Category Archives: About Budget

Lifetime Taxes and Benefits for Singaporeans (Budget 2012)

We consider the example of a low-income household which has a combined income of $1,200 per month (excluding employer CPF contribution). The husband earns $800, and the wife earns $400 from part-time work. Over their working life, the low-income husband and wife each experience four spells of unemployment (for two months at a time) and attend training courses twice. In her old age, the wife receives subsidised home-based care for three years and may receive care in a nursing home for two years.

The following assumptions are made for both the low-income and middle-income household:
1) Today, the husband and wife are aged 30 and 28 respectively and are both employed. They purchase a resale HDB flat near their parents at this age.

2) In line with current population data, they retire in their mid-sixties and live into their eighties.

3) They have two children, who attend childcare for four years before going through 10 years of primary/ secondary school education, and ITE/Polytechnic/ University education thereafter.

4) The household of four occasionally seeks medical treatment, including episodes of hospitalisation (at the same level of incidence currently observed for children and adults in the general population).

5) The couple experiences real wage growth of 1% per annum on average over their working lives. They also experience bouts of unemployment (specific assumptions for each household given below). Note that these wage assumptions are not forecasts, and are used for purely illustrative purposes here.

source: http://app.singaporebudget.gov.sg/data/budget_2012/download/FY2012_RUS_Appendix.pdf
compiled by : Fabrications About The PAP

*********************************************************************************************************************************

LOW-INCOME HOUSEHOLD

Two parents and two children in a two-room HDB flat, with a combined income of $1,200 a month, excluding employer CPF contributions

TAXES $113,000
In the form of GST, water conservation tax and other taxes over a lifetime

BENEFITS $535,000
In Baby Bonus, housing grants and other subsidies and bursaries over a lifetime.

How 2-room households get $5 for every $1 tax
Tharman gives clear idea of benefits to the low-income

TO GET back nearly five dollars in government benefits for every one dollar paid in taxes over a lifetime, a person should be part of a four-member family living in a two-room Housing Board flat.

The household of two parents and two children should also have a combined income of $1,200 a month, excluding employer contributions to the person’s Central Provident Fund (CPF) account.

These were the broad assumptions that the Finance Ministry made in the illustration it used when asserting that low-income Singaporeans receive more in government transfers than they pay in taxes.

It is the most detailed of several illustrations that Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam gave yesterday in a written reply to Mr Pritam Singh (Aljunied GRC).

Mr Singh had asked for the assumptions, variables and projections underlying the ministry’s calculations of lifetime benefits and taxes for low- and middle-income households, shown on the website for Budget 2012.

Mr Tharman also gave examples of low-income households in three-room flats, showing the amounts they would receive with and without nursing home subsidies or the Silver Housing Bonus of $20,000 for eligible elderly flat owners who downgrade to a smaller flat.

Similar calculations were done for the two-room households.

Based on these examples, a low-income household can expect to receive $3.97 to $5.10 in benefits for every tax dollar paid.

Last month, Mr Tharman said at the conclusion of the Budget debate that government transfers to families in the bottom 20 per cent in the last five years had amounted to almost 20 per cent of the household income per household member.

But in the illustrative two-room household, the family can expect more in a lifetime.

Based on today’s prices, retirement age and life expectancy, the household pays $113,000 in taxes, such as GST and water conservation tax, over a lifetime.

But it can expect to receive $535,000 in real terms, through cash, subsidies, permanent transfers, CPF top-ups, housing grants and the like.

The $535,000 is paid out through a range of transfers, including the Baby Bonus, ComCare aid for the needy, Workfare Income Supplement, housing grants, Medifund subsidies and education bursaries.

At the middle-income level, a household with a monthly income of $5,600 that owns a car and takes up the Silver Housing Bonus later in life stands to get 87 cents in benefits for every tax dollar paid.

A comparable family without a car can more than break even with $1.88 in benefits for every dollar of tax paid.

Full details of these examples can be found at

http://app.singaporebudget.gov.sg/data/budget_2012/download/FY2012_RUS_Appendix.pdf

Published on Apr 10, 2012 – The Straits Times
By Phua Mei Pin
mpphua@sph.com.sg

About these ads

The $1.1 billion package to expand bus capacity – Who is the Government Subsidising?

 

   Hri Kumar

https://www.facebook.com/HriKumarNair/posts/332366263476644

 

I attach a write-up which I hope you will find helpful in explaining the decision to purchase the 550 extra buses.

The $1.1 billion package to expand bus capacity – Who is the Government Subsidising? 
Many people have asked about the Government’s decision to spend $1.1 billion to expand public bus capacity. One of the key questions is whether this is in fact a subsidy to SBST and SMRT, the two public transport operators (PTOs) . It is in fact a subsidy for commuters, and not a subsidy for the PTOs. This note explains why.

The Government considered its investment to expand public bus capacity very carefully. It is an important step, aimed at reducing waiting times and crowdedness that Singaporeans experience as they take public transport. 

First, what are the PTOs themselves responsible for?

The PTOs are required to expand their bus fleets to cater to growth in passenger numbers, as well as to ensure they meet the service levels mandated under existing regulatory requirements. Therefore, in addition to operating the existing bus fleet, they will have to buy 250 additional buses to achieve this. They will fund this on their own.

Why is the Government putting $1.1 billion into the bus system?

We are doing this in order to step up bus service levels well beyond the current service standards required of the PTOs.

a.It will increase bus capacity on existing heavily utilised routes making them less crowded and giving commuters a more pleasant journey.
b.Almost all feeder buses will run every 10 minutes or less – for two hours during morning and evening peak periods, instead of a one-hour peak under current service level requirements.
c.Commuters on existing routes will thus benefit both from shorter waiting times and less crowded bus journeys.
d.A number of new bus services will also be added in order to improve connectivity, and provide commuters with more public transport choices.
e.These improvements are what commuters have been hoping for.

As a condition for the Government’s investment, the PTOs will have to deliver these service level improvements.

We cannot simply mandate that the PTOs add these 550 buses to improve service levels.

First, because it goes significantly beyond the service levels under the current regulatory framework.

Second, the PTO’s bus operations are already running operating losses, and the 550 additional buses in particular are projected to be a loss-making operation. The cost of acquiring and running the 550 buses are beyond what can be recovered through revenues from these buses.

a.Take the example of improving the frequency of feeder bus services. Increasing the number of buses will shorten waiting times but will add little to the revenue, since the total number of passengers taking the service will remain largely the same.

Without the Government stepping in, these significant service levels improvements would only have been achievable if fares are raised sharply. The 550 additional buses mean significantly higher costs – not only to purchase the buses, but also because more than 1000 drivers would need to be hired and paid a good wage. Fare revenues of the PTOs would have to go up by about 12% – 13% – which translates to an increase in passenger fares of about 15 cents per journey – for the PTOs to achieve this on their own. In the 5 years from 2006, fare revenues went up by only 0.3%, cumulatively. So 12% – 13% is quite a significant increase compared to the last 5 years.

Hence the reality of the matter is that the $1.1 billion Government package, or $110 million each year, is a subsidy for public transport commuters, and not a subsidy for the PTOs. It will improve service levels for commuters, not the profits of the PTOs.

The $1.1 billion package is expected to cover the losses on the 550 buses – in other words, the additional costs net of revenues. Of the $1.1 billion package, $280 million is budgeted for the purchase of the 550 buses over the next five years, and $820 million to cover the net operating costs over 10 years. This is based on best estimates currently. However, we will be monitoring and scrutinising the PTOs’ actual costs for both the purchase and running of the buses. Should their losses turn out to be lower than expected, the Government funding will be reduced correspondingly. So one way or another, there will be no profits made from the 550 buses.

The $1.1 billion for additional buses complements the $60 billion we are putting into the expansion of the rail system. It will take several years for the new rail lines to all come on stream. That is why we are stepping in now to add bus capacity and quickly improve the daily experience of commuters. It is what commuters wanted, and we have assessed that it is worth the public investment.

Despite this Government package, regular and incremental fare increases will continue to be necessary in future, as wage and operating costs rise, so that the bus industry can stay financially viable. The Government will also continue to make sure that needy commuters get adequate assistance for their transport expenses.

**********************************************************************************************************************************************************************

 

On Social Investments, Balanced Budgets And Other Matters – by MP Vikram Nair

 

https://www.facebook.com/notes/vikram-nair/on-social-investments-balanced-budgets-and-other-matters/333624530008170

 

    Vikram Nair

 

I read a facebook note by Donald Low’s FC with interest.

As Mr Calvin Cheng pointed out in my facebook page, my speech in Parliament was really to ask Mr Chen what exactly  was the “more” he intended to do in the many areas he highlighted and how he intended to fund it.  Mr Chen did not suggest doing less in any other areas or raising revenues or making any other trade-offs.  In response to my questions,

Mr Chen also confirmed that he did not intend to run a deficit and simply said the investments would be self-funding.  I was simply trying to understand the specifics of how his plan would work and it was not really an exposition of my economic views in any detail.

I am also grateful to Davian Lee and Alps Tan for taking the time to share their thoughts on the matter.  You may find links to their notes here:

Alps Tan’s note:

http://www.facebook.com/notes/alps-tan/let-us-all-do-more-can-singapore-go-beyond-first-world/257774450970971

Davian Lee’s note:

https://www.facebook.com/#!/notes/davian-lee/investments-in-social-capital-but-how-do-you-fund-it/257630124318597

Anyway, for the avoidance of doubt, I am happy to set out some of my views on some of the issues.

 

On Social Returns and Investments

I fully accept that non-monetary considerations should go into decision making and as an MP, our job quite often involves pushing government agencies to make decisions that may not be profit maximizing purely in the financial sense, but which meet the needs of our residents.

For example, one of the issues I asked about just a few days ago in the ongoing COS debate involved the Best Sourcing Initiative by the Ministry of Finance.  This essentially involved the Singapore government moving away from awarding contracts for outsourced functions to the lower bidders.  Instead, it would only award contracts to accredited providers and part of the accreditation process involved the employment terms provided to workers.  This would naturally entail higher costs in the purely monetary sense.  In a supplementary point, I also suggested that in developing these guidelines, the Ministry should keep two tensions in mind:-

(i)  That many of the low wage workers in some of these industries, such as cleaning, may not be highly educated and introducing stringent requirements for language or literacy may result in their unemployment.  Yet, they might nonetheless be able to perform the function well.  As such, at least for our local workers, the accreditation guidelines should not deny these workers the chance for employment.

(ii)  I also suggested that the government look into the wages that employers provide the workers.  These wages should be fair and sufficient to provide them a decent living.  This may also have a knock on effect on the private sector by raising the wages for comparable low wage workers, especially if the supply of foreigners is also reduced and the labour market tightens at this end.

The Minister of State for Finance, Ms Josephine Teo, in response, said she appreciated the feedback and would look into incorporating these principles in the guidelines.  It should be noted that this is not by any stretch a monetary profit maximizing decision.  It essentially involves the government paying more for outsourced services and potentially, driving up costs across the industry.  Yet, I think it is a good measure because it improves the lives of some of the workers who struggle most in our country. It is an investment in our people.

On a more local level, at my ward, the concept of building a caring community, strong families and support for the vulnerable is one theme that emanates through many of the activities we do.  This includes programmes for families facing difficulties, programmes providing subsidised tuition.  I also tell residents and all my volunteers and activists to be on the look out for people who may need any form of assistance and to bring them to my attention if necessary.  I am aware that economic disruption may affect many people and families, and there is nothing worse than suffering alone.  I think there is nothing better than a strong community and local support to focus on helping these people get back on their feet.  To me, these are all investments in people, and I support the concept wholeheartedly.

In terms of dealing with agencies, one of the early issues my team had to deal with was the overcrowding of bus services during rush hours.  After some pressing, we managed to get an additional service of one of the feeder busses used by a large number of my residents during the period when overcrowding was worst and this has alleviated the situation somewhat.  However, there are still further routes and local transport issues to press for.  This decision was not a financially motivated one but one made to meet the need of residents for a more comfortable journey and a shorter waiting time for the bus.  There is tension between us and the bus operators on this, but by making a sufficiently strong case to LTA, LTA agreed to require the operators to provide the service.

Needless to say, there are many more examples of decisions made at a government level (cited by Alps and Davian too) which are not purely financial but which instead take into account our resident’s needs.  I am not sure if these social returns can be measured in precise mathematical form, but I certainly recognize their value.

 

 

Balancing the Budget

At the same time, I believe that as a general rule, governments should try to balance the budget.  I accept that there are situations when governments should spend beyond the budget.  In this regard, I have nothing but respect for the ideas of John Maynard Keynes suggesting deficit spending to pull countries out of the Great Depression.

However, I do think that this principle that it is ok to spend beyond the budget and incur debt has been abused by governments over the years in many different countries.  Doubtless, these countries would have had proper sounding investment justifications for issuing this debt at the time it was issued.  The crisis of government debt, playing itself out in Europe and elsewhere, I think is the result of systematically spending beyond the budget.  This price for past excesses is now being paid for by the current generations in these countries.

At alternative to issuing debt is to tap into reserves.  In Singapore, the investment income generated from our reserves is a an additional source of income for our government.  In that sense, the reserves are a little like the goose that lays the golden eggs.   I accept at times it may be necessary to dip into the reserves, but these attempts should be properly scrutinized.  It is for this reason that tapping into the reserves is a matter that requires approval from the President and is subject to stringent requirements.   It may be expedient for us to spend more now by tapping into our reserves, but doing so essentially reduces the amount of reserves our future generations can rely on for income.  The reality is that as the need for government spending grows, preserving our reserves and allowing them to grow in sync with the economy  is one way to continue to generate investment income for these needs without straining our people further by raising taxes.

The issue of incurring debt or tapping into reserves never arose in the Parliamentary Debate because the importance of balancing the budget was accepted by almost all members of the house who spoke up on it.  Mr Chen too was very quick to emphasize that he did not agree to incurring a deficit to fund any of his proposals.

 

Raising Taxes

It should be noted that this issue was not discussed in any detail because the Worker’s Party never mentioned it intended to do anything to raise revenues.   Indeed, Mr Low Thia Khiang suggested cutting GST by 2%.  This was part of the reason I felt it necessary to probe their proposals to understand how they intended to do “more” without additional funds.

I accept that there may be times when taxes may need to be raised, but I also recognize that any rise in taxes would largely be carried by middle-income earners.  The wealthy, especially those who do not generate their earnings from salaries paid in a particular country, will be able to organize their affairs to minimize the tax burden they face.  The poorest will probably remain exempt.

 

My ward is one composed largely of 4 and 5 room HDB flats, and my residents would broadly be in the middle-income group.  Thus, any rise in taxes will probably impact them hardest.  I would therefore want to scrutinize any substantial demand on government finances that may require taxes to be raised, so I can explain to them in very clear terms why they have to pay more taxes.  I accept it is sometimes necessary, but it is also my duty to ensure it is so.

 

The Real Issue:  Allocating Scarce Resources

There was much in common in principle between Mr Chen and myself.  We both accept that the government should be focused on taking care of its people and also on not incurring deficits in doing so.  This really means that the question we face in a budget debate is one of the trade-offs that one wishes to make.My main quarrel was with the made loud claims for spending in many areas without any detail on the trade-offs that were to be made in order to spend more in all these areas identified.  Mr Chen simply said they were investments and would be ‘self-funding’.

Of course, I don’t expect every MP that raises a discrete suggestion to be able to argue for where the additional revenues should come from.  However, where the changes appear to be broad ranging and substantial I think it is necessary to explain where the revenues come from.  For example, a Worker’s Party member suggested that the government should raise healthcare spending to 6% of GDP.  In response, DPM Tharman highlighted the very large increase in taxes that this would require.

It should be noted that healthcare was just one of the 10 areas in which Mr Chen said “Let’s do more”.  My concern was that the Worker’s Party were contemplating changes of substantial magnitude in government spending and seemed to measure success on the basis of the spending itself rather than the outcomes achieved.  When proposing such substantial changes, I think it becomes necessary to discuss revenue implications as every MP must be sure they can justify the additional burden this spending may incur to their residents.

 

I think the current approach of the government is to focus on the outcomes it wants to achieve, and devise affordable ways to get there, rather than just throwing money in an area.   For example, in relation to healthcare, this is why the approach in the budget is to address the needs that need to be met, including the provision of more hospital beds, community hospitals and home based healthcare.  This is to make sure that healthcare remains affordable and accessible to users, but it is still delivered in a cost-effective fashion.

In principle, I would support any schemes whose social returns far outweigh the initial outlay.  However, I also recognize the government would still need to raise revenues to meet this outlay (initial or permanent).  We then have to prioritise, which are the best schemes and how high we should take taxes or other revenue measures.

 

**********************************************************************************************************************************************************************

 

Let us all do more! Can Singapore go beyond First World? – by Alps Tan

 

Source : https://www.facebook.com/notes/alps-tan/let-us-all-do-more-can-singapore-go-beyond-first-world/257774450970971

*********************************************************************************************************************************************************************

 

Thoughts on Donald Low, Chen Show Mao and Vikram Nair

I was impressed yet saddened to read the piece Donald Low wrote for Chen Show Mao, “Vikram Nair’s flawed economics”. Donald uses words well and his economics training shows. Personally I think Show Mao should have given credit to Donald for such good help, even if Donald did not expect the attribution.

Donald is spot-on that spending can achieve many different kinds of returns and that philosophies used to be different about infrastructure versus social spending. As an economist, Donald would also be familiar with the idea of “stickyness”: some policy decisions are harder to move in one direction compared to another. Around the world, cutting back on big economic projects is generally easier than cutting back on social expenditure. So there’s also a policy case for being careful with moving social spending. It doesn’t mean you don’t spend — but social spending requires care in the same way that big investments need a different kind of care.

Donald also makes good points about how spending upfront can stop a small problem from ballooning into a big problem — thus avoiding much bigger expenditure later on. This is good common sense, which may be why spending on education is regarded as an investment too, such as the generous financial support and subsidy given to Singaporean school students, especially those from low-income families.

So why was I saddened? Because when I read Donald’s article, I felt some kind of anger had shaded his thinking. Donald wasn’t so much rebutting Vikram Nair’s speech, but rather an idea of Vikram Nair’s speech, and an idea of what the PAP was supposed to be a long time ago.

Vikram Nair’s speech might have been uncalled for if Chen Show Mao, in Parliament, had made all the points Donald provided several days later. But Show Mao didn’t do that in his speech. Show Mao’s speech had none of the analysis, none of the detailed explanation you need to understand how an investment will lead to economic, social and cultural returns. Show Mao basically said: “It will pay for itself and there will be returns — take my word on it (but I’m not telling you exactly how).”

The saddest part of all is that Donald and Show Mao are perpetuating some very outdated thinking about what kind of society Singapore should be. When Show Mao says “Let’s Do More” and Donald analyses state expenditure, both are still speaking the ideological language of people versus state, of one against another: they are really saying is that “the state should do more”.

But what about We, The People?

And that’s why Singapore needs better politics and better politicians than Show Mao, and better policy thinkers than Donald. We will have failed, if our First World status comes with First World Taxes and First World Debts and First World Divisions.

I propose a different rallying cry of hope: “LET US ALL DO MORE”.

Because a truly inclusive society isn’t just about the state giving out more.

It’s about all Singaporeans stepping forward and stepping up as proud citizens to help their fellow men and women.

When was the last time you looked around the MRT train before taking a seat, to see if somebody needed it more?

When was the last time you gave a dollar to charity without somebody prompting?

When was the last time you volunteered your time and energy and passion for a cause? (Writing articles doesn’t count.)

And that’s why in the new Singapore, the real rallying cry should be LET US ALL DO MORE. Because We, The People, make up our Singapore.

*********************************************************************************************************************************************************************

.

Investments in Social Capital? But how do you fund it? – by Davian Lee

 

Source : https://www.facebook.com/notes/alps-tan/let-us-all-do-more-can-singapore-go-beyond-first-world/257774450970971#!/note.php?note_id=257630124318597

*********************************************************************************************************************************************************************

 

Donald Low’s note is a very interesting lecture on the importance of social returns and the importance of social capital. However, it does not answer the fundamental question. If you want to spend more, you must surely explain how you want to fund this spending. I think when committing to future spending of any sort, should a responsible government think about how it is going to fund them?

This simple question applies to :

a) social investments (the Government has many, such as public education, workfare, comcare, medifund, subsidised HDB) that it is hoped will strengthen our society or provide benefits valued by our society (eg preserve social mobility, help the poor to uplift themselves) or that may even yield economic returns or reduce costs in other areas;

b) economic investments that it is hoped will yield economic returns (or eg in wages or other incomes), or may even yield social benefits (by improving the quality of jobs and allowing broad-based improvements in economic welfare) Many expenditures will it is hoped yield social benefits. The Government is doing more to enhance social mobility and improve the welfare of the elderly, and seeks to justify them and to ensure we will be able to fund these programmes.

There is a good question in what Donald Low posed in one part of his article, which is a different argument from much of the rest of his article and CSM’s: “The central fiscal question is always “how should we allocate and prioritize our scarce resources?”

This is very different from giving a lecture on social returns, or on the returns from human capital. Or saying now that every expenditure sorts itself out or that “social spending is no more or no less “self-funding” than other types of government expenditure”.

PS: I also note that Mr Chen Show Mao did a bit of editing of Mr Low’s note that made the points confusing or just plain wrong – eg replacing Donald’s point that ‘from an accounting viewpoint” every expenditure is the same cost in the period it is spent (ie a brilliant observation that $100 today equals $100 today regardless of what it is spent on) by saying that from an economics viewpoint, there is no conceptual difference between any expenditure – which is embarrassingly wrong.

**********************************************************************************************************************************************************************.

$1000 monthly income can afford a small HDB flat

 

   Lawrence Wong

 

DPM Tharman’s remark in his Budget Round-up Speech that a family with $1000 monthly income can afford a small HDB flat sparked a lot of online discussion.

In Parliament yesterday, Minister Khaw Boon Wan explained how this was possible.

A subsidised 2-room HDB flat costs $100,000. A couple purchasing the flat as a first-timer gets a total housing subsidy of $60,000 from the Government. So the net selling price is $40,000. The monthly mortgage payment for this amount can be covered from the couple’s CPF contributions, without them having to make any out-of-pocket payments.

Some have highlighted that even if the couple can afford a small flat, they will still face financial pressures, for example, to look after their children, to cope with daily living expenses, or to provide for their own retirement needs.

I understand these concerns. While housing is important, our assistance cannot just be limited to housing grants. That’s why we have other schemes like Comcare and Workfare. That’s why additional measures were introduced in this Budget to help the elderly and lower-income in other areas, like the permanent GST vouchers, subsidies for community hospitals and nursing homes, and enhanced financial assistance for their children in schools.

The Government has been taking steps to strengthen our social safety nets over the past few years, and will continue to move in this direction in the years to come.

But what we want to achieve as an inclusive society cannot be done through government policies and programmes alone. As NMP Laurence Lien said in his maiden speech in Parliament, we need to be build a “new social compact”, where the community is empowered to do more for “mutual problem-solving and mutual self-help”.

We need all stakeholders, whether government, employers, families or community groups, to do their part – to care for one another and for the less fortunate, and to collectively build a society with a deep sense of compassion, responsibility and community spirit. 


Over the last few days in Parliament, I was struck by how MPs on both sides of the House voiced their support for the budget and said that this was a “pro-people” budget, and a “budget with a heart”.

The budget on its own will not solve all our challenges. But it is an important part of a national process, to forge a stronger consensus on what is best for Singapore, and to take concrete steps towards realising the promise of an inclusive society, and a stronger nation.

 

**********************************************************************************************************************************************************************

 

The $1.1 billion package to expand bus capacity – Who is the Government Subsidising?

 

  Lee Bee Wah

https://www.facebook.com/permalink.php?story_fbid=397503600264130&id=147450805269412

 

Many people have asked about the Government’s decision to spend $1.1 billion to expand public bus capacity. One of the key questions is whether this is in fact a subsidy to SBST and SMRT, the two public transport operators (PTOs) . It is in fact a subsidy for commuters, and not a subsidy for the PTOs. This note explains why.

The Government considered its investment to expand public bus capacity very carefully. It is an important step, aimed at reducing waiting times and crowdedness that Singaporeans experience as they take public transport.

First, what are the PTOs themselves responsible for? The PTOs are required to expand their bus fleets to cater to growth in passenger numbers, as well as to ensure they meet the service levels mandated under existing regulatory requirements. Therefore, in addition to operating the existing bus fleet, they will have to buy 250 additional buses to achieve this. They will fund this on their own.

Why is the Government putting $1.1 billion into the bus system? We are doing this in order to step up bus service levels well beyond the current service standards required of the PTOs.
a. It will increase bus capacity on existing heavily-utilised routes making them less crowded and giving commuters a more pleasant journey.
b. Almost all feeder buses will run every 10 minutes or less – for two hours during morning and evening peak periods, instead of a one-hour peak under current service level requirements.
c. Commuters on existing routes will thus benefit both from shorter waiting times and less crowded bus journeys.
d. A number of new bus services will also be added in order to improve connectivity, and provide commuters with more public transport choices.
e. These improvements are what commuters have been hoping for.

As a condition for the Government’s investment, the PTOs will have to deliver these
service level improvements.

We cannot simply mandate that the PTOs add these 550 buses to improve service levels. First, because it goes significantly beyond the service levels under the current regulatory framework. Second, the PTO’s bus operations are already running operating losses, and the 550 additional buses in particular are projected to be a loss-making operation. The cost of acquiring and running the 550 buses are beyond what can be recovered through revenues from these buses.

a. Take the example of improving the frequency of feeder bus services. Increasing the number of buses will shorten waiting times but will add little to the revenue, since the total number of passengers taking the service will remain largely the same.

Without the Government stepping in, these significant service levels improvements would only have been achievable if fares are raised sharply. The 550 additional buses mean significantly higher costs – not only to purchase the buses, but also because more than 1000 drivers would need to be hired and paid a good wage. Fare revenues of the PTOs would have to go up by about 12% – 13% – which translates to an increase in passenger fares of about 15 cents per journey – for the PTOs to achieve this on their own. In the 5 years from 2006, fare revenues went up by only 0.3%, cumulatively. So 12% – 13% is quite a significant increase compared to the last 5 years.

Hence the reality of the matter is that the $1.1 billion Government package, or $110 million each year, is a subsidy for public transport commuters, and not a subsidy for the PTOs. It will improve service levels for commuters, not the profits of the PTOs.

The $1.1 billion package is expected to cover the losses on the 550 buses – in other words, the additional costs net of revenues. Of the $1.1 billion package, $280 million is budgeted for the purchase of the 550 buses over the next five years, and $820 million to cover the net operating costs over 10 years. This is based on best estimates currently. However, we will be monitoring and scrutinising the PTOs’ actual costs for both the purchase and running of the buses. Should their losses turn out to be lower than expected, the Government funding will be reduced correspondingly. So one way or another, there will be no profits made from the 550 buses.

The $1.1 billion for additional buses complements the $60 billion we are putting into the expansion of the rail system. It will take several years for the new rail lines to all come on stream. That is why we are stepping in now to add bus capacity and quickly improve the daily experience of commuters. It is what commuters wanted, and we have assessed that it is worth the public investment.

Despite this Government package, regular and incremental fare increases will continue to be necessary in future, as wage and operating costs rise, so that the bus industry can stay financially viable. The Government will also continue to make sure that needy commuters get adequate assistance for their transport expenses.

 

**********************************************************************************************************************************************************************

 

My Speech at the Budget 2012 Parliamentary Debate on 29 Feb 2012 – by MP Amy Khor

 

Source : https://www.facebook.com/notes/amy-khor/my-speech-at-the-budget-2012-parliamentary-debate-on-29-feb-2012/381941965149584

Mr Speaker Sir, as Chairman of REACH and Mayor of the South West District, I have had the privilege of being at close quarters with different segments of the population who have responded to Budget 2012.  Since the Budget Speech on 17 Feb 2012, REACH has received more than 600 feedback inputs.

The theme “Building a Fair and Inclusive Society” clearly resonates with many people. It is gratifying for me to hear the spontaneous reactions and  support for the Budget.  Words like “great”, “responsive” and “caring” have been used.  It is the government putting the money where its mouth is.

Many feedback contributors have said that they like the budget as it reflects how we are part of a community that cares for one another and, more importantly, that the ground has been heard and their views taken into account.

I can testify that REACH does not get only pro-government feedback.  But, the overall support is indeed encouraging.

However, as with all budgets, we cannot be all things to all men. There will be some trade- offs, which could lead to some stakeholder segments feeling neglected.  Already, businesses and some middle income have lamented that this Budget offered few goodies for them.  But it must be said that whilst the middle income segment is not singled out, many of the measures such as extending subsidies in the intermediate and long term health care sector to cover up to two thirds of Singaporean households do benefit them.

Let me now highlight some key concerns raised and which the government could address. 

CPF Contribution Rates

The move to increase CPF contributions for workers aged 50 to 65 years to encourage them to continue working is welcome.  However, it can be argued that since people are becoming more educated and skilled, living longer and healthier and even as we increasingly embrace a performance based wage system, the CPF contributions rates should be similar for all workers regardless of age and should be extended beyond 65 years.  Otherwise, the signal would still be that older workers are less valued.

Special Employment Credit (SEC) and WIS for Disabled

It is also suggested that the SEC and WIS for the disabled be extended to Persons with Disabilities (PWD) but who did not graduate from SPED Schools.

Feedback from the disabled community is that even those who graduate from mainstream schools are still discriminated against and the SEC would help to ensure that employers are not discouraged from employing them. 

Productivity Drive and Foreign Workers

For businesses, the criticisms to Budget 2012 have been sharper.  There are few objections towards the statement that Singapore needs to reduce its reliance on foreign workers and steer its economy toward higher productivity. But, growing productivity takes time and replacing foreign workers with more locals in a tight labour market will be extremely challenging in the short to medium term.  Hence, there are concerns that the shortage of foreign labour may hurt small businesses and eventually increase costs for everyone.

We need to stay the course in climbing the productivity ladder, lest cheaper foreign workers become an intoxicant that numbs us to the need to restructure for the long term. However, we should also not dismiss these concerns, especially pressing when a slowdown in the global economy is looming.

Despite increases in foreign worker levies since 2010 and the government’s gradual tightening of foreign worker employment, the number of foreign workers in Singapore has grown.  After a strong 11% labour productivity growth in 2010, our productivity growth virtually ground to a halt in 2011 at 1%,  Although this may be attributed to a lower 4.9% GDP growth and more jobs being created, it does show that shifting the economy to a productivity-driven model is not so simple.

It is very difficult to wean companies off their dependence on foreign labour because that is the quickest fix, and SME’s rarely have the luxury to think long term when the entrepreneurs who run them have to deal with day to day business challenges.

Besides the measures announced in Budget 2012 to incentivise companies to improve productivity, the government will need to work closely with the various industry sectors to change mindsets and more aggressively drive productivity initiatives.  Employers will also have to make concerted effort to adapt their work processes to include more flexible work hours and better HR policies and pay structures to accommodate older workers and other untapped labour pools such as back -to -work women. Here, the Government could take the lead by employing older workers and back – to – work women across all Ministries and agencies.

For work that the Government best sources such as cleaning and security, it could stipulate  minimum standards  required of these workers,  so that they will be able to get better pay commensurate with better skills and improved productivity.

Boosting Bus Capacity

There is significant resentment that public funds are being used to boost bus capacity even though doing so to improve service level is welcome.   The government has always maintained that the privatisation model is the best way to ensure that the public transport system operates effectively and efficiently.

Given their size and credit standing, the publicly listed bus companies can quite easily raise funds via bond or share issues to buy the buses.  So, many people cannot fathom the logic for the direct use of public funds to ramp up bus capacity. Moreover, it is argued that these companies have been making substantial profits over the years even though their bus business may be running operating losses.

If the $1.1 billion subsidy is inevitable, then the Government  must have strict oversight over these operators and impose conditions to ensure that  we achieve the desired service level improvements and the extra money does not go toward boosting dividends or share prices.  These conditions should be made known to the public.

Some questions also remain unanswered – if government pays for the buses, will they be “given” to these bus companies, or more appropriately, leased to the bus companies at market rates? The very idea of public funds being used for the purchase of buses for private transport companies also raises the question whether nationalisation or some hybrid model similar to those in Australia and the UK  should be the way forward.

Mr Speaker Sir, at this juncture, I want to take a step back and look at the Budget from a macro perspective.  From the point of view of depicting priorities, Budget 2012 indicates a stepped up response to realities that have asserted themselves more and more forcefully.  The opposition would like to think that Budget 2012 is a reaction to the GE last year. But clearly, deeper forces are at work.

Let me organise my thoughts under four headings:

1.  A persistent problem

2.  A fresh approach

3.  A social partnership

4.  A real danger

1.  A persistent problem

Mr Speaker Sir, globalization — which Singapore has whole heartedly embraced and continues to do – has two opposite effects.

Firstly, it produces big winners: a start up of the “Next Big Thing” that goes IPO and enriches its founders by millions, top financial talent that attract salaries and sign-on bonuses which international banks clamour to offer, obscure artists on YouTube that goes viral and draws the attention of record companies or sports promoters.

But, globalization also produces big losers.

While Singapore has one of the highest percentage of millionaires in the world, the lower segments of the population find it difficult to pull themselves out of their difficulties.

Our Gini Coefficient without government transfers and taxes increased from 0.442 in 2000 to 0.473 in 2011.  While government transfers and taxes have brought down the corresponding Gini Coefficients for 2000 and 2011 to 0.434 and 0.452 respectively, it has thus far not reversed the general rising trend of income inequality.

This is despite the higher and higher amounts of funds allocated to social development.  For instance, social spending rose from $13b (or 5.5% of GDP) in FY 2006  to $21.5b (or 6.6% of GDP) in FY 2011, both in absolute terms and in proportion to share of overall budget.  Even so, the gaps have not closed.

These observations point to deepening and chronic income divisions that need urgent attention.  This is compounded by the rapidly ageing population which many people have noted, with the attendant problems of slowing growth in the domestic workforce, and a higher fiscal burden for health care.

It will be foolish to jettison the dogma of globalisation and free markets because it has brought enormous benefits to Singapore. Millions have been uplifted from their poverty in many countries that have embraced market reforms and plugged their economies into the global trading system.  But,  we need to address the inequalities which plague dense cities like Singapore.

The problem will not easily disappear anytime soon.  In fact, perhaps alarmingly, it is likely to worsen as the numbers of dependant aged rise.  The investment in up-levellers like education (which this Budget also offers) pays dividend only in the long term.

The persistence of the widening income gaps thus call for a reinforced fiscal policy to tackle the problem.

2.  A fresh approach

When the global financial crisis broke out in 2008, central banks around the world resorted to a massive and co-ordinated injection of liquidity to decisively unclog credit channels and help re-start bank lending.

In the US, they pursued an unconventional fiscal policy called quantitative easing or QE, and Mr Ben Bernanke even initiated 3 rounds of it.

Speaker Sir, I am not at all advocating that we start pouring vast sums of money into the social sector, but – poor analogy as it is –there is a need for the rough equivalent of  QE for social development.

In this respect, I am grateful to Minister Tharman for heeding comments I and others have made last Budget about the need to raise the social allocation even further. I call this a responsive government although some opposition members would label it a populist move.  But, this is not a course correction as the member for Aljunied, Miss Sylvia Lim, suggested yesterday.  It is the reinforcement of an existing policy.

What Budget 2012 implies is a further loosening of the purse strings to help the most vulnerable segments of the population, with full awareness that the help they receive may be prolonged over many budget cycles.

Indeed, Budget 2012 signals in my view, a fresh approach the government has taken in cognizance of these social realities. It is a fresh approach because the government has brought to bear substantially more funds than hitherto to try and decisively tackle the income gap.  Hence, we have a permanent GST voucher scheme.

We already have a number of “permanent” assistance schemes such as Workfare and now, we have a permanent GST vouchers program. But a “QE” for the social allocation does not and should not negate the core principle of self reliance.  The GST vouchers are subject to some measure of means testing  and equally important are targeted. For instance, only about a third of the GST voucher scheme is in cash whilst the other two portions are directed toward Medisave for the elderly and utility subsidies.  Whilst some of these might need further refinements, we must never veer away from the goal of all such schemes, that is  to give a leg up and promote self reliance as far as possible.

At the same time, measures to ensure social mobility for the young who may come from low income families are crucial so as to ensure that they have a chance of getting out of the poverty trap.  We must do all we can to preserve social mobility, which is likely to get harder over time, so that a permanent underclass will not coalesce.

3.  A social partnership

Building and being an inclusive society does not just mean the government singularly putting in place policies to redistribute resources to help the vulnerable.  It is also as much about individuals wanting to be helped and to help themselves, families bearing responsibility and the community coming forward to lend a helping hand.  Everyone must chip in and do their part.  This is the social partnership Singapore needs to forge and strengthen even as we face a period of greater economic uncertainty.

But, while the government has done more, and no doubt, will continue to do so in the years ahead, the problems have to be collectively owned and comprehensively tackled. They will require a total response from everyone.

Having more social workers as called for in the Budget will help, but the problems still cannot be resolved without the support of the family and other stakeholders.

I draw an analogy from the short video clip and frequent announcements at MRT stations.  In the clip, a suspicious looking man boards an MRT and deposits a bag under his seat.  He disembarks the train several stations away but leaves the bag on the train.

Shortly after he disembarks, the train explodes as it enters a tunnel. The message is clear, and is reinforced by the announcement over the PA system – if anyone sees a suspicious object at the station that is left unattended, he or she should alert the station staff, lest it turns out to be an explosive device from a terrorist.  The responsibility falls on everyone so that everyone is safe.

Likewise, we need to pursue a social partnership that leverages off the strengths of each party – the government’s resources, the community’s local networks, the neighbour’s alertness to specifc people in need. The community must look out for one another, and the able must stoop to help the less able.  In this way, the holes are plugged and more sustainable solutions can be proffered.

Let me cite an example to illustrate such a social partnership.  This is the case of a resident in my constituency who alerted us of the Chow  family of four siblings in a neighbouring HDB unit.  All four were afflicted by a genetically inherited disease and all became blind. Life has dealt them many harsh blows. One of them is now in a nursing home, one works as a masseuse supporting himself and his two sisters staying at home.

GRLS did not know about the family as the family never switched on the lights – since they were blind — and sleeps early every night. Hence, we never reached them during house visits.

The masseuse was able to support the family until he  fell down.  The neighbour alerted GRLs that this family needs help.  The CDC is now helping them with monthly cash, food rations and other subsidies. The RC visits them every month.

I visited them and was impressed that even though they were blind and only the youngest sibling — already aged 50 –has some vision, they kept their house very neat, without a speck of dust on the floor. And they were very independent, able to cook and feed themselves.

Hence, we need the community to come forward to reach out and support such vulnerable families, hand-in-hand with the government.

4.  A real danger

While we pursue inclusiveness, and open government purse strings, we must also jealously guard the principles of individual and collective responsibility and not go down the unconditional welfare route which will erode our work ethic and our sense of responsibility.  I cannot stress this enough.

Ultimately, growing the economic pie via productivity, innovation and higher skills must be done so that we have the resources for the programmes and initiatives that will help us achieve a vision of an inclusive and stronger Singapore. To do so means we must also have a robust and sustainable fiscal policy that can ride through the economic cycles.

A number of my fellow MPs have indicated these concerns, and I myself have raised this during last year’s Budget debate.  Amidst the pressure to spend and spend to address real needs, we need to preserve the ethos of prudence in our fiscal policy needed to buffer ourselves against global volatilities.

We must not go the way of countries like Greece and France whose large government spending, often in excess of 40%, on welfare payouts and unemployment benefits are funded by cripplingly high taxes and unsustainable budget deficits.  Their high social spending has not prevented but entrenched a permanent underclass dependent on handouts and experiencing high unemployment within the community.

In sum, balancing the budget & removing obstacles to sustained growth are the best safeguards against welfarist budgeting.

Sir, I support the Budget.

**********************************************************************************************************************

Speech by Minister Khaw Boon Wan at MND’s Budget Debate, 2 March 2012

 

Source :  http://app.mnd.gov.sg/Newsroom/NewsPage.aspx?ID=3372&category=Parliamentary+Speech&year=2012&RA1&RA2&RA3

 

Excerpts

5. Mr Dhanabalan had an outstanding CEO in Mr Liu Thai Ker – an unusual talent with deep knowledge of Chinese culture. Mr Liu and his team picked an excellent piece of calligraphy by the late Mr Pan Shou to display in the HDB lobby to remind HDB staff of their mission. This was the one in which Pan Shou captured on paper, the moving poem of Du Fu, a Tang Dynasty poet:

安得广厦千万间
大庇天下寒士俱欢颜
风雨不动安如山

6. My translation is this: “How I wish there would suddenly appear tens of millions of houses to house everyone, especially the poor, so that they can live in comfort and rejoice, and protected against any thunderstorms”. I first read this poem when I was still in high school and immediately committed it to memory, especially the last two lines:

何时眼前突兀见此屋
吾庐独破受冻死亦足!

7. “If the price for realising this wish is that I alone, my own heart is destroyed in the storm, and I freeze to death, so be it.” What a great vow! Du Fu’s compassion and deep sense of self-sacrifice left a deep imprint in me, and I am sure in many Chinese scholars. He died a pauper but this, and many of his other heartfelt poems immortalised him. I am glad that despite many changes in HDB leadership over the years, Pan Shou’s calligraphy still hangs in HDB lobby, as it should. I recall this part of MND’s history, not out of nostalgia, but because I want to draw on the wisdom of these pioneers. Their ideas and the values underpinning their thinking process, remain equally relevant today and for the future. Let me distill them into 3 learning points: (a) focus on the longer term greater good of many; (b) put community interest above self interest; (c) dare to try. It was with this spirit that they turned rural Toa Payoh into a thriving modern township of today and Singapore a world-renowned Garden City. We owe them a lot.

 

Excerpts 

 

Of Pigs, Mice and Men

8. I stepped into MND facing a hot housing problem. A severe mismatch in supply and demand, coupled with global liquidity and low interest rates, caused a sharp spike in housing prices. The situation reminded me of a speech that the late Dr Goh Keng Swee made in 1980 on the plight of pig farmers. I was then a very young civil servant and I remembered that particular speech. He spoke on what the economists refer to as the pig cycle. I think the economists in this house will know the cobweb theorem. When the price of pork is high, pig farmers rear more pigs in the hope that they will make more money. However, when the piglets grow up and reach the market, there is a glut and prices drop. Farmers then cut the number of piglets they are going to raise for the next time, thereby ensuring that when these piglets mature, there will be a shortage and prices go up again.

9. The pig cycle applies to many economic activities: rice, vegetables, even container shipping, all follow such a cycle. Dr Goh used the pig cycle to explain the difficulty of matching the supply of hotel rooms to actual tourist arrivals, resulting in a critical shortage of hotel rooms at that time. With more sophisticated projection, Dr Goh hoped that planners and hoteliers might perform better than pig farmers. But wisely, he added a caveat, that in real life, events seldom move in accordance with projections. Adding a poetic touch to his speech, Dr Goh referred to Scottish poet Robert Burns’ poem “To a mouse”. Let me recite the key stanza:

“But little Mouse, you are not alone,
In proving foresight may be vain:
The best laid schemes of mice and men
Go often askew,
And leave us nothing but grief and pain,
For promised joy!”

10. Such is the occupational hazard of planners. The best laid scheme can often go askew. This is particularly so for Singapore where the larger global environment, over which we have little control, can easily derail our projections. That was how MND’s housing projection and recent rebuilding programmes went askew, when our population shot past projections, mortgage interest rates plunged, and our economy made a surprisingly quick and strong rebound in 2010. And bear in mind how difficult it is for the construction industry to ramp up and slow down. There is a long lead time.

 

Excerpts 

 

Basic Values

Deputy Chairman

41. In MOH and now MND, I have stuck to basic values when formulating public policies, in 8 simple words:

老者安之
少者怀之

42. “Try to help the seniors so that they can age with peace of mind. And shower the junior with love and care.” This ancient Confucian ethos underpins strong families, the marriage institution and filial piety. This is how a strong society is built. With growing individualism, like Er Lee Bee Wah, I worry that these values are getting diluted. There are worrying signs: rising divorce rates, abandonment of parents. These are larger social issues, beyond MND, but they impact MND’s work.

43. At the very least, MND policies must not unwittingly facilitate such negative trends. And where possible, MND policies must actively try to support positive trends. Our latest initiatives, such as the Silver Housing Bonus, the enhanced Lease Buyback Scheme, the Multi-Generation Priority Scheme and the Ageing-in-Place Priority Scheme are all designed to support this ethos.

 

**********************************************************************************************************************

 

Earn $1000 a month and you want to buy a flat?!

 

     Tan Chuan-Jin

 

Only in Singapore.

Tears were shed by some, who lamented about the ability to buy flats for their parents in the future. Others raised their eyebrows when DPM Tharman made the point about the $1,000 income family being able to afford to buy a small flat. Online critics went to town to mock the im-possibility of this.

Well…

For a first time applicant, he can apply for a new 2-room standard BTO (Build-to-Order) flat in a non-mature estate. These flats are set aside for those earning $2,000 and below a month.

These households earning $1,000 can qualify for generous housing grants. Available to them are the Additional CPF Housing Grant (AHG) of up to $40,000, and the Special CPF Housing Grant (SHG) of up to $20,000. These grants could be used for the flat down payment. Total = $60,000

How much is a flat? Using the selling price of a new 2-room BTO flat in Fernvale Lea in Sengkang as an example, it is $100,000 (offered in the Jan 12 BTO exercise; the price range was from $83,000 to $112,000)

Deduct the $60,000. The applicant needs to pay $40,000.

With a loan for $40,000, repayment per month is as shown below:

- 30 years loan : $161/mth

- 25 years loan : $182/mth

- 20 years loan : $214/mth

 

For a young household headed by an income earner with a salary of $1,000 per month. He will have a total of $217 contributed monthly to his CPF Ordinary Account.

Monthly cash outlay = $0

This support for families enable them to move from rental to owning their own homes. Rentals for income of about $1,000 is $90-123 for 1-room, $123-$165 for 2-room.

An Inclusive Society…making it happen

 

More info can be found at HDB InfoWEB

Special Housing Grant HTML the link 

Additional Housing Grant HTML the link 

Help for low income families HTML the link 

 

TYPICAL 2-ROOM FLOOR PLAN APPROX. FLOOR AREA 47 sqm (Inclusive of Internal Floor Area 45 sqm and Air-Con Ledge)

 

**********************************************************************************************************************