Subsidies not the answer, keeping costs down is

The recent removal of the off-peak pass for senior citizens has garnered some negative reaction. This begs the question of whether subsidies and grants are the way to go in the long term.

When the Government decides on some tax relief, subsidy or grant, it is often greeted with happiness.

However, the converse is also true: removal of these incentives causes many to get up in arms.

The net goodwill effect could actually be negative.

So, instead of subsidies, can we not strive to keep costs down?

Why do we need to keep increasing the cost of food at hawker stalls and coffee shops, for example?

Rentals play a big role in this. If we allow market forces to dictate terms, profit-minded companies will obviously want to extract the most from the stalls or the coffee shops that they run.

We should also remember that nothing is for free. Someone pays for all these subsidies, and it is not practical to think that there will always be someone else to push this tax burden to.

The increasing costs also affect businesses and cause Singapore to be less competitive.

As for public transport, it is often explained that fare increases are needed so that there can be more buses, trains and improvements.

But after rounds of fare hikes, if we try to measure "bang for buck", it seems that the money spent is not yielding dividends.

We should also remember that nothing is for free. Someone pays for all these subsidies, and it is not practical to think that there will always be someone else to push this tax burden to.

We are already talking about an increase in the goods and services tax, and we have been warned that there will be a rise in other forms of tax.

So, ultimately, if we rely on such financial relief, we still end up paying for them.

However, if we reduce costs in Singapore, it will not only benefit the less fortunate, but also improve the conditions for businesses to work in, and make us more attractive for international companies to come and invest here.

With more employment, the tax base also widens and everyone benefits.

Peter Loon Seng Chee

A version of this article appeared in the print edition of The Straits Times on January 18, 2018, with the headline 'Subsidies not the answer, keeping costs down is'. Print Edition | Subscribe