1. ABOUT THE BIG QUIZ
í Co-organisers: The Straits Times and the Ministry of Education
í Presenting sponsor: Singapore Press Holdings Foundation
í Innovation partner: Shell
í The run-up to the Big Quiz comprises:
1. A series of 12 primers on current affairs topics
2. Talks given by editors and correspondents of The
Straits Times
3. A sponsored segment on students’ say to set questions
THE BIG QUIZ CONTEST
Four quiz rounds in which teams from participating schools will
vie for the top prize: a championship trophy and $5,000 cash
í Open to: First year pre-university students and Year 5
Integrated Programme students from 24 participating schools
For more information, go to www.straitstimes.com/thebigquiz
By AARON LOW
ASSISTANT MONEY EDITOR
E
VERY year, usually in
February, Singapore’s
Finance Minister
presents Parliament
with one of the most
important economic and political
documents of the year: the Bud-
get.
He also gives a speech to Parlia-
ment to explain the Budget.
The document is an accounting
of the Government’s expenditure,
such as building MRT lines or pay-
ing civil servants, and revenues,
mostly taxes collected from firms
and individuals.
It is also a means for the na-
tion’s leaders to communicate the
biggest policies of the day.
It is a closely watched event,
with the media and analysts scruti-
nising every detail of the docu-
ment. Many Singaporeans watch
it live via various platforms.
In other countries, especially in
European nations such as Italy,
Spain and Portugal, Budgets have
taken on much greater signifi-
cance as these countries are heavi-
ly indebted to foreign investors.
They have to adhere to strict
rules about how much more they
can borrow and what they are sup-
posed to spend their funds on.
Break a rule and it could mean the
collapse of an entire economy,
with foreign funds drying up.
By contrast, Singaporeans do
not have to worry about whether
the Government is facing trillions
in debt, or preparing to imple-
ment tough austerity measures.
Instead, the main question on
many Singaporeans’ lips is:
“What’s in it for me?”
‘Robin Hood’ Budget
IN A trend that Europeans can on-
ly dream of, the Government has
been dishing out tax rebates,
cash gifts or Central Provident
Fund (CPF) top-ups to citizens
almost every year for the past
decade. This is because the Gov-
ernment has been able to bring
in surpluses – where govern-
ment revenues and investment
income exceed expenditure –
on a fairly regular basis.
Between 2000 and last year,
there were about five years when
the Budget was in deficit – mean-
ing expenditures exceeded reve-
nues. The other seven times, the
Government recorded a surplus.
In 2011, just before the General
Election, the Government record-
ed $4 billion in overall surpluses.
That same year, the Government
gave out $3.2 billion in cash gifts,
bonuses and rebates to individuals
and families.
Called the “Grow and Share”
surplus-sharing package, it was
one of the largest baskets of
“goodies” given out by the Gov-
ernment.
Annual deficits are funded
from the accumulated surpluses
over the current term of govern-
ment. But by the end of each
five-year term of government, the
Budget has to be balanced.
This year, the Government re-
corded operating revenue – which
includes personal and company
taxes – of $55.2 billion. In addi-
tion, investment returns came in
at about $7.65 billion.
After deducting for expendi-
ture, transfers and endowment
fund top-ups, the Government
logged a very decent surplus of
$3.85 billion.
Transfers include Goods and
Services Tax vouchers, service
and conservancy rebates as well
as CPF top-ups.
But whether a resident has re-
ceived anything from the Govern-
ment would depend very much on
whether he was in the rich seg-
ment or the poor segment of the
population.
If you were in the top 10 per
cent of income earners, chances
are, you would have got very little
from the Government. In fact, the
rich are being more heavily taxed,
especially if they are in the habit
of buying big cars and investing in
expensive properties.
Higher-end investment proper-
ties will attract heftier tax rates.
The cost of a big luxury car, such
as a Mercedes-Benz, will jump by
tens of thousands of dollars.
It wasn’t for nothing that some
dubbed the Budget this year a
“Robin Hood” one.
It was a lot more generous to
lower-income earners, who have
been struggling to raise their wag-
es in the past few years.
For instance, the Workfare In-
come Supplement (WIS), in which
the Government gives cash and
CPF top-ups to low-wage work-
ers, was strengthened.
Maximum WIS payouts will
rise by between 25 per cent and 50
per cent for workers aged 45 and
above.
The salary ceiling for those eli-
gible for WIS will also be raised
to $1,900 from the current
$1,700.
Other measures will help stu-
dents from lower-income fami-
lies, starting from pre-schoolers.
Among other moves, $72 mil-
lion will be pumped into the Op-
portunity Fund, which gives
schools money to help less
well-off pupils have the chance to
learn new things.
Even when it comes to the cor-
porate world, policies announced
to transform the economy had a
clear social objective.
Deputy Prime Minister and Fi-
nance Minister Tharman Shanmu-
garatnam made this clear when
he spoke about the massive
three-year Transition Support
Package worth $5.3 billion for
businesses.
The centrepiece is a $3.6 bil-
lion Wage Credit Scheme. The
Government will co-fund for the
next three years the wage in-
crease of Singaporean workers
earning up to $4,000 in monthly
gross wages.
This is to help firms struggling
with the rising costs of doing busi-
ness as well as to nudge bosses to
give higher pay increments for
low-wage workers.
Apart from the redistributive
slant of policies, there was also a
clear signal that the Government
will not flinch from its stated goal
of reducing the reliance on for-
eign workers.
Moves to tighten foreign work-
er policies started in 2010 and the
Government has continued to
rein in the growth of foreign work-
er numbers.
This year was no exception.
But instead of targeting only un-
skilled workers, this year the Gov-
ernment took aim at the
mid-skilled and higher-skilled
workers by raising the salary re-
quirements for both categories.
This was, as DPM Tharman put
it, to level the playing field for lo-
cals looking to compete with for-
eigners for jobs.
He also addressed growing con-
cerns that the middle class was
feeling the squeeze due to higher
costs of living. The best way to
help them is not by reducing costs
but by making sure their incomes
continue to grow, even as the Gov-
ernment moves to ensure that the
overall tax burden on them is low,
he said.
There will also be a major re-
view of health-care financing,
with the Government promising
to pick up more of the costs of
health care, he said.
The moves to increase social
spending have led some to ask if
the Government is tilting to the
left to become socialist. But anoth-
er question that has been raised
is: How will the Government pay
for all of this?
There is a limit to raising taxes
as businesses and wealth earners
are mobile and can relocate to low-
er-tax regimes. Singapore’s tax
base is also shrinking as its popula-
tion ages and there are fewer
workers.
That is the biggest question on
the minds of economists such as
OCBC economist Selena Ling.
“It’s fine to say spend on this
and that but how is the Govern-
ment going to raise the money to
pay for all of this?” she said.
“And is there an objective for
social policies like Workfare? Are
we content at stopping at the cur-
rent salary cap of $1,900 or will it
be raised higher to, say, $2,500?”
Whatever other social policies
the Government adopts, it should
not and cannot sway from the one
guiding principle it has held to all
these years: living within one’s
means.
aaronl@sph.com.sg
THIS series of 10 questions
is brought to you by the
National Current Affairs
Quiz’s innovation partner
Shell and aims to look for
the best ideas and solutions
to issues today.
í This week’s question
(part 2 of 10): What is the
most important
consideration for ensuring
public spending remains at a
sustainable level?
Sum up your thoughts in
200 to 250 words and
submit your essay through
your teachers this week.
The top 10 essays
received in response to this
question will be uploaded to
The Straits Times’ current
affairs website Singapolitics
from April 15 for public
voting.
The top three essays
with the most votes will
each win $200 in vouchers
and be reproduced, in full
or in part, in print.
The overall best essay of
the entire series wins
$1,000 in vouchers.
This competition is
open only to Pre-University
1 and Integrated
Programme Year 5 students
from 24 participating
schools.
Visit the website
www.singapolitics.sg to
vote for the responses to
last week’s question on
environment issues.
Thought
Leadership
Question
PRIMER
The Budget
and what it
means for
S’poreans
This is the second of 12 primers on various current affairs issues, which will be published in the run-up
to The Straits Times-Ministry of Education National Current Affairs Quiz.
S
INGAPORE’S conserva-
tive fiscal spending has
been lauded as a shining
example of prudence,
but a quick check online
may bring one to data that points
to the country having one of the
world’s highest debt to gross do-
mestic product ratios.
For instance, the CIA World
Factbook lists Singapore as hav-
ing public debt equivalent to 105
per cent of its GDP, the 14th high-
est in the world.
Why the discrepancy?
Singapore’s public debt as list-
ed by CIA, and other websites, is
gross debt, not net debt.
To understand the difference
between the two, consider this:
Say two men both borrow $1 mil-
lion each. The first has no other as-
set, so his gross debt and net debt
are the same: $1 million.
The second man actually has $1
million in his bank account, but
took up a $1 million loan for in-
vestment purposes.
His gross debt is $1 million. But
his net debt is zero.
So there is a big difference be-
tween a man with no money who
borrows $1 million to spend, and a
man with $1 million in assets, who
borrows the same amount to in-
vest.
Singapore has not borrowed to
finance its spending since the
1980s, a critical fact that is often
ignored by these statistics.
Singapore does issue debt but
for very different reasons.
One type of debt that is regular-
ly issued are the Singapore Gov-
ernment Securities, which are is-
sued to develop the domestic debt
market.
The other is the Special Singa-
pore Government Securities,
bonds issued to the Central Provi-
dent Fund (CPF). The bonds is-
sued in this case are to pay the
CPF interest rates that CPF mem-
bers get on their savings.
The Finance Ministry says on
its website: “All borrowing pro-
ceeds are therefore invested. The
investment returns are more than
sufficient to cover the debt servic-
ing costs.”
Under the Constitution, the
Government cannot spend the
monies raised from both sets of se-
curities. In fact, Singapore is one
of 14 countries which continue to
hold the highest AAA rating level
from the various credit-rating
agencies.
Singapore’s Constitution also
stipulates that the Budget must be
balanced over the term of govern-
ment. Any leftover surpluses at
the end of the term of government
will be locked away as past re-
serves. And if there is a need to
dip into the past reserves, the
President must give his consent.
So far, the Government has
dipped into the past reserves only
once. In 2009, it obtained the
President’s approval to draw
down $4.9 billion from past re-
serves to fund special schemes in
the light of Singapore’s worst re-
cession since Independence.
These included the Jobs Credit
Scheme, which subsidised the
wages of Singaporeans, and the
Special Risk-Sharing Initiative,
which helped companies get ac-
cess to credit.
The actual amount taken out
from the reserves amounted to $4
billion. But in 2011, after a strong
economic recovery in 2010
boosted tax collections, the Gov-
ernment put the money back into
the reserves.
AARON LOW
Singapore has not borrowed to finance its spending since the 1980s, a critical fact that is often ignored in statistics put out by some organisations. ST PHOTO: SAMUEL HE
The
moves
to
increase
social
spending
have led
some to ask if
the Government
is tilting to the
left to become
socialist. But
another question
that has been
raised is:
How will the
Government pay
for all of this?
THE SINGAPORE PERSPECTIVE
Prudent or heavily in debt?
M O N D A Y , A P R I L 8 , 2 0 1 3 OOPPIINNIIOONN A23