A Budget for families and the future

SINGAPORE — In a Budget speech heavy on announcements but singularly focused on preparing Singapore for the future, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday outlined how the Government will help Singaporeans learn for life, provide more assurance for poor retirees and give a leg-up to innovative companies.

Singapore must build on achievements from the past 50 years and reach its next frontier as an economy, while ensuring society is fair and just, he said in a speech seen by observers as charting the course for a nation celebrating its jubilee year.

One-off measures for this year include a 50 per cent personal income tax rebate (capped at S$1,000) for income earned last year and a 300 per cent tax deduction for donations to Institutions of a Public Character.

From socks to swimming, Mr Tharman used anecdotes to sketch out what Singapore is trying to achieve in the longer term.

While it cannot achieve expertise in every area, Singapore is well-placed to be a leader in five growth clusters: Advanced manufacturing, applied health sciences, smart and sustainable urban solutions, logistics and aerospace, and Asian and global financial services.

Some of this action will take place at Tukang Innovation Park in Jurong, which is home to new-tech companies as well as a dedicated medical technology facility. Merely 50 years ago, the area was a factory making Swan brand socks worn by many in the older generation as schoolchildren.

Singaporeans must be motivated to master what they do and gain satisfaction from it, he said. They should then pass on their knowledge and passion to the next generation, as 69-year-old Vincent Poon did. Mr Poon taught himself to swim at the age of six and became a swimming coach after a serious road accident. His students included Asian Games gold medallist Joseph Schooling when he was a boy, said Mr Tharman.

Mr Tharman said this year’s Budget takes major steps in four areas: Investing in the skills of the future, strengthening assurance in retirement, promoting innovation and internationalisation among businesses, and investing in economic and social infrastructure.

The SkillsFuture initiative will mark a new phase of investment in Singaporeans, beginning from their time in school. Career counsellors will be available in schools, but the journey continues long after. Internships for tertiary students will be improved and on-the-job training will be given to fresh polytechnic and Institute of Technical Education graduates through earn-and-learn programmes supported by the Government.

From next year, each Singaporean aged 25 and above will receive a SkillsFuture Credit of S$500 for education and training that will be topped up regularly. Mid-career Singaporeans will have enhanced education and training subsidies for courses funded by the Education Ministry and Singapore Workforce Development Agency.

“We must become a meritocracy of skills, not a hierarchy of grades earned early in life,” said Mr Tharman.

He added: “Developing this new landscape of learning will take time and resources, but we must put full effort into this … We must make it possible for every individual to decide on his or her own learning journey: When to go for fresh infusions of skills or knowledge, and whether it should be in specialised professional training, acquiring soft skills or developing a new interest.”

Economic restructuring efforts continue, but with foreign-worker inflows slowing down markedly, some companies will get a respite from foreign-worker levy increases. Companies that want to develop new processes or brands or venture abroad will get help.

Singapore’s economy is expected to grow by 2 to 4 per cent this year, amid an uncertain global outlook. Mr Tharman said the Republic should not count on significantly stronger global demand over the medium term, though inflation, which fell to 1 per cent last year, is expected to be close to zero this year, despite rising food prices, he said.

SOCIAL SUPPORT

Among the Budget’s social measures is the new Silver Support Scheme, which was first announced by Prime Minister Lee Hsien Loong at last year’s National Day Rally. Under the scheme, poorer Singaporeans aged 65 and above will receive payouts of between S$300 and S$750 every three months.

The scheme was lauded by several observers, including Association of Women for Action and Research’s Dr Vivienne Wee. She described it as groundbreaking, in that it was not reliant on employment, as well as a “good first step towards a universal basic pension”.

Singaporeans could also have more for retirement, with the Central Provident Fund (CPF) salary ceiling increasing from S$5,000 to S$6,000 next year. CPF contribution rates for workers aged above 50 to 65 will also increase, and the interest rate on the first S$30,000 of the CPF balances of those aged 55 and above will be raised by one percentage point.

Perks for younger families include top-ups to help pay for pre-school fees as well as to the post-secondary education accounts of youth aged 17 to 20.

These initiatives, together with new healthcare and transport services and infrastructure, will need to be funded. Healthcare spending alone — with new hospitals, nursing homes and subsidies — will exceed S$9 billion this year and S$13 billion in 2020, said Mr Tharman.

Changi Airport’s fifth terminal will be a major outlay over the next 10 to 15 years, and the Government will set up a new fund with S$3 billion injected, as a start.

The Government will spend judiciously, but overall spending will, on average, rise to nearly one-fifth of Singapore’s gross domestic product over the next five years, said Mr Tharman.

To boost the Government’s revenue, Temasek Holdings will be included in the Net Investment Returns framework — joining GIC and the Monetary Authority of Singapore — so part of its projected long-term returns can be spent. Currently, only actual dividends paid by Temasek to the Government can be spent. Higher income tax rates for top income-earners from 2017 will also boost revenue.

Said Mr Tharman: “Budget 2015 takes us into our future … A future that meets the aspirations of young and middle-aged Singaporeans, and enables us to realise the best in ourselves. And a future that provides greater assurance as we grow old.

“We must go forward with the blend of imagination and practicality that brought Singapore this far in 50 years. With hard heads, but warm hearts too, so that we all move up together.”

Writing on Facebook, Mr Lee reiterated that the “jubilee Budget” focuses on the future — building Singapore and helping Singaporeans prepare for changes to come. “We want Singaporeans to have greater assurance at each stage of life, more opportunities and a better home for all,” he said.

Observers, in general, hailed the measures. Mrs Chung-Sim Siew Moon, Ernst & Young Solutions’ head of tax, said: “There is an ‘ang pow’ for every individual and every business ... By far, this is one of (the) most comprehensive Budgets seen. The winners are clearly the people and the SMEs.”

READ THE FULL BUDGET STATEMENT HERE

Other documents on Budget 2015 available on the Budget 2015 website.