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Madam Speaker, I beg to move, that Parliament approve the financial policy of the Government
for the Financial Year (FY) 1st April 2014 to 31st March 2015.
Our Budget for FY2013 is expected to record an overall surplus of
$3.9 billion (or 1.1% of GDP). That is for FY2013.
This is higher than the surplus of $2.4 billion (or 0.7% of GDP) that we
had budgeted a year ago. A few factors led to this higher surplus.
On the expenditure side, we had temporary delays in the implementation of public infrastructure projects.
For example, there were unexpected delays in the construction of the Downtown Line
due to the insolvency of one of the contractors. Our revenues were also boosted by the higher vehicle
quota premium (VQP) collections, resulting both from a higher-than-expected number of
vehicle de-registrations and hence more replacement COEs being issued, as well as more commercial
vehicles being renewed. Secondly, stamp duty collections did not fall as much as expected.
The stronger fiscal surplus in FY2013 was mainly due to cyclical factors.
They will not last, and we should see a tighter budget position in coming years.
The Singapore economy grew by 4.1% in 2013, up from 1.9% a year earlier, supported by
a gradually improving external environment and strong domestic construction growth.
The global outlook for 2014 is uncertain. The advanced economies are gradually recovering,
while the emerging economies are slowing. However, the odds are against a sharp slowdown in the global economy.
MTI hence expects the Singapore economy to grow by 2% to 4% in 2014.
Our labour market remains close to full employment. The unemployment rate for citizens fell to 2.9% in 2013.
Job vacancies significantly exceed unemployed workers.
Wages have continued to pick up. The wages of the median Singaporean worker increased
by about 5% in real terms in 2013. Wages also grew for many lower-income workers, with those
at the 20th percentile of the income ladder seeing real wages go up by around 7%.
CPI inflation was lower in 2013. However, higher wages, together with other increases
in business costs, are expected to contribute to a slight uptrend in CPI inflation in 2014.
Besides consumer price inflation, we have been concerned about property prices,
which have risen sharply in recent years. The Government's successive rounds of market-cooling measures are working,
with both the HDB resale and private residential prices stabilising.
In the meantime, HDB BTO prices have been stable, because we had delinked them from the resale market.
Our cooling measures had been aimed at moderating the market,
so as to prevent property prices from getting too far out of line with incomes.
We are not engineering a hard landing. But neither are we able to eliminate cycles in
the property market, with upswings in prices in some years followed by corrections.
Given the run-up in prices in the last four years, it is too early to start relaxing our measures.
The Government will continue to monitor the property market and adjust our measures when necessary.
Our businesses have also faced rising rental in the last few years,
costs in the last few years, especially in industrial space.
Fundamentally, this has reflected the growth in demand for space, which has exceeded new supply.
However, a very large quantity of industrial and shop space is entering the market, and should have
a moderating influence over the next few years.
We have embarked on new directions in our economic and social strategies.
First, we are going for quality growth, in other words, growth based on innovation and deeper capabilities,
that will enable us to sustain rising incomes for Singaporeans. It will also allow us to
avoid indefinitely expanding the foreign workforce. Second, we are building a fair and equitable society,
with stronger support for those who start off with less, where everyone has a
real chance to pursue their aspirations and earn their own success. We are strengthening
social safety nets, and mitigating inequalities. And as our population ages, we are keeping
quality healthcare affordable and strengthening community networks, to help seniors to enjoy
active and fulfilling years. Achieving quality growth and an inclusive
society go hand in hand. Together, they will help average Singaporeans as well as those
with lower incomes improve their standards of living over time; ensure a caring hand
is always there to help those who run into life's inevitable difficulties; and enable
everyone to contribute to Singapore in meaningful ways.
Budget 2014 will reinforce and build on these new directions.
We are transforming our economy to create higher-value industries and quality jobs for
Singaporeans in the next decade and beyond. We are investing in new manufacturing capabilities,
to make use of advanced robotics, new sensor technologies and networks of Internet-enabled devices.
We are developing an ecosystem to exploit Big Data and open promising new services opportunities.
And we are taking advantage of the huge demand in Asia and other parts
of the emerging world in fields where our companies are strong, such as in urban solutions
and a whole range of services for Asia's growing middle classes.
There is no lack of demand for what Singapore can offer. But we are also changing how we grow,
in a fundamental way. We must adapt to the permanent reality of a tight labour market,
and transform every sector of the economy to achieve higher productivity and skills.
This is the only way we can sustain higher incomes for Singaporeans.
Among citizens, median wages have increased by about 9% in real terms in the five years to 2013.
This is significantly better than in the other Asian Newly Industrialising Economies (NIEs) (Hong Kong, Korea, Taiwan).
Singapore is the bar at the top when comparing it
with a range of developed countries as well as the Asian NIEs.
Real incomes at the 20th percentile of our income ladder rose
by a similar amount. We have avoided the problems in many advanced economies, where median wages
have stagnated or even fallen over much longer periods, while unemployment has gone up.
The tighter labour market and increase in wages that we are seeing are part of economic restructuring.
However we can only sustain wage increases if we succeed in boosting productivity.
Let me put this another way. Without good productivity growth, if we try to push wages up,
we will end up with either higher consumer prices or squeezed profit margins that hurt
both businesses and ultimately jobs. Firms will either pass on higher wage costs to consumers
through higher prices, especially in the domestic service industries, or else they will become less competitive.
It becomes a zero-sum game between business profits and wages, that no one benefits from.
That is why raising productivity is at the centre of our economic agenda.
It is the only way we can raise our living standards in the years to come.
To reach advanced country incomes, we must
develop advanced country capabilities -- the corporate and managerial skills, the ability
to translate Research and Development (R&D) into commercial opportunities, and deep skills
and expertise in the workforce. It is a major, multi-year undertaking.
We cannot transform our economy and achieve major, innovative breakthroughs in every sector in
only a few years. Indeed, while productivity has increased by 11% since we began the restructuring
journey four years ago, this was entirely due to the strong cyclical recovery in 2010,
with little improvement since. However, we are now seeing real progress on the ground.
Mature, SME-dominated industries like precision engineering and food manufacturing
are retooling and experiencing significant productivity growth. More companies are sharing services.
Manufacturing firms are sharing logistics and waste water treatment,
restaurants are using shared services for food preparation and dish-washing,
and hotels for laundry services. And in several sectors, individual players are now introducing
game-changing innovations -- altogether new ways to grow their businesses.
Mindsets have also changed. Whereas two years ago the predominant mood amongst businesses
was to call for the Government to slow down or postpone tightening of foreign worker inflows,
most have now accepted the reality of a tight labour market, and are seeking assistance
to upgrade, bring in new techniques and grow internationally. Many more firms are taking
advantage of our schemes to invest in productivity and to expand abroad.
We will aggressively support every form of upgrading by firms -- whether through R&D,
automating business processes, creating new designs and brands, or enriching the skills
of their employees. Budget 2014 will strengthen support for early
adopters of new technologies, and for SMEs that are going beyond the norm in their upgrading efforts.
We will also promote wider adoption of high-impact productivity solutions, beyond
the early adopters to a larger group of firms in each industry.
This will include a major effort to scale up the use of Infocomm Technologies (ICT) by SMEs.
The Budget will also enhance funding schemes to help catalyse growth enterprises, and support
SMEs in their expansion abroad. In addition, in the construction sector, we will tighten
upstream rules on developers to encourage manpower-saving designs, and give contractors
stronger incentive to invest in the skills of their workforce.
Taking all our productivity support schemes together, we will be flowing back to businesses
more support than the additional foreign worker levies collected from the policy tightening in recent years.
We are collecting more foreign worker levies but we are flowing back more than what we are collecting in support for upgrading.
However, we are not recycling monies indiscriminately, or seeking to benefit
all firms equally. Our schemes will still favour the more dynamic and efficient players.
Any company that invests in order to save manpower or achieve innovative breakthroughs
gets government support, as long as it has its own money in the game.
However, transforming our economy is not just about technology, and productivity is
ultimately not about the dollars and cents of investments or upgrading. It also means changing our social norms.
We need a workplace culture where employees' views and contributions are valued, up and down the line.
When employees are engaged and empowered, productivity goes up.
Some of our firms, including SMEs, are good role models in this regard.
Many more have to get on board.
Second, we also need a culture of mastery on the job. As individuals or companies, and
as a society, we have to take pride in developing expertise and flair in every vocation,
seeking not just competence but excellence, throughout people's lives. Employers have to
support this too -- doing the job well is what counts, not long hours on the job.
Third and importantly, we have to change our habits as consumers. Quality service comes
in many forms, and need not mean having service staff constantly waiting on us. We must also
feel at ease with self-service technologies, such as at check-out counters in supermarkets.
This photo was taken yesterday, I won't say which supermarket.
But you notice the queue on the left is the traditional queue, a little halest.
The queue on the right with the lady pressing a few buttons is a self-service queue.
Faster, easier and in my opinion, it should also be cheaper.
We are well behind many other cities in these respects.
These other cities were not always that way, but their social norms evolved. We too must
make these shifts, in order to avoid a growing dependence on foreign workers, and to create
quality jobs. There is no reason, for example, why restaurants
and cafes in Singapore cannot be like those in Europe or the United States, which operate with fewer
service staff, each taking more responsibility and getting more pay; where customers treat
staff with respect and the staff wear their uniforms with pride.
We must all make the effort to change our social norms, in order to raise productivity
and pay. Restructuring our economy will ultimately succeed if, at its heart, it is about these
changes in our social practices. Budget 2014 also takes forward the major strategies
that the Prime Minister spoke about at last year's National Day Rally, aimed at ensuring
that ours is a fair and equitable society. We are building on the broader initiatives
we have taken in the last five years: in education, work, housing and healthcare.
The changes reflect the new phase that we have entered as a country: with incomes rising less quickly,
and disparities between different groups becoming a greater concern; and with a growing population
of older Singaporeans, often with fewer children to support them, needing security and assurance
in their retirement years. It's a new phase. Our thinking has shifted in this new phase,
and our initiatives are helping to level up our society and mitigate inequalities.
These policy interventions also help to explain why, taking into account government transfers
and taxes, Singapore's Gini coefficient was lower in 2013 than it had been in over a decade.
We take seriously the challenges faced by our lower-paid workers, and are helping them
through both our economic and social strategies. First and always, we must have a competitive
and vibrant economy: that is the only way we can have good jobs and rising incomes for
average and lower-income Singaporeans. Jobs are the most important safety net, and the most
meaningful way we can keep society inclusive. Second, we are mitigating wage disparities,
by using tax revenues to top up the wages of those in the lowest 20% through Workfare.
Wages for these workers are in fact going up, as I mentioned earlier.
With Workfare,and the Special Employment Credit, the average older lower-wage Singaporean will receive
wages at least one quarter higher than what their employers will pay.
With Workfare, and the Special Employment Credit, they receive pay that is one quarter higher, at least,
on top of what their employer is in fact paying.
The three-year Wage Credit Scheme (WCS) that I introduced in last year's Budget is also
working well. Wages for lower-paid Singaporeans have in fact improved the most rapidly, helped by the WCS.
Our third strategy has been to tackle the problem of cheap-sourcing.
It is a specific problem that has required a more interventionist solution,
worked out among the tripartite partners. In industries such as cleaning and security,
cheap-sourcing has held down pay and also led to high attrition, making it
difficult for workers to acquire skills and upgrade themselves. The Progressive Wage Model (PWM),
which will be a licensing requirement for companies in both these industries,
will ensure that cleaners and security guards too enjoy significant upgrades in their basic pay,
and have a pathway to improve their skills and wages over time.
We are making progress, but there is more work to do. We cannot change the realities
of global competition and technological advances that put pressure on less-skilled workers
all over the world. But we can do much more to improve the lives of lower-income workers,
and to give their children the best chances to do well, so that disadvantage is not passed
from one generation to the next, and so that our society preserves a sense of equity and opportunity.
Let me now summarise the major social planks of this year's Budget.
We are giving special recognition to the Pioneer Generation through a package that assures
them of affordable healthcare. The Budget will also set aside funds today to meet the
full cost of the Pioneer Generation Package in future. By doing so, the Government is
assuring the Pioneer Generation that the commitment we are making today will be met, regardless
of future economic or fiscal circumstances. By taking advantage of current resources to
provide fully for this special package for our pioneers, we will also allow future Budgets
to focus on the needs and challenges of the future, such as in education, transport and
the healthcare needs of all Singaporeans. The Budget will continue with our efforts
to support social mobility, and to build a strong and sustainable social safety net.
First, we will boost education subsidies, starting with the early childhood years.
The earlier we intervene to help children who start with a disadvantage, the better their
prospects for achieving their full potential in life. We will also strengthen support for
the middle-income group, especially in tertiary education.
Second, we will continue to enhance healthcare subsidies for both the lower- and middle-income groups.
Besides enhanced government help, we will increase employers' CPF contributions
so as to increase the retirement savings of workers.
Third, we will buttress schemes to help the disabled, from young. Their difficulties are
the greatest, and often their courage too. They deserve greater support.
Taken together, our initiatives of the last five years, plus the further steps in this year's Budget
amount to a major programme to support lower- and middle-income Singaporeans --
in fact 2.5 times more compared to what it was ten years ago.
Both for lower-income Singaporeans and middle-income Singaporeans,
if you add up what we have been doing in the last five years, plus this year's Budget,
we are now providing them support over their lifetimes that will be 2.5 times more than it was a decade ago.
So it is a major shift.
Let me illustrate what this means for a typical low-income couple, a couple at the 10th percentile
of our income ladder, through the major episodes of their life.
First, the couple buys a home of their own.
Nowhere else in the world will a couple at the 10th percentile be able to buy a home of their own the way they do in Singapore.
They receive $60,000 in housing grants to
buy a BTO 2-room flat, with payments only from their CPF, nothing from their take-home pay. Later on, if they upgrade
to a new 3-room flat, they receive an additional $15,000 in Step-Up CPF Housing Grant.
Every step of their children's education will be heavily subsidised. Childcare fees will
typically be just $3 a month. Then, through their children's school years and if they
go on to polytechnic, for example, financial assistance will cover 75% of their total fees,
through school, and including ITE and polytechnic.
If they go on to university, they get further support.
Workfare tops up their pay by up to 30%. And if they face set-backs along the way,
such as losing a job, ComCare will help. As the couple gets older, healthcare needs become more important.
They will get subsidies of 70% to 80%, whether in in-patient or outpatient treatments,
and for long-term care. And if they still have difficulty with their healthcare bills,
Medifund will help. Taking these episodes in their life together,
the couple will receive significant help from the Government. Government transfers
(net of the taxes they pay) will in fact exceed their lifetime incomes.
However, what is critical is not just how much we spend and redistribute resources,
but how we do so. Our approach to uplifting the poor and levelling-up
society can only succeed if it supports a culture of personal responsibility --
the desire to learn a new skill and work for a better living, and to make the effort to look
after our own families. We know this from the evidence of half a century of major social
interventions around the world, such as in the United States and the European nations.
We cannot leave people to face life's uncertainties on their own. That is not our approach.
But as we strengthen our social support and safety nets, our whole approach must be to encourage a
compact between personal and collective responsibility, where each reinforces the other.
It is the best way to sustain a vibrant and equitable society, where everyone plays a role in making
Singapore a better place.
Let me now go on to the first major plank of the Budget: to deepen incentives for restructuring
to enable innovation to pervade the economy. Our basic approach has been two-fold.
First, we have been tightening foreign worker policies in progressive steps since 2010.
As a result, foreign workforce growth has slowed significantly in the past two years.
We can expect further slowdowns in the next two years, particularly in the Services sector,
as Dependency Ratio Ceiling (DRC) cuts that were previously announced take full effect by July 2015.
The Construction sector has been the exception.
While we are not making further moves to tighten foreign worker inflows for the economy at
large in this year's Budget, we will make further efforts to encourage the Construction
sector to retain skilled workers and to implement manpower-saving technologies.
I will speak about this later.
The second prong in our restructuring strategy, besides our policies with regard to foreign workers,
has been to provide firms with strong support for every investment that can improve productivity.
This year, companies will continue to benefit from the three-year Transition Support Package
that we introduced last year. It is a major package of support, now estimated at about
$7.3 billion over the three year period. It has been very well utilised in the first year of rollout. In particular,
strong wage increases over the past year will boost the payouts under the WCS at the end of March 2014
to around $800 million, significantly more than originally estimated.
We are also seeing higher take-up rates for the existing PIC scheme, or the Productivity and Innovation Credit scheme.
Two out of three SMEs with turnover of more than $1 million have claimed benefits.
Besides these broad-based measures, we are also providing targeted help to firms investing
in innovative ideas through the Innovation and Capability Voucher (ICV) and the Capability
Development Grant (CDG) schemes. As I mentioned earlier, change is happening on the ground.
Even within our 'old economy' sectors, individual players are doing things quite differently.
These individual players show us that change is possible and how, if we scale up such changes
across whole industries, we can achieve a major impact in overall productivity.
I will give just three examples of such firms, each of which operating in industries which have relatively low productivity.
First example is in security: Oneberry Technologies.
I know this doesn't look like a security agency, but it is.
An example of how a security firm is transforming itself in an industry that is known for low productivity.
Using its proprietary system of intelligent cameras and surveillance software in place
of traditional security guards, Oneberry provides security cover with no manpower on site.
Instead, staff at its central command centre receive instant alerts when there are intrusions and
respond with alarms and warning announcements on-site, or by alerting the police.
This helps Oneberry's clients to significantly cut down on security manpower.
SCAL Kim Chuan dormitory, one of its clients, managed to save $300,000 in three years as a result.
This technology-driven business model has also enabled Oneberry itself to more than double
its revenue with only a one-third increase in manpower.
Second example: Marcella, a menswear retailer. Marcella has used technology to produce bespoke
shirts at off-the-shelf prices. It developed software to enable its sales
staff to translate customers' measurements automatically into draft designs. And as more
customer data is collected, data from more customers is collected, the software makes constant improvements in creating fitting designs.
This has reduced the need for alterations. Marcella also uses laser technology to cut
fabric to precision in its factories for better accuracy and to reduce wastage.
With this cost-efficient business model in hand, Marcella is opening its first retail
outlet abroad, in New York, in the middle of this year.
Third example, F&B, we look at Genki Sushi.
It is a Singaporean-owned franchise. They have invested in a system that has reduced the number of
staff serving tables by about 85%, and cut waiting times for orders by half.
Orders are placed using iPads and conveyed directly to the kitchen. 'Trains' shaped like
the Shinkansen are then used to serve food straight to diners' tables.
In addition, every table has a mechanised plate-clearing system which allows customers
to slip empty plates into a slot to be sent directly to the stewarding area. That's what you see at the top of the slide.
The technologies have not only reduced the need for staff but have become a novel dining
concept that attracts more customers. These are different examples from
industries, but they each shows us what is possible. We must spread this willingness to innovate
and make breakthroughs. We will therefore provide sharper incentives
in this Budget to support significant efforts in business transformation and upgrading.
Our support for companies will be along five thrusts:
First, we will extend and deepen support for businesses to invest in innovation and skills
so that they can sustain and step up their restructuring efforts;
Second, we will give a stronger and more specific push to the piloting and scaling-up of ICT
solutions that can help us to transform whole sectors;
Third, we will catalyse investments in growth enterprises to facilitate their growth and expansion;
Fourth, we will support companies in their
efforts to internationalise and grow their brands in the global market;
Lastly, for the Construction sector, we will put in place a series of measures to help
players meet the challenge of raising construction productivity.
The Productivity and Innovation Credit (PIC) scheme is due to expire in Year of Assessment (YA) 2015.
There have been many calls for its extension. I have decided to extend the
PIC scheme for another three years until YA2018. This extension will cost the Government a total of $3.6 billion.
I will also introduce a "PIC+" scheme for SMEs,
to help firms that are making more substantial investments to transform their businesses.
Under the current PIC scheme, the expenditure cap is $400,000 per year for each qualifying
activity and the cap can be combined for a total of $1.2 million across three years.
That's the current scheme.
I will raise the expenditure cap for SMEs to $600,000 from YA2015. This means that SMEs can now
claim tax deductions for up to $1.8 million in expenditure.
To illustrate, take the example of a medium-sized logistics company planning to invest in an
automated storage and retrieval system at a cost of $1.6 million. Under existing PIC rules,
the company can claim enhanced tax deductions on the cost capped at $1.2 million.
With the new PIC+ for SMEs, it can now enjoy deductions on the full $1.6 million expenditure and expect
total tax savings of about $530,000.
That is a large subsidy, $1.6 million expenditure, $530,000 subsidy in effect.
To continue encouraging private R&D, we will
extend the 50% additional tax deduction on qualifying R&D expenditure for another 10 years until YA2025,
and the further tax deduction administered by the EDB for another five years until 31 March 2020.
We will also extend the writing down allowance
for cost incurred to acquire qualifying Intellectual Property Rights for another five years until YA2020.
We will create new industrial spaces that
cluster companies within the same industry. SMEs will benefit from lower costs through
the consolidation of operations, pooling of resources and aggregation of demand for delivery
and other services. For instance, JTC's Food Hub concept will
feature an integrated cold room-warehouse shared facility operated by a third party
provider who will also provide logistics services. This will not only lower the capital investments
needed by SMEs -- as they no longer need to invest in their own cold rooms -- but also
enable them to benefit from more efficient supply chains.
In addition to these cluster strategies, we will continue to encourage individual businesses to maximise land use.
We will renew the Land Intensification Allowance (LIA), due to expire next year, for five years to 30 June 2020.
We will also extend the allowance to the logistics
sector as well as to businesses carrying out qualifying activities on airport and port land.
We are undertaking a major review of our Continuing Education and Training (CET) system
to support the up-skilling of workers on a continuous basis
and the transformation of our economy. The review will be completed later this year.
As more funds will be needed for the expansion of our CET system, I will top up the
Lifelong Learning Endowment Fund (LLEF) by $500 million, bringing the total fund size to $4.6 billion.
Our second major thrust is to catalyse the adoption of ICT especially in our SME sector.
ICT is transforming almost every industry internationally. While the Public Sector and
our larger corporations have been actively leveraging ICT, we have to help our SMEs step up
adoption of ICT solutions. We will give this a major push over the next three years.
We will launch an ICT for Productivity and Growth (IPG) programme, comprising three
key initiatives which I will elaborate on briefly in turn.
The first concerns proven ICT solutions. Over the past three years, IDA has worked with
trade associations and the ICT industry to develop and deploy sector-specific solutions
under the iSPRINT scheme. In F&B, for example, more than 50 F&B operators have adopted a
wireless integrated restaurant system that has relieved their service staff from manual
and repeated tasks. We target to extend the reach of these sector-specific proven solutions
from what is an existing base of 500 SMEs to another 10,000 SMEs over the next three years.
We will subsidise 70% of the costs of ICT products and services under this scheme.
Second, we will encourage first movers, first movers who
can pilot emerging technology solutions that have the potential to transform businesses.
These can, for example, include innovations in sensors, data analytics and robotics.
Over the next three years, we will support 80% of the qualifying costs for firms that
are implementing innovative solutions that are new to Singapore.
The support will be capped at $1 million per participating firm.
Third, we will promote high-speed connectivity for SMEs. It is difficult for SMEs to take
full advantage of cloud computing and data analytics solutions without high-speed Internet access.
We will subsidise SMEs' fibre broadband subscription
plans for at least 100 Mbps (Megabits per second) and provide support for them to implement
Wireless@SG services at their premises.
We will also ensure that more buildings have facilities to bring fibre broadband to their business tenants.
We will subsidise building owners for up to 80% of the costs of new in-building infrastructure,
capped at $200,000 per building.
When you want to take the fibre up to the tenants, there is a fair bit of renovation that is involved in the building itself.
As this is not a permanent measure, building owners are strongly encouraged to take this
up within the next three years. IDA will consult the industry and building
owners to determine the most optimal way to structure the subsidy.
These three initiatives together will cost $500 million over the next three years.
Let me move to the third thrust in our restructuring strategies, and that is to promote industry transformation by catalysing financing
for companies at various stages of growth so that they can take full advantage of growth opportunities.
SMEs in the growth and expansion stage often
need a boost in financing to achieve sufficient scale and become globally competitive.
In 2010, the Co-Investment Programme (CIP) was launched to catalyse patient growth capital
for Singapore-based enterprises, through co-investing with the private sector.
The Government set aside $250 million for the first phase of the programme, of which
approximately $160 million has already been deployed. This has already catalysed over $500 million
of investments from private sector players, or over three times the Government's outlay.
In view of the good take-up to date, we will launch the second phase this year with the
Government providing an additional $150 million to match private sector investments.
The CIP will continue to focus on investing in growth-oriented Singapore SMEs and provide the patient capital
to help SMEs that need more time to execute their expansion and internationalisation plans.
The additional capital will be allocated to two funds.
First, an SME Co-Investment Fund II.
Similar to the existing SME Co-Investment Fund, this second fund will make direct equity investments into
companies alongside other private equity investors.
Second, an SME Mezzanine Growth Fund. This is a new fund
that aims to meet the demand from SMEs for mezzanine financing, a hybrid debt-equity instrument.
It provides a more flexible financing option for SMEs that do not wish to dilute
their equity but face challenges in increasing their borrowings from traditional banking sources.
In addition, young SMEs often face financing
challenges that hinder their potential growth. They lack a track record and are inherently
more risky investments, making it difficult for them to obtain loans from banks.
We thus launched the Micro-Loan Programme (MLP) in 2001, with the Government taking on some of
the risk for small loans below $100,000, to encourage banks to lend to our small and young enterprises.
The Government will take on more of the risk,
to spur lending to young SMEs. SPRING Singapore will raise the government's risk-share under the
MLP for young SMEs from 50% to 70%. These are firms that have been registered for less than three years (young companies).
The enhancement is expected to catalyse an additional $32 million in loans
from FY2014 to FY2015 over the two years. We are also studying the potential for equity
crowdfunding, which is emerging in some countries as an alternative source of financing for
start-ups and small companies. MAS and SPRING are looking into an appropriate regulatory
framework for such new business models in financing. Our fourth thrust concerns internationalisation.
Take-up of IE Singapore's schemes to help companies internationalise has grown over
the past year. We will make targeted enhancements to further assist companies in seizing opportunities abroad.
First, we will raise the maximum loan quantum
supported by the Internationalisation Finance Scheme (IFS) from the current $15 million
to $30 million. This will boost debt financing for companies to make additional asset investments
abroad or to fund working capital expenses for secured overseas projects. With this enhancement,
the IFS is expected to catalyse up to $500 million in loans over the next two years.
Second, we will enhance the Global Company Partnership (GCP) Programme by providing additional
support in two areas: We will raise the support level for pilot
and test-bedding projects from the existing 50% to 70%. This is to assist our companies
to establish track records and prototype new products to break into overseas markets.
We will also expand support for staff attachments in overseas markets.
This should benefit some 200 companies over the next two years. MTI will announce more details at its COS.
Our fifth and last thrust in our economic restructuring has to do with the
more intensive efforts needed to upgrade the Construction sector.
Transforming the industry requires change across the whole construction eco-system:
from ensuring that developers and architects create designs that allow for more efficient
downstream construction operations; to ensuring adequate supply of pre-fabricated components;
and to allocating land near the site for storage needs during the construction stage.
We will take a few initiatives in this budget to encourage change across this ecosystem.
First, for selected Government Land Sales (GLS) sites, we will mandate the use of productive
technologies such as Prefab Prefinished Volumetric Construction and Prefab Bathroom units in
the tender conditions. JTC will also stipulate a minimum percentage level of prefabrication,
as part of tender conditions for Industrial Government Land Sales (iGLS) sites.
In addition, we will incentivise developers to adopt productive technologies in developments
on non-GLS sites. We will continue to increase the legislated
buildability-scores (B-score) and constructability-scores (C-score) for all projects.
From September this year, private projects that are outside of the GLS programme will
need to meet the same higher standards as public sector projects and private sector
projects on the GLS and iGLS sites. This is expected to reap 9% to 14% of manpower savings on such projects.
We will also require standardised floor heights
and building components such as drywalls for new projects.
The public sector will also take the lead by using productive technologies more aggressively
to provide a demonstration effect, and catalyse mass demand. Development agencies such as
LTA, JTC and HDB will continue to adopt more advanced technologies such as shield tunnelling, in the case of ITA,
and optimise the use of precast and prefabricated components in their upcoming projects.
For government construction projects, tender evaluation will favour firms with good track
records in adopting productive construction designs and methods.
More details on these upstream measures will be provided by MND at its Committee of Supply.
We will also introduce further calibrated measures to discourage construction firms
from over-reliance on lower skilled foreign workers. First, we will increase the foreign
worker levies for construction Basic Skilled Work Permit Holders.
The levy for Basic Skilled (or R2) Work Permit Holders employed within the Man-Year Entitlement (MYE)
will be increased from $600 to $700 in July 2016. We are announcing this change
in the Construction sector two years in advance because of the significant pre-planning needed in construction projects.
Levies for Higher Skilled (or R1) Work Permit Holders
will remain unchanged to further encourage construction firms to opt for more skilled
foreign workers, and to train up their workers. In the longer term, we are looking into
mandating a minimum proportion of R1 Work Permit Holders at the firm level to improve
the skills profile of the foreign workforce. We will help construction firms retain workers
with better skills and experience. We will introduce a new Market-Based Skills Recognition Framework
to complement the existing upgrading pathway which requires Work Permit Holders
to pass a skills certification test to achieve Higher Skilled status.
Under this new framework, this market-based Skills Recognition Framework, Basic Skilled workers
who have worked in Singapore for at least
six years and who earn a salary of at least $1,600 will be allowed to upgrade to Higher Skilled or R1 status.
Many firms have provided feedback through
the SBF's SME Committee about the need to retain experienced workers
who have acquired deep skills and valuable knowledge on the job.
We will extend the maximum Period of Employment for R1 Work Permit Holders from non-traditional sources (NTS)
and the PRC from 18 to 22 years. This extension of Period of Employment will
also apply to the Marine and Process sectors. So we are helping the Construction firms to retain their skilled workers
in two ways. First, by making it possible to upgrade their Basic Skilled workers to R1 status
through the Market Skills Recognition Framework, and secondly, by extending the maximum period of employment
that they can have in Singapore.
We will closely monitor the growth of foreign manpower in other sectors, to ascertain
whether further tightening measures, including levy increases, are needed for 2016 and beyond.
Madam Speaker, if I can move on to
the second major plank of the Budget, and this has to do with our work to achieve a fair and equitable society.
We are driving important initiatives to help
our lower-income families aspire for themselves, and enable every Singaporean to contribute
to a better society. It is a determined, multi-year effort to keep up social mobility and do all
we can to avoid becoming a society of permanent tiers. Equally, we are enabling a better system
of care and financial security for the elderly and Singaporeans with disabilities.
A key feature in this year's Budget is the Pioneer Generation Package.
As PM has stated, we are honouring this unique generation of Singaporeans who built up the country,
although no package can fully reflect the contributions that our pioneers have made.
Budget 2014 will also enhance retirement adequacy and healthcare affordability for all Singaporeans,
besides the Pioneer Generation, and strengthen support for persons with disabilities.
In addition, we will take further steps to support children from lower- and middle-income homes.
As we enhance our social spending, however, I want to highlight two important challenges that we face.
The first concerns healthcare costs.
Healthcare will be the main driver of the higher social spending that we will see over the next 10 to 15 years.
It will happen as Singaporeans get older, but also as new medical treatments
become available, enabling longer and better lives. The demand for medical treatment will inevitably grow.
We will have to find the right ways to fund these future healthcare needs.
It means finding the right balance of funding: between tax-funded subsidies,
collective risk-pooling through MediShield Life and ElderShield,
individual co-payments and safety nets like Medifund for the needy. We must find a balance that
is equitable to the poor, and that also ensures that we can fund quality healthcare on a sustainable basis,
in the next decade and well beyond. But equally important, we must ensure that
healthcare cost inflation is controlled in the years to come. We cannot end up in a cycle
of ever-increasing healthcare spending and funding needs -- whether from the Government
or citizen's own pockets. We therefore have to reshape our healthcare system
to control costs, even as we ensure good healthcare outcomes.
While we have to expand the capacity of our system in every area, from hospitals to home-based care,
we must over time also reduce the over-concentration of patient load in our acute hospitals.
Primary care providers like our family physicians and polyclinics have to play bigger roles.
We are also developing the long-term care sector, to enable patients to receive continuing
care outside hospitals, and close to home.
Besides rebalancing the system, besides evolving the structure of our system to be less concentrated on acute hospitals,
we must also ensure that hospitals, doctors, insurers and patients have the right incentives, so that
Singaporeans receive treatments that are both clinically sound and cost-effective.
There are many lessons to be learnt from the experience of countries where healthcare costs have ballooned
because incentives favour the most expensive treatments, even where benefits are doubtful or unproven.
That's the first challenge I wanted to highlight. The second key challenge is that of developing
quality people for the social sector. We will not succeed without good people: with professional skills,
empathy and the knack of helping those in need to find their own feet.
We need nurses, doctors and allied healthcare professionals; early childhood professionals
and learning support specialists; social workers and counsellors; and imaginative leaders,
who can build strong and effective networks across social services to tackle increasing
complex social challenges. In the coming years, we will be investing
more in our people in the social sector. We will ensure that they have opportunities to deepen
their expertise, empower them to find creative solutions to problems, and give them the reward and recognition they deserve.
Let me move on now to social mobility, which remains a key priority for us.
We will do more in this Budget to strengthen
opportunities for lower- and middle-income students in our education system, both at
pre-schools and at our Institutes of Higher Learning (IHLs).
Our existing financial assistance scheme for kindergartens is aimed at lower-income households.
We will enhance this in two ways through the Kindergarten Fee Assistance Scheme (KiFAS).
First, we will provide more fee assistance, and extend this to the middle-income group.
With this change, more households in the lowest quartile, these are those with household income of up to $3,000 a month, will now pay
just $3 a month, down from as much as $75 previously. A lower-middle income household
that earns $4,800 a month will now pay $85 a month, compared to about $130 today.
The second change is that KiFAS will be made available to all Anchor Operators and MOE Kindergartens.
The Minister for Social and Family Development will provide more details at the Committee of Supply.
We will significantly enhance bursaries at our Institutes of Higher Learning - ITEs, polytechnics and the universities.
First, we will enable more students to qualify
for bursaries by raising the per capita monthly household income threshold from $1,700 to $1,900.
The bursaries will hence benefit students from two-thirds of all Singaporean households.
For university undergraduates, those from the lowest one-third of households will see
bursaries increase to $3,600 a year. Middle-income students will see a $450 increase to $2,600 a year.
This is besides the Tuition Fee Loan and Study Loan schemes that enable students
to pay for their university education interest-free while they are studying.
Similarly, polytechnic and ITE students from middle-income households will receive increased support,
besides the substantial support that we will continue to provide for those from lower-income families.
ITE bursaries for lower-income students will be significantly higher than
their fees, helping them to defray their living expenses.
These changes will together cost up to $147 million more each year.
The Minister for Education will provide more details at the Committee of Supply. Next, healthcare affordability.
We are taking significant steps to enhance
healthcare affordability for Singaporeans by introducing subsidies for MediShield Life,
and expanding subsidies at Specialist Outpatient Clinics (SOCs). We will also raise CPF contributions
to better provide for the future medical needs of Singaporeans.
Let me first start with the MediShield Life Review.
The Review Committee has been reviewing the various parameters of MediShield,
taking into consideration the feedback received. It is reviewing benefits such as claim limits
and co-insurance rates so that MediShield Life provides better protection against large
hospital bills and reduces patients' share of the bill.
Naturally, these significant enhancements will require higher premiums.
However, the Government will ensure that premiums remain affordable for the lower- and middle-income groups.
We will do so in two ways: First, we will provide them with significant
permanent subsidies, so that they can fully pay for their remaining premiums out of their
regular Medisave contributions. We will also provide further assistance for those in financial difficulty.
Secondly, to ease the transition into MediShield Life,
we will provide a subsidy to offset premium increases for the first few years, including
for those who are of the higher-income group. We will finalise the details of the subsidies
after the Review Committee has completed its work. We will also do more to keep outpatient care
affordable in middle-income groups.
Today, all subsidised patients enjoy a 50% subsidy on average for general Specialist Outpatient Clinics (SOC) services,
including consultation and diagnostic tests.
We will raise subsidies for lower- and middle-income Singaporeans from the current 50%
to 70% for lower-income Singaporeans, and 60% for middle-income Singaporeans.
This will be especially helpful for patients who require regular treatment at the SOCs because of their conditions,
these are people with chronic illnesses especially.
The subsidies for SOC services will be implemented from September 2014.
Apart from SOC services, patients also have to spend on medication.
We will similarly enhance subsidies for medication.
However, as this has to be implemented across different healthcare settings, the enhancements will
be introduced early next year. The Ministry of Health will provide the details later.
To illustrate how these subsidies work, consider someone in his 50s who is lower-income and
suffers from chronic illnesses such as high cholesterol and hypertension.
These changes.would mean reducing his annual SOC charges, his annual charges at the Specialist Outpatient Clinics,
by almost half from $480 today to $265, once the subsidies for services and medication are implemented.
An estimated 400,000 patients will benefit from the enhancements. It will cost an additional $123 million each year.
Next, CPF Medisave contribution rates. Everyone has to play a role in meeting future healthcare costs.
The Government is significantly increasing its support for lower- and middle-income Singaporeans,
and providing a special package for the Pioneer Generation.
For individuals, as I mentioned earlier, MediShield Life premiums will go up so as to pay for the enhanced benefits they will receive.
It is important for employers to play a role too in this national effort to provide for the future healthcare needs of Singaporeans.
Indeed, it is in employers' interest to have a healthy and motivated workforce.
We will therefore raise the CPF contribution rate by 1 percentage point for all workers.
This increase will be channelled to the Medisave Account.
To help employers manage this increase,
the Government will provide them with a 50% offset, through a one-year Temporary Employment Credit (TEC).
Employers will receive an offset of 0.5 percentage points of wages, up to the CPF salary ceiling of $5,000.
Both the CPF contribution rate change and the TEC will
take effect from January 2015 to give employers sufficient time to factor the changes into their business plans.
The TEC will cost $330 million.
Our younger workers will benefit significantly from this increase in the CPF contribution rate,
but so too will middle-aged workers.
For example, a 40-year-old earning a wage of $4,000 will increase his Medisave savings
by $20,800 by the time he retires at age 65.
As a result of this adjustment, the overall CPF contribution rate will be 37%, with employers
contributing 17 percentage points and employees 20 percentage points.
At 37%, the overall rate is higher than the range of 30% to 36% that was targeted in 2003.
We deliberated on this increased contribution rate carefully, taking into account future needs.
Compared to a decade ago, life expectancy has increased, and will very likely move up
further in Singapore. The demand for healthcare services has also increased, as advances
in medical care become available. We do not expect to make further changes soon
to total CPF contribution rates, beyond this 1 percentage point increase.
In the longer term, any future changes will have to be carefully considered by the tripartite partners,
taking into account economic conditions, business costs and competitiveness.
With higher Medisave contributions, we will allow elderly Singaporeans to use a portion
of their Medisave more flexibly across a range of outpatient treatments.
This is on top of the existing Medisave withdrawal limits for specific chronic conditions and other treatments.
The Minister for Health will elaborate on this more flexible use of Medisave for elderly Singaporeans at the Committee of Supply.
Madam Speaker, I move on now to the Pioneer Generation Package.
Taken together, the review of MediShield Life -- including the subsidies we will provide
for Singaporeans -- as well as the enhanced SOC subsidies, Specialist Outpatient Clinics subsidies,
are significant improvements in healthcare accessibility and affordability.
These are changes that we will sustain for the long term for all Singaporeans.
The Pioneer Generation Package will provide a special package of support on top of these enhancements.
As the Prime Minister has announced, the Pioneer Generation Package will be for the first generation
of Singaporeans who were living and working in Singapore after we became independent.
The Pioneer Generation Package will thus be for those who were at least 16 years old in 1965.
Within these age cohorts, we have -- for practical reasons -- included those who became citizens before 1987.
This is because our manual records before that are incomplete with regard to the dates they became citizens.
However, we do know that more than 90% of those
who became citizens by 1987 were already living in Singapore before 1970.
In total, about 450,000 Singaporeans fulfil the criteria. There may be people who marginally
miss out on the precise criteria, but have good claims to be counted among the Pioneer Generation.
We will hence establish a panel to assess appeals on a case-by-case basis.
There will be three key components to the Pioneer Generation Package -- Outpatient care, Medisave Top-ups and MediShield Life subsidies.
These special benefits that we are providing
the Pioneer Generation will not be differentiated by income because our objective is to honour
the contributions of this whole generation. However, members of the Pioneer Generation
who are less well-off will benefit more where there are higher underlying subsidies for
all lower-income Singaporeans -- such as at the SOCs, as I have just announced.
Let me start with Outpatient Care.
Many of the Pioneer Generation require outpatient treatment, either for common illnesses or
for chronic conditions, such as diabetes and high blood pressure.
We will provide them with additional subsidies in three areas.
As I have just explained, we are increasing SOC subsidies for the lower- and middle-income groups, for all Singaporeans.
We will give the Pioneer Generation a further 50% off their subsidised bills at the SOCs.
What this amounts to is that all Pioneer Generation members will get a 75% to 85% subsidy for treatment at the SOCs.
If you take the underlying subsidies together with the 50% further discount for Pioneer Generation members,
it amounts to 75% to 85% subsidy for treatment at the SOCs.
Similarly, the Pioneer Generation will receive an additional 50% off their subsidised bills at polyclinics.
So that's the first piece of the Outpatient component of the Pioneer Generation Package.
Second, CHAS benefits, the Community Health Assist Scheme benefits,
which are important because private GPs play an integral role in our primary care system.
CHAS is currently targeted at lower- and middle-income Singaporeans.
Under the Pioneer Generation package,
all members of the Pioneer Generation will get more:
Those who are not on CHAS will now qualify; Those already on CHAS will enjoy additional subsidies,
which will be similar to our enhancements for the Pioneer Generation at SOCs and polyclinics.
The third component has to do with long-term care, and we call this the Pioneer Generation Disability Assistance.
Those who have moderate to severe functional
disabilities often face much higher long-term care expenses because they require assistance
to feed themselves, to bathe or to move around.
Under the Pioneer Generation Package, they or their nominated caregivers will receive cash assistance of $1,200 a year.
The subsidies for SOC and polyclinic services, as well as for disability assistance, will be implemented in September 2014.
The additional CHAS benefits will be implemented in January 2015.
The Minister for Health will provide more details at the Committee of Supply.
The second major component of the Pioneer Generation Package comprises annual Medisave top-ups
of $200 to $800 for members of the Pioneer Generation.
These are on top of the regular GST Voucher -- Medisave payouts for older Singaporeans.
The older Pioneer Generation cohorts will enjoy larger top-ups.
The Medisave top-ups will be paid out from August this year.
The Pioneer Generation can also look forward to the more flexible Medisave for all older Singaporeans,
that I just spoke about.
I move on now to MediShield Life, and the special subsidies that will be provided to members of the Pioneer Generation.
Many of them, especially older members of the Pioneer Generation, are currently not covered by MediShield.
MediShield Life will cover all Pioneer Generation members, including those with pre-existing conditions.
They will receive enhanced coverage for large hospital bills.
We will also provide the Pioneer Generation a special subsidy to
ensure that MediShield Life premiums are highly affordable for them.
The special subsidy will increase with age. All Pioneer Generation members will enjoy
subsidies starting from 40% of the MediShield Life premium at age 65, rising to 60% of the premium at age 90.
What this means is that a 65-year-old today -- who is expected to live to 85 -- will get a 50% average subsidy over his lifetime.
So starting at 40% at age 65, reaching 60% by age 90,
and for someone who is age 65 today, who is expected to live to 85, it works out to an average subsidy of 50%.
The MediShield Life Review Committee is currently
reviewing the benefits and premiums, which will be ready later this year.
However, the Government's intent is clear: For Pioneer Generation members aged 80 and above in 2014,
we intend to fully cover their premiums through a combination of premium subsidies and Medisave top-ups.
This will be the case even for those who are
currently not covered under MediShield, and who will now enjoy the benefits of MediShield Life.
So we will fully cover the premiums through our subsidies and Medisave top-ups, for those who are aged
80 and above in 2014, those members of the Pioneer Generation.
For those who are younger, for example, aged 70 in 2014, if they are on MediShield today, with the
new premium subsidies and Medisave top-ups, we aim for them to pay only about half of their current premiums.
If they are not on MediShield today, they will be brought onto MediShield Life.
They should still pay less than current premiums.
The MediShield Life subsidies will be implemented in end-2015, when MediShield Life is rolled out.
So let me summarise the Pioneer Generation Package.
All members of the Pioneer Generation will receive the special benefits of the Package regardless of income.
They will also get it for the rest of their lives. First, for outpatient treatment.
They will get a 50% discount on their subsidised bills at the SOCs and Polyclinics.
They will also receive CHAS benefits. These will be on top of the underlying subsidies.
And for those with moderate to severe disabilities, they will get cash assistance of $1,200 per year
under the Pioneer Generation Disability Assistance Scheme.
Second, Medisave top-ups. The Pioneer Generation will receive $200 to $800 each year, with the older cohorts receiving more.
This is on top of the annual Medisave top-ups and the GST Voucher.
They will also be able to use their Medisave more flexibly for a range of outpatient treatments.
Third, MediShield Life will be affordable.
For those aged 80 and above in 2014, we intend to fully cover their MediShield Life premiums
through a combination of MediShield Life subsidies and Medisave top-ups.
For those who are younger, around 70 in 2014, we aim for them to pay only half of their current premiums,
with the rest covered through premium subsidies and Medisave top-ups, if they are on MediShield today.
I will explain how I will fund the Pioneer Generation Package later.
Let me move on now to older Singaporeans in general, including those who are not members of the Pioneer Generation.
We want to provide more support for other older Singaporeans.
As I mentioned earlier, they will benefit from subsidies for MediShield Life and the enhanced subsidies at Specialist Outpatient Clinics.
We will introduce further measures to help them.
To help those not eligible for the Pioneer Generation Package with their healthcare expenses, I will provide a Medisave top-up of $100 to
$200 annually over the next five years to Singaporeans aged 55 years and above in 2014.
The vast majority, who are those living in HDB flats, will get $200 a year.
And this is on top of what we are providing annually in the GSTV Medisave.
This is expected, this five-year top up, is expected to cost around $440 million over the 5 years.
I move on now to CPF contribution rates for older workers.
In recent years, we have boosted our support for older workers to help them remain meaningfully employed.
Schemes such as the Special Employment Credit (SEC) and the Workfare Training Support Scheme (WTS)
encourage companies to hire them and invest in training them.
Our efforts at improving the employability of older workers are showing results.
The employment rate of older residents aged 50
to 64 has risen steadily from 56% in 2003 to 70% in 2013.
We had made a commitment in 2012 to give older workers aged 50 to 55 the same contribution rates as their younger counterparts.
We made the first step in that year with a 2.5 percentage point increase.
Similar increases were introduced for workers aged 55 to 65.
So that was in 2012.
NTUC has called for contribution rates for older workers to be increased this year.
The Singapore National Employers' Federation (SNEF) also supports some adjustments in contribution rates,
but has cautioned that rates be increased gradually to preserve the incentive for employers to hire older workers.
Following consultations amongst tripartite partners, we will take a second step towards raising the contribution rates for them.
This will be on top of the 1 percentage point increase in the Medisave contribution rate, for all workers, which I announced earlier.
We will raise CPF contribution rates for those aged from 50 to 55 by 1.5 percentage points -
1 percentage point from the employer and 0.5 percentage points from the employee.
We will also raise the employer contribution rate
for those aged above 55 to 65 by 0.5 percentage points.
All increases in employer contributions will be allocated to the Special Account.
As some older households may still be servicing mortgages, the 0.5 percentage points from employees will
go to the Ordinary Account.
As a result of these changes, a 50-year-old worker earning a wage of $3,000 will have
$6,500 more in his retirement savings at age 65. So it is a significant move, even for older workers.
To help employers adjust, we will provide a one-year increase in the SEC of up to 0.5 percentage points.
This comes on top of the existing SEC of up to 8% of wages, and will offset the increase in older worker contribution rates.
This temporary increase in SEC will cost an additional $30 million.
Like the Medisave contribution increase announced earlier, the higher contribution rates for older workers,
as well as the SEC offset, will begin from January 2015 onwards.
I will also enhance income tax reliefs to
give greater encouragement and recognition to individuals supporting their parents and grandparents.
I will increase parent relief and handicapped parent relief by up to $3,000,
with those individuals who are staying with their elderly dependants enjoying a higher relief quantum.
This measure will benefit about 170,000 individuals, supporting 208,000 dependants.
It will cost about $27 million a year.
Currently, the relief for a parent can only be claimed by one child.
Following a public consultation last year, I will allow the sharing of parent relief in recognition that care
for parents is a shared responsibility among family members.
Our next set of initiatives for Budget 2014 concerns support for persons with disabilities.
We have over the last decade significantly expanded support for them, to help them at each stage of their lives.
First, we will enhance subsidies for the Early Intervention Programme for Infants and Children (EIPIC) as it is called.
For children with special needs, access to
early intervention in the form of therapy and educational support services helps greatly
in developing their potential and their ability to be independent.
However, it is resource-intensive and therefore costs more, which places a higher strain on the finances of families with such children.
We will enhance subsidies so that more middle-income households can benefit.
Those earning above median household income (up to the 80th percentile)
will now benefit from a further 20% to 50% subsidy, on top of an enhanced $500 base subsidy
that benefits all Singaporean children enrolled in the EIPIC scheme.
For example, after the enhancements, a middle-income household with per capita income of $1,875
would pay less than $300 per month -- compared to $600 previously, depending on the service their child requires.
Lower-income households will also see a decrease in monthly expenses.
They will now pay a nominal monthly fee of as low as $3, down from $50 a month today.
Our next set of initiatives is to reduce the cost of transport for the disabled community.
In January 2014, we announced a new government-funded
fare concession scheme so that persons with disabilities who travel by bus and train enjoy a 25% discount on adult fares.
Beyond public transport, we will move on two other fronts.
We will introduce subsidies of up to 80% for
those who require dedicated transport services to access special education and care services.
This will apply to the lower two-thirds of households.
There are also those who rely on taxis as they are unable to travel by public transport or to tap on dedicated transport.
We will subsidise those in the lower half of all households through
a new Taxi Subsidy Scheme, covering up to 50% of the cost.
The Minister for Social and Family Development will elaborate on these initiatives at the Committee of Supply.
Finally, apart from the increase in reliefs
for handicapped parents which I announced earlier, I will also boost support for individuals with handicapped dependants.
Reliefs for those caring for a handicapped spouse, sibling or child will be increased.
Starting from YA2015, each relief will be increased with $2,000 to provide greater recognition and support to these individuals.
This measure will benefit about 11,500 taxpayers.
Collectively, these initiatives to support
persons with disabilities will cost the Government an additional $30 million a year.
Finally, I will provide in this Budget some additional support, especially for lower-income
groups and retirees, to help them with their costs of living.
Older Singaporeans are broadly most affected by increases in cost of living, especially retirees with little or no incomes.
We will provide eligible Singaporean seniors with
a special GST Voucher -- Cash: Seniors' Bonus.
They already receive a GST voucher which contains a cash component, and we will provide a Seniors' Bonus.
This will effectively double the GST Voucher -- Cash that they usually receive.
The additional cash will help them to offset some of their daily expenses.
About 675,000 Singaporeans aged 55 and above in 2014 will benefit from this. This will cost $170 million.
Second, we will also provide a one-off GST Voucher -- U-Save Special Payment this year.
The rebates will be larger for those in smaller flats and through these additional rebates,
eligible households will be able to free up cash for their other expenses.
This will benefit approximately 800,000 HDB households, and will cost the Government $110 million.
The third component has to do with rebates for S&CC charges.
We will provide one to three months of Service & Conservancy Charges (S&CC) rebates.
1 and 2-room HDB households
will receive a total of three months of rebates for this year, while 3- and 4-room households
will receive two months of rebates. This will cost the Government $80 million.
Let me summarize the various enhancements in social support in this year's Budget, which is aimed at helping all Singaporeans
with a special emphasis on the needs of our seniors.
The Pioneer Generation will get assurance on their healthcare costs for the rest of their lives.
Our lower- and middle-income families will enjoy enhanced assistance for pre-school and tertiary education.
They will also benefit from the increased subsidies at our Specialist Outpatient Clinics,
and they will receive subsidies for MediShield Life later on. In addition, they will benefit from increased employer Medisave contributions.
Those who are older will also see increased CPF contributions.
Further, our enhanced tax reliefs will help the large number of Singaporeans
who look after their parents and grandparents.
Persons with disabilities will benefit from our increased support for early interventions when they are young.
Our new transport subsidies will also help them in their schooling years, during their working lives and beyond.
Finally, their families will benefit from the enhanced tax reliefs for handicapped dependants.
I will also take the opportunity to make a series of other tax changes.
First, I will make adjustments to our vehicle taxes to enhance incentives for environmentally-friendly vehicles.
The Early Turnover Scheme was introduced last
year to encourage replacement of old commercial diesel vehicles to meet the new Euro V emissions standards.
Owners who de-register their Pre Euro and Euro I vehicles before the end of
statutory life will pay lower, pro-rated COE premiums for their replacement vehicle,
as they can transfer the unused period of their COE to the replacement vehicle.
They will also get a bonus COE period for their replacement vehicle based on the current vehicle's remaining statutory life.
We will enhance the bonus COE period to further
incentivise owners to replace their vehicles early.
The Minister for the Environment and Water Resources will announce more details during the Committee of Supply.
Last year, we introduced the Carbon Emissions-based Vehicle Scheme (CEVS) to improve the take-up of green vehicles.
Car models with low carbon emissions will enjoy generous rebates on their
Additional Registration Fee (ARF) of up to $20,000, whilst those with high carbon emissions
will have to pay a registration surcharge of up to $20,000.
We are encouraged by the results so far - more than 50% of the new cars registered in 2013
received CEVS rebates while about 10% paid the surcharge.
This is an improvement over 2012, where only about 40% of the new cars registered would have been in the rebate bands
and about 14% in the surcharge bands. As the CEVS was introduced last year amidst
other changes to the COE system and the introduction of tiered ARF, we should observe the full
impact of CEVS before making refinements. Hence, I will extend CEVS by six months until
June 2015, with a view towards continuing the scheme thereafter.
Next, I will raise duties on betting, tobacco and liquor, no budget is complete without this,
in line with our social objective
of avoiding excessive consumption or indulgence in these areas.
Duties on cigarettes and manufactured tobacco products have remained constant since 2005.
In the meantime, smoking prevalence has increased, especially amongst youth aged 18 to 29.
To discourage this trend, I will raise the excise duties for cigarettes and manufactured products by 10%.
This is expected to yield additional revenue of about $70 million a year.
The last effective increase in liquor duties
was made 10 years ago, in 2004, when we rationalised our liquor duties to bring them in line with our international obligations.
We will now raise the excise duty rate of all liquor types
by 25% to keep pace with inflation.
These changes will take effect today and will result in a revenue gain of about $120 million a year.
I will raise the betting duty rates on lotteries from 25% to 30% of gross bets, from 1 July 2014.
The rate increase affects Singapore Pools.
Private clubs are not affected as they pay different duties on their jackpot machine takings.
The Tote Board will have adequate resources to continue its donation activities.
The additional duties will increase Government revenues by $255 million a year.
The other tax changes are reflected in the Annex.
Madam Speaker, before I go on to summarise the FY2014 budget position, let me set out
how we will fund the Pioneer Generation package. We estimate that the cost of providing the
extra benefits to the Pioneer Generation over their lifetimes will be slightly over $9 billion
in nominal terms, it will be slightly over $9 billion in nominal terms. It is right and prudent to set aside monies
today to pay for the Pioneer Generation Package, while we have sufficient resources to do so.
We will therefore set aside monies in Budget 2014 that will enable us to meet the full
projected cost of this package. We will createa Pioneer Generation Fund for the purpose
and set aside $8 billion into the Fund. The $8 billion, with accumulated interest over
time, will be enough to pay for the full projected cost of the package, including a buffer for inflation.
Of the $8 billion in the Fund, we expect that about half will be drawn down
in the first ten years, due to the age profile of the Pioneer Generation and the higher benefits
for older members. With this Fund, we assure the Pioneer Generation
that Singapore will honour our commitment to them, regardless of future economic or fiscal circumstances.
The Fund also ensures that Budgets in subsequent years can focus on the needs and challenges
of the future, for all Singaporeans. Our spending needs will grow significantly in the next 10 to 15 years.
Investments in infrastructure, such as HDB estate renewal, MRT expansion,
and Changi Airport Terminal 5 will accelerate. Government healthcare spending for the population
as a whole will grow, quite apart from the extra benefits we are providing the Pioneer Generation.
We are also spending more on education. On pre-schools, in the next 5 years, we are
spending an additional $1.5 billion, an additional $1.5 billion in the next five years, just on pre-schools.
We are expanding university education and enhancing the polytechnic and ITE pathways.
We will also do much more in continuing education for our workers.
The $8 billion Pioneer Generation Fund is
not intended to cover the underlying healthcare subsidies that the Pioneer Generation receives
together with all Singaporeans. These will continue to be funded from future annual budgets.
For example, the enhanced Specialist Outpatient Clinics subsidies in this year's Budget are part of our future
budgetary spending and we have planned for them on that basis.
After including the Pioneer Generation Fund and various measures in this year's Budget,
and factoring in the Net Investment Returns Contribution, the Overall Budget Balance is
a deficit of $1.2 billion, or about 0.3% of GDP. This is close to a balanced budget, and
will not result in a draw on past reserves as we have sufficient surpluses from the last few years.
Madam Speaker. let me conclude very briefly.
This Budget builds on the changes that we have been making in recent years as Singapore enters a new phase.
We are transforming our economy to sustain improvement in incomes;
we are opening up new opportunities for the young; and we are giving more assurance to our seniors.
We can never be certain of the future.
But the Pioneer Generation has given us something beyond the material.
As the Prime Minister put it at the Pioneer Generation Tribute Event on 9 February, it is the pioneering spirit --
to be self-reliant, never-say-die, and to be united in purpose.
One of the people that I met at the Tribute Event was Madam Fong Yuet Kwai.
We have a photograph here, she is the one in the deep red blouse. She's now retired.
She had been an educator for over four decades, all of it at Nan Hua Primary, including 21 years as principal,
working tirelessly during the switchover from Chinese-stream to English-stream and strengthening the school year by year.
Madam Fong was diagnosed with cancer in 1997.
Took a break to get some rest, but came back after just six months.
She wanted to re-immerse herself in school life.
I was then in education a decade ago when she finally retired,
so I met her to thank her for her contributions to education, because she was retiring, and her reply was simple.
"It was my duty".
The best we can do for the Pioneer Generation
is to live according to their values as we seek to build a better future for Singapore.
Madam Speaker, I beg to move.