GST hike needed to take care of rapidly ageing population

The impending goods and services tax (GST) increase is necessary as Singapore's population is ageing rapidly, said Prime Minister Lee Hsien Loong in his Mandarin speech at the National Day Rally yesterday.

Singapore must be prepared to take better care of the elderly, including providing more medication subsidies to reduce the burden of healthcare costs on older Singaporeans and their families.

More hospitals, polyclinics and other facilities also have to be built so that they can access medical services.

All these mean that Singapore's healthcare and social spending is increasing sharply.

"Not raising the GST would be a politically expedient move. However, it would be irresponsible," he said.

"While the people worry about not having enough money to spend, the Government also worries about not having enough money," he added.

He said that it is concerned about not having enough resources to take care of low-income families and the healthcare needs of the elderly.

One in six Singaporeans is aged 65 and above. By 2030, this number will increase to one in four, with mature estates seeing their population grey earlier.

PM Lee said many of his Teck Ghee residents were young married couples when he was first elected as an MP in the 1980s. More and more of them now need walking sticks and wheelchairs.

"While I am happy that they continue attending community activities, I am also worried for them, as their healthcare needs will definitely increase over the years," he said.

"Therefore, we must be prepared to take better care of the elderly."

Turning to Covid-19, he said Singapore has been able to cope with the pandemic better than some other countries because of prudent financial management and sufficient reserves.

The Republic should continue to save for a rainy day and plan for the future, he added.

The planned GST increase will take place in two stages - from 7 per cent to 8 per cent on Jan 1 next year, and from 8 per cent to 9 per cent on Jan 1, 2024.

Acknowledging that many are worried about the rising cost of living, PM Lee assured Singaporeans that the Government has taken steps to help, and will provide more support if necessary.

For instance, the Community Development Council (CDC) vouchers that have been distributed not only help households defray some daily expenses, but also support heartland shops and hawkers, he said.

To date, more than 18,000 heartland merchants, hawkers and coffee shop stalls have joined the scheme.

Most households have also utilised their CDC vouchers, with close to $180 million spent so far.

Other forms of support have also been given progressively, PM Lee said. He cited the example of a married couple with two children living in a three-room Housing Board flat. They will receive support almost every month, amounting to $3,700 over 12 months that includes:

•Cash payouts of $1,400 this month.

•About $190 in U-Save and S&CC rebates in October to help pay for utilities and service and conservancy charges.

•$200 of CDC vouchers next January, on top of the $100 of vouchers distributed in May.

•$300 to be credited into their MediSave accounts in February next year.

"There's no support in November, because the god of fortune is taking a break to watch the World Cup," PM Lee said, to laughter from the audience. "But he will be back to work in December."

PM Lee said everyone will receive some support, but the amount each family receives will depend on its income level and housing type.

For instance, a middle-income family with two young children living in a four-room HDB flat can expect an additional $2,200 in support in this fiscal year, compared with the $3,700 the lower-income household living in a three-room flat will receive, he said in his English speech.

The Assurance Package - a $6.6 billion package where every Singaporean aged 21 and above will get cash payouts ranging from $700 to $1,600 over five years - will help offset the increase in GST.

These will be spread over five years, with the first payout to be made in December this year.

The Monetary Authority of Singapore has also tightened Singapore's exchange rate policy. A stronger Singapore dollar makes travelling overseas more affordable and imported goods cheaper.

However, PM Lee cautioned that there is a limit to this.

"A stronger Singdollar also makes our exports more expensive, and we lose competitiveness against other countries," he said.

PM Lee said Singapore has faced the challenges of Covid-19 calmly and fought the battle in solidarity.

As a result, society has emerged more cohesive and resilient after going through this test, and now has greater courage and conviction to face future crises.

"Whether it be economic challenges, fault lines in our own society or national security challenges, I believe we can overcome them," he said.