B. Moving Forward Together

 

B. Moving Forward Together

  1. 39 Beyond the immediate outlook, we must set our eyes on the future.
  2. 40 We have come this far as a nation, because we are always thinking about tomorrow: planning and taking actions not just for the present, but also with the longer-term interests of Singapore and Singaporeans at heart. So we must position ourselves now for the challenges and opportunities of the decade ahead.
  3. 41 We are moving forward from a position of strength. Our responses to the pandemic have distinguished us from other countries. We have kept our air and sea ports open, and ensured an uninterrupted flow of critical supplies. We have enhanced our reputation as a trusted and reliable node.
  4. 42 This is why we are not only attracting more investments, but also securing more high quality, cutting-edge, and innovative projects. Singapore continues to be a strategic launch pad for businesses around the world looking to expand into new markets in the region.
  5. 43 For example, BioNTech, the company that, together with Pfizer, developed the mRNA COVID-19 vaccine, is establishing its regional headquarters for Southeast Asia in Singapore.
  6. 44 BioNTech also plans to build a fully integrated mRNA manufacturing facility here, which will be operational as early as next year. The new facility will boost BioNTech’s regional and global supply capacity for its growing pipeline of novel mRNA-based product candidates. (See Annex B-1.)
  7. 45 Together with other new investments and plans to build businesses and headquarter operations in Singapore, this will create many good jobs for Singaporeans.
  8. 46 Our ability to create jobs will depend on how quickly we restructure and transform the economy to take advantage of new opportunities. It will also depend on us getting our foreign worker policies right. Even as we adjust these policies, we must remain open and welcoming to talent from around the world.
  9. 47 On the whole, we are making good progress. Our productivity is increasing, enabling continued income growth for our workers. We are advancing as a Smart City, with our world class infrastructure and digitally-enabled workforce as our key competitive strengths.
  10. 48 We also have a more vibrant start-up and innovation ecosystem. Last year alone, eleven Singapore-based start-ups achieved unicorn status – no mean feat for a small city-state. These and other technology firms create many highly-skilled jobs and opportunities for Singaporeans.
  11. 49 So our economic prospects are good. But we will have to contend with new external challenges, and adapt quickly to a new environment.
  12. 50 We have entered a new era of greater contestation for influence between countries and blocs, which may erode the rules-based multilateral system that has been so crucial to Singapore’s success. In particular, rivalry between the two great powers – US and China – has intensified, and will impact the world for the rest of the decade and more.
  13. 51 The pandemic has also turbocharged the move to a digital future. Every time a task moves to the digital realm, it becomes easier to use software to automate and optimise it. Such new digital technologies will disrupt and reshape businesses, and impact a wide range of jobs across all sectors of the economy.
  14. 52 Our local businesses, especially those that are digitally savvy, will be able to take advantage of the rich opportunities on offer, and transcend our geographical limitations. But this cuts both ways, as it will also be possible for MNCs to “reshore” more functions to their home countries, as they seek to simplify and localise their supply chains.
  15. 53 In short, we are entering a future where conditions are more volatile, the global environment more unpredictable, and change more fast-paced than ever. We can and must adjust, and still excel in this new environment.
  16. 54 Our enterprises and workers will need to accelerate their transformation and develop new capabilities to stay ahead of the competition, and look for opportunities beyond our shores and in new areas.
  17. 55 But there will be segments of our society who are displaced. The fast pace of change can also give rise to a greater sense of anxiety and insecurity about the future.
  18. 56 It is not the first time we have faced such concerns. When we emerged from the Global Financial Crisis of 2009, and began restructuring our economy in earnest, we were keenly aware of those who could be left behind. So we stepped up efforts to reskill and upskill our workers, and to strengthen our social security system.
  19. 57 We enhanced Workfare and launched the Progressive Wage Model to uplift the incomes of lower-wage workers. We introduced Silver Support to supplement the retirement income of seniors who had low incomes in their working years. We implemented MediShield Life to provide universal and lifelong protections against large hospital bills. Today, these policies have become vital pillars of our social security system.
  20. 58 And these efforts have made our growth more inclusive. Real incomes of our local workers at the 20th percentile have risen by almost 40% between 2009 and 2019, faster than that of the median worker. Lower-income workers have also benefited from our highly progressive system of taxes and transfers. Inequality after taxes and transfers as measured by the Gini coefficient has steadily improved over the last decade.
  21. 59 But we cannot stop here in our efforts to strengthen our social compact. We must continue to do more in a post-pandemic future, where our workers and firms will be exposed to more competition, and where there will be greater churn for our businesses and livelihoods.
  22. 60 In the coming years, we expect an increasing shift in market rewards towards those with the highest skills and who are best able to take advantage of new technologies. This will make it harder to keep our growth inclusive and to hold our society tightly together.
  23. 61 Besides these growing economic and employment-related risks, there are other forces on the horizon that raise the stakes in our efforts to preserve social solidarity, and will also have significant implications for our future generations.
  24. 62 We are now one of the fastest ageing countries. In 2010, 9% of our population were aged 65 and above. Last year, this became 16%. By 2030, we expect Singapore to become like Japan and some European countries today – where about one in four or 25% of Singaporeans will be 65 and above.
  25. 63 Ageing will mean an inexorable rise in demand for healthcare and social care. At the same time, our means to provide for this will come under strain, as the ratio of our working population to aged dependents decreases. We must therefore plan ahead to ensure we will have the resources needed to look after more seniors.
  26. 64 We must also take decisive steps to join the global effort in tackling climate change. If the world is unable to cut emissions sufficiently in time and temperatures rise beyond a certain level, we risk extreme flooding and weather events. This could result in food and water stress for hundreds of millions of people around the world. Island nations like Singapore will be especially threatened.
  27. 65 Moving to net zero emissions will be a very costly affair for Singapore, a built-up city-state with very limited scope to tap on renewable energies. But it is a cost we cannot afford to skimp on, for it is existential. It affects our very survival, and the Singapore that our children will live in. So we must take actions now to progressively decarbonise our economy and change our way of life.
  28. 66 The changes brought about by the pandemic, rising geopolitical contestation, climate change, as well as domestic issues like our rapidly ageing society – these are the defining challenges of our time. They call for robust policy responses to reinforce our resilience and retool our capabilities for the future.
  29. 67 More importantly, to overcome these major tests and trials, we must continue to stand united as one. This is why it is more important than ever to renew and strengthen our social compact, and to reaffirm our values and what we stand for as a nation.
  30. 68 Our existing social compact has been shaped by our history, beginning as a young and vulnerable nation thrust into independence. We start and maintain the basic premise that no one owes us a living, and that we are responsible for our own defence and survival.
  31. 69 The pillars underpinning our social compact – the individual, community groups, businesses, and the state – all play a role, complementing one another, and contributing to a system of mutual support.
  32. 70 The individual works hard to be self-reliant and to provide for his or her family. Community groups, be it unions, charities, or voluntary associations, come together to help different groups of people. Employers do their part to invest in workers, advance their well-being, and improve the quality of jobs. The Government creates the conditions for a vibrant economy, invests heavily in our citizens and delivers essential public services.
  33. 71 The Government, working actively with the community and tripartite partners, also provides an extra hand to those who start with less, to keep social mobility a defining feature of our society, to mitigate life’s inevitable inequalities and to provide support for the elderly.
  34. 72 Even with the demands of building a nation and reinvesting continually in our future, we have been able to keep public expenditures in Singapore extremely lean. Government spending today, excluding COVID-19 related expenditure, stands at $88 billion, or about 18% of GDP. This is probably the lowest among the more developed economies, yet it has produced social and economic outcomes that have been better than most.
  35. 73 We generate sufficient revenues to fund this expenditure and maintain a balanced budget. We are supported by our Net Investment Returns Contribution, or NIRC, which is a continuing stream of income from the reserves we have accumulated over the years.
  36. 74 Over the past five years, NIRC provided on average a revenue stream of around $17 billion or about 3.5% of GDP. So this means that for every dollar we spend on public services, about 80 cents is funded by tax, and the remaining 20 cents is funded through the NIRC.
  37. 75 This fiscal approach has enabled us to keep our overall tax burden low. Currently, half of our workers do not have to pay personal income taxes. In particular, for the middle-income, we have deliberately ensured a low tax burden so that they can enjoy the rewards of their hard work.
  38. 76 Put another way, for the quality of public services we have in healthcare, education, housing, transport and many other areas, the amount of tax our citizens pay is much lower compared to many developed countries.
  39. 77 The continental European and Nordic countries have a different social compact, arising from their different histories. They have much higher levels of state-financed welfare provisions, designed to meet the needs of their citizens from cradle to grave. Their governments typically spend well above 30% of their GDP. To fund such spending, they impose high income taxes, usually much higher than 30%, even for the middle-income group, as well as consumption taxes that range from 20% to 25%.
  40. 78 We do not intend to adopt the European model of comprehensive universal welfare and high taxes. But as we tackle the challenges of a changing world, and as our own society ages and faces new stresses, we will have to do more to preserve and strengthen the unity of our people and our social compact.
  41. 79 In fact, we have already been adjusting our approach over the years, with the Government progressively doing more to support the community and individuals. Our social spending in particular, has almost doubled from $17 billion to $31 billion over the last decade, and now takes up close to half of our annual Budget.
  42. 80 The increase has gone to programmes that have made a difference in Singaporeans’ lives, like higher subsidies in our healthcare system and in tertiary education, as well as schemes like SkillsFuture, Workfare, and Silver Support.
  43. 81 In the coming decade, we will invest even more in our people and social infrastructure. We will spare no effort to ensure that all Singaporeans continue to have access to world-class education and healthcare, affordable housing, good jobs, and have peace of mind over their retirement needs as they grow old. We will strengthen our system of collective risk sharing, so as to give Singaporeans more assurance in managing life’s uncertainties.
  44. 82 We want every Singaporean to know and feel that he or she has a stake in our society – that everyone’s contributions matter, and that they will not be left to fend for themselves when times are down. We want to uphold that sense of obligation to each other, and strengthen the assurance that, whatever the challenges we face, we will always have each other’s back.
  45. 83 These plans require additional spending. They reflect the need to respond to lasting, structural shifts in our society, as well as our new social and environmental aspirations. The spending requirements will therefore be recurring in nature, not temporary.
  46. 84 Given this, it would not be right to dip into our reserves to meet these new needs. We must husband our reserves for use in major crises and emergencies, as was necessary during the Global Financial Crisis, and especially in the last two years. We must ensure that we continue to get a steady stream of income from the reserves to benefit both today’s generation of Singaporeans, and our children and grandchildren.
  47. 85 Let me summarise our fiscal outlook over the coming decade:
    1. a. On the expenditure side, our needs are significant and growing. By 2030, we expect government expenditures to increase to more than 20% of GDP. Most of this increase in spending will go to healthcare.
    2. b. On the revenue side, we will not have enough to cover the additional spending needs. The stream of income from NIRC should keep pace with economic growth over time, in spite of a more challenging global investment environment. But our sharply slowing labour force growth, and hence slower GDP growth compared to the last decade, will constrain our tax revenues.
  48. 86 This is why we will make significant enhancements to our tax system in this Budget. These tax adjustments will help to raise additional revenue and also contribute to a fairer revenue structure. That means everyone chips in and contributes to a vibrant economy and strengthened social compact, but those with greater means contribute a larger share.
  49. 87 At the same time, we are mindful of the impact of the tax increases on households and businesses and will have a very comprehensive set of measures to cushion the impact and help Singaporeans adjust.
  50. 88 This Budget therefore is about charting our new way forward together. It is a first step in renewing and strengthening our social compact for a post-pandemic world, and in realising our vision of a fairer, more sustainable, and more inclusive society. It is about giving Singaporeans the confidence to embrace the change that lies before us, so that we grow into an ever stronger economy and nation, and an ever more secure society and home.
  51. 89 This Budget will set out the key changes we must make to
    1. a. Invest in new capabilities;
    2. b. Advance our green transition;
    3. c. Renew and strengthen our social compact; and
    4. d. Develop a fairer and more resilient revenue structure.