By MP for Aljunied GRC, Pritam Singh
[Delivered in Parliament on 6 March 2013]
Thank you Madam Speaker.
My speech is divided into two parts. The first assesses the budget’s attempts to create a more inclusive Singapore with the second focused on changes to our car ownership policy as a result of budget announcements on the same.
Madam Speaker, a simple ‘Control F’ of the budget speech and a search for the words “do more” reveals seven matches. According to the budget, the government will “do more” for retirees, Singaporeans who need help with their medical expenses, seniors so they have a sense of economic security and fulfilment in their retirement years and also for children at the pre-school and primary level. The government also wants to do more against rising inequality to tilt the balance in favour of the lower and middle income, and for older Singaporeans with enhancements to Workfare and CPF.
The timing of these changes are significant too, three years before the next General Elections – with enough lead time for these proposals to take effect. Be that as it may, the government’s efforts to improve social mobility and reduce inequality are a necessary step, especially in view of how the global economy and more importantly, forces beyond this government’s control are shaping up, chief among which are inequality and economic insecurity.
For the longest time, the state discourse in Singapore has eschewed any reference to welfare. Similarly, the state has tended to place meritocracy on a pedestal. In fact, the political leadership has tended to frame both issues in the extreme, with welfare representing the bad, and meritocracy, representing the good. However, this budget was noteworthy because meritocracy came with a caveat. The DPM’s budget speech noted that meritocracy alone will not assure Singaporeans of social mobility and that government policy seeks to level up children that come from poorer or less-stable families. This is a significant statement, as it appears to premonition a shift in the state discourse. Equally noteworthy, the budget speech established that while overall healthcare expenditure will go up, government policy envisages a reduction in Singaporeans’ out-of-pocket share of medical costs, with the Government taking on a larger share. Whatever the reason for these shifts to the left, they are in line with the long-held belief of the Workers’ Party and many Singaporeans that for a country with a per capita income of about USD45,000, the government can do much more on the social front for Singaporeans.
Madam Speaker one subject covered in the budget that affects many middle-class Singaporeans are changes to the government’s policies on car ownership. The significance of the budget and associated changes to the government’s car ownership policy led the executive director of a leading dealership to say, “in my 28 years in the trade, this is the most serious development I’ve seen”, while an accounting partner of a big four firm was quoted as saying, “the minister is riding through Singapore’s Sherwood Forest to tax the rich who own high-end property and drive luxury cars.” While I would not take it as far as the accounting partner, as there is much more room for greater progressivity in our tax system, I am in favour of higher taxes paid by those who drive luxury cars.
It was telling that as the Minister spoke about the tiered ARF in his budget, an MAS circular about a cap on loan-to-valuation (LTV) ratios also started making its rounds. The circular established that the new loan quantum for a car with an OMV of less than $20,000 would be 60% of the car price and 50% if the OMV is higher. Significantly, the maximum loan repayment period is now only five years from ten years previously. On one level, the Finance Minister’s budget speech on changes to the ARF appears to continue with the theme of progressive taxation. But the possible effects of the budget announcement and MAS circular taken together leads me to conclude the opposite, that the rich will benefit from the latest changes to our car ownership policies as the latest changes do not address the high disposal income of the rich. In the context of the budget statement, it would have been helpful if the Minister had addressed the changes to the ARF with the policy intent of MAS circular, especially since the two are so inextricably linked.
If these changes were implemented to force Singaporeans to use public transport, the system as it stands, leaves much to be desired, particularly during peak hours. I am not sure what the effects of these latest changes to our car ownership policies will be, as there are differing views on the impact of the latest policy changes on COE prices and as a result, the price of cars. But the effect of the new LTV ratio is likely to felt most acutely by families with two or more children, those with elderly family members or the disabled who need the mobility provided by a car, but are unable to raise the down payment since a larger household size necessarily entails a lower disposable income set aside for the higher down payment required.
There is also the tangential concern about the inability of larger families to purchase a vehicle, which from a policy perspective may well indirectly stymie efforts to promote our Total Fertility Rate (TFR) since the lack of mobility for family leisure, travel and support may well factor into a person’s decision to have fewer children and prejudice those who already have large families. It would be imperative for the government to look at possible tweaks to the system if indeed larger families and families that include disabled Singaporeans, or elderly parents are genuinely affected, as the effects of the new policy kick in over the next few months. One specific way could be to raise the LTV ratio for cars back to 70% as it was previously, but only for families with 2 or more children so as to buttress and incentivise the government’s efforts to raise TFR.
Madam Speaker, it would be a tragedy if younger Singaporeans included the inability to purchase a car as a reason for wanting to look abroad for greener pastures, in addition to the visceral insecurity of a more crowded Singapore in future. It may be helpful for the government to solicit feedback from Singaporeans about our car ownership policy going forward particularly on the aspirations of owning a car, even if the stated objective of this policy is to discourage Singaporeans from over-leveraging. This may even entail a deeper look into the COE system or even larger national considerations such as the future population size of Singapore, so that the policy fear of a more crowded Singapore does not operate to scupper the aspirations of Singaporeans to own the car of their dreams; unless of course, the government’s intention, be it directly or indirectly, is to remove the dream of car ownership for middle-class Singaporeans.
On the flip side, I am encouraged by tweaks to the COE policy that give greater business flexibility to SMEs. In January 2013, I asked the Minister for Transport in a parliamentary question whether the Ministry will consider reviewing the COE bidding system for goods vehicles and buses to alleviate the costs of doing business for small businesses and SMEs. While the Minister replied that there were no plans to review the COE system for the said category, he did say that as part of Budget 2013, his Ministry would carefully consider if more help was needed.
To this extent, I welcome the flexibility granted to commercial vehicle owners whose vehicles reach the end of their ten-year COE, as they can now choose to renew their COEs for five years in the first instance, and a further five years later. Likewise the granting of a one-year 30% road tax rebate for goods vehicles, buses and taxis is also welcome. It would be helpful if the government could make the extension of such road tax grants permanent, especially for the mom-and-pop SMEs with a headcount of 5 or less when COE prices reach astronomically high levels, as they have been in the recent past for Cat C COEs. In addition, as some SMEs owners, particularly hawkers and sundry store owners work with narrow margins, it may be useful to look into allowing Cat C COE holders to extend their COE every 30 months (two and a half years) rather than every five years as the budget has announced. Such a move would allow for even greater flexibility for SMEs and also indirectly nudge SME owners to consider putting an older vehicle off the road since the decision making cycle on renewing a COE would be shorter.
Madam Speaker, post-budget, the Finance Minister acknowledged that the country continues to be in an unhappy part of the property cycle, following up from the budget speech that reiterates the government will spare no effort resolving the pressing challenges facing housing and transport. While I look forward to the resolution of these problems, it would be equally important for the government to explain the reasons behind significant policy shifts instead of leaving Singaporeans to second-guess the government’s real purpose, as has been the feedback for MAS’ changes to the car-ownership policy. Such engagement would help reduce unpredictability, encourage a more participatory democracy and allow Singaporeans to plan for their future with more certainty.
Thank you.