Many MPs have expressed concern with the well-being of middle and lower income Singaporeans. Let me assure the House that this is a group that the Government pays close attention to. In assessing how the middle and lower income groups have fared, we have to look at a broad range of factors, not just in this Budget – consumer prices, wages, taxes, benefits. By almost any measure, the middle and lower income groups have not been left behind.

First of all, on the cost of living. This is a perennial subject. But inflation in Singapore continues to be low. Last year, the CPI rose by only 0.5%, although for lower income groups, it went up slightly more - by 1.1% - but this is still very low.

Secondly, the purchasing power of Singaporeans has increased over the years. Their real wages have gone up. In the last two decades, nominal wages have nearly tripled - they have gone up by 190% - whereas the CPI has only increased by 28%. So, real wages have more than doubled.

MOF recently did a study to compare different households, different income groups, different housing, all the taxes they paid compared to all the subsidies they received. I have a Chart which is also on the screens. And you can see that we have taken in all the taxes they paid – personal income tax, GST, property tax, foreign maid levy, car taxes, and all the subsidies they received (healthcare, education, public housing, plus one-off transfers like ERS and rebates on rental, utilities, and S&C charges). You can see how each household fares in terms of what they paid and what they received.

Overall, 90% of the households gain more in subsidies than they pay in taxes, that is, if they do not own a car. If they own a car, even then more than half the households gain more than they receive. If you look at a typical household from different income levels, the bottom 20% of households (those who are in the 1- and 2-room flats), they gain the most - $13,000 or so a year. The middle and lower middle-income households, they gain about $11,000, so long as they have no car, no maid but two children. Even households at the 60th to 80th percentile level (that means, the 5-room or executive HDB flats), if you do not own a car and do not have a maid, you are still getting about $7,400 each year in net subsidies. In contrast, for the top 20% of households owning a car and with a maid, which most of them have, taxes exceed subsidies by more than $42,000 each year.

So, that is how it balances out. And I think that is the background which we should remember when we talk about the middle class squeeze which Dr Amy Khor and Dr Wang Kai Yuen mentioned. In many ways, the “middle-class squeeze”, or the squeeze on middle-class households, really boils down to lifestyle choices, whether or not you want to own a car, and the car is a very big item. To some extent, the high cost is unavoidable because it reflects our need to control congestion in a land-scarce city. However, the Government recognises that many Singaporeans hope to own cars, and we have been reducing the upfront cost of owning a car. Over the last two years, we have reduced the upfront car taxes, which include the ARF and the excise duty, from 171% of OMV to 130% of OMV. Even though we have done that, if you look at the COE prices, they have not really gone up that much. So, overall, the cost of owning a car has come down. With the ERP, I believe, over time, we can gradually lower the upfront ownership taxes further.