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Jubilee Budget to tackle future challenges
EVEN as productivity withers and business costs swell - keeping the focus of many on the here and now - the main thrust of Budget 2015 will be equipping the Singapore economy with the skillsets required for the future, as well as securing retirement adequacy for a rapidly ageing population.
A key plank will be the SkillsFuture drive. Details on this long-term effort to equip Singaporeans with employable skills are expected today (Monday), when Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam delivers this year's Budget Statement in Parliament.
The SkillsFuture push was first announced by Prime Minister Lee Hsien Loong in his National Day Rally speech last August. He said then: "We want to help (Singaporeans) to create a brighter future for themselves by many routes - not just the academic route but also alternatively by getting good jobs, mastering deep skills, performing well and then getting relevant qualifications along the way, as they work, as they advance in their careers."
While this focus on skills is not entirely new - the government has long promoted lifelong learning with substantial Continuing Education and Training (CET) subsidies - the new SkillsFuture drive is meant to be more far-reaching in its impact.
Last November, Mr Tharman referred to the initiative as a "significant undertaking", saying: "We have to have enough flexibility and fluidity in curriculum; to stay responsive to a changing workplace - not just what we see today, but to anticipate the future skills in demand. That is a task especially for CET, but also for educational institutions that cater to students before they start work . . . "
"This is a long journey. It is not a one- or two-year plan, or even a five-year plan. This is a long journey, to develop expertise and mastery in every skill and job, and to become a truly advanced society."
This afternoon's Budget speech will be closely watched for precise details on the SkillsFuture push. For example, while it is known that sector-focused frameworks are being drawn up for several priority industries, specifics have yet to be announced. The broad idea, though, is to lay out a roadmap for the kinds of skills workers will need to advance to in their respective sectors and careers.
Apart from the renewed focus on skills, Budget 2015 is also expected to be one for the history books: the nation is celebrating its 50th year of independence, an election deadline looms, and the economy continues to grapple with restructuring pains and low productivity.
Expectations run high for a crowd-pleasing, expansionary Budget that features something for all Singaporeans. Economists have noted that previous pre-election Budgets saw hefty goodies being handed out - for instance, Budget 2011's S$3.2 billion Grow and Share package, and Budget 2006's S$2.6 billion Progress Package.
Amid the celebrations, though, the theme of retirement adequacy - whether ageing people have enough funds for their retirement years - will loom large in this year's Budget.
Building on last year's S$8 billion Pioneer Generation Package, the government will introduce the Silver Support Scheme, aimed at helping needy elderly people with insufficient savings for retirement. To assist them with living expenses, the government is expected to foot annual bonuses to such seniors when they turn 65.
Economists have said that the government could put aside anywhere from S$10-12 billion for this initiative, which is part of ongoing efforts to help those who fall through the cracks of existing social safety nets.
Given that one in five people will be 65 or older by 2030, changes to the Central Provident Fund (CPF) scheme are also on the cards. Earlier this month, a 13-member advisory panel announced proposed changes to the 60-year-old system, advocating a more flexible national retirement scheme that allows different levels of savings and payouts.
Although the government has accepted these proposals, Manpower Minister Tan Chuan-Jin has said that more details on official CPF changes will be given at the Budget and Committee of Supply parliamentary debates.
While Budget 2015 gazes into the future, the tough issues of the day - especially those stemming from ongoing restructuring pains - will have to be addressed head-on.
Just last week, the Ministry of Trade and Industry (MTI) announced a set of subdued data for 2014: GDP growth slowed to 2.9 per cent last year, well below 2013's 4.4 per cent expansion; labour productivity declined 0.8 per cent, reversing 2013's 0.3 per cent growth; and with Singapore's low unemployment rate of 2 per cent, the rise in unit labour cost accelerated to 3.5 per cent in 2014, up from 2.4 per cent in 2013.
Against this backdrop, economists and business leaders believe more will be done to help companies cope with rising business costs and manpower constraints, although support is likely to be more finely calibrated by sector and firm size.
This applies to existing initiatives such as the Productivity and Innovation Credit (PIC) scheme, where targeted measures for laggard sectors - such as construction and accommodation & food services - are anticipated. Audit firms and business federations have also called for the PIC scheme to cover a wider range of innovation or research and development (R&D) activities.
In addition, companies have asked for the Wage Credit Scheme (WCS) - which helps firms pay for salary increments - to be enhanced and extended beyond its scheduled 2015 expiry. Still, observers want to see a more selective approach, where assistance is doled out only to small and medium-size enterprises (SMEs) that demonstrate a real need for support.
But even as further assistance is given to companies, participants at BT's Pre-Budget Roundtable have said that Singapore's productivity drive should now shift away from mere cost-cutting measures, and have greater focus on value-creating activities instead.
This should include more support for internationalisation which would in turn boost topline growth, said panellists. While some want to see cash subsidies on qualifying expenses for internationalisation, others are hoping for tax rebates to help SMEs relocate lower-value operations out of Singapore.
As for whether the Singapore government can afford the increased expenditure, economists seem to believe the answer is an unqualified yes.
While budgets, by their very definition, tend to be constrained by financial adequacy, balancing the Budget has never been difficult for the Singapore government. Economists estimate that the fiscal surplus accumulated in the current term of government is sizeable - anywhere from S$10-12 billion. This, they say, will provide a wide berth for further expenditure on big-ticket items.
- Mr Tharman will deliver the Budget Statement at 3.30pm today (Monday).
A live webcast of his speech will be available on www.singaporebudget.gov.sg and the Singapore Budget mobile app, available for download on the Apple and Android platforms. Follow BT's coverage online at btd.sg/budget_15 and at @BTBreakingnews on Twitter.