What's in the Budget mix?

Amid SG50, Budget 2015 is likely to have more goodies, but Insight finds that greater importance will lie in how it helps set up Singapore for the future

Coming hot on the heels of Chinese New Year celebrations, expectations are high that Budget 2015 will also hit a festive note.

This year, the annual slicing of the fiscal pie - make that, sharing of the communally tossed "lo hei" raw-fish salad - coincides with the nation's 50th anniversary of independence.

But economists expect that the jubilee Budget, which will be unveiled on Feb 23, will both mark Singapore's past success that led it to this historic milestone, and set the scene for the future.

As DBS economist Irvin Seah puts it: "Transient measures (such as cash handouts and tax rebates) can be expected amid the SG50 celebration. But the focus will be on shaping the next 50 years."

This is especially as Singapore is experiencing growing pains as it moves into the next phase of middle age.

Economic growth is more modest now, so the need to step up the transition from over-reliance on cheap foreign labour to higher domestic productivity has become more urgent. More measures are expected to help accelerate this.

This will also allow those who can to better save for their own retirement and health-care needs, while the nation starts bearing more of the cost for the rest as the population ages.

In line with these shifts, Finance Minister Tharman Shanmugaratnam is expected to lay the foundation for some far-reaching policy directions when he delivers a Budget that he said earlier this month will "look towards the future".

Economists and MPs have signalled measures, including a fresh approach to worker training, a new system of aid for needy retirees, significant changes to the Central Provident Fund savings scheme and the start of the universal health-care programme MediShield Life.

Some of these build on longer-term themes, such as making companies more productive and creating a more inclusive and compassionate society.

Can the purse this year take the strain? Some think so. Bank of America Merrill Lynch economist Chua Hak Bin estimates that the Government has accumulated up to $12.6 billion in surpluses during its current term, not including this year's accounts.

Economy of the future

ENSURING that Singapore's economy and workforce stay relevant in the coming decades is likely to be one of the main thrusts.

This is the motivation behind one of the critical planks of Budget 2015: the SkillsFuture initiative.

It aims to help workers master skills that will remain in demand by employers in a world where technological advances and global competition are making many jobs obsolete, and to foster a culture where age is no barrier to learning or to switching careers.

While the details have yet to be worked out, some have suggested grants or subsidies for continuing education or vocational training.

Going one step further, NTUC assistant secretary-general and MP Patrick Tay (Nee Soon GRC) reiterates his call to create an individual Skillsave learning account for every Singaporean. This would enable and encourage all citizens - including stay-at-home mums and freelance professionals - to take the reins of their own lifelong career development, he says.

The expected focus on workers could reflect a new approach to the lagging productivity drive, says Barclays economist Leong Wai Ho.

The 10-year exercise is now past midpoint, with little to show. Productivity gains averaged just 0.2 per cent a year between 2011 and 2013, far from the target of 2 to 3 per cent annually.

While the Government is likely to continue with existing productivity measures such as giving companies incentives to invest in technology, training and research, SkillsFuture could bolster the drive from a different angle.

"We interpret this as a shift in emphasis towards employees taking greater ownership of productivity gains, incentivising Singaporeans to want to improve their career prospects," says Mr Leong. "This should complement the existing top-down approach of employers implementing training initiatives."

Companies themselves may get more of a push to step up to the plate.

Mr Low Hwee Chua, partner and head of tax services at Deloitte Singapore and South-east Asia, suggests widening the Productivity and Innovation Credit (PIC) scheme to cover a broader range of innovative activities.

MP Tin Pei Ling (Marine Parade GRC) also called for an update on the results of the myriad productivity measures so far, to assess their effectiveness.

But there may also be comfort for business owners squeezed by rising costs and a manpower shortage.

UOB economists Francis Tan and Jimmy Koh expect the Wage Credit Scheme - which helps firms pay for salary increases but expires this year - to be extended and enhanced for sectors that need a bigger push.

Old is gold

EVEN as the Government helps able companies and workers thrive in a fast-changing economy, it is likely to also be mindful of those who are less fortunate.

One clear goal of this year's Budget is to continue the theme of providing enough support for Singaporeans in their golden years, to ensure the ageing population can retire without fretting about money woes.

Last year there was the $8 billion Pioneer Generation Package, and a major initiative to be introduced this year is a Silver Support scheme that will aid low-income elderly folks with insufficient retirement savings, no housing assets and little or no family support.

While some expect cash payouts for these seniors, help may instead take the form of vouchers and offsets for everyday bills, say UOB's Mr Tan and Mr Koh.

The scheme was announced by Prime Minister Lee Hsien Loong in his National Day Rally speech last year. Up to $12 billion could be set aside for it in the Budget, tips DBS' Mr Seah.

He adds that the scheme is likely to be funded with returns from investing this money - a structure similar to the Pioneer Generation Fund set up last year to help pay the medical costs of first-generation citizens.

Also on the cards are official changes to the 60-year-old Central Provident Fund system, after a panel tasked to review the national savings scheme made its first proposals this month.

Among other things, the panel suggested giving CPF members the option of withdrawing an additional lump sum of up to 20 per cent of their Retirement Account balance at age 65.

All these moves aim to make retirement more enjoyable, not only for today's seniors but also for the generations of retirees to come as the population ages.

"Over the past few years, the Government has done a lot to help cushion the health-care costs for older Singaporeans," says MP Tin.

Other recent elderly-friendly efforts include Medisave top-ups. "But retirement adequacy in other areas is definitely something that people are paying attention to," Ms Tin adds.

Singapore is expected to be a "super-aged" nation by 2030, when one in five people will be 65 or older.

Jubilee gifts

SERIOUS stuff aside, most Singaporeans will have only one question about the Budget: What goodies can I expect this year? The short answer: probably quite a lot.

Apart from commemorating SG50, this Budget could potentially be the last one before the next General Election, which must be held by January 2017.

This means the Government can technically choose to spend all the surpluses it has stored up since its term started in 2011. If not, these will be locked up as past reserves when the next government takes power.

"Given our electoral cycle, no matter how prudent you are at the beginning, towards the end people will expect you to use up the surpluses," says former Nominated MP Laurence Lien.

UOB's Mr Tan and Mr Koh expect a "geared-to-the-masses" Budget "that will address the needs of the majority of eligible voters". These would be the middle-income "sandwiched class", who are balancing the twin pressures of raising children and caring for elderly parents.

Since most of them do not pay income tax, tax rebates - as some experts are expecting - would likely benefit only a relatively small group.

Instead, DBS' Mr Seah believes there may be a one-off cash handout and rebates for all Singaporeans, similar to those given in 2011. That cost the Government $1.5 billion.

Other help for the middle class could take a more considered, targeted approach.

The Association of Women for Action and Research (Aware), for instance, has mooted eldercare leave for full-time workers to care for their aged parents, and an allowance for home-based caregivers, who might have quit their jobs to look after their parents.

Working mothers, on the other hand, would benefit from subsidies that cover not just childcare centres but also babysitters and nannies, to give them more childcare options, says MP Ang Hin Kee (Ang Mo Kio GRC).

Meanwhile, single parents, including those who are divorced or widowed, may also be struggling without government aid.

"We should look into ways to offer more help to single parents, who may face financial hardship and lack family support," says MP Lee Bee Wah (Nee Soon GRC).

Of course, even with its robust finances, the Government cannot fund every demand on its purse. It must weigh priorities and spending trade-offs accordingly.

But this is as good a year as any to expect a blockbuster Budget, one that lives up to its SG50 tag.

fiochan@sph.com.sg

charyong@sph.com.sg

asyiqins@sph.com.sg