By MP for Aljunied GRC, Sylvia Lim
[Delivered in Parliament on 3 Mar 2015]
Social Solidarity @ SG50? A Work in Progress
As I listened to the Deputy Prime Minister deliver Budget 2015, I noted some difference in tone and approach from the past. From a traditional stance of emphasizing individual responsibility and treating cross-subsidies with disdain, we see the language of “collective responsibility”, giving Singaporeans “greater assurance at each stage of life”, “strengthening our social security system” and using not just “hard heads” but “warm hearts”.
In this landmark year when we celebrate 50 years of nationhood, it is timely to reflect upon the government philosophy of budgeting and the role of the people in nation building. We want to move together as one united people. How can we use the Budget to build social solidarity?
Left is Right
This Budget explicitly talks about strengthening social safety nets. This suggests a shift to the left, a direction that I believe is right. A shift to the left is not desired for its own sake, but because it can build confidence in the people. People who have safety nets are more willing to make choices with longer-term pay-offs, like taking time out for training, becoming an entrepreneur or taking risks to innovate at work. Countries with good records on innovation and productivity tend to have strong safety nets. A shift left does not necessarily undermine economic performance, but could well enhance it.
A shift left is also important to mitigate Singapore’s income and wealth inequality. As at 2014, our Gini Coefficient measuring income distribution was 0.464 before government transfers and 0.412 after transfers (Household Income Trends 2014 published by Singstats). Though the coefficient has now come down from the highs of 2007 and 2012, it is still high. As for wealth inequality, the government has said that it does not measure the wealth gap (Parliamentary answer in August 2014). However, our global image over the last 10 years seems to have morphed into being a playground for the rich, with Singapore being termed “the world’s newest Monaco” in a 2013 article of Wall Street Journal (Mahtani, S. Wealth over the Edge: Singapore. The Wall Street Journal. Mar 7, 2013).
One particular concern is to avoid poverty becoming entrenched across generations, where children of poor parents are more likely to end up poor as well. I have come across poor young families in my ward, and see a real risk that the children may be distracted or demoralized by the challenges their families face and not do well in school, affecting their prospects for social mobility. Indeed, the Prime Minister himself acknowledged this challenge in Singapore, with fewer of children from lower income families rising to the top.
Two of the key thrusts of this years’ Budget are the SkillsFuture initiative and the Silver Support scheme. These two initiatives are important for social solidarity, as they have the potential to mitigate inequality in Singapore.
Enhancing Solidarity through Skills Future
The DPM said that the aim was to “create a meritocracy of skills, moving away from academic credentialism around grades earned early in life”. SkillsFuture emphasises lifelong learning, and the pursuit of non-graduate pathways to skills mastery. Put another way, there is a national attempt to enable someone who may not have had the best school results to try to catch up and find a niche in Singapore. SkillsFuture should thus not just be about upskilling the workforce. It should also be about increasing social mobility.
As someone who was involved in Continuing Education and working with adult learners for more than twelve years, I have seen the drive of Singaporeans when given an opportunity to earn a higher qualification. While some do so in order to do their jobs better, most are aspiring towards promotions, better prospects and better salaries. In high-cost Singapore, it is still a rat race. SkillsFuture has the potential to be a social leveler, if the qualifications and products of SkillsFuture courses earn the respect of employers and significantly improve wages.
We have had skills-based certificates and diplomas around for decades, and it cannot be that SkillsFuture is more of the same. For SkillsFuture to truly impact lives, the scissor must have 2 blades. The first is to change employer mindsets and foster real career paths tied to skills-attainment milestones. The second is that SkillsFuture courses must be rigorous. The training sector must have the capacity and quality needed to deliver good skills training. We are not ready yet, as the government has acknowledged that it needs more time to develop quality offerings in the SkillsFuture landscape. To this end, it was mentioned that the SkillsFuture Credit could be used for a broad range of courses supported by government agencies. Besides the courses run by Institutes of Higher Learning and accredited education and training providers, it will be useful to know how what other courses might be funded by the Workforce Development Agency and how it will go about ensuring the quality of the programmes and trainers.
Enhancing Solidarity through Silver Support
The other initiative that has the potential to mitigate inequality is the Silver Support Scheme. This scheme comes as a surprise to most because it embodies what the PAP government has always eschewed – having any form of rights-based “defined benefits” welfare scheme. Up to now, government assistance schemes were usually temporary and subject to continuous means testing and conditions, with applicants needing to fill forms and provide documentary proof of illness and family income. Now, with Silver Support, between 20 to 30% of elderly aged 65 will get some form of cash support for the rest of their lives, once they qualify. They do not even need to apply. Silver Support is thus a limited pension for up to 30% of the elderly population. It is an important gesture of gratitude from society to our seniors, and will give some an option not to work in their old age.
While I welcome Silver Support, I see it as an acknowledgement by the government that the CPF system and family support are not sufficient to provide retirement adequacy to about 30% of our seniors. This is worrying. As seen from various surveys, the top concerns of Singaporeans are usually about the cost of living and the cost of healthcare. These are likely to be what seniors especially worry about. Besides Silver Support, can we do a broader review of policies, to give our seniors more peace of mind? One example is Medisave usage for outpatient treatment. We commonly come across seniors in their seventies and eighties requiring medical treatment and drugs, and yet have to stomach going to their children for cash when they have tens of thousands locked in their Medisave accounts. It seems absurd to deny an elderly person the use of his own Medisave savings for medical needs, in his twilight years. I am glad that the government has finally taken some steps to relax Medisave usage for seniors. Can we relax this further for the very old? If more policies like such could be reviewed to ease the burden on families, it would go a long way to give Singaporeans the “greater assurance” that they need.
Revenue to Fund Spending
This year’s Budget is also refreshing in how it secures additional funding for the increased expenditures in FY 15 and beyond.
The Budget names two immediate steps to secure additional revenues.
The first additional revenue source comes from including Temasek Holdings in the Net Investment Returns Framework. This is the second step to channel more of our investment returns to fund the annual budget. The first step was in 2009 when the definition of investment contribution was expanded from just income and dividends to include the expected long term real returns on net assets managed by the Monetary Authority of Singapore and the GIC. These steps evince a shift towards unlocking more of the investment returns for current needs, rather than locking these additional monies to grow the reserves. Probably the government has concluded that there is a better balance to be reached between locking up for the future and investing in the present. As the total size of our reserves is not published, I can only surmise that elaborate calculations have been done to ensure that the additional monies being channeled to fund the annual budget are “affordable”.
The second source of additional revenue is the decision to increase the top marginal rate of personal income tax for the top 5% of income earners. Those with chargeable income above $320,000 will see their tax rate go up by 2%, from 20 to 22%. Others in the top 5% range will see smaller increases. I welcome this change. It makes our tax system more progressive, and was something I advocated in the Budget debate 2 years ago. While I agree that we should not take tax competitiveness lightly, the fact is that many foreigners choose to come here because our tax rates are far lower than the 40%-50% range they pay in their home countries. I believe we still have room to increase progressivity of personal income tax to beyond 22% for the top marginal rate. It would be useful to understand the government’s plans on this.
Budget as Nation Building
To a very large extent, the way we raise national revenue and allocate expenses says something about our values as a nation.
This Budget illustrates that the government has options at its disposal to fund annual expenditures. It also shows that some of the costs imposed on the people may have been unnecessary, such as fees for national examinations. Having seen families agonise over how to pay these costs, one wonders whether the anguish was necessary. Perhaps the government realizes that it has been too calculating with the people, and is now making adjustments.
The Budget can play a large part in nation building. This and recent Budgets call on a spirit of collective responsibility in several notable ways: providing Silver Support to seniors in need, implementing risk-pooling for life’s vicissitudes via Medishield Life, and emphasizing social responsibility of high income earners to pay more progressive taxes. The government has also moved to utilize more of the returns on investment of reserves to fund national expenditures, while sinking resources for lifelong learning that has the potential to mitigate inequality. These directions are welcome, as they carry the ingredients of building social solidarity and a united nation.