Kopi Politics

Worker’s Party’s Take on Budget 2014

This is an excerpt from a speech delivered in parliament given by the Worker’s Party’s Gerald Giam.

The points Mr Giam raised are in response to the issues addressed in Singapore’s 2014 budget.

PIONEER GENERATION PACKAGE

Madam, it is important that we honour our pioneers and do so before it is too late. Last year, over 13,000 people aged 65 and over departed from us, according to the Singapore Demographic Bulletin. Last week, I met a resident who said that his 80-plus year old neighbour was very happy to learn about the Pioneer Generation Package, but sadly he passed away suddenly the next week before enjoying any of the benefits.

The subsidies for specialist outpatient clinics and polyclinic services, as well as disability assistance, will be rolled out in September 2014, and all pioneers who do not already qualify can join the Community Health Assist Scheme (CHAS) only in January 2015. The MediShield Life subsidies will be applied at the end of 2015.

The Government should expedite the roll-out of the Pioneer Generation Package benefits. For example, since CHAS is already in place, can we allow all Pioneer Generation members to immediately benefit? Although MediShield Life will only be rolled out in end-2015, the Government should start applying MediShield premium subsidies for the Pioneer Generation from this year. The elderly above age 65 are already shouldering a heavy premium burden of between $540 and $1,190 per year for just MediShield Basic.

Alternatively, the Government could consider doubling the planned additional Medisave Top-ups for Pioneer Generation members until the Pioneer Generation Package is fully rolled out, so that pioneers can start to enjoy the benefits of this package sooner. This would provide 65-year olds an additional $400 in Medisave Top-ups this year and next year, instead of $200 in each year.

The DPM said that there would be panel to assess appeals from those who marginally missed out on the precise criteria. Could the DPM share what are the guidelines the panel will be given to make their assessments? I hope the panel will err on the side of generosity, as many of those who just missed out have made significant contributions on par with pioneers. In particular, I am of the view that all those who served in the first few batches – and not just the first batch – of National Service (NS) should qualify for this package because they played an important role at a critical juncture in our nationhood.

It is important to emphasise that the Pioneer Generation Package is not a “senior citizen’s package” even though all of our pioneers are now elderly. It should not be viewed as the fulfilment of the Government’s obligations to the elderly. There is still much that needs to be done for the elderly and future elderly in Singapore, especially people with disabilities, homemakers and low income workers who will have insufficient savings when they reach retirement age.

Madam, I would now like to touch on a few other aspects of Budget 2014.

GST

First on GST (goods and services tax). For the past six years, GST has been the second-largest contributor to government revenue, after corporate income tax. In FY2013, its contribution of $9.52 billion exceeded that of personal income tax by almost $1.9 billion. In FY2014, GST’s proportion of revenue is expected to increase to 17%, up from 16.7% last year.

It is widely recognised, even by this Government, that GST is a regressive tax, because the poor fork out a higher proportion of their income to pay GST than the rich do. The permanent GST Voucher scheme is meant to correct this regressivity.

However, GST Vouchers fully offset the GST expenses for only retiree-led households and the very low income. For other lower-income households, on average the GST Vouchers offset only about half of the GST they pay each year. Therefore, many lower income earners are still net contributors to GST.

I note that Budget 2014 provides an additional, one-off GST Voucher in the form of cash for seniors and a U-Save Special Payment. However, these are only for this year, and they still do not fully offset the GST expenses for all lower income households.

Can the GST Voucher scheme be enhanced so that it fully offsets the GST expenses of all lower income households, and offsets a greater proportion of GST expenses for middle income households?

This will better ensure that the GST Voucher scheme fully corrects the regressive nature of GST and makes it more progressive.

PRODUCTIVITY-ENHANCEMENT SCHEMES

Next, on productivity enhancement schemes and their outcomes. Before I continue, I wish to declare that I work in the IT industry and in the SME sector.

I agree with the Government’s intent to raise productivity in our companies, increase technology adoption and reduce reliance on manpower.

In his 2010 budget statement, the Finance Minister said that the “key goal” of the Government was to grow productivity by 2 to 3% per year, or 30% cumulatively, over the next 10 years to 2020. He said this will allow Singapore to maintain an economic growth rate of 3-5% a year, even with slower growth in our work force. The DPM reiterated in this year’s budget statement that raising productivity is “at the centre” of the Government’s economic agenda.

How have we progressed so far in achieving this key national goal? In 2011, labour productivity growth was 2% over the year before. In 2012, it dropped by 2%. Last year, it was flat – there was no overall growth from the year before.

The DPM acknowledged that while productivity has increased by 11% since economic restructuring began four years ago, this was entirely due to the strong cyclical recovery in 2010, with little improvement since. At this rate, is the Government going to be able to meet the targeted 30% cumulative productivity growth by 2020?

In the last four years, hundreds of millions of taxpayer dollars have been transferred to businesses through various grants and tax credits for productivity-enhancing schemes. The schemes introduced in this year’s Budget are mostly enhancements or extensions of existing schemes. Given the disappointing overall productivity growth for the past 3 years, I think we need to examine these schemes to see what adjustments need to be made to produce more positive outcomes.

ICT FOR PRODUCTIVITY AND GROWTH

Budget 2014 will include a major effort to scale up the use of ICT (infocomm technologies) by SMEs. The DPM said the Government will give a stronger push to the piloting and scaling-up of ICT solutions that can help to transform whole sectors, through the ICT for Productivity and Growth (IPG) programme.

Under one of the initiatives in the IPG programme, the IDA (Infocomm Development Authority) will pre-qualify eligible vendors and their solutions. SMEs need not apply to IDA for the subsidy; they can approach the pre-qualified vendors, and IDA will reimburse the vendors directly. These apply only to sectoral solutions currently supported under IDA’s iSPRINT programme.

How will the Government ensure that IDA uses a fair and objective method, and that its officers have sufficient industry experience and competencies to select the right vendors and solutions? This is critical because SMEs will be limited to these vendors and solutions – for better or for worse – if they want to tap on the IPG fund. In this respect, wouldn’t it be more appropriate to allow SMEs to choose the best vendor and solution that meets their unique business needs, rather than restrict them to a pre-qualified list from the government?

Under the current iSprint scheme, SMEs need to wait for several months for grant approval from IDA, and I am told that IDA asks SMEs many questions before approving the grant. I presume this is to ensure that SMEs and vendors do not abuse the grants. There is also a lengthy business proposal that must be submitted to justify the funding. After evaluation, IDA may decide that the “qualifying costs” for the grant will be lower than the actual implementation cost of the system, hence lowering the overall grant disbursed.

As a result, many SMEs may find that it is not worth the time and effort to apply for such funding, and this will result in a lower adoption of productivity-enhancing technology in SMEs. Only 500 SMEs have benefited from funding for sector-specific proven solutions so far under the iSprint scheme, out of over 154,000 SMEs in Singapore. This stands in great contrast to the Productivity and Innovation Credit (PIC) scheme, which does not require such a lengthy and onerous application process to obtain funding. Is it no wonder that the PIC has proven to be much more popular with SMEs? Over 80,400s SMEs tapped on the PIC scheme in the last two years.

I hope agencies can adopt a more streamlined approach when evaluating and approving technology grants for productivity enhancement. This will be a key success factor for IDA if it is to reach its target of another 10,000 SMEs over the next three years.

If the concern is that some SMEs and IT vendors will abuse the grants, then audits could be conducted after project implementation and penalties could be put in place to deter such behaviour, rather than to weigh down all SMEs because of the actions of a few black sheep.

Click to comment

Leave a Reply

Your email address will not be published.

To Top