On June 5, Deputy Prime Minister and Finance Minster Heng Swee Keat took the opportunity to sum up his aims with his Fortitude Budget, the fourth budget of the year, which he announced on May 26.
He focused on the necessity of preserving jobs and maintaining a strong fiscal position as Singapore battles Covid-19, the "global crisis of our generation".
Heng said,
"There is now talk of a global 'Lockdown Generation', and fears that the youth of our time could have their skills, employability, and incomes permanently affected, even after the world recovers from the pandemic. We must work to prevent a 'Covid Generation' of workers and students in Singapore."
Overall spending on four budgets has come up to S$193 billion
Coming in at S$33 billion, the Fortitude Budget means that a total of S$92.9 billion will be committed by the government to its Covid-19 response across all four budgets.
In addition, over S$72 billion, or nearly 80 per cent of the $92.9 billion sum, is committed to supporting businesses, their employees, and helping workers stay in their jobs.
Combined with the additional spending, the total size of all four budgets comes up to a mammoth S$193 billion, more than double the size of Singapore's annual budgets in preceding years.
Heng then noted that the budget debates had largely centred around three major themes:
- Supporting jobs, livelihoods, and the future economy.
- Maintaining a strong fiscal position.
- Social capital.
On supporting jobs
Heng highlighted that the global unemployment figures is estimated to outpace those recorded in the 2009 Global Financial Crisis.
Within Singapore, the number of unemployed residents is expected to potentially rise above 100,000 in 2020, he added.
The loss of jobs also exacts a social toll and can lead a vicious cycle of reduced consumption, with affected businesses further reducing labour demand.
As such, this is why the top priority is to "provide fiscal resources to help workers stay in their jobs."
Job Support Scheme enhancement
The Job Support Scheme (JSS), which has been enhanced over the four budgets, will result in a flow of up to S$23.5 billion to support 1.9 million jobs over 10 months.
Nearly two-thirds of these jobs are in Singapore's SMEs, and over S$11 billion has already been disbursed to help employers defray wage costs, and allow them to retain workers.
Creating 100,000 new opportunities
Heng stated that the newly-created National Jobs Council had since started working to preserve jobs and help the unemployed, with Senior Minister Tharman Shanmugaratnam as the council's chair.
Fresh job entrants will receive enhanced access to jobs and traineeship opportunities in growing sectors, while older workers will receive support from the SkillsFuture Mid-Career Support Package and enhancements to the Adapt and Grow programme introduced during the Unity Budget.
Digital transformation to be accelerated
Digital transformation will also be accelerated under the Emerging Stronger Task Force.
Led by Minister for Social and Family Development Desmond Lee and PSA International Group CEO Tan Chong Meng, the task force will study key shifts arising from the impact of Covid-19, and make recommendations to the Future Economy Council.
Adding that this transformation was key in ensuring Singapore emerged stronger during the recovery, Heng said:
"In our next phase of growth, we must anchor Singapore as a Global-Asia node of technology, innovation and enterprise. Like a pearl that is part of a strand of vital global nodes across the world, we must play a valued and inextricable role in the new global configuration."
Maintaining a strong fiscal position
Heng elaborated that the four budgets have been estimated to help Singapore's economy avert an average output loss of five percentage points, or S$23.4 billion annually, in real GDP terms, over 2020 and 2021, according to a study conducted by the Monetary Authority of Singapore (MAS).
Heng acknowledged that it could be argued that either too much or too little had been spent, but said this showed "crisis budgeting is anything but straightforward" and that the decisions had been made "after careful deliberations, based on the best information available at the time."
Heng then focused on the following points raised by other MPs during the debate. This included:
Setting aside an additional S$13 million in Contingencies Funds
"Such contingency budgeting reflects both the unprecedented levels of severity, as well as uncertainty, of this crisis," Heng explained.
He added, "Each year we have S$3 billion in the Contingencies Funds to meet urgent and unforeseen needs. With greater uncertainties. It is natural for us to cater for a bigger quantum."
Heng added:
"We have run some “what if” scenarios, including the possibility that we may experience a setback in our fight against COVID-19 or the global economy does much worse than currently expected."
There are also safeguards in place regarding the use of the Contingencies Funds.
These consist of the government needing to seek the President's concurrence to draw down the funds, and replacing the draw down with a subsequent supply bill, that has to be presented and voted upon in Parliament before being submitted for the President's assent.
Drawing on past reserves - dealing from position of strength
With regard to the drawing on past reserves, Heng said that it was preferred over borrowing, which "increases the risk of unsustainable debt financing, which has severe consequences for the economy in the long run."
For countries that take this path to fund their large stimulus packages, this means they will also have to find new ways to repay the debt and interest accrued, with future generations required to shoulder the burden "in the form of higher taxes, higher inflation, or lower returns on their retirement assets."
It also means that such countries will have less fiscal space to invest in human capital or infrastructure.
As such, the importance of Singapore's past reserves is that it allows the country "to deal with this crisis from a position of strength".
Heng elaborated:
- Singaporeans are assured that the government has the means to protect the country's lives and sustain livelihoods.
- Global investors are given the confidence that Singapore's economic fundamentals are "sound and stable" for the long-term.
- Singapore is protected during this period of flux, with speculators deterred from attacking Singapore's currency and economy.
He pointed out the the government only took three months of FY2020 to use up the accumulated surplus built up over its entire current term.
Is it sustainable?
Heng then addressed the concerns that had been raised about the sustainability of tapping on the reserves, noting that the way forward was to invest in healthcare, education, training and infrastructure.
For major long-term infrastructure projects, Heng added that these may be financed through borrowing as it required large upfront investments, but it also benefited several generations of Singaporeans.
Meanwhile, recurrent spending should be met with recurrent revenues, as such spending primarily benefitted the current generation of Singaporeans.
Heng highlighted that the GST increase could not be put off indefinitely and will be needed by 2025.
On social capital
Acknowledging MPs' points on improving support for groups like low-income workers and households, Heng said that while some schemes covered all Singaporeans, the overall payouts were tilted towards lower-to-middle-income groups.
For example, 60 per cent of households can receive additional benefits equivalent to 12 per cent of household income on average, including cash assistance from the Temporary Relief Fund, and Workfare Special Payment, among others.
Heng noted that this was a significant sum, double that provided during the Global Financial Crisis.
He also noted that there might be families who "marginally miss" the eligibility criteria, but still require help. Such families will be assessed on on a case-by-case basis.
As for why the much of the four Budgets were devoted to jobs, Heng cited a "thoughtful commentator" who had this to say:
"It is right that the Government has devoted, as a central plank of the four Budgets, this central focus on supporting our workers to retain their jobs, or to move into new jobs.
Because, should the sole breadwinner of the family loses his or her job, the effect on the whole family is much more adverse. It is important that we see this in totality, not just what is in each little compartment."
Top image collage from Heng Swee Keat Facebook