. For example, St Luke’s ElderCare provides day care services; Metta Welfare Association helps the disabled to stay active; the Home Nursing Foundation does good work to help the elderly in the community. We need more of them, and must raise the quality across the whole spectrum of providers – including community hospitals; day rehabilitation centres and home-based care so that the elderly can be close to family and friends; and also do more to develop high quality institutionalised care in nursing homes and hospices. We will take two important steps to develop this long-term care sector. Top up to ElderCare Fund First, we will strengthen existing Government funding for long-term care. Today, the Government provides significant subventions to providers in the sector through the ElderCare Fund. I will top up the fund by $700 million to reach its previous target size of $2.5 billion.”
“When we add up all the grants and bursaries that the Government is providing in education for students from low-income families – those at the bottom 20% – the support is significant. Currently, a child from a low-income family who starts off in childcare and proceeds through to a polytechnic diploma, already pays only 3% of the cost of his education. With the enhancements we are making today, he will pay just 1% of the cost of his education. [2] As announced in May 2010, the employer CPF contribution rate has been raised by 0.5% point in September 2010, with another 0.5% point increase due in March 2011, which will bring the employer CPF contribution rate to 15.5% in March 2011. [3] Household Expenditure Survey 2007. [4] Including all children born in 2011. [5] The usage and withdrawal of the Child Development Credit will be subject to the current approved usage and withdrawal under the Children Development Co-Savings Act. Children who are not currently eligible for CDAs will continue not to receive matching government contribution. [6] They will now also qualify for CFAC, and receive an additional subsidy of $210 a month. They also currently receive the universal childcare subsidy of $300 a month for each child, which is roughly half the average childcare fee of $588 in NTUC childcare centres. [7] The existing polytechnic bursary scheme only extends to the 50th percentile. The university bursary scheme was extended to the 66th percentile in 2008. Providing the best care for our seniors –transforming long-term care Next, providing the best care for our seniors. Singaporeans are living longer, fortunately. A larger proportion of our people are going to be elderly – by 2030, one in five residents will be aged 65 and above.”
“Each school will receive an average of $15,000. In addition, we will extend the MOE Financial Assistance Scheme to pupils from lower-income families in the SPED schools. It will mean that SPED students from these families will be fully subsidised for their school fees, uniforms, and textbooks, and receive a 75% subsidy on their examination fees. We will then have more Ramadan Salawats in future. Enhanced bursaries for polytechnic and university students We will do more to keep higher education affordable. We have already enhanced our CDC and CCC bursaries for ITE students from low-income families this year. We will increase our *Cols. 2795-2796; undergraduate and diploma bursaries significantly to ensure that no student is discouraged from taking his education as far as possible. We will raise bursaries for undergraduates at our universities, and diploma students at our polytechnics, and NAFA and LASALLE. We will provide bursaries for students from both lower- and middle-income families, up to the 66th percentile of household incomes[7]. University students who get the first tier of bursaries, who are those from the bottom one-third of households, will benefit from an 80% increase in bursaries, from $1,600 a year currently to $2,900 a year. These subsidies will cover 40% of their fees, and the students can finance the rest of the cost with a subsidised loan. They will not need to come up with cash. For diploma students, those from the bottom third of households will receive bursaries that are enough to cover 80% of their fees. In total, the measures will cost us an additional $120 million each year. The Minister for Education will elaborate on the details of these measures in the COS.”
“The amount they have to co-pay for childcare fees will be reduced from $300[6] to about $90 a month. So a family that is earning $2,500 a month will see childcare fees for their child reduced from $300 typically to about $90 a month. If instead their child is in an eligible kindergarten, they will now co-pay $33 a month. Low-income families will continue to pay far less – less than $10 a month for childcare. These enhancements will double the number of children who benefit from KiFAS and CFAC, to a total of 24,000. The Minister for Community Development, Youth and Sports will provide more details in the Committee of Supply (COS). Support for school and tertiary students – Edusave top ups and grants We are topping up each primary and secondary school student’s Edusave account by $130, as has been earlier announced by the Minister for Education. We have also committed an additional $100 million in Edusave grants to schools. Top ups to SAC/SMC funds School Advisory Committees and School Management Committees also raise money to complement Government assistance for these and other needy students in addition to the support that the Government provides directly to the students. To provide more support for the good work of our School Management Committees (SMCs) and School Advisory Committees (SACs), I will provide a one-off top-up of $4.7 million to the funds of SACs and SMCs to help needy Singaporean students. Each school will receive between $10,000 and $15,000, enough to cover about half of what they spend each year to help these students for the purpose. Financial assistance to Special Education schools I will also provide a top-up to the Boards of our Special Education (SPED) schools which are run by VWOs.”
“The Credits will be provided from time to time when we have surpluses to share with Singaporeans. This is similar to the way we provide top-ups to Edusave accounts for school-going children, and to Post-Secondary Education Accounts (PSEA) for students to use when they go on to tertiary education. The Child Development Credit can be used to pay for their children’s preschool, childcare and medical expenses. Eighty percent of families with young children will receive $400 per child, which is, in fact, more than one month’s worth of NTUC childcare fees, after including the universal childcare subsidy. So 80% of families, the majority, will receive $400 for each child. The remaining 20% who are better-off will receive $300. The Child Development Credit will cost about $90 million each year and benefit over 220,000 children aged six and below. The Child Development Credit will be paid into the existing Children Development Accounts (CDAs), which most children already have. For those who do not currently have CDAs, they will be able to open accounts to receive their Credits[5] [Annex B-1* ]. Enhancements to KiFAS and CFAC We will also give additional support to lower-income families by enhancing subsidies for preschool education and childcare fees. The Kindergarten Financial Assistance Scheme (KiFAS) and the Centre-based Financial Assistance Scheme for Childcare (CFAC) currently provide subsidies for children from low-income families. We will enhance and extend subsidies to a larger group of families, including those with up to $3,500 in gross monthly household income. This is, in fact, the 40th percentile in our population. Let me give an example of a family earning $2,500 a month, which is the 30th percentile.”
“Having this cap allows us to provide the greatest benefits to those with chargeable income of less than $120,000, which covers about 90% of our taxpayers. The income tax rebate will cost the Government $580 million. In other words, 90% of our income tax payers will be able to receive that full 20% tax rebate and be unconstrained by the $2,000 cap. [Applause.] Removing radio and television licence fees I will remove radio and television licence fees permanently. The licence fees are losing their relevance. First, ownership of TVs is no longer limited to the middle- and higher-income groups. Members will remember that it was not such a long time ago when it was a luxury. Today, most households – including 99% of lower-income households – own TVs, and often flat-screen TVs. Second, with increasing media convergence, Singaporeans can now receive broadcast content over the Internet and mobile devices, which do not attract a licence fee. I did contemplate extending the licence fees to all of them but I decided in the other direction. I will thus do away with the $110 annual licence fee for televisions, with effect from January 2011. The $27 annual fee for vehicle radios will also be removed. Therefore, those who have yet to pay this year’s radio and television licence fees will not have to make the payment, while a refund will be given to those who have already paid. The revenue forgone from the removal of these licence fees will be approximately $120 million per year. Supporting families with children Sir, let me now move on to what we are going to do to help families with children. Support for early years – Child Development Credit First, I will introduce a new Child Development Credit scheme for all Singaporean children aged six and below[4].”
“Further, only 44% of our resident workforce pay income taxes. However, I will reduce taxes significantly for middle- and upper middle-income taxpayers by introducing a more progressive personal income tax schedule. Marginal tax rates will be reduced for the first $120,000 of chargeable income. All taxpayers benefit when marginal tax rates are reduced at the bottom-end of the scale, even those near the top-end of the scale will benefit some, when you reduce the marginal tax rates at the bottom-end of the scale. But middle-income earners will enjoy the largest percentage reduction in taxes. Those with chargeable income of $60,000 will now pay 25% less tax; they will save $650 a year. So that is the $60,000 the first yellow row, it end up making a 25% tax savings, or $650 each year. Those with chargeable income of $160,000 save a smaller percentage of about 10%; but as they currently pay higher taxes, they will, in fact, save about $1,600 [Table 1* ]. Those with chargeable income above $330,000 will save less than 1%, and get a modest $350. *Cols. 2701-2702; These personal income tax changes will take effect from Year of Assessment 2012. They will cost the Government about $590 million each year. Personal income tax rebate We will continue to review our top personal income tax rate. While it is higher than in Hong Kong, there is no pressing competitive need for us to reduce it at this point. I will however give something back to all taxpayers this year, in view of our stronger than expected revenues in 2010. I will provide a personal income tax rebate of 20% for individual resident taxpayers for YA 2011. The rebate will be capped at $2,000.”
“The bonus will amount to 50% more WIS for work done in 2010, and 25% more WIS each year for work done in 2011 and 2012. So 50% on top of the regular Workfare payment for 2010, and 25% on top of the regular Workfare payment for each of the next two years. Employees will receive these bonuses fully in cash. This year, there will be two Bonus payments, with the first on 15th May 2011. Self-Employed Persons who make their Medisave contributions will also benefit. They will receive half of their bonus in cash and the other half in their CPF Medisave accounts. Let me give an example. A 55-year-old employee earning $1,000 a month last year will be receiving a regular WIS payout of $2,100. That is under the existing scheme. With the Workfare Special Bonus this year, he will get an additional 50%, or additional $1,050. This is equivalent to getting one month extra pay, on top of the regular WIS which provides him more than two months’ extra pay. In other words, he is getting more than three months extra pay from the Workfare scheme when we include this bonus. The Workfare Special Bonus, together with the Special Employment Credit that I mentioned earlier, will therefore provide significant additional support over the next three years for older Singaporeans at work – helping them keep their jobs and topping up their pay, including more in the form of cash. We last enhanced the Workfare scheme in 2010, and will review it again comprehensively in two years’ time. The schemes I have just announced, last for three years. But in two years’ time, we will do a comprehensive review of the whole scheme. Reduction of personal income taxes Next, personal income taxes. Our personal income tax rates are already low by international standards.”
“6 billion – part of which to be received this year, and the rest being set aside for the future. First, I will provide a "Grow & Share" Package of $3.2 billion for households this year, with more going to our lower- and middle-income families. Second, I will set aside $3.4 billion now for longer-term social investments to enhance Singaporeans’ well-being – especially to support a first-class long-term care environment as our citizens grow older. We should study the picture carefully because the amount of rise in longer-term social investments is a little higher than what we see from the "Grow & Share" package that will be received this year. These benefits, however, do not include other permanent shifts in taxes and subsidies that Budget 2011 introduces – including greater progressivity in our income taxes and significantly enhanced bursary support for students. So the $6.6 billion is comprising $3.2 billion of the "Grow & Share" package to be received this year, and $3.4 billion of social investments for the longer-term. On top of that, we are making some permanent changes in our tax and grant scheme that will provide continuing benefits for Singaporeans in the future. *Cols. 2699-2700; Rewarding working Singaporeans Let me start with measures to support working Singaporeans. Workfare Special Bonus Our Workfare scheme currently provides support for about 400,000 workers. As the economy has performed exceptionally and our revenues have been strong in 2010, I will provide a one-off Special Bonus payment for those on the Workfare Income Supplement (WIS) scheme. The Workfare Special Bonus will be given for work done in 2010, as well as for 2011 and 2012.”
“It is part and parcel of how we redistribute the benefits of growth, but keep to fiscal prudence. Together, it all adds up to a highly progressive fiscal system. If we add up all our taxes – income and property taxes, the GST and other indirect taxes – we find that the top 10% of households account for 38% of the taxes paid. That is the yellow bar on the extreme right. The top 10% of households pay 38% of the total taxes paid. The top 20%, if Members add that two yellow bars on the right, the top 20% contribute 53% of all taxes [Chart 3* ]. That is as it should be. A highly progressive tax system, when we take the income taxes, property taxes, GST and other indirect taxes, and the 53% paid by our top 20% of households compares with, for example, if you look at the United Kingdom. The top 20% in the United Kingdom pay for about 43% of total taxes. So ours is a progressive system despite having much lower income tax rates than most of the advanced countries. Our lower-income groups, on the other hand, receive substantially more transfers from Government than what they pay, including the GST and other taxes. For those in the second decile from the bottom which is the yellow bar on the extreme left. This is those from the 10%-20% percentile of households. Net transfers from Government over the last five years were, in fact, equal to about 23% of their old incomes [Chart 4* ]. Transfers received from Government, net of the taxes they pay – GST and other taxes – amounted to 23% of their incomes. What our measures add up to We will keep this progressive system, and enhance it further in this year’s Budget. The Budget will provide a package of benefits for Singaporeans adding up to $6.”
“Some of these developed countries are therefore now undertaking painful reforms to gradually recover their economic dynamism. But there is going to be a wrenching process of change, unwinding this whole system of social entitlements and recovering economic dynamism. Our approach must therefore remain centred on opportunities, not entitlements. This is why we are focusing on helping the low-income group through education, employment and home ownership: (i) We will give their children every support in education, and provide pathways for every ability and talent. We must do everything we can to keep social mobility going in each new generation. (ii) Second, we will support employment, which is our real safety net in Singapore. Instead of automatic unemployment benefits, we provide automatic employment benefits. Through Workfare, we top up to the wages of older, lower-income workers and provide them extensive support to upgrade in their jobs. Employment is the real safety net in Singapore. (iii) Third, we help lower-income Singaporeans own their own homes so that they too can see their assets grow as Singapore progresses. Even amongst the lowest 20% of our households, the home ownership rate is about 85%[3]. No other society comes close. But we will do more. We complement this with ComCare and our health subsidies for the needy, and strong incentives to encourage philanthropic and community giving. Further, when our economy does well and our Budget is strong, we share surpluses with Singaporeans through special transfers, with more going to those in the lower- and middle-income groups. As I mentioned earlier, this is not an incidental approach. It is not incidental to our fiscal policy approach.”
“Finally, I will also extend the Green Vehicle Rebate scheme for another year till 31st December 2012. In the meantime, we will undertake a comprehensive review on the measures to promote the adoption of green vehicles as part of our overall efforts to promote sustainable development. Strengthening our society – building an inclusive society Mr Speaker, Sir, if I can move on now to the measures we are taking to strengthen our society, which is the second major thrust of this year’s Budget. We will do more to build an inclusive society where lower-income citizens can aspire and work towards a better life, and where everyone can contribute and share in Singapore’s progress. The most important way for us to achieve this is to sustain our growth, create good jobs and provide opportunities for everyone to keep upgrading. That is the only way we can grow the incomes of Singaporeans sustainably and over the long term. However, we cannot leave social cohesion purely to market forces. Left to the market, incomes will continue to diverge and opportunities, too, will diverge. This is happening around the world in almost every society that is integrated into global markets. That is why the Government has intervened significantly in Singapore to tilt benefits in favour of those lower down the income ladder. But we must avoid the mistakes of the developed countries which have built up unsustainable systems of entitlements – in healthcare, unemployment insurance and pensions. These have not only meant high taxes today, but huge debts and huge unfunded government liabilities which can no longer be postponed. Worse, the over-generous social entitlements have progressively weakened the work ethic over time.”
“Singapore is fast developing into a location for businesses to manage their clinical research and manufacturing. To support growth in the biomedical sector, I will grant GST relief for imported clinical trial materials as well as enhance the Approved Contract Manufacturer and Trader Scheme. I will allow GST zero-rating for specified services supplied to overseas persons, if they are performed on goods kept in qualifying specialised warehouses and eventually sent overseas. This scheme will help to promote the use of specialised storage facilities that store high-value collectibles such as art and antiques. Lastly, to strengthen our commodity markets, I will enhance the Global Trader Programme to qualify all derivative trades under the scheme. Other tax initiatives I will also introduce a few other tax-related changes. And I will go through them very briefly, but the details are in the Annex*. First, to help start-ups. They often incur substantial costs before they begin generating revenue. It is a typical story for start-ups. I will now allow businesses to claim tax deductions on pre-commencement expenses incurred during the accounting year immediately before the year in which they earn their first dollar of trade receipts. I will also make refinements to the current tax deduction scheme for *Cols. 2711-2794; 2709-2814. companies that purchase shares for the purpose of their equity-based remuneration schemes. I will henceforth allow for tax deductions when they make such purchases through the special purpose vehicles that are set up as trustees to administer the schemes. Next – and no Budget can do without some mention of sin taxes – I will raise the excise taxes by between 5% and 10% on two classes of non-cigarette tobacco products.”
“Banks are increasingly tapping funds from non-bank sources such as hedge funds and insurers which are not covered under the current inter-bank interest withholding tax exemption. To help banks access more diversified funding sources for their lending business and strengthen our position as a regional funding centre, I will exempt all interest payments made by banks and similar financial institutions from withholding tax. I will also extend the tax exemption schemes for Captive Insurers, Specialised Insurers and Marine Hull and Liability Insurers, to grow their technical expertise and underwriting capacity in Singapore. This is a significant move, in other words, previously, we provided with holding tax exemption when banks borrowed from banks. We will now provide the same exemption when banks borrowed from non-bank players such as hedge funds, insurance companies and others. Next, the maritime sector. The GDP contribution of the sector has increased , in fact, from 5% to over 7.5% over the last decade. To further promote its growth, I will introduce the Maritime Sector Incentive (MSI) with effect from 1st June 2011. This scheme will streamline and enhance existing maritime tax incentives. New tax benefits such as certainty of withholding tax exemption for interest payments on loans to build or buy ships will also be introduced to further entrench international ship operators and encourage the growth of the shipping-related services sector in Singapore. I will also expand the scope of GST zero-rating for repair and maintenance services performed on ship parts and components so as to further promote our maritime sector. The biomedical sector continues to grow in importance as a key contributor to our economy.”
“Our Research, Innovation and Enterprise (RIE) 2015 plan for the next five years was announced by the Prime Minister in September last year so I will not expand on this here. To support the broadening of our research agenda and increasing commercial outcomes from the RIE 2015 plan, I will top up the National Research Fund by $1 billion this year. Strengthening clusters – becoming a Global-Asia Hub We are making good progress to becoming a Global-Asia Hub – a location of choice in Asia for global companies as well as a launch-pad for Asian enterprises to globalise. For example, a study by the Business Times and the Accounting and Corporate Regulatory Authority (ACRA) found that about 51% of international companies registered in Singapore in 2009 were from Asia, up from 40% in 2000. We will set aside $2.5 billion over the next five years under the Economic Development Assistance Scheme (EDAS) to enable EDB to further strengthen Singapore’s value proposition as an Asian base for corporate headquarters and other high-value activities. This will support new efforts, such as developing a talent pool of professionals and executives with a strong understanding of Asian markets and businesses, as well as attracting global mid-sized companies to set up their first Asian base in Singapore. Enhancing competitiveness of our Business Hub I will now highlight key tax changes in strategic business sectors to enhance our overall competitiveness as a Global-Asia Hub. The details, along with various other minor tax changes, are set out in Annex A-2* to the Budget speech. I will start with the financial sector.”
“The Government is working with Temasek Holdings to develop this initiative. Temasek is in discussions with potential partners on establishing an institution that is financially and commercially viable and sustainable. The Government is prepared to provide some initial support for such an institution during its start-up phase. To complement this, we are also in advanced discussions with multilateral agencies to partner in offering political risk insurance for infrastructure projects. These are long duration projects and, in certain markets, political risk is a consideration that prevents bank-lenders from providing support to the investors. This is especially relevant for Singapore corporates venturing into unfamiliar markets. The second area we are addressing is trade financing. Our review has concluded that a full-fledged, dedicated trade finance institution would not be ideal as it would require significant economies of scale to be viable. The Government is therefore exploring a model by which our trade finance schemes can be outsourced to existing specialist providers. As these providers have well-developed risk assessment and underwriting capabilities, they would be better able to provide trade finance solutions that better meet the needs of our SMEs. We will provide an update on this study by the second half of this year. Reaping economic value from R&D We will add to our investments in R&D, with an increasing share going towards supporting private sector R&D activity as well as commercialisation of R&D. These are long-term investments, but we have to keep up our steady commitments to R&D, if we are to make the transition towards a high-value economy with a broad base of innovative enterprises.”
“One of the priorities of the EDF is to help high-growth enterprises in their overseas expansion. Demand in Asia is growing, in fact, it is growing rapidly for competencies and strengths that Singapore companies possess in areas such as urban solutions and clean technology, as well as service sectors including healthcare and education. We will boost support significantly to help our companies build up capabilities and defray their costs when they venture into new markets in the region and elsewhere. Foreign tax credit pooling I will also simplify and reduce the taxation of foreign income so as to support companies that are globalising and earning a larger share of their income overseas. I will introduce foreign tax credit pooling to encourage remittance of foreign income to their Singapore bases. It will also give them greater flexibility in the use of their foreign tax credits, reduce their tax payable and simplify tax compliance. This, too, has been an issue that we receive regular feedback on. This measure will cost the Government $22 million per year. Catalysing cross-border financing Cross-border financing is another important enabler for our strategy of growing globally competitive enterprises. The Economic Strategies Committee (ESC) had recommended that a specialised institution be set up in Singapore to address current structural gaps in financial markets, namely the limited capacity for long-tenor project finance as well as inadequate access to trade finance for SMEs, especially in their dealings in emerging markets. We have developed our plans to plug these gaps. I will first explain briefly our approach to strengthening project financing. Our aim is to work with commercial players so as to catalyse and not crowd out market participants.”
“They will be paid out over three years and will encourage employers to attract and keep older workers which has to be a priority in a tight labour market. Employers will receive a Special Employment Credit of up to 50% of employer CPF contributions for workers aged 55 to 59. They will get a higher Credit of up to 80% of employer CPF contributions for workers aged 60 and above. The Special Employment Credit will cost the Government about $100 million. Supporting enterprise growth Let me now move to the steps we are taking to support our enterprises in growing their topline and expanding overseas. In Budget 2011, we will make several major investments in our corporate ecosystem. We will help our companies make the most of opportunities in emerging markets, and entrench our position as a Global-Asia Hub. We will do more to groom globally competitive local enterprises. In addition, we will introduce incentives to strengthen our economic clusters by deepening capabilities and enhancing their competitiveness. Grooming enterprises –differentiating support for high-growth enterprises We are making major, broad-based commitments to help all enterprises upgrade and make productivity improvements. However, to restructure our economy, our fundamental approach towards the SME sector must ultimately favour companies that are more dynamic and innovative. We must provide them with the room to grow – to attract the managerial talent and skilled workers they need, and to expand internationally. We will commit $850 million in grants under the Enterprise Development Fund (EDF) over the next five years, to be administered by SPRING and IE Singapore. This is a substantial increase of about 45% over the previous five-year tranche.”
“The schemes are available for all businesses but many of our schemes are geared especially to help our SMEs to restructure, invest and upgrade. Take maximum advantage of them. Helping companies with rising costs I recognise that many companies have seen significant cost pressures in the past year besides increases in their wage bills. Rentals have increased, and so have utility costs. I have therefore decided to provide a set of one-off support measures for companies this year. Corporate income tax rebate and SME cash grant First, companies will receive a 20% corporate income tax rebate, capped at $10,000, in Year Assessment (YA) 2011. However, many of our small companies, even with this cap of $10,000 which is planned to benefit the broad base of companies, may not benefit fully from the corporate tax rebate as they pay very little taxes. In fact, more than 85% of eligible companies will receive less than $5,000 from this 20% tax rebate. Therefore, I have also decided to provide the option of a one-off SME Cash Grant this year, amounting to 5% of a company’s revenue in YA 2011, subject to a cap of $5,000. They must, however, have made CPF contributions in YA 2011. Companies will automatically receive the higher of the corporate tax rebate or the SME Cash Grant when IRAS assesses their tax returns. They will automatically receive either the 20% tax rebate or the Cash Grant of up to $5000, whichever is the higher, when they file their tax returns. In total, this measure will cost the Government about $560 million. Special Employment Credit As a further measure, I will provide employers with a one-off Special Employment Credit for older Singaporean workers who are covered by the Workfare scheme. The Credits are one-off.”
“5% to annual labour costs and foreign worker levies, by the time they are fully implemented, and would add about 1.7% to annual labour costs. This is the right time to make these adjustments, while the economy is growing well. However, the increases in foreign worker levies are not merely a cyclical response to current conditions. This is the direction we are setting for the long term, so as to provide clear and strong incentive for businesses to upgrade their operations, train up their workforce and reduce their dependence on lower-skilled foreign workers. We understand that when the economy is doing well, the number of foreign workers will rise faster. But this has to be offset by a slowdown or even reduction in the number of foreign workers when the economy grows more slowly. Hence, should demand for foreign labour continue to strengthen beyond what we expect in the next two years, the Government will have to review if there is a need for further tightening. In the past too, we had made short-term reductions to foreign worker levies in response to economic downturns, as a means to reducing business costs. We will avoid cyclical adjustments to foreign worker levies in the future. Instead of cutting levies, we will adopt other measures to help companies through a downturn, such as the enhanced training subsidies we provided in the last recession. The Government is also providing firms with substantial assistance to help them upgrade their operations and train their workers, through the National Productivity Fund (NPF) and the enhanced PIC scheme. Companies should take maximum advantage of these schemes, especially our SMEs, to restructure, improve their efficiency, grow their businesses, and offset the impact of higher labour costs over time.”
“Last year, we announced that average levy per foreign worker for the Manufacturing and Services sectors will be raised by about $100 between 2010 and 2012. For the Manufacturing sector, over and above the earlier announced increase of about $100, we will increase the levy by an average of another $60 by July 2013. We will go further in the Services and Construction sectors, where the scope for productivity improvements is greatest. For the Services sector, we will tighten the levy tiers and raise levies such that the average levy goes up by a further $180 by July 2013 on top of the earlier announced increase of about $100. For the Construction sector, average levy rates will go up by a further $200 over the same period on top of the earlier announced increase of about $130. To manage the continued increase in demand for S Pass holders, we will also increase the levy rates for this category from $50 prior to the adjustments made on 1st July 2010, to $300 to $450 by July 2013, depending on the number of S Pass holders hired by the companies. The overall dependency ratios for all categories of foreign workers, Work Permit as well as S Pass holders will remain unchanged. The Ministry of Manpower (MOM) and the Ministry of National Development (MND) will release more details on Monday. Taken together, the increases in foreign worker levies and CPF contributions will raise business costs. The CPF changes will increase annual labour costs of businesses by 0.5% on average and 0.5% increase in annual business costs. The Foreign Worker Levy adjustments, including those announced last year, would add roughly 1.7% to annual labour costs when fully implemented in 2013. So, the CPF increase will add 0.”
“For example, under the National Taxi Association’s Drive and Save scheme, taxi companies have agreed to co-contribute to the Medisave of their taxi drivers. To support such initiatives, I will grant tax deduction to eligible companies that make voluntary contributions to the Medisave accounts of their self-employed partners, up to $1,500 per self-employed person per year. I will also exempt self-employed persons from paying tax on these contributions. This tax exemption will take effect from YA 2012. Managing reliance on foreign labour Last year, we had set out a schedule to progressively raise foreign worker levies and tighten the levy tiers from July 2010 to July 2012. Since then, our economy has grown much faster than either the Government or businesses expected. The local labour market is at virtually full employment levels. If we do not take further steps now to raise the Foreign Worker Levy, it will be difficult for us to prevent the proportion of foreign workers from rising over time, and exceeding our long-term target of one-third of the workforce. We will thus introduce further levy increases for all sectors this year. Most of the additional measures will be phased in at six-monthly intervals, starting only from 1st January 2012, and extending till 1st July 2013, one year beyond the previous schedule. So the first schedule set off increases which we announced a year ago is from July 2010 to July 2012. We will now introduce a further schedule of increases starting from 1st January 2012, in other words, revising the previous 2012 increase and extending to 1st July 2013, one year beyond the original schedule. This will give companies time to prepare for the changes. The fact that we are starting only in January next year with a further increase.”
“Adjusting to higher labour costs – raising employer CPF contributions and CPF salary ceiling As our economy has recovered strongly, it is timely that we review our CPF contribution rates and the CPF Salary Ceiling. In 2003, we cut the total CPF contribution rate by three percentage points to 33%, and set a target range of 30% to 36%. In the years since, we have progressively raised the employer contribution rate. With the outlook for continued growth in 2011, we will now raise the employer contribution rate by another 0.5 percentage points, from 15.5%[2] to 16%, which will restore the total contribution rate to 36% which is at the top end of the 30% to 36% range. The additional 0.5% will go into the Special Account. We will also revise the CPF Salary Ceiling from $4,500 to $5,000 per month to keep pace with income growth in recent years. This will align the salary ceiling back to the 80th percentile income, and help middle-income Singaporeans. To give employers sufficient time to adjust, both these changes will only take effect in September this year. In line with the higher CPF Salary Ceiling, we will also raise the contribution cap within the Supplementary Retirement Scheme (SRS), which offers tax incentives to encourage voluntary retirement savings to complement the CPF. We also want to help self-employed persons (SEPs) increase their savings under the CPF scheme to enjoy the good interest rates and save for their medical and retirement needs. The CPF Board and NTUC have been active in reaching out to the self-employed persons and encouraging them to make Medisave contributions. Companies that work with self-employed persons can also help.”
“2711-2794; Manpower (MOM) will also introduce an umbrella programme for PMETs, Skills Training for Excellence Programme (STEP). We will also make it more affordable for PMETs who wish to upgrade their qualifications or obtain new skills. First, we will increase subsidies significantly for Singaporean adults who pursue their first degree or diploma on a part-time basis at any of our polytechnics, CET centres, universities or UniSIM. They will receive the same percentage cost subsidy on their part-time courses as what a full-time student currently enjoys. For example, it will mean a part-time undergraduate student in an engineering degree at NTU will pay about $14,000 over a five-year course, down from $21,000 currently. Trainees who obtain their first part-time polytechnic diploma, ITE NITEC or Higher NITEC certificate will benefit from increased subsidies through a completion award. Those who complete their first Workforce Skills Qualification (WSQ) diploma or certificate can also qualify for the award. This award will be applicable to Singaporeans who graduate from 1st March 2011. About 30,000 Singaporeans will benefit from these subsidies. Our CET enhancements will cost the Government an additional $30 million per year. More details on these initiatives will be announced by the Minister for Education and the Minister for Manpower in the Committee of Supply (COS). In addition to these enhancements for PMETs, I will also make a $500 million top-up to the Lifelong Learning Endowment Fund (LLEF), thus increasing the fund size to $3.6 billion. This will increase the base level of long-term assured funding for CET, to complement the allocations from future annual budgets.”
“Second, PIC benefits are currently limited to spending on R&D done in Singapore. Responding to the feedback we got, I will now also allow businesses to enjoy PIC benefits on expenditure for R&D done abroad as well. For the companies that are investing in productivity improvements, it will amount effectively to a significant cut in the corporate taxes that they would pay. Take for example a medium-sized company, a company with an annual turnover of about $5 million and net profit of $200,000, which invests $40,000 in productivity – computers, training, whatever. The generous tax deductions under the PIC would reduce the company’s tax burden by some 60%, so that its effective tax rate, which would normally have been something like 8% for a medium-sized company would come to 3% as a percentage of its net profits [Annex A-2* ]. These changes will take effect immediately, so that businesses can enjoy the enhanced deductions for YA 2011 for the productivity investments they have already made. The PIC scheme will cost the Government $520 million each year. Expanding training support We are moving ahead with our Continuing Education and Training (CET) plans. Last year, we announced the Workfare Training Scheme (WTS) to give additional training support for older, low-wage workers. This year, we will strengthen our support for professionals, managers, executives and technicians (PMETs). PMETs in fact now make up more than half of our workforce. We will increase both the capacity and quality of CET for PMETs. The Ministry of Education (MOE) will expand the capacity for diploma-level programmes at our polytechnics by about 60%, to about 10,000 places by 2015. These are largely part-time diploma places. The Ministry of *Cols.”
“Let me illustrate the significance of this enhanced scheme, with the example of a company which makes investments totalling $500,000 – comprising $400,000 on automation equipment such as computers, and $100,000 on training for its staff. Under the scheme introduced last year, it would have enjoyed savings of $187,000 off its tax bill. With the enhanced PIC, it will now enjoy almost double the tax savings, amounting to $340,000. In other words, the PIC scheme will pay for two-thirds of the value of the company’s investments [Annex A-2* ]. $340,000 returns to them for their investment of $500,000. I will also enhance the current cash payout option under the scheme, which was introduced last year to benefit SMEs who pay little or no taxes currently, but wish to invest in productivity. I will allow businesses to opt for a cash payout of up to $30,000 for the first $100,000 of their investments, in lieu of tax deductions. This is an increase from the maximum grant of $21,000 that a business can currently get under the PIC scheme as introduced last year. I will also introduce other changes to make it easier for businesses to make full use of the PIC scheme when these, too, come with the feedback we have received. First, to help SMEs benefit from the PIC scheme, last year I had allowed businesses to combine their annual expenditure caps for two years – YA 2011 and YA 2012. I will now extend this principle, so that businesses can combine their annual expenditure caps for the following three years, from YA 2013 to YA 2015. It will help an SME that is planning a large investment in any one year to benefit from the full 400% tax deduction because the normal cap of $400,000 per year can be added together with the caps for the next two years – 2013 to 2015.”
“The utilisation of the National Productivity Fund is expected to reach $150 million this year, and based on plans for the various industries, will reach more than $800 million by 2015. Even before 2015, this amount could grow beyond $800 million as more proposals come in over the next few years. To ensure continued support beyond the first five years for this long-term effort to restructure our industries, I will top up the National Productivity Fund with another $1 billion this year. This will bring the total fund size to the target of $2 billion. More details on the work of the NPCEC will be provided by Deputy Prime Minister Teo Chee Hean during the Budget Debate. Further enhancement of Productivity and Innovation Credit (PIC) Last year, I introduced the five-year Productivity and Innovation Credit (PIC) scheme. The scheme was especially geared towards SMEs. Taking into account feedback from the various trade and business associations, I will make significant enhancements to the PIC scheme. I will now allow businesses to deduct from their taxable income 400% of their expenditures in any of the six broad categories of investment under the scheme, for example, training or investment in automation equipment. Four hundred percent for any of the categories of investment and 400% added across the categories. So if you invest in two different categories, it is 400% for each and combined the benefits. This is up from the 250% tax deduction introduced last year. I will also raise the cap for such claims for each category of investment from $300,000 to $400,000 of expenditure. As before, businesses can undertake any number of investments in a year, in the six categories. $400,000 for each category up to 400% tax deduction and companies can use any number of the six categories.”
“Doubling our investment in the National Productivity Fund Our industry associations, businesses, unions and government agencies have been working out detailed roadmaps to tackle the productivity challenge. For example, NParks has been working with the landscape industry and the Singapore Workforce Development Agency (WDA) on a new apprenticeship scheme which will provide training to build deeper trade skills, and a structured career path. An apprentice with qualifications from ITE could start off with a pay of $1,500, and aspire to become a Master Tradesman in 10 years, and more than double his starting pay if he makes it to Master Tradesman in 10 years. The upgrading of jobs will be complemented by increased use of technology, such as automatic irrigation and targeted weed control systems, which can reduce need for low-skilled manpower by 30% to 50%. I know a very interesting young man; Ramadan Salawat. He is 21 years old, a special needs student in Delta Senior School. He went there to learn horticultural skills and take a programme of work and study, organised together with WDA, that helped him take modules one at a time, built up his skills and made the transition to the workforce. He is one of several. His pay has gone up since he started on this programme, because he is working in the industry whilst being enrolled in school. His pay has gone up from $900 to $1,200 in three years. He started off with a difficulty and a challenge, like many Singaporeans; addressed it with diligence, determination; move up; improved continuously; and raised the gain for all of us. I should also mention, incidentally, that he is an exceptionally good futsal player and also represented Singapore in the Special Olympics in hockey.”
“We have targeted to improve our productivity by 2% to 3% per year on average, or 30% cumulatively over 10 years. This will be significantly higher than the 20% increase we managed over the last decade. Achieving this will bring us up to today’s levels of productivity in the most advanced economies – the US, Japan and the Scandinavian region. If we achieve this 30% lead in productivity in the next 10 years, we would have reached today’s levels of productivity in the most advanced economies. It is a challenging target, but we are devoting substantial resources to achieving it. Last year, we set aside $1 billion in a National Productivity Fund (NPF), and set up the National Productivity and Continuing Education Council (NPCEC), which the Deputy Prime Minister chairs, to oversee its use and coordinate the national effort to boost up-skilling and raise productivity. We also lowered taxes to support a broad base of investments in productivity, through the Productivity and Innovation Credit (PIC) scheme. Budget 2011 will build on the strategies that we embarked on last year and enhance them significantly. I will now elaborate on the specific initiatives. [1] Productivity growth over 2000-2010 averaged 1.8% per year. This was about one-third of GDP growth over the period. Productivity growth over 1999-2009 was lower, at 1.2% per year, which was about one-quarter of GDP growth over that period. Boosting skills and productivity – enhanced support for business restructuring and skills upgrading We will provide a significant boost to the schemes we announced last year to help businesses to restructure their operations, up-skill workers and create better quality jobs.”
“Income growth was stronger for median Singaporean households. Their *Cols. 2697-2710; 2697-2698. real incomes grew by 21% over the decade – again with more of this growth taking place in the second half-decade compared to the first. Our growth strategies are therefore working. We can and should do more to help Singaporeans who have seen little improvement in their wages. For example, the NTUC and WDA have been working intensively to up-skill workers in the cleaning and security industries and partner with companies to create better paying jobs for them. But the vast majority of Singaporean households, including both the median and the lower-income households, have seen significant improvement in real incomes in the last five years, and consequently for the decade as a whole. Growth has also given us the resources to invest for Singaporeans’ future, in education and healthcare, and in providing the highest quality living environment in Asia. We have grown so that we raise living standards and benefit our people. Changing how we grow However, we are changing the way we grow. Our local workforce will expand slowly in the next 10 years. We also should not become ever more dependent on foreign labour. We must therefore restructure our economy and raise skills in every job, so that productivity becomes the key driver of growth. Even including the exceptional productivity growth we experienced last year on the back of strong GDP growth, productivity improvements contributed to just one-third of our economic growth over the past decade[1] . In the next decade, productivity needs to contribute two-thirds of our economic growth. Otherwise we will fall short of the 3% to 5% economic growth that we are aiming for.”
“The challenge of keeping jobs and growing incomes for low-skilled workers is ever-present. The reasons are well-known – competition from China and other emerging players has exerted downward pressure on wages of low-skilled workers around the world, at the same time that IT and other technologies have replaced many simpler jobs in factories, offices, stores and other work areas. It has led to stagnating or falling wages at the bottom end in most developed societies. In Asia, we see it happening in Japan; even in Korea, which has a competitive and dynamic economy, wages of those at the bottom end have fallen in real terms. Fortunately for us, we have been able to avoid a sustained decline, and achieved some growth in real incomes at the 20th percentile of workers over the last decade, unlike in many other economies. Further, we have created many more jobs. More of our people have joined the workforce, raising our participation rates closer to OECD levels. The result of avoiding a decline in wages and, in fact, achieving some real growth and creating more jobs has been higher household incomes, as more members of the family have been able to find work, including part-time jobs. This chart* shows what happened. For Singaporean households at the 20th percentile of incomes, nominal incomes went up by 34% over the decade, real incomes by about 8%. The reason for this was that growth in the second half of the decade more than offset the decline in real incomes that took place in the first half. Further, this 8% increase in incomes over the decade as a whole does not take into account the significant increase in net transfers from the Government that low-income households received over the decade. This is only the income from work.”
“By growing faster when conditions are right, we are not therefore going for growth for its own sake. It is the way for us to achieve an average growth that is in line with our longer-term potential, and thereby grow Singaporeans’ incomes on a sustainable basis. We saw this in the last decade. We had three recessions – in 2001, again from 2002 to 2003, and during the global financial crisis in 2009. Despite these recessions, we averaged creditable growth of 5.5% per annum over the decade. This was only possible because we grew well during the recoveries following each recession, making up for the periods of slow growth. Had we not seized opportunities and attracted investments vigorously after each storm, we would have done significantly worse than we actually did over the decade. Incomes of Singaporeans would have grown much more slowly or not at all, with the brunt of the difficulties being borne by those at the bottom. Consider what happened to low-income Singaporean workers at the 20th percentile of incomes. Their wages grew by about 23% in the last decade – 23% in nominal terms – or 5% in real terms. This is without taking into account the Workfare payments that have begun in the latter part of the decade since 2008. But virtually all the increase in their incomes – this increase of 23% in nominal terms or 5% in real terms – happened in the second half of the decade, when our economy grew well. It more than made up for the first half of the decade, when weak economic growth kept wages at the bottom stagnant [Annex A-1 *]. Because we grew well in the second half of the decade, we brought unemployment down, raised demand for workers and enabled wages to pick up for many at the lower end of the workforce.”
“The third way we can help Singaporeans with inflation is through our fiscal policies. We provide greater subsidies and benefits to those who need it the most, in health, education, housing and other areas. These are the permanent programmes, a permanent system of subsidies and grants. On top of these, there is more help for the needy through ComCare and a whole range of community-based programmes – just like the daily meal vouchers that Southwest CDC, using a donation from a local entrepreneur, has just expanded to reach out to 2,000 students living in the district. The final approach, however, is the most fundamental. We must continue to grow Singaporeans’ incomes, so that even after taking into account inflation, their real purchasing power increases. It is not possible to achieve this every year, but we must grow the real incomes of Singaporeans over time. This is indeed the first major strategy of this Budget. Growing incomes for all Singaporeans – sustaining growth To raise Singaporeans’ incomes over the next decade, we must first sustain our economic growth. Without a growing economy, no strategy can realistically raise incomes, whether for the average citizen or those at the lower end of the workforce. We expect Singapore to be able to sustain growth of 3% to 5% on average over the rest of the decade, lower than the 4% to 6% we had expected for the last decade. It is however not possible to achieve this steady rate of growth each year. We cannot avoid the impact of global recessions, but our strategy is to recover quickly each time. We also seize the opportunity to grow faster when global conditions are positive because we know that the economic cycle will eventually turn.”
“Dealing with inflation However, while we are able to share surpluses with Singaporeans this year, this is not the main way we deal with the rising cost of living. Let me briefly explain how we approach this problem of inflation. As a country that imports almost all we consume, we will always be vulnerable to inflation abroad. This time round, it is mainly food, utilities and other fuel-related charges that are concerning most Singaporeans. Our first approach is to seek to moderate medium-term inflationary pressures through the Singapore dollar exchange rate policy of the MAS. The MAS has permitted the Singapore dollar to appreciate against a basket of foreign currencies over the last 18 months, which has helped counter inflation in imported goods. However, using the exchange rate to offset sudden spikes in prices, such as what we have seen in oil prices over the last six months, would require a sharp appreciation of the Singapore dollar. This would disrupt our exporters. Second, the Government will stay alert to any attempts by businesses to profiteer or collude to raise prices excessively. This is unlikely to happen in most industries, because firms which raise prices excessively risk losing business to their competitors. Nevertheless, the Ministry of Trade and Industry (MTI) has been monitoring retail prices, and will be forming a group under Minister of State Lee Yi Shyan to keep a closer watch on any excessive price increases or anti-competitive practices. In fact, some of our businesses can also be angels. NTUC Fairprice has just cut prices of its house brand items by 5% till the end of May, and NTUC Foodfare has also announced that it will not increase the prices of basic beverages like tea and coffee at most of its outlets.”
“Our second objective is to strengthen our society. We will take further measures to ensure an inclusive society – where everyone can contribute and share in the country’s progress, regardless of where they start from. The Budget will introduce tax measures to expand support for lower- and middle-income Singaporeans. We will help their children get the best start in life through education, from pre-school through to tertiary education. We will enhance grants to help lower-income Singaporeans own their homes. We will commit substantially more resources towards developing a top quality long-term care sector for the elderly. We will also raise the quality of life for all Singaporeans, by investing in the rejuvenation of our HDB neighbourhoods and developing a vibrant and widely accessible arts and culture scene. Finally, we will also be able to share surpluses with Singaporeans this year. As I explained earlier, we have first, as a matter of prudence, used our surpluses to put back in Past Reserves what we had drawn during the crisis. Next, in Budget 2011, we are moving ahead with major measures for our future – to build up a vibrant economy and enable an inclusive society. However, our strong Budget also allows us to provide an additional package of benefits to all Singaporeans this year. This is a bonus, but it is not merely incidental part of our fiscal policy approach. It is how we share and redistribute the benefits of growth with Singaporeans, while keeping to fiscal discipline. This package of surplus-sharing will also help most of our lower- and middle-income households to offset their higher costs of living this year.”
“We have thus decided to put back into Past Reserves the $4 billion that we had drawn earlier for the Resilience Package. I have informed the President of our decision. There is no legal or constitutional obligation for the Government to return to Past Reserves any amount drawn. However, it is the responsible and prudent thing to do, once a Government has secured a stable fiscal position within its term. This is the way to uphold the philosophy that has enabled us to build up and maintain our reserves, and derive from it income each year to meet our strategic needs. Budget 2011: growing incomes, strengthening our society We are taking major steps in this year’s Budget to strengthen our economy and society for the future. The Budget has two objectives. First, we must grow incomes for all Singaporeans. We aim to raise incomes by 30% in real terms over this decade. However, we can only achieve this if we grow our economy, upgrade our businesses and invest in raising skills, craftsmanship and the quality of service in every job. That is the only way we can improve incomes and living standards, including for those at the lower end of the income ladder. This year’s Budget doubles our commitments to achieving this objective. We will significantly enhance support for companies to invest in workers’ skills and productivity, and to help Singaporeans upgrade. We will also boost assistance for our companies to venture abroad, and to entrench high-value economic clusters in Singapore. Together, these efforts comprise our core economic agenda. If we succeed, we will make the breakthrough into becoming a first-rate developed economy a decade from now, with advanced skills and higher incomes, and a larger base of globally competitive enterprises.”
“The Monetary Authority of Singapore’s (MAS) core inflation measure, which excludes the effects of these two factors on the CPI, is projected at 2% to 3% for 2011 as a whole. Fiscal position for FY2010 p> Our strong growth last year, far better than either the Government or the markets expected at the start of the year, has yielded an improved fiscal position for FY2010. The better growth is estimated to account for about 80% of the increase in revenues over what we projected a year ago. The property market was also much stronger, resulting in strong increases in stamp duties and other revenues. We had originally estimated an Overall Budget Deficit of $3 billion or about 1% of GDP for FY2010. Given the much improved economic performance, we now expect the overall budget to be close to balanced, with a small deficit of $0.3 billion or 0.1% of GDP. Putting back into past reserves Members will recall that the Government had sought and obtained the President’s approval to draw $4.9 billion from Past Reserves, to fund the Jobs Credit Scheme and the Special Risk-Sharing Initiative under the Resilience Package. We were in the midst of a global crisis of unprecedented scale. Our access to Past Reserves gave us the resources and confidence to deal decisively with the downturn and to be prepared to take further measures if the situation worsened. In the event the amount drawn for these two schemes was $4 billion, less than expected. We have recovered well from the crisis, putting our fiscal position on stronger footing. With the much lower deficit we achieved last year, as well as our good Budget position for this year, we should be able to achieve an overall budget surplus during the current term of Government.”
“Heavy budget cutting in Europe, the UK and Japan, and the withdrawal of the fiscal stimulus in the US later this year, will also dampen growth. In addition, there remain risks in global finance. Problems surrounding sovereign debt in parts of Europe are causing concern. We will have to watch the risks and be ready to respond if global growth falters. Overall, however, we face a positive environment for Singapore. The Government expects Singapore’s economy to grow by between 4% and 6% in 2011. This is still above our estimated trend growth of 3% to 5% for the next 10 years, and reflects the continuing momentum in the economy. Investments and activities are still flowing into Singapore, attracted especially by opportunities in Asia. The record investments that we saw in 2010 alone are not only higher in quantum but of an exceptionally higher quality, and are expected to create 21,300 new skilled jobs once these projects are fully realised. These are investments in 2010 alone, which are expected to create 21,300 high quality jobs when the projects materialise. However, inflation is a concern for everyone this year, and especially for low-income families. CPI inflation was 4.6% year-on-year in December 2010. We expect inflation to be around 3% to 4% this year, higher in the first half before moderating later in the year. However, a large part of the CPI inflation increase can be explained by higher COE premiums and the higher imputed values of owner-occupied homes, compared to a year ago. For the majority of households, these increases, the COE premium increases and higher imputed values of owner-occupied homes do not mean substantially higher cash outlays.”
“Our companies made good use of the crisis measures, including the Jobs Credits, SPUR, and the Government’s loan guarantees under the Special Risk-Sharing Initiative (SRI). We were therefore ready to seize opportunities when the winds shifted. In short, our crisis strategy worked. 2011 outlook – opportunities and risks As we are now well past the rebound from the crisis, our economy will grow more slowly this year. But Singapore will continue to benefit from the global economic recovery, as well as the competitive edge that we have gained over the past few years. The external environment is however more complex this year. Growth in the emerging economies, which accounts for two-thirds of global growth, is expected to remain strong. However, these economies are also seeing a build-up of inflationary pressures. Food and other commodity prices have climbed sharply, because supply has been affected by harsh weather conditions while demand continues to grow in China and elsewhere. The political uncertainties in the Middle East have also driven oil prices up. There will be no early relief from these inflationary pressures. Further spikes in commodity prices could lower economic growth in Asia, if governments are forced to tighten domestic policies to control inflation. The recovery in the advanced economies, especially in the US, is picking up steam. Business investment has restarted and manufacturing activity is strengthening. These are the positives. However, these are only cyclical improvements, while growth prospects continue to be weighed down by structural difficulties. In particular, a combination of high long-term unemployment, weak housing markets and large household debts will depress consumption for some *Cols. 2695-2696. years.”
“Mr Speaker, Sir, I beg to move, "That Parliament approves the financial policy of the Government for the financial year 1st April 2011 to 31st March 2012." Economic performance – an exceptional year Our economy has performed exceptionally well in the past year. After two weak years in 2008 and 2009, when growth was close to zero, our GDP grew by a record 14.5% in 2010. Unemployment is down to the levels seen in early 2008, before the crisis. We have recovered faster than most economies. The IMF has estimated how long various economies will take to get back to their potential GDP levels – in other words, their potential based on longer- term trends. Singapore had recovered fully from the crisis by the second quarter of 2010, like Taiwan, the two at the bottom of the chart [Chart 1* ]. Most of the other Asian economies either did so by the end of last year, or will get back to their potential levels in the course of this year. However, the outlook for the US, the Eurozone and Japan is challenging, with recovery from the crisis expected to take at least another four years. Our stronger recovery was partly a matter of good fortune, as global trade and confidence in Asia turned around. But it also reflected the way we prepared ourselves for the turn in the winds. We intervened during the crisis to help employers hold on to the workers they need and, in fact, help them hold on to the workers they felt they would need for the recovery. Trained up their workers, and prepared them to emerge fitter and stronger when the winds turned. We also helped workers who lost their jobs to get back into the workforce, by matching them to new employers quickly.”
“While Government is the shareholder of Temasek, Temasek operates autonomously and makes its investment decisions on a commercial basis. The Government does not interfere in Temasek's business decisions or actions. This applies to Temasek's investments in Indonesia. There have been recent news reports that the KPPU is considering seizing Temasek's assets in Indonesia for failure to pay its fines, after being found guilty by the KPPU for breaching anti-monopoly laws. To date, the Government understands that Temasek has not received any official notification yet of the result of the Civil Review application to the Indonesian Supreme Court. As for the next course of action, it is a matter for the Board of Temasek and its management to consider, and pursue as part and parcel of Temasek's business decisions. INCREASING THE POOL OF FOSTER PARENTS FOR ABUSED CHILDREN 6. Ms Ellen Lee asked the Minister for Community Development, Youth and Sports whether the Ministry has plans in place to enhance and increase the pool of foster parents to meet the increasing need of caring for abused children.”