18 Feb 2006

Windfall For All

Budget wows with bigger-than-expected cash handouts to older and low-wage workers
Weekend • February 18, 2006
Christie Loh

Every Singaporean gets to dip into last year's harvest but the sweetest fruits will go to the truly needy. This was at the core of the Government's 2006 Budget statement on Friday when Prime Minister and Finance Minister Lee Hsien Loong unwrapped $3.6 billion worth of goodies for individuals and companies.

Taking centre-stage during his two-hour outline of the Budget for the fiscal year starting April 1 was a $2.6-billion "Progress Package" that included cold, hard cash for all Singaporeans and extra handouts for workers earning below $1,500 a month.

"Everyone contributed to our economic restructuring efforts and should now share in the fruits of growth. However I will weigh it more towards the lower-income groups, in line with our philosophy that we should progress together as one people," Mr Lee addressed Parliament in a speech titled "Building on our strengths, creating our best home".

So on May 1, all adult citizens will get a one-time 'Growth Dividend' of between $200 and $800 that can be instantly encashed upon allotment.

But the maximum sum will go to the low-wage worker. That is the Singaporean who, besides earning $24,000 or less annually, lives in a flat with an "annual value" of no more than $6,000 – a classification that includes 1, 2, 3 and most 4-room HDB flats. Falling under this category is 45 per cent of the population including lower-middle income earners who often "miss out on our social safety nets", said Mr Lee who expects the Growth Dividends to cost the Government $1.4 billion.

Low-wage workers aged 40 and above will also get a 'Workfare Bonus' ranging from $150 to $1,200 per person "as a reward for regular and productive work", said Mr Lee, who decided to be more generous than what a ministerial panel recommended recently. Instead of handing out cash only to those who earned no more than $1,200 a month, the Government will reach out to those with monthly incomes of up to $1,500 as long as they live in a property with an annual value not exceeding $10,000.

Up to 400,000 Singaporeans are expected to benefit from the Workfare Bonus totalling $400 million. Another $75 million will go to low-wage workers' Central Provident Fund (CPF) accounts as an extra housing grant if they wished to buy their first homes.

Mr Lee explained that this Budget was "more targeted" in sharing surpluses with needy groups compared to the broad-based approach adopted in previous years when schemes such as rental and utilities rebates were used. Such well-worn measures, however, retained their place in this year's Budget.

The Government will waive rentals for those living in 1- and 2-room HDB flats, and dish out rebates for utilities ($60 million) and Service & Conservancy Charges ($50 million).

Besides handouts, the Government adopted ministerial suggestions to help the elderly and low-wage earners stay employable by re-creating jobs and providing incentives for firms to hire older workers.

Also part of the surplus-sharing exercise were National Service men who got one-off bonuses, and Singaporeans aged 50 and above who will get CPF top-ups for their retirement and healthcare needs.

In the area of education, all schools will get a sum of money for providing more enrichment activities, with neighbourhood schools getting double the grant per capita compared to independent and autonomous schools.

But on the corporate front, companies had received less attention, said Mr Zulkifli Baharudin, chairman of Mercy Relief and former Nominated Member of Parliament (NMP).

Corporate measures were "geared towards fine-tuning the economy" and enhancing competitiveness through a $5-billion Research and Development Trust Fund and an upgraded national broadband network, said United Overseas Bank economist Ho Woei Chen who felt that specific industries including maritime, logistics and financial services were given boosters from an array of tax measures.

Overall, this is a 'people's Budget' that was more generous than expected, said Ms Ho.

Other observers noted that the so-called "sin taxes" levied on cigarettes and alcohol were not raised – unlike in previous Budgets – a move that is bound to cheer related industries and the man in the street.

Could the Government's remarkably-outstretched arm be a vote-buying tactic for the People's Action Party in the upcoming elections?

Not necessarily, said OCBC Investment Research economist Suan Teck Kin: "Even without the elections, the Government would probably still give handouts to the low-income groups because these people have been left behind. But the elections could be a catalyst for PM to be even more aggressive."

Added Mr Zulkifli: "Regardless of election talk, one thing we cannot ignore is, here could be a man who really has a heart for social issues."

Because of the Government's generosity, 2006's balance sheet is expected to see a deficit of $2.86 billion, the bulk of which would be funded by projected Net Investment Income (NII) of $2.39 billion, which comes from investing past reserves.

The rest of the deficit will be financed by funds accumulated in the Government's current term, said Prime Minister Lee.

But Mr Steve Chia, secretary-general of the National Solidarity Party, was glad to see surplus being returned to the people even though he felt that the Opposition would have to fight even harder during the elections.

"The low-income will definitely be more appreciative. That would translate into less anger against the Government and therefore their votes," he told TODAY.

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