“To emerge stronger from this crisis, we must not only tackle current challenges but also have a strategic plan for our future. But this entails making hard choices,” DPM Heng Swee Keat said.
Budget 2021 – Emerging Stronger Together – comes at a particularly critical juncture.
The first hard choice
The first hard choice involves drawing down on Past Reserves. Mr Heng said this was ‘a difficult decision, but necessary given the exceptional circumstances’.
The $11 billion COVID-19 Resilience Package will be funded through a draw on Past Reserves.
“This is the second consecutive Financial Year where we will be drawing on our Past Reserves. This is necessary, given the exceptional circumstances we are in. We are extremely fortunate to be able to tap on our strategic assets and deploy the resources required to deal decisively with COVID-19 and the considerable uncertainties that lie ahead. We should never take our reserves for granted.”
Together with the $42.7 billion of Past Reserves drawn in FY2020, the total expected draw on Past Reserves over FY2020 and FY2021 will be up to $53.7 billion.
Need to now place greater focus on running balanced budgets post-crisis
“Having unlocked the “national safe” on more than one occasion in this crisis, we must now place even greater focus on running balanced budgets post-crisis,” Mr Heng said.
We have an ageing population. Our recurrent spending will inevitably rise. Healthcare spending has tripled within a decade from $3.7 billion in FY2010 to $11.3 billion in FY2019.
“Fellow Singaporeans have often expressed the desire to better care for our seniors, with quality yet affordable health and aged care services. This is possible only if we can muster the resources to do so,” Mr Heng said.
Spend in a responsible way that is fair for current and future generations: GST hike
Recurrent expenditure should be funded by recurrent revenue. To finance spending on recurrent needs, the GST rate increase cannot be put off for too long.
We will have to make the move sometime from 2022 to 2025, and sooner rather than later, subject to the economic outlook, Mr Heng said. “Running balanced budgets will put us and our children on a firmer footing in the longer-run.”
No finance minister likes to talk about tax increases, certainly not when the pandemic is still raging around the world. But we do this because we plan for the long-term and do not shy away from explaining to fellow citizens why we need to make tough but necessary decisions to ensure that we have enough to provide for our nation’s future.
While we are fortunate to be able to tap on our reserves to respond to the COVID-19 crisis, it is not tenable for the Government to run persistent budget deficits outside periods of crisis. Without the GST rate increase, we will not be able to meet rising recurrent needs, particularly in healthcare spending.
The $6 billion Assurance Package will cushion the impact of the GST rate increase on the lower-income families.
Second hard choice: raise petrol duty rates
Climate change has become a more urgent challenge. Sustainable development will be an even greater priority for Singapore, Mr Heng said. “Over the years, we have taken steps to reduce vehicular emissions. Raising petrol duty rates builds on this momentum.”
- For premium petrol, the duty will be raised by 15 cents per litre.
- For intermediate petrol, the duty will be raised by 10 cents per litre.
These changes will take effect immediately. To ease the transition for Singaporeans, especially for those who rely on their vehicles for their livelihood, these support will be provided:
Let us continue to focus on what lies ahead, and chart a clear direction forward. Let us continue to think long-term, tackle long-term challenges such as climate change and future pandemics, and forge partnerships with people around us, in Singapore, as part of Singapore Together, and with people around the world.
Let us strive to emerge stronger together, as a united and shining red dot, trusted by all!
– DPM Heng Swee Keat –