Singapore Budget 2016: Business-minded focus on the future and help upstream for families

SINGAPORE - Mr Heng Swee Keat's maiden Budget announced on Thursday (March 24) afternoon has a singular focus: to transform companies, so they can work together and with the government, to raise productivity, automate and innovate processes, and expand overseas.

At the core of the $73.4 billion Budget are measures to give grants to companies, co-fund bank loans to companies, and to increase R&D activity.

There are also measures for the people but these are modest in comparison.

For example, $4.5 billion is set aside for the Industry Transformation Programme to support enterprises and industries. Another $4 billion is set aside for industry-focused R&D.

In contrast, new programmes for households are relatively modest. The new Silver Support Scheme that gives cash allowances to lower-income seniors will cost $320 million this year and is expected to increase as the population ages and more cross the cut off age of 65 to qualify for the allowance. The existing Workfare income supplement has been made more generous, and $770 million is to be paid out next year.

Special transfers for households this year amount to $500 million. These will be given out in the form of the GST voucher, CPF Medisave top-ups for older Singaporeans and service and conservancy rebates.

Special transfers for businesses amount to $2.2 billion. This includes $790 million under the extended Wage Credit Scheme to co-fund wage increases.

All these have to be seen within the context of an increase in social expenditure overall. Social development spending these days takes up a big chunk of the Budget - 46.7 per cent in FY 2015.

Still, individuals hoping for tax breaks will be disappointed this year, especially given that companies get a 50 per cent corporate income tax rebate this year, up from 30 per cent, subject to a cap of $20,000.

But this was is not unexpected. In last year's Budget, taxpayers got a 50 per cent income tax rebate for their incomes earned in FY 2014, even as top earners saw a hike in their tax rates. This year, unemployment rates continue to be low and median incomes have sustained growth. Meanwhile, businesses are bracing for a global slowdown.

The bottom line: workers can fend for themselves, while the firepower from the Budget is trained on companies.

Hence the business focus of Budget 2016.

This is after all a tough fiscal year - it's the start of a new term of government, so the state coffers are bare. It has to live within its revenue. Luckily for Singaporeans, its operating revenue is supplemented by the returns from long-term reserves. This has provided a welcome cushion for the Budget.

This year, the reserves added $14.7 billion in Net Investment Returns Contribution (NIRC) to the Budget. This was thanks to inflows from Temasek Holdings' funds. Last year, the NIRC was $9.9 billion.

The injection of nearly $15 billion into the national coffers allows Finance Minister Heng Swee Keat to announce a Budget surplus of $3.4 billion.

Listening to Mr Heng announce his Budget while helming The Straits Times' live blog with my colleague Ignatius Low, I was struck by two things.

The first is Mr Heng's emphasis on partnership and the need for companies to work together and tap on each other's networks to transform the industry.

This would mean companies setting aside traditional rivalries and competitiveness, and seeing how they can work together - perhaps co-invest in infrastructure or bring in automation equipment - that can change the way they all do businesses. Some of the Industry Transformation Programme initiatives aim to get businesses to partner each other. This will require painstaking effort by the trade associations and business and government bodies.

The labour movement made a start with this kind of industry-wide approach, when it worked sector by sector, company by company, to get cleaning and security companies to come up with a progressive wage structure for workers. The private sector will have to do something similar, to work together to transform the way they do business.

The second thing that struck me was the emphasis on supporting families at risk.

The KidStart programme will tap government and community resources to help children up to the age of six from vulnerable families get support in learning, development and health support.

The pilot programme for 1,000 children will cost more than $20 million a year or about $20,000 a child. It is thus a heavy and intensive investment. But as Mr Heng points out, research shows that a child's early life experiences significantly influence their development.

This is a welcome initiative, and brings Singapore in line with developed countries that have such programmes. The United States' well-known Head Start programme for example started in the 1960s and became a national programme in 1981. It supports children from low-income families up to the age of five. Once identified, children get help in learning and social interactions, get access to nutritious meals, health, dental, and mental health programmes. Social workers also work with parents on their parenting skills, and to provide housing stability and financial security.

Such upstream intervention in at-risk families has been shown to help improve children's chances of settling down in school and doing well there.

Another programme that I cheered was the one to give second-timer families another shot at owning a Housing Board flat. This is for families who sold their first flat and then ended up having to rent again. Anecdotally, there are even stories of people who end up living at parks after foolishly selling their HDB flats.

Now if they have young children, they can get grants of up to $35,000 to buy a new two-room flat on a shorter lease that will be more affordable. Families have to show commitment to getting their lives in order, such as by staying employed.

This move helps such families get back on their feet again by giving them a chance to secure shelter over their heads. In the end it is the children who stand to benefit most, moving out of rental flat areas - some of which are plagued with drug and crime - into new HDB estates.

Even though these two programmes will not cost a great deal - likely in the tens of millions, not billions - they signal Singapore's move to be more proactive in helping families in need.

Join ST's Telegram channel and get the latest breaking news delivered to you.