Budget 2017: Six key takeaways

SINGAPORE — Amid growing uncertainties on the economic front, Finance Minister Heng Swee Keat on Monday delivered a Budget Statement aimed at re-positioning Singapore for the future. We break down the key points for you.

1. He’s back

Finance Minister Heng Swee Keat’s Budget speech on Monday (Feb 20) not only marks his official return to Parliament, but also caps his remarkable recovery from a stroke last year.

He collapsed during a Cabinet meeting on May 12 due to an aneurysm, which is a localised weakening of a blood vessel. He underwent successful treatment, and was discharged in June.

Before launching into his 80-minute speech, Mr Heng thanked Singaporeans and his fellow Members of Parliament for their support during his ailment.

“Your kindness and encouragement are both humbling and uplifting to me and my family. I’m happy to be back in the Chamber and grateful for the opportunity to continue, alongside Members of this House, to serve Singapore and Singaporeans to the best of my ability,” he added, to applause from the MPs.

2. The big picture

Mr Heng opened his Budget speech by acknowledging the “deep shifts” around the world and at home - from the rising tide of protectionism to the growing pains at home as the Singapore economy matures.

But he reiterated that the new challenges would also open up fresh opportunities for Singapore in the years to come. What Singapore needed to do, he stressed, was to be adaptable, and forge stronger capabilities and partnerships at home and abroad.

Added Mr Heng: “We will take a learning and adaptive approach, try new methods, continue with them when they work well, cut losses when they do not, and draw on feedback and experience to adjust and refine our plans. That is the Singapore way.”   

3. Jobs, jobs, jobs

Many Singaporeans are concerned about the uncertain employment outlook and have asked what new measures the Government would introduce.

In his Budget speech, Mr Heng said Singapore needed to go beyond a “general stimulus” given the uneven performance across different job sectors, and should instead tackle specific issues faced by different industries.

Sectors which are doing well, such as the electronics, and health and services sectors, ought to think long term, build on their momentum and seize new opportunities. To that end, Mr Heng introduced several measures to help scale up and internationalise firms with good prospects.

For industries suffering from cyclical weaknesses, the minister introduced specific support measures. The hard-hit Marine and Process sectors, for instance, were granted a deferment on a previously announced increase in foreign worker levy.

To help the construction sector, the Government will bring forward S$700 million in public infrastructure projects over the next two years.

But for sectors facing major disruption, such as retail, Mr Heng said they “will need to dig deep to change their business models to stay viable”.

4. A new carbon tax

Come 2019, Singapore will be the first South-east Asian country to have introduced a carbon tax in order to encourage large emitters to reduce their carbon footprint.

“The tax will generally be applied upstream, for example, on power stations and other large direct emitters, rather than electricity users,” Mr Heng said in announcing the new tax during his Budget speech.

The Government is looking at setting a carbon tax rate of between S$10 and S$20 per tonne of greenhouse gas emissions, which is within the range of what other countries have implemented, he added.

For businesses, this proposed carbon tax rate represents a 6.4 to 12.7 per cent increase from current oil prices, compared to historical quarterly oil price fluctuations which have ranged from -29 to 35 per cent from 2011 to 2016.

For households, the tax rate would be equivalent to a rise in electricity prices of 0.43 to 0.86 cents per kilowatt-hour. This is a 2.1 to 4.3 per cent increase from current electricity tariffs as compared to quarterly electricity prices that have fluctuated up to 10 per cent between 2010 and 2016.

The move to tax greenhouse gas emissions will also help Singapore meet its commitments under the Paris Agreement efficiently and at “as low a cost to the economy as possible”, said Mr Heng.

Singapore ratified the Paris Agreement on climate change last September, formalising its pledge to reduce emissions intensity by 36 per cent from 2005 levels by 2030 and to stabilise emissions with the aim of peaking around 2030.

5. Water prices are going up

In the first price hike for water in 17 years, Mr Heng said prices will rise by 30 per cent by July next year. The price hike will take place over two rounds, with the first kicking in from July this year.  

For the average household living in a public flat, this will mean forking out roughly S$9 to S$15 more a month before the government’s additional U-Save vouchers. After the additional U-Save subsidies, one- to two-room flat households would see their water bill go down by S$1, while an executive flat household would see a smaller increase of about S$11 in its water bill.

Currently, Housing and Development Board households pay about S$26 to S$49 a month for water.

For non-domestic users such as building owners and industry, water prices will similarly increase. From S$2.15 per cubic metre, the price will hit S$2.74 per cubic metre from July next year. Those who use NEWater will have a new water conservation tax imposed, that is 10 per cent of NEWater tariffs. This is to encourage water conservation, the PUB said.

6. More support for low and middle-income households

With basic costs of living in the form of water and service and conservancy charges set to increase, Mr Heng announced measures to help lower income households cope.

The GST Voucher — U-Save rebate for eligible HDB households will be increased by S$40 to S$120, depending on flat type. This means the rebates will increase from S$180 to S$260 now, to between S$220 to S$380 from July.

The higher U-Save rebates mean that three-quarters of all HDB households will see an average increase of less than S$12 in monthly water expenses. About 880,000 households will benefit, and one- to two-room flat households will not see any increase, said Mr Heng.

For lower income households, a one-off GST Voucher special cash payment of up to S$200 will be given, and more than 1.3 million Singaporeans will benefit.

S&CC rebates will also be raised by 0.5 months for the 2017 financial year. This means a total of 1.5 to 3.5 months’ worth of rebates for about 880,000 HDB households

“In total, we will provide additional support of over $850 million this year to help households with their expenses,” said Mr Heng.