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Financing a New Singapore: Happiness, Prosperity and Progress
Mr Deputy Speaker, with all this talk about “social compact”, it may be useful to note that while the concept was born hundreds of years ago in 17th century political philosophy, in this House, it was first used only in 1996, in a debate on the White Paper introduced by the Minister for Transport on "A World Class Land Transport System”.
Since then, it has been used in almost every Budget Debate in recent years, and certainly, by the last few speakers. A social compact is essentially an exchange of promises - each of us giving up our freedoms to pursue selfish interests in an unfettered way, in exchange for a stable, ordered fair society, in which all of us have an equal chance to flourish.
In the founding days of Singapore, these ideas were front and centre in all that Mr Lee Kuan Yew and his colleagues did. An examination of records around Singapore’s independence would show that Mr Lee and his colleagues were very clear in their purpose.
“My business is the people’s happiness” – Mr Lee Kuan Yew said on 27 May 1965 in the Malaysian Parliament. “Happiness of the people” appears in the Proclamation of Independence on 9 August 1969. The word “Happiness” is enshrined in our National Pledge.
All these formed part of the social compact that he and his team forged with the people of Singapore.
Over the years, our social compact was not lost on successive PMs and their teams, from Mr Goh Chok Tong, to Mr Lee Hsien Loong and their teams. So, I am very glad that DPM Lawrence Wong called this out in his Budget Statement last year and that this year’s Budget had many good measures which will certainly help strengthen our common identity and social compact.
The Budget is the most binding version of our social compact, because it allocates resources that put these big ideas to work, for the future of Singapore and Singaporeans.
An Inspired Budget
Budget 2023 is an inspired political statement that spells out duties for the rich, welfare for the poor and opportunities for all. In many ways, it is a decisive break from the past.
To show how, and why, let me contrast this with the political language and financial principles outlined in 1996 by the person who first used the words “social compact” – this was by Nominated MP and economics Professor Lee Tsao Yuan.
In her speech that year which argued for increased subsidies for transport, she said: “Education, health and housing have, from the very beginning of the PAP Government, been treated differently.
To me, subsidy is not a dirty word. Making basic health, education and housing affordable is, and always has been, the social compact between this Government and the people.”
She then outlined her own ideas of four financing principles used in the provision of public services by the Government.
First, she argues, “There is no such thing as a free lunch. A price tag is put on almost everything in Singapore by the Government.” In the 1990s, where there was a wave of experiments on privatisation, this could be true.
Indeed, it is still a principle of good fiscal prudence to understand the price of things.
However, Budget 2023 with its high focus on redistribution, especially for those most vulnerable among us, shows that there are free lunches for those who need them.
The second principle is: "you get what you pay for". Her example was on hospitals. She said, “If you want the comfort and privacy of an "A" class ward, well, you pay hotel prices.”
This principle certainly holds for the upper end of the market, but increasingly, not for the lower, especially in this Budget.
The Assurance Package, the increases in CPF housing grants and subsidies for the elderly, they all show that we are not slaves to the market and in fact, going quite far in the opposite direction. In large sectors of our economic life - in fact in the biggest ticket items, most Singaporeans get far more than what we pay for.
I shall say more about these two principles in my cuts during the Committee of Supply on Ministry of Social and Family Development.
The third principle, she says, applies to the provision of three public goods - health, education and housing - and is that of progressive subsidisation. In this I would like to say that this Budget shows clearly that the progressive element - both in our tax and subsidy - remains core to our financing philosophy.
It is a political, not mere fiscal, commitment - one which goes to the provision of all Government spending, not just social spending. This is because of political origins of the PAP Government, born of our socialist beginnings - that those who have the most, should carry the heaviest tax burdens, in order to benefit those who have the least.
And in this, I’d like to make a point about tax on cars and how we can improve our current COE system to make it even more progressive.
There are cars which costs upwards of a $1 million - the Ferraris, Lamborghinis, and McLarens - and even more exotic ones that could cost up to $6 million. The tax they attract is higher than those cars which costs, say $100,000.
But the price of the COE they pay, in the “open category”, is the same. Can the government consider a special category for such “super cars” such that the COE market is competitive within this special class? This would have little impact on the majority of Singaporeans who own only one, and relatively moderately priced, car.
In general, however, this year’s Budget shows that the socialist heart of policy-making is still beating strong - from housing, to workers’ welfare, to specific social groups.
The fourth financing principle of the Government outlined by Professor Lee is that all Government revenues go into a consolidated revenue account, which is that the Government does not to tie revenue to specific expenditure items.
This principle remains, but since 1996, one major change is that the Net Investment Returns Contribution (NIRC) today accounts for the majority of our government funding. This is possible only because of the judicious and careful husbandry of public funds, and wise investments over the last 57 years.
In these years, we have resisted over-spending, maintained a strong sense of self-reliance and continued giving all workers opportunities for training and progress - these were all ingredients of the current strong financial position we are in today.
The Singapore Welfare State: Balance and Ambition
How do we ensure that, with greater welfare provision, that the self-reliance and ambition of our pioneering years remain strong?
First, it is important to keep our debates both vigorous and honest so that we know when and where subsidies are truly needed.
Second, to keep opportunities open and plentiful for us all is by growing our Small and Medium Enterprises (SMEs), which collectively provide the most number of jobs to Singaporeans.
Yes, SMEs occupy a special place in my heart, which is why in the last Budget Debate, I also spoke about them and today, I also want to say a few things about them. Many SMEs are dealing with a myriad of challenges. There is added pressure all round as SMEs face higher operating costs – be it rental, energy, manpower, financing, etc. Vendors may also artificially increase prices, which can in turn negate costs offset by existing grants that SMEs have applied for.
More specifically, it is the lack of manpower and challenges in hiring local workers that is worrying for many of them. SMEs with labour shortages are pre-occupied with day-to-day operations, and constrained in planning for longer-term business transformation and digitalisation.
Hiring local workers with relevant skillsets is made more difficult if the sector is unattractive to locals, e.g., retail, F&B, manufacturing. As a result, SMEs in these sectors have called for increase in foreign worker quotas or to relax the criteria to qualify for foreign worker quotas to ease their labour shortages.
So, NTUC has called out to government for enhanced support to offset these higher costs, boost local hiring and productivity for our SMEs.
We ask Government to enhance the level of and range of support to companies to offset high operating costs and manpower challenges, step up productivity and digitalisation initiatives.
Can the Government offer loans with lower interest rates, and review eligibility criteria for grants, such as removing the 30% local shareholding requirement and to allow more SMEs to qualify for Productivity Solutions Grant?
We also ask for the Government to support SMEs in hiring local workers and training efforts.
Can we make upskilling a compulsory component in evaluating companies’ eligibility for tax relief, while providing complementary training grants for companies to send workers for training?
Can we also increase avenues for companies to obtain local accreditation for specific skillsets and improve funding support? With a vibrant and strong SME sector, we will be able to ensure opportunities for all.
Conclusion
Now we see more fully why this Budget is such a big step forward. These are three big ideas that form the bones of our new social compact - a greater redistribution of welfare and duties among all of us who live on this tiny island, so as to ensure new and continued opportunities for us all, that we may achieve happiness, prosperity and progress as a nation.
With this, Mr Deputy Speaker, I support the Budget.
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