SINGAPORE — Subsidising utilities across the board, as some countries do, will lead to higher spending by the Government and taxpayers, while households that need the most help benefit less, Prime Minister Lee Hsien Loong said.

"With across-the-board subsidies, the households benefitting most are the ones using the most water or electricity, and these are usually not needy households." 

He also said that with cheap water and electricity, households will also have no incentive to conserve "because they do not bear the proper cost".

Singapore's approach is one where the ruling People's Action Party (PAP) runs a lean and efficient government while ensuring essential public services are run efficiently, he added.

Mr Lee was speaking on Wednesday (Nov 22) at the opening ceremony of the National Trades Union Congress (NTUC) National Delegates’ Conference 2023 held at Orchid Country Club.

The conference, which happens once every four years, was attended by about 1,500 union leaders, tripartite partners and other guests.

Mr Lee said households that need extra help are given targeted and direct assistance in the form of cash or vouchers such as U-Save rebates for utility bills as well as public transport vouchers.

"In difficult years like this one, when economic growth is slow, inflation is high, and wages are not outpacing inflation, we need to think what more we can do to help Singaporeans cope."

When it comes to raising fees, the Government adopts the approach of delaying non-essential fee hikes for "a while longer", or moderating any immediate increases, he added.

For example, the Government is spending S$300 million this year to absorb two-thirds of the public transport fare hike, or 15.6 per cent, which was announced in September. The move will defer the hike to future fare review exercises.

However, when increases are inevitable, the Government is more generous with targeted support to households, he said.

WHY THIS MATTERS

Mr Lee's speech came after several fees and tariffs hikes for utilities were announced in 2023.

In September, the national water agency PUB and the Ministry of Sustainability and the Environment announced water prices will rise by a total of 18.2 per cent over two years starting April 1 next year.

Bus and train fares to increase by 10 to 11 cents from December 2023, the Public Transport Council said in September, due to rising energy prices and inflation.

The moves led to a parliamentary motion on the cost of living in Singapore tabled by the Workers' Party (WP) last month, which was passed in Parliament after several significant amendments from PAP.

Both political parties agreed that the cost of living was an issue for many, but they clashed over how to deal with such concerns.

WP's original motion was titled “cost of living crisis” and called on the Government to review its policies so as to lower cost of living pressures on Singaporeans. 

PAP's Member of Parliament (MP) Liang Eng Hwa from Bukit Panjang ward proposed changes to WP's motion, stating that MPs acknowledge that cost of living is a global concern and call on the Government to continue pursuing policies to lower cost of living pressures without undermining fiscal sustainability and burdening future generations of Singaporeans.

'LEAN GOVERNMENT'

To moderate the pressures of cost of living on households, Mr Lee said on Wednesday that the Government is lean and essential public services are run efficiently and cost-effectively. He gave several reasons why this is the case:

• Singapore's government revenue from taxes and fees comprises only about 15 per cent of the country's economic output, or gross domestic product (GDP)
• This is unlike other countries, such as Italy, which spends about 15.3 per cent of GDP in 2022 on state pensions alone, for instance
• While Singapore's Goods and Services Tax (GST) will be raised to 9 per cent from 2024, a similar consumption tax in Italy is 22 per cent
• "By keeping government spending and taxes low, workers can enjoy the fruits of their own labour directly," Mr Lee said, adding that Singaporeans are "getting very good value for their money"
• On ensuring that essential public services are run efficiently and cost-effectively, Mr Lee said that somebody has to pay for these services. That means either the user pays through tariffs and fares, or the Government subsidises them, which means taxpayers pay indirectly through higher taxes
• To avoid putting the whole burden on taxpayers, users pay reasonable charges for the services they use
• Mr Lee also countered the argument that public services should not aim to earn a profit, saying that this removes pressure on such service providers to run efficiently. Earning a reasonable profit gives them the resources to re-invest to improve services, and provides the incentive to do so

WHY TARGETED SUPPORT WORKS

Mr Lee said with such an approach taken by the PAP Government, Singaporeans benefit from a high-standard public transport system, reliable and affordable utilities, and access to affordable and high-quality healthcare.

"This strategy has moderated the cost of living for all households. But some households will still need extra help, which we have provided," he added, referring to the U-Save rebates and GST vouchers that help to offset these costs.

If the Government were to use across-the-board subsidies, households benefitting the most would be those using these services the most, which "are usually not needy households".

It also removes the incentives for households to conserve their utilities spent.

However, in "difficult years like this one", fee increases have to be thought through "extra hard", Mr Lee said.

Though some price increases cannot be avoided, the Government's approach is to continue with them but "be more generous" with the targeted support to households, such as by enhancing the Assurance Package to further cushion the impact of the GST hike. 

"What we are doing keeps public services financially sustainable and of a high standard for the long term, while in the short term, households get extra help according to their need, so that we share the burden fairly," he added.

"This is how the PAP government keeps faith with workers, and does right by them, through good times and bad."