Singapore’s finance minister Heng Swee Keat says that reducing the cost of living for struggling households is one of his main priorities.
He told the media yesterday (Tuesday) that families in the lowest 20 per cent by household income got S$4 of benefit for each dollar they paid in taxes, and those in the middle bracket received S$2 in benefits per tax dollar.
Meanwhile, primary and secondary schools were “almost free” and subsidies ranged from 75 per cent to 90 per cent for further education, added Heng, who is tipped to become the next prime minister.
The robust Singapore dollar meant cheaper imports and an open market helped keep costs low, Heng added.
Rohan Solapurkar of Deloitte said the raft of budgetary measures announced this week was largely expected, and it catered to all of the groups the People’s Action Party was hoping to ingratiate before the election.
“There is something for everyone, and I think that’s how the government wants to look at it, whether it is the younger generation or whether it is the older generation,” Solapurkar told CNBC.
Singapore is concerned about its ageing population, who traditionally vote in high numbers, and has awarded those born in the 1950s health and fitness subsidies. The programme is expected to cost a total of S$8 billion (US$5.9 billion), with the authorities setting aside S$6.1 billion in the 2019 budget for the measures.
There were also other populist payouts for SMEs and low-income families.
Heng’s budget said a 60-year-old, low-income Singaporean would receive around 30 per cent of their wages from the state.
Heng is clearly aware of the impact of demographics on Singapore’s economy, saying the city-state must avoid “hitting a brick wall a few years down the road”.
“I know it is not easy for us to just restructure, but my concern is that if we do not act now, we will be storing up problems for the future,” he said yesterday.
The budget also avoided any highly anticipated taxes on sweet drinks, Solapurkar, while adding that diesel duties were rising to address air quality and global warming.
Heng also announced curbs on immigrants in the service industries, although employers are already struggling to hire sufficient staff.
Singapore’s service industries in 2013 had a dependency ratio ceiling of 45 per cent, so a firm with 20 full-time citizens or permanent residents could employ 16 foreigners. In 2015, the ratio was reduced to 40 per cent and now Heng wants to cut the ratio to 35 per cent in two steps by January 2021. This means the same firm could only employ 11 foreigners if it had 20 Singaporean employees.
Singapore’s status as a trading hub helps keeps prices low. Picture credit: Wikimedia