SINGAPORE — While rising costs of living prompted the provision of additional help to Singaporeans, higher than projected revenues have given the Government the financial muscle to do this early, without having to wait until next year’s Budget, analysts have said.
The bulk of the S$1.1 billion support suite announced on Thursday (Sept 28) will go towards boosting the Assurance Package, which is aimed at helping Singaporeans cope with the Goods and Services Tax (GST) increase, bringing it up to over S$10 billion in the process.
The Assurance Package has been enhanced several times since it was first announced in Budget 2020 as a S$6 billion package — it was topped up to S$6.6 billion in 2022, and then to S$9.6 billion in this year’s Budget.
Economic and political analysts are not ruling out the possibility of such ad hoc supplementary packages being more common in future, noting the prospects of further economic volatility.
They said that it would hinge on two broad factors: Whether the Government would want to build more flexibility into the system, and if the national revenue positions allow them to do so.
And while more flexibility in reacting to changing economic conditions may be good, some experts highlight the risk of developing a welfare mentality.
FISCAL AND ‘POLITICAL’ CONSIDERATIONS
In announcing the slew of enhanced support measures, Deputy Prime Minister and Finance Minister Lawrence Wong said the move was made in view of downside risks: Ranging from global issues like the disruption of food and energy supplies to domestic ones like moderating real wage growth and increases in the price of water and public transport fares.
Economists Selena Ling and Song Seng Wun both noted that the higher than initially projected revenue collection for the financial year ending March has given the Government fiscal space to provide more help to Singaporeans.
A total of S$68.6 billion (US$50.3 billion) in tax revenue was collected for the 2022/23 financial year in Singapore, a 13.1 per cent increase from the previous year.
Corporate income tax came in at about S$23 billion, above the S$18 billion projected, while personal income tax accounted for S$15.5 billion, higher than the S$14 billion projected. GST collected amounted to about S$14 billion, against S$12.8 billion projected.
Mr Song, an economic adviser from financial service provider CGS-CIMB, said the fiscal position gives Mr Wong some “room to give back without having to wait for Budget Day next year”.
There also considerations beyond fiscal, said other experts.
Associate Professor Walter Theseira from the Singapore University of Social Sciences said: “It’s a bit of a political element there because I think it’s responding to the public concern or belief that some of the cost pressures are government controlled.”
These refer to things like the hike in GST, public transport fares and water prices.
Hence, he said that the off-Budget-cycle packages are not “course correction” actions but are instead the Government “conspicuously” addressing people’s pain points.
Political analyst and Singapore Management University (SMU) law don Eugene Tan said that regular assistance comes across better than a single-tranche support in demonstrating the Government’s continuing commitment to help Singaporeans.
“With the current term of Parliament ending in under two years (August 2025), such regular updates to the Assurance Package seek to impress upon the population of the Government’s commitment as well as the equitable sharing of the country’s wealth,” said Associate Professor Tan.
Meanwhile, Associate Professor Tan Ern Ser from National University Singapore’s (NUS) Lee Kuan Yew School of Public Policy described the off-cycle measure as “necessary” to provide timely help.
“If the Government waits till next year’s Budget to introduce these measures, it may end up as a case of ‘closing the stable door after the horse has bolted’,” said the sociologist and political analyst.
CAN MORE AD HOC PACKAGES BE EXPECTED?
Looking ahead, Assoc Prof Theseira said that there is the prospect of unexpected changes in prices for key commodities like energy and food.
Having exercised flexibility in reacting to the economic effects of the protracted Covid-19 pandemic not long ago, he believes that the Government is probably prepared to act more urgently to future volatility.
Assoc Prof Tan of NUS agreed, adding that such off-cycle measures have become a “tried and tested formula” since the pandemic.
However, whether there would be more assistance packages given beyond what is announced during the Budget cycle depends on the “philosophy” the Government chooses to adopt with the Budget process, said Assoc Prof Theseira.
“Is it better to basically fix your entire plan for the Budget at the start of the year? Or do you want to actually build some flexibility in the system?” he said.
Mr Song said it would depend on whether the nation’s fiscal position in the future would allow the Government to do so in the first place.
This in turn depends on whether Singapore maintains a strong and stable revenue collection, balanced against whether costs continue to rise.
“So all these things will matter for the Government to consider whether there will be more money than what they have collected, to be given back to the taxpayer or to Singaporeans or to residents,” said Mr Song.
While having flexibility in dealing with volatile economic conditions is good, the experts also cautioned against taking it to the extreme.
Ms Ling, the head of treasury research and strategy at OCBC, said: “There may be a perceived risk of breeding a handout mentality, too, the more frequently these off-cycle packages are given and come to be taken for granted.
“In times of fiscal scarcity, this may become an issue, but for now, Singapore can still afford it.”
Agreeing, Assoc Prof Tan of SMU added: “To be clear, such help is necessary and welcomed, but it would be ideal if the Government explains its policy — the when, the how, and the why for regular updates to the Assurance Package.”
REFINING CUT-OFF POINT FOR FUTURE SUPPORT
The cut-off for the additional cash component has been drawn such that it covers the lower- and broad middle class, the experts noted.
All Singaporeans will receive the existing Assurance Package cash handouts of differing quantum depending on their income and number of properties owned.
However, people with multiple properties or those earning more than S$100,000 annually will not qualify for the additional cash payments.
“The practice here is not too different from the past, where there’s also been an attempt to try to segment between lower- and middle-income Singaporeans, and then to give the least support to the higher income ones,” noted Assoc Prof Theseira.
This broad approach ensures that the “likelihood of people falling through the cracks” is reduced, Assoc Prof Tan said.
Mr Song said that the cut-off points for the various support components are deliberately designed such that they reflect the groups that need help the most.
Asked if the cut-off points should be re-evaluated going forward, Assoc Prof Theseira acknowledged that there may be those in the higher income groups who may be doing quite well but are still weighed down by cost of living pressures.
While what they will receive from this support package may be “a drop in the bucket” for them, what is more important for this group is that the Government addresses more pertinent issues that affect them in the long term.
“That group I think has less interest in just getting more money from the Government. It is more that they want to see their incomes rising, career progression, and the likes. So I think that’s probably the more important area to tackle,” he said.