The cost of living crisis
Mr Speaker, the number one issue which many of our Sengkang residents share during our house visits, and one which I am sure many residents across Singapore are grappling with, is undisputedly the relentless rise in the cost of living. Indeed, the World Economic Forum Global Risks Report 2023, ranked the cost of living crisis as the top ranked global risk by severity over the next two years, given stubborn inflationary pressures, food supply and energy supply concerns.
Domestically, while one can argue that inflation rates have been trending down in recent months, where the latest data for August 2023 has CPI-All Items inflation easing to 4.0% year-on-year in August, from 4.1% in July, it is important to note that this is still significantly higher than what we have been used to in Singapore, where inflation rates have averaged a mere 1-2% in the last four decades.
While I acknowledge the one-off S$1.1 billion Cost-of-Living Support Package introduced on 28 September 2023, the recent slew of price spikes of key necessities which could persist well into the future, have caused much consternation; with electricity prices up by an average of 3.7% compared to three months ago, gas prices up by 2.3% compared to three months ago, public transport fares set to go up by 7% next year, with another 15.6%-points of future fare increases yet to be inflicted on commuters, unleaded 95-octane petrol now close to S$3 a litre and of course, not forgetting COE prices which continue to set new record highs with Cat A at S$105,000 and Cat B at S$140,889.
Moreover, the second order effects on inflation from increases in basic utilities, transportation and fresh shocks to global energy and food commodity prices, have yet to be fully seen on consumer prices, which could result in persistent price pressures in 2024.
Our (better-than-expected) current fiscal position
Moving from the individual Singaporean’s point of view to that of the Government’s position, now that we are close to the halfway mark in terms of the financial year, it is also timely to re-evaluate the Government’s current fiscal position, against what was initially projected as per Budget 2023.
As a quick recap, I shared in my Budget debate speech that the Government’s fiscal position turned out to be better than expected in the last two financial years. Based on the latest revenue and expenditure data released on Singstat, it appears that there could be a further close to S$3 billion of primary surpluses in FY2022 than what was initially expected.
What about the current financial year? In Budget 2023, the Government expects operating revenues to increase by S$6.4 billion to a record high of S$96.7 billion. This is set to be led by corporate income tax, personal income tax and GST revenues, which are all set to reach new record highs.
But based on just the first five months of the year, operating revenues are already higher by S$6.9 billion compared to a year ago. In other words, the increase in revenues that was expected for the whole of FY2023, was already surpassed at the five-month mark! Meanwhile, expenditures in the first quarter of FY2023, have been stable.
Why can’t we delay the second step of the GST hike?
If we set the cost of living crisis which is threatening the living standards of many Singaporeans, against what will likely be a better-than-expected fiscal position for the Government and yet another year of record high collections of corporate income tax, personal income tax and even GST, I find it difficult not to feel a strong sense of imbalance and injustice here.
This leads me to my next point about the hike in GST rate from 8% to 9%, which is all set to go ahead from 1st January 2024, despite the circumstances I have described.
At the conclusion of the Budget debate, DPM Lawrence Wong shared that, and I quote, “we have to proceed with the second step of the increase in GST in 2024 as planned. Deferring this will only store up more problems for the future, and will leave us with less resources to take care of our growing number of seniors”.
Now even if I am personally resigned to the fact that no matter what my objections to the GST rate increase are, and that the Government is adamant that the alternatives that The Workers’ Party has put forth will not be accepted, could we not at the very least defer the planned increase in GST in 2024?
In Budget 2022, DPM Lawrence Wong shared that the GST hike will bring in about 0.7 per cent of GDP in revenues annually, or about S$3.5 billion when the full hike is in place in 2024. Even with a one percentage point increase in the GST thus far, the Government expects GST revenues in FY2023 to be S$2.9 billion higher than FY2022. Close to what the full GST hike was supposed to bring in. If we compare FY2023 GST revenues against that in FY2021, then GST revenues would be S$4.7 billion higher.
With Government revenues already better than initially projected at the five-month mark, is it that difficult to delay the second step of the GST increase, and will this delay result in us storing up “more problems for the future, and will leave us with less resources to take care of our growing number of seniors” as shared by DPM Wong during the Budget 2023 round up speech? I leave Singaporeans to draw their own conclusions.
Reconsider changes to Working Mother’s Child Relief (WMCR)
Finally, while I note that changes to the Working Mother’s Child Relief (WMCR) is set to go ahead as per clause 53 of the Bill, I wish to again reiterate my desire for the Government to reconsider this move.
As I shared in my Budget debate speech earlier this year, while there could be a group of lower income working mothers who would benefit marginally from this change, the majority of would-be working mothers will be worse off with the change in methodology.
Based on my estimates of working mothers’ income within married couples in resident households, roughly 20% of mothers will benefit from the WMCR change to the tune of up to $40 while the remaining 80% of mothers will either be unaffected or worse off. I wonder if the WMCR truly seeks to reward families with children and encourage married women to remain in the workforce after having children, or does it have the unintended opposite effect?
If the aim is to benefit lower to middle income working mothers, why not just give a motherhood tax rebate to working mothers earning below a certain income? To further support lower income working mothers, if the tax rebates granted exceed the tax payable, tax credits can be paid out in cash to ensure the reliefs are not lost. Moreover, unwed single mothers are ineligible for this relief.
The Government can say that look, the change to the Working Mother’s Child Relief (WMCR) should not be seen in isolation. And IRAS can claim that, considering both the WMCR change and a one-off $2,000 increase in the CDA First Step Grant in the child’s first year of birth, about 97% of mothers would be better off or, at least, no worse off in that one particular year. But what about the next 15 years’ of tax assessments for the working mother? Would she be better off, or worse off with the WMCR changes?
Perhaps a reversion of the WMCR to what it previously was, could be considered as part of the, “A Singapore Made For Families 2025 plan”, which is supposed to affirm our whole-of-society effort to create a family-friendly Singapore.
Allow me to conclude in Mandarin Mr Speaker.