Budget Speech 2011 by Mr Low Thia Khiang

Speaker Sir,

Budget 2011 is seen by many Singaporeans as a pre-election ‘sweetener’ designed to win back the hearts and minds of people disempowered by 46 years of PAP rule. The Growth Policy adopted by the Government in recent years has left a hardworking nation disillusioned with its own identity, values and quality of life.

The global recovery has helped Singapore greatly. The Finance Minister has called 2010 an exceptional year. We ended the year with an exceptionally high GDP growth.

The exceptional year also saw the number of locally born residents dipping to just 57.3 per cent of the population. This has caused some of our young men to lament that they no longer know what they are defending any more.

The year also ended with aspiring home seekers grappling with a 14.1 per cent rise in HDB prices and older Singaporeans worrying about retirement and rising medical costs.

Looking ahead, the new decade did not start off well either. Singaporean students attending our universities in 2011 will have to content with a 4 to 6 per cent rise in tuition fees, all in the name of making the distinction between Singaporeans and PRs sharper.

While the economic outlook for Singapore is positive this year, almost every basic necessity is expected to cost more moving forward. From food to utilities, rental to childcare, lower- and middle-income Singaporeans will bear the brunt of the rising cost of living.

Most Singaporeans are already resigned to paying more for public transport despite the unexpected move by the Public Transport Council to defer the 2011 Fare Review Exercise to the end of the year, after the election is over.

The immediate threat that can derail the momentum of our economic growth is Inflation. Singapore’s inflation has just hit a two-year high in January. Food prices, healthcare and education costs have gone up by 2.8 to 3.8 per cent. With oil prices hovering around the $100 mark, Singaporeans can expect to pay more for many essential items and services this year.

Therefore, I am of the view that the 2011 Budget should do more to tackle inflation from every possible angle as it is going to be a concern for everyone. There is a need for a concerted effort to address the rising cost of living at the fundamental level, which is to control the price increase of essential items like food, transportation, education and healthcare.

Using rebates and subsidies to fight inflation can only ease the hardship in the interim. Permanent programmes like the Public Assistance (PA) scheme take a long time to catch up with inflation. The PA amount took 2 years to finally reach $400 a month in this budget.

At this point, I must state that it is a blessing to Singapore that many charitable organisations like Lions Club and Food from the Heart are willing to help needy residents beyond what the government is doing. However, inflation bites all sectors of the society. Middle-income families are hard-hit too. Many of them suffer in silence under a mountain of levies and price hikes.

Thus, without tackling the rising cost of living at the fundamental level, the election year Growth Dividends would evaporate fast.

The GST is at the centre of everything we consume. I urge the government to seriously consider reducing the GST to help all sectors of the society cope with a projected slower growth and high inflation expected.

The Minister for Finance told this house in 2007 that the government was shifting towards indirect taxation as a source of revenue when it raised GST from 5 to 7 per cent then. When GST was increased in 2003 and 2004, its percentage share of the total tax revenue went up to 14.9 per cent in 2005. In this year’s Budget, GST is projected to contribute 19.5 per cent of the total tax revenue. As you can see, the GST’s share of the tax revenue has gone up 30 per cent since 2005.

If the government is shifting from direct to indirect taxation, we should see the share of direct tax, specifically Personal Income Tax, come down over the years. In 2007, Personal Income Tax constituted 15.5 per cent of the total tax revenue. In the 2011 Budget Estimates, this share is expected to go up to 16.1 per cent. How can the Government justify the increase in GST when there is hardly any shift from direct to indirect taxation as a source of revenue?

Therefore, the Workers’ Party calls upon the Government to reduce the GST rate by 2 percentage point from the current 7 per cent. Although, this will shave $2.4 billion from the estimated receipt for FY2011, if we discount the one-off election year Growth Dividend of $1.55 billion, the shortfall in receipt is $0.85 billion. The shortfall in revenue can be balanced by trimming the budgets of some bloated ministries. The shortfall may also be compensated by an increase in consumption stimulated by a lower GST rate and the expected increase in tourist receipts from the two fully operational IRs.

The Workers’ Party has also called for a waiver of GST on basic necessities for a long time. I hope the Government will consider the proposal seriously.

Next, the Foreign Domestic Worker (FDW) Levy, like the Radio and Television Licence Fee, is fast losing its relevance too.

Hiring a domestic helper is no longer a luxury like in the past because of our changing life style. Families with two working parents will need a helper to take care of their young children. Although subsidized infant care is an option, most parents would prefer a domestic helper to look after their babies under the supervision of their aged parents at home.

Furthermore, in our ageing society, domestic helpers can be trained to provide some basic care for our elderly and disabled. These helpers will complement our long-term care objectives and ease the demand for nursing homes.

I am not aware of Singaporeans who want to work as stay-in domestic helpers. Yet, such help is important to many working class families. The FDW levy should be removed permanently. A saving of $170 to $265 a month will ease the financial burden of families with children and aged parents significantly. It will also somewhat mitigate the rising cost of employing a domestic helper since foreign governments supplying such labour are demanding a higher salary for their citizens.

The removal of this levy may even nudge couples to think about having more babies since getting a domestic helper has become more affordable.
The key thrust of this year’s Budget is to strengthen our economy and society for the future. It promises to grow incomes for all Singaporeans by 30 per cent in real terms over this decade.

Out of curiosity, I looked up the salaries in the Budget to estimate how much a 30 per cent increase would work out for all Singaporeans. One group of employees did enjoy a 30 per cent rise in salary last year. The estimated salary for Political Appointments for FY2010 was $58.3 million. This salary was revised to $75.7 million or about 30 per cent more. This increase took only a year to materialise. Unfortunately, the incomes of Singaporeans do not grow 30 per cent just like that.

It is a lot harder for the salaries for Singaporeans to grow because foreign workers are always willing to work for less. I really hope to see we succeed in growing the income of low wage workers through the road of productivity growth.

The Workers’ Party recognises the contributions of foreigners to the economic vibrancy of our nation and the need for foreign expertise in certain fields. However, the reason for admitting foreigners into our country should be to enhance the quality of life of Singaporeans.

There must be sufficient opportunities for Singaporeans to earn a decent living and to advance careers in our own country. Employers should give priority to hiring Singaporeans. Foreign workers should primarily be employed in positions Singaporeans are unable to fill. Until that happens, increasing the incomes of all Singaporeans by 30 per cent is going to be a tough thing to do.

I have questioned the effectiveness of the Foreign Workers’ Levy in controlling the number of foreign workers in Singapore. The latest increase in levy may dampen the demand for such workers in the short term but once the increase is priced into the foreign workers’ salaries, the situation is likely to return to status quo.

The strong recovery has brought the unemployment rate down to the levels seen in early 2008, before the crisis, but no one can tell if Singaporeans have benefitted much from the 14.5 per cent GDP growth last year.

Are there more Singaporeans employed now than in the pre-crisis days? Will Singaporeans get the lion’s share of the 21,300 new skilled jobs mentioned by the Finance Minister when the investment projects are fully realized? What about the 35,000 Integrated Resort (IRs) jobs that the Prime Minister mentioned in this House in 2005? How many of these jobs went to Singaporeans now the two IRs are operational?

The PM has announced in 2009 and 2010 that the Government will make the distinction between Singaporeans and PRs sharper. Unfortunately, the Ministry of Manpower does not believe that this distinction is necessary when it comes to reporting employment data. MOM has never made a distinction between Singaporean citizens and Permanent Residents in its labour force report.

Is the distinction important? The answer is ‘Yes’. It tells Singaporeans that more jobs did go to them. It tells Singaporeans that distinction between PRs and them goes beyond a mere difference in fees charged for education and healthcare. It tells Singaporeans that jobs are indeed created and reserved for them.

I am sure this house did not forget that Singaporeans did not even enjoy any significant fee advantage in education and healthcare when compared to PRs as recent as five years ago. So let’s make the distinction clearer. Let Singaporeans know more jobs did go to them in 2010 and more are reserved for them in the next decade. This is the true spirit of Singaporeans first.

In conclusion, sir, the Budget this year has done one thing right. It has prudently put back into Past Reserves the $4.0 billion that the government took in 2009.

The Finance Minister has said no less than 5 times in the budget statement that the government can do and will do more to help our society. Therefore, I urge the government to do more to reduce the rising cost of living and the burden of supporting a family in Singapore.

We also need to start working on reversing our low fertility rate urgently. This Budget has fallen short in encouraging couples to procreate. Increasing our fertility rate has to remain a top priority despite most of the efforts initiated by the government has failed so far. Taking the easy way out to boost our population by importing foreigners is counterproductive.

As this may be one of the last sittings of Parliament before it is dissolved, I wish all Singaporeans well. I also wish to see a first world parliament in the making when we reconvene in this house after the coming General Election.