The Budget – and my two cents worth

First, an announcement: Sin taxes have NOT been raised. I guess that’s a small reprieve for those who smoke and drink, especially those who are unhappy at not being able to drink in public places after-hours…There’s nothing on property either, so your home is safe…

Okay. That was just an attempt at light-heartedness.

So what is it about the Budget that will make anyone, including me, happy? I am UNhappy that my CPF contribution rate is going up, although the euphemism used is “normalised’’. Having enjoyed a little bit more take-home pay for a few months after turning 50, that little bit is going to go back into CPF. The plus point is that my employer also has to pay its 1 per cent portion. Yes, yes, I know all the big picture arguments about retirement adequacy…Still I was hoping that only the employer contribution rate went up, not mine!

That’s the trouble isn’t it? We’re all looking at what’s in it for us.

Drivers are fuming at the extra duty on petrol, after enjoying lower petrol prices over recent months. Even though the higher duty isn’t going to push pump prices back up to where it was, it just seems like a little windfall has been taken away. Then comes the argument: What is all this about taxing road usage, rather than ownership then? Point to ponder: The G needn’t have upped petrol duties, but upped ERP rates instead – and earn curses everyday from drivers who have to pass through gantries. Petrol duties are….well…subtle.

Actually much of Budget 2015, dubbed the Jubilee Budget even by the PM, was anticipated:

– The CPF review panel and the NTUC recommended the “normalisation’’ of CPF contribution rates for older workers, and so it happened.

– The panel also suggested raising the CPF salary ceiling from $5,000 to $6,000 while  NTUC wanted it in two steps – in $500 increments. The G did it in a single bound.

– The NTUC wanted some kind of training account to encourage workers to upgrade. It happened. The SkillsFuture credit is going to be set up with $500 in the first instance. And those aged 45 and above can get up to 90 per cent of their continuing education courses subsidized. I suppose we’ll hear more about how this “credit’’ will be administered. Maybe a sort of Edusave account for workers?

– Businesses wanted a moratorium on foreign worker levies. It happened. They are “safe’’ for two years although Finance Minister Tharman Shanmugaratnam made it plain this was no rewind, just a pause.

– Businesses wanted more restructuring support, such as the continuation of the Productivity and Innovation Credit scheme and Wage Credit Scheme. They’re still alive, although the co-funding portions have been lowered. Nothing was said about monitoring or tracking the usage of PIC which, I suppose, will be raised by the MPs. Nor was more said about driving up our dismal productivity figures, which I thought would feature majorly…

– The Silver Support scheme announced during the National Day rally was fleshed out, with about $600 going to seniors and up to $750 to the really badly off group every quarter. Now, that’s a windfall. The G seems to be conscious about how people will grumble about eligibility criteria and has decided on a mix of past income, household type, level of support. The Manpower ministry will sort this out. I wonder why. Shouldn’t this come under the Ministry of Social and Family Development?

Now for what’s not anticipated:

At the low end:

Although the CPF review panel had suggested raising the salary ceiling and older worker contribution rates, it didn’t dwell very much on the issue of retirement adequacy. It’s been getting some brickbats for this. After all, there’s no point tweaking the nomenclature surrounding the Minimum Sum if people don’t have a minimum sum to speak of. Now, the G has loaded another 1 to 2 per cent interest for those with low CPF balances. I wonder how this will pan out in concrete terms – how many people will achieve the minimum sum levels when they hit 55?

At the high end:

The higher personal income tax for top earners hadn’t been expected, and seems to be bucking the trend of lower income taxes worldwide. It has always amazed me that so many people here do not pay tax at all. BT says 90 per cent of the people here account for just 20 per cent of direct taxes (GST is an indirect tax). I guess some people will sniff and say that the G “taxes’’ in other ways, through levies and fees ecetera.

With these changes to make the system more progressive, I had expected the term income inequality to be used and references made to the Gini co-efficient. Instead, Mr Tharman took a big sweep of history talking about the rise in median incomes since 1965 and how they compare with other countries. Conclusion: We’re better-off. The “median Singaporean worker’s wage” (Mr Tharman didn’t say how much) is now the highest among the Asian newly industrialised economies and just 10 per cent lower than Japan. Over the past decade, “median household income per person” has increased, in real terms, by 36 per cent, he said.

I am no economist but I gather there is some concern about Temasek Holdings being included into the Net Investment Return framework. In case you don’t know what this means, here’s, hopefully, an accurate idiot-proof version: Currently, when MAS and GIC invests money, there is a return on investment that is projected/calculated. Half of this “projection’’ – whether it comes through or not – can be used by the G. Now, the concern is whether Temasek belongs in the same category as MAS and GIC which both invest conservatively. Temasek is supposed to be more “adventurous’’ – so you can’t be that sure about returns. I guess it’s a way to bolster our revenues and, another guess, to show detractors that Temasek’s money is being put to public use.

As I said, I am no economist but it does look like a lot of long-term thinking went into the budget. Some will say it is the work of civil servants. Even if so, I would think they would need some political direction. I frankly don’t care if it’s an election budget or not – oh, we’re all still getting GST cash rebates – but it does make me ask myself if any other political party will be able to produce a Budget that is so wide-ranging and finely-calibrated.

Anyway, let’s see how the MPs do during the debate on the Finance Minister’s statement. I hope they will cut to the chase and raise pertinent issues rather than merely laud it with nice-sounding adjectives. In other words, I hope to see, in productivity parlance, some “value-added’’.