Budget 2018 - What’s New and What’s Not
Last week, Finance Minister Heng Swee Kiat delivered Budget 2018 in Parliament. As a finance geek and fellow Singaporean, I am interested in how Budget 2018 will affect me as an individual, and us as a country in the coming decade. Many have lauded Budget 2018 as a forward-looking, long-term budget that plans for the increasing expenditures for 2020 and beyond.
In the last few days, various politicians have crossed swords over the proposed GST hike from 7% to 9% projected to kick in by 2020.
Listening to the parliamentary debates, I think there is a general consensus that an increase in spending is inevitable - in education, in healthcare, social spending, etc. The disagreement lies in how these expenditures should be funded.
Like you, I do not know whether raising GST is the best approach to tackle this teething issue of rising costs. I am sure though that our Government has thought through and considered multiple alternatives before proposing the GST hike in Budget 2018, and I was hoping that they could share more with everyone alternative options to increase revenue in greater detail, so that we can have a more open and fruitful discussion in our parliamentary debates.
Aside from the GST debate, let us take a closer look at what’s stayed the same and what’s changed for Budget 2018?
Unchanging Trend: Uptrend in Social Spending
Like in previous years, the ageing population and promoting social inclusiveness is one of the major themes in this year’s budget. Singapore like many other developed countries is facing an aging population. Based on UN 2017 World Population Aging report, in the near future, about 1 in 4 of our population will be above 65 years old. So the burden of supporting an ageing society is inevitably going to fall on the shoulders of a shrinking workforce. I think it is unavoidable that the increase in healthcare and social spending will continue over the next decade.
Same Idea, Different Name: Promoting innovation among businesses
In previous years, we used to have the Productivity Innovation Credit (PIC) scheme that enables companies to use tax or cash incentives to adopt technology to raise productivity. The PIC scheme has expired this year, and will be replaced by the Productivity Solutions Grant (PSG) which provides funding for up to 70% of qualifying costs for SMEs seeking to adopt off-the-shelf technologies with defined scope.
For larger companies, they can look into the new Enterprise Development Grant (EDG) to innovate and internationalize. The EDG will be run by Enterprise Singapore, a new agency formed from the merger of Spring and IE Singapore.
Like in previous years, the Government is very generous with productivity grants to encourage companies to innovate and internationalize to stay competitive in Singapore. While the general idea behind these grants has not changed, details of the grants (for example, what constitutes qualifying costs that can be funded) are going to be tweaked and more clearly defined as compared to previous grants.
What’s New: Big Moves in Economic Spending
As for economic spending, the Government realizes that Singapore needs to make big moves to stay competitive. Minister of National Development Mr Lawrence Wong says that “Singapore has to navigate an uncertain global environment and the threat of other countries bypassing the Republic as a regional hub”.
For example, other countries are building new ports and creating new shipping routes. With the intensifying competition, Singapore is now placing big bets on billion-dollar projects – a mega port in Tuas, a fifth airport terminal in Changi, a high-speed rail between Jurong and Kuala Lumpur.
And that is why our Finance Minister, Mr Heng Swee Kiat, shares candidly in an interview that “Jack Neo’s lovely movie Money Not Enough was a phrase that I used in many of my meetings”. And that the raise of GST from 7% to 9% is highly unpopular, but necessary to fund these projects. Even with the increase, the money might still not be enough and the Ministry of Finance is considering even allowing statutory boards to borrow to fund these big infrastructure projects. But like previous years, the Government will help lower-income households to cope with the increase through its GST voucher scheme.
Summary
On economic spending, I definitely agree with the Government that Singapore has to change to stay competitive as a regional hub. Funding these big projects is one thing, but I think the bigger question is whether these billion-dollar projects are going to be enough to keep Singapore competitive in the next 50 years.
At the end of the day, I think what really matters is whether these billion-dollar projects can bring in more foreign investments and good jobs for Singaporeans. Although I’m very supportive of these changes in our budget, I think we need more ‘out-of-the-box’ ideas from the Government to take us forward in the next decade.