TL;DR – It’s all about being prudent and effective.
A country’s budget is far more important than the average citizen thinks. After all, a Government does not actually make money but it funds its national budget through taxes and fees. And this concerns us because it affects us directly through the personal income taxes we pay, through GST and fees levied on products, etc etc etc.
You can have a look at how our Government raises money to fund our budget here, and also learn what’s so scary about it all.
And equally, if not more, important is that the Government uses this revenue to fund the ministries which ensure that the key services that our nation requires are fulfilled. You know, things like defence, education, infrastructure, so on and so forth.
Here’s are the top five expenditures in Singapore’s Budget.
Can you guess what are the top 5 expenditures in Singapore’s budget?
Let’s have a look at the 5 things you need to know about Singapore’s Budget.
1. Budget 2020 is happening on 18 Feb, Tuesday
2. Our financial year runs from 1 April to 31 March
The Singapore Budget is prepared for each financial year, which begins on 1 April of every calendar year and ends on 31 March of the next calendar year.
The Budget includes the revised government revenue and expenditure projections for the current financial year, as well as the planned government revenue and expenditure in the coming financial year.
3. Our budgets are always about being “prudent and effective”
I’ve been following our national budgets for at least the past five years, and if there are two adjectives to describe what our budgets are all about, they would be “prudent” and “effective”.
I guess it’s the Singaporean in all of us, including the Cabinet, the people running the Ministry of Finance (MOF). You will always hear things like “fiscal prudence” or “prudent budget” during Budget season.
Just how prudent? Well, our annual Budget is usually below 20% of our Gross Domestic Product (GDP).
In fact, it’s more like 15-18% of our GDP.
National budgets are often expressed as a percentage of GDP, and this also allows country-to-country comparison. According to the chart from MOF above, Singapore’s spend is really quite small compared to how much the other countries spend.
Very prudent, indeed.
4. Effectiveness: Important to look out outcomes and not just absolute spending
Well, some people seem to gauge a Government’s level of care and concern towards its people from how much they spend on the people. But I say while looking at how big the Budget is and how the Budget is spent is one dimension, it’s more meaningful to look at effectiveness too.
What if a Government is very efficient and effective, and is able to spend a fraction of what other countries do, but is able to yield equally impressive results? And what if a Government spends a very high percentage of GDP on, say, education, but is unable to produce a nation of literate and skilled people?
Get the drift? Surely it’s equally, if nor more, important to look at outcomes?
Have a look at these two charts below.
Education and healthcare are always amongst the biggest ticket items in all Government’s budgets.
When you look at Singapore’s spending and the outcomes achieved compared to other countries, you can easily see that although our spending is relatively lower than other countries, our effectiveness is right up there.
As said, most governments the world over devote largest chunks of their resources to two key sectors – healthcare and education. These two sectors basically form the basic building blocks for economic growth.
Especially in Singapore’s case, since we have absolutely nothing to write home about in terms of natural resources. Our people are all we have. We need to ensure we have a healthy, educated and skilled population in order that we can thrive and survive.
Let’s just take Healthcare as an example to dive into and have a deeper look.
Healthcare: Preparing for an ageing population
Yes, Singapore has even overtaken Japan and we now have one of the highest life expectancy in the world. Today, Singaporeans can expect to live beyond 80 years old , thanks to the advancements in technology and medicine, as well as the country’s ever-improving living conditions.
We need to do a few things.
One, we need to keep these older folks healthy. Two, we need to ensure that they have the financial means to live a longer life. This means either earlier financial and retirement planning, working till longer, social support and probably a mix of all of these and then some.
This ageing population issue is further complicated by falling birth rates. You see, both these factors will dip the old age support ratio for Singapore. By 2025, our population is expected to start to shrink, but the old-age dependency ratio will keep rising. What does this mean?
Well, this means that there is only one way public spending can go, and that is up.
And we cannot wait till then to tackle the problem. It is only prudent (yes, that word again!) and right that the Government starts ramping up spending in some healthcare areas, like infrastructure and manpower. Especially since Singapore is always about thinking, planning and working ahead.
But with these increasing needs and expectations come rising costs and expenditures. Someone has to pay for these, right?
So, the six million dollar question in the room, really is, how to strike the right balance so that there is responsibility, equity and accountability in public spending.
You may say “Government pay lah….”
But what does that really mean? If we were to get the Government to bear the bulk of the public spending, then that money has to come from somewhere. Where from?
We have to acknowledge and accept that there is joint responsibility and accountability. It is not just the Government’s problem, neither is it our own problems only.
We have to look at it as a shared collective responsibility.
5) Does the Government give you a chicken or a chicken wing?
You know, there’s that story that always circulate online during Budget season. It claims that the Government gives you a chicken wing but takes a whole chicken from you. Is this true?
Well, it depends on who you are. Or rather, how much you earn.
Senior Minister Tharman (my fave political rockstar too!) has said more than once that under the Singapore system,
“Currently, for the lower income group (those in the bottom 20%) for every dollar they pay in taxes, they get $4 back in benefits. For the middle income group, every dollar they pay in taxes, they get $2 back in benefits.”
So I urge everyone to pay more attention to our Budget, where the money comes from, how the money is used, and also spend more time to understand how our policies are formulated and why.
Perhaps people can start having meaningful discourse online, but then I digress.
(Featured image via)
The Government giveth and the Government taketh… and the Government giveth again
Join the discussion One Comment
[…] John is in the asset management industry and would sometimes make insightful posts about finance and investment related topics. In the past, he has even explained in layman terms the differences between Temasek, GIC and MAS, and also shared what Net Investment Returns Contribution (NIRC), which is a key contributor to the Government’s revenue to fund our national budget. […]