Parliamentary Replies

Parliamentary Question by Mr Liang Eng Hwa:

To ask the Minister for Finance in light of inflation and rising costs (a) whether there are available fiscal resources in the upcoming Budget to further assist Singaporeans to cope with increased costs; and (b) whether the proposed GST increase remains part of our strategy for fiscal sustainability; and (c) if so, what can be done to mitigate the impact of GST increase on Singaporeans, especially the lower income households and retirees.

Parliamentary Question by Ms Foo Mee Har:

To ask the Minister for Finance (a) whether the economic policy involving billions of fiscal support to businesses and households is contributing to higher inflation; and (b) how will the market adjust when the support schemes taper off.

Parliamentary Question by Mr Saktiandi Supaat:

To ask the Minister for Finance (a) what is the assessment of second-round inflation effects in 2022; and (b) what additional fiscal policy related measures can be taken to offset the impact of non-demand driven inflation effects caused by rising producer costs or supply-side constraints on Singaporeans.

Parliamentary Question by Mr Chua Kheng Wee Louis:

To ask the Minister for Finance whether the Government will consider mitigating fee increases by government agencies and statutory boards for lower income households for the next 12 months.


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Parliamentary Reply by Second Minister for Finance, Ms Indranee Rajah:

Mr Speaker, in addition to the Parliamentary Questions (PQs) enumerated by Minister of State (MOS) Ms Low Yen Ling, may I have your permission to answer PQ 2312 by Mr Louis Chua that is scheduled for a subsequent Sitting as it touches on related subject matter?

MOS Low Yen Ling has just provided an overview of the inflation outlook, including second-round inflation effects which Mr Saktiandi Supaat asked about, and the Government’s overall approach to managing inflation. I would like in addition to emphasise the following two points.

a.    First, while the inflation rate of 3.8% reported for November 2021 is high, a significant part of that 3.8% is accounted for by accommodation (mainly imputed rentals) and private transport costs. However, most Singaporeans live in owner-occupied homes and use public transport. As such, the MAS Core Inflation measure, which excludes accommodation and private transport costs would more accurately reflect the actual inflation experienced by most Singaporeans. MAS Core Inflation was at 1.6% year-on-year in November 2021.

b.    Second, a significant share of the recent rise in core prices is being driven by global factors. Higher energy prices have had an impact on utilities bills, while global food prices and supply chain disruptions have affected prices of non-cooked food locally.  The sharp rise in global energy and food prices is expected to be temporary and should subside as bottlenecks are resolved and supply improves to better meet demand.

That said, the Government understands the concerns of Singaporeans about these cost increases and empathises with the very real pressures felt by individuals and households. The Government has been working hard to help Singaporeans with these costs in a number of ways.

First, through our economic and fiscal strategies. MOS Low has given a comprehensive overview on how the Government keeps our economy competitive, ensures sustainable real wage growth, manages business costs, and has allowed the Singapore dollar to strengthen to mitigate inflation.

Second, the Government also directly helps Singaporeans with the cost of living.

As mentioned, two key drivers of core inflation are higher global fuel costs and food prices, leading to higher prices for utilities and groceries. The Government has been directly shielding the majority of Singaporeans from the full impact of the cost increases for these items, and is continuing to do so.

a.    To help with the cost of utilities, the Government provides quarterly GST Voucher – U-Save rebates to HDB households as part of the permanent GST Voucher scheme. All eligible HDB households received a tranche of U-Save rebates this month. In Budget 2021, the Government provided an additional 50% of U-Save rebates for all U-Save recipients, which was paid out in April and July 2021. 

b.    This additional 50% on top of the permanent U-Save rebate has helped HDB households to substantially defray the cost of their utility bills. HDB 1- to 2-room households received $595 in U-Save rebates in FY2021, equivalent to about 4.5 to 6 months of their utilities bills on average even after the increase in the electricity tariff this month. HDB 3- and 4-room households received $535 and $475 in U-Save rebates, equivalent to 3 months and 1.5 months of their utilities bills in FY2021 respectively.

c.     To help households with daily expenses especially food, the Government has given $100 in Community Development Council (CDC) Vouchers to every Singaporean household in December 2021. In addition, Singaporeans living in HDB 1- to 2-room flats would also have received $100 in Grocery Vouchers in October 2021. These would help with the increased spending during the year-end and New Year festive period.

d.    We have also begun distributing 600,000 Public Transport Vouchers of $30 each to help lower-income households, amid the public transport fare adjustment.

e.    These payouts are over and above the regular GST Voucher – Cash payouts of up to $300, Service and Conservancy Charges (S&CC) rebates of between 1.5 to 3.5 months, Silver Support of between $720 to $3,600 per year for seniors who had low incomes in their working years, and Workfare Income Supplement of up to $4,000 per year in cash and CPF top-ups for lower-wage workers.

Mr Liang Eng Hwa asked whether we have the fiscal resources to help Singaporeans with the cost of living. I would like to assure Mr Liang Eng Hwa that we will give priority in our fiscal plans to help Singaporeans manage. As we prepare for Budget 2022, we are assessing the situation carefully and reviewing the scope of household support measures.

Mr Louis Chua and Mr Ang Wei Neng asked about mitigating or delaying increases on fees charged by Ministries and Statutory Boards.

a.    The Government will do its best to keep costs, and in turn, fees as low as possible, to provide the best value to the public.

b.    We froze fee increases in 2020 on account of the sudden COVID-19 crisis, but we cannot do so indefinitely. As fees are raised, we will continue to provide support to those who need it most.

c.     Our approach of running cost-efficient services and providing targeted help allows us to keep our total burden on businesses and households low.

Ms Foo Mee Har asked if our fiscal support contributed to higher inflation. The answer is no.

a.    The size of our fiscal injections in 2020-2021 was correctly sized to cushion the sharp fall in output during this crisis period.

b.    Much of our support over the last two years has been to relieve costs, through schemes such as the Jobs Support and Rental Support Schemes. These not only helped save jobs and incomes, but also had less impact to inflation. 

c.     As businesses and households adapted to living with COVID-19 and stabilised their revenues and incomes, we were able to taper off our fiscal support and shift the emphasis towards restructuring, transformation and growth.

d.    On Mr Saktiandi Supaat’s and Ms Foo Mee Har’s questions about the fiscal response going forward: we will continue to monitor economic conditions closely to ensure that businesses are adequately supported, especially in more adversely affected sectors, and balance tapering off of relief with support for transformation and restructuring.

Mr Liang Eng Hwa asked if the proposed GST increase remains part of our strategy for fiscal sustainability; and if so, what can be done to mitigate the impact of GST increase on Singaporeans, especially lower-income households and retirees.

We need sound fiscal foundations, not just to provide support to households and businesses when needed, but also to meet our collective aspirations – affordable healthcare, quality education, and a safe and secure home – in a responsible and sustainable way. The GST, together with our income and wealth taxes, are important parts of a sound revenue structure that will enable us to provide care, support and a strong social compact. Even as we keep our finances on a sound and stable footing, we will ensure that our overall system of taxes and transfers remains a fair and progressive one. 

We will also significantly mitigate the impact of the GST rate increase on Singaporeans through the Assurance Package. We have already set aside $6 billion for this Package to provide direct cash and other support to Singaporeans.  Such support will effectively delay the impact of the GST rate increase by at least five years for the majority of Singaporean households. This means that for most households the actual impact of the GST increase will only be felt 5 years after implementation.  Lower-income households will receive more support under the Assurance Package, and for this group, the impact of the GST rate increase will be pushed back by about 10 years.  

To sum up: while global inflationary pressures have been a significant driver of the recent rise in core inflation, the Government has shielded and continues to shield Singaporean households from much of these price pressures. We will continue to review and improve ways to support Singaporeans, particularly lower-income households, seniors, and those with greater needs.