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Madam Speaker, I would first like to thank Members of the House for a very rich debate
Members agree, everyone agrees with the need for us to transform our
economy, and everyone agrees that we need to build a fair and
equitable society. We are taking important steps forward.
The Pioneer Generation Package was spoken about by virtually every
member of the House. You all lent strong support for the
Government's plans to honour the Pioneer Generation. We heard
many heart-warming stories that brought the spirit of our pioneers vividly
to life. There were also many other, more specific
issues which are going to be taken up in the Committee of Supply:
specific issues to do with protection of low wage workers, Mr
Zainal Sapari for instance; issues to do with benefits for the self-employed, Mr Ang Hin
Kee; some issues to do with the specifics about particular sectors
-- prefabrication in the construction industry, for instance, Mr.
Teo Ho Pin; issues to do with arts and heritage, Ms Janice Koh; issues
to do with the preschool sector; issues to do with work-life balance; green vehicle schemes and so
on. So many specific issues have come up which I am sure will be
taken up in the COS debate. What I would like to do is to concentrate
on the three main themes that have come up in the debate,
and which are also, in fact, three main themes in the budget.
First, how we can move towards a higher productivity, higher income economy and society
-- one with a productive and vibrant SME sector
and one with good jobs and good futures for
all Singaporeans. Second, how we are honouring our Pioneer Generation,
and beyond our Pioneer Generation, how we are
building a system of quality and affordable healthcare for all
Singaporeans. And third, importantly, I want to talk about how we will
have to balance our Budget for the future as our infrastructural
and social needs go up over time.
So three important themes -- one is often thought
of as economic, although at the heart it is also social; the second
has to do with social spending, particularly healthcare; and the
third has to do with how we balance our budget over the long-term.
Before we go into the first main theme
-- the economic challenge of restructuring -- let me first deal with the
issue of costs, which many MPs have raised, and rightly so. First, the issue
of cost of living. Second, the issue of business costs, particularly
for our SME sector. I will speak about each of these two aspects of costs
in turn, costs of living and business costs.
First, cost of living. Some members, I think Mr Nicholas Fang and Assoc Prof Eugene Tan,
mentioned the latest EIU report, which ranks Singapore the
most expensive city in the world, and I know this is floating around and attracting a lot of attention.
I do not particularly want to focus
on this report in its own right, but to explain a couple of very basic
things about the reports that will come out from time to time, whether
it is the EIU or Mercer, which
are really aimed at measuring expatriate cost of living in different
parts of the world. They are useful tools for HR managers and
corporate HQs as they decide where to place their people. And even when
they are placing them in a particular place, how
to compensate them adequately based on the cost of living. It is a useful tool.
But these are basically aimed at comparing
cost of living for expatriates in different cities or different countries in the world.
And what this means, therefore, is two things make an important difference in these surveys
and two things in these surveys are quite different from factors that affect the cost of living for locals, for Singaporeans. Quite different.
First, currency. An important reason why, in fact, we have become
an expensive place for expatriates is the Singapore dollar has strengthened.
And indeed, the EIU report points this out.
Singapore dollar has strengthened over the years, particularly in
recent years and it means that it is a more expensive place for
someone who is paid in a foreign currency, or for a corporate HQ abroad whose earnings are in foreign currency.
As the Singapore dollar strengthens, it becomes more expensive. But the reverse is true for Singaporeans.
The stronger Singapore dollar improves purchasing power both in Singapore because imported goods become cheaper
(and for us, food and everyday items are all largely imported).
Secondly, it improves purchasing power even when Singaporeans go abroad,
and you can see that from the latest travel fair last week.
So a stronger Singapore dollar, not sudden sharp appreciation, but steady appreciation, has been
good for Singaporeans, but it does mean that it becomes a more expensive place for expatriates.
Second important difference has to do with what goods and services are being measured as part of the
cost of living basket in these surveys.
And the EIU consumption basket, I wouldn't knock it, it is inevitably subjective.
But they are trying to put together a basket of what they think are expatriate costs.
Perhaps a little on the high end, but expatriate cost.
And it is quite different from the goods and services consumed by ordinary Singaporeans, which our
Consumer Price Index (CPI) basket, for instance, measures.
So for example, the EIU basket includes imported cheese, filet mignon.
I am not sure which restaurant that is, but filet mignon.
Burberry-type raincoats, not very common I think, but Burberry-type raincoats.
And I, of course, know very little about this.
Four best seats in a theatre; three-course dinners at high-end restaurants for four people.
These are items in the cost-of-living basket.
And I do not think they are irrelevant to an expatriate cost of living basket, but it is quite
different from a cost of living basket for Singaporeans.
And indeed for some of these items, Singapore is expensive.
Transport is also part of the cost of living basket for these expatriate indices.
But no public transport, it is just cars and taxis.
And our public transport is, as you know, significantly cheaper than most other cities -- New York, London and Tokyo.
We are about comparable to Hong Kong but significantly cheaper than most other cities.
Even our taxi fares are cheaper. But our cars are expensive because we are small.
So for an expatriate, if you want to own a car, it is expensive in Singapore.
But if you are talking about an average Singaporean taking public transport,it is in fact much cheaper than many other cities.
So I highlight this just to point out the differences.
It is not that these surveys are wrong, it is not that they are misguided.
They are measuring something quite different from the
cost of living for an ordinary local in different cities around the world.
Now, there are in fact unfortunately not very many
surveys that truly try to measure the cost of living for ordinary residents.
But we have a good study that was done by the Asian Competitiveness Institute
in 2012, which compared purchasing power in different cities.
And they specifically distinguished the cost of living for expatriates
and the cost of living for a typical resident household.
And they looked at all sources of data, including the EIU studies, World Bank's International Comparisons Programme,
and they constructed consumption baskets for expatriates and for ordinary residents.
And they found that Singapore was indeed quite expensive for expatriates
compared to other cities. At the time of their study,
Singapore was ranked 5th out of a 109 cities in the index for expatriates.
But costs for Singapore residents were very different.
We were ranked 61st out of the 109 cities when we compared the
cost of living for residents, quite similar to other
Asian cities like Hong Kong, which was ranked 58th, or Seoul which was ranked 60th.
So that is the basic difference.
From time to time, these surveys will come up, and I know some people will give it a spin,
but it is measuring something quite different from the cost of living for our residents.
What is important for us is that Singaporeans,
and particularly low- and middle-income Singaporeans, have incomes that grow faster
than the cost of living. That is what is important, and in fact that is what we have fortunately been able to achieve.
In the last five years alone, if you take our middle-income households, or median households,
their incomes have gone up faster than the CPI index in the cost of living.
In fact, it has gone up by about 10% in real terms. Similar rate of growth for
the low-income household, about 10% in real terms.
And indeed, for the low-income households, if you exclude from the CPI index
imputed rentals for those who are in fact owning their homes and they do not actually have to pay rentals,
if we exclude that factor, then actually the increase in real incomes
of the 20th percentile was 19% over the last five years.
So significant improvement, and we keep our eyes focused on that.
Keep our eyes focused on how the average
Singaporean and the low-income Singaporean is doing with regard
in their incomes, relative to the cost of living.
Let me move on now to the issue of business costs and competitiveness.
And expatriate costs are part of that equation, we should keep our eye on expatriate costs as well
because it is part of overall business costs equation. But the key challenge we face --
Mr Inderjit Singh, Mr Dhinakaran, Mr Teo Siong Seng, Mr Ang Wei Neng just a short while ago --
several MPs spoke about this. Ms Jessica Tan herself highlighted this as a challenge in her opening speech.
There is a challenge of business costs.
It has gone up. And it has gone up, fundamentally, because
we have not been doing poorly as an economy. Wages have therefore gone up.
Rentals have gone up because the demand for space has been very strong.
Demand for industrial space, demand for retail space, demand for office space.
Demand has been very strong for businesses. And because supply was short of demand, rentals have gone up.
Wages will go up as long as there is a tight labour market and there is a demand for labor.
So demand in our economy is strong, demand for resources, and especially labour and space.
And that is why costs have been picking up, fundamentally.
The wrong strategy will be to weaken our economy, be a less vibrant economy.
And you can think of many cities not so far from where we are, which are less vibrant.
And the cost of living is significantly lower because you do not have wage pressures and rentals are cheap.
Cost of living is lower, but that's not what our business community wants, and that's not what Singaporeans want.
So we have to keep this as a vibrant place, keep a check on costs to make sure they don't rise perisistently faster than business
profits or wages. That is our strategy.
But except that we are not going to be a cheap location for business.
Now how do we address it?
If I can use a contrast that was in Mr Yeo Guat Kwang's speech between two countries.
A very interesting contrast, because Guat Kwang spoke about the difference between Hong Kong and Japan.
In Hong Kong, retail rentals have gone up very sharply.
In fact, the cost of land and the cost of all properties, including homes, have gone up very, very sharply.
So prime retail rentals in Hong Kong today, are more than seven times higher than in Singapore. Very high.
Their cycles are sharper than us, and
and they have on a trimmed basis, gone up much more than we have in terms of the cost of space.
And in Hong Kong, they leave it to the market to restructure. Price goes up, cost go up, businesses have to restructure.
They leave things much more to the market than we do, in fact in Hong Kong.
And the consequences businesses have in restructuring, in the example which Mr Yeo Guat Kwang gave
was about how because retail rents are so high, businesses have shifted away from
traditional clientele and traditional services towards catering to the high-end Chinese,
and many Hong Kong residents are not happy about that.
But that has been business adjustment.
And he contrasted it to Japan, where you have rental protection, still quite extensive even in Tokyo. Very extensive rental protection.
And that is why you have lots of little very charming ramen shops, craft shops, momenpop shops all surviving.
But that is a strategy quite different from Hong Kong in another regard. It's not just rents are cheap, but wages are stagnant,
and opportunities for the young are very limited, as we all know.
Japan has stagnated.
So rents are cheap, government has intervened to keep it cheap, the laws are still in place, but things are stagnant.
So those are two quite different approaches, and I think we should avoid either extreme.
Don't just leave it to the market but neither can we fix rents and keep prices low, and expect the cost of living goes up at the same time.
It doesn't work like that anywhere in the world.
So what we have done is to try to mitigate the cycles.
And when you look at industrial land, you look at retail space, that's our approach.
And supply is catching up quickly. In the next three years, as I mentioned in the Budget Speech,
we have in the next three years just for multiple-user factory space, the amount of new supply
coming on stream in the next three years is going to be double
the demand that we saw in the last three years. Demand is not going to suddenly double,
but supply is going to double, so I expect that what
we are doing will have a moderating influence on rentals.
And indeed, in the last quarter, we have already seen industrial rentals fall by 1.4% in the fourth quarter of last year.
Likewise for shop space,
very substantial increase in supply that is going to be coming on to the market.
So that's our strategy. We don't have perfect foresight, but when we see the market heating up,
we take action to boost supply and find other ways to help businesses to mitigate costs.
And one of the ways is what Ms Jessica Tan, Dr Teo Ho Pin and some others spoke about,
which is to help companies to save costs through the sharing of services.
We are doing it through JTC's cluster industrial spaces like the Food Hub and Tuas Biomedical Park.
There will be more such cluster concepts, which will
enable companies and especially SMEs to share services.
And this means reducing upfront investment costs that otherwise they will have to do on their own.
It also means lower maintenance costs over time.
Ms Penny Low spoke about having
more clusters for startups, like Block 71, she wanted more of those and that is also a good idea.
Mr Zaqy Mohamad spoke about retail malls, helping retail SMEs to share services.
So these are useful ways in which we
can mitigate the rise in costs and help companies to have a
more efficient model as well -- a more efficient way of
using their manpower and getting more value out of the space they occupy.
Transport again in a important business cost issue.
That's why we had not just road tax rebates last year, but we also allowed
for a further five-year Certificate of Entitlement (COE) extension for
vehicles who had already had their COE renewed.
It is really to help our smaller businesses. This year, we enhanced
the Early Turnover Scheme to lower replacement costs for old commercial disesl vehicles.
So those are important ways in which we can mitigate the cycle,
mitigate business cost increases, and we are open to any other suggestions,
any other practical and effective ways in which we can help.
But the fundamental solution, Mr Inderjit Singh had asked for a permanent solution.
The permanent solution to address rising business costs is to raise productivity.
That's the only permanent solution. We have got to upgrade our economy fundamentally.
Because our costs, as long as we remain vibrant as an economy,
our costs will basically approach that of an advanced country.
A little higher in some areas, a little lower in other areas, but basically
we will have advanced countries' cost.
And the only way for our businesses to survive in that environment
is to have advanced country capabilities: in innovation, in the
commercialisation of R&D, in managerial skills, in investing
in employees so that they have deep skills. That's the only way.
And we summarise it with a concept or measure called
productivity, but it's actually about those things. It's about skills, workplace culture, automation, and innovation.
That's the only fundamental solution. We have got to raise productivity.
Which brings me now to the first main theme of the Budget as we
look to the future -- how can we achieve this higher productivity, higher income economy.
First, I think it is useful to take a step back.
It is not as if we are a failing economy when it comes to productivity.
It is useful to see where we have come from. I will show you a chart,
on the journey we have traversed over the last 30 years.
This is 1980. In 1980, this is the level of productivity
compared to the US. I am using the US here for simplicity as it is a
major advanced country and in many aspects, a leader in productivity.
If you take the US as 100, Singapore was basically
about 40% in 1980, 30 years ago.
So we were very much a developing country then, about 40% of the level of the US',
and well below most developed countries.
Fast forward 30 years, where are we now? We are now basically at about 2/3, in fact it should be 70% of the level of the US.
So quite a major shift in 30 years, from 40% of the US to 70% of the US.
We are almost at the level that UK is at now, and in fact we are, because of low service sector productivity in Japan,
overall we have the same level of productivity or slightly higher compared to Japan.
So it is not a bad achievement.
that Singapore has taken this journey. Our SMEs, our people, everyone has taken this journey, and
we have come a far way in 30 years.
There is a second challenge, however, as we go forward, that it is not just about productivity .
As Mr Yeo Guat Kwang again emphasised, it is about raising productivity while maintaining full employment,
because that too is extremely important. And one of the unique things about what we have been able to achieve,
is that we have been able to achieve a rising employment rate, giving everyone an opportunity to have a job.
In the last decade, in fact, if you look at Singapore. I will have to explain this chart, if you just focus on it one step at a time.
It looks at the employment rate, that's the horizontal axis. And in the vertical axis, it looks at the level of productivity.
And where we were 10 years ago, basically level of productivity, was one where we were about a little over 60% of the level of the US then.
But our employment rate was basically around 65%.
Since then, our employment rate has increased. If you look at Singapore last year, our employment rate has
increased significantly, It is not the highest in the world,
but it has caught up with some of the advanced countries.
It is a little lower than what UK was 10 years ago, but we have caught up in employment rate.
But it is a very important challenge, for us to be able to raise productivity while providing jobs and opportunities for all our citizens.
It is a much bigger challenge than raising productivity by shedding jobs, and that is in fact what has happened in many countries.
If you look for instance at the US, if you look at the US for the last 10 years,
in fact employment rate has come down significantly. Productivity has risen, but employment rate has come down significantly.
Same thing in the United Kingdom -- employment rate has come down, productivity has moved up a little bit.
And typically, when they talk about employment rate coming down, it is the lowest-skilled
that are the ones who are put out of the workforce.
And we found a way in which we can have an economy where everyone has a role to play.
The easy way to raise productivity is go through some shock treatment, shed firms, shed jobs,
but the ones who will suffer in our case are the lower-skilled and especially our older workers.
But we have taken a more inclusive approach, and we should retain this approach as we go forward,
which makes it a special challenge.
Do not do it the way that some countries have done --
take a segment of your workforce out, and you get higher productivity almost automatically.
You want to keep everyone in the workforce, but as Mr Lim Swee Say says, make every job better.
And that makes it a very difficult challenge, but one which we can achieve.
So I just want to highlight this fact, that it is about productivity in a full employment economy.
That's our particular challenge, and that is what we are set about.
How do we go about it? No one is satisfied by the rate of productivity growth in the last few years - it has been dismal, the last few years.
But how we do go about it?
What has the Government's approach been?
First, we have tightened foreign worker policy. Second, we have provided very substantial assistance for businesses to upgrade.
And that means principally, providing our SMEs with assistance,
because all our schemes -- whether it is the Productivity and Innovation Credit (PIC) or the Transition Support Package (TSP)
-- all our schemes have been skewed towards SMEs, because we know they are the ones who need the most help.
The large firms are able to adapt to the market much more easily.
They've got the resources upfront to invest, it pays back over time.
It is the SMEs who need more help, so most our schemes are tailored to the SMEs.
And if you look at the TSP, this is the second year, it is a three-year package ($7.3 billion),
about 80% of that goes to the SMEs. About $5.8 billion, it's very substantial assistance.
And as I explained at the Budget speech, it's not a lather equally across the whole system.
Not everyone is getting the same, but some SMEs are geting a lot more than others
because they are taking the initiative to put their own money in the game - to invest, to innovate,
to upgrade the skills of their people. But it is substantial assistance that we are providing.
So that's what we are doing - tightening labour market policy, providing
strong support for businesses to upgrade, but productivity cannot just be summoned up.
You can tighten the labour market, you can provide assistance, but you can't summon up productivity. That requires entrepreneurial energy,
and business leadership. That requires everyone striving to do a better job. That's how productivity goes up.
On the Government's part, every time we see an innovation,
we see someone who is an early adopter doing something new, we will try to spread that innovation, help other firms adopt it
in the same sector, try and scale up improvements. That is our approach.
So this is a fairly fundamental point. The Government can tighten labour supply, give companies an incentive to upgrade,
it can provide strong support, but really businesses have to respond, management has to respond.
And the Government will then find every way to spread innovation and spread improvements
throughout that sector and throughout the economy. That is our approach.
And we have to let market forces work, which is the third dimension about it.
It's about individual firms upgrading, it's about Government supporting, but market forces have to work.
And market forces will reward those who are upgrading,
those that are more efficient and more innovative. And the market needs time.
Companies do not give up their business simply because they are doing poorly in one year.
It takes time for the market to sort itself out,
for the better businesses to move ahead at the expense of the rest.
How we pace of our restructuring journey is therefore quite important.
There was two views in this Debate on this.
In fact, Mrs Lina Chiam had wanted us to accelerate the shake-out of firms, and
accelerate the consolidation of small firms. That is one view.
Mr Inderjit Singh, Mr R Dhinakaran and several others felt that
we had been moving too quickly in restructuring, that we needed to pause a little more, which is another view.
And we have taken the middle path.
First, avoid shock therapy. Avoid shock therapy because we know actually it takes time for market forces to work.
And if we go with a shock therapy, good firms can be shaken out, firms with a good future can be shaken out,
and good jobs too can be shaken out. So we have avoided shock therapy,
but we've got to have a steady clip in our restructuring effort, be very clear about direction
and keep a steady clip, so that there is pressure on firms to upgrade.
All the changes that we've done have been phased in. They are not sudden.
The most significant are the changes in the Dependency Ratio Ceilings (DRCs), sector by sector,
but they were all announced two years in advance,
which is why this year and next year, you will see the final effect of the DRC cuts in the Services
sector that were announced last year. We phase in all our measures.
Second, we try to avoid a cookie cutter
approach where there is only one formula for all firms and one scheme for all firms.
Here, again, there are two contrasting views as to how we should go about government assistance.
On the one hand, we have some views which have some merit. Ms Jessica Tan, Er Dr Lee Bee Wah and others spoke about the need
to make it easier for firms to qualify and take advantage of
our schemes; or as Er Dr Lee Bee Wah said, to provide the assistance
Another view which Assoc Prof Eugene Tan and Mrs Lina Chiam and others expressed was a more cautious one,
which is that we must require firms to demonstrate productivity
improvements first, show proof before you get assistance. Mandate certain improvements as the requirement
before you get assistance. These are both meaningful views.
Through the range of our schemes, we in fact have: First, a broad base of support that is easy to
qualify for; Secondly, a second level of support that is more
customised: where we work with the firms and we work for what we know are real
improvements in productivity within a space of time. We need both approaches, in fact.
It can't be only one approach of having companies show proof before they get assistance;
neither can it be an approach where the money is just being handed out liberally upfront, no questions asked.
Because then you get what's called 'deadweight funding' - we are just going to
fund what the companies would have done anyway without assistance. So we need both approaches,
and that is indeed our approach. The PIC, in fact, leans a little more towards the liberal approach.
It is not "no questions asked". Companies know that
they qualify as long as they meet the criteria.
But when it comes to the PIC cash scheme -- where
the money comes much earlier,
we have had to put a check into the system, which
is the "three employee rule". It is only for the PIC cash scheme,
not for the PIC scheme at large, which is the major scheme. But for the PIC cash scheme, we did have to put in that requirement
because it is easy to abuse. Those are some of the practical challenges
we face when devising government support. How fast do we move?
Second, do we have a system which allows liberal use of funds with no questions asked?
Or do we place requirements that have to met before assistance is provided?
We try to find the right balance, and we will improve as we go along.
Let me now move on to this
next phase of restructuring. What are the priorities that have been expressed
in this debate, which I think has been a useful debate. First, we must transform our SMEs.
Second, we must transform jobs and develop every talent.
Third, we must transform our culture and our norms, at the workplace and in some regards, in our society.
In short, we have to transform our economy and our society if we succeed in this restructuring journey,
and achieve a high productivity and high income society. It is unrealistic to achieve this in a few years.
It is going to take some time, but we have to have a determined approach to the problems,
put resources into it and make sure we move at a continuing and steady clip.
A decade from now, if we move at this clip, we will be in a different place,
where firms will be able to survive with good
profit margins and workers will have higher incomes, and the reason why
you can achieve both higher incomes and good profit margins is productivity would have been transformed.
So the first priority is transforming our SMEs, and help them overcome the constraints of a tight labour market and
high business costs. They remain at the core of our economy,
as many MPs spoke about it. Ms Denise Phua, for instance, yesterday spoke about this.
We have to make sure that our traditional businesses remain
a unique part of Singapore society. As Mr Teo Siong Seng said,
there is no reason why traditional businesses, including our many
family-owned businesses, cannot be dynamic players in the new Singapore,
by applying new management concepts, by going for strategies that are seen amongst other firms, including the larger firms.
Our traditional businesses do have a role to play in the future Singapore economy.
And our SMEs have come a long way in the last ten years alone.
If you just look at two things, and I am just picking two things. If you look at broadband access, for instance.
10 years ago, 40% of SMEs had broadband access. Now it is 80%, and in
this year's Budget, we are going to give them high-speed broadband access.
Second, they are far more internationalised than they were before.
The Singapore Chinese Chamber of Commerce and Industry did a survey of SMEs. They found that 60% of those
surveyed were now venturing abroad.
Thirdly, many more Singapore brands are now known abroad.
It used to be SIA, Creative and Singtel. Now there are many other brands:
Hyflux, Ezra Holdings in the Offshore and Marine sector,
SC Auto in Manufacturing, Charles and Keith in the Retail sector,
Eu Yan Sang in Healthcare, and many other names that you can
think of, well-known in Asia especially.
So they (the SME sector) have made progress, but we have got to re-double
our efforts in this next decade. And I don't think it's just a matter
of government support, because frankly, the level of support we are providing is unmatched internationally.
Whatever aspect you can think of -- automation, technology,
R&D, design, training of employees -- we are providing very
substantial support. But we have got to give our SMEs time,
keep up the pace of restructuring, and every time we see innovations arising, try to spread those innovations.
One important approach is the the sector-wide approach,
which is an emphasis in this year's Budget and which we will take forward, going for sector-wide solutions.
And I will give you just one example, which is in the wholesale sector.
We are developing, in fact we have an e-procurement hub for SME wholesalers.
It has enabled about 200 SME wholesalers to transact electronically with
their large retailers, thereby improving inventory management.
Also, it provides a shared platform for accounting and business intelligence functions.
It saves them costs and manpower.
And the interesting thing is that this was a solution developed by an SME itself,
which IDA then went in to lend support for. Many other firms hopped onto this platform.
We want our SMEs to be a vibrant part
of the future Singapore economy, and we will provide as much support
as it takes to help them to get there.
The second focus is to transform jobs and to develop every talent, as Ms Jessica Tan had emphasised.
It involves every job -- as Mr Lim Swee Say said, every job has to be professionalised.
He cited the gardener in Japan,
the cleaner in Germany, and the waiter in the US. Every job has to be professionalised and can be.
It's not about preserving jobs the way they were in the past, but about making
every job better for the worker, and thereby also helping every
worker to contribute to our upgrading. That's one challenge.
We know what the existing jobs are, and how we have to make them better. But we also
have to prepare for jobs of the future, many of which do not exist
today, as several speakers pointed out, including Ms Irene Ng.
Many don't exist today.
The experts say that if you take people who are young today, those who are in our primary schools,
by the time they enter the workforce, computers will be a hundred
times cheaper, and a hundred times smarter on current trends.
it will mean a very different workplace, whether in services
or manufacturing. Every area of economic activity will be different,
because the digitalisation of the economy is proceeding
apace, in every major economy and every economy that is globalised. It's proceeding apace.
It transforms not just businesses, but it transforms jobs.
Several MPs spoke, including Ms Tan Su Shan, about the challenge this poses to middle-end jobs (middle-income, middle-skilled jobs).
You already see it in the United States. They call it job polarisation,
where the middle-end is disppearing and the top-end is growing, and the middle-end is shifting to the bottom-end.
Lots of jobs being created. You are seeing it in the United Kingdom.
We face that challenge here in future. So far, we have been able to have near full employment,
but this will be a challenge, as technology proceeds apace. And we have to prepare for that new world.
It will not be a jobless world, particularly for Singapore, a small
country with the world as its market. It will not be a jobless world. If we stay competitive,
if we get our fundamentals right, we can create jobs.
There will be many jobs that involve working with technology and
using technology to gain competitive advantage.
Jobs in engineering, system and product design, systems management,
people who can troubleshoot problems, solve complex problems.
Jobs in programming, data analysis, ICT.
And jobs in the creative industry, which Ms Janice Koh had spoken about.
There will also be many jobs that involve personalised service -- in
the hospitality industry, in healthcare, in social services, including education.
The social sector is going to be a major area of job
creation in the future. But no one knows for sure what jobs are
going to be around 20 or 30 years from now.
We know what the broad sectors are, we know that there will be jobs, but you can't say for sure exactly what jobs they will be.
And that is why several MPs have highlighted,
we have to also focus on developing obsolescence-proof skills, as Ms Irene Ng put it --
the skills that apply regardless of what jobs come. We know roughly
what they are, but we have to keep sensing the skills that are
in need in the market. Being inquisitive, thinking in original
ways, the habit of continuous learning. And very importantly,
the ability to interact with others and to respect everyone.
The soft skills, and this is something which MOE is focusing on, from the early years and all the way through the school system.
But secondly, very importantly, we also have to redefine education, and we are redefining education.
So that it's not simply a matter of what we do in schools and tertiary institutions and then you have a separate phase altogether,
which is what we do in the workplace.
It's not about two distinct phases of education and learning in a person's life,
where most education is over by the time you finish school, ITE, poly or university and you get your certificate,
and then you have a little bit of training after that as you go through working life.
It has to be a continuum, a continuum that involves regular refreshing of knowledge and skills throughout our lives.
That has to be the new concept of education. If you want to develop every talent,
and keep adapting to this new world including the new jobs that will come along, it has to be a continuum.
We have a world-class school system, we know that.
And our challenge is now to complement that world-class school system by having one of the best systems of lifelong learning,
as part of that continuum.
And we are willing to put significant resources into this. We are starting the whole CET framework.
We are developing a whole new CET masterplan, which we will announce later in the year.
It will require resources, and these will be resources well spent.
But I want to emphasise two points. First, that quite apart from
Government putting in resources, the business community plays a very important role.
It will play a role in a somewhat different way from what has been the case before.
It's not just about investing in your own employees,
and if you're worried about whether they'll still be with you 3 or 4 years from now, you don't invest as much.
Every business has to invest in its employees.
As the economists put it, you have to invest in the commons.
Every business has to invest in its employees,
and if everyone does so, we raise the human capital of Singapore society.
Everyone moves up and everyone benefits. Because in a small society like Singapore,
what goes around comes around. You invest in your employees, some may not be with you 5 or 10 years from now.
But everyone has been raised to a different level and is constantly moving up.
That is really what we have to see.
Everyone has to be invested in, every Singaporean has to be invested in, with constant skills upgrading
and everyone will benefit, including our businesses.
And we will help, the Government will help.
We will also help Singaporeans themselves to take charge of their learning
and their development. This is a very important strategy going
forward as well, strengthen career guidance,
strengthen knowledge of careers from early on.
There were some suggestions in the Debate about starting in secondary
school, in fact MOE is starting this (internships and attachments) even when the boys and girls are in secondary school.
And especially at the tertiary stage, which is the work of the ASPIRE Committee.
Developing meaningful work engagements when students are in tertiary education, and in particular, in our ITEs and polytechnics.
But beyond the internships and the early attachments,
it really has to be a continuous process, where we have to conceive of lifelong learning as one that
involve regular infusions of education and learning at different
times in our career. We have to think ahead about the challenge, put the resources
and plan a whole new framework for CET that enables us to do this.
There are examples. MOE, for instance, started a decade ago with
a system where every teacher and principal, after a period of
years, can take time off to learn. Some go on work attachments, some go
abroad, some do something in another field of education before coming back
(constant infusion of skills and knowledge).
There are many possibilities and we'll have to study this.
It will require resources, but this will be resources well spent.
We have to redefine education, and invest in this next lap in education,
that has to do with complementing a world-class school system with a world-class system of lifelong learning.
Third challenge: Transforming culture and social norms.
Many MPs spoke passionately about this, Ms Foo Mee Har,
Ms Penny Low, Mr Patrick Tay spoke about this.
And I don't want to cover the same ground, which I have stated in the Budget speech
and which MPs have very eloquently and thoughtfully spoken about.
It's a softer area, less tangible, but we all know it underpins everything else we want to do.
If we want to achieve the first two objectives -- of transforming our SME sector
and transforming jobs -- we also have to transform the workplace
culture and our social culture -- we know that.
The NPCEC, or the National Productivity and Continuing
Education Council, will give this great attention in the next few years.
It is something that is going to take time, but we are going
to place special emphasis on this, not just the hard skills and
technologies involved in upgrading, but helping companies
upgrade management practices and helping them to reshape the
workplace culture with the employees. This requires much more emphasis, and we will be working together
with companies and working with everyone to get
ground-up ideas as to how best we can do this and support this.
So it is a very important priority as we go forward.
I don't want to go through the specifics again, it has been very well discussed.
But I just want to highlight a point which Dr Lam Pin Min, Mr David Ong and Mr Ang Wei Neng a short while ago emphasised,
which is that one dimension of this which we have to think very hard about, is the way in which we include older workers
in the workplace and in our economy. And the reason why
companies have to do this is not just because of a tight labour market and
they have no choice but to employ older workers.
And it is not just because we are trying to help older workers build up
retirement savings, and therefore we want them to work for longer.
Those are the economic and financial reasons.
It's also because, as Mr David Ong says, it's ultimately about self-worth, dignity
and productive ageing. It's a social objective. When we think about this issue therefore,
it's not just about the financial strategies.
It's really about changing the way we think about every Singaporean -- maximising
the worth of our older workers, finding ways in which they
can add value as part of the team. And this involves transforming
mindsets, which is why I wanted to emphasise this particular
point that came up I think very usefully in the debate.
And the government will play its role to support this in every way we can.
We've got the Special Employment Credit. The public sector is playing its role.
For instance, MOE again, if I just use that example, is drawing on many retired teachers and educators,
involving them in a very meaningful way as we upgrade our
education system. But the business community has to treat this
as a strategic priority and responsibility, because we can only
create an inclusive society in the true sense, if as Mr Yeo Guat Kwang says,
we give everyone a chance to have a job and a meaningful opportunity to contribute.
Next aspect of social norms that
I just want to mention briefly is the importance of moving to a system
where self-service becomes the default option,
and something which customers even prefer. If you look at
what's happened in the Finance industry, for instance, it's quite interesting.
We now treat ATMs as a default, ATMs and internet banking are in fact the default option.
Not long ago, everyone wanted to go to a bank branch, speak to the
officer across the counter, see the passbook being updated in front
of your eyes and make sure it is updated. How many people still do that?
Some of our older folks still want to do it, but for
most Singaporeans, the ATM is the default option now. And for many in fact, internet banking is the default option.
And we are going to go further, because
in June this year, we will be introducing what is called the
FAST System -- the Fast and Secure Electronic Funds Transfer -- which
allows consumers and businesses to use electronic devices to
transfer funds between banks almost immediately.
Today, it takes two or three days to transfer funds between banks. It will be almost immediate.
These are the changes that we have to make in every industry - make self-service the default.
I give you another example -- Real Estate. In Australia, the
majority of real estate transactions are exclusive agency
arrangements. And because they are exclusive, it is a sole agent system,
the agents are happy to put all the information about the
property online or in newspaper ads. They leverage on ICT so when
you in fact go and look at a house or property, the prospective buyers can look at the floor plans,
look at the different rooms, take a virtual tour of the entire property through online property ads.
As a result, basically, the prospective buyers do a lot of self-service
before contacting the agent. This is another example I'm giving,
but it applies in many other industries. In every industry, we can think of
how self-service can, in fact, provide good service but it also saves on
manpower and takes us to a new and higher level.
So these three priorities go together -
transforming our enterprises, especially our SMEs; transforming
our jobs and developing every talent; and transforming our culture.
We will not succeed unless we do all three.
Let me move on now to the issue of social spending and especially finding the right balance in our social spending.
I will start with the Pioneer Generation Package, which as mentioned earlier,
there has been very strong support for, uniformly in the House.
Strong support for the fact that it's focused on healthcare needs; strong support for the fact that it is being given to all
pioneers regardless of income; and strong support for the fact that we are setting aside fully now
the funding required for the Package, for the entire life of the Package, and that it is fortunate that we have
the means to do so because of our prudent fiscal policies.
I think those were three features of the Pioneer
Generation Package which were very important defining features, and which have received strong support in the House.
Some important questions that were raised about the implementation of the Package.
The first issue has to do with when the
Package will be implemented, how quickly are we going to implement this Package. Dr Teo Ho Pin, in particular,
had asked whether we can bring forward the Community Health Assist Scheme (CHAS) benefits,
the ability for the Pioneer Generation to benefit from the extra subsidies in our GPs. We, in fact, studied
this very carefully and we have decided
to bring forward the Pioneer Generation CHAS benefits from
January 2015 to September this year so that it will come into
place at the same time as the enhanced subsidies in our Specialist Outpatient Clinics
so that across the outpatient sector (polyclinics, specialist outpatient clinics and the GPs),
from September this year, the Pioneer Generation
will be able to get their enhanced subsidies.
And before September, every member of the
Pioneer Generation will get a Pioneer Generation card, which can be
used at the GPs, dental clinics, the SOCs and the polyclinics.
The card will be mailed to them by September.
Before September, however, we will make the the first round of MediSave
top-ups for the Pioneer Generation. We will do this in early July.
And this means that although MediShield Life is going to be implemented at the
end of next year (end of 2015), we have two years of Medisave top-ups that the Pioneer Generation is going to enjoy,
that can help them to pay for a significant part of their current MediShield premiums,
two years' worth of assistance to pay for their MediShield premiums using the Medisave top-ups.
Ms Sylvia Lim had asked whether the MediShield Life premium
subsidies for our Pioneer Generation will cover not just MediShield
Life but the Medisave-approved private plans. The answer is yes.
The Medisave-approved plans are Integrated Shield Plans and
they include MediShield as a basic component. In future, the plans
will include MediShield Life as a basic component.
So those on Integrated Shield Plans will receive the same dollar amount of
subsidies as those on MediShield Life.
Next, the whole issue of outreach, which many MPs spoke about.
This is a massive exercise, it's 450,000 Singaporeans.
It is a task that involves IT systems, many agencies
and many points of contact, and we want to do this as well as we can.
The first thing that we have to assure our Pioneers
(members of the Pioneer Generation) is that the benefits will
be provided automatically. The pioneers do not need to
worry, even if they are unsure of their exact benefits. It is going
to be provided automatically. The Pioneer Generation cards
will enable them to easily identify themselves at the clinics
to get additional subsidies. Even if they forget to bring their
card, it is there in the computer system.
They will get their Medisave accounts automatically topped up.
They do not need to have been CPF members, having worked earlier and had CPF accounts. They do not need to be CPF members.
As long as they have signed up for our Government
schemes in the past, which almost all have --
GST Vouchers and Growth Dividends - the CPF would have opened a
Medisave account for them. In fact, over 430,000 of our Pioneer
Generation already have Medisave accounts because of these schemes.
I think the bottom line is as Ms Irene Ng had put it, "don't worry".
Whenever the Pioneer Generation express some anxiety as to whether they are going
to get benefits, tell them don't worry, you will get it automatically.
There is nothing to worry about.
There is a very small group, less than 3%, who do not have
Medisave accounts because we have been unable to contact them
over the years, despite considerable effort by grassroots leaders,
many people making the effort to contact them. Some have passed away
overseas without their next-of-kin informing us.
The NRIC addresses for some are also not valid. We will continue to work hard
to reach out to find them, and reach out to them. It is a small group
but we will have to keep working at this. The outreach effort will have to involve
many different approaches, many different media, many different languages.
MPs have all emphasised this, and this point is well taken.
It is not just about printed brochures arriving in your letter box.
It involves personal contacts, radio, TV and it involves languages
that are most familiar to the Pioneer Generation.
It will not be just a top-down outreach effort. We will work with
everyone on the ground, our grassroots leaders, all the staff in our healthcare settings,
our GPs, our polyclinics, our outpatient clinics,
work with staff at all the healthcare settings where people come for treatment.
We will work with our VWOs as well because they too have a lot of contact in the community care sector
especially with the Pioneer Generation. The online facilities there,
especially for younger family members, they are very familiar with looking up details online.
As I mentioned, the benefits will be provided automatically and
there is nothing to worry about. If someone really needs to talk
to a volunteer or officer to find out more, we already have
today 26 CitizenConnect Centres across the island, where advice can
be given on the Pioneer Generation Package.
Eligibility is the next issue.
Mr Baey Yam Keng and Mr Lim Biow Chuan, for example, had highlighted the case of individuals
who have been living in Singapore and contributing from the time of independence,
but who were not able to get citizenship for various reasons until later.
The appeals panel that we are setting up will be able to look
into such cases. That is why we are setting up an appeals panel. It will have diverse representation, it will have
Singaporeans from a range of backgrounds. This panel will
be set up by the end of April and we will provide more details on this later.
If I can move now to the issue of broader recognition of the Pioneer Generation, which many MPs spoke about,
beyond the Pioneer Generation Package that the Government is providing.
What are the other ways in which the community and businesses can do to recognise
our pioneers and our seniors (besides our pioneers). The seniors amongst our Singaporeans. This will be a collective effort.
As we approach Singapore's 50th birthday, special attention has to be paid by everyone
to the role of our Pioneers, and all our seniors. The Ministerial
Committee on Ageing has called for a special SG50 -- Seniors
Program to appreciate the role of our seniors in contributing
to our nation. The Committee will engage business and organisations
as part of our SG50 effort, to offer special privileges to our
seniors, whether it is discounts to places of recreation and leisure or other
benefits, and also find ways to engage our seniors actively,
help them to lead active and engaged lives. This is an important
initiative, and it is part of SG50. We want to involve our businesses and
community in recognising and honouring the role of our seniors.
Can I move on now, Madam Speaker, to a broader challenge
which is that of healthcare financing. This is in fact a key fiscal
challenge for the future in Singapore, as it is in fact for many maturing
societies. It is the key fiscal challenge that we face and I want to
spend a bit of time talking about the nature of this challenge, and
how we should address the challenge. Good quality, affordable healthcare
has to be our priority. We are making a few shifts in that direction
-- in the last few years and in this year's Budget.
First, we are increasing the role of risk-pooling through MediShield
Life to provide all Singaporeans, including those with pre-existing
illnesses, with protection against large hospitalisation bills. So greater risk-pooling.
Second, we are increasing the government share of healthcare
spending across health care settings -- in hospitals as well as
outside hospitals. The increased subsidies in this year's Budget for
SOCs, the increased subsidies in recent years' Budgets for
intermediate and long-term care services, is an important shift. It is an increase in the Government's share of spending.
We have introduced CHAS for primary care at our GPs.
Medifund is also being strengthened and we will keep it strong as part of the system.
So that is the second part -- the government is taking on an increasing
role in the financing of healthcare. But the third part is important, which is
that we have to preserve the role of individual savings, through Medisave, as a key pillar.
Individual responsibility for healthcare, and using individual savings
is a key pillar of our healthcare system.
And we are going to provide additional flexibility
in the use of Medisave. Mr Gan Kim Yong will talk about it more at the COS.
That will help in reducing out-of-pocket payments in polyclinics and other outpatient settings.
This will be implemented in the first half of next year.
But the sum of these changes that we have made in the last few
years are quite significant, because we are providing much greater support in
healthcare, not just for the low-income group, but for the
middle-income group, particularly in outpatient primary care and
step-down care sector. It is quite an important shift. I will just give you an example.
This is not a Pioneer Generation example. I give you the example of a couple in their early 60s - middle-income.
I am not talking about the low-income group, which in fact receives very significant assistance.
Middle-income couple, early 60s, the median household income per
capita is about $1,700. So I have chosen the median household, about $1,700 per capita household income.
This is a typical case where the husband receives day rehabilitative care two to three times a week.
The wife also visits the polyclinic and SOC polyclinic twice a year, and the SOC three times a year.
Not an uncommon example. Over the past decade, the
policy shifts that we have made to increase subsidies for the
middle-income group, particularly outside hospitals, have meant
that this couple would receive a quadrupling of the benefits that were in place a decade ago.
Four times more than was the case a decade ago.
In addition, as we expand home-based care in future, the husband, for instance, stays at home and receives care,
the household would see a 7.5 times increase in support
compared to what we had in place a decade ago.
So it is a very significant increase in support that we are providing for all Singaporeans.
As the couple gets older, they will be getting Medisave top-ups
through the GST Voucher, not an insignificant sum.
Each of them will get $250 a year. By the time they get into their seventies,
it is $350 each a year. Plus, the enhanced
benefits of MediShield Life, which cuts down on the risk of large
bills in hospitals, and which will come with further subsidies from the
Government for the middle-income group. So I just want to
say that we have been making significant shifts, not just for
the Pioneer Generation, but for all Singaporeans as they get older especially.
But we have a larger challenge in future.
Beyond these shifts that we are making, we have to look to the
future and address the larger challenge of healthcare costs.
To put the scale of things in perspective, the Pioneer Generation is 450,000 Singaporeans.
The next generation, aged 45 to 64, is one million Singaporeans.
They will be entering into retirement ten to twenty years from now. That was called the baby boom.
They will be entering into retierment ten to twenty years from now. That is a very important challenge that we have to meet,
how we can provide quality care in an affordable way.
It first involves appreciating, very fundamentally, two key points that we have to bear in mind.
And the first is that it is a misconception that countries
that spend more are doing a better job in providing healthcare.
Spending more does not mean better healthcare. The evidence is very
clear on this internationally, that it is a misconception that merely spending more means better healthcare. Some countries have very
high spending, but in fact have much weaker healthcare outcomes
than others. I will show you a chart to illustrate this.
This is a set of mainly advanced countries, plus Asian economies like
Hong Kong, Korea, Singapore and Japan. The first thing you will notice
of course -- well, I will have to explain the chart. The horizontal
axis is total healthcare expenditure per capita -- national expenditures,
i.e. what the government, or insurers, or individuals who are paying for it. This is total healthcare expenditure per capita.
The vertical axis is the 'health grade' that comes
from Bloomberg's Rankings of the World's Healthiest Countries,
which looks at life expectancy, percentage of underweight children,
proportion of people with high cholesterol (various indicators).
First thing you will notice, of course, is Singapore
is not doing badly on health grade. In fact, we are rated the best in the world.
I don't know if it is true, but we are certainly doing
quite well in healthcare outcomes. We have been doing it with relatively
lower expenditure compared to other countries. Part of this
is because we are a little younger as a society compared to the maturing European
societies, but even if you adjust for that, we spend less
on healthcare, but we achieve good healthcare outcomes.
And then you see at the other end of the spectrum, the United States. People often
refer to it in articles, and wonder why we are not spending as much.
Well, they spend a lot of money, but they have very weak
healthcare outcomes. In fact, much weaker than most other
advanced countries. And if you look at the countries in the
middle, there is very little correlation between how much you
spend and your healthcare outcomes. Why is it some countries are spending
far more and yet not getting better outcomes?
There are basically three reasons. First, particularly in the United States,
prices are just much higher, the costs are much higher for any particular treatment you talk about.
You talk about a knee replacement, it is
about four times the cost in Singapore. Prices are just far higher
in the United States than in other advanced countries. That is the first reason.
The second reason is very important because
it applies to many countries, which is that incentives have led
to over-prescription and over-utilisation of healthcare services in many countries.
So you end up just spending a lot more without commensurate improvements
in healthcare outcomes. This is in fact a very serious issue
in countries where you have fee-for-service models, where as long as the
doctors are prescribing new services, new treatments,
their fees go up, their incomes go up. In the United States,
in particular, their incomes can go up very significantly for prescribing
additional services. This is the second reason. There is such a thing as over-prescription
and over-utilisation which does not lead to better healthcare outcomes. That is the second reason.
The third reason, which is also very important also, is there are many
healthcare systems that provide universal subsidies for everyone
across the board. The poor, the middle-income and even the rich.
In fact, many advanced countries do that. They provide universal
subsidies across the board at much higher cost. It may make healthcare look very
cheap for everyone at the point of consumption, but it leads
to much higher usage because it looks cheap, and people do not
realise it but they are actually paying for it in another way, through higher taxes.
So, universal subsidies where everyone benefits,
leading to a high utilisation of the healthcare system, but
the cost is in fact paid through taxes, through insurance, through other means.
And it is not just cases like the US, Japan is actually a very good example.
In Japan, health insurance covers a very wide range of services,
with very little control over access to treatment.
The Japanese see physicians three times more often than in
other developed countries, and they stay in hospitals two
to three times longer than in other developed countries, because the system incentivises it. It has nothing
to do with demographics, because it has nothing to do with their
medical condition. It is all a matter of incentives.
The costs that you saw in that chart are not the end of it. In the
next ten to twenty years, the costs are going to go up very
considerably in these societies because of the incentives towards
over-utilisation and over-prescription. It is a very fundamental issue. So that is the first point --
more spending does not mean better healthcare outcomes.
The second key point I want to make is that there is in fact no free
or cheap healthcare anywhere in the world. It can look cheap or
free at the point of obtaining the service because your insurance
pays for it or the government has subsidised it. But the public is
ultimately paying for it either through taxes or hefty insurance
premiums. It is not as if someone else is paying for it. The public is ultimately paying for it.
Take Germany, where co-payments at the
point of treatment are extremely low when you go to
hospitals or even in the outpatient setting. The only reason why it is very low is because
of very substantial contributions to payroll tax for what they call a "sickness fund".
Both the employer and employee contribute 15.5%, in fact,
of payroll tax that goes into a "sickness fund". The 15.5% is entirely for the "sickness fund".
So the worker and the employer, and when you think of an employer paying, it is actually out of wages --
what would have gone into wages goes
into payroll fund, pays 15.5% for the "sickness fund". When you finally go to the
hospital or clinic, you think it is very cheap but actually you paid for it.
It is actually pre-paid health care with very few limits on how you
use it. So this is a fundamental point that we have to understand.
In fact, there is no cheap or free healthcare although it sometimes looks like that. It is being paid for.
We will have to spend more on healthcare
in future as our society goes up, as medical treatments that improve the quality of life become available.
We'll have to spend more, but we will have to do it in a cost-effective
way and prevent the total healthcare bill from spiralling
upwards, because everyone will have to pay for that. We have to be fair, prevent the total healthcare bill from spiralling upwards.
To do this, we have two key strategies. First, to rebalance the
structure of our healthcare system and second, to ensure that we
have the right incentives for everyone - Doctor, patient, insurer. First strategy of rebalancing the
structure of our healthcare system has been spoken about.
Dr Lam Pin Min has been talking about this for some time in fact and also spoke about it again in the Debate.
And several others spoke about this.
The need for us to place much greater emphasis on primary care, through our GPs especially,
community care through our rehabilitative centres, home-based
care, nursing homes and so on.
This is very important in our next phase. In the near- to medium-term, we still have to expand our acute hospital capacity,
and we are going to invest significantly in acute hospitals. But in the longer-term, it is really the expansion of capacity
in primary care and community care that will ensure
that we prevent the total bill from spiralling out of control.
We got to invest in primary care and community care and rebalance our system away
from an over-concentration on the acute hospitals. That is why
we have CHAS, that's why we have stepped up, in fact, our subsidies
for intermediate and long-term care to encourage people to get
treatment and care nearer to home, or at home. This is a
very important shift for the future, and Minister Gan Kim Yong will
talk more about this at the Committee of Supply. So that's about the structure.
But incentives are very important as well - incentives for the healthcare professionals, incentives for Singaporeans ourselves.
We have to first make sure that we avoid this problem of over-prescription that we have
seen in so many countries; the US is an extreme example, but
there are many others we can point to, including Japan as I spoke about. We have to ensure that treatments
which are subsidised are clinically necessary based on evidence and are cost-effective.
There are some interesting lessons we can learn from elsewhere
in this regard. In fact, in the United Kingdom,
France and Germany, they have set up institutions that look at
evidence-based research to establish what are the effective treatments and technologies
for various illnesses, and when a specialist referral be made.
We can learn from some of these experiments and develop our own systems.
Second, we have to promote more team-based
care, in particular, one that allows our nurses and our allied
health professionals to play larger roles alongside our doctors.
Here too, there are very good examples, in Australia and elsewhere,
where nurses play a larger role. And Dr Lam has also spoken about this.
Third, we have to ensure that our healthcare clusters are
encouraged to play a key role in managing the overall quality of care in and out of hospital.
The clusters are not just the hospitals, but they involve community care, and they involve step-down care besides our hospitals.
And our clusters have to take responsibility for overall care of the patient, both in and outside hospitals.
The Government will support new alternative approaches such as tele-health. The Khoo Teck Puat Hospital, for
instance, has a tele-health system that involves nursing homes,
where the patients and nurses in the nursing homes can
communicate directly with the geriatricians at the hospital using tele-health.
It saves on time, it's convenient but it allows the patient to stay in the nursing home and not to be warded in a hospital.
Finally, we all have to take responsibility
for maintaining healthy lifestyles. Many MPs spoke about this -
Mr Gan Thiam Poh and Dr Intan. Many MPs spoke about this, the importance of healthy lifestyles.
The Government will spare no effort, especially through the HPB,
in promoting healthy lifestyles and early screening for all Singaporeans.
I have gone about this at some length, because
this is in fact a key fiscal challenge for our future -- controlling total
healthcare spending and secondly, finding a fair balance in terms of who pays for that total bill,
a fair balance between the individual, the Government and the employer. It's a very important challenge for our future.
Both the Ministry of Health and the Ministry of Finance (MOF) will be quite seized with this issue over the next few years.
Let me move on now to the third theme of this rounding up, which is the need to balance
our budget as spending goes up in the future. We have to plan for our higher infrastructural and social spending.
First, expenditures will go up. We expect our expenditures
to increase by another two percentage points
of GDP by 2020. Two percentage points of GDP.
Beyond 2020, it will increase by at least another 1% of GDP. So, that is 3% of GDP in total by 2030.
It will be driven by two key components. First, infrastructural spending and secondly, social spending, especially in healthcare.
Infrastructure - I won't go through all the details. But basically, we have a lot more investment to do in our infrastructure.
We are investing heavily in our rail lines. In the next ten years alone, we are going to
expand our rail network by about 100km, which is more than any other
ten-year period in our history. By 2030, we are really doubling our
entire rail capacity (our entire rail capacity by 2030) to 360km - massive investment.
Changi Airport - expansion of Changi Airport, another very important infrastructural investment.
Terminal 5, in order that they can cater to many more
passengers. It's not just an infrastructural investment. This is a key industry in its own right -- staying
relevant and competitive in the aviation space is an important
economic strategy for us. And it's an important strategy to help the rest of our economy, because Changi Airport also
supports our wider economy. So, another very important investment and a very expensive one.
Third, housing. Quite apart from the fact that we are building a lot more HDB flats, 100,000 new flats over the next few years,
by 2020, two thirds of our HDB flats (or more than 630,000 units) will be 30 years or older. So, estate
renewal and rejuvenation will be a very important priority as we go
forward, and particulaly in the next decade. We will have to steadily
upgrade and renew our HDB estates. That too will be a source of
increased spending. Social spending will increase,
and I have explained the challenge in healthcare expenditures. Quite apart
from what I was talking about with regard to subsidies and the need for increased spending at point of treatment,
that's an immediate infrastructural challenge. We're increasing public hospital capacity by 50% --
Ng Teng Fong Hospital, Sengkang General Hospital, Woodlands General Hospital.
We're increasing intermediate and
long-term care facilities by 80% by 2020.
Nursing homes, community hospitals - 80% increase in capacity by 2020. And we are increasing our subsidies as I have spoken about.
In Budget 2012, two years ago, we had projected yearly total healthcare spending
to double from $4 billion to $8 billion by 2016. We are in fact likely
to reach the $8 billion figure, which is close to 2% of GDP, a year earlier, in 2015.
We're going to get there earlier - $8 billion of healthcare spending in 2015. Beyond that, healthcare spending will continue to grow.
We expect it to reach about $12 billion by 2020,
so from $4 billion in 2011 before we announce the change in 2012, to $12 billion by 2020 - 3 times increase.
And beyond 2020, as our baby-boomer generation
enters into retirement, gets older, the bill will grow. So we will have to spend more as our society
gets older, but we are not spending less in other areas. If you
look at it demographically, you think that as your
society gets older, you spend more on healthcare and you spend less at the early stage of life
because the cohorts are smaller.
In fact, despite smaller cohorts, we are not spending less on
education because we are spending a lot more per student - smaller cohorts but a lot more spending per student at
every level -- at pre-school, through our schools, and importantly in the tertiary sector,
because we are expanding opportunities in the tertiary sector, including university
enrolment going up to 40% of cohort.
So spending a lot more in healthcare and for older Singaporeans, but other spending is not coming down.
And in particular, for our young, we have to keep investing in them. More investment per student, per Singaporean.
How do we manage this increase in spending and stick to prudent fiscal policies?
First, as our spending goes up, we have to ensure
that all spending is judicious. We have to achieve value for money
in every programme, and be obsessed with achieving value for money
in every programme. Second, we have got to target social
subsidies at those who need them most. And for most of our schemes, this
means more for the lower-income group, but also some
for our middle-income group. Avoid universal subsidies, as Mr Ang Wei Neng just said.
The Pioneer Generation is the exception because we are honouring a whole generation for what they have done for Singapore.
But in general avoid universal subsidies, stick to targeted subsidies that give more to those who need the most
and also help the middle-income group. That is our first strategy, to do with spending.
Second, we need to raise revenues over time to ensure that we
can meet our future needs without the risk of persistent deficits.
We are starting from a position of strength. We have a healthy
fiscal position today, and this is because we made timely changes over the
years to strengthen our revenue base and develop a resilient revenue base.
We increased the GST in 2007, while providing a significant
package of offsets to help the lower- and middle-income groups.
The GST Voucher for the lower-income group is now permanent.
We also put in place the Net Investment Returns (NIR) framework
in 2008, which has been a major addition to our revenues, and created
greater resilience in our revenues as well.
It provides 2% of GDP each year in our Budget, or about $8 billion - 2% of GDP.
To illustrate how significant it is,
just think of many other countries which have exactly the reverse.
Instead of bringing onto their Budget 2% of GDP each year in net investment
returns. they have to do the opposite.
They have to find tax revenues to service debts, with 2% of GDP
being the lower end of the scale, because, in fact, if you look at most other countries (UK, Japan, many other countries),
you are really talking about 3-4% of GDP each year that has to be found in revenues to service the debt. Exactly the reverse situation.
So this is a real strength that we have in Singapore, and it comes about
because we have maintained prudent fiscal policies over the
years. We built up our reserves, and we are now able to use the
investment returns on our reserves to fund current expenditures.
Our strong fiscal position has allowed
us, in the current term, to set aside resources to meet future priority needs.
This is a prudent way of managing the budget. While you have
the strength, set it aside because you know there are needs
in the future. We've set aside money for the Community Silver Trust,
set aside money for R&D, and most significantly, we are setting aside monies for our Pioneer Generation.
But what do we expect going forward, because
beyond this term, it's going to be different.
Our revenues are not expected to increase as a percentage of GDP.
In fact, revenue growth could moderate. Asset markets are likely
to moderate, and we are not going to get the same amount of
asset market-based taxes as we've done in the last few years.
Our foreign worker levy collections will also taper off, as the
foreign workforce growth slows down.
So, revenues are not going to increase as a percentage of GDP.
But spending will go up as a percentage of GDP. So we will not have the current fiscal advantage that we have in the future.
And at some point, our revenues will fall short of expenditures.
This is a challenge which many other economies face, and Hong Kong, which is a very similar society
to us in terms of its demographics and its challenges, faces the same challenge.
They don't have to spend on defence and foreign relations, but in fact they have the same ageing workforce,
and they have projected that within the next 7-10 years, they are likely to face structural deficits,
where revenues will fall short of expenditure structurally.
Their Finance Secretary, Mr John Tsang, has acknowledged this.
In fact, last year he acknowledged that the growth of
government revenue will drop substantially if the tax regime remains unchanged.
They know the need to change. Like them, we will run into structural deficits if
we do not raise revenues in the next decade. We must be
prepared for the years ahead and build up our revenues for the
spending needs of the next decade and beyond.
How do we do it? Our approach has to be based on three principles.
First, whatever our tax and revenue strategies,
we have got to sustain a vibrant economy. Second, we have got to maintain
a progressive fiscal system -- a fair and equitable system
of taxes and transfers. A progressive system of taxes and transfers. And third, keep the tax burden
on the average Singaporean, the average household - keep the tax burden on the middle-income low.
Three principles: Keep the economy vibrant, ensure that we have a fair and equitable system of taxes and transfers,
and third, keep the burden on the middle-income low.
The first principle is very important. Dr Alvin Yeo spoke about this, Dr Janil Puthucheary spoke about it.
We have got to keep our economy vibrant. That is central to our social strategies, because
an inclusive society is a hollow concept if we don't have fruits to
redistribute and share. We have got to keep the economy vibrant, and that is how Singaporeans' have improved.
Economic competition is intensifying. It is not lessening, it is intensifying globally.
The UK is bringing down corporate income taxes to 20% by next year.
Taiwan has reduced its corporate incomes taxes to 17% (same as Singapore).
And importantly, quite apart from taxes,
the world of technology and globalisation is reshaping the way business is being done.
Re-shoring back to the advanced economies is happening,
particularly in the United States, driven partly by
cheaper energy costs because of the shale oil and gas revolution.
Advances in robotics and additive manufacturing are allowing manufacturing to be done cost-effectively
much nearer to their customer base,
allowing for rapid prototyping and mass customisation,
catering to their markets, It used to be too expensive to do it in the United States.
Now, it's becoming increasingly possible because of advances
in technology. To be sure, our economic competitiveness package
is not just about taxes. It is about a quality workforce, excellent infrastructure,
rule of law, and our whole system of governance. It is about
how as Singaporeans we make the system work well. Taxes are not
the only factor. But the reality is, we are a small country
without a natural hinterland. Business does not need to be here.
Ms Jessica Tan made this point; even knowledge-based businesses, creative businesses - They do not need to be here.
They can be done anywhere in the world. And with technological advance, they are being done everywhere in the world -
sliced and distributed around the world, and then brought together when it reaches the consumer.
We have to remain competitive so that we continue to attract
investments and continue to grow talents. And that also involves retaining our
own talents -- Singaporeans who are well-qualified, well-educated,
and they are mobile. It doesn't mean we keep taxes unchanged.
For example, we made property taxes more progressive
last year, and there is further room over time to enhance our asset taxes.
We have to keep all options open.
Second principle - a fair and equitable system of tax and benefits - equity. That's a very important second principle.
It means, firstly, that everyone has to pay some tax. I think that is a good society where everyone is contributing.
The majority of Singaporeans don't pay income tax, but they pay GST.
Everyone pays something for a better Singapore.
But those who have done better, those who are better off should contribute
more to society. And the lower-income and those in need should
receive the bulk of the benefits, enabling us to level up society.
That is our system. Everyone contributes
something but those who are better off contribute far more, and those
in need receive more benefits than the taxes they pay. They are paying something in tax, but they receive more benefits back.
And the GST is a good example. Not every tax in a progressive system needs to be a progressive tax.
In fact, that's not an efficient system. Not every single tax or benefit needs to be progressive. But the system
as a whole must be progressive. The GST is a good example
because the GST in its own right is a regressive tax. But when
we increase the GST, we also made major changes in
our other social policies -- Workfare, household grants, educational
subsidies -- many other changes that far more than offset the impact of a
higher GST on the lower-income group. It is not just a matter of the GST Voucher.
The GST Voucher is one part of the permanent offsets for the GST.
It's a whole system of means-tested benefits that ensure that
our poor get back far more benefits than the taxes
they pay. In fact, for every dollar of tax they pay, they get at least $5 back in benefits,
from childcare all the way to retirement.
In my Budget speech, I have given the example of a low-income couple
and the amount of benefits they get over a lifetime. I won't go through the details again.
But it is a very progressive system of taxes and subsidies.
If you look at the tax system alone, it is more
progressive than, in fact, several advanced countries. If you take the United Kingdom, for instance,
in the UK, despite very high top marginal tax rates,
the top 20% is paying 44% of all taxes if you add Value Added Tax (VAT),
income tax and everything together (council taxes). They are paying 44% of all taxes.
In Singapore, the top 20% pays more than 50% of all taxes. It's about 52 or 53% - a highly progressive system.
Next, I will show you how things add
up across the system - taxes and transfers together. How do they add up and how we have
a system where those who are better off pay more taxes than
the benefits that they receive and those who are less well-off get
more benefits than the taxes they pay.
I should first explain that this chart shows the net benefits (net transfers).
After you pay your taxes, what is the net amount you get at transfers.
As you can see, the bottom 50% in the income ladder receives
significantly more transfers than the taxes they pay and those at
the higher end are paying more taxes compared to the transfers
they receive. This is expressed as a percentage of the household income.
If I express it in dollar terms, of course those on the high end would
be paying a very large amount of dollars in net taxes, but as a
percentage of income, it is lower. Now I should mention also this is important because
it comes in to interpreting many of our other statistics. I have left out the first decile here -- which is the bottom 10%,
because we have to understand that two-thirds of the bottom 10% are in fact retiree households who in fact don't have incomes.
But, many of them are in fact not poor. 16% of
those in the bottom 10% live in private properties; another 13%
live in HDB 5-room and Executive flats; a fair number own
cars and hire maids. The bottom 10% is basically anyone who's not earning an income any more, but many of them are quite well-off.
So I have left the bottom 10% off from there, and
in any event, because they don't have income from work, if I were to add them in,
the benefits can't be expressed on the chart, because as a percentage of income, it would be infinity.
The basic point is: if you look, for instance, at those in the second decile, which is
our low-income group, they get significant more amount of dollars in benefits
compared to the taxes they pay. And compared to 10 years ago, it has shifted,
because the blue bars reflect the situation in 2013, even before this year's enhancements,
and the red bars reflect the situation in 2003.
A significant shift towards progressivity in our fiscal system.
And we are doing more. In this year's Budget, we spoke about KiFAS, we spoke about the
increased subsidies for pre-school education, we spoke about increased subsidies in the tertiary level.
I just want to mention one fact, which didn't feature in the Budget, but which is a
continuing story in the education system -- which is how we are doing more
in the school system, to help children who have difficulties in basic
skills, literacy, numeracy and other areas. We are already spending 20% more for
a child who is weak in literacy and numeracy, throughout the course
of their primary education, compared to the average pupil.
And over the next few years, by 2017, this will increase to 40%.
We will be spending 40% more, because of MOE's strategies, on children who are weak compared
to the average being spent on all pupils - an important initiative.
To summarise, whatever we do to raise revenues in future,
we have to retain this fair and progressive system of taxes and transfers.
Third priority - keep the tax burden on the middle-income low. It is an important objective of our system,
and Singaporeans want it to remain that way.
This chart, which I show, will show average tax paid by the median worker - in Singapore that's there in red -
average tax paid by the median worker -- this is just income tax and GST -- significantly lower than in other countries.
In fact, it is lower even than in Hong Kong because in Hong Kong, income tax starts from the first dollar.
It's like the UK system. In our system, most
people don't pay income tax, the lower-income pay GST. So the average
tax on the median worker is very low by international standards.
And even if you include all other taxes -- foreign maid
levies, taxes on cars -- if you include all other taxes, we still remain a relatively low tax country for the middle-income group.
This compares Singapore with the UK, and this looks at what's called the
the middle quintile - those from the 40th to the 60th percentile - the middle quintile.
Basically, the effective tax rate - this is real data - this is what all the taxes amount to.
Effective tax rate - the amount of taxes as a percentage of the incomes - is about 10%.
For those who own a car, it'll be somewhat higher. For those who don't own a car, it is lower.
For those who own a car, it's about 7%. So that's our system.
We have to keep that tax burden on the
middle-income low, so that they get to keep as much as they earn.
That's our principle. Help their incomes go up, and help
them to keep as much as they earn, so that it is principally the higher-income
group that pays significant net taxes into the system, which
we use to help the lower-income group, so they can get significantly more benefits than the taxes they pay.
So we have to keep these approaches in mind in future years.
We have a strong revenue position for now. But in the decade ahead
and beyond, we are going to need more revenues to meet our
infrastructural and our social needs. Keep our economy vibrant, keep a fair and
progressive tax system, keep a low tax burden on the middle-income
group, and that is how we will keep Singapore a nation
of opportunities with assurance for all, and a country that is fair and equitable to its citizens.
And as Mr Seng Han Thong says, it will be in a very unusual situation.
We have a system where we have the heart as well as the strength.
I think you used a familiar Chinese saying for this - we have the heart as well as the strength.
There are many other countries who have the heart, and they are waiting for a future
government to deliver the strength. We have the strength; we are able to do things with a heart,
provide quality care, provide services in a humane way,
but because we have prudent fiscal policies and make sure we can afford it. And we must
stick to that system of having the heart and having the strength.
So let me conclude very briefly, Madam Speaker.
We had a very good Debate, as I mentioned, very strong
support for the restructuring of our economy and raising of
productivity, including transforming our SMEs, transforming our jobs
and transforming our social culture.
Strong support for the steps we are taking to build a fair and
equitable society. And strong support for prudent fiscal policy
which has allowed us to set aside a Package to honour our
Pioneer Generation, set aside the funds today for the full life of that Package.
But it is worth emphasising a point which Ms Penny Low made,
which has to remain our key focus for the future. She made a very
good point I think, which is what matters most to the
Pioneer Generation. Actually, what has always mattered most to them is
that the next generation does better than them. We all know it.
We know it from every meal time, we know it from every
conversation we have in the community. That's what they are like.
They want their children, they want the next generation to do
better than them. They are like that. And because they are like that, Singapore
is like that. We are like that. We want our children to do better.
So every Budget must be focused on our future -- investing in our
young, opening up opportunities and helping them to create a
better Singapore. Madam Speaker, thank you.