The Business Times

More social spending not 'a fiscal drain on economy'

It's expected to create jobs and fresh growth areas for Singapore

Lee U-Wen
Published Wed, Jan 29, 2014 · 10:00 PM
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[SINGAPORE] The government's clear message that its priorities lie in raising social spending need not be seen purely as a greater fiscal drain on the country's resources, say some analysts and observers.

Rather, they point out that the heavier investment in this regard - be it in the building of more hospitals and preschools or the opening of new social-service offices - would mean fresh growth areas for Singapore and better opportunities for the people.

OCBC economist Selena Ling said: "The increased social-sector spending should be a positive for the Singapore economy."

It is a signal that policymakers are responding to medium-term socioeconomic trends such as the ageing population, and more pressing concerns such as healthcare affordability, income inequality and work-life integration, Ms Ling added.

"Social spending should not be viewed as a fiscal drain on the economy or a 'tax' on growth per se, or even in terms of promoting welfare dependency," she said.

Tan Wah Yeow, deputy managing partner of KPMG here, said that one often overlooked side to social spending by the government is that it creates jobs, as in when facilities such as hospitals need to be built.

Member of Parliament (MP) Patrick Tay agreed, saying that this is even more pertinent, given Singapore's already tight labour market.

"We are talking about better jobs and better-paying jobs. When we build new hospitals that are state-of-the-art, these will require people who are skilled, and will also involve the PME (professionals, managers and executives) community," he said.

OCBC's Ms Ling added that if social spending is done sustainably and effectively, it can "promote growth, facilitate greater efficiency and alleviate some of the potential negative externalities associated with an ageing population".

Arguably the most anticipated portion of Budget 2014, set for Feb 21, will be what Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam will reveal about the new Pioneer Generation Package.

It was at last year's National Day Rally that Prime Minister Lee Hsien Loong broached the move to develop such a package to recognise and help a special group of elderly and deserving Singaporeans.

In his annual Chinese New Year Message released this morning, he said that these are the seniors who saw Singapore through its most difficult times, having worked hard to build the country into what it is today.

MP David Ong, a businessman by profession who has championed issues facing the elderly since his entry into politics in 2011, said many of these "pioneers" have, in many ways, been left behind as Singapore progressed over the years.

"Many would have missed out on the fruits of the nation's progress as their salaries were much lower then, and they have few safety nets such as savings and CPF.

"It is only right that we do what we can now for this group of people and share with them the successes of the country they helped to build," he said.

OCBC's Ms Ling, while conceding that no one would begrudge having such a package for seniors, wondered whether this would be an ad hoc package or one that would pave the way for a more comprehensive support system for seniors and seniors-to-be on a rolling basis, as is the case with the Workfare scheme.

At a community event earlier this month, Mr Tharman disclosed that the Pioneer Generation Package would not be a "one-year bonanza"; rather, it would give its recipients sustainable help so that they can lead long, happy lives.

Kalyani Mehta, a social work academic who teaches Singapore's first Master's programme in gerontology at SIM University, expressed hope that the government would look beyond just healthcare provisions for the pioneers of this country.

She said: "There should be more transport concessions or subsidies for their conservancy charges and PUB bills. These costs are going up, and any help would be most welcome."

Mr Ong said he would like to see the government restore the CPF contribution rate for older workers to plump up their retirement savings, and more incentives given to companies to retain and hire them.

Mr Tay said this is the right time for Singapore to invest more, given that the country is facing the twin challenges of an ageing society and a low fertility rate.

"We are making ourselves future-ready and future-proof. Now that we have a reasonably stable economy, we should start preparing while we can. We don't know how the global economy will turn out in the coming years," he said.

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