Income Inequality in S’pore Hits Record Low Due to Schemes Supporting Lower-Income Groups

When it comes to budget 2021, we always hope for more money and less payment be it via taxes or GST.

This year, things are a little different.

Around a week ago, all eyes were on Deputy Prime Minister and Finance Minister Heng Swee Keat during budget 2021.

It was pretty lengthy, you can check out the highlights of it here.

The main focus was on workers and jobs growth incentive.

Another of the points brought up was support for low-wage workers and lower-income families.

According to Mr Heng, bridging the income gap in 2020 was something done well because of schemes supporting lower-income groups.

Income Inequality in S’pore Hits Record Low Due to Schemes Supporting Lower-Income Groups

This was mentioned on CNA‘s ‘Ask The Finance Minister’ programme on Sunday (21 Feb).

Mr Heng said that income inequality was a “historically low” due to schemes supporting lower-income groups.

Wait, does that mean the rich cannot get richer so the poor are catching up to the rich? That does not sound right.

The Singapore Department of Statistics also released a statement on 8 Feb.

In it, they mentioned that resident households received S$6,308 per household member on average from various Government schemes in 2020.

This was higher than the amount in 2019, which was S$4,684.

In his Budget speech, Mr Heng also said all eligible households will receive a one-off special payment of between S$120 and S$200 this year.

This would be part of a S$900 million Household Support Package for Singaporeans.

It includes the following:

• Extension of service and conservancy charges rebate
• S$200 top-up in the relevant education accounts for each child under 21
• S$100 worth of Community Development Council vouchers for all Singaporean households.

Lower and middle-income Singaporeans will also receive an additional cash payment of S$200 under the GST Voucher scheme.

Keep in mind this additional payment is one-off only.

He also responded to a question about the eventual GST increase and plans to soften the blow.

With Regards To GST

If you recall, way back in the 2018 Budget that GST was planned to increase from 7 to 9 per cent.

Mr Heng said that the S$6 billion Assurance Package, introduced during Budget 2021, will be very vital for households.

“For our lower 20 per cent of households it is equivalent to not paying the increased GST for 10 years, and for the average (household) it’s five years.”

He said in the 2020 Budget that the GST rate hike would not take place in 2021, in light of the impact of COVID-19 on the economy.

However, it was mentioned that it could not be put off for long and will likely happen between 2022 and 2025.

Mr Heng says also that GST is a rather progressive system.

He says that in Singapore, the top 20 per cent of households pay 56 per cent of the taxes but get back 11 per cent of the benefits.

The lowest 20 per cent of households pay 9 per cent of the taxes but get 27 per cent of the benefits.

In short, you will still have to pay GST eventually. It will just hit you like a wrecking ball somewhere between 2022 and 2025.

Tight Budgeting

If you recall, the Government had to draw on S$52 billion from its reserves due to the COVID-19 pandemic.

This will occur again this year, with an expected deficit of S$11 billion for this Budget.

Mr Heng said that it is a “very very stressful time”, as the world is in a severe recession and the path to recovery depends on the trajectory of the COVID-19 pandemic.

However, he is optimistic for recovery in 2021 and beyond, though it will still take time for a full recovery.

“That said, what we are hoping over the next four or five years is that we will still be able to balance our budget during this term of government.”

Mr Heng also believes that if all goes well, they have a good chance to properly balancing the budget.

Being Prepared

The government has also allocated S$5.2 billion allocated to job growth.

Mr Heng believes trends for jobs will accelerate and change between the next five to fifteen year.

The budget will help workers move and adapt better through schemes such as training programmes.

He says if people can prepare themselves for change, they can help prevent a foreseeable crisis.

“But so far, I think humans have not had the ability to be able to predict the future with such accuracy. So we must get ready for the future.”

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