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Singapore Budget 2014 is to achieve fair and equitable society: Tharman

IMFC Chairman Tharman Shanmugaratnam speaks at a news conference during the Spring Meeting of the IMF and World Bank in Washington, April 20, 2013. REUTERS/Yuri Gripas/Files

A fair and equitable society.

That’s what the Singapore government is hoping to achieve with the 2014 Budget, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in his speech in Parliament on Friday afternoon.

As expected by many, Tharman gave details on a “Pioneer Generation” package which was announced by Prime Minister Lee Hsien Loong earlier this month.

The package, to recognise the contributions pioneers have made to the nation, will apply to all Singaporeans who were at least 16 years old in 1965, when Singapore became independent, and citizens by 1987.

About 450,000 Singaporeans fulfill the criteria, said the finance minister, adding that there will be a panel set up to assess appeals on a case-by-case basis for those who miss out in the criteria but may have good claims.

The much-anticipated package, which will cost S$8 billion in the fiscal year starting 1 April, will focus on three areas: help with outpatient treatment cost, Medisave top-ups and Medishield Life subsidies, Tharman announced.

He added that the cost of providing the extra benefits this group over their lifetimes will be slightly over S$9 billion.

First, pioneers will get an additional 50 per cent discount off their net subsidised bills at specialist outpatients clinics and polyclinics. This means that their total subsidies at specialist outpatient clinics will now amount to 75 per cent to 85 per cent of their bills. Similarly, they will receive an additional 50 per cent off their subsidised bills at polyclinics.

The pioneer generation will now also qualify for the Community Health Assist Scheme (CHAS).  Currently, only the lower-income could qualify for the scheme, which provides accessible and affordable medical dental care. Existing members of the scheme will enjoy additional subsidies.

Pioneers who have with moderate to severe disabilities, or their nominated caregivers, will receive cash assistance of S$1,200 a year under a Pioneer Generation Disability Assistance scheme.

These subsidies will come into effect from September.

The additional CHAS benefits will be implemented in January 2015.

Second, pioneers will receive Medisave top-ups of S$200-S$800 a year paid from August this year. Older pioneers will enjoy larger top-ups.

Third, pioneers will pay a subsidised rate for the upcoming MediShield Life universal health insurance scheme. Their premiums will be offset by 40 per cent for those aged 65, rising to 60 per cent for those aged 90 and above.

Tharman said the target is to fully cover MediShield Life premium for those aged 80 and above through a combination of subsidies and Medisave top-ups.

The MediShield Life subsidies will be implemented in end 2015, when MediShield Life is introduced.

All members of the pioneer generation will receive the package for the rest of their lives.

The finance minister said, "These special benefits that we are providing the pioneer generation will not be differentiated by income because our objective is to honour the contributions of this whole generation."

To help those not eligible for the pioneer generation package with their healthcare expenses, the government will provide a Medisave top-up of S$100 to S$200 annually over the next five years to Singaporeans aged 55 years and above in 2014.

For lower- and middle-income households, government will enhance and extend assistance for pre-school and tertiary education. (More details on page 31 of Budget speech)

Some enhancement to MediShield Life subsidies are also being studied and will be finalised after a review.

The government will enhance subsidies for a programme for children with special needs, so that more middle-income households can benefit. Those earning above median household income (up to the 80th percentile) will now benefit from a further 20 to 50 per cent subsidy, on top of a current S$500 base subsidy that benefits Singaporean children enrolled in the Early Intervention Programme for Infants and Children.

On transport for persons with disability, the government  will introduce subsidies of up to 80 per cent for those who require dedicated transport services to access special education and care  services. This will apply to the lower two-thirds of households.

For those who rely on taxis as they are unable to travel by public transport or tap on dedicated transport, the government will launch a new taxi subsidy scheme will will cover up to 50 per cent of the cost for the lower half of households.

CPF contribution changes

Tharman also announced changes to the CPF contributions rates.

The government will raise the CPF employer contribution rate by 1 percentage point for all workers. This increase will be channelled to the Medisave Account. It will take effect from January 2015.

For those aged 55 to 65, the government will raise the employer contribution rate by 0.5 percentage points.


On the economy, the finance minister said Singapore's GDP grew by 4.1 per cent in 2013, up from 1.9 per cent a year earlier, supported by a gradually improving external environment and strong domestic construction growth. The Ministry of Trade and Industry (MTI) has forecast that the country's economy will grow between 2 and 4 per cent this year.

The country is estimated to record an overall surplus of S$3.9 billion for the current fiscal year, higher than the surplus of $2.4 billion budgeted a year ago, Tharman said.

For example, expenditure was lower than expected, said the minister, citing delays in the construction of the Downtown Line.

The finance minister also revealed that the labour market remains close to full employment, with unemployment rate for citizens falling to 2.9 per cent in 2013.

Meanwhile, wages of the median Singaporean worker increased by about five per cent in real terms in 2013.

Tharman also said that CPI inflation was lower in 2013. But a slight uptrend in CPI inflation is expected in 2014.

Continuing the trend from the the 2013 Budget, Tharman said raising productivity is at the centre of the country’s economic agenda and it’s the only way to raise living standards in the years to come.

Tharman noted a mindset change in depending on foreign workers with most firms accepting the reality of a tight labour market and taking advantage of productivity schemes.

The government will "aggressively support" any form of upgrading by companies and will strenghten support for early adopters of technology, the finance minister said.

He announced that the Productivity and Innovation Credit (PIC) scheme, which is due to expire in 2015, will be extended until 2018.

The scheme, which was introduced in 2010, reimburses companies with tax deductions or cash grants when costs are made in line with productivity.

The extension will cost the government S$3.6 billion.

Tharman also announced three initiatives to subsidise the information and communications technology costs for local businesses until 2018. They will cost a total of $500 million over the next three years.

The finance minister also revealed that the further slowdowns in foreign worker growth could be expected in the next two years, particuarly in the services sector, as previously announced dependency ratio ceiling cuts take full effect by July 2015.

In particular, measures will be introduced to help the construction sector improve productivity.

The government will increase the levies for basic-skilled worker permit holders in the sector from S$600 to S$700. This is will be effective from July 2016.

For selected government land site sales, the government will also mandate the use of productive technologies such as the use of prefabricated bathroom units in the tender conditions.

Tharman also said that measures implemented by the government to cool down the property market here have been working but it was "too early" to relax them.

Tax changes

Among tax changes announced by Tharman were the raising of duties for tobacco, liquor and lottery betting.

The minister said the government will raise the duties on cigarettes and manufactured tobacco products by 10 per cent to discourage the increasing prevalence of smoking.

The excise duty rate of all liquor types will also increase by 25 per cent to keep pace with inflation.

These changes will take effect today, Friday.

Tharman also announced that the betting duty rates on lotteries will be raised from 25 to 30 per cent of gross bets, from 1 July.

In concluding, Tharman revealed the overall budget balance as a deficit of S$1.2 billion, or about 0.3 per cent of Singapore’s GDP.

“This is close to a balanced budget, and will not result in a draw on past reserves as we have sufficient surpluses from the last few years,” the finance minister said.