Budget 2020 roundup
Updated: Feb 20
Singapore presented a historic budget proposal yesterday (Feb 18), projected to lead the country into its biggest budget deficit in more than 20 years and throwing earlier estimates by economists in the shade.
That’s largely because the Government has set aside a whopping $6.4 billion in special support packages to stimulate the economy dragged down by the Covid-19 outbreak. Companies and their workers will receive a $4 billion “stabilisation and support package” while $1.6 billion will go into “care and support package” for households. An $800 million sum will also be set aside for frontline agencies fighting the outbreak.
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“The Singapore economy faces considerable uncertainty because of heightened risks in the global economy, and the rapidly evolving Covid-19 outbreak,” said Deputy Prime Minister and Finance Minister Heng Swee Keat, who wasted no time giving details on plans to help businesses tide over the economic slowdown.
The deficit, which refers to how much the Government’s projected spending will outstrip its revenue, is estimated to be $10.9 billion for 2020, or 2.1 per cent of Singapore’s gross domestic product (GDP). Economists had earlier predicted a deficit in the range of $500 million to $8 billion.
The sum eclipses the $1.7 billion revised deficit chalked up last year and exceeds the $8.7 billion deficit forecasted in 2009 when the country was under strain from the global financial crisis.
Here are some details:
A sum of $800 million, mainly to the health ministry, will be set aside to help those working in the frontlines to contain the Covid-19 outbreak.
The Government will also provide top-ups to two healthcare funds: $750 million to the ElderCare fund, which subsidises nursing homes run by voluntary welfare organisations; and $200 million to the MediFund, which provides financial help to the needy.
Mr Heng announced a $4 billion Stabilisation and Support Package to counter economic threats from the coronavirus outbreak. It’s mainly about two things: helping workers keep their jobs and supporting businesses hit hard by the outbreak.
To help firms retain their workers, the Government will offset 8 per cent of the wages of each local worker, up to a monthly cap of $3,600 for three months. It will also contribute 5 percentage points more in the co-funding of pay raises for Singaporean workers who earn $5,000 a month (up from $4,000 previously), to ensure Singaporeans continue to get raises.
Sectors directly hit by the coronavirus outbreak — tourism, aviation, retail, food services and taxi and private hire car services — will get property tax rebates, rent waivers and preferential short-term loans. The Government will also extend funding for the retraining and redeployment of workers in some of these sectors.
On a macro level, all firms will get a 25 per cent corporate income tax rebate, up to a cap of $15,000 per company, as well as faster tax write-downs on investments to put more cash in hand to prepare for an economic rebound. The Government will also increase loans for Singapore’s small and medium enterprises (SMEs) and allow flexible rent payments to tenants of government-managed properties.
Keeping seniors in the workforce
To encourage employers to hire older workers, Mr Heng introduced a Senior Worker Support Package comprising four measures.
First, the Special Employment Credit (SEC) and Additional Special Employment Credit (ASEC) — wage offsets given to employers hiring Singaporean workers aged 55 and above — will be repackaged into a Senior Employment Credit from 2021. Nothing new here other than the name change, but we can expect wage offset levels to taper down over time as Retirement and Re-employment Ages are raised.
Second, employers will receive a CPF Transition Offset in 2021 to help them cope with the rise in CPF contribution rates paid to their employees. This offsets half of the increase in employer contributions.
Third, the Senior Worker Early Adopter Grant will reward enterprises that voluntarily raise their own Retirement and Re-employment ages ahead of the legislated changes — by 2030, retirement age is set to go up from 62 to 65, re-employment age will increase from 67 to 70.
Fourth, the Part-Time Re-employment Grant will support companies that voluntarily commit to providing part-time re-employment to all eligible older workers who ask for it. More details will be provided during the Ministry of Manpower’s budget debate.
But those who want to continue learning can do so. Every Singaporean aged 40 to 60 in 2020 will receive a SkillsFuture Credit top-up of $500 to pursue their interests — be it cooking or coding.
Saving for retirement
To ensure that Singaporeans save enough for retirement, the Basic Retirement Sum (BRS) — from which monthly payouts are drawn — will continue to rise. Currently set at $90,500 for those turning 55 this year, it will increase by 3 per cent per year for the next two cohorts. This means that the BRS will be $93,000 for those turning 55 in 2021, and $96,000 in 2022.
To encourage family members to help their elderly tide over their retirement, Mr Heng introduced a Matched Retirement Savings Scheme. It will match every dollar of cash top-up made to their CPF Retirement Account, up to an annual cap of $600.
For seniors aged 65 and above who have insufficient savings and little to no family support, the Silver Support Scheme will provide higher cash payouts. From December this year, this will rise by 20 per cent — an increase from $750 to $900 per quarter.
The eligibility criteria of Silver Support will also be expanded. A new payout tier will be added from December 2020 to provide a smaller payout to seniors whose monthly household incomes per person are above $1,300 but not exceeding $1,800.
Overall, the cost of Silver Support will nearly double, from today’s $330 million, to around $620 million in 2021.
The goods and services tax will stay at 7 per cent in 2021. But the two per cent hike will still happen — sometime from 2022 to 2025. When it does, there is a $6 billion Assurance Package to buffer Singaporeans against the increase.
The package includes a cash payout of $700 to $1,600 over five years for adult Singaporeans. Most households will receive offsets to cover at least five years worth of additional GST expenses. Lower-income households will receive more. Those who live in one to three-room HDB flats will receive help for 10 years worth of the expenses, on top of the existing permanent GST Voucher.
In the Care & Support Package, additional GST vouchers under Utilities-Save (U-save) will also be given out. These vouchers are given out every three months to help HDB households offset some of their utility bills and lower overall household expenses. The amount of rebate to be received will depend on the HDB type. Those who own more than one property are not eligible for this voucher.
The number of rebates this year will be doubled through a one-off U-Save Special Payment for all eligible HDB households. There will also be an additional rebate for larger households with five or more members to help with their bills. Together with the U-Save Special Payment, these large households can receive a total of 2.5 times (up to $1,000) their regular rebates this year.
The Government wants more students to go on study and work trips abroad. And it wants them to do it in the region. It is setting a target for 70 per cent of local students at institutes of higher learning to go overseas, up from 50 per cent. Of this group, the Government aims for 70 per cent to visit China, India and Asean countries via a new Asia-Ready Exposure Programme. It will also double the capacity of SkillsFuture Work-Study Programmes, with the aim of admitting 12 per cent of each cohort for the programme, up from 3.5 per cent today.
Pre-university students under the Financial Assistance Scheme will receive an additional $100, raising their annual bursary to $1,000. Transport subsidies for all students and school meal subsidies for secondary school students will also be increased.
Full-time Institute of Technical Education students who qualify for the lowest income tier of bursaries will now receive full fee subsidy on top of the cash bursary, and those from low- and middle-income households will receive up to $200 a year in additional bursaries. Bursaries for polytechnics and autonomous university students will also be raised for the 2020 academic year.
Mr Heng announced that by around 2025, 80 per cent of pre-schools will be government-supported, up from just over half today. Funding for the early childhood sector will also double to over $2 billion per year.
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Electric vehicles, or EVs, is the word of the day. Mr Heng said that the government is placing a “significant bet” on them and is planning to phase out internal combustion engine vehicles by 2040.
Besides pledging that the government will progressively use “cleaner vehicles”, Mr Heng announced measures to encourage the switch to EVs. These include an early adoption incentive providing up to 45 per cent discount on the existing Additional Registration Fee tax, capped at $20,000, for buyers. The number of public EV charging points will increase from 1,600 today to 28,000 by 2030.
But the switch would mean losses in fuel excise duties. Some changes to how road tax is calculated can be expected. Among other things, a lump-sum tax will be built into the road tax specifically for EVs.
Other measures announced are incentives for lower-income households which buy energy-efficient appliances and a coastal and flood projection fund. The Ministry of Environment and Water Resources will elaborate on plans to tackle sea-level rise and increase local food production during the Committee of Supply debate next week.
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Older Singaporeans stand to make more money out of their homes. Without giving specifics, Mr Heng said the Silver Housing Bonus and Lease Buyback schemes will be enhanced. The schemes allow elderly homeowners to profit off the downgrading of their homes or leases.
For other Singaporeans, Mr Heng pointed to two affordability measures introduced last year: raised income ceilings for flat eligibility and the Enhanced CPF Housing Grant, which is more generous than earlier housing grants.
Sustainable living will be integrated into newer HDB estates under a new HDB Green Towns Programme, which will focus on reducing energy consumption, recycling rainwater, and cooling HDB towns. In line with earlier government plans for more green cover in estates, housing developments with 45 to 60 per cent of its area covered by greenery will be ready from this year.
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Mr Heng announced that the quota for S Pass workers — mid-skilled foreigners earning at least $2,400 a month — in the construction, marine shipyard, and process sectors will be cut. That’s to give local workers “fair opportunities to grow while supporting the manpower needs of enterprises”, he said.
The S Pass sub-Dependency Ratio Ceilings, which refers to the proportion of S Pass holders a firm can employ, will be tightened for these sectors. This will happen in two phases: The first cut — from 20 per cent to 18 per cent — will happen in 2021 and the second cut down to 15 per cent, in 2023.
"We created the S Pass category because despite our best efforts, we are not producing enough of such skilled locals,” said Mr Heng. "But S Passes should not be a means by which enterprises hire low-cost foreign workers when qualified locals are available."
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Mr Heng emphasized the need for continued technological innovation and integration in order to drive Singapore’s economy. He introduced the Research, Innovation and Enterprise 2020 Plan, which will channel investments into the fields of artificial intelligence, industrial robotics, urban sustainability and solutions, and the biomedical sciences, among others.
Enhancing digital connectivity was also a focus. To sustain Singapore’s shift towards digitalization, Mr Heng announced that this year, Singapore Customs will be connecting their Networked Trade Platform with the customs portals of the country’s trading partners.
Additionally, in January this year, Singapore concluded its first Digital Economy Agreement with Chile and New Zealand, which aims to foster trade by tackling frontier issues like artificial intelligence governance.
This digitalization process will also apply to the finance sector, which will open up new ways of doing business. In the FinTech (Financial Technology) aspect, annual investments have risen six-fold to over $1 billion between 2015 and 2019.
To support businesses and drive the adoption of digital technologies, Mr Heng introduced an Enterprise Grow Package. Under this package, the government will launch the GoBusiness platform, a singular touchpoint for enterprises to transact with the Government digitally. The existing SMEs Go Digital programme will also be expanded. Across all 23 ITM sectors, Industry Digital Plans or equivalents will be introduced, enabling enterprises to access pre-approved digital solutions.
Aside from this, Mr Heng also announced that $300 million has been set aside to support deep-tech startups in particular, under the Startup SG Equity. Deep-tech startups refer to firms in emerging technology industries, such as pharmbio and medtech, advanced manufacturing, and agri-food tech. These startups will be able to tap this fund for better access to capital, expertise and industry networks.