ABOUT THE BIG QUIZ

L Co-organisers: The Straits Times and the Ministry of EducationL Presenting sponsor: Singapore Press Holdings FoundationL Innovation partner: ShellL The run-up to the Big Quiz comprises:1. A series of 12 primers on current affairs topics2. Talks given by editors and correspondents of TheStraits Times3. A sponsored segment on students’ say to set questions

THE BIG QUIZ CONTEST

Four quiz rounds in which teams from participating schools willvie for the top prize: a championship trophy and $5,000 cashL Open to: First year pre-university students and Year 5Integrated Programme students from 24 participating schools

For more information, go to www.straitstimes.com/thebigquiz

By AARON LOWASSISTANT MONEY EDITOR

EVERY year, usually inFebruary, Singapore’sFinance Ministerpresents Parliamentwith one of the most

important economic and politicaldocuments of the year: the Bud-get.

He also gives a speech to Parlia-ment to explain the Budget.

The document is an accountingof the Government’s expenditure,such as building MRT lines or pay-ing civil servants, and revenues,mostly taxes collected from firmsand individuals.

It is also a means for the na-tion’s leaders to communicate thebiggest policies of the day.

It is a closely watched event,with the media and analysts scruti-nising every detail of the docu-ment. Many Singaporeans watchit live via various platforms.

In other countries, especially inEuropean nations such as Italy,Spain and Portugal, Budgets havetaken on much greater signifi-cance as these countries are heavi-ly indebted to foreign investors.

They have to adhere to strictrules about how much more theycan borrow and what they are sup-posed to spend their funds on.Break a rule and it could mean thecollapse of an entire economy,with foreign funds drying up.

By contrast, Singaporeans donot have to worry about whetherthe Government is facing trillionsin debt, or preparing to imple-ment tough austerity measures.

Instead, the main question onmany Singaporeans’ lips is:“What’s in it for me?”

‘Robin Hood’ Budget

IN A trend that Europeans can on-ly dream of, the Government has

been dishing out tax rebates,cash gifts or Central ProvidentFund (CPF) top-ups to citizensalmost every year for the pastdecade. This is because the Gov-ernment has been able to bringin surpluses – where govern-ment revenues and investmentincome exceed expenditure –on a fairly regular basis.

Between 2000 and last year,there were about five years whenthe Budget was in deficit – mean-ing expenditures exceeded reve-nues. The other seven times, theGovernment recorded a surplus.

In 2011, just before the GeneralElection, the Government record-ed $4 billion in overall surpluses.That same year, the Governmentgave out $3.2 billion in cash gifts,bonuses and rebates to individualsand families.

Called the “Grow and Share”surplus-sharing package, it wasone of the largest baskets of“goodies” given out by the Gov-ernment.

Annual deficits are fundedfrom the accumulated surplusesover the current term of govern-ment. But by the end of eachfive-year term of government, theBudget has to be balanced.

This year, the Government re-corded operating revenue – whichincludes personal and companytaxes – of $55.2 billion. In addi-tion, investment returns came inat about $7.65 billion.

After deducting for expendi-ture, transfers and endowmentfund top-ups, the Governmentlogged a very decent surplus of$3.85 billion.

Transfers include Goods andServices Tax vouchers, serviceand conservancy rebates as wellas CPF top-ups.

But whether a resident has re-ceived anything from the Govern-ment would depend very much onwhether he was in the rich seg-ment or the poor segment of thepopulation.

If you were in the top 10 percent of income earners, chancesare, you would have got very littlefrom the Government. In fact, therich are being more heavily taxed,

especially if they are in the habitof buying big cars and investing inexpensive properties.

Higher-end investment proper-ties will attract heftier tax rates.The cost of a big luxury car, suchas a Mercedes-Benz, will jump bytens of thousands of dollars.

It wasn’t for nothing that somedubbed the Budget this year a“Robin Hood” one.

It was a lot more generous to

lower-income earners, who havebeen struggling to raise their wag-es in the past few years.

For instance, the Workfare In-come Supplement (WIS), in whichthe Government gives cash andCPF top-ups to low-wage work-ers, was strengthened.

Maximum WIS payouts willrise by between 25 per cent and 50per cent for workers aged 45 andabove.

The salary ceiling for those eli-gible for WIS will also be raisedto $1,900 from the current$1,700.

Other measures will help stu-dents from lower-income fami-lies, starting from pre-schoolers.

Among other moves, $72 mil-lion will be pumped into the Op-portunity Fund, which givesschools money to help lesswell-off pupils have the chance tolearn new things.

Even when it comes to the cor-porate world, policies announcedto transform the economy had aclear social objective.

Deputy Prime Minister and Fi-nance Minister Tharman Shanmu-garatnam made this clear whenhe spoke about the massivethree-year Transition SupportPackage worth $5.3 billion forbusinesses.

The centrepiece is a $3.6 bil-lion Wage Credit Scheme. TheGovernment will co-fund for thenext three years the wage in-crease of Singaporean workersearning up to $4,000 in monthlygross wages.

This is to help firms strugglingwith the rising costs of doing busi-ness as well as to nudge bosses togive higher pay increments forlow-wage workers.

Apart from the redistributiveslant of policies, there was also aclear signal that the Governmentwill not flinch from its stated goalof reducing the reliance on for-eign workers.

Moves to tighten foreign work-er policies started in 2010 and theGovernment has continued torein in the growth of foreign work-er numbers.

This year was no exception.But instead of targeting only un-skilled workers, this year the Gov-ernment took aim at themid-skilled and higher-skilledworkers by raising the salary re-

quirements for both categories.This was, as DPM Tharman put

it, to level the playing field for lo-cals looking to compete with for-eigners for jobs.

He also addressed growing con-cerns that the middle class wasfeeling the squeeze due to highercosts of living. The best way tohelp them is not by reducing costsbut by making sure their incomescontinue to grow, even as the Gov-ernment moves to ensure that theoverall tax burden on them is low,he said.

There will also be a major re-view of health-care financing,with the Government promisingto pick up more of the costs ofhealth care, he said.

The moves to increase socialspending have led some to ask ifthe Government is tilting to theleft to become socialist. But anoth-er question that has been raisedis: How will the Government payfor all of this?

There is a limit to raising taxesas businesses and wealth earnersare mobile and can relocate to low-er-tax regimes. Singapore’s taxbase is also shrinking as its popula-tion ages and there are fewerworkers.

That is the biggest question onthe minds of economists such asOCBC economist Selena Ling.

“It’s fine to say spend on thisand that but how is the Govern-ment going to raise the money topay for all of this?” she said.

“And is there an objective forsocial policies like Workfare? Arewe content at stopping at the cur-rent salary cap of $1,900 or will itbe raised higher to, say, $2,500?”

Whatever other social policiesthe Government adopts, it shouldnot and cannot sway from the oneguiding principle it has held to allthese years: living within one’smeans.

aaronl@sph.com.sg

THIS series of 10 questionsis brought to you by theNational Current AffairsQuiz’s innovation partnerShell and aims to look forthe best ideas and solutionsto issues today.L This week’s question(part 2 of 10): What is themost importantconsideration for ensuringpublic spending remains at asustainable level?Sum up your thoughts in200 to 250 words andsubmit your essay throughyour teachers this week.

The top 10 essaysreceived in response to thisquestion will be uploaded toThe Straits Times’ currentaffairs website Singapoliticsfrom April 15 for publicvoting.

The top three essayswith the most votes willeach win $200 in vouchersand be reproduced, in fullor in part, in print.

The overall best essay ofthe entire series wins$1,000 in vouchers.

This competition isopen only to Pre-University1 and IntegratedProgramme Year 5 studentsfrom 24 participatingschools.

Visit the websitewww.singapolitics.sg tovote for the responses tolast week’s question onenvironment issues.

ThoughtLeadershipQuestion

PRIMER

The Budgetand what itmeans forS’poreans

This is the second of 12 primers on various current affairs issues, which will be published in the run-upto The Straits Times-Ministry of Education National Current Affairs Quiz.

SINGAPORE’S conserva-tive fiscal spending hasbeen lauded as a shiningexample of prudence,but a quick check online

may bring one to data that pointsto the country having one of theworld’s highest debt to gross do-mestic product ratios.

For instance, the CIA WorldFactbook lists Singapore as hav-ing public debt equivalent to 105per cent of its GDP, the 14th high-est in the world.

Why the discrepancy?Singapore’s public debt as list-

ed by CIA, and other websites, isgross debt, not net debt.

To understand the differencebetween the two, consider this:Say two men both borrow $1 mil-lion each. The first has no other as-set, so his gross debt and net debtare the same: $1 million.

The second man actually has $1million in his bank account, buttook up a $1 million loan for in-vestment purposes.

His gross debt is $1 million. Buthis net debt is zero.

So there is a big difference be-tween a man with no money whoborrows $1 million to spend, and aman with $1 million in assets, whoborrows the same amount to in-vest.

Singapore has not borrowed tofinance its spending since the1980s, a critical fact that is oftenignored by these statistics.

Singapore does issue debt but

for very different reasons.One type of debt that is regular-

ly issued are the Singapore Gov-ernment Securities, which are is-sued to develop the domestic debtmarket.

The other is the Special Singa-pore Government Securities,bonds issued to the Central Provi-dent Fund (CPF). The bonds is-sued in this case are to pay theCPF interest rates that CPF mem-bers get on their savings.

The Finance Ministry says onits website: “All borrowing pro-ceeds are therefore invested. Theinvestment returns are more than

sufficient to cover the debt servic-ing costs.”

Under the Constitution, theGovernment cannot spend themonies raised from both sets of se-curities. In fact, Singapore is oneof 14 countries which continue tohold the highest AAA rating levelfrom the various credit-ratingagencies.

Singapore’s Constitution alsostipulates that the Budget must bebalanced over the term of govern-ment. Any leftover surpluses atthe end of the term of governmentwill be locked away as past re-serves. And if there is a need to

dip into the past reserves, thePresident must give his consent.

So far, the Government hasdipped into the past reserves onlyonce. In 2009, it obtained thePresident’s approval to drawdown $4.9 billion from past re-serves to fund special schemes inthe light of Singapore’s worst re-cession since Independence.

These included the Jobs CreditScheme, which subsidised thewages of Singaporeans, and theSpecial Risk-Sharing Initiative,which helped companies get ac-cess to credit.

The actual amount taken outfrom the reserves amounted to $4billion. But in 2011, after a strongeconomic recovery in 2010boosted tax collections, the Gov-ernment put the money back intothe reserves.AARON LOW

Singapore has not borrowed to finance its spending since the 1980s, a critical fact that is often ignored in statistics put out by some organisations. ST PHOTO: SAMUEL HE

Themovestoincreasesocialspendinghave ledsome to ask ifthe Governmentis tilting to theleft to becomesocialist. Butanother questionthat has beenraised is:How will theGovernment payfor all of this?

THE SINGAPORE PERSPECTIVE

Prudent or heavily in debt?

M O N D A Y , A P R I L 8 , 2 0 1 3 OOPPIINNIIOONN A23