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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“We are also addressing the needs of that group which has a specific learning disability although they may be of average or above average intelligence. Particularly for Dyslexic kids, there is more that can be done. We are now working a tight referral system between the Ministry and schools and the Dyslexic Association of Singapore to see how we can intervene earlier to help these children while they are in Primary One or Primary Two. Unfortunately, we often find that amongst these very weak students, they have both problems. They have both specific learning disabilities plus weak intellectual ability. We can help them remedy some of their problems with Dyslexia but we will still have to make do and help them find and discover themselves and be able to go through primary school feeling that they are not being cast away. Go through Northlight, some of them might make it into the Normal (Technical) stream, the main stream, pick up some skills, and move on to ITE. We think more can be done. Does the Member want me to answer the second part of her question first?”
“Ms Phua asked three questions. I was going to ask MOS Lui to answer the first, I answer the second and MOS Gan the third. But there is a Parliamentary rule that says maximum two responses to any set of questions. So I will answer the first two. Why do students fail their PSLE repeatedly? It is something we have been looking at. We notice that there is a group of students who go through the learning support programme at Primary One and Primary Two and do not graduate or they may just barely make it after the end of those two years. We have taken a very thorough look at this group of students several months ago. We looked at a whole cohort and at each student individually. There is in any population, a group of students who will be of lower intellectual ability. This is true anywhere you go. There is also in any population, a group of students who might be of average or even above average intellectual ability but who have a specific learning disability, be it dyslexia or some other form of learning disability, and we find that for this group that fails to make it through Primary Six, it is principally the first group, those who are very weak in intellectual ability. They might have some other strengths, they might have some artistic flair, they might be good at some aspect of the languages but weak in mathematics. They have some strengths typically which we can try to draw on. This is a group that we are now looking at carefully to see how we can further support them in Primary Three and Primary Four. Not through a formalised learning support programme, not through a new stream as such, but see how we can help them keep pace with the class, at least on the basics. Keep them well occupied and help them find some strengths in themselves.”
“What we are doing is improving our pupil-teacher ratios - fewer pupils for each teacher - by providing more teachers to every school and then letting the school decide, because the schools are different, classes are different. Students differ in their abilities and learning styles and it is really for the principal, the Heads of Departments and the teachers to decide how best to deploy these additional teachers. Some principals might feel that their average classes are doing fine just as they are. But there might be a group of students with an exceptional talent who need a little more pushing on a smaller group basis, and a group of students who are weaker who need more attention and supervision even after school hours to help them come up and catch up with the rest. So, these are school-based decisions. It is best that we flow more teachers to the schools and let them decide how best to allocate them, rather than mandate this across the board.”
“Sir, the results have been positive. We now have a few years to look at this. In fact, we have studied it quite carefully across schools as well as looking at specific schools to see what real outcomes have come about as a result of smaller class sizes in Primary 1 and Primary 2. The small class size per se has not been a decisive factor. What has really mattered is how teachers have made use of a small class size, and we do see some variations across schools. The schools in which the teachers have made the most use of a smaller class size to change learning methodologies - a lot more group work, a lot more chances for the students to question, a lot more interaction back and forth between teacher and students - are the ones that have seen the most measurable outcomes coming out of smaller class size. So, smaller class sizes have facilitated something that is more important, and that is really the interaction of teacher and students. What types of benefits? We cannot put a score to this but, on the whole, the teachers and parents have concluded that the students are now more interested in their learning, more outspoken and willing to stand up in class to question and express their views. And the weaker students especially, together with what we are doing on the learning support programme, are now a lot more engaged in their learning. They are able to catch up with the rest of the class and are progressing better in Primary 3 and 4. Should we extend it beyond Primary 1 and 2? I do not think we should go for the same model of mandating a fixed class size across schools.”
“At the end of the day, let us keep this system, where we keep identifying good people to join education, identify people with leadership capabilities early, train them up, develop them, put them at the helm of the school, and then keep sharing lessons across the system, and resist the temptation to question everything they say. That is how we ensure ownership on the ground, and that is how we will see quality continuously rippling across our system. University”
“They found that students from Africa, the Middle East and the United States were the most confident about their ability in Mathematics. And students from East Asia, Japan, Hong Kong and Singapore were the least confident about their abilities in Mathematics. But the results were exactly the reverse. The students from countries who felt that they were the least confident did better than the students who felt they were the most confident. Specifically, they found the least confident Singaporean child did better than the most confident American child. They highlighted that in their report, "the least confident Singaporean child does better in Mathematics than the most confident American child." This is a complex matter. Confidence is important, motivation is important in learning. We do not want to defeat a child. So some affirmation is necessary, starting from primary 1 all the way up, some affirmation of every child's strengths. If the child is weak overall, try and find a strength that we can affirm. That is important. But we also need to challenge them. We also need students who keep coming late to school to buckle down and get working, because the "N" levels examination is not many months from now, the "O" levels is not many months from now, and so on. So, finding that right balance between affirming and challenging is something the schools have to find their own way of doing; principals have to find their own way of doing. The Ministry should not intrude in specific decisions unless something goes completely wrong. And, over time, I think we will tell which schools are doing better and which schools are not doing so well, and lessons will be shared. That is our approach.”
“In fact, the same school, not many years ago, had a requirement that every girl wears a petticoat, not a MOE stricture but that was the practice of the school. Parents knew what the school was like. They sent their girls to the school because they liked the ethos. So, let parents choose and, over time, we will know which school's methods, which principal's methods, work better than others. And individual principals too will learn over time - tweak here, improve here and there, because no one is perfect. We have to find a balance between affirming children and challenging children. That is the craft of the school principal and the teacher. That is the key craft - affirming and challenging. In some countries like the US, there was a whole wave starting from the 60s about making children feel good about what they are doing. The idea sounded good and the literature looked good. But if we simply do that, I am not sure we are going to keep achieving what we have been doing, and I am not sure Singapore is going to stand out the way it has. In fact, studies in the United States over the last decade have come to the view that it is not just a child's confidence that matters. What really matters is how well trained the teacher is, how effective his or her teaching is, and the willingness of the child to put in some hard work. That is what really matters. And when children finally achieve, that is when true confidence comes, and that is the more enduring confidence. In fact, there was a study done by the Brookings Institution quite recently of the international results in the Trends in International Mathematics and Science Study (TIMSS). A whole lot of countries take part, from Africa all the way to the States.”
“And it also enforces discipline on the part of each supervisor, to be honest about his or her subordinates, recognise the things that they do very well, and identify those who need help in order to realise their full potential as teachers. Mr Low mentioned an example that was reported on recently about a principal who had given a stern talk to Secondary 5 Normal (Academic) students. When that came up, the first thing I did within the Ministry was to take a closer look at what the school was doing, what they have been achieving, and look at the data as well. We looked at the Normal (Academic) data - successive cohorts of Normal (Academic) students in this school. The first thing that struck us was that almost all their Secondary 4 Normal (Academic) students moved on to Secondary 5, a very high transition rate. The second thing that struck us about this school was that their Secondary 5 Normal (Academic) students did better than most other schools, not just in absolute terms but value-added. Consistently, under the same principal, the school has done better than comparable schools in raising the level of performance of its Normal (Academic) students - better value-add. And that must count for confidence. It is now understood from research all over the world - true confidence comes from true achievement and the joy of achieving. Different schools have different methods, different principals have different methods. I as the Minister for Education, and the Ministry, try not to scrutinise everything they say, everything they do, as long as they have not committed a serious offence. Let them do their own thing and let parents judge the character of the school.”
“Again, it is something which other countries look at with great interest, because they are also trying to do the same thing - assessing schools, not with a very close and direct hand, but assessing them in a way which gives them leeway to do their own thing but, nevertheless, recognises those that are doing better than others, recognises the more competent, capable and caring teacher from the others. That is how the system stays dynamic, that is how quality keeps rising. Our teachers are assessed on several competencies. It is not simply how well their students do in their tests, neither is it simply a matter of what teachers do outside the classroom. It boils down to their passion and commitment in nurturing the whole child. That is what we call the core competency, and we state it as such, that there is a core competency that every teacher knows is the first thing and the most important thing we look at - their passion and commitment in nurturing the whole child. And the rest follows from that. We look at whether our teachers are able to teach creatively and effectively, whether they go out of their way to look after the needs of their students, whether they contribute to the capabilities of their colleagues, contribute to better team work within their department of the school, and so on. These are not new criteria. They are not new factors that we look at in a teacher's performance. They have always been there. What is new about the Enhanced Performance Management System is that it is now transparent; it provides explicit feedback to the teacher each year on how he or she is doing, and what he or she could pay more attention to and what he or she could get more help in developing new competencies.”
“Some of the most important things we want to achieve cannot be measured. We want schools to focus on aims and values that cannot be measured, as much as they track the indicators which can be measured. This is why MOE looks at the school holistically and qualitatively - we do school visits, we do surveys and we get feedback from parents, industry leaders, and even other educators, to get a holistic picture of a school. I think the work we have put in over the years - by our educators as well as our MOE HQ administrators - has been well worth it. This is a system where quality is being driven from the ground because we have given schools autonomy, we free them up, but we assess them over time and reward and recognise those who are achieving higher quality, so that the rest can see what they can emulate, and the good practices spread across the system. That is how we keep raising quality across our system. 12.45 pm This brings me to Mr Low Thia Khiang's question on how we assess our schools - both our school leaders as well as our teachers. We do not appraise principals on the basis of the ranking of their schools or the number of awards their schools win. And neither do we assess our teachers simply on the basis of either the results of their class or the things they do outside the classroom. It is a more holistic assessment. It has been carefully worked out over the years with lots of two-way feedback. The current system is called the Enhanced Performance Management System, introduced a few years ago. It is working quite well, working better now than when we first introduced it.”
“There is no quota on the number of schools who reach these benchmarks or obtain the awards. These are what are called criterion-referenced awards rather than norm-referenced awards, to use the technical language. So they are meaningful indicators of the level of quality that we are seeing in the system, and how it is rising over time. I agree, nevertheless, with Ms Denise Phua, that we should take a fresh look at our KPIs from time to time, make sure they match our desired outcomes. And we can also look at how we can refine our Budget book indicators which reflect some of our KPIs but not all of them. For instance, we could include indicators that capture how well our schools have engaged the students and enthused them in areas such as national education. But we must bear in mind that the real outcomes of education are observed over a much longer period of time, well after a student has left school. For example, an important outcome has to be the spirit of lifelong learning that shows up later in life, as Dr Lily Neo has pointed out. Sometimes, even the outcomes in school are not directly measurable. For instance, Mr Hri Kumar raised the issue of racial integration. It is an important priority for our schools and tertiary institutions, but we cannot measure our success directly. We survey students for their views and attitudes, but we can never be sure if we are capturing real thoughts and feelings, or how they will really react in a crisis. What we nevertheless know is that this is important work, and continuous work for our schools and tertiary institutions. Minister of State Lui will speak more on the issue reply later on. We must therefore keep a sense of balance in defining our KPIs in education.”
“Not many indicators, but there is a lot that underpins each of these indicators. Some of them are systemic indicators, the obvious ones, like education attainment rates for the latest cohorts, and the average number of years of schooling. There are also indicators that reflect how well our schools are doing - how many of them have achieved key performance benchmarks. The benchmarks go beyond just academic achievement. They are holistic, and try to capture whether our schools are doing a good job in developing their students all round. MOE's School Excellence Model (SEM) is essentially our quality assurance framework for schools. It helps schools identify areas of improvement, both through self-appraisal and external validation. We have spent many years refining and improving it, and it is, in fact, now seen by many other countries as a model worth studying and emulating. The SEM focuses on the key processes by which schools deliver holistic education to their students - how effective their teaching is, and how well they develop strength of character, teamwork and leadership skills among their students. Character building and moral education are important tasks in education, as Dr Lily Neo, Dr Ong Seh Hong and Ms Lee Bee Wah have emphasised. Senior Parliamentary Secretary Masagos will be talking more about this later. Some of the key performance indicators in the Budget book therefore reflect the number of schools that have achieved key benchmarks under the School Excellence Model. While they are recognised by way of awards when they do so, the aim is not for us to measure the number of schools achieving awards, but the number of schools who have got that whole set of processes in place that underpin the achievement of these performance benchmarks.”
“Dr Su will help the SST grow its capabilities and networks, and lead a board comprising others from industry, academia and the Government. The new School of Science and Technology will, I am sure, become another peak in our landscape. It has the promise of nurturing a new breed of inventive young Singaporeans who will help us sustain a high-value economy. We do not know where the next Sim Wong Hoo will come from, but these different ways of learning from young will enhance our chances of throwing up the Sim Wong Hoos of the future. Let me now turn to the comments raised by Ms Denise Phua, Mr Low Thia Khiang and the others which, as I mentioned, are related because they all touch on how we keep improving quality across the board, and how we keep track of how well we are achieving the outcomes we want to see in education. How do we keep track of all this and what are our assessment systems and measurement systems to ensure that we have got the right balance in education? We have a system that works well because we identify and develop people who can be strong school leaders, and we give them sufficient autonomy to run their schools in the best interests of their students. That is our basic approach. This way, schools and teachers develop ownership over what they are doing, and it is ownership that drives the improvements that we are seeing. It is ownership that is driving the quality that we are seeing in our system. But with increasing autonomy on the ground, the question posed by Ms Denise Phua becomes important. How do we define our Key Performance Indicators (KPIs) that help us track whether we are achieving the outcomes we desire in education? If we look at the indicators in the Budget book, they are, in fact, fairly comprehensive.”
“This will also require that class sizes be kept small so as to facilitate learning through experimentation - generally about 20 to 25 students per class, so that the students benefit from closer supervision and interaction with their teachers. The school will also house special facilities and laboratories to help its students in their learning, and also make use of specialised facilities in Ngee Ann Polytechnic and NTU. The SST will also be one of our FutureSchools, which means that it will leverage fully on ICT in its activities. Third, the SST will have strong partners in our tertiary institutions. It will collaborate with Ngee Ann Polytechnic and Nanyang Technological University (NTU), and tap their expertise. It will also work with leading companies, such as IBM and Creative Technology, to provide additional learning opportunities and internships for its students. Fourth, just like NUS High School, the SST will have full flexibility on its student admissions – it will be able to select students based on interviews, their track records, recommendations from their teachers, and the like. Like the other specialised schools, we expect it to attract talents from all across the island. MOE will be appointing Mr Chua Chor Huat, the current principal of Ngee Ann Secondary School, to head the SST as principal from June this year. Chor Huat is one of a new generation of strong school leaders, who has distinguished himself in all his appointments to date. Sending him to SST is the first signal we want to send on the importance of this new school. The school leader is critical. We will also have Dr Su Guaning, the President of NTU, as the Chairman of the Board of Directors of the SST. He needs no introduction.”
“It also allows them to discover strengths and interests they never knew they had until they tried it. We will take this a step further. MOE will establish a fourth specialised independent school, a School of Science and Technology (SST), which will open in 2010. It will offer a new option for students who are likely to be university-bound, and who want both a solid academic foundation and immersion in real-world applications. They will be able to learn by experimenting, tinkering, and by taking a project through all its stages – from concept to design to building the models. But the exposure to real-world applications will not be aimed at getting students to specialise early in any particular skill. The real aim will be to nurture students with inventive minds, people who keep looking for a different way of doing things. The SST will be different from other schools in several respects. I will explain this very briefly, as MOE will be releasing more information on the new school. First, the four-year curriculum of the school will offer both academic subjects and new Applied Subjects like Biotechnology, Design, Media Studies, Environmental Science and Technology. All these subjects will all be part of the Singapore-Cambridge 'O' level examination framework. The SST will also be different from the NUS High School in this regard, which offers a six-year programme including JC. The School of Science and Technology will offer a four-year route for capable students who want to keep open the option of going to either junior college or polytechnic, before they eventually go on to university. Second, the teaching methods in the SST will give students greater exposure to practical and real-world application of concepts.”
“The students who are offered places in the new secondary pathways also come from a whole range of primary schools. The School of the Arts (SOTA) made offers to students from 126 primary schools when it opened. At NUS High School of Maths and Science (NUSHS) – although the competition to gain entry is highly competitive, as Dr Amy Khor mentioned - students currently come from 150 primary schools. So these are small pools of students, but varied in their talents and drawn from across the island. It all amounts to a broader meritocracy, and a livelier one. More free-play for students with special talents, around a common foundation that helps every Singaporean stretch his potential. And more Singaporean talents being discovered and nurtured, besides good talents in regular academic fields. This increased free-play around a central core in Singapore education will give us the best chance for the future. It gives us the best chance of seeding the innovative teams that we need, as well as the individuals who want to do exceptional things. They will help keep us in the league of top cities. One of the new approaches that we have been developing in several of our schools is in applied learning, which Dr Amy Khor spoke about. A whole range of schools, from neighbourhood schools like Bishan Park Secondary and Tanglin Secondary, to our Integrated Programme schools like Raffles Institution and Hwa Chong Institution, have partnered the polytechnics to offer electives to their students in a variety of disciplines, like Media & Design, Engineering, Business and Information Technology, and so on. The feedback has been very positive. Students find that the 'real-world' learning that they encounter is interesting and engaging. It motivates them to go further.”
“We need these new and different pathways, because if we do everything the same way in education, we will not produce the individuals who are capable of breakthroughs. We will not be capable of peak performance as a city. I want to highlight two features of these new pathways that we have been creating, which Dr Lily Neo and Dr Amy Khor spoke about. First, the numbers of students entering these new pathways will not be large, but they will very likely have an impact on Singapore that goes beyond their numbers. The three new Specialised Independent Schools - in Mathematics and Science, in Sports and the Arts, currently take in just 230 students in each cohort, or barely 0.5% of cohort. They will eventually grow to over 800 or about 2% of cohort, which is still small. Around 6% of cohort are also enrolled in our Integrated Programme (IP) schools. Some of them too are being groomed in quite different ways compared to before – many more opportunities to explore their interests and do their own projects. And we are also nurturing a different breed through several of our mainstream schools, which are developing niches of talent in a range of fields. Not a large number in each school, or even when you add them together. But these new pathways to learning will help us bring out the individuals with a passion for what they do and who want to go much further than the norm. The second feature of these new paths is that they are recognising a broader range of Singapore talents. We are recognising and nurturing diverse talents, besides the academic. The Direct School Admissions (DSA) process now reinforces this - schools are looking out for different strengths among our young besides the academic, and teachers and parents are encouraging their children to take these seriously.”
“And if there was an international test on bilingual competence, I have no doubt that Singapore students will come out amongst the top internationally, if not the top. It is only possible because we have good schools across the board, not just a few good schools at the top. That is the real strength of the Singapore system compared to others - committed principals and caring teachers, spread across our schools, so we can uplift every child. Doing well in the basics, however, is not going to be enough. It distinguishes us from most countries when we look at what they achieve on average, but it is not enough to distinguish us in the league of leading cities. These are cities which attract the best from a broader population canvas, and also have a way of throwing up individuals with a special edge and passion in what they do. We must do the same. We know our future has to be in innovation, in every field we engage in, whether it is media and design, financial services, or precision engineering. It requires a whole team of people, focused on continually improving and seeking a competitive edge through innovation. But it also requires a special cut of individuals, those with a special passion for what they do and the urge to keep going beyond the ordinary. These are the ones who think in original ways, do things differently, and keep the leading cities spinning differently. 12.30 pm It does not mean that we shake up our education system. It is working very well by any international standard, giving all our students the chance to stretch their abilities, move on to a good post-secondary education and keep upgrading once they enter the workforce. What we are doing is to open up new pathways and different approaches to learning, around a well-functioning mainstream system.”
“Let me thank the Members who have spoken so far for their comments and questions. My response will focus on two issues. I will first address Dr Lily Neo and Dr Amy Khor's questions on what MOE is doing to prepare our young for the future and provide them with options which bring out their unique strengths. I will then address the range of issues raised by the other Members - Dr Ong Seh Hong, Ms Denise Phua, Ms Lee Bee Wah, Mr Low Thia Khiang and Mr Hri Kumar - which touch in different ways on how we can continue to provide a quality education, and keep improving how we achieve the outcomes that we desire in schools. Different angles that the questions took, but they all come down to the question of how we can keep improving, how we can achieve the outcomes we truly desire in schools. There were also some other specific and valuable issues raised - whether it was on special education, what more we can do to help our disadvantaged children, and on the regulation of the private education sector. These are issues which my colleagues will also talk about later. How do we prepare our young for the future, and especially for a future of innovation, as Dr Lily Neo put it? First, keep doing the basics right, and hold all our schools to high standards. That is how we come up with the highest average scores internationally in Mathematics and Science, and now even in English, where our primary school students have emerged amongst the top in reading literacy, despite the fact that more than half of our students come from non-English speaking homes. It came as a surprise to the British and Americans, because they found that the average Singapore student does better in English reading literacy than their average students.”
“Mdm Deputy Speaker, I beg to report that the Committee of Supply has made further progress on the Estimates of Expenditure for the financial year 2008/2009, and ask leave to sit again tomorrow.”
“Mdm Deputy Speaker, may I seek your consent to move that progress be reported now and leave be asked to sit again tomorrow?”
“Madam, I beg to move, That the total sum to be allocated for Head Z of the Estimates be increased by $4,399,250,000. The increase is for the Special Transfers announced in the Budget Statement of 15th February 2008. Of the increase, $1.39 billion comprises Special Transfers that are part of the surplus sharing package that was announced in the 2008 Budget Statement. This includes the $865 million for the Growth Dividends package, $300 million for top-ups to Post-Secondary Education Accounts of those aged 7-20, $220 million for top-ups to the Medisave Accounts of Singaporeans aged 51 and above and $4.25 million for additional assistance to needy families. A further component of the surplus sharing package, comprising personal income tax rebates, has been reflected in the Government's operating revenues. The remaining $3.01 billion is for transfers to National Research Fund, $800 million, Lifelong Learning Endowment Fund, $800 million, Eldercare Fund, $400 million, Medical Endowment Fund, $200 million, Community Care Endowment Fund, $200 million and funds for payouts under the CPF Deferment and Voluntary Deferment Bonus, $350 million and LIFE Bonus, $260 million. That the total sum to be allocated to Head Z of the Estimates be increased by $4,399,250,000. That the increased sum of $10,701,911,000 for Head Z ordered to stand part of the Main Estimates.”
“Our basic philosophy has been and must remain what Mr Zaqy Mohamad, Mr Zainul Abidin Rasheed, Dr Lily Neo, Ms Lee Bee Wah, Mrs Josephine Teo and Dr Lim Wee Kiak expressed – we must keep alive the incentive for every Singaporean to strive and maximise opportunities to do better for themselves and their families. This Budget has given Singaporeans something to tide over their present difficulties. But far more important is what we are doing to help every individual upgrade himself through education and training, to stay in a job and keep advancing his skills, and to save for retirement. We have embarked on new initiatives, and there is much more work ahead. We will stay focused on this central task. As Mdm Halimah Yacob summed up, it is what we have to do so that this continues to be a place where everyone has the opportunity to fulfil his dreams through hard work and can look forward to the future with hope. This is the philosophy which will keep Singapore going through good years and bad, which will ensure that prosperity will last more than three generations, as Mr Seng Han Thong hoped. And above all, which will make this a society where every Singaporean can be proud that they are playing their part, not just by doing better for themselves, but by contributing to Singapore. [Applause.] Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 2008 to 31st March, 2009. *Cols. 1111-1112; 1113-1114.”
“His desire to see nobody left behind is noble and shared by us all. But his exhortation that we should ignore waste, ignore deadweight loss, ignore disincentives to work is reckless. As Chew Chu Ching pointed out in his Zaobao column today, commenting on Mr Siew Kum Hong’s speech, “if a country does not care about creating wealth at all, it is big question whether it could survive in the real world." [Chart 8*] The cartoon accompanying his commentary expresses it more pithily. To be able to help the poor, we must first create wealth, grow our GDP and provide every incentive for Singaporeans to strive and work to improve their lives and that of their families. If our policies harm that, for the noblest of reasons, we will be in serious trouble, as many other countries have found. Instead of helping the people we all want to help, we will be doing worse for them. The real issue is how we can keep our economy productive and vibrant, and how we can keep our society resilient and caring, not just now or for a few years, but for many years to come. Will it be achieved by Government giving more and more and handing out more and more goodies, which MPs like Mr Sam Tan, Dr Ong Seh Hong, Mr Baey Yam Keng and Dr Lim Wee Kiak cautioned against? As Chua Mui Hoong put it in yesterday’s Straits Times, “it is timely to recall that the Finance Minister is not the God of Fortune, and that not all calls for spending have merit. Even if there is a $6.4 billion surplus”.”
“This means that these households are getting back more than they are paying to the Government. Households in the second decile, in other words from the 11th to 20th percentile, will obtain a net transfer from Government that is equal to about 25% of their incomes this year. However, while the bulk of Government revenues come from the top 20%, the burden on them is not high. The top 10% pays to Government about 13% of their income on average, including not just personal income tax, but also motor vehicle tax, foreign maid levy, property tax and GST. Even after this year’s surplus sharing benefits, and after the GST offsets are fully paid out in 2011, there will still be the permanent scheme of Workfare to support lower-income families. In net terms, the bottom 20% of families will still receive a positive net transfer from Government after the GST offsets have run out. Conclusion Mr Speaker, Sir, the most important debate in the last two days has been about the basic ethic that we want to sustain in our society. We all aspire to help and uplift the less fortunate members of our society. Mr Siew Kum Hong made an impassioned speech. He says that the Government is only concerned about not eroding the work ethic, rather than caring for Singaporeans, and so we tend to provide the bare minimum to Singaporeans in need such that they have just enough to survive. His description does not square with the reality of Government interventions to support the lower-income group. Through Workfare, through our housing subsidies, through our CPF subsidies and top-ups, through the support we provide the poor with Medifund and the many flexible schemes that ComCare offers, we are providing substantial support for lower-income Singaporeans.”
“In fact, the scheme was targeted at the bottom 20%, but was extended up to 30% so that there would not be a sudden fall off in benefits for those at the margin. We will need more time to see how well the scheme is working and whether it should be refined. We have committed to review the scheme by 2010. *Cols. 1109-1110. I should add that Workfare is not simply a means to supplement the income of low-wage workers. As Minister Lim Swee Say put it during last year’s Budget Debate, another important objective of Workfare is to encourage as many people as possible to join the CPF system. We know this will take time, and will take considerable effort. But getting as many workers as possible to join the CPF is the only real way we can more adequately address their needs, through the OA (for housing), the MA (for medical needs) and the SA (for retirement), and now the CPF-LIFE scheme. Keeping a progressive fiscal structure Workfare is part of a broader fiscal system that supports Singapore’s social compact. It is a highly progressive fiscal system, despite our very low rates of tax on the middle and upper-income groups. The Singapore system is one that provides targeted help for the needy, while keeping the overall tax burden low so that we reward work and enterprise. [Chart 7*] The next chart shows what households pay to the Government in taxes and receive from the Government in benefits this year. However, it does not include our housing, healthcare and education subsidies which are in fact much more significant for lower-income households. Members can see that up to the 40th percentile of households, Singaporeans are getting a positive net transfer from the Government this year.”
“This is a fair and workable approach – to apply simple, consistent criteria at the national level, but provide targeted assistance at the local level for those who need more help. Addressing the widening income gap Let me now address the challenge of a widening income distribution which many Members, including Dr Lily Neo and Mr Zainudin Nordin, have spoken about. As set out in both last year’s Budget and this year’s Budget, this has to be a key concern for Singapore. As Dr Lily Neo puts it, if those at the bottom end of the income ladder stagnate, or see declining living standards, Singapore’s social compact will be at risk. This is why we have embarked on major new initiatives in the last two years to help our lower-income workers with their income, their savings, their job prospects and the upgrading of their skills. Workfare is a major addition to our social security system – it will give those at the lower end of the workforce a strong incentive to find a job, stay employed and save for their future. But as Ms Cham Hui Fong pointed out, Workfare should not be the end game for any worker. Our objective should be to help our low-wage workers up-skill and graduate out of WIS. Several MPs, including Mdm Halimah Yacob, Mr Christopher de Souza and Mr Zainul Abidin Rasheed, had suggestions on how to improve the Workfare scheme, including broadening its reach amongst informal workers. Mr Inderjit Singh also suggested raising the WIS ceiling and increasing the quantum of payouts. WIS is a new scheme – the first payments were only made in January this year. We should not be changing the basic parameters so quickly. The current ceiling of $1,500 captures the bottom 30% of the working population.”
“The CPF-LIFE scheme may not be the best way to help them if they have trouble meeting even immediate retirement needs. We will have to find other ways of helping them. The Lease Buyback Scheme, which will enable elderly people to monetise their HDB flats to provide them with more retirement income, will be a significant measure for the low-income aged. Minister Mah will be addressing this more fully during the MND COS. Minister Ng Eng Hen will be addressing comprehensively the issues Members have raised with regard to CPF-LIFE during the MOM COS. Design of surplus sharing system There have also been suggestions on how we can improve on the way we share our surpluses. Ms Jessica Tan, Mr Ong Kian Min and Mdm Halimah Yacob suggested using other means of approximating wealth so that we do not penalise needy families living in bigger HDB flats or, in a few instances, in private property. One suggestion was to look at the number of dependents living in the household. I agree that home type is only a proxy for the household’s wealth and it is an imperfect proxy. But it will be both difficult and extremely intrusive to design a national scheme that takes into consideration the profile of needs of every household. In practice, however, families with more dependents do get more benefits. This is because of the PSEA we have given to young Singaporeans as well as the additional Growth Dividends and Medisave top-ups that we have given to older Singaporeans. There will however be cases of families who do not qualify under the criteria but who are truly in need. This is why we have provided additional funds to the CCCs and CDCs, self-help groups and the VWOs. They are in the best position to assess the needs of such families in detail.”
“Housewives were one of the reasons why we decided to offer the L-Bonus to those who wish to participate in the CPF-LIFE scheme but who have less than $40,000 in their Minimum Sum. Dr Amy Khor had asked about what contributions this group of CPF members would have to make in order to receive the L-Bonus. We will extend the full L-Bonus to those whose balances are below $40,000, as long as they have at least $20,000 in their Minimum Sum. As they have smaller balances, however, they must be prepared to receive lower monthly payouts than those with $40,000 or more would receive. We will also offer the L-Bonus to those whose balances fall below $20,000, but on a pro-rated basis, if they wish to participate in LIFE. If they top up their accounts to $20,000, they will be able to qualify for the full L-Bonus. The L-Bonus will therefore provide strong incentive for husbands, children and other family members to top up the accounts of our housewives. It applies across all income groups. And this is also why we have also enhanced the tax relief given to those who top up their family members' accounts so as to encourage those with middle incomes and above to do so. But the L-Bonus is not itself the solution to the problem of low balances of housewives. I think Members will agree that Government’s role should not be to substitute for the responsibility of husbands and children to provide for their wives and mothers. The topping-up of housewives’ accounts will require concerted effort in education and persuasion. NTUC is already moving. As Mdm Halimah said, it has embarked on a programme specifically aimed at encouraging husbands to top up their wives’ accounts. Nevertheless, there will be some CPF members who have low balances and limited family support.”
“This is how we will continue to provide the quality services in health, education and other areas that matter to Singaporeans, including our lower- income Singaporeans. Addressing the needs of all Singaporeans Disabled Several MPs have also made points about groups they feel deserve more attention, especially the disabled and women. Let me deal briefly with each of these in turn. Dr Ahmad Magad, Ms Denise Phua and Dr Teo Ho Pin are concerned with how we are helping the disabled. MCYS will be addressing this more fully in its COS. Let me however say from a budgetary perspective that we are substantially increasing our spending to provide better support for the disabled. Between FY2007 and FY2011, Government expects to spend up to $0.9 billion on disability programmes such as funding on special education (SPED) schools as well as SPED classes in mainstream schools. This also includes various MCYS programmes for the disabled. This is double what we spent in the previous five years. On top of this, MND and MOT will be spending about $200 million over the next five years on barrier-free access - in our public housing estates and in public transport – and to encourage private building owners to retrofit their buildings with basic accessibility features for the disabled. L-Bonus Several Members like Dr Lim Wee Kiak, Mr Ang Mong Seng, Dr Amy Khor, Mdm Cynthia Phua, Prof. Kalyani, Mr Yeo Guat Kwang and Mdm Halimah Yacob have highlighted the special challenges facing women, especially housewives who do not have much in their CPF accounts and who face the prospect of outliving their husbands. We agree this is an important issue which everyone should address.”
“The reason is because polytechnic fees are already much more heavily subsidised by the Government. Polytechnic students therefore pay relatively low fees of $2,100 per year, which are about a third of the fees that university students pay. Moreover, polytechnic students up to the 80th percentile are also able to take loans. We are extending the Government fee freeze for the whole of this year. However, we cannot do so indefinitely. We should not change our basic practice of charging realistic fees so we are not faced with ever increasing subsidies on public services. This is the only way we can provide the quality services that people want, whether in healthcare or other areas. If fees are not priced realistically, someone else will have to end up paying for the cost; which means taxpayers in general. Not only that, but there will be over-consumption of public services that are provided either for free or on a highly subsidised basis. This is what has happened in many developed countries and is why they end up with extraordinarily high taxes to compensate. This is the case in the Nordic countries, for example, where education and healthcare are free. Denmark’s top marginal personal tax rate is 59% and their VAT (which is their GST) is 25%. Our practice of charging realistic fees on public services is what allows Singapore to keep our total taxes, fees and other charges collected from the population, at one of the lowest levels in the world [Chart 6*]. Our approach is working well – a low overall tax burden, realistic fees that only users of the public services pay, plus financial assistance targeted at the poor.”
“This will include fees charged on all Government-provided services (for exam ple, school fees, ITE and polytechnic fees, charges in public carparks, and all licence fees). Regulatory charges, such as those in the transport sector and the development charges applied in the property market, will not be frozen. They must continue to serve the purpose of regulating demand. (For example, the increase in ERP charges which has to be seen together with the decreases in road taxes and Additional Registration Fees that comprise part of the Land Transport Review). The Government fee freeze has not applied to fees charged by non-government entities, such as the universities, restructured hospitals and town councils. These entities have to make their own decisions on whether or not they will raise fees. I would however urge the town councils to consider holding their S&CC charges unchanged this year. In the case of the universities, fee increases have been announced, but they apply only to first year students in 2008. They will face a once-off 4% increase in fees this year, with no subsequent increase over their next three years in university. So, the once-off 4% increase works out to only 1.6% a year. However, while we have to allow our universities to raise fees from time to time, so that they can cover their cost and raise their quality, what the Government is doing is extending further support to lower as well as middle-income students. Members have lent their strong support to this move. Dr Ong Seh Hong had also asked why the new MOE bursaries for polytechnics only applied up to the 50th percentile of household incomes, whereas the university bursary was being extended to the 66th percentile.”
“In sum, it is far better that we provide help to lower-income Singaporeans directly, so that we can target the assistance and provide help in much larger quantums. Government fee freeze Mr Inderjit Singh and Mr Michael Palmer gave a long list of price hikes Singaporeans have faced on the ground. Mr Inderjit Singh says many were factors that Government should have watched and prevented, including even prices of certain non-Government entities. I notice their lists were remarkably similar to a blog posting that has been making its rounds for quite a while now. First, let me clarify that, taken as a whole, Government taxes, fees and charges, other than GST itself, contributed only 0.1 percentage points to the 2007 CPI inflation of 2.1%. If we look at the January 2008 numbers, the Government related contribution (excluding the GST increase) was also about 0.1 percentage points out of the total CPI inflation of 6.6% [4]. [4] This includes Government charges in the transport sector, ie, ERP, road taxes, COE and ARF. It does not include taxi fares, bus fares and MRT fares which are charged by private companies, not the Government. The latter contributed 0.15 percentage points to 2007 average inflation and 0.5 percentage points to January 2008 inflation. Electricity and gas tariffs which were also not included above contributed negative 0.1 percentage points to the 2007 average inflation and positive 0.3 percentage points to the January 2008 inflation. We announced a one-year freeze on Government fees starting from July last year when the GST was raised. We have decided to extend the Government fee freeze till end of 2008 to provide further reassurance to Singaporeans, at a time of rising prices.”
“There are two reasons why exempting essentials from GST is not an effective way of helping the lower-income groups: (i) First, most of the GST revenue collected on essentials comes from the higher income households and foreigners. They contribute the bulk of GST on essentials, just as they do for all other types of expenditure. (ii) Second, the bulk of consumption by the lower income is not on essential items, but on other items. As I showed in the Budget Debate last year, the eight most commonly cited essential items make up only 5% of the expenditures of the bottom 20% of households. Even if we take all uncooked food into account, it is only one-eighth of the expenditures of a typical household in the bottom 20% of the income ladder. And if we add their spending on public transport and utilities, the total comes to around one-quarter of their expenditures. *Cols. 1107-1108. Therefore, it is far better for the lower income groups that we help them directly in a targeted manner and allow them to decide on how best to use the assistance we provide for their household expenditures. Exempting GST on essentials will benefit mainly richer Singaporeans and foreigners and leave less to be provided to lower-income households. Exempting certain items from GST is also not cost free. It will mean the need to impose higher GST rates on other items over time, in order for the GST to generate the same amount of revenues as before. This is in fact what has happened in several other countries which have exempted essentials from GST. It will affect Singaporeans across the board if we were to do that, including those in the lower-income groups.”
“It will not be in the interest of either businesses or households if we end up with a spiral of wages and inflation chasing each other. The inflation resulting from higher food and energy prices means we are indeed seeing some impact on the living standards of consumers, and on the profit margins of companies. But as Dr Lim Wee Kiak pointed out, the only real solution is to raise our productivity. Mr Yeo Guat Kwang also said that the only lasting way to help low-income Singaporeans cope with rising costs is to improve their employment prospects through training. If we try to remedy the problem caused by inflation by pushing up wages to catch up, or by companies pushing up prices to maintain profits, we will end up chasing our tail. The only reliable and sustainable way to address this problem is for both workers and companies to improve productivity, so as to justify a higher standard of living for ourselves. Let me now move on to other suggestions from Members on how we could mitigate the impact of inflation. Zero-rating GST on essentials Mr Inderjit Singh and Ms Sylvia Lim had asked if we could exempt GST on certain essential items to help the lower- income group. I had explained fully in last year's Budget Debate why this is not a good idea, especially not for lower-income Singaporeans. It is still not a good idea today. The argument to zero rate essentials has always had great emotional appeal. As Mr Inderjit Singh pointed out, lower- income groups spend a higher percentage of their incomes on essentials compared to the higher-income groups.”
“The first example shows a 2-room HDB household comprising a retiree elderly couple. The total amount that 2-room retiree households spent last year would have been about $980 per month on average, or $11,900 per year. This year, their total spending could go up by about $650 for the year because of inflation (this assumes the top end of the forecasted inflation range of 4.5% to 5.5%). However, they will get around $3,100 in benefits from this year's surplus sharing package and the GST offsets that they continue to get – more than four times their increase in cost of living. The second example is a typical 4-room household – a couple with two children, one in secondary school and the other in Polytechnic. Their total increase in expenditure due to inflation in 2008 is about $2,200, and they will receive around $4,100 in benefits from the 2008 transfers – almost twice their cost of living increase. The third example is a 5-room household – a family with two children (one in primary and one in secondary school) and one grandparent. Their total expenditure arising from inflation in 2008 is about $3,100, and they will receive around $4,400 in benefits from the 2008 transfers – more than their cost of living increase. These illustrations, I have to emphasise, are before taking into account the increased wages that working households would experience in a growing economy. The Government's package of measures has therefore helped to offset the impact of higher prices on most households. This will have to be taken into account by the National Wages Council (NWC) when it considers its recommendations later this year.”
“Fuel prices were also at a two-and-a-half year low in January last year). The Government's forecast of inflation remains at 4.5% to 5.5% this year. As I mentioned in the Budget Speech, we expect inflation in the first half of the year to be higher before declining in the second half of the year, due to the wearing off of one-off factors such as the GST increase. Helping households As I explained in the Budget Speech, however, we cannot avoid global inflation, but we are mitigating its effects. Our efforts to diversify our food sources and our policy on the Singapore dollar exchange rate have helped mitigate the effects of inflation. Dr Teo Ho Pin and Mr Liang Eng Hwa have supported this move to diversify our food sources to build resilience of our food supply and encourage competition among suppliers. We are also helping Singaporeans directly. First, by helping them own their homes, which provide a large hedge against inflation. This is why, as we have explained before, although the revision in the Annual Value of homes has raised the CPI number, it has no impact on most Singaporeans. The 95% of Singaporeans who own their homes are not affected by inflation in the rental market, which is especially worrisome if you are a retiree household. In fact, the AV revision simply recognises the fact that HDB flats have become more valuable. It does not mean that homeowners are worse off. Second, by helping needy Singaporeans directly. Because we had a large surplus last year, we have been able to provide a substantial package of benefits directly to Singapore households. It will in fact exceed the cost of living increases that most lower and middle-income households will experience. [Chart 5*] I will show three examples that describe typical households.”
“I can assure him and Dr Teo Ho Pin and the others who spoke about this that the Government will not be complacent on this issue. This year, we will be taking a few further steps to encourage energy efficiency. MEWR and MTI will elaborate a bit more on these areas during their COS. Are we doing the right things to help Singaporeans? The third broad question that has come up in the Debate – how do we ensure that we are doing the right things to help Singaporeans, especially those in need? Cost of living for households Despite the good growth, there are still many Singaporeans who are struggling to make ends meet. Many Members such as Dr Teo Ho Pin, Ms Ellen Lee, Mr Ong Ah Heng, Mdm Cynthia Phua, Mr Zainudin Nordin, Ms Indranee Rajah and Dr Mohd Maliki Osman spoke passionately about the less privileged groups, particularly: (a) Lower-income groups who are fearful that the growth in their wages will not keep pace with inflation; (b) The sandwiched middle class who often have dependents, both young and elderly; and (c) The elderly retired and the disabled, who have no regular source of income. I agree that we should be concerned about each of these groups. Our whole approach has been designed to help these Singaporeans in a sustainable way. Increases in the headline inflation rate Members have all seen the latest January CPI numbers, which show inflation at 6.6% compared to January 2007. MTI has explained the reasons for this increase, which largely have to do with the unusually low level of prices in January last year. (In particular, there were one-off factors such as the S&CC rebate that was given in January last year, but not in January this year. The schedule for S&CC rebates has been changed so that the rebate was given in December 2007 instead.”
“However, we are addressing the whole framework of sustainable development comprehensively. This is why the Government has set up two Inter-Ministerial Committees, one on Climate Change chaired by DPM Jayakumar and another on Sustainable Development co-chaired by Minister Mah and Minister Yaacob, which will be looking at our domestic strategies. Minister Mah and Minister Yaacob will be elaborating on the issue of Sustainable Development during the MND and MEWR COS sessions. We are embarking on a comprehensive study of the measures we should take to support environmentally friendly development. We want to look at this holistically, and avoid rushing into schemes that would increase costs for businesses and consumers without real impact on the environment. Our strategy has always been to focus on areas where we can make practical, effective and impactful contributions. With this approach, we have managed to achieve good economic growth, while sustaining a high quality environment. We are a small player, contributing very little to global emissions. But we want to play a meaningful role where we can. However, we are not starting from scratch. Singapore is today widely recognised as a clean and green city. Indeed, as Mr Kevin Hydes, Chairman of the World Green Building Council has noted recently, on a per capita basis, Singapore probably has one of the highest incentives to encourage green buildings [3]. We are also developing a cluster of world-class players and R&D capabilities in the green industries. [3] The Business Times, 23rd February 2008. Mr Edwin Khew also noted that we were already in the lead in environmental initiatives but he wanted to make sure that we did not lose the momentum of what had been started.”
“CET – Learning at all levels Many Members, such as Dr Lily Neo, Mr Ong Kian Min, Mdm Ho Geok Choo, Mr Heng Chee How, Mrs Josephine Teo, Mr Zainudin Nordin and Mr Yeo Guat Kwang have strongly supported our investments in retraining and CET. Mdm Halimah Yacob asked if we can consider opening individual learning accounts (ILA) to mitigate financial barriers that individuals might face in pursuing adult learning. Dr Teo Ho Pin also asked for incentives for education institutes and training allowances to encourage lifelong learning. Adult training is already heavily subsidised. Workers who attend re-training continue to receive subsidies of up to 80% of course fees (for older workers, 90%). This is regardless of whether they attend courses by themselves or are sent by their companies. This year, the Government has made it easier for individuals to obtain tax relief for the cost of re-training and has also agreed to fund up to 40% for part-time degree programmes. The ILA concept is an interesting one which we will study. Our survey of ILA schemes overseas has shown that there are problems of abuse and workers who end up experiencing poor quality programmes. We will need to study carefully the issues and potential in introducing an ILA scheme. In the meantime, our focus is centred on building capacity, further developing the Workforce Skills Qualifications (WSQ) certification framework and improving the quality and span of CET programmes as a whole. Sustainable development Many MPs like Ms Jessica Tan, Mr Gautam Banerjee, Ms Penny Low, Dr Lim Wee Kiak, Dr Teo Ho Pin and Mr Edwin Khew, were disappointed that we did not announce more incentives to promote green business practices. They are right that the Budget delivered no new initiatives on this important issue.”
“This is on top of the $160 million that SMEs will benefit from the Corporate Income Tax rate cut and partial tax exemption changes that were announced last year, which will take effect this year. So that makes a total of $310 million for SMEs. [Chart 4*] These incentives will make Singapore one of the most compelling locations for companies to start, grow their companies and engage in R&D activities. A company with about a million dollars of profits – in other words, still an SME – and which spends 1.5% of its turnover on R&D in Singapore would have an effective tax rate of about 6%. This is comparable to that in Ireland despite their much lower headline tax rates, and much lower than that in Hong Kong. This is our focus – we will provide a conducive and attractive tax environment for companies to build sustainable competitive advantages through innovation. *Cols. 1105-1106. But it will take time. As Mr Zaqy Mohamad, Mr Ong Kian Min, Dr Amy Khor and Ms Denise Phua have pointed out, we will have to nurture an entire culture of innovation, especially among our smaller companies. There is a lot of work ahead in spreading the message amongst all our companies and helping them to take advantage of the incentives we have provided. They do not have to be in the high-tech sector. Mr Gautam Banerjee had asked about this. The definition of R&D that we currently adopt for corporate tax purposes is in fact a broad one, and is consistent with that in countries such as UK and Ireland. Providing the best workforce We are committed to providing the best workforce, this is why companies will continue to invest here, establish themselves here.”
“We had indeed done so back in the past, such as 1999, 2001 and 2002. That was however in response to economic downturns rather than problems caused by strong economic growth. Businesses then were suffering because of weak demand rather than rising costs. Today's situation is very different. The economy is expanding. Providing rebates would not solve the imbalance of supply and demand, which is the source of the problem. In fact, it might even accentuate the problem. In an environment of strong demand for rental space, it is quite possible that the outcome of Government giving tax rebates on rental costs will drive prices up further, because it would stimulate demand for rental space without adding to the supply of space. The real solution is to relieve the bottleneck in supply, which is what the Government has been seeking to do. MTI will also be addressing the issue of rising business costs and supply constraints at their COS. Providing an attractive tax environment We will continue to ensure that Singapore remains the best place for businesses to start, grow and mature. We have provided an attractive tax regime for all our companies, having made decisive moves in last year's Budget when we reduced the Corporate Income Tax rate from 20% to 18%, and enhanced the Partial Tax Exemption scheme to benefit SMEs. This year's further tax moves to promote productivity and innovation will complement the reduction in headline rates that we announced last year. (a) The Fixture and Fittings Allowance together with the R&D incentives will cost us a total of $380 million every year. Of this, about $150 million will go to SMEs – much more than Mr Inderjit Singh's estimate of about $50 million.”
“This will be close to twice the quantum of industrial space added in the last two years, and is expected to ease tight occupancy rates and relieve pressure on rentals. Land sales policy Mr Inderjit Singh suggested that the Government was responsible for driving up property prices because we have had a land sales policy that has sought to time the release of land to get the best price for Government, instead of providing a steady long-term release of land. Our land sales policy has been a responsible one that is market-led. We ensure that enough supply is made available to meet basic demand through the Confirmed List, and let the market decide whether it wants to develop more sites through the Reserve List. No one anticipated the strong surge in demand for office space in the last two years coming right after the 2002-2004 period, when market conditions were very weak. In fact, some owners were converting their office space to other uses then [2]. [2] Between 2001 and 2004, there was a net conversion of around 120,000 sq m of office space to other uses. Mr Inderjit Singh said that the Marina Bay Business and Financial Centre (BFC) could have been released for development two years earlier. I think everyone in town would like to take this view with the benefit of hindsight. But let me remind Members that when the Government was actively planning the sale of the BFC site in 2003, the feedback from the industry was very negative. Nevertheless, the Government went ahead to make the site available for sale on the Reserve List in 2004. The site was eventually sold in 2005, after much marketing. Mr Inderjit Singh and Ms Jessica Tan also suggested that we give rebates to businesses to address their short-term cost pressures.”
“Our approach, therefore, is to provide the conditions for Singaporeans and our companies to succeed and to grow over the long term. We will help our companies to move up the value chain so that they are more competitive in a higher cost environment, and help our people to acquire the skills and competencies they need to earn a good living. In the short term, however, we address the bottlenecks. The key constraints that we face today are that of labour and space. To ease pressures on the tight labour market which MPs like Ms Penny Low and Ms Lee Bee Wah have asked about, the Government has allowed more flexible access to foreign manpower: (a) MOM has increased the quota for mid-skilled foreign manpower (S pass holders) from 15% to 25% in January 2008. (b) The Dependency Ratios (the number of foreign workers companies can hire for every local worker) have been raised for the manufacturing, services, construction, process and marine sectors from January this year. (c) Office space, on the other hand, has seen a serious shortage – much of it due to the rapid expansion in the financial sector in 2007, when it grew by 17%. Businesses have found rapid rises in rentals unsettling. I have set out in the Budget the measures the Government is taking to address the temporary shortages in office space until the large supply of new office space comes on-stream in 2010. (d) Industrial rentals too have risen significantly. Since the resumption of the industrial Government Land Sales programme in 2003, MTI has been putting out an orderly release of industrial land, which will result in a significant supply coming on-stream in the next year or so.”
“We lose the whole cluster – the critical mass necessary for the industry to be in Singapore. We could have rejected leading manufacturing investors or turned away financial sector players when they wanted to expand in Singapore, in the name of avoiding rapid growth. Would Singapore today have been better off if we had done so? Would food be more affordable? I am sure most Members would agree that Singaporeans would be worse off today if we had adopted that path. Mr Inderjit Singh had in fact claimed that our growth policies had led to lower-income Singaporeans being worse off. This is plainly wrong. It is precisely the rapid growth that we have seen in the last few years that has turned things around for our low-income households and allowed them to enjoy positive growth in real incomes after the very difficult period they went through in the earlier part of this decade. In the last two years, our strong economic growth has increased the number of employed persons amongst lower-income households. And as Ms Cham Hui Fong pointed out, 2007 was also a good year for low-wage workers because we had the lowest retrenchments since 1994. This is why the bottom 20% of (non-retiree) households saw their incomes grow by 5% in 2007 in real terms (over 7% in nominal terms). This is before taking into account the substantial Government transfers to the lower-income group which has further boosted their incomes. Our SMEs too have been better off because Singapore has grown well in the last few years. Many of them are involved in the domestic market rather than exports and their businesses have picked up because of the strong growth in Singaporeans' incomes. Costs are higher, but so is the overall demand for goods and services.”
“Our whole approach has been to enable our people and businesses, as both Ms Lee Bee Wah and Mrs Josephine Teo have pointed out, so that we can take advantage of opportunities for growth when external conditions are good. This is why, for example, we cut corporate taxes last year, which Mr Inderjit Singh in fact strongly supported – although we did not cut Personal Income Taxes, which he had called for and continues to call for now. We wanted to provide the best conditions for our enterprises to seize opportunities and grow, not just for one or two years, but over the long term. We know that growth will be volatile – strong in some years and weak or even recessionary in other years. We cannot avoid these cycles because it is part and parcel of being a global city. But we have to take advantage of the opportunities when external conditions are favourable so that the good years can offset the down years when the global cycle turns. This is how we assure Singapore of healthy long-term growth through good years and bad. Our economy has grown at an average 5% over the past 10 years. But this is only because we grew rapidly in the last four years, by close to 8% on average. If we had not had this strong growth in recent years, we would not have made up for the very weak growth in earlier years and would in fact have performed below the economy's potential over the last 10 years. There is another reason why we should be prepared to take the opportunities when they come. The significant opportunities come in cycles – chemical crackers, once every seven to eight years. When they are ready to invest, and we say no, they go elsewhere. If we miss them, we miss the whole cycle. And we lose not just one investment.”
“In total, therefore, when we take into account the amounts set aside for endowment fund top-ups as well as for surplus sharing, we will be spending $5.4 billion. This is a large sum we are putting aside to meet the needs of Singaporeans, both for the immediate term as well as for the future. Are we doing the right things to sustain competitiveness? Rising business costs Many MPs, including Mr Inderjit Singh, Ms Jessica Tan, Mr Gautam Banerjee, Mr Michael Palmer, Ms Penny Low and Mr Edwin Khew have spoken up for local businesses and SMEs. They were concerned that this Budget has not done enough for them. Local costs are rising because the economy is doing well and there is increased competition for resources, especially labour and industrial and office space. Mr Inderjit Singh attributed this to what he said was the Government's 'grow-at-all-costs' policy, which he says had overheated the economy and has been the cause of our inflation in business costs and prices of consumer goods, including even food. In other words, the problems faced by businesses and households are the result of a flawed growth policy. It made for very entertaining listening, but it was in fact Inderjit's analysis that is flawed. The Government has not pursued a 'grow-at-all-costs' policy as Mr Inderjit Singh suggested. We ‘went for growth’ not by over-stimulating the economy with fiscal spending (because our budgets have been fairly balanced, and indeed in surplus last year as some Members have complained), but by making Singapore more competitive by building up our capabilities, keeping taxes competitive and investing in infrastructure.”
“Transfers are too small compared to our surplus Mr Seng Han Thong said that the amounts we are giving out this year are significant. However, several MPs referred to feedback that this year’s surplus sharing package (at $1.8 billion) is small compared to our surplus of $6.4 billion last year. Could we not have afforded to give more, for example, through S&CC rebates and property tax rebates, as Mr Inderjit Singh suggested? First, to clarify, the special benefits that we are providing to households through this year’s Budget amount to $2.8 billion. This is because, in addition to the $1.8 billion that comprises this year’s surplus sharing package, we will in fact be giving $1 billion of benefits that were previously announced as part of the GST Offset Package. Second, it is useful to put in perspective the $6.4 billion estimated surplus for 2007. It is, in fact, not large by historical standards, relative to the size of the economy. [Chart 3*] The surplus is a turnaround from the deficits we have been running in recent years. But at 2.7% of GDP, it is in fact not large compared to the budget surpluses we were running in the 1990s. There is no assurance that we will continue to run significant surpluses and we do not expect to. This is why, while we have provided a substantial package of benefits in the $2.8 billion that we are providing to households this year, we are also setting aside resources for the endowment funds that are dedicated to the long-term social expenditures that are necessary for Singapore and for R&D. By doing so, we are ensuring that long-term needs such as Medifund, Eldercare and continuing education obtain a secure stream of funding, independent of the ups and downs of the economic cycle. *Cols. 1103-1104; 1105-1106.”
“But they are citizens, and the Government’s job is to anticipate their future needs, put in place the finances that allow us to meet these needs and help Singaporeans with the changes that are necessary by providing them offsets to help them adjust. Internationally, too, the trend continues, of moving away from direct taxes on income to indirect taxes on consumption. Even in Hong Kong, which today enjoys very strong revenues, professionals and the serious money know that the GST would eventually be necessary in order to sustain their revenues and make the investments they need for the future. Hong Kong’s strong surpluses today are largely due to buoyant stamp duty and land sales collections. As the Hong Kong Financial Secretary stated in his Budget Speech this morning, “revenues from land premium and stamp duties together will account for about one-third of total government revenue for 2007-08. This is the highest contribution that these relatively less stable revenue sources have made to total government income since 1997–98.” To sum up, we made the right decision to raise the GST last year and put in place a strong and stable revenue position for the future. We introduced it at a time of good economic growth, although no one expected growth to be as strong as it eventually was. Doing so allowed us to provide substantial offsets to lower- and middle-income Singaporeans, and to put in place the WIS as a long-term programme of income support for our low-wage workers. The 2% increase in GST also did not contribute to the fiscal surplus in 2007. Is Government giving back too little? Let me now examine the question of whether the Government is giving back too little.”
“The next 20% (in other words, from the 20th to the 40th percentiles) paid 7%, and the subsequent 20% (in other words, from the 40th to the 60th percentiles) paid 10%. Adding up, this means that the bottom 60% of all resident households contributed less than 25% of total GST collected. This is because upper income Singaporeans, as well as tourists and foreigners, account for the bulk of our GST collections. Let us now look at what Singaporean households are getting back. [Chart 2*] The chart plots the additional GST paid by each of the household quintiles (in dollar terms) against what they have received in FY07 from the GST Offset package and WIS. As you can see, households in the bottom 60% are getting back much more in terms of offsets than additional GST paid. For the bottom 20% especially, it is quite significant. In 2007 alone, the GST offset package plus WIS is five times more than the GST they paid. Fourth, given that the GST increase was an essential part of our strategy for funding future expenditures, it would have been quite unwise for us to wait until we have run out of revenues before raising the GST. The last thing we should do is to wait until there is an economic downturn, households are facing financial difficulties, and the Government is facing declining revenues before we raise the GST, because then we would be unable to provide a full offset for Singaporeans. We should never try to game this – to wait until the last minute to raise revenues, or to roll back the GST increase now because we had a good year of surpluses, in the hope that we can raise it again later – as suggested by both Mr Gautam Banerjee and Dr Loo Choon Yong. We could do that if Singaporeans were simply shareholders in Singapore Inc.”