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Social spending set to increase further as population ages

SINGAPORE — Over the past decade, Government spending on social development has ballooned almost three times — from about S$12.7 billion in financial year 2006 to an estimated S$32 billion in the current financial year ending March 31.

SINGAPORE — Over the past decade, Government spending on social development has ballooned almost three times — from about S$12.7 billion in financial year 2006 to an estimated S$32 billion in the current financial year ending March 31.

During this period, the proportion of spending in this area — which includes housing, education and healthcare — of the total expenditure has hovered in the range of 41 per cent to 48 per cent. As the Republic population ages, social spending is expected to rise. The spending on healthcare, in particular, has increased eightfold between FY2000 and FY2015 to reach an estimated S$9.3 billion.

The figure is set to rise to more than S$13 billion in FY2020 due to, among other things, significant expansion in healthcare infrastructure, such as the increase in public hospital, community hospital and nursing home capacity.

Subsidies have also been enhanced for specialist outpatient clinics, as well as intermediate and long-term care. MediShield Life, which provides universal health insurance coverage for all Singaporeans for life, was rolled out late last year, and subsidies have been extended to low- and middle-income Singaporeans to help them pay for the premiums.

World Bank data showed that, in 2013, healthcare spending constituted 4.6 per cent of Singapore’s total gross domestic product, compared with 17.1 per cent in the United States, 10.3 per cent in Japan and 9.1 per cent in the United Kingdom.

Prime Minister Lee Hsien Loong noted in 2013 that it was “the results that count, not how much you spend, not how much the Government takes on to itself”. While the Government will do more, additional government help does not always mean a better government, Mr Lee said.

He cited the example of the European model of welfare, where government spending makes up half or more of Gross Domestic Product (GDP), but it is in serious trouble.

“Similarly, more social spending does not mean better results. We just take healthcare — the Americans spend more on healthcare than anybody else in the world — 18 per cent of GDP ... more than four times what we spend in Singapore,” he said. “We spend about 4 per cent of our GDP on healthcare and yet, in Singapore, our life expectancy is longer and infant mortality rates are lower.”

Mr Lee also touched on the topic in his National Day Rally speech the same year, stressing that Singaporeans “cannot saddle our children’s generation with debt so as to pay for our consumption”.

Noting that healthcare costs will spiral upwards year-on-year, he said: “Today, people accuse us ‘why are we spending so little on healthcare?’ One day we will be lamenting ‘why are we spending so much, how do we save?’. The risks are there. We have to realise this, we have to be prepared to pay for this, whether by raising taxes, whether by cutting back on other spending, if we want to keep the social safety nets and the programmes.”

As Singapore’s economy moderates, experts TODAY spoke to stressed the need to raise productivity to generate more revenue to fund the social spending.

CIMB Private Banking economist Song Seng Wun said: “GDP growth was 2 per cent in 2015, and almost all of that came from growth in labour — productivity was zero. As the population ages and leaves the workforce, labour growth will slow or shrink and we will have to depend on productivity growth to expand the pie (to delay the need to raise taxes).”

Citing the 2013 Population White Paper, UOB economist Francis Tan pointed out that for every one person leaving the workforce in 2030, there would only be 0.7 persons entering it, should there be no net new immigration to supplement the local workforce at the current fertility rate.

Mr Tan added that, in 1980, only 5 per cent of residents were above 65 years of age but last year, the figure has grown to 12 per cent. During the same period, the proportion of residents below 15 years old fell from 28 per cent to 15 per cent. Time is running out for Singapore to raise its productivity, Mr Tan warned.

By 2030, the scenario in Singapore could be worse than Japan’s current situation, where 25.8 per cent of total Japanese residents in 2015 were above 65 years old, while 13.2 per cent were below 15 years old. “A further extrapolation reveals that the older group of residents (in Singapore) could reach 29 per cent of total residents in 2030, while the younger group of residents drops to 10.3 per cent of total residents,” he said. Lee Yen Nee

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