Edwin Tong, Cost of Living

Budget 2013: MP Edwin Tong warns of over-reliance on transfers to poor

The experiences of Hong Kong and South Korea in tackling income inequality should give Singaporeans pause even as some call for the Government to spend more to help the poor, said Mr Edwin Tong (Moulmein-Kallang GRC) on Thursday.

Both Hong Kong and South Korea increased their social spending budgets, yet they have seen their income gap widen.

Hong Kong introduced a HK$50 billion package of measures, including public housing rental waivers and direct electrical subsidies. South Korea is planning to introduce a further means tested "national happiness pension" on top of the existing pension scheme, he said, speaking on the third day of the Budget debate.

"These experiences tell us that social transfers address only the symptom but not the cause of income inequality," said Mr Tong. "They help alleviate poverty, but do little to fix the underlying issue of income stagnation or minimal income growth."

He warned against becoming too dependent on government transfers, which would create a soft population that demands more and more. Instead, the Government should focus on other steps to address the income gap and maintain social mobility, he said.

These include ensuring equal education opportunities for low and middle income families, and also improving pre-school education.

"We have to be careful not to end up on the slippery slope of welfarism and becoming overly dependent on handouts," he said.

The Government last year made permanent the GST Voucher Scheme, which provides subsidies to low and middle income households for living costs. It announced in this year's Budget that it will give out an extra GST voucher to families this year, and also top up the GST Voucher Fund further.

"I am concerned that we create a dependency on such transfers which is not paired with co-funding or co-payments. In contrast to off-set packages, once we introduce a permanent transfer, especially over a sustained period, it will be difficult to withdraw or even re-calibrate. Come 2020, we may either have to find a way to top up this fund, or create another one," Mr Tong said.

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