TL;DR – Did you know that if not for NIRC, we would have been running into budget deficits?
Most Singaporeans don’t pay enough attention to our National Budget. The Budget Statement is usually unveiled in the first quarter of every year.
For this year, DPM Heng Swee Keat who is also our Minister for Finance will be delivering the Budget Statement for 2020 next Tuesday, 18 Feb.
In this piece, I’d like to look at these few areas:
- The Budget process
- What is in the Budget
- Recent Budget Measures
- The Backdrop of the fiscal landscape
The Budget Process
It is a strategic financial plan to position Singapore for the future.
Presented annually around February, it depicts the Government’s plans for expenditures and revenues in the coming financial year to:
- Transform the economy
- Support and care for all groups in our society
- Prepare for the future, in a prudent and sustainable manner
- And to do all these in partnership with all Singaporeans
Basically, it’s about looking at the internal challenges and problems we have, and also looking at the larger, external landscape with all the opportunities, threats and challenges it holds, and decides how best we should find the money to fund all that we need to spend on as a country.
Here’s a look at the process itself.
What goes in the Budget
Now, let us look at what goes into the Budget. The key components we should be familiar with include Operating Revenue, Operating Expenditure, Social Transfers and also the Net Investment Returns Contribution (NIRC).
This is where the Government finds the money to fund the national budget, and this usually refers to taxes and fees. As you can see from the table below, over 90% of Singapore’s operating revenue comes from tax revenues.
This component is about how the Government spends the revenue.
These refer to one-off transfers to businesses and households, as well as top-ups to endowments and trust funds created by the Government for specific expenditure objectives. Examples of one off-transfers include the Wage Credit Scheme, Productivity and Innovation Credit, Medisave top-ups and GST vouchers.
For Budget 2019, a total of $15.3 billion was set aside for special transfers to meet the current and future needs of Singaporeans. Such transfers include top-ups to endowments and trust funds.
Of the $15.3 billion, $6.1 billion went to the Merdeka Generation Fund, which provides financial and other support to those born between 1950 and 1959; and $5.08 billion to the Long-Term Care Support Fund, which supports measures like CareShield Life subsidies and the ElderFund assistance scheme.
The rest went to businesses and households, like the one-off SG Bonus that was announced last year to share the fruits of the country’s development with Singaporeans.
Net Investment Returns Contribution (NIRC)
According to the information found on the MOF website, Net Investment Returns Contribution (NIRC) comprises:
- Up to 50% of the Net Investment Returns (NIR) on the net assets invested by GIC, MAS and Temasek; and,
- Up to 50% of the Net Investment Income (NII) derived from past reserves from the remaining assets.
The annual NIRC amount is published in each year’s Government Budget.
In other words, we spend 50 per cent of the estimated gains from investment, and put the remaining 50 per cent back into the reserves to preserve its growth for future use.
Prior to FY2009, there was only the NII component. The NIR component was introduced in FY2009 with the implementation of the NIR framework, which allows the Government to spend up to 50% of the expected long-term real returns (including capital gains) from the net assets invested by our investment entities.
Did you know that if not for NIRC, we would have been running into budget deficit? Our revenue is not enough to fund our expenditure, and it is only with the contribution from our NIRC that we are able to do all that we need to do. Currently, NIRC is the biggest contributor to our revenue.
We have to thank the earlier generations of Singaporeans for making the money for the country, and also for the prudence of the past governments to save up enough so that we have enough to draw on.
Recent Budget Measures
The Government’s focus, in recent years, has been in skilling and reskilling so that Singaporeans can take on good jobs and seize opportunities amid rapid technological change. Different programmes have been pushed out to help the different worker pockets in our population.
For youths and young professionals
- Earn and Learn Programme
- Global Ready Talent Programme
For mid-career workers through reskilling and career transitions
- Professional Conversion Programmes
- Career Trial Programme
- SkillsFuture Mid-Career Enhanced Subsidy
For corporate leaders to acquire the skills needed to transform their businesses and industries
- SkillsFuture Leadership Development Initiative
- ASEAN Leadership Programme
Families have always been an important theme in all of Singapore’s policies. In recent years, we have seen the following measures that aim to make Singapore a great place for families.
Help for Singaporeans when they start a family and buy their first home:
- Increased income ceiling to from $12,000 to $14,000
- Consolidated housing grants into the Enhanced Housing Grant (EHG)
- First-timer families can now receive higher grants of up to $160,000
Help for Singaporeans with young children and elderly parents:
- Baby Bonus and MediSave Grant for newborns to help with expenses for a newborn
- Parent leave schemes for parents to spend more time with their infants and toddlers
- Enhanced Proximity Housing Grant for those buying a resale flat to live with/near parents
- Concessionary foreign domestic worker levy if additional help is needed at home
- Home Caregiving Grant to defray caregiving expenses
For Children and Youths
To ensure that every young Singaporean gets a good start in life, these measures have been put in place:
- More pre-school places, with better quality and more affordable fees, to build sound foundations for life
- More families enjoy higher preschool and childcare subsidies from Jan 2020
- 80% of preschoolers in Government-supported preschools by around 2025
- Subsidised education from primary to secondary to tertiary, catering to all students’ needs
- Enhanced MOE Financial Assistance for lower- and middle-income families, increased annual Edusave account contributions for enrichment activities
- Enhanced Government bursaries for tertiary education
- Uplifting Pupils in Life and Inspiring Families Taskforce (UPLIFT) for disadvantaged students
- KidSTART pilot started in 2016, to give more support to children from lower -income and vulnerable families •
- From 2020 to 2022, KidSTART will be expanded to reach another 5,000 children
For the Silver Generation
Let’s face it, we have an ageing population and it’s a huge challenge in many ways. We will need to help Singaporeans
age gracefully, help them to work longer and supplement their retirement savings. So in terms of work for the silver generation, these have been put in place:
- Special Employment Credit to support employment of older workers
- By 2030, raise the retirement and re-employment ages to 65 and 70 respectively
- First-step increase on 1 July 2022:
- Retirement age to 63 and re-employment age to 68
- Increase in CPF contributions for older workers gradually over the next 10 years
There is also a $3 billion Action Plan for Successful Ageing, aimed to fulfill multiple goals:
- Opportunities for all ages, by promoting lifelong learning, employability, and active ageing
- A kampong for all ages, by increasing social cohesion and bonding across ages
- A city for all ages, by making our living environment more senior-friendly
- Nationwide expansion of the Community Networks for Seniors to support active ageing, and provide befriending and care to seniors
As people live longer, it is also important to look at retirement adequacy in the financial sense. In order that the older generation have better peace of mind in their golden years, the following measures have been introduced or enhanced:
- CPF LIFE provides a monthly stream of income for life
- HDB home ownership gives the majority a stake in the nation’s development, and an asset that can be monetised for retirement: Lease Buyback Scheme, Silver Housing Bonus, HDB 2-Room Flexi Scheme
- Silver Support Scheme for those with low incomes through life and with little or no family support
Healthwise, other than trying to ensure that Singaporeans stay as healthy as they can, we will still need to relook our entire healthcare system to ensure that we are able to provide the necessary support, treatment and care and at affordable prices too. The government has come out and said this more than a few times: Singaporeans can be assured that no one will
be denied medical care because they cannot afford it.
MOF has shared that these are either in planning or have been implemented:
- Building more polyclinics, hospitals and aged care services, and enhanced healthcare subsidies to keep services
- MediShield Life and the new CareShield Life protect us against life’s uncertainties
- MediSave top-ups for Singaporeans aged 50 and above
Other than the Pioneer Generation benefits earlier years ago, this term of Government also saw the announcement of the Merdeka Generation (born between 1 January 1950 and 31 December 1959), to thank for their contributions to nation-building.
- One-off $100 Passion Silver Card Top-Up
- $200 annual MediSave Top-Ups from 2019 to 2023
- More subsidies at 3 healthcare touchpoints at polyclinics, Public Specialist Outpatient Clinics, and CHAS clinics
- $4,000 participation incentive to join CareShield Life
- Additional 5% subsidy for MediShield Life Premiums
Last year saw Singapore celebrating our Bicentennial year, and there were also one-off announcements to support individuals who need more help, including youth, working adults and older Singaporeans:
- $200 million Bicentennial Community Fund to encourage giving back
- $1.1 billion Bicentennial Bonus
- For the lower-income: GST Voucher – Cash (Bicentennial Payment) and Workfare Bicentennial Bonus
- For parents with school-going children: Top-up to Edusave account and Post-Secondary Education Account (PSEA)
- For older Singaporeans: CPF Top-ups to those with lower CPF balances
- For workers: Personal Income Tax rebate for Year of Assessment 2019
Other than all of these, there were also schemes to help businesses, as only when businesses do well, then Singaporeans will have better opportunities in their work-lives and opportunities.
Budget 2020, against the backdrop of the current fiscal landscape and challenges
In almost every country, the situation is quite similar – in that we all need and want everything, but we all also don’t want to pay a high price for it. But it doesn’t work that way, does it?
Every programme, scheme, policy implemented will have a cost to it, so how does a country continue to find revenue to fund the ever-increasing needs and demands of different groups in our country? Other than these, the government of the day also needs to consider investing in infrastructure, in defence and security, etc etc etc.
In the coming year or in fact, years, the key drivers that will affect our country’s performance and also spending include:
- Demographic Change
- Shift in global economic weight towards Asia
- Technological disruption
- Heightened Security Threats
These will, in term, lead to significant spending in these areas:
- Health and Aged Care (challenges of an ageing population)
- Social Security (to ensure social mobility and that inequality issue doesn’t tear the country apart)
- Education & Skills (Lifelong learning included so that the population can cope with the ever-changing digital world)
- Hub Infrastructure (ultra-important to Singapore as connectivity is one of our critical success factors)
- Liveable City (so that Singapore remains an attractive place to live in for Singaporeans and for foreign talents that we need)
- Security (we are so small and vulnerable, and surrounded by not-so-friendly neighbours, need I say more? And oh, cybersecurity and psychological operations are things to look out for too.)
And for 2020, we have one unexpected challenge that has just erupted.
Yes, COVID-2019. Prime Minister Lee Hsien Loong has also said that the intense outbreak will definitely impact the economy for a few quarters.
For the coming Budget, I think we can expect that it will still be something that shows we spend within our means, as we need to ensure sustainable use of our reserves, so that our future generations can also benefit from NIRC.
But I think we can expect a slew of measures to help businesses and individuals to ride over this rough patch of a virus as well.
Meanwhile, I quote PM’s words from a Facebook post,
Do not let fear and paranoia overwhelm our better selves. We can overcome this current challenge by keeping calm, staying united and supporting one another.
(Featured image via)